What Skin in the Game Teaches Us About Independent Deal Origination

One of the most important books I have read in recent years is Skin in the Game by Nassim Nicholas Taleb. While the book touches on philosophy, investing, ethics, and risk management, its core message is surprisingly practical: people should share in the consequences of the decisions they make.

In other words, if you advise, recommend, invest, or negotiate, you should have something at risk yourself.

This idea has a powerful application in the world of independent deal origination.

In private equity and M&A, there are many participants involved in transactions — bankers, brokers, consultants, investors, management teams, lawyers, and intermediaries. However, not everyone carries the same level of accountability. Some participants are incentivized simply to generate activity, while others are focused on long-term value creation.

Independent deal originators operate differently.

Unlike large institutions with layers of protection and corporate branding, independent originators rely heavily on reputation, relationships, and trust. Every introduction matters. Every conversation reflects on personal credibility. If a low-quality opportunity is brought to an investor, the damage is personal and long lasting.

That is real skin in the game.

Taleb argues that systems become fragile when people enjoy upside without downside exposure. In deal origination, this can happen when intermediaries push transactions simply to collect fees, regardless of whether the deal is actually suitable for either side. The incentives become misaligned.

Independent originators often cannot afford that approach.

A successful independent deal professional understands that one bad introduction can damage years of relationship building. Because of this, the focus tends to shift away from quantity and toward quality. The best opportunities are usually sourced through trusted networks, careful listening, and patience rather than aggressive mass outreach.

The concept also applies to investors themselves. Many founders and business owners prefer working with people who demonstrate commitment beyond financial engineering. Investors who understand operations, market cycles, and entrepreneurial risk often build stronger relationships because they appreciate what is actually at stake for owners.

Another important lesson from Skin in the Game is that practical experience matters more than theoretical expertise. In deal origination, this is particularly true. Spreadsheets and market reports are useful, but they rarely replace years of conversations, failed negotiations, founder psychology, and local market knowledge.

Ultimately, independent deal origination is a relationship-driven business built on trust and aligned incentives. Taleb’s philosophy serves as a reminder that credibility is not created through titles or presentations alone. It is earned when your reputation, judgment, and future opportunities are directly tied to the quality of the deals you bring to the table.

References:

Taleb, N.N. (2020) Skin in the Game: Hidden Asymmetries in Daily Life. New York: Random House.