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> A new car built by my company leaves somewhere traveling at 60 mph. The rear differential locks up. The car crashes and burns with everyone trapped inside. No

> A new car built by my company leaves somewhere traveling at 60 mph. The rear differential locks up. The car crashes and burns with everyone trapped inside. Now, should we initiate a recall? Take the number of vehicles in the field, A, multiply by the probable rate of failure, B, multiply by the average out-of-court settlement, C. A times B times C equals X. If X is less than the cost of a recall, we don't do one. - Narrator, Fight Club

madez 8y ago
That first approximation is only valid for small total numbers of failures. If a failure repeats, the loss function is not simply A times B times C but greater, for example by loss of perceived quality of products, or by criminal investigations against the company and individuals in it.
- munk-a 8y ago
  At the same time a recall doesn't just cost the amount of parts and labour to collect and refit the effected products, it has a similar impact on the prestige of a company. Even if the company is "acting in the right" it will still be known that the company erred in the first place.
dabbledash 8y ago
What is the alternative to a cost benefit analysis though? We could spend an infinite amount on diminishing safety gains.
- caconym_ 8y ago
  There is a difference between proactively pursuing safety, which will yield diminishing returns sooner or later, and acting to correct a known defect that puts human lives at risk via a clearly understood mechanism.
  - dabbledash 8y ago
    I’m not sure that’s right. Proactively searching for risks would cost more, but the same reasoning still applies. I think we know that if we limited cars’ top speed to 10mph, they would be much safer. But it’s not worth it. I think it would make sense to require the disclosure of known flaws though, if it isn’t required already.
  - userbinator 8y ago
    You could say that everything is a known defect. Pilots can make fatal mistakes or just become suicidal, all the engines could be overwhelmed by birds, etc. The argument against that is, succinctly, "life is a risk." Humans do things all the time with the full knowledge that what they're doing could kill them.
    - jetrink 8y ago
      But we attempt to mitigate the risks you cited as well. Engine designs are subjected to bird ingestion tests. Controls and procedures are designed to reduce the chance that pilots will make serious errors. Pilots can be ordered to undergo psychological testing by an FAA-approved physician if they show signs of mental health issues. Etc.
- pizza 8y ago
  No one is saying to use something other than a cost benefit analysis; they are saying make sure that the costs are actually priced accurately, and to err on the side of caution when estimating the damages you can cause.
- theptip 8y ago
  A cost-benefit analysis is appropriate, but the "cost" side should be QUALYs not literal litigation costs.
  - dabbledash 8y ago
    I’d slightly tweak this and say legal liability should be calculated using QUALY. The idea is to shift the financial burden on the right party so they’ll be incentivized to do the CBA correctly. They’re not going to internalize costs out of the goodness of their hearts.
- jerquee 8y ago
  you're forgetting that the numbers are skewed by the concealment of information by the manufacturer. If there were no secrets, the public would boycott airplanes with known problems like this one, and the cost comparison would be more appropriate.
- scottlamb 8y ago
  The problem isn't a cost/benefit analysis. It's the (perhaps straw man) cost/benefit analysis (quoted from Fight Club) that optimizes solely for (short-term) profit, ignoring the intrinsic value of human lives (as well as company reputation / future sales, regulatory compliance, etc). This is immoral, and we need to know if it's what Boeing has done. Here's an altruistic way to do a cost/benefit analysis. Optimize for safety. Consider money as a means to an end. If the airplane is prohibitively expensive or your company goes bankrupt, people will use some other (presumably less safe) form of transportation instead. You have to limit price. You might be able to pay for a recall yourself once in a while, but you have to sell products at a profit on average, take subsidies, or close shop. So no, you can't spend an infinite amount on diminishing safety gains. Okay, altruism is too much to expect from a for-profit company, but we should expect better than total short-sighted greed/psychopathy. Maybe we should expect (by "expect" I mean "require/demand", not "naively assume") enlightened self-interest and long-term thinking?
rangibaby 8y ago
https://users.wfu.edu/palmitar/Law&Valuation/Papers/1999/Leggett-pinto.html https://users.wfu.edu/palmitar/Law&Valuation/Papers/1999/Leg...
deleted 8y ago
[deleted]

madez 8y ago

That first approximation is only valid for small total numbers of failures. If a failure repeats, the loss function is not simply A times B times C but greater, for example by loss of perceived quality of products, or by criminal investigations against the company and individuals in it.

