Skin In The Game [new N. Taleb book]

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Ron Scott
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Skin In The Game [new N. Taleb book]

Post by Ron Scott » Tue Mar 13, 2018 7:10 am

This is a wonderful new book by Nassim Nicholas Taleb (The Black Swan et al).

The general thrust of this treatise is that only those who are exposed to the consequences of their beliefs have standing to share those beliefs.

To us...

"If you give an opinion, and someone follows it, you are morally obligated to be, yourself, exposed to its consequences. In case you are giving economic views:

Don't tell me what you 'think', just tell me what's in your portfolio."



Recommended reading.

timmy
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Re: Skin In The Game

Post by timmy » Tue Mar 13, 2018 7:24 am

Half way through. So far so good. My sense ... If you liked his prior books, you'll like this one. If you were put off by his prior books, I'd pass.

JoeRetire
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Re: Skin In The Game

Post by JoeRetire » Tue Mar 13, 2018 7:46 am

I have the book on order with my local library.

The premise seems like nonsense to me, but I look forward to reading it and seeing for myself.

bgf
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Re: Skin In The Game

Post by bgf » Tue Mar 13, 2018 8:07 am

It is on my list. Sounds like the natural continuation from the Black Swan and Antifragile.

Black Swan - Recognition of problems associated with decision-making in 4th quadrant
Antifragile - How to benefit from the recognition of 4th quadrant risks
Skin in the Game - Ethics of action in 4th quadrant/general application through policy

I doubt that Taleb means 'skin in the game' refers to mere alignment of incentives, as most people think. For Taleb, anyone who is set up to benefit from asymmetries should not transfer his downside risk to others. Simplest example I can think of is the modern day CEO who juices near term earnings by sacrificing a long term plan, collects his large bonus, then leaves everyone holding the bag with a mismanaged and poorly situated company moving forward. In doing so, he leveraged the entire company for his personal benefit, while bearing none of the risk personally.
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"

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market timer
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Re: Skin In The Game

Post by market timer » Tue Mar 13, 2018 8:09 am

I was a fan of Taleb's previous books, but felt this one was a disappointment. Perhaps it is because I don't find ethics a particularly interesting subject.

GoldenFinch
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Re: Skin In The Game

Post by GoldenFinch » Tue Mar 13, 2018 8:25 am

Thanks for the post.

Makes me wonder how many financial advisors who put their clients in funds with 5.75% front loads and 2b-1 fees invest in those same funds themselves.

Ron Scott
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Re: Skin In The Game

Post by Ron Scott » Tue Mar 13, 2018 9:34 am

GoldenFinch wrote:
Tue Mar 13, 2018 8:25 am
Thanks for the post.

Makes me wonder how many financial advisors who put their clients in funds with 5.75% front loads and 2b-1 fees invest in those same funds themselves.
Taleb has made the point here and elsewhere that we should pay more attention to fund managers who are required to hold half their net worth or more in the fund. And he's not just saying that such managers will change their investing styles to maximize returns on the funds: He claims they learn more when they have skin in the game and actually become better at it.

The theory is more than simply an alignment of interests or avoiding a conflict of interest.

I like this read. Simple logic, but a lot of it.

AlohaJoe
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Re: Skin In The Game

Post by AlohaJoe » Tue Mar 13, 2018 9:39 am

GoldenFinch wrote:
Tue Mar 13, 2018 8:25 am
Thanks for the post.

Makes me wonder how many financial advisors who put their clients in funds with 5.75% front loads and 2b-1 fees invest in those same funds themselves.
Luckily I posted a thread about exactly this: viewtopic.php?f=10&t=241566

Advisors generally invest in exactly the same kinds of high-fee funds they put clients in. Advisors trade frequently, chase returns, prefer expensive, actively managed funds, and underdiversify.
Advisors are willing to hold the investments they recommend—indeed, they invest very similarly to clients—but they have misguided beliefs.
(If this seems like it undermines Taleb's argument, well.....)

22twain
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Re: Skin In The Game

Post by 22twain » Tue Mar 13, 2018 9:57 am

AlohaJoe wrote:
Tue Mar 13, 2018 9:39 am
Advisors generally invest in exactly the same kinds of high-fee funds they put clients in.
So they have just as much trouble saving enough money for a yacht, as their customers do? :wink:

(...just thinking of Schwed's "Where Are the Customers' Yachts?")
My investing princiPLEs do not include absolutely preserving princiPAL.

2015
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Re: Skin In The Game

Post by 2015 » Tue Mar 13, 2018 11:06 am

Book has also been skewered by some reviewers. Taleb is one of those guys people either love or hate. Many of his ideas in prior books are borne out in a variety of fields, and I've found them valuable. This book, however, I'll pass on based on reviews I've read and the subject matter.
Last edited by 2015 on Tue Mar 13, 2018 2:49 pm, edited 1 time in total.

