This article is an excerpt from the Shortform book guide to "Skin in the Game" by Nassim Nicholas Taleb. Shortform has the world's best summaries and analyses of books you should be reading.
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How much does your job limit your freedom? Apart from freedom, what other sacrifices do you have to make for the security your job provides?
In his book Skin in the Game, Nassim Taleb argues that employment is a mutually beneficial agreement in which employees are trading freedom for security to a company that, in exchange, bears some of their personal risks. In Taleb’s words, employees put their skin in the company’s game.
In this article, we’ll discuss the risk-freedom trade-off made by employees, detailing the benefits employees receive from employers and the ways in which their freedom is limited.
Employers Purposefully Limit Their Employees’ Freedom
For businesses, hiring employees is a way to minimize risk. Today’s corporations are so efficient and produce goods at such a massive scale that any obstacle in the assembly line comes at an enormous cost. Undependability and errors are more costly than ever before.
Employers do what they can to make sure their employees keep production running and subjugate their desires for the sake of the company. As Taleb puts it, employers want to take away their employees’ freedom.
Employers give employees something to lose—skin in the company’s game—so they’re more likely to reliably fulfill their duty. The ideal employee is scared enough of losing what the company gives him that he makes his duty to the company a central priority of his life. People are far more motivated by fear of losing what they have than the desire for something they don’t—employers use this fact to ensure their employees’ loyalty.
Essentially, employers pay employees to put skin in their game and accept some of the company’s risk for a share of its rewards. This not only benefits the employers, who earn profits from the work of their employees, but also the consumers, who get to buy the things they want.
(Shortform note: While Taleb argues that the employee relationship is driven by fear, this doesn’t mean that the workplace itself needs to be driven by fear. If workers are constantly threatened with being fired or otherwise punished, the miserable work experience will make them less afraid of losing their job, making employees less reliable and defeating the purpose of employment. On top of this, studies have shown that fear-based workplaces hinder productivity, further incentivizing owners to maintain a positive work environment.)
Employees Trade Freedom for Security
What does this skin in the game look like? What does the employee receive in exchange for the freedom that they’re so afraid to lose?
- Job Security
- Benefits and Perks
- Personal Identity
We’ll discuss each of these in turn.
For employees, the central exchange of employment is trading freedom for security. Employees are less free than the unemployed—eight hours a day, they’re forced to go to work.
In exchange, though, their personal risk is greatly reduced. As long as an employee fulfills her job description, the employer promises a steady paycheck—a long-term commitment to help the employee get a place to live and food to eat. Compare this to an independent contractor or freelancer, whose future income is never assured.
This security is the first benefit that the employee has to lose—the form that her skin in the company’s game takes. An employee can always be fired, cutting off that steady paycheck, and the fear of losing it ensures that employees are dependable.
| Is Job Security Dead? Some experts have asserted that job security has become a thing of the past. Highly competitive and rapidly changing industries mean that companies no longer need to offer the long-term job security typical for most of the 20th century. As a result, employees are advised to prepare to pivot—attain valuable skills, don’t be shy about promoting yourself, and always keep an eye out for other opportunities. Taleb mildly disparages the idea of working on yourself in order to appear employable. In his view, the need to maintain an employable image limits your freedom more than simply having a job does—you’re no longer trying to just keep one company happy, but every company happy. He would prefer that you focus on putting your “Soul in the Game” and do good regardless of the incentives. Taleb’s opinions aside, even if long-term job security is becoming obsolete, employment certainly isn’t. In most cases, even short-term job security is more attractive than freelance work. |
Secondly, employers give their employees benefits and perks that make the idea of getting fired even more unattractive. Standard benefits like health insurance are obviously important to employees, but they may also find themselves hooked on luxuries like a company car, expensive business trips, or a workplace fitness center.
(Shortform note: Most of the time, humans tend to normalize to a consistent baseline of happiness regardless of their external circumstances, a phenomenon psychologists have termed “hedonic adaptation.” People with cushy perks at work aren’t significantly happier than those without them, yet they assume they’d be much less happy without them. You should take steps to avoid falling into this trap: pursue time in the flow state, rotate pleasures in your life to keep them feeling new, and spend some time helping others.)
Finally, to many employees, their relationship to the company is a source of fulfillment and a core part of their personal identity. This is another part of their skin in the company’s game—if an employee loses her job, she also loses the identity that gives her life meaning. Imagine a workaholic lawyer who gets disbarred. The idea of being a lawyer gave her life so much direction and meaning that without it, she doesn’t know what to do. Sometimes, employers even encourage this—if an employee defines herself by her work, she is more likely to prioritize good work and be dependable.
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Like what you just read? Read the rest of the world's best book summary and analysis of Nassim Nicholas Taleb's "Skin in the Game" at Shortform .
Here's what you'll find in our full Skin in the Game summary :
- Why having a vested interest is the single most important contributor to human progress
- How some institutions and industries were completely ruined by not being invested
- Why it's unethical for you to not have skin in the game
