Narrator: A new car built by my company leaves somewhere traveling 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 by the probable rate of failure, B, multiply by the average out-of-court settlement, C. A times B times C equals X. If X is less than the cost of a recall, we don't do one.So boiling it down, there are the four variables.
A. Number of vehicles
B. Probable rate of failure
C. Average out-of-court settlement
X. Cutoff number for a recall
Following the narrator's math, X<A*B*C or Recall<Vehicles*Probability*Settlement
Sounds terrible and mathematical right? If a business does this, we should boycott their clearly unethical behavior, right? Well, legally, this is not only ethical, but legal and expected behavior from any person.
Welcome, to the wonderful world of negligence law. In particular, the formula the narrator describes is a rephrased version of the "Calculus of Negligence" or Hand Test. Now, lawyer's typically aren't good at math, so leave it to them to make a very basic Algebraic formula "Calculus." Here there are three variables:
B. Burden of taking Precaution
Applied, this formula comes out as B<P*L or Burden<Probability*Loss.
Starting to look familiar? That's because this is the same formula the narrator rattled off. The probability multiplied by the number of the cars in the field gives you the total probability of loss in the field. The loss in this case is the average settlement, and as 97% of cases are settled out of court, using the average out of court settlement is completely fair.
So was the car company evil? That's completely debatable from a moral perspective. Granted, they didn't beat people half to death, but they didn't do a voluntary recall to save some lives. However, legally, they were completely in the right, as long as their math was right.