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.
Additionally, long-term employees often build their social lives around those they work with—yet another benefit they have to lose if they’re fired.
| Diversify Your Identity How can you avoid investing too much of yourself into your job? Author Mark Manson recommends that you develop a diverse identity: Define yourself according to multiple different values. We each assess our own self-worth in different ways—some people are proud of being successful at work, while others are more proud of being well-liked by friends, or their faithfulness to a religious code. Manson argues that the healthiest way to live is to invest time and emotion into multiple roles you play in life. Don’t be only a good worker, but also a good parent, a good friend, a good artist. Pursue a greater variety of interests and allow yourself to care deeply about all of them. This way, if you get fired, you won’t collapse into an identity crisis or depression—your life will still be rich with meaning. You’ll be less afraid of losing your job and retain more of the freedom sacrificed in employment. |
Corporate Culture: Another Way Employees Lose Their Freedom
Not only are employees expected to fulfill their job descriptions, they are also expected to do so in a certain way, further limiting their freedom.
During long-term employment, employees adapt to a specific corporate culture. They begin to obey a set of manners and customs that are specific to the job—for example, wearing a tie to work, acting respectfully and professionally in meetings. Employees are also motivated to maintain a good reputation among their coworkers. These behavioral limitations are a large part of the freedom given up by employees.
| Corporate culture is not always a bad thing—its “limitations” can sometimes contribute to personal evolution. Hedge fund manager Ray Dalio’s Principles states that this kind of culture is vitally necessary in any ambitious organization. Dalio requires his employees to comply with a specific culture designed to foster productivity and fulfilling working relationships—the cornerstones of which are radical transparency and radical honesty. Anyone who can’t adapt to this tightly optimized work culture is asked to leave the company. As Dalio puts it, it’s “a family business in which family members have to perform excellently or be cut.” While this sounds harsh, it ensures that the remaining team members can be proud that they’re performing at their best. |
The Exception: Employees With Freedom
Taleb highlights a unique group of employees that are able to transcend these limits on their freedom. Those who are able to visibly provide enough value to the company that they are unable to be replaced can regain some of their “freedom” as long as they remain valuable.
This special group of employees—“wolves,” as Taleb calls them—are “freer” than the typical employee, with fewer restrictions on their behavior. This is because they bear more of their own risks.
These employees know that if they produce good enough results, they’ll never be fired, so they don’t care about their image or reputation. They ignore dress codes, curse and swear on the job, and take four-hour lunch breaks, behaving as erratically as they’d like. However, by refusing to mold to the corporate culture, they risk being fired if they ever become less productive. They willingly take on greater risk in order to have more freedom.
| When High Performers Need to Be Fired Entrepreneur Gary Vaynerchuk argues that these high-performing wildcards may need to be fired regardless of how much money they’re making. In Vaynerchuk’s eyes, a positive work culture is priceless in the long run. “Toxic” employees that put their coworkers in a bad mood are slowing down productivity in subtle ways. Time spent worrying about office politics or pacifying a nasty communicator is time that could be spent getting things done. Likewise, employees with below-average sales numbers or other forms of trackable productivity may be making work a brighter place, paying for themselves by making the most productive employees happier to be at work. Emotionally healthy work culture is a valuable asset, and it’s worth protecting. |
How to Approach Freedom in Our Lives
Taleb doesn’t frame “freedom” as an absolute good. There are pros and cons to how much “freedom” you have—as we’ve discussed, the more freedom you have, the more risks you embrace. It’s up to each of us to decide for ourselves how much freedom and risk we want and strike an appropriate balance.
The majority of first-world citizens are employees—they have chosen to limit their own freedom for the rewards described above: job security, benefits, and a sense of personal identity. At the same time, there’s nothing stopping us from quitting our job and making a living independent of any existing organization. Many people do—freelancers, entrepreneurs, and even hermits living off the land. A free country enables us to choose how free we want to be.
Regardless of what we decide, Taleb cautions us to be aware of how much freedom we have and what risks we’re taking to have it. If you act too boldly and don’t have the freedom to do so, you will lose what you have. A salesman who overestimates his value to the company (and consequently, his freedom) and keeps skipping meetings will eventually be fired. Alternatively, if you feel like you lack freedom in your life, you could try taking more risks.
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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
