Imagine you were offered the choice of a rather ordinary coffee mug, or a big slab of chocolate. Which would you prefer?
Now, say you really preferred the chocolate but were given the mug instead, what would you do if offered the opportunity to trade your mug for the chocolate?
This may seem like an odd question but it has even odder results. Economists have, traditionally, believed in the idea of a rational consumer. A person who values chocolate more than mugs should immediately swap. The ownership of the mug should make no difference to the transaction. But a surprisingly large number of people find it hard to swap the mug even though they prefer chocolate. This was named the "endowment effect" by Richard Thaler of the University of Chicago, and explains why you have such a hard time throwing away unwanted gifts.
In much the same way, it shouldn't matter to governments whether they own schools, hospitals or power companies. What governments want is a universal and well-educated workforce, not a bunch of run-down schools.
Aung San Suu Kyi has been kept isolated and under military guard in Burma since she, and her political party, won their 1990 elections. She is currently the most famous political prisoner in the world.
The secretive and isolated military junta that has controlled Burma since 1962 has driven a once-productive nation into the floor. Citizens are subjected to forced labour in military work camps. A popular uprising by Buddhist monks in August 2007 was viciously crushed.
Yet, like Robert Mugabe's Zimbabwe or Kim Jong-il's North Korea, the leadership that spurns and denigrates the rest of the world also relies entirely on that outside world to provide relief to their people.
At the beginning of May, Cyclone Nargis struck the coast of Burma. The mangrove forests along the coast that would normally have absorbed massive tides and flooding have all been demolished. Poverty, a lack of electricity for heating and cooking, and direct military intervention, have all resulted in the wholesale destruction of the forests.
The result has been the devastation of the country. Estimates put the death toll at over 100,000 people. More than a million people have been left homeless. Disease and famine have followed.
If I'd had an extra week in Mozambique I would have travelled from Lichinga, in the north-west, to Ilha de Mozambique, directly east. However, the 300 km journey to Cuamba takes 10 hours and taxis only leave when they're full, if at all. The train between Nampula and Cuamba takes 24 hours and runs irregularly. It is the only way to get across. Then it's another five hours to Ilha.
More than 16 years after the peace accords that settled Mozambique, there is still no main bridge across the Zambezi River linking north and south. The current bridge requires that Mozambiquans travel via Malawi. There is, however, a new road being built between Cobue and Metangula; two towns interesting only because the president sometimes likes to visit and the road from the airport is a dirt track.
The colonial-era train station in Inhambane, a sea-side resort town, has been lovingly restored by international donors. A soldier stands proudly out the front and the original ticket offices, with their wooden trim and neat attendants, await passengers.
There is only one problem. No trains can reach Inhambane. The railway line is still a twisted wreck.
The music industry has been an unhappy one for almost a decade. Music sales are worth some $ 17.6 billion, but that is 10% down in just the last four years. For every song sold, 20 are estimated to have been pirated.
However, one firm is grinning cheerfully.
In 2001, Apple – the fashionista's technology company – released the iPod and iTunes music store. A cunning digital music player twinned with a dedicated music download store. Since 2001, Apple has sold 140 million of the little gadgets and sold over 1 billion songs; 80% of all digital music.
And Apple got away with it. No other company has managed to break into Apple's digital music domain.
Periander, however, understood Thrasybulus’ actions. He realised that he had been advising him to kill outstanding citizens, and from then on he treated his people with unremitting brutality. Herodotus, Histories
What Herodotus knew in 440BC, some 2,500 years ago, was this: opportunity is set on the margin. It is the historical power to choose either astonishing innovation, or “unremitting brutality”.
Consider the power of the margin. Say the average inter-city passenger airplane can carry a maximum of 150 passengers. Now, they may fly full at peak times, but they don’t at others, so the airline will set themselves a target of 85% occupancy. Plus, they’ll want a 15% profit (at least) on their capital.
This means that the airline doesn’t begin to make a profit until the 109th person gets on board. Everyone is important, but a plane that flies with only 108 people on board runs at a loss.
These subtle marginal effects can rock markets, bankrupt companies, and destroy nations.
aloft: the whythawk blog 
Learn about the Spyder Curve
