United States | News & Politics

Fines are fine penalties for businesses, but they're always far too small.

Start with an amount that is 2-3x higher than the potential gain from doing the thing. Let's say that's $100,000, just for the sake of discussion.

Divide that by the chance of a given instance of the crime being caught / reported, and successfully prosecuted. Let's say that chance is 0.01% (1 in 10,000 instances) - I think this is a very low estimate, but again, just for the sake of discussion. We're now sitting at $10,000,000 per instance.

Add a deterrent increase - let's say 100%, so $20,000,000 per instance.

We've all seen Fight Club, I'm sure:

A new car built by my company leaves somewhere travelling 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 it by the probable rate of failure, B.

Multiply the result by the average out-of-court settlement, C.

A x B x C equals X.

If X is less than the cost of a recall, we don't do one.

The key is to make sure that X is always considerably higher than A x B x C. Always.