Coronavirus Times - COVID-19 Brainteaser

Problem Definition

You and your family are faced with a challenging set of decisions. Due to coronavirus, your partner has taken a 20% paycut and you are worried you may lose your job. In addition, while daycare is still open, you are worried that sending your two children there will increase the risk of them bringing the virus back to your house, where your elderly grandparents are also staying.

How would you go about thinking about this problem, and what would you recommend?

Comments

This brainteaser is a perfect way to test a candidate's ability to react to the unexpected. Use this brainteaser when testing/training adaptability and learning how to answer any question, regardless of context. This tests one's ability to frame a problem – any problem – and take a logical approach to solving it.

The case is a very linear constraint-based problem-solving case which requires the candidate to think about what is most important, in what order, and prioritize accordingly. They need to first prioritize health, then prioritize wealth (making ends meet), and finally happiness has to come last in these trying times.

You may provide the candidate with the following information (Though try and guide them towards discovering the below for themselves):

• Between health, wealth, and happiness, you would optimize health (i.e. minimize risk of anyone, particularly your parents, from getting sick)
• You also need to make sure ends meet (you cannot go into debt)
• Before the crisis, you and your partner each earned the same amount of money – $100k each
• It seems almost certain that your partner keeps their job, and that pay is not reduced further
• You place the odds of you losing your job at 50%
• Before the crisis, you spent 75% of your joint salary
  • ​There does seem to be an ability to significantly reduce daily costs
• If you don't send your children to day-care, one of you will have to stop working

Short Solution

Solution

The key here is to recognize that the family needs to balance 3 things: Health, Wealth, and Happiness.

The candidate should both ask which should be prioritized (answer: Health), and come up with a view of what the trade-offs/balance points are.

Health

• We cannot risk the health of the family/parents
• Need to minimize time spent outdoors
• The children need to be homeschooled (but implications for Wealth and Happiness)

Wealth

• How much income do we need to survive? This is table stakes and the minimum must be met

Expenses

1. Our previous expenses were 75% of income. The candidate should understand this is $150k
2. How much have our expenses decreased and can they decrease further?
   • We can cut our expenses in half, but this will negatively impact our happines
   • Result: expenses are now 37.5% of income, or $75k

Income

1. How much can we cut our income, and still make ends meet?
2. Since your partner's income is at 80%, our total income is now $180k
3. Since the children are homeschooled, can one of the parents work part-time?
   • Unfortunately not – homeschooling is a full time job, and neither employee will allow a shift to part-time
4. In this case, we need to decide which parent gives up their job...there are 2 approaches, and both lead to the same result:
   1. Approach #1: Expected Value (EV)
      • EV of you working = $50k (i.e. $100k earnings times 50% probability of keeping the job)
        • This isn't enough to make ends meet!
      • EV of your partner working = $80k (i.e. 80% paycut on $100k, but the job is safe)....just barely larger than our expenses of $75k
      • Answer: Your partner keeps their job with a value of $80k
   2. Approach #2: Risk aversion
      • Keep your job but risk losing it all
      • Keep your partner's job but with a certainty of less money than the highest potential
      • You're a married individual with a family! You would take the risk-averse route and be sure of providing for your family
      • Answer: Your partner keeps their job, giving you a certianty of keeping food on the table

Answer/Conclusion

We should:

1) Homeschool our children (to protect the health of our parents)

2) Cut expenses by 50% in order to make ends meet (at the expense of happiness)

3) Have our partner keep their job at 80%, while we give up our risky job and take on the household homeschooling responsibilities