New Math and the World Bank
Last week I attended a professional seminar on building and sustaining innovative teams. Present at the course were over one hundred folks from all walks of industry, academia and government. To illustrate how seemingly straight forward problems can be analyzed in unexpected ways, one of the course speakers asked the audience to solve the following problem:
A business man purchases a horse for $60 and later that same day sells it for $70. The next morning he buys the same horse back for $80 and sells it later that same day for $90. How much profit, if any, did the business man make in total?
Immediately I was sure that correct answer was $20 in profit.
However four other individuals at my table were convinced that no profit was made. A fifth person that initially agreed with me was quickly swayed by the other four that zero was the correct answer.
Unconvinced, I asked them to explain their reasoning. ”It is obvious”, the man sitting to my immediate left confidently stated, “the business man loses his first $10 profit when he buys the horse back the following morning and only by selling it again at the end of the second day does he break even.”
Undeterred, I tried to reason with my table mates that the fact that it was the same horse was inconsequential. Instead, I argued, imagine that it were two separate horses, one sold for a $10 profit on day one, and another sold for an additional $10 profit on day two.
They weren’t buying it. ”Clearly”, the same man informed me, “the fact that the horse is the same is a critical piece of information that we must include in the analysis”. The others nodded in agreement and I could see in their eyes that they were starting to view me as the table dunce, so I just stopped trying to argue with them.
The speaker called the audience back to the presentation and asked for answers from the crowd. After collecting responses that varied from losing $10 to making $20, the speaker quickly demonstrated that the correct answer, was indeed $20. ”In fact”, he pointed out, “the best way to see this is to ignore the fact that it is the same horse!”
As I looked around at the sheepish expressions from the others at my table, I realized from his name tag that the man to immediate left was from a little institution known as the World Bank.
Now I understand why we’re in such a terrible financial mess.
