"Skin In The Game"
Aug. 20th, 2011 01:59 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
alexandraerinThe new GOP/Fox News (but I repeat myself) catchphrase is "skin in the game". This was a phrase that was popularized in the investing world by Warren Buffett, the Oracle of Omaha.
It refers to stakes, as in gambling. If you've anted up, if you've put money on the table, you have skin in the game. You're taking on a share of the risk and thus are entitled to a chance at the rewards. The "skin" here could be seen as referring to a slang term to money, though it could refer equally well in a more literal sense to your hide. Your hide's on the line. Risk = exposure.
When Buffett talked about people having "skin in the game", he meant that the people at the top of a company... the people who profit most directly from it and exert the most control and are most responsible for its business practices, ethical or otherwise... ought to be invested in their own company. Then instead of pocketing exorbitant salaries and inappropriate severance packages regardless of how many other people's the company loses or mismanages, their fortunes are tied to how well the company performs, and how well they perform their functions as stewards of it.
When the current crop of right-wing commentators say it, what they mean is this: poor people don't pay enough taxes.
This is the evolution of a pose they've assumed that started off with them trying to defend balancing the budget on the backs of the poor and middle class as good economic sense (because there are so many more of us than rich people), and when cold mathematical reality failed to be swayed to their side, it magically became a moral position. The Big Lie that half or nearly half Americans contribute nothing to the common weal in taxes became significant. It's no good talking about where "revenue" is going to come from or impending "default" or the "full faith and credit of the United States" because half the population doesn't even have skin in the game. Nothing we do is going to matter in the long term unless all those lazy, poor, uninterested, uninvested poor people get their skin up off the couch and put it in the game.
Now, this is a ridiculous and odious position for a lot of reasons, but one of the bigger holes in it is that the whole point of the "skin in the game" philosophy has nothing to do with how much of your money is put where, in a literal sense... it's about sharing in risks and rewards. It's about tying your personal fortune in a real and tangible way to the fortunes of something else.
Who has more skin in the game than the poor?
Who is more affected by the rising and falling fortunes of the government and the economy: the rich, or the poor?
Oh, the rich may have lost more total wealth in the various crashes and recessions, but one of the many marvelous things about money is that the more you have the less it matters, and the less you have the more it matters. Somebody with even just ten times as much money as you who lost 90% of their wealth would be where you are, wherever that is. Now imagine that you lost 90% of your total wealth and property. See how that works? It's less obvious but still true at 10% or 5%.
If you can get everywhere you might need or want to go regardless of the state of the sidewalks and mass transit in your city, regardless of the availability and reliability of something like Amtrak, you don't have much skin in the game.
If you can get decent healthcare (or any healthcare) regardless of the availability of public funding for such, you don't have as much skin in the game as people who can't.
If a volatile market or a slow economy could force you to lose one of your houses or otherwise downsize your real estate holdings, you have less skin in the game than people who don't have anywhere to downsize to.
"Skin in the game" is not about a magical bit of abstract responsibility or accountability that comes from how we push around paper and numbers. Buffett advocates it as a means of promulgating a sense of responsibility and keeping everyone honest, but merely having stock in one's own company isn't the same thing as being honest and responsible. It ties your fortune to the value of the company's stock, not to the well-being of the company in the sense of the entire entity including its employees and customers.
The people who depend on the company for a living or who trust it with their health or savings or security... their skins are in the game! The CEOs who are going to get the same millions in salary that is a drop in a bucket compared to the value of the stock options that are supposed to be ensuring honesty and fidelity and that will only increase in value the more jobs they eliminate and corners they cut?
It's no skin off their backs what happens to anyone else. They have no exposure. They have no skin in the game.
It refers to stakes, as in gambling. If you've anted up, if you've put money on the table, you have skin in the game. You're taking on a share of the risk and thus are entitled to a chance at the rewards. The "skin" here could be seen as referring to a slang term to money, though it could refer equally well in a more literal sense to your hide. Your hide's on the line. Risk = exposure.
When Buffett talked about people having "skin in the game", he meant that the people at the top of a company... the people who profit most directly from it and exert the most control and are most responsible for its business practices, ethical or otherwise... ought to be invested in their own company. Then instead of pocketing exorbitant salaries and inappropriate severance packages regardless of how many other people's the company loses or mismanages, their fortunes are tied to how well the company performs, and how well they perform their functions as stewards of it.
When the current crop of right-wing commentators say it, what they mean is this: poor people don't pay enough taxes.
This is the evolution of a pose they've assumed that started off with them trying to defend balancing the budget on the backs of the poor and middle class as good economic sense (because there are so many more of us than rich people), and when cold mathematical reality failed to be swayed to their side, it magically became a moral position. The Big Lie that half or nearly half Americans contribute nothing to the common weal in taxes became significant. It's no good talking about where "revenue" is going to come from or impending "default" or the "full faith and credit of the United States" because half the population doesn't even have skin in the game. Nothing we do is going to matter in the long term unless all those lazy, poor, uninterested, uninvested poor people get their skin up off the couch and put it in the game.
Now, this is a ridiculous and odious position for a lot of reasons, but one of the bigger holes in it is that the whole point of the "skin in the game" philosophy has nothing to do with how much of your money is put where, in a literal sense... it's about sharing in risks and rewards. It's about tying your personal fortune in a real and tangible way to the fortunes of something else.
Who has more skin in the game than the poor?
Who is more affected by the rising and falling fortunes of the government and the economy: the rich, or the poor?
Oh, the rich may have lost more total wealth in the various crashes and recessions, but one of the many marvelous things about money is that the more you have the less it matters, and the less you have the more it matters. Somebody with even just ten times as much money as you who lost 90% of their wealth would be where you are, wherever that is. Now imagine that you lost 90% of your total wealth and property. See how that works? It's less obvious but still true at 10% or 5%.
If you can get everywhere you might need or want to go regardless of the state of the sidewalks and mass transit in your city, regardless of the availability and reliability of something like Amtrak, you don't have much skin in the game.
If you can get decent healthcare (or any healthcare) regardless of the availability of public funding for such, you don't have as much skin in the game as people who can't.
If a volatile market or a slow economy could force you to lose one of your houses or otherwise downsize your real estate holdings, you have less skin in the game than people who don't have anywhere to downsize to.
"Skin in the game" is not about a magical bit of abstract responsibility or accountability that comes from how we push around paper and numbers. Buffett advocates it as a means of promulgating a sense of responsibility and keeping everyone honest, but merely having stock in one's own company isn't the same thing as being honest and responsible. It ties your fortune to the value of the company's stock, not to the well-being of the company in the sense of the entire entity including its employees and customers.
The people who depend on the company for a living or who trust it with their health or savings or security... their skins are in the game! The CEOs who are going to get the same millions in salary that is a drop in a bucket compared to the value of the stock options that are supposed to be ensuring honesty and fidelity and that will only increase in value the more jobs they eliminate and corners they cut?
It's no skin off their backs what happens to anyone else. They have no exposure. They have no skin in the game.