Linear Thinking in a Nonlinear World
by Bart de Langhe, Stefano Puntoni, and Richard Larrick
Test yourself with this word problem: Imagine you’re responsible for your company’s car fleet. You manage two models, an SUV that gets 10 miles to the gallon and a sedan that gets 20. The fleet has equal numbers of each, and all the cars travel 10,000 miles a year. You have enough capital to replace one model with more-fuel-efficient vehicles to lower operational costs and help meet sustainability goals.
Which upgrade is better?
- Replacing the 10 MPG vehicles with 20 MPG vehicles
- Replacing the 20 MPG vehicles with 50 MPG vehicles
Intuitively, option B seems more impressive—an increase of 30 MPG is a lot larger than a 10 MPG one. And the percentage ...