In the phrase, “skin” is a synecdoche for the person involved, and “game” is the metaphor for actions on the field of play under discussion. The aphorism is particularly common in business, finance, and gambling, and is also used in politics
According to the economist Joseph Stiglitz, there tends to be a negative correlation between excess “skin” and negative returns.
The main issues surrounding “skin” or excess “skin” is the principal–agent problem whereby transparency and fiduciary obligations are disregarded by principals who have capital or excess capital (skin) tied into an entity. Many banks and other financial institutions bar employees from having any “skin” where client capital is managed, principally to address the issue of front running and commingled funds (MF Global). Investment structures such as hedge funds, private equity, Trusts and mutual funds are legally limited to a minority investment positions or are done to create a tax efficient structure. Typically equity inputs by these fiduciaries are around 0.5–2%. Nassim Nicholas Taleb and Constantine Sandis have argued for skin in the game as a rational and ethical heuristic for all risk-taking.
With over £9m of client funds, Bentley Intelligence trades sports betting and information across the globe. Our ‘skins’ are our ‘insiders’. Our ‘game’ is ‘football’.