{"id":33104,"date":"2018-04-04T06:41:51","date_gmt":"2018-04-04T11:41:51","guid":{"rendered":"http:\/\/olduvai.ca\/?p=33104"},"modified":"2018-04-04T06:41:51","modified_gmt":"2018-04-04T11:41:51","slug":"why-nassim-taleb-thinks-leaders-make-poor-decisions","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=33104","title":{"rendered":"Why Nassim Taleb Thinks Leaders Make Poor Decisions"},"content":{"rendered":"
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Why Nassim Taleb Thinks Leaders Make Poor Decisions<\/a><\/h3>\n
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Why do experts, CEOs, politicians, and other apparently highly capable people make such terrible decisions so often? Is because they\u2019re ill-intentioned? Or because, despite appearances, they\u2019re actually stupid? Nassim Nicholas Taleb, philosopher, businessman, perpetual troublemaker, and author of, among other works, the groundbreaking Fooled by Randomness,<\/em> says it\u2019s neither.<\/p>\n

It\u2019s because these authorities face the wrong incentives.<\/p>\n

They are rewarded according to whether they look good to their superiors, not according to whether they are effective. They have no skin in the game.<\/p>\n

Seasoned readers of Taleb will be pleased to see the so-called \u201cexperts problem\u201d pop up in living color in Skin in the Game: Hidden Asymmetries in Daily Life<\/em>, Taleb\u2019s latest collection of essays on risk, rationality, and randomness. According to Taleb, dentists, pilots, plumbers, structural engineers, and \u201cscholars of Portuguese irregular verbs\u201d are real experts; sociologists, policy analysts, \u201cmanagement theorist[s], publishing executive[s], and macroeconomist[s]\u201d are not.<\/p>\n

The difference is that, when people from the first list are wrong about something, it\u2019s obvious from the results and they suffer; they have skin in the game. Bad teeth, crashed planes, and leaky pipes are bad for business. People from the second list rationalize by substituting a different theory. They were not really wrong but just early, and, if they\u2019re lucky, which is to say skillful at apple-polishing, earn promotion after promotion by not failing utterly. (Financial advisors can argue that the fiduciary standard is the most powerful tool for putting them in the first list.) Skin in the Game<\/em> is full of insights like this, some recycled from his earlier work but many of them new. It is well worth the relatively quick read.<\/p>\n

…click on the above link to read the rest of the article…<\/p>\n<\/div>\n