If you are anything like me, it will strike a discordant note when people, particularly senior managers, prove unable to relinquish a failing strategy—if indeed it is a strategy and not a platitude. Part of the reason for this is the sunk cost fallacy in which people continue to push on because of what they have invested so far. However, another reason is that people are worried about the appearance of changing course—they are worried about appearing reckless. Drawing on Margaret Thatcher's (1925–2013) defiant pose that came to define her premiership:
To those waiting with bated breath for that favourite media catchphrase, the "U" turn, I have only one thing to say. "You turn if you want to. The lady's not for turning."
Managers often stick to their guns. Usually when they would do better to reassess based on new data, which can change the odds significantly. In business, refusing to turn can drive your organisation straight into a wall.
Enter the Monty Hall paradox, a probability puzzle named after the host of the American game show Let's Make a Deal, appears to be one of simple probability; yet, it has profound implications for decision-making, rational thinking, and even the ethical dimensions of business strategy. It also serves as a sobering reminder that intuition and correctness are often at odds—a concept with no small resonance in organisational behaviour.
Before diving into the corporate ramifications, the paradox in a nutshell is that a contestant is presented with three doors. Behind one is a car (the desirable prize), and behind the other two are goats (decidedly less desirable, unless you happen to be a goat enthusiast). The contestant picks a door, upon which Monty Hall (1921–2017), the host who knows what is behind each door, opens one of the two remaining doors to reveal a goat. The contestant is then given the option to stick with their original choice or switch to the remaining unopened door. The optimal strategy is to switch doors, as it provides a 2/3 probability of winning the car, compared to the 1/3 probability of sticking with the original choice. Yet, most people instinctively believe the odds are 50-50.
The Illusion of Rationality in Business
Managers, like game show contestants, often place excessive faith in their initial decisions. The sunk-cost fallacy, overconfidence bias, and strategic rigidity all contribute to poor decision-making. Much like the contestant who stubbornly refuses to switch doors despite mathematical proof to the contrary, managers frequently cling to failing strategies, convinced that changing course would portray weakness rather than demonstrate adaptability.
The 2008 financial crisis is a prime example. Many firms doubled down on subprime lending even when the economic equivalent of Monty Hall—market analysts and financial regulators—were practically waving their arms and shouting, "There's a goat behind this door!". The refusal to pivot led to catastrophic losses, much like a contestant walking away with a goat when a simple switch could have secured a Bentley.
The Ethics of Information Asymmetry
The Monty Hall paradox also highlights the ethical dilemma of information asymmetry—a common issue in business ethics. Monty knows what's behind each door but only selectively reveals information. Does this sound familiar? It should, as it mirrors how corporations, regulators, and even employees navigate strategic disclosure.
Consider the Volkswagen emissions scandal: executives allegedly knew their cars failed emissions tests but disclosed selective information to both regulators and consumers. The Monty Hall analogy here is striking. Volkswagen essentially played the role of Monty, showing the customer a 'clean diesel' door while ensuring the real outcome—a regulatory and financial disaster—remained hidden. Unlike the game show, however, this deception wasn't a quirk of probability but an outright breach of the law, not to mention ethically acceptable behaviour. As the Australian Federal Court ruled:
Pursuant to s 224(1) of the ACL [Australian Consumer Law], within twenty-eight (28) days of the making of this Order, VWAG pay to the Commonwealth of Australia a pecuniary penalty of $125,000,000 (One Hundred and Twenty-Five Million Dollars).
Australian Competition and Consumer Commission v Volkswagen Aktiengesellschaft
Risk, Reward, and the Conservative Approach
The Monty Hall paradox also serves as a striking allegory for the role of risk in business strategy. Conservative business practices often favour stability over speculative manœuvring, and much like the contestant who refuses to switch doors, many corporate leaders see change as too risky. However, switching doors is the rational choice—not reckless gambling. This distinction is crucial.
In investment strategy, firms that fail to reassess probabilities and adjust plans and product lines accordingly often find themselves holding the proverbial goat. Kodak, for example, clung to film-based photography well past the point where digital was clearly dominant. A failure to embrace the Monty Hall mindset—re-evaluating probability and making the optimal switch—led to Kodak's decline from industry leader to a case study in stubbornness.
The Wisdom of Switching Doors
The Monty Hall problem isn't just a cocktail-party brain teaser—it's a parable for every manager who's ever clung to a strategy like a barnacle to a sinking ship. It reminds us that the rational move is often the uncomfortable one: changing tack, reassessing assumptions, and, yes, switching doors—even when it feels like a betrayal of our first instincts.
Bravery is overrated if you're charging at the wrong hill. The best managers know when a door has a goat behind it and have the nerve—and the humility—to pivot. Not because they're impulsive, but because they're paying attention.
And here's the good news: managers who learn to update their choices based on fresh information don't just avoid disaster—they thrive. They become more trusted, more resilient, and far more likely to walk away with the metaphorical car. In a world that rewards agility over obstinacy, switching isn't a sign of weakness—it's your strategic edge.
So next time the numbers—and the goat—are staring you in the face, don't double down. Switch. Smile. Drive off into the sunset with the car. And leave the goat for someone still clinging to their first guess.
Good night, and good luck.
