In any stable system, the person who takes a risk should profit from it if things go well but should also pay the price if things go wrong. As far as I’m concerned, this is the purest and most honest way to set things up. There should never be a reward without risk. I believe we all instinctively understand this. The idea of skin in the game is one of those ideas I think animals even understand. There’s a reason we all know Hammurabi’s famous law, an eye for an eye. No matter how advanced society and its systems get, there’s no escaping skin in the game. It’s kind of like moral gravity. Unfortunately, anytime a rule exists, people are gonna try to break it. In these cases, we should do as wise men do and learn from others’ mistakes.
Beware those who pursue the reward but outsource the risk.
We’ve all met a person like this. They want what they want but are not interested in paying the price. They want someone else to pay the price. They’re the boss who wants recognition but never works alongside their employees. Or the bank that gambles with investors’ money. When things go well, the bank makes a profit, and when things go bad, the investors lose their money.
Beware those who make decisions and aren’t exposed to any risk. (AKA government bureaucrats with 0% ownership, 0% accountability, and 100% decision-making power)
Ever seen someone who has to make a big decision that they have to live with? Where to live, the person they marry, and even buying a cell phone contract. They all pause and think. In all of those situations, the person is exposed to the risk of things going badly, and so they're forced to slow down. That risk of the decision registers physiologically; their body tenses, and their heart rate increases. They make the decision with every part of their being. That’s a proper decision. Now consider how useless bureaucrats declare war on another nation. None of their children are sent to do the fighting. The fighting is done thousands of miles away from where they live. Maybe there is a reason leaders used to lead their armies into battle. Alexander, Napoleon & The Prophet Muhammed all were in the thick of their battles.
Beware something with no owner.
Ownership is just another way of saying you own the risk and the reward. Whoever owns something is responsible for it. This is why the owner of an apartment building gets the rent, but they also get property violations. This balance of risk & reward keeps the building running smoothly. Contrast this with the Subway system in NYC. No one owns it. No one is responsible for it. New York City points the finger at New York State. New York State points the finger at NYC, and then they both point the finger at the federal government. This is a particularly insidious setup because it scares would-be problem solvers away. Why should they take the risk of “owning” the problem if there’s no upside? They’d carry the risk with 0% reward.
You can’t escape risk.
Being alive is a risky endeavor. At every turn, we’re asked to carry some sort of risk. Being vulnerable with those we love, starting a business, crossing the street, I can go on and on. I believe that risk/reward seeking is part of our biology. We all have energy that needs to be channeled into risky endeavors. Without a risk for us to focus on, that energy becomes destructive. I believe this is one of the sicknesses of our era. The safer our environments have become, and the more we try to avoid risk, the unhappier we get. Whereas that energy might have been focused on maneuvering risk, now it gets pent up and turns into anxiety & depression. Our biology punishes us when we try to avoid the law of skin in the game.
Risk is the true red pill.
We live in a world that craves certainty. We need to know when it will rain when we get to our destination and when our package will arrive. The problem is that we’ve gotten good at predicting what comes next, and we keep fooling ourselves into thinking we can always get certainty. We can’t. Every so often, something completely unpredictable happens that shocks us back to reality. The false sense of confidence that we can project and predict everything, the reality with no risk, that’s the matrix. It’s a pleasant lie, and worst of all; it doesn’t even hold up. The only way forward to a healthy life, a sober life where you live in accordance with reality, is one where you accept risk willingly.