Here is some Friday #GrupeerGoodToKnow (or #GGTK) for you. Have you ever asked yourself where the phrase “Skin in the Game” in finance comes from? This concept refers to owner of the principal having a significant stake in it. On Grupeer “Skin in the Game” refers to our own participation in the loan that is placed on the platform, to share the potential risks of our investors. But what skin are we talking about?
It is believed that in finance this phrase is attributed to the mastermind investor Warren Buffet, when he contributed to the fund he has raised. Some historians argue that the inspiration for the phrase is coming from William Shakespeare’s play The Merchant of Venice, the treasure chest for financial phrases: “…Antonio, must promise a pound of his own flesh as collateral…”. (Btw, the famous diversification phrase “don’t put all your eggs in one basket” is coming from the same Shakespeare’s play). Basically, this phrase means you risk your own “skin” in the venture you offer others to participate in. Don’t believe anyone who says that the actual skin is meant in this phrase.