Kashish’s Origin and Experience:
Kashish, a former trader, highlights the counterintuitive aspect of “skin in the game” related to knowledge acquisition and actions. His national origin is as a trader, unlike many who transition from other fields. As a trader, Kashish faced the realities of the trading world, including the questionable accuracy of theoretical models and the clash between theory and practical experience. Traders, like bicycle riders or prostitutes, often feel lectured by academics who lack practical experience.

Critique of Theoretical Models:
Kashish emphasizes the significant gap between theoretical models and the realities of trading. He views academic models as imprecise and belonging to a different world, rather than providing practical guidance. The limitations of theoretical models become evident in the trading world, leading to skepticism among traders.

Practical vs. Theoretical Knowledge:
Kashish draws a distinction between practical knowledge gained through experience and theoretical knowledge derived from academic models. He suggests that practical knowledge, gained by “doing things,” provides a deeper understanding and more accurate insights compared to theoretical knowledge. This contrast between practical and theoretical knowledge is a central theme in Kashish’s perspective on “skin in the game.”

Kashish’s Trading and Academic Career:
Kashish retired from trading after 21 years. He tried retirement activities but found he couldn’t focus. He then pursued an academic career in modeling and challenged established theories.

The Ludic Fallacy:
Kashish introduced the concept of the ludic fallacy, emphasizing the difference between randomness in real life and in textbooks or games. He highlighted the importance of distinguishing between professionals who genuinely understand their field and those who do not.

Expert Problem:
Kashish discussed the idea of the expert problem, where professionals in certain fields may not possess genuine expertise, while others have a clear understanding of their domain.

Peer Judgment vs. Reality-Based Judgment:
Kashish emphasized the importance of reality-based judgment in professions like trading, where success is measured by financial performance. He contrasted this with professions where peers’ approval determines success, leading to problems such as inflated awards and bureaucracy.

Importance of P&L and Accountant Approval:
In businesses judged by peers, like academia and bureaucracy, meeting goals becomes secondary to impressing colleagues. In contrast, in professions like plumbing, success is directly tied to financial performance, ensuring that plumbers are judged by the quality of their work rather than peer approval.

Identifying Incompetent Experts:
In fields where incompetence can be easily detected, such as dentistry or hard sciences, judgment can be made based on metrics or reality. However, in fields where judgment is solely based on the opinions of other experts, there is a risk of monoculture and vulnerability.

The Issue with Intellectual Debt Idiots (IYIs):
IYIs are a class of people who have no accountability to reality and only account to one another. As a result, their expertise can degrade over time, leading to poor performance and a lack of accountability.

The Problem with Macroeconomists:
Macroeconomists like Paul Krugman have a poor track record in forecasting economic events. Despite this, they continue to be influential and are not held accountable for their mistakes.

The Importance of Skin in the Game:
Skin in the game refers to having a personal stake in the outcome of a situation. Experts with skin in the game are more likely to be competent and accountable, as their reputation and financial well-being are at stake.

The Value of a Profit and Loss (P&L) Statement:
A P&L statement provides a clear measure of an expert’s performance and accountability. Without a P&L, experts can easily bullshit their way through life and avoid accountability for their mistakes.

The Comparison of Experts to Pilots:
Pilots have skin in the game because their mistakes can have disastrous consequences. This leads to a selection mechanism that favors competent pilots, as bad pilots are quickly removed from the profession.

The Problem with Economics:
Economics is a field where experts often lack skin in the game and are not held accountable for their mistakes. This can lead to poor economic policies and a lack of progress in addressing economic issues.

The Importance of Symmetry:
Symmetry in skin in the game means that the expert and the client have equal stakes in the outcome. This ensures that the expert is motivated to provide the best possible advice and service.

Hammurabi’s Law and Risk Hiding:
Hammurabi’s law aimed to prevent the hiding of risk by architects in the construction of houses. It stated that if a house collapsed due to the architect’s negligence, the architect would be put to death. This law ensured that architects took responsibility for the risks associated with their work and could not walk away from them.

Bob Rubin Trade:
Kashish explains the Bob Rubin trade, where Robert Rubin collected $120 million in compensation at Citibank while the bank took on hidden risks. These risks eventually led to Citibank’s insolvency in 2008, resulting in taxpayer bailouts.

