Nassim Taleb says "skin in the game" is a moral imperative. That's a strong statement, but one I happen to think is correct.

Deeply so, in fact.

If you aren't familiar with Taleb, much of his writing discuses what economists have studied for decades under the heading principal-agent conflict: situations where one person makes a decision, but doesn't fully share in its outcome. A realtor is an everyday example: negotiating on the seller's behalf (as agent), they have more to gain from getting a deal done quickly—earning them their commission—than holding out for the best price possible, which might be better for the seller.

One might criticize Taleb for simply "repackaging" a huge body of academic research. But names matter, and calling it "skin in the game" adds a lot—it's a great example of how the best the ivory tower can offer, with all its research, sophistication, and nuance, might already be understood by "ordinary people" going about their lives, running their shops and deciding who to elect.

Those "ordinary people" aren't a "dumb" as they look. They don't have models, but they have what Taleb calls "grandma wisdom". (A point I've made before, in bigville vs smallville.)

Taleb's criticism of "modernity"—his term for today's intellectual and moral environment—is the utter absence of skin in the game. The problem: skin in the game entails risk, and the modern world is very good, perhaps dangerously so, at moving that around.

Skin in the game is one of those irritating cases where once you give something a name, you can't help seeing it everywhere. Examples:

• Realtors who buy and sell our houses for 3%, but worry more about getting the deal done quickly, and their reputation with other realtors, than serving their clients.
• Retirement planners who earn commissions selling products vs. doing what's in their client's best interest
• TV pundits who tell us which stocks to buy, despite following none of their own recommendations
• Commission-only mortgage salesmen, who sold bad mortgages and helped cause the subprime crisis
  • Ratings agencies, which rate but don't feel the effects of bad debt
  • Securitizers, who package but don't invest in bundles of mortgages
• Regulators who enact complex policy at great distance (both geographic and economic) from the regulated
• Citizens who vote to "tax the rich" but won't pay any of the taxes themselves

In case you don't like Taleb, or just want a different perspective, John Bogle (father of index investing and founder of the Vanguard group) wrote an entire book on principal-agent conflict, calling for a "smaller, simpler financial system".

One with less complexity, and a little more skin in the game. Though I'm not sure he'd say it that way himself.