Animal Spirits, Dave Kingman,Lopsided Payoffs, and illogical business people

Remember Dave Kingman? He was the home run hitting, hapless journeyman outfielder who played for the Cubs a few years.

From Wikipedia:

It was said of him that he was one of those players that when he came to bat, everyone in the park stopped whatever they were doing to watch him.

Why would they do that? He hit 450 homers in 16 years, which is about 30 a year. His best year he did hit 50, so heck, that was a good year, but that just means he hit even less in other years.

Here is a thought experiment: What payoff multiple would you need to bet your entire net worth on a coin flip? 5X? 10X? 30X? For some people, like those with a few million in net worth and above, there is probably no payoff that they would take.

But how about this bet: Odds of success, 15%, only bet 30% of your net worth, and a lifestyle reduction of 50%? What payoff do you need for this bet? This is roughly the bet that business people take, over and over, when they start a new business.

A friend with decades of marketing consulting experience told me that about 15% of all new products introduced are successful. In other words, a huge percentage of executed business ideas fail.

Animal Spirits is a good answer. Business people are being illogical when they do things that probably will not work for too low of a payoff. And thank god!