Skin in the game

Skin in the game is a phrase mostly understood in a business context where the potential investors look to how much the CEO has anted up before throwing their cash in the pot. The potential of future profits are dickered over, but it’s what will be lost if things go awry which indicates a certain confidence level in the project. Apparently people are more adverse to loosing what they have, than gaining in the future.

Corporations offer incentives to employees to invest in their the company’s stock 401K based on this premise. A matching corporate contribution is thought to be money well spent, as employees have a reason to care about the future of the company. Tying their retirement fund to the company dollar sets up a scenario where they could loose, which then spurs them to adopt custodial duties over and above their cube and highbacked chair.

These two scenarios are pretty easy to peg as they are demarcated by the flow of dollars between employees, investors and the corporation. But what about skin in the game in the production of public goods, street safety for instance? How do the subgroups get divvied up and who has something to loose on which street corner?

The skin in the game problem here is that members don’t realize what they have to loose, they don’t realize that they are players in services that greatly impact their lives and the potential for loss is real. They think, because they have been told to think, that public goods are something provided to them. If anything the problem in public goods has been described as one of free riding- which is mostly irrelevant. It is skin in the game that matters.

When encouraged to turn on the illegal element in a neighborhood, the individual actor’s calculus is that there is more to loose by going to the cops. Yesterday a $30,000 reward was posted for information leading to the arrest of individuals responsible for the death of a six year old by a stray bullet. We’ll see if that’s the right number to buy out the loss, perceived or real, and remove one tax on safety.

But street safety is not the only public arena where skin in the game lacks proper account. If citizens could truly see what they loose over their lifetime by failing to put some of their efforts in the production of public goods, I think their dispensation of time and resources would change. And for that reason lack of approachable role models at all levels of neighborhood public goods is the skin in the game we are all missing.