GoldenFinch
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Re: Skin In The Game

Post by GoldenFinch » Tue Mar 13, 2018 11:45 am

AlohaJoe wrote:
Tue Mar 13, 2018 9:39 am
GoldenFinch wrote:
Tue Mar 13, 2018 8:25 am
Thanks for the post.

Makes me wonder how many financial advisors who put their clients in funds with 5.75% front loads and 2b-1 fees invest in those same funds themselves.
Luckily I posted a thread about exactly this: viewtopic.php?f=10&t=241566

Advisors generally invest in exactly the same kinds of high-fee funds they put clients in. Advisors trade frequently, chase returns, prefer expensive, actively managed funds, and underdiversify.
Advisors are willing to hold the investments they recommend—indeed, they invest very similarly to clients—but they have misguided beliefs.
(If this seems like it undermines Taleb's argument, well.....)
Thanks! That’s an interesting thread and another testament to the value of Bogleheads. It demonstrates the value of being well educated about investing and able to do it yourself.

Like some others here, I’ve had terrible experiences with other people managing our money. I thought they were crooks, but maybe they were just incompetent.

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Wildebeest
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Re: Skin In The Game [new N. Taleb book]

Post by Wildebeest » Tue Mar 20, 2018 8:41 pm

I read " The Black Swan" which I thought was interesting and got me to read more of his books. I read "Fooled by randomness" such a better book and I loved it. "Anti fragility" was the same refrain all over again and Taleb is feeling his oats. Not a good thing. A downer.

So I bought" Skin in the game". I agree with Taleb in principle. He is right till you read his book. After reading the first three chapters I feel, I supported a three year old crazy person in love with his own ego and I feel guilty about buying his book.Why feed the beast if the beast is misbehaving toddler. What happened to the writer of " Fooled by randomness" Did he not have a editor telling him he is full of it. Does not he have a mother, father, wife, child or some poor soul having to read his book telling him that his book sets off any body's B**L Sh*T detectors.

So I did not like this book. Please read "Fooled by randomness" and I thought "The Black Swan" was worthwhile but reading Benoit Mandelbrot's book " The (mis) behavior of markets" was more illuminating.
The Golden Rule: One should treat others as one would like others to treat oneself.

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arcticpineapplecorp.
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Re: Skin In The Game [new N. Taleb book]

Post by arcticpineapplecorp. » Tue Mar 20, 2018 8:57 pm

you can hear an interview with Nassim at econtalk a couple weeks ago (about some ideas from the book):

http://www.econtalk.org/archives/_featu ... sim_taleb/
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

alex_686
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Re: Skin In The Game [new N. Taleb book]

Post by alex_686 » Tue Mar 20, 2018 9:02 pm

I knew a portfolio manager who head a muni fund. She was very good at her job. She was early to mid career. I assume she had a fair chunk of private college debt, housing debt, and wanted to save for her young children's education. Only having a vague idea of what they paid her I assumed she had low taxable savings. I would assume she had a agreesive risk profile. So not a good candidate to be put into a conservative tax free fund.

I have not read the book. I do believe in linking preformace with return. I am a bit skeptical.

NYCguy
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Re: Skin In The Game [new N. Taleb book]

Post by NYCguy » Wed Mar 21, 2018 10:04 pm

Wildebeest wrote:
Tue Mar 20, 2018 8:41 pm
I read " The Black Swan" which I thought was interesting and got me to read more of his books. I read "Fooled by randomness" such a better book and I loved it. "Anti fragility" was the same refrain all over again and Taleb is feeling his oats. Not a good thing. A downer.

So I bought" Skin in the game". I agree with Taleb in principle. He is right till you read his book. After reading the first three chapters I feel, I supported a three year old crazy person in love with his own ego and I feel guilty about buying his book.Why feed the beast if the beast is misbehaving toddler. What happened to the writer of " Fooled by randomness" Did he not have a editor telling him he is full of it. Does not he have a mother, father, wife, child or some poor soul having to read his book telling him that his book sets off any body's B**L Sh*T detectors.

So I did not like this book. Please read "Fooled by randomness" and I thought "The Black Swan" was worthwhile but reading Benoit Mandelbrot's book " The (mis) behavior of markets" was more illuminating.
u
Ut oh. I just bought the book. Hope I find it better than you did.
If your out-go is greater than your income, your upkeep will be your DOWNFALL.

Ron Scott
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Re: Skin In The Game [new N. Taleb book]

Post by Ron Scott » Wed Mar 21, 2018 10:56 pm

NYCguy wrote:
Wed Mar 21, 2018 10:04 pm
Wildebeest wrote:
Tue Mar 20, 2018 8:41 pm
I read " The Black Swan" which I thought was interesting and got me to read more of his books. I read "Fooled by randomness" such a better book and I loved it. "Anti fragility" was the same refrain all over again and Taleb is feeling his oats. Not a good thing. A downer.

