Skin in the game is an individual who assumes risk related to their decisions, strategies, advice, designs and activities. Generally speaking, individuals who are responsible for risks are more likely to make good decisions and put in a reasonable effort. The following are illustrative examples.
SafetyA pilot may pay more attention to safety risks if they are actually on the aircraft they are flying as opposed to working from home.
PerformanceA CEO may perform better if they have most of their wealth tied up in the success of a firm.
FinancialA financial trader may take less risks with their own money than with a client's. This is particularly true if their fee structure rewards overperformance but doesn't penalize losses.
ProjectsStakeholders who do the work of a project and are responsible for its failure. Stakeholders who simply contribute their requirements or advice may be indifferent to project risks.
InventionA chemical engineer who needs to eat foods on an ongoing basis treated with a pesticide that she invents.
CriticismA film critic who is also a working director or actor.
CostsA student who is paying their own way through university or college may be more motivated to study.
DesignAn aircraft engineer who will be on the first test flight.
PolicyA bureaucrat who needs to sell a policy, process or procedure to the public by going out and meeting them.
NotesSkin in the game is a type of solution to the principal–agent problem whereby a person making decisions on the behalf of other people has little or no incentive to act on in their best interests.The origin of the phrase skin in the game is unknown but is possibly related to William Shakespeare's The Merchant of Venice in which the antagonist Shylock, demands collateral of a pound of flesh on a debt from the protagonist Antonio.
This is the complete list of articles we have written about risks.
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