The video discusses a thought experiment presented by Richard Thaler to the board of a large American company, potentially GE. Thaler offered the heads of eight major divisions a decision with a 50% chance of a 50% increase in profits and revenue, but also a 30% chance of a 30% decrease in profits and revenue. Surprisingly, all but two division heads declined the offer. When Thaler questioned their decision, citing the favorable net odds, they explained that a 30% chance of failure meant a significant risk of losing their jobs. The chief executive, responsible for the aggregate performance, wanted all division heads to accept the odds, believing that the collective outcome would be positive despite individual risks.

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The second thing is a story which actually comes from Richard Thaylor. He's talking to the board of a large American company, possibly GE, we're not quite sure. It's never said. Okay.

And he goes around the boardroom table to the heads of the eight largest G divisions and said, "I can offer you a decision which has a 50% chance of success where your profits and uh and and and revenue will go up by 50%. But it also comes with a 30% chance of failure where your profits and revenue will fall by 30%. How many of you would take those odds?"

And all but two of the eight said, "No, I wouldn't take those odds." Two of them said they wouldn't. He said, "Well, you're all good enough mathematicians to realize that this is an uneven bet with, you know, a net upside. Why wouldn't you take the odds?" He go, "Because 30% of the time I'd lose my job."

The chief executive is sitting at the end of the room now. He he is responsible for the aggregate of all their decisions. Okay? And he go, "But I want all of you to take those odds because net net between the eight of you, we're almost certain to end up."

"On the road to success there's always we, not me"

The second thing is a story which
actually comes from Richard Thaylor.
He's talking to the board of a large
American company, possibly GE, we're not
quite sure. It's never said. Okay. And
he goes around the boardroom table to
the heads of the eight largest G
divisions and said, "I can offer you a
decision which has a 50% chance of
success where your profits and uh and
and and revenue will go up by 50%.
But it also comes with a 30% chance of
failure where your profits and revenue
will fall by 30%. How many of you would
take those odds? And all but two of the
eight said, "No, I wouldn't take those
odds." Two of them said they wouldn't.
He said, "Well, you're all good enough
mathematicians to realize that this is
an uneven bet with, you know, a net
upside. Why wouldn't you take the odds?"
He go, "Because 30% of the time I'd lose
my job." The chief executive is sitting
at the end of the room now. He he is
responsible for the aggregate of all
their decisions. Okay? And he go, "But I
want all of you to take those odds
because net net between the eight of
you, we're almost certain to end up

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"On the road to success there's always we, not me"

Transcription