So I bought" Skin in the game". I agree with Taleb in principle. He is right till you read his book. After reading the first three chapters I feel, I supported a three year old crazy person in love with his own ego and I feel guilty about buying his book.Why feed the beast if the beast is misbehaving toddler. What happened to the writer of " Fooled by randomness" Did he not have a editor telling him he is full of it. Does not he have a mother, father, wife, child or some poor soul having to read his book telling him that his book sets off any body's B**L Sh*T detectors.

So I did not like this book. Please read "Fooled by randomness" and I thought "The Black Swan" was worthwhile but reading Benoit Mandelbrot's book " The (mis) behavior of markets" was more illuminating.
u
Ut oh. I just bought the book. Hope I find it better than you did.
You either enjoy his attitude or hate it, but it’s front and center. This guy out-New York’s me by a country mile and I got a real kick out of it.

He’s onto himself however. The lead quote on the back cover jacket reveals this: “The problem with Taleb is not that he’s an a-hole. He is an a-hole. The problem with Taleb is that he’s right.” (The last part is partially correct...)

Buy it, you’ll like it!

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aspirit
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Re: Skin In The Game [new N. Taleb book]

Post by aspirit » Wed Mar 21, 2018 11:26 pm

Aligned financial interest is optimal avoiding conflict of interest. :happy
Time & tides wait for no one. A man has to know his limitations.

dziuniek
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Re: Skin In The Game

Post by dziuniek » Thu Mar 22, 2018 11:54 am

bgf wrote:
Tue Mar 13, 2018 8:07 am
It is on my list. Sounds like the natural continuation from the Black Swan and Antifragile.

Black Swan - Recognition of problems associated with decision-making in 4th quadrant
Antifragile - How to benefit from the recognition of 4th quadrant risks
Skin in the Game - Ethics of action in 4th quadrant/general application through policy

I doubt that Taleb means 'skin in the game' refers to mere alignment of incentives, as most people think. For Taleb, anyone who is set up to benefit from asymmetries should not transfer his downside risk to others. Simplest example I can think of is the modern day CEO who juices near term earnings by sacrificing a long term plan, collects his large bonus, then leaves everyone holding the bag with a mismanaged and poorly situated company moving forward. In doing so, he leveraged the entire company for his personal benefit, while bearing none of the risk personally.
Sort of like GE? :)

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VictoriaF
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Re: Skin In The Game [new N. Taleb book]

Post by VictoriaF » Thu Mar 22, 2018 3:02 pm

Ron Scott wrote:
Wed Mar 21, 2018 10:56 pm
NYCguy wrote:
Wed Mar 21, 2018 10:04 pm
Wildebeest wrote:
Tue Mar 20, 2018 8:41 pm
I read " The Black Swan" which I thought was interesting and got me to read more of his books. I read "Fooled by randomness" such a better book and I loved it. "Anti fragility" was the same refrain all over again and Taleb is feeling his oats. Not a good thing. A downer.

So I bought" Skin in the game". I agree with Taleb in principle. He is right till you read his book. After reading the first three chapters I feel, I supported a three year old crazy person in love with his own ego and I feel guilty about buying his book.Why feed the beast if the beast is misbehaving toddler. What happened to the writer of " Fooled by randomness" Did he not have a editor telling him he is full of it. Does not he have a mother, father, wife, child or some poor soul having to read his book telling him that his book sets off any body's B**L Sh*T detectors.

So I did not like this book. Please read "Fooled by randomness" and I thought "The Black Swan" was worthwhile but reading Benoit Mandelbrot's book " The (mis) behavior of markets" was more illuminating.
u
Ut oh. I just bought the book. Hope I find it better than you did.
You either enjoy his attitude or hate it, but it’s front and center. This guy out-New York’s me by a country mile and I got a real kick out of it.

He’s onto himself however. The lead quote on the back cover jacket reveals this: “The problem with Taleb is not that he’s an a-hole. He is an a-hole. The problem with Taleb is that he’s right.” (The last part is partially correct...)

Buy it, you’ll like it!
I still have not read "Skin in the Game," but I consider Taleb one of the smartest people ever. Smarter than Steve Jobs. Smarter than other modern "luminaries." Not only Taleb is smart, he's direct. He calls a spade a spade. Taleb is incredibly insightful and he is right to emphasize his insights so that people would not miss them in the sea of noise.

Taleb also dares to criticize prominent people when they are dead wrong. When others do not understand incompetence, or don't want to pick up a fight, Taleb is doing public service. He deserves gratitude for doing this dirty job on our behalf.

