I recently watched a video on the book Skin in the Game: Hidden Asymmetries in Daily Life by Nassim Nicholas Taleb, author of The Black Swan and Antifragile, among other books.
A concept that has been in my mind for a while now re-emerged. Could “skin in the game” be the key to achieving our financial and other goals? Could it be the key to accomplishing your business goals, online or otherwise? Is it what’s holding you back from being successful?
Firstly, though, “skin in the game” refers to how much you have invested in the outcome of any undertaking you’re involved with. In other words, what are the consequences on you if plans go south and the enterprise fails, what amount of risk are you taking?
One example Nassim Nicholas Taleb gives is that of an investment banker. He gets to invest with other peoples’ money but when he fails, as happened in the 2008 financial crisis, the government steps in and bails him out. This is an example of a person with little skin in the game, which is the reason you should not trust him with your money.
The author considers all bureaucracy as people with little skin in the game.
On the opposite side is the entrepreneur, for example. As an entrepreneur, you are very much invested in the success of your business. You have put in effort, time, and money to see your business succeed. You have taken a high risk, in building your own business, and, thus, you have a lot of “skin in the game”.
“Starting a business is the ultimate expression of skin in the game.
— Nassim Nicholas Taleb
If you succeed, you succeed, but if you fail, it’s on you.”
That is why entrepreneurs tend to be viewed more favorably than bureaucrats in the eye of the public, according to the author.
“Skin in the game” can make us smarter too, in a sense.
Imagine you hate studying math and probability at school. As a result, you are not good at it. Now picture that you get a job in the financial sector where your success, and livelihood, depend on understanding and solving probability equations. You now study probability with vigor, and not only do you understand it and even get good at it, but you also find pleasure in it.
“Let us return to pathemata mathemata (learning through pain) and consider its reverse: learning through thrills and pleasure. People have two brains, one when there is skin in the game, one when there is none. Skin in the game can make boring things less boring. When you have skin in the game, dull things like checking the safety of the aircraft, because you may be forced to be a passenger in it cease to be boring. If you are an investor in a company, doing ultra-boring things like reading the footnotes of a financial statement (where the real information is to be found) becomes, well, almost not boring.”
— Nassim Nicholas Taleb
Now consider the same idea in the context of your online business and entrepreneurship endeavors.
If you don’t get the results you want, if you find it difficult and even frustrating at times, if you feel you have already tried hard enough, maybe you are ready to give up, could it be that you have little skin in the game?
Maybe you don’t have the motivation to get out of your comfort zone and take the action required to succeed because you don’t bear enough risk.
Perhaps you have a plan B that you can always fall back into. You can go back to your day job, return to the relative safety and comfort of being an employee (funnily enough, employees also have skin in the game. In this case, though, it works to keep them obedient to their employers. Nassim Nicholas Taleb likens employees to dogs and entrepreneurs to wolves who choose freedom over being taken care of at a house, but also carry the associated risks).
This makes it easy to give up on your entrepreneurial aspirations on the first hardship.
This begs the question, how much risk should you take? How invested should you be in your online business?
I don’t think there is a clear answer to this. In my opinion, since building a successful, profitable online business is typically a long-term process that can take from months to a few years, depending on your starting point, regarding skills and mindset, it’d be prudent to do it in parallel with a job that can sustain you while you learn and create. At the right time (for you), you can abandon the “employee-boat” and focus on your business.
In some cases though, it may work better to go all out. Do or die, as the saying goes. The “skin in the game” is so high you are far more likely to take decisive action and succeed, and do it faster also. But you are far more likely to lose it all too, the risk being so high.
I think the key question is, how much “skin in the game” do you require to be able to stay focused on your vision, your purpose, and your bigger, truly fulfilling longer-term goals related to building your own online business?
Arnold Schwarzenegger, in a favorite motivational speeches, says that he never had a plan B. He hates having such a plan because it takes away energy from plan A. It means that you start doubting yourself, and it is connected to our fear of failure.
He goes on to describe how there is nothing wrong with failing. It’s ok to fail as long as you get up and try again, as long as you give it everything you’ve got.
“It is very important to understand that we function better if there is no safety net.”
— Arnold Schwarzenegger
On the other hand, you may want to have a worst-case scenario, temporary backup plan in your mind, even if it’s just to re-frame and dampen your fears.
In case of failure, your temporary “disaster-relief” plan may help you get up and give it another go.
In time, if you’re committed enough, and invested enough in the outcome, success is the only possible end result.
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