Transferors of Risk

Nassim NIcholsas Taleb has written a book called Skin in the Game. In it he talks about how today’s bureaucrats, politicians and business leaders do not have skin the game. Like the bailed out banks in 2008, these people share in the upside but not the downside. They are transferors of risk. He argues that those who don’t take risks should never be involved in making decisions. Below is a quote:

“This idea of skin in the game is woven into history; historically, all warlords and warmongers were warriors themselves, and, with a few curious exceptions, societies were run by risk takers, not risk transferors.

Prominent people took risks – considerably more risks than ordinary citizens. The Roman emperor Julian the Apostate, about whom much later, died on the battlefield fighting the never-ending war on the Persian frontier – while emperor. One may only speculate about Julius Caesar, Alexander, and Napoleon, owing to the usual legend-building by historians, but here the proof is stark. There is no better historical evidence of an emperor taking a frontline position in battle than a Persian spear lodged in his chest (Julian omitted to wear protective armor). One of his predecessors, Valerian, was captured on the same frontier, and was said to have been used as a human footstool by the Persian Shapur when mounting his horse. And the last Byzantine emperor, Constantine XI Palaecologus, was last seen when he removed his purple toga, then joined Ioannis Dalmatus and his cousin Theophishis Palaeologus to charge the Turkish troops with their swords above their heads, proudly facing certain death. Yet legend has it that Constantine had been offered a deal in the event of a surrender. Such deals are not for the self-respecting kings.

These are not isolated anecdotes. The statistical reasoned in this author is quite convinced: less than a third of Roman emperors died in their beds – and one can argue that given that only few of these died of really old age, had they lived longer, they would have fallen either to a coup or in battle.”

“Some think that freeing ourselves from having warriors at the top means civilization and progress. It does not. Meanwhile:

Bureaucracy is a construction by which a person is conveniently separated from the consequences of his or her actions.”

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