Skin In The Game \ stacker news ~culture

2630 sats \ 17 comments \ @kr 9 Feb culture

Sometimes I wonder how many of the big issues that society faces could be solved with adequate skin in the game…

Zoning laws were created when cars made it possible for people to live and work in separate cities/towns (enabling people to move loud, polluting factories into other people’s neighborhoods). Would they be necessary if everyone lived in the neighborhood they worked in?
Builders create homes they would never live in, in places they would never move to. Many also sell their properties right away, and have no financial interest in building homes that are durable or easy to maintain. What would new home construction look like if builders all had to live in the complexes they created, or maintain ownership of their properties for decades?
Food companies create chemical-infused junk that their employees would never eat. What would food standards look like if all employees needed to regularly eat their own products? Would food regulation even be necessary?
Politicians optimize for short-term results to get re-elected in the next few years. What would policies look like if every politician was elected for life?
CEOs of public companies often hold a majority of their wealth outside of their own company’s stock. What products would they build (or kill) if they had all their net worth invested in their company?

I’m sure there are lots more examples of how a mismatch of incentives can create bad outcomes.

I’m also sure there are limits to these incentives, and there could be unforeseen consequences of some of the extreme measures I outlined above.

Curious to hear from other stackers on how to build a society that values skin in the game. If you have any other favorite examples, leave them in the comments too!

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569 sats \ 0 replies \ @wingalt 10 Feb

Skin in the game is a very simple and powerful concept:

builders in ancient times were responsible for the quality of construction work, if a bridge collapsed the builder and their family would suffer big consequences
Leaders used to lead the troops on the battlefield, how many bureaucrats would start wars if they or their kids would have to fight in the front line
actually many CEOs get paid in stocks to reduce their tax liabilities (capital gain < income tax) so they have skin in the game which many have abused with heavy borrowing, stock buybacks to boost stock price at the expense of long term investments in their company
sending their in the school they teach in would probably improve the overall quality of education

537 sats \ 6 replies \ @Undisciplined 9 Feb

Zoning was never necessary, but we've already had that discussion.

I’m also sure there are limits to these incentives, and there could be unforeseen consequences of some of the extreme measures I outlined above.

There certainly are, but that doesn't make it an uninteresting thought experiment. My perspective on this is that liability needs a larger role. There are perfectly good reasons to provide goods and services that you wouldn't use yourself, but you're right that it creates an incentive problem.

When I look at the examples you lay out, I see a bunch of situations where the state grants liability protections of various sorts: polluters are difficult to sue if they're complying with regulations; builders are hard to sue if the home is up to code; food companies are hard to sue if they're using FDA approved ingredients; politicians can't be sued for their misdeeds; etc. You could certainly add Big Pharma into the mix here, as well as many others.

If goods and service providers didn't have these state standards to hide behind, they would be responsible for the actual safety of their products. Of course, they could take the economic hit of fully disclosing the known risks and continue on, but at least then consumers would have more information to base their decisions on.

201 sats \ 2 replies \ @kr OP 9 Feb

My perspective on this is that liability needs a larger role. There are perfectly good reasons to provide goods and services that you wouldn't use yourself, but you're right that it creates an incentive problem.

What do you think the effect of eliminating limited liability for corporations (which has been the standard way of operating a business since the 1800s) would be on the US economy?

One could make a pretty good case that limitations to liability enabled better capital formation and more rapid innovation in America

500 sats \ 0 replies \ @Undisciplined 9 Feb

One could make a pretty good case that limitations to liability enabled better capital formation and more rapid innovation in America

That was the justification at the time at, least. I don't privilege economic growth over property rights protections.

If liability protections were repealed it would have to conform to the general standard that if something was legal when it was done, it cannot be made retroactively illegal. So, companies would not be on the hook for prior activities.

We'd see an enormous increase in the usage of liability insurance and an immediate recall of innumerable products that producers know are more harmful than they've disclosed.

Over time, there would be precedent built up that would provide producers protection against facing the same baseless suits repeatedly. To some extent, that will recreate an element of current liability protections.

0 sats \ 0 replies \ @Bell_curve 9 Feb

Not for Philip Morris and other tobacco companies

27 sats \ 2 replies \ @Bell_curve 10 Feb

I have changed my mind on zoning laws. We have residential and commercial zones and they should be segregated. Neighborhoods with single family homes should not be coerced to build multi family apartments that are targeted for poor or section 8 residents

0 sats \ 1 reply \ @Undisciplined 10 Feb

Neighborhoods with single family homes should not be coerced to build multi family apartments that are targeted for poor or section 8 residents

I certainly agree with that, but that's also a type of zoning law. I think it's unlikely, in the absence of zoning laws, that the same areas would be developed with both low income and single family housing.

0 sats \ 0 replies \ @Bell_curve 10 Feb

California is suing cities for not doing this.

Obama and now Biden want to do this

https://www.whitehouse.gov/briefing-room/statements-releases/2023/03/09/fact-sheet-president-bidens-budget-lowers-housing-costs-and-expands-access-to-affordable-rent-and-home-ownership/

https://www.gov.ca.gov/2023/03/09/california-sues-huntington-beach-for-violating-state-housing-laws/

500 sats \ 4 replies \ @0fje0 9 Feb

Interesting thought experiment!

the big issues that society faces

One of the biggest - judged by how often it comes up as a cause of these issues - must be a lack of quality education?

So, if we can figure out a way to have skin in that game, we could potentially resolve a lot of other issues at the same time.

0 sats \ 3 replies \ @kr OP 9 Feb

for sure. if you had to design a better education system with skin in the game, what would it look like?

474 sats \ 2 replies \ @Bell_curve 9 Feb

Abolish teachers unions. Smaller school districts. Expel juvenile delinquents

10 sats \ 1 reply \ @kr OP 9 Feb

one other idea i was just thinking about at higher education levels is to escrow tuition costs and only pay them to teachers if a student earns more than their expected salary had they started work after high school

0 sats \ 0 replies \ @Bell_curve 10 Feb

No teacher would work in low income areas like Baltimore or St. Louis. Maybe that’s not a terrible thing

474 sats \ 0 replies \ @Bell_curve 10 Feb

What if public school teachers had to send their kids to public school? The vast majority of public school teachers send their kids to private schools

0 sats \ 0 replies \ @BitcoinIsTheFuture 10 Feb

There is little money in the solution but a lot of money discussing the issues and working on something. I.e. IT consultants

615 sats \ 1 reply \ @shado_op 9 Feb

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25 sats \ 0 replies \ @kr OP 9 Feb

Yes, Taleb’s book on this is great. I need to read it again.