Skin in the Game

Roman generals practiced devotio — a ritual vow to die with their troops if the battle was lost. This wasn’t superstition; it was incentive alignment. A general who shares the downside makes different decisions than one who can retreat to safety. Skin in the game.

Nassim Taleb argues this principle explains most institutional dysfunction. Bankers who profit from risks but don’t suffer the losses take excessive risks. Policymakers who don’t live with policy consequences make careless policies. Consultants who advise but don’t operate optimize for appearance over function. The feedback loops between decision and consequence is broken.

Competence emerges from exposure. The builder who lives in what they build learns lessons the architect never does. The cook who eats their own food adjusts in ways the recipe writer can’t. Knowledge that matters accumulates through consequences — you can’t acquire it by reading about other people’s mistakes.

This creates a hierarchy of credibility. Practitioners outrank theorists. People with track records outrank people with predictions. Those who risked and succeeded outrank those who advised from the sidelines. antifragility applies to knowledge: learning that survived real-world testing is stronger than learning that hasn’t been tested.

The pathology of modern institutions is systematic removal of skin in the game. Layers of abstraction separate action from consequence. Committees diffuse responsibility. Tenure protects from accountability. The result: decision-makers optimizing for metrics they can manipulate rather than outcomes they’ll experience.

The fix requires structure, not punishment. Design systems where decision-makers face consequences proportional to their power. The captain goes down with the ship not because we’re cruel, but because captains who might go down make better decisions. selection favors accountability.