Consequences of Hidden Risks:
The Bob Rubin trade highlights the consequences of allowing risk hiding. Taxpayers ultimately bear the burden of bailing out insolvent institutions. Such events lead to policies that suppress entrepreneurship and innovation.

Satoshi Nakamoto and Bitcoin:
Kashish discusses Satoshi Nakamoto’s creation of Bitcoin in response to the Bob Rubin trade and bank bailouts. The Genesis block of Bitcoin cited bank bailouts as the reason for its creation. Bitcoin was inspired by the need for a trustworthy system that prevents risk hiding and eliminates the need for bailouts.

Historical Examples of Risk Hiding:
Kashish provides historical examples of risk hiding and the resulting bailouts, such as the Resolution Trust Corporation in 1993 and the savings and loans crisis in 1982. Banks have a history of hiding losses and socializing them, leading to taxpayer bailouts.

The Principle of Skin in the Game:
Kashish emphasizes the principle of skin in the game, where individuals should bear the downside risks associated with their actions. This principle ensures that individuals take responsibility for their decisions and cannot pass the consequences on to others.

Evolution of Hammurabi’s Law:
Over time, Hammurabi’s law evolved into softer rules, such as the notion of symmetry, which advocates for treating others the way one wants to be treated.

Moral Symmetry and the Golden Rule:
Societal norms are founded on symmetry, with a balance between punishments, rewards, and justice. The Golden Rule promotes positive actions but can invite unwanted interference. The Silver Rule, which emphasizes refraining from harmful actions, is more robust and reliable.

The Importance of Shared Risk and Responsibility:
Leaders in history have taken more physical risks than the common people. Risk-sharing ensures that all parties involved in a transaction or endeavor bear a fair share of the burden. In ancient societies, merchants and travelers shared risks and compensated each other for losses.

Skin in the Game and Its Regulatory Effects:
Modern life has led to a loss of symmetry and risk-sharing principles. People with the power to inflict harm often lack personal exposure to the consequences of their actions. The absence of skin in the game has resulted in reckless behavior, such as reckless driving and warmongering.

Historical Examples of Leaders Taking Risks:
Ancient leaders like Hannibal, Napoleon, and Roman emperors were at the forefront of battles, exposing themselves to danger. Valerian was captured by the Persians due to his insistence on being on the front line. Julian the Apostate died in battle, demonstrating the risks leaders faced.

Consequences of Leaders’ Lack of Exposure to Risks:
Modern leaders often avoid personal risks and lead from a distance. This asymmetry has resulted in reckless decisions, like wars, without personal consequences for the decision-makers. Risk-taking is essential for maintaining a balanced and just society.

Conclusion:
Throughout history, symmetry and risk-sharing principles have played a crucial role in maintaining societal balance and justice. The absence of these principles in modern times has led to imbalances and reckless behavior, highlighting the need for a renewed emphasis on shared responsibility and personal exposure to consequences.

Zahavian Signaling:
Zahavian signaling is a concept that explains why peacocks have fancy tails. These tails are a handicap but also show their genetic superiority and strength. It is called costly signaling because it is not cheap to produce these tails.

Costly Signaling and Virtue:
There are many virtues that can be faked, but risk-taking is real and cannot be faked. This explains why there is so much haggling over the nature of Christ in theology. If Christ were God, he would not have skin in the game and could not suffer.

The Importance of Skin in the Game:
Having skin in the game means that someone is vulnerable and can suffer. This is important for leaders and decision-makers because it ensures they are accountable for their actions. Without skin in the game, leaders can make decisions without considering the consequences for others.

Real Risk and Virtue:
True virtue requires real risk-taking and sacrifice. Mere claims of virtue without cost or risk are not genuine. The story of Christ exemplifies the true nature of virtue.

Fake Virtual Signaling:
Fake virtual signaling is prevalent in society today, especially among NGOs and corporations. It involves claiming to support a cause or virtue without taking any real risks or making sacrifices. Examples include companies using environmental concerns as an excuse to increase profits.

Encouraging Entrepreneurship:
Young people should start businesses and embrace failure as a path to success. Entrepreneurship entails taking risks and facing challenges, making failed entrepreneurs more honorable than those who never try. Starting a business is more valuable than joining an NGO, which often engages in fake virtual signaling.

