“Avoid taking advice from someone who gives advice for a living, unless there is a penalty for their advice.” 

Nassim Nicholas Taleb – Skin in the Game: Hidden Asymmetries in Daily Life

Nassim Nicholas Taleb‘s book, “Skin in the Game: Hidden Asymmetries in Daily Life”, is certainly one of the more divisive books I’ve come across in the last few years and definitely worth a read. 

If you’re in business, you’ve most certainly heard the phrase being used in conversations about aligning incentives, but what does ‘Skin in the Game’ actually mean? 

Skin in the Game is about symmetry. 

It’s about sharing in the harm of negative outcomes just as well as profiting from the positive outcomes.

More pertinently, Skin in the Game allows you to judge the reliability of someone’s advice or knowledge. 

Lawyers without Skin in the Game

As a lawyer, giving advice is pretty much all that you do. 

But lawyers don’t usually have skin in their clients’ games. That’s because we rarely, if ever, bear the consequences personally for wrong decisions, whether those consequences occur because of our advice or not. 

Some obvious examples illustrate this point.

The company or its directors get fined or sued if the company acts on bad advice and breaks the law, not its lawyers. 

If the company makes a bad deal, it’s on the execs. Lawyers very rarely get blamed and have the often-used “out” to say “but that’s a commercial point”.

The more common scenario is that the company and its operational staff bear the cost and burden of having to implement impractical or poorly thought out advice.

All in the name of mitigating risk. I’ll get to this later.

It’s true that reputational harm, losing clients or getting fired are consequences for lawyers. It’s also true that lawyers who work on a contingency fee basis share in the bad outcomes of their clients to a degree (i.e. they don’t get paid). 

But ultimately clients will always have more risk. Remember – Skin in the Game is about symmetry.

For completeness, the threat of being sued or disbarred for negligent advice isn’t Skin in the Game. Lawyers have ethical and professional standards to uphold and ‘not being negligent or fraudulent’ is the baseline assumption for all lawyers. Professional indemnity insurance is also a thing.

‘Synthetic’ Skin in the Game

It isn’t necessarily a bad thing that lawyers don’t have Skin in the Game. 

There’s a reason that Western society evolved away from the ancient Athenian practice of individuals having to plead their own cases, and that’s because it’s far more difficult to stay calm and rational when you stand to feel the pain of your wrong decisions. (I describe an example of this from my own life here). 

In a legal setting, the stakes are often high and taking considered and well-reasoned actions matters.

So, accepting that lawyers can’t (and in some cases probably shouldn’t) have skin in their clients’ games, what are we to do?

Perhaps the answer is to try to emulate Skin in the Game.

Call it Synthetic Skin in the Game, if you will.

By understanding and appreciating the inherent risk asymmetry in the lawyer-client relationship, lawyers can demonstrate significant empathy towards clients and ultimately give better advice. 

To quote the famous line by Atticus Finch in To Kill a Mockingbird: “You never really understand a person until you consider things from his point of view…until you climb into his skin and walk around in it.” 

“Synthetic” Skin in the Game isn’t true Skin in the Game. It’s recognising that you don’t have true Skin in the Game but still behaving and making decisions as if you do. 

Lawyers with Synthetic Skin in the Game 

Synthetic Skin in the Game can take many forms. 

Simplicity is a Product of Skin in the Game

If you’re an in-house lawyer, you could start by taking on some operational responsibility and actually implementing your advice yourself once in a while.  

From experience, a strange thing happens. Your drafting becomes more straightforward and reflective of plain language (who needs Legal Doublets and Triplets anyways???). 

Your risk tolerance also increases because you actually feel the opportunity cost of mitigating or avoiding remote or insignificant risks.

As a result, your advice becomes more concise and easier for your clients to actually implement. 

As Taleb very elegantly puts it: “Skin in the game brings simplicity – the disarming simplicity of things properly done. People who see complicated solutions do not have an incentive to implement simplified ones.”

Sophistication Betrays a Lack of Skin in the Game

But what about law firm lawyers? 

For starters, it’s no secret that lawyers are rewarded for perception. The swanky offices, cabinets chock-full of deal tombstones and features in ‘Who’s Who’ lists of prominent lawyers exist for a reason.

Clients looking for perceived experts in their field are willing to pay top-dollar.  

But when you’re rewarded for perception, there’s also a business imperative to show sophistication. This often means more agreements, more risks analysed, more words, more complexity. 

I’ll fess up and say that I was heavily guilty of this as a junior associate. 

If I didn’t deliver a bulletproof argument, research every case that’s ever existed and cover off each possible edge case scenario in my agreements, I felt I wasn’t excelling at my job. On reflection, I’m not sure that helped anyone. At least, not on the occasions when it didn’t actually matter.

Maybe there are times when a quick question does warrant a quick answer after all?  

Operating in the Grey is a Sign of Skin in the Game

As lawyers, we also use words like “it depends”, “on balance” or “the probability that x happens is low” instead of giving a definitive “yes” or “no” answer. Often it’s under the pretense that there is some inherent greyness in the question (of course it’s grey, that’s why you’re being asked for advice in the first place). 

Chances are we’re really just covering the off-chance that the bad outcome we’re advising our clients against actually materialises despite our advice (search your feelings, you know it to be true).  

We hate being wrong, or worse, being seen to be wrong.

But if you aren’t willing to take the risk of being wrong, should you be giving an opinion? 

Taleb writes about an extra dimension to honour, being the act of putting yourself at risk for others; that is, having your skin in other people’s game. 

Perhaps that’s the very least we owe our clients. 

Why Synthetic Skin in the Game Matters

The cynic in me says there are compelling business reasons for having Synthetic Skin in the Game. 

Clients will appreciate your succinct, usable advice and recognition of the practicalities they grapple with every day. And they’ll keep coming back.

It’s certainly one of the easiest ways to become that most sought after of things – the “trusted advisor”. 

But the truth is, I think it just makes you a better lawyer. 

And isn’t that what we’re all striving to be?