Tue 24

A Business Fable

Writing Once upon a time a boy went to business school. The boy was not sure he wanted to go into business, because what he most loved was writing stories about aliens and monsters and girls who did not love him back. But he knew he could not hope to earn a living from such stories, so business school it was.

The boy learned many interesting things, until he began to think perhaps business was for him after all. One day, he attended a class in which students were divided into groups and asked by the lecturer to solve the following puzzle:

“A man buys a horse for $400. He feeds it, trains it, and sells it to a racetrack manager for $500. However, soon he regrets his decision, and asks the racetrack manager if he can have the horse back. The racetrack manager, being a good capitalist, asks for $700. The man objects, seeing no reason why the horse should be worth so much more than the day before, but eventually he relents and accepts the loss. Some years later, he finally sells the horse to neighbor for $800. Question: What is his total profit or loss?”

The boy’s group began to discuss this puzzle. The boy thought the solution was fairly obvious: the man bought and sold the horse twice, making $100 profit each time. However, his teammates were seduced by the puzzle’s suggestion of a loss, and insisted this be accounted for. They thought the man broke even.

The boy tried to explain his reasoning a different way. He added up the man’s outlays and revenues, showing the difference was $200. The group agreed, but insisted this was then canceled out by the loss. The boy tried again. “Imagine it’s not the same horse,” he said. “The man buys and sells one horse, then buys and sells a second horse.” The debate became heated. There was no second horse, the group insisted. There was one horse, and the man broke even.

After a few minutes, the lecturer halted the exercise and asked each group for its verdict. Only unanimous decisions would be accepted. Every other group in the class declared their belief that the man broke even. The boy’s group hissed at him to bow to the majority opinion, but he could not bring himself to do it. They informed the lecturer that they could not agree.

The answer, said the lecturer, was that the man made $200 profit. However, the exercise was not about that. It was designed to test teamwork. He had observed most groups working effectively: establishing leadership roles, managing divergent opinion, and finding common ground to reach a shared solution. The boy’s team, however, was a textbook example of failure: it had allowed a disruptive element to block them from consensus. It was then that the boy decided business was probably not for him.