Where it mostly fails is incompetence, some might have the best intention of something succeeding but their best effort is still not worth much.
You could think of this as avoiding "a scam", but there is no conscious intention involved.
And even if that were the case, it's still quite a complex calculation to make. Let's say there are two architects building a tower block with the knowledge that they will be living in the top floor when it's built. One of them has little appetite for risk and builds their skyscraper very safely, without any real deviation from classic proven standards. Meanwhile, the other architect is much more open to risk and designs their skyscraper using brand new ideas and techniques. Both of them are equally happy to stay in the top floors of their buildings, but are the two buildings equally safe and risk free?
Firstly, you've made the assertion that someone whose own life of at risk based their decisions is more likely to make safe decisions. As you say, it's an intuitive assumption to make, but reality tends to be very counterintuitive, especially when it comes to human logic and risk. Look at misconceptions around dangers of fighting vs driving, for example, or health risks and causes of death. So my first argument is that you should find evidence for that assertion before relying on it. I just don't trust it.
My second argument is that, even if it is true that people will take fewer risks if they know their life will be affected by those risks, I still don't think that would make that a useful tool in judging absolute risk. This is because human appetites for risk seem to vary a lot. Judging whether a building is safe based on whether the builder sleeps there is meaningless unless we know the builder's own propensity for risky decisions.
To give a more concrete example not directly related to risk: say you've got a disease, and I come to you with two medicines, A and B. I won't tell you how effective they are, but I will give you a double dose of medicine B, which will double its effectivity. Which one of these medicines should you take?
The logical answer here being that you just don't know, because you don't know the baseline effectivity of the medicines. Maybe they work about the same, in which case the double dose is obviously better. Maybe A is ten times more powerful to start with, so it doesn't really matter that B gets doubled.
Similarly, unless we have some indication of people's baseline propensity for risk, I don't think we can effectively make genuine (as in, statistically valid, data-backed) judgements about the situations you're describing, however counterintuitive that might feel.
I absolutely do not. Pretty much all of the risky decisions I see people make, they seem to be self-harming just as often as they harm others.
To me whether the engineer lives in his own building doesn't tell me anything, because a guy who cuts corners does it because he thinks it's safe to cut corners.
What I want to know is, is the engineer's personality risk-seeking or risk-averse? Are they the kind of person who does things by the book or is always looking to cut corners? Do they value a job well done or do they value speed? These are the things that matter, not their personal tolerance for risk.
Overconfidence, hubris, obsession, laziness, envy, spite, and a nearly-infinite list of other "irrational" behaviors are a function of human existence and would cause someone to take stupid risks with both themselves and others!
The problem is that old line from Upton Sinclair about how it was "difficult get a man to understand something when his salary depends on not understanding it." The engineers, investment people, mortgage people etc. are motivated to believe that what they are doing is sufficient. This is supposed to be why disinterested government regulators- people whose pay does not change on whether this building, investment, submarine, mortgage etc. is safe- jump in and actually approve things. But, of course, government regulators are silly and just slow things down, because they don't understand how our new system uses computers/crypto/AI/whatever to be just as safe.
"some kind of magical anecdote" [sic. You mean "antidote"]
I don't think you've even read the book, or you wouldn't say something so devoid of logic. "I know lots of people who take risks themselves who'd never recommend the same risks to others" is a non sequitur.
> "Skin in the game" seems like an extremely faulty heuristic in its own way, with little evidence to support a strong assurance effect.
The entire book is full of evidence from history.
I did read the book, although that was around the time it came out and my memory may be faulty. I remember not being particularly impressed with the level of evidence presented, and the care taken to present that evidence accurately.
It’s just that we have better categorisation of physical failures than psychological ones.
It does provide strong incentives, which you should trust a lot more than words.
Your point that some people are daredevils who don't care too much about personal risk is interesting though. Hadn't thought about that.
We need to know more about said someone, their risk aversion profile and history, and what part of their area of expertise matches the "game" -- if any.
A theme of the book is that outsiders were taken by surprise by the success of the Wright brothers. Outsiders only got to hear of the passion and tragedy of the Tower Jumpers, who were making no progress. Only insiders knew of the Arm Whirlers with their gradual accumulation of knowledge and slow progress.
The distinction helps us understand "skin in the game". If you can distinguish between Tower Jumpers and Arm Whirlers, employ only Arm Whirlers. Insisting that they have "skin in the game" will ensure proper caution. If you cannot tell which is which, insisting on "skin in the game" will have an uneven record, with the Tower Jumpers ruining your safety record and their own skin.
The trickiest question is: how much skin in the game? Insist on too much and the Arm Whirlers will stay away; they were the risk averse ones. Then you only have Tower Jumpers and insisting on "skin in the game" will help you not at all.
The point of antifragility is the system benefits, even if the individual loses as happened here. The corruption is when the benefits accrue to one set of people and the risks somewhere else.
But, the point of skin in the game isn't that it reduces the risk, it's a moral issue of who bears the risk. Skin in the game means you don't get the upside without the downside risk. That's it. It's not some magical pixie dust that makes people act rational, or follow safety protocols.
Taleb and others spread this idea that "skin in the game" is some kind of magical anecdote to faulty thinking, incomplete risk analysis, incorrect application of heuristics, and other things. That just doesn't seem true. Lots of people do risky things every day based on social proof, or familiarity, or commitment, or scarcity, or many of the other risk-perception-altering heuristics that govern our lives. We do it when we drive, when we drink, when we ski, and in all kinds of other occasions. "Skin in the game" seems like an extremely faulty heuristic in its own way, with little evidence to support a strong assurance effect.
Conversely, I know lots of people who take risks themselves who'd never recommend the same risks to others (especially outdoor and motor sports enthusiasts). That's the opposite of Taleb's hypothesis.