Victoria
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)

staythecourse
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Re: Skin In The Game

Post by staythecourse » Thu Mar 22, 2018 3:12 pm

market timer wrote:
Tue Mar 13, 2018 8:09 am
I was a fan of Taleb's previous books, but felt this one was a disappointment. Perhaps it is because I don't find ethics a particularly interesting subject.
You must work on Wall Street. :D

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

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pezblanco
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Re: Skin In The Game [new N. Taleb book]

Post by pezblanco » Fri Mar 23, 2018 9:14 am

VictoriaF wrote:
Thu Mar 22, 2018 3:02 pm

I still have not read "Skin in the Game," but I consider Taleb one of the smartest people ever. Smarter than Steve Jobs. Smarter than other modern "luminaries." Not only Taleb is smart, he's direct. He calls a spade a spade. Taleb is incredibly insightful and he is right to emphasize his insights so that people would not miss them in the sea of noise.

Taleb also dares to criticize prominent people when they are dead wrong. When others do not understand incompetence, or don't want to pick up a fight, Taleb is doing public service. He deserves gratitude for doing this dirty job on our behalf.

Victoria

I think we have a true believer ....

heyyou
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Re: Skin In The Game [new N. Taleb book]

Post by heyyou » Fri Mar 23, 2018 10:35 pm

It was sad when the market did not fall while Taleb's hedge fund was shorting it, at least for his investors. He was significantly right once in the past, and will be again some time in the future, but he wasn't successful soon enough when he was managing other people's money.

I wonder where he invests these days, twenty years after he made his fortune from buying derivatives before the 1997 Flash Crash?
"On Monday, October 27, (1997) the Dow Jones Industrial Average ("DJIA") declined 554.26 points (7.18%) to close at 7161.15."
Index funds have done okay since then.

KlangFool
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Re: Skin In The Game [new N. Taleb book]

Post by KlangFool » Fri Mar 23, 2018 10:39 pm

VictoriaF wrote:
Thu Mar 22, 2018 3:02 pm
Ron Scott wrote:
Wed Mar 21, 2018 10:56 pm
NYCguy wrote:
Wed Mar 21, 2018 10:04 pm
Wildebeest wrote:
Tue Mar 20, 2018 8:41 pm
I read " The Black Swan" which I thought was interesting and got me to read more of his books. I read "Fooled by randomness" such a better book and I loved it. "Anti fragility" was the same refrain all over again and Taleb is feeling his oats. Not a good thing. A downer.

So I bought" Skin in the game". I agree with Taleb in principle. He is right till you read his book. After reading the first three chapters I feel, I supported a three year old crazy person in love with his own ego and I feel guilty about buying his book.Why feed the beast if the beast is misbehaving toddler. What happened to the writer of " Fooled by randomness" Did he not have a editor telling him he is full of it. Does not he have a mother, father, wife, child or some poor soul having to read his book telling him that his book sets off any body's B**L Sh*T detectors.

So I did not like this book. Please read "Fooled by randomness" and I thought "The Black Swan" was worthwhile but reading Benoit Mandelbrot's book " The (mis) behavior of markets" was more illuminating.
u
Ut oh. I just bought the book. Hope I find it better than you did.
You either enjoy his attitude or hate it, but it’s front and center. This guy out-New York’s me by a country mile and I got a real kick out of it.

He’s onto himself however. The lead quote on the back cover jacket reveals this: “The problem with Taleb is not that he’s an a-hole. He is an a-hole. The problem with Taleb is that he’s right.” (The last part is partially correct...)

Buy it, you’ll like it!
I still have not read "Skin in the Game," but I consider Taleb one of the smartest people ever. Smarter than Steve Jobs. Smarter than other modern "luminaries." Not only Taleb is smart, he's direct. He calls a spade a spade. Taleb is incredibly insightful and he is right to emphasize his insights so that people would not miss them in the sea of noise.

Taleb also dares to criticize prominent people when they are dead wrong. When others do not understand incompetence, or don't want to pick up a fight, Taleb is doing public service. He deserves gratitude for doing this dirty job on our behalf.

Victoria
+1,000.

I agreed. Unfortunately, I do not understand everything that he wrote about. I wish I could but I am not smart enough.

KlangFool

Random Walker
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Re: Skin In The Game

Post by Random Walker » Sat Mar 24, 2018 3:17 pm

GoldenFinch wrote:
Tue Mar 13, 2018 8:25 am
Thanks for the post.

Makes me wonder how many financial advisors who put their clients in funds with 5.75% front loads and 2b-1 fees invest in those same funds themselves.

Good point. For those considering an advisor, they should only consider one who uses the same investment vehicles that he is recommending. Of course the specific asset allocation will be different and variables like tax advantaged versus taxable space need to be accounted for, but overall, the advisor should use the same vehicles he recommends.

Dave

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