{"id":53750,"date":"2021-11-09T15:07:00","date_gmt":"2021-11-09T19:07:00","guid":{"rendered":"https:\/\/www.shortform.com\/blog\/?p=53750"},"modified":"2021-11-20T14:20:29","modified_gmt":"2021-11-20T18:20:29","slug":"nassim-taleb-risk","status":"publish","type":"post","link":"https:\/\/www.shortform.com\/blog\/nassim-taleb-risk\/","title":{"rendered":"Nassim Taleb: Risk Defines Reality"},"content":{"rendered":"\n<p>Do you consider yourself a risk-taker? How does risk-taking enrich your life? <\/p>\n\n\n\n<p>In his book <em>Skin in the Game<\/em>, <a href=\"https:\/\/www.shortform.com\/blog\/nassim-nicholas-taleb\/\">Nassim Taleb<\/a> argues that risk-taking\u2014 having skin in the game\u2014is the essence of life itself. As Taleb puts it, \u201creal life is risk-taking.\u201d He means this literally\u2014by definition, a life without risk is not real life. Taleb is saying that risk defines what we consider to be reality and creates meaning by defining value.<\/p>\n\n\n\n<p>In this article, we&#8217;ll explore Taleb&#8217;s take on risk (that is, having your skin in the game, as Taleb puts it). <\/p>\n\n\n\n<!--more-->\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Risk Determines What We Call Reality<\/strong><\/h2>\n\n\n\n<p>According to Nassim Taleb, risk determines how we define reality. Movies aren\u2019t \u201creal\u201d because their events have no lasting consequences. They\u2019re entirely without risk. Taleb asserts that this is why dreams aren\u2019t real. When we wake up, they have no lasting consequences.<\/p>\n\n\n\n<p>Taleb brings up a <a href=\"https:\/\/www.shortform.com\/blog\/philosophical-thought-experiments\/\">thought experiment<\/a> posed by philosophers: Imagine we were able to plug ourselves into an \u201cexperience machine\u201d that could create the illusion of real life. We would see, hear, and feel a full world for an extended period of time, but it would all be implanted in our brains instantly. Would that experience be real? Taleb says no\u2014because of the absence of risk or lasting consequences.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>The Experience Machine\u2019s Libertarian Roots<\/strong><br><br>This \u201cexperience machine\u201d thought experiment was first posed by philosopher Robert Nozick in his 1974 book <em>Anarchy, State and Utopia<\/em>. Nozick was a libertarian who wrote <em>Anarchy, State and Utopia<\/em> <a href=\"https:\/\/plato.stanford.edu\/entries\/nozick-political\/\">as a counterargument to the political philosophy of John Rawls<\/a>. The experience machine is intended to support his argument that maximal pleasure for as many people as possible cannot be the end goal of society, as some people seek higher values than pleasure (and so should not have their behavior limited by the government except when necessary to preserve human rights).<br><br>To prove that some people seek higher values than pleasure, Nozick argues that even if the experience machine could provide whatever pleasurable experience you could want, some people would refuse to plug into the machine, because they want things that the machine can\u2019t give them\u2014for example, to live up to a higher ideal in the \u201creal\u201d world by staying and providing for their family.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Risk Is What Makes Us Human<\/strong><\/h3>\n\n\n\n<p>Humans emotionally connect to the idea of risk and loss\u2014it\u2019s baked into our neurology. This is because <strong>how much we value something can be measured by how much we\u2019re willing to risk for it.<\/strong><\/p>\n\n\n\n<p>If you want something, you\u2019re going to need to sacrifice something to get it\u2014for example, if you want a larger income, you need to spend time and effort to secure a raise at work or find a new job. Even then, you\u2019ll never know for sure that you\u2019ll get the raise you want. This is where risk comes into play\u2014our world is inherently uncertain. Every sacrifice you make to get something you want is a risk.<\/p>\n\n\n\n<p>In this way, risk and sacrifice are the core of the human experience. <strong>Risk is what makes us human.<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Why Do Humans Find Stories Meaningful?<\/strong><br><br>In his book Story, screenwriting teacher Robert McKee argues that stories \u201centertain when they give the audience a fresh model of life empowered with an affective meaning\u201d [emphasis added]. Humans are on a never-ending quest for meaning. We want to figure out what will make us happy\u2014more than that, we want to know what is worth sacrificing for. Like Taleb, McKee understands that we define value by how much we\u2019re willing to risk, and he makes it a central tenet of his writing advice. Characters in stories need to have something to lose, or else it becomes obvious that nothing in the story matters, and the audience gets bored. Stories with stakes are engaging because they have a chance of showing us a new situation where meaning can be found.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>The Origin of Value<\/strong><\/h3>\n\n\n\n<p>So, skin in the game is a reflection of value, but this still doesn\u2019t answer the question: <strong>Why do we value what we value?<\/strong><\/p>\n\n\n\n<p>Taleb frames everything we are, everything we do, everything we risk, as a means toward one end: the survival of the human race. Everything we feel an emotional attachment to is, somehow, intended to motivate us to keep the human collective alive.<\/p>\n\n\n\n<p>All of society is one group effort to help us all live for as long as possible. We build houses to protect us from nature, we build cities to help us collaboratively fulfill our survival needs, and we create technology to help us live longer and easier lives.<\/p>\n\n\n\n<p>In order to achieve these goals, each of us needs to make countless sacrifices over the course of our lives\u2014it takes sacrifice to <a href=\"https:\/\/www.shortform.com\/blog\/how-to-build-your-career\/\">build a career<\/a> that benefits society and to forge mutually fulfilling relationships. Skin in the game is what it means to be human because being human means being wired to contribute to the collective&#8217;s survival.