The central tenet to a safe, just society

The problem with risk in the world markets is that those in charge just don’t get it, writes Nassim Nicholas Taleb. It’s all about skin in the game, and it’s what’s needed this year.

THE highlight of 2012 for me was when, during a difficult moment, I received a message of encouragement from a firefighter. His point was that he found my ideas on tail risk extremely easy to understand. His question was: How come risk gurus, academics, and financial modellers don’t get it?

Well, the answer is right there, staring at me, in the message itself. The fellow is a firefighter; he cannot afford to misunderstand risk. He is the one who would be directly harmed by his error. In other words, he has skin in the game. And, in addition, he is honourable, risking his life for no bonus.