Making good decisions isn’t easy, especially when it’s hard to know what information to trust. In an ideal world, we could trust the information we hear from friends and from the news. But the media likes to cover the rare and shocking, not the common and routine. A plane crash halfway around the world (a highly uncommon occurance) can seem as likely as a car accident down the street. This distortion skews our perspective, creating a big gap between what we think is likely and what actually is.
Nassim Nicholas Taleb has a smart way of knowing what really matters—he calls it “Skin in the Game.” In his book by the same name, Taleb explains that people with something at stake usually offer the best information. It’s simple: when you stand to lose, you’re going to think carefully. But when you’re insulated from the consequences, it’s easy to toss around advice or make bold predictions because they sound good, not because they’re giong to work.
I learned this firsthand when I worked at AIG, one of the world’s largest insurance companies. I’d always heard that smoking was dangerous, but just how dangerous is it, really? Insurers have skin in the game—they make money by getting risks right. Actuaries are tasked with calculating the risks for each person and how these affect lifespan. For smokers, they’ve found it takes about seven years off their lives. That isn’t just a random figure; it’s backed by decades of data and reflected in higher premiums. It’s a real number that matters both to life insurers and, even more critically, to smokers themselves.
We took this approach when deciding where to host our kids’ birthday parties. As parents, we’re experts at spotting danger everywhere, but that doesn’t help much with knowing what’s actually worth worrying about. We looked at an indoor climbing gym and were terrified—kids climbing three stories up, held by just a single rope? It seemed risky.
So, we turned to a friend who’s a personal injury lawyer, hoping she could give us a sense of the real risks based on how often she sees cases from these places. Her answer surprised us: indoor climbing gyms are actually very safe. She almost never sees lawsuits from climbing gyms. The injury rates are low, somewhere between 0.02 and 0.29 per 1,000 hours of climbing, and most of those are minor—sprains, strains, the usual bumps and bruises. We compared that with trampoline parks, which seem a lot less scary. But it turns out they’re far riskier, with an injury rate of 1.14 per 1,000 hours, almost five times higher. And the injuries are often more serious—around 11% need medical attention, with a mix of fractures, dislocations, and even head or neck injuries.
We got another bit of kids safety advice from a friend of ours is a senior manager at a retailer. He often gets sued by parents whose kids wore Crocs on escalators. Crocs, with their soft, flexible material, can easily get caught in escalators, especially when kids stand too close to the edges. The result? Feet get trapped, and injuries are often severe. The U.S. Consumer Product Safety Commission even warns about the risk of soft-sided shoes on escalators, but the lawsuits keep coming. Crocs added safety labels, but retailers like my friend’s company still get hit with liability when accidents happen.
So next time you’re trying to make sense of risk, look to the people with skin in the game. Those who have something real at stake tend to cut through the noise and focus on what actually matters. In a world overflowing with opinions, there’s no substitute for someone who’s living with the consequences of their advice.
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