On Skin in Game and Bearing the Cost.

On Skin in Game and Bearing the Cost.

During a recent coaching call, I was asked about several specific investments I’ve made and my outlook on those assets. While the answers I gave were specific and strategic (i.e., fluid and reactive), the underlying principles were not and they centered around having skin in the game.

Nassim Nicholas Taleb, author, mathematician and former options trader talks frequently about having skin in the game. 

“Skin in the game means you own your own risk. It means people who make decisions in any walk of life should never be insulated from the consequences of those decisions, period. If you’re a helicopter repairman, you should be a helicopter rider. If you decide to invade Iraq, the people who vote for it should have children in the military. And if you’re making economic decisions, you should bear the cost if you’re wrong.”

No economist or journalist has ever gone broke writing about the follies of those who thought they could time the market. So, in this brief article, I’ll leave you with two important thoughts on investing in this upcoming period of extreme volatility:

First, anyone who is tempted to avoid the economic costs of a wrong decision should not invest in the stock market. Period. Full stop.

Second, when in doubt, zoom out.

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Worked at Burleson Orthodontics. Attended University of Missouri–Kansas City. Lives in Kansas City, Missouri.