Trump’s Election and Inequality:
The public recognized Trump’s authenticity in losing a billion dollars of his own money, despite criticism from academics. Losing personal wealth demonstrates real-world experience and risk-taking. Inequality is often measured incorrectly, with static inequality metrics failing to capture dynamic changes over time.

What is the difference between inequality of opportunity and equality of outcome?:
Equality of outcome is communism, which requires coercion and is undesirable. Equality of opportunity is what should be strived for, but it is difficult to achieve due to differences in DNA, upbringing, and education.

The best metric for measuring equality of opportunity is how many large corporations fail:
This measures the dynamism of the economy and the ability of new businesses to enter the market. A high failure rate indicates that there is more opportunity for new businesses to succeed.

The green lumber fallacy:
A trader who knew everything about green lumber lost all his money because he didn’t understand the true meaning of the term. This highlights the importance of learning from experience and understanding the nuances of a business from the inside.

Education and anti-fragility are against traditional education:
Traditional education teaches students to memorize facts and theories, which is not helpful in the real world. Anti-fragility is the ability to benefit from chaos and uncertainty, which is essential for success in business.

The best doctor for brain surgery is the one who has the most skin in the game:
When someone has skin in the game, they are more likely to be careful and take responsibility for their actions. In the case of brain surgery, the doctor who has the most skin in the game is the one who is most likely to perform a successful surgery.

Symmetry and Asymmetry:
Symmetry: The alignment of consequences with actions, creating feedback loops for learning. Asymmetry: Extreme outcomes, like black swan events, where the upside outweighs the downside.

Nassim Taleb’s Work:
Timeless and valuable: Praised as work that will be read for centuries. Simple concepts: Accessible to a wide audience, despite the underlying mathematical backing. Provocative and controversial: Criticized for his combative style, but admired for his courage in defending his principles.

The Value of Boredom and Twitter Fights:
Boredom as a motivator: Naval Ravikant engages in Twitter debates as a means to alleviate boredom. Courage in online debates: Authenticity and willingness to engage under one’s own name, rather than anonymously.

The Importance of Skin in the Game:
Asymmetry in contracts and options: The potential for greater upside than downside. Transferring downside to others: Exploiting asymmetry by shifting negative consequences to others, often taxpayers. Trial and error vs. design: Trial and error, with its inherent asymmetry, often outperforms design due to our limited intelligence.

Developing the Best Pizza:
Top-down vs. bottom-up approach: Chemists’ theoretical approach vs. overweight individuals’ practical trial-and-error method. Trial-and-error method: Iterative process of adding ingredients, tasting, and refining, with limited downside risk.

Conclusion:
The importance of understanding symmetry and asymmetry in decision-making. The value of Nassim Taleb’s work and his unique perspective. The role of boredom and Twitter fights in stimulating intellectual engagement. The importance of skin in the game and avoiding asymmetry in contracts and options. The effectiveness of trial-and-error methods, exemplified by the development of the best pizza.

Bitcoin and Asymmetric Bets:
Bitcoin is an asymmetric bet with limited downside risk but potentially significant upside gains if it becomes digital gold.

Convexity and Anti-fragility:
Convex functions offer more upside gains than downside losses. Bitcoin’s anti-fragile nature makes it stronger with each survived hack or failure.

Concave Trades and Shorting Cryptocurrencies:
Shorting cryptocurrencies is a concave trade with limited upside potential and significant downside risk. Paul Krugman’s short position at $40 illustrates the potential losses in such trades.

The New York Times and Skin in the Game:
The New York Times bestseller list featured Skin in the Game without any book reviews in the United States. Awards in the investing industry are often meaningless as the true reward lies in making profitable investments.

The Lindy Effect and News:
The Lindy effect suggests that the longer something has existed, the longer it is likely to continue existing. Before the 1940s, news was organically spread through various channels, making it difficult to control. The period from 1946 to 2016 saw a controlled news landscape, which was disrupted by the rise of Twitter and social media.

Lindy Effect and Technology:
Lindy effect suggests that things that have survived a long time are likely to survive even longer. This applies to technology as well. Older technologies are likely to outlive newer technologies, not because newer ones are bad, but because there are more newer technologies vulnerable to newer advancements.

