Skin-in-The-Game (more later) ...What it is

As a frequent observer and commentator on actions taken by the Mesa City Council done in public view and available for anyone to see, your MesaZona blogger hasn't heard any recent lately mention - or use - of the phrase "Skin-in-The-Game"

 

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It is a book Skin in the Game: Hidden Asymmetries in Daily Life is a 2018 nonfiction book by Nassim Nicholas Taleb, a former options trader with a background in the mathematics of probability and statistics. Wikipedia 

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Skin in the game (phrase)

From Wikipedia, the free encyclopedia

To have "skin in the game" is to have incurred risk (monetary or otherwise) by being involved in achieving a goal.

Reference: https://en.wikipedia.org/wiki/Skin_in_the_game_(phrase)

In the phrase, "skin" is a synecdoche for the person involved, and "game" is the metaphor for actions on the field of play under discussion.^[1] The aphorism is particularly common in business, finance, and gambling, and is also used in politics.^[1]

In business and finance

The term is used to ask or convey an owner(s) or principals undefined but significant equity stake in an investment vehicle where outside investors are solicited to invest. The theory is that principal's equity contribution is directly related to the stability of the investment and confidence that management has in the venture and is also (falsely) strongly correlated to the expected yield of the investment.

According to the economist Joseph Stiglitz, there tends to be a negative correlation between excess "skin" and negative returns.^[4]

The main issues surrounding "skin" or excess "skin" is the principal–agent problem whereby transparency and fiduciary obligations are disregarded by principals who have capital or excess capital (skin) tied into an entity. Many banks and other financial institutions bar employees from having any "skin" where client capital is managed, principally to address the issue of front running and commingled funds (MF Global).^[5] Investment structures such as hedge funds, private equity, Trusts and mutual funds are legally limited to a minority investment positions or are done to create a tax efficient structure. Typically equity inputs by these fiduciaries are around 0.5–2%. Nassim Nicholas Taleb and Constantine Sandis have argued for skin in the game as a rational and ethical heuristic for all risk-taking.^[6] 

 

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Accordingly, there are quite naturally some questions

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