3 ms·
This real life example is more complicated than the Fight Club version. It includes more variables like the added sales I mentioned and all these variables are
by slg 5y ago
This real life example is more complicated than the Fight Club version. It includes more variables like the added sales I mentioned and all these variables are unknown. How can you draw conclusions about one variable in a formula in which you don't know the value of any of the variables?
- refulgentis 5y agoNot sure what you mean: the movie scene has the same property. It's not about the risk of individual failures of components, it's risk of a payout Strong indicator I believe my anti-flood machine is good at preventing floods is I'm willing to take on paying for any liabilities you incur from flooding
- slg 5y agoYou are only thinking about payouts and not the change in sales. Imagine you make $100m selling your anti-flood machines. Maybe your machine fails 10% of the time and a failure costs 2x the unit price. Taking on liability in that situation would bring you down to $80m. Bad deal for you. But what if someone in marketing comes and tells you that market research suggests taking on liability leads to an extra $30m in sales. You come out ahead because the $30m in new revenue exceeds the $26m in new liability. That isn’t confidence in your machine. It is marketing and accounting.
- refulgentis 5y agoOccam's Razor: would only work in the short run, crash data goes to regulators.