Lindy Effect in Finance:
The concept of a commercial transaction coupled with a financial transaction is entirely Lindy, as seen in the letter of credit. Bitcoin is a Lindy currency due to its long survival and increasing faith and investment over time.

Government-Issued Currencies:
Government-issued currencies have not been Lindy. People often don’t realize this, but it’s evident in the history of fiat currencies.

Money and God:
Ancient temple authorities preferred the shekel of Tyre due to its stability. Governments historically debased their currencies, leading to a choice of currencies for citizens. God chose the least debased currency.

Crypto and State Separation:
Separating money from the state, like cryptocurrencies aim to do, could be as impactful as separating church from state. Competition between cryptocurrencies mimics ancient competition between currencies.

Minority Rule:
Minority rule is a counterintuitive but stable outcome in complex systems. Complex systems behave differently at different scales, and individual psychology does not predict collective behavior. Understanding the minority rule can lead to a better understanding of complex systems, such as government and society.

Impact of Minorities on Society:
Kashish recounts a personal experience at a barbecue where a delegation from Jerusalem informed him that all drinks were kosher. Upon investigation, it was discovered that despite less than 0.3% of the American population being kosher eaters and drinkers, close to 100% of drinks in America are kosher.

Reason for Kosher Dominance:
The kosher rule’s simplicity makes it cost-effective for manufacturers to produce only kosher products, eliminating the need for separate production lines and storage facilities. Supermarkets can easily create dedicated kosher aisles, making it easier for consumers to find kosher products. Non-kosher consumers can still consume kosher products, while kosher consumers strictly avoid non-kosher products.

Intransigence of Minorities:
For minorities to maintain control over the majority, they must be unwavering in their beliefs and unwilling to compromise. Kashish cites the example of marketing preferences, where individual preferences are often overlooked in favor of accommodating the needs of minority groups.

Case Study: Stick Shift vs. Automatic Cars:
In the past, most Americans preferred stick shift cars. However, households with even one member who disliked stick shift opted for automatic cars. This resulted in a shift towards automatic cars as the norm, accommodating the minority preference.

Extension of Minority Rule to Other Societal Norms:
Kashish posits that minority rule is not an exception but rather the norm in society. Examples include non-smoking spaces, wheelchair accessibility, and gluten-free options in restaurants.

Conclusion:
Minorities can significantly influence societal norms and preferences by maintaining unwavering adherence to their beliefs and values. This influence can lead to the adoption of practices that accommodate minority needs, even if they differ from the majority’s preferences.

Intransigent Minorities and Their Impact:
Intransigent minorities can wield significant influence in society, even if they represent a small percentage of the population. They can set the agenda and control the narrative, often at the expense of the majority. Examples include the extreme left and right in politics and the anti-GMO movement.

Minority Rule and Its Implications:
The minority rule phenomenon extends beyond politics, affecting various aspects of society, including ethics and consumer choices. The illusion of increasing societal ethics is often driven by minority rule, not majority consensus. The introduction of GMOs illustrates how a small but vocal minority can sway public opinion and influence corporate decisions.

The Power of Intransigent Minorities in Shaping Society:
Intransigent minorities can dictate societal preferences, even when their views are not shared by the majority. They can influence elections by staying home or voting for third parties, forcing politicians to cater to their preferences. This dynamic undermines the notion that society is governed by the will of the majority.

Impact on Ethics and Consumer Behavior:
Minority rule can shape ethical standards, as the choices of the minority often become the norm due to their intransigence. Consumer choices can also be influenced by minority preferences, as seen in the case of GMOs and halal meat. When the price difference is small, consumers tend to choose the option favored by the minority.

Implications for Society:
The influence of intransigent minorities highlights the need for thoughtful consideration of minority perspectives in decision-making processes. Society must find ways to balance the rights and preferences of minorities with the interests of the majority. Understanding the dynamics of minority rule can help us navigate complex social issues and promote more inclusive and equitable outcomes.

Minority Rule:
Minority rule applies when the minority is not willing to compromise and is relatively distributed throughout the population. If the minority is concentrated in a specific area, they can be serviced as a minority and left alone. As a country opens up, the minority rule will prevail if the majority is not offended by it. The increase of halal meat consumption in Europe is a result of the application of minority rule. However, some people reacted negatively to this, causing a counter-reaction.