munk-a 8y ago
At the same time a recall doesn't just cost the amount of parts and labour to collect and refit the effected products, it has a similar impact on the prestige of a company. Even if the company is "acting in the right" it will still be known that the company erred in the first place.

dabbledash 8y ago

What is the alternative to a cost benefit analysis though? We could spend an infinite amount on diminishing safety gains.

caconym_ 8y ago
There is a difference between proactively pursuing safety, which will yield diminishing returns sooner or later, and acting to correct a known defect that puts human lives at risk via a clearly understood mechanism.
- dabbledash 8y ago
  I’m not sure that’s right. Proactively searching for risks would cost more, but the same reasoning still applies. I think we know that if we limited cars’ top speed to 10mph, they would be much safer. But it’s not worth it. I think it would make sense to require the disclosure of known flaws though, if it isn’t required already.
- userbinator 8y ago
  You could say that everything is a known defect. Pilots can make fatal mistakes or just become suicidal, all the engines could be overwhelmed by birds, etc. The argument against that is, succinctly, "life is a risk." Humans do things all the time with the full knowledge that what they're doing could kill them.
  - jetrink 8y ago
    But we attempt to mitigate the risks you cited as well. Engine designs are subjected to bird ingestion tests. Controls and procedures are designed to reduce the chance that pilots will make serious errors. Pilots can be ordered to undergo psychological testing by an FAA-approved physician if they show signs of mental health issues. Etc.
pizza 8y ago
No one is saying to use something other than a cost benefit analysis; they are saying make sure that the costs are actually priced accurately, and to err on the side of caution when estimating the damages you can cause.
theptip 8y ago
A cost-benefit analysis is appropriate, but the "cost" side should be QUALYs not literal litigation costs.
- dabbledash 8y ago
  I’d slightly tweak this and say legal liability should be calculated using QUALY. The idea is to shift the financial burden on the right party so they’ll be incentivized to do the CBA correctly. They’re not going to internalize costs out of the goodness of their hearts.
jerquee 8y ago
you're forgetting that the numbers are skewed by the concealment of information by the manufacturer. If there were no secrets, the public would boycott airplanes with known problems like this one, and the cost comparison would be more appropriate.
scottlamb 8y ago
The problem isn't a cost/benefit analysis. It's the (perhaps straw man) cost/benefit analysis (quoted from Fight Club) that optimizes solely for (short-term) profit, ignoring the intrinsic value of human lives (as well as company reputation / future sales, regulatory compliance, etc). This is immoral, and we need to know if it's what Boeing has done. Here's an altruistic way to do a cost/benefit analysis. Optimize for safety. Consider money as a means to an end. If the airplane is prohibitively expensive or your company goes bankrupt, people will use some other (presumably less safe) form of transportation instead. You have to limit price. You might be able to pay for a recall yourself once in a while, but you have to sell products at a profit on average, take subsidies, or close shop. So no, you can't spend an infinite amount on diminishing safety gains. Okay, altruism is too much to expect from a for-profit company, but we should expect better than total short-sighted greed/psychopathy. Maybe we should expect (by "expect" I mean "require/demand", not "naively assume") enlightened self-interest and long-term thinking?

rangibaby 8y ago

https://users.wfu.edu/palmitar/Law&Valuation/Papers/1999/Leggett-pinto.html https://users.wfu.edu/palmitar/Law&Valuation/Papers/1999/Leg...

deleted 8y ago

[deleted]