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Irrational Beauty<\/strong><br><br>Taleb doesn\u2019t comment on beauty or art\u2014the things we value highly, but don\u2019t seem to have much <a href=\"https:\/\/www.shortform.com\/blog\/practical-value\/\">practical value<\/a> when it comes to survival. Immanuel Kant defined beauty as that which is pleasurable, <a href=\"https:\/\/plato.stanford.edu\/entries\/kant-aesthetics\/#2.1\">yet not a means to another end<\/a>. That is, not a biological pleasure like food or sex (which would, by Kant\u2019s definitions, be \u201cagreeable\u201d) nor a conceptual pleasure that makes you happy because you <em>rationally know <\/em>it will help you get what you want, like a house or a car (which Kant would call \u201cgood\u201d). Music, art, and aesthetics are \u201cbeautiful.\u201d In this way, Kant defines beauty specifically as what Taleb would call \u201cirrational,\u201d as it seems to serve no greater purpose.<br><br>If that\u2019s the case, how would Taleb explain how much humans value beauty? Artists often bear tremendous risk and sacrifice in order to create something beautiful, showing, by Taleb\u2019s definition, that they value it, despite it not contributing to humanity\u2019s survival. By his logic, Taleb would have to argue that beauty serves some practical purpose for humanity that we can\u2019t easily identify. For example, beauty <a href=\"https:\/\/www.wired.com\/2011\/07\/why-does-beauty-exist\/\">could merely be an intense drive for pattern detection<\/a> that motivates us to discover subtle information valuable for survival. An unromantic way of looking at the world, for sure.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Redefining Rationality<\/strong><\/h3>\n\n\n\n<p>With this conception of humanity in mind, Taleb redefines what is \u201crational.\u201d Instead of defining rational beliefs as those that align with our understanding of the way the world works, <strong>Taleb argues that we should see any belief that enables survival as rational.<\/strong><\/p>\n\n\n\n<p>It\u2019s impossible to judge the rationality of beliefs using logic and abstraction. The universe is too incomprehensibly complex\u2014there will always be unknown factors that could lead us to faulty conclusions. Even if we did possess complete knowledge of the universe, no one on Earth would be able to effectively process that information into a usable mental model. We need a different way to determine the rationality of beliefs.<\/p>\n\n\n\n<p>To this end, Taleb believes in a \u201cnatural selection\u201d of beliefs: <strong>Any belief that has survived for several generations is rational because those who held that belief have survived and chosen to pass it down. <\/strong>This is an extension of the Lindy effect\u2014time is the only impartial judge of quality.<strong> <\/strong>In this view of rationality, even beliefs that are distorted or outright untrue can be \u201crational\u201d if they cause us to behave in a way that helps us survive.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Critique of Taleb\u2019s Rationality<\/strong><br><br>This definition of rationality is a recurring <a href=\"https:\/\/medium.com\/@oliverwaters_76079\/the-anti-rationality-of-nassim-nicholas-taleb-2733ce24dde1\">point of contention among <em>Skin in the Game<\/em>\u2019s critics<\/a>. If we were to totally refrain from abstract judgment of beliefs and instead wait for them to play out over years to see if they survive, truly irrational beliefs could cause massive amounts of suffering\u2014as an extreme example, if the Allied Forces had allowed Nazi Germany\u2019s ideas to play out, they could have destroyed the world. It\u2019s necessary to label some beliefs as irrational.It\u2019s impractical to assume that <em>all<\/em> new beliefs are inferior to traditional ones. Taleb\u2019s assertion that \u201ceverything that survives survives for a reason\u201d doesn\u2019t necessarily prove his more extreme point that every belief that <em>has survived<\/em> has aided that survival. Sometimes, beliefs survive <em>despite<\/em> hurting our chances of survival\u2014people <a href=\"https:\/\/www.medicalnewstoday.com\/articles\/bloodletting-why-doctors-used-to-bleed-their-patients-for-health#The-theory-of-the-4-humors\">believed in medicinal bloodletting for thousands of years<\/a>.<br><br>Additionally, the world is constantly changing, and we have reason to believe <a href=\"https:\/\/waitbutwhy.com\/2015\/01\/artificial-intelligence-revolution-1.html\">that it\u2019s changing faster and faster<\/a>. Even if a belief has been successful at promoting survival for the past several millennia, this doesn\u2019t 100% prove that it will continue to do so forever\u2014this is the main idea in Taleb\u2019s own <em>The <a href=\"https:\/\/www.shortform.com\/blog\/black-swan-theory\/\">Black Swan<\/a><\/em>. The world is inherently unpredictable and can change in unpredictable ways.<\/td><\/tr><\/tbody><\/table><\/figure>\n","protected":false},"excerpt":{"rendered":"<p>Do you consider yourself a risk-taker? How does risk-taking enrich your life? In his book Skin in the Game, Nassim Taleb argues that risk-taking\u2014 having skin in the game\u2014is the essence of life itself. As Taleb puts it, \u201creal life is risk-taking.\u201d He means this literally\u2014by definition, a life without risk is not real life. Taleb is saying that risk defines what we consider to be reality and creates meaning by defining value. In this article, we&#8217;ll explore Taleb&#8217;s take on risk (that is, having your skin in the game, as Taleb puts it).<\/p>\n","protected":false},"author":7,"featured_media":36232,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[7,24],"tags":[529],"class_list":["post-53750","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-lifestyle","category-society","tag-skin-in-the-game","","tg-column-two"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v24.3 (Yoast SEO v24.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Nassim Taleb: Risk Defines Reality - Shortform Books<\/title>\n<meta name=\"description\" content=\"In Skin in the Game, Nassim Taleb argues that risk-taking is the essence of life itself. 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