Halal Meat:
In the Roman world, halal meat was similar to sacrificial meat in the Near East. Christians would not eat sacrificial meat, which was a problem when pagans practiced sacrificial meat consumption. There may be counter-minority rules coming from somewhere.

Intransigent Minorities:
Minorities can be intolerant of the majority or the majority’s way of life. This can lead to a counter-reaction and potential conflict. There is a need for a balance between majority rule and minority rule to protect both groups.

Minority Rule in Crypto:
If a significant portion of skilled developers in Silicon Valley starts working on crypto-related projects and demands payment in crypto, it can lead to the adoption of crypto payments by payroll systems. This demonstrates the power of minority rule when it is unconditional.

Black Swans:
Black swan is an old concept that refers to something rare but not entirely impossible. The term was first used by a Roman poet to describe the rarity of a good person.

Science and Proof:
Science is a process of disproving rather than proving. Consensus in science doesn’t matter; one counterexample can destroy an argument. The system is designed to protect the minority that is right against the majority.

Ergodicity:
Ergodicity is a concept that examines whether the average behavior of a system over time can be predicted by observing the behavior of individual elements of the system. The sequence of events can matter, and analyzing things dynamically is essential for understanding certain concepts.

Skin in the Game:
Skin in the Game is organized around two concepts: things that appear static but have different properties when viewed dynamically, and the importance of personal experience and consequences. Having skin in the game allows one to understand the importance of considering the dynamic aspects of a situation and the potential for catastrophic outcomes.

Example:
In a casino, even with a small probability of losing, one can eventually experience a financial catastrophe due to the dynamic nature of gambling.

Past Dependence and Dynamic Thinking:
Our decision-making is often influenced by past events and experiences, leading to a tendency to be paranoid and risk-averse. Traditional psychology and economics studies often analyze decision-making statically, ignoring the dynamic nature of real-life situations. This static approach can lead to inaccurate conclusions about human behavior, such as labeling people as irrational when they are actually making rational choices in a dynamic context.

The Flaw in Static Analysis:
The example of a casino gambler illustrates the fallacy of static analysis. A gambler playing with house money might appear irrational by risking big winnings, but dynamically, this strategy is rational because it allows them to preserve their initial endowment while maximizing potential gains.

Loss Aversion:
Loss aversion is often viewed as irrational behavior, but it is a rational response to the potential consequences of financial ruin. If an investor goes bust, they may never recover and be able to participate in the market again. Staying in the game and preserving capital is essential for long-term success in investing and trading.

Dynamic Thinking in Crypto Asset Accumulation:
In the context of crypto asset accumulation and trading, it is crucial to adopt a dynamic mindset. Selling everything and going super short can lead to a situation where the investor is unable to re-enter the market, missing out on potential gains.

Appreciation for Dynamic Thinking:
Only a select group of traders, mathematicians, and computer scientists, such as Kelly and Shannon, truly grasp the importance of dynamic thinking. Psychologists often fail to understand the dynamic aspects of decision-making, leading to inaccurate conclusions about human behavior.

Risk Management:
Taking risks is necessary, but prioritize survival by mitigating the risk of ruin. Risk appetite should increase as wealth grows, known as mental accounting. Paranoia and skepticism are rational approaches because they consider multiple events, not just isolated incidents.

Replication Crisis in Psychology:
Many psychological studies fail to replicate, and those that do often show weaker effects. This suggests that traditional psychological science may not be as reliable as once thought. Grandmothers and grandparents often possess wisdom and insights that have stood the test of time.

Complexity and Time in Risk Management:
Large-scale systems and groups behave differently than small-scale ones, demonstrating complexity. Strategies must adapt over time to account for repeated behaviors and changing conditions. Grandparents and individuals with skin in the game often possess valuable insights into these dynamics.

Uncertainty and Decision-Making:
Uncertainty is inherent in many complex systems, including global warming. In the face of uncertainty, it is prudent to adopt a precautionary approach and minimize potential downsides. The more uncertain a system is, the more important it is to take a paranoid stance and position oneself for potential upside gains.

Conclusion:
Nassim Taleb’s work offers valuable insights into risk management and decision-making under uncertainty. His books provide practical guidance for improving decision-making in various aspects of life, including investing, healthcare, and personal conduct.