The Essence of Problem Solving #6 — The Australian

In statistical legend from World War II's bomber campaign — Professor Abraham Wald argued against the crowd that armor should be added to the very spots on returning planes that had no bullet holes, such as the engines and cockpit, because planes hit there never made it home. The heart of that famous story is "silent evidence" — the dead who cannot speak.

Between the late 18th and the 19th centuries, the history of transporting convicts to Australia staged an equally profound drama about silent evidence and institutional design. It shows vividly how people tried again and again against appearances before finally digging out the essence of the problem:

First Attempt: A Remedy for "Scarcity of Provisions"

Faced with astonishing mortality rates of up to 25% — and 37% on ships such as the HMS Lady Shore — on the ocean crossing, the first investigators fixed their eyes on the physical state of the arriving ships. Convicts were generally gaunt and underfed, and the shipboard rations were extremely poor.

On the strength of this seemingly obvious "evidence," the problem was defined as "malnutrition." So the first solution was issued: the government increased food subsidies, trying to improve the convicts' constitution by providing more provisions.

Yet this measure achieved little. The investigators had not seen the "silent evidence" — for the shipowner, an increase in the subsidy might simply mean a higher profit margin (whatever was saved was earned) rather than an incentive to improve the convicts' lives.

Second Attempt: Regulation of the "Sanitary Environment"

After the nutrition remedy failed, people began to examine the living conditions aboard ship. Inspections found the holds overcrowded and filthy, with typhus and other infectious diseases raging. So the problem was redefined as "poor sanitation."

The second solution soon followed: the government drew up detailed sanitary standards and required every vessel to carry a ship's surgeon and medicines.

Yet this measure still failed to turn the tide — and even produced the tragic, "unexplained" deaths of surgeons and supervisory officials aboard. This failure exposed a deeper problem: purely technical regulation, in the absence of any underlying self-interest driving it, is easily neutralized or even sabotaged by those with vested interests.

Third Attempt: Deterrence Against "Lack of Oversight"

Since neither material nor sanitary measures worked, public opinion and the government turned their aim at "human greed" and "missing supervision." They believed that unscrupulous shipowners and the absence of effective oversight had brought about the tragedy. So the third solution was rolled out: the government stationed supervising officials, trying to constrain the shipowners' conduct through external authority, and subjected them to "moral education," exhorting them to value life.

Yet — as discussed above — measures built on moral appeals and external coercion proved hollow against the distorted incentive structure. Shipowners either bribed the supervisors or ignored the moralizing; the mortality rate stayed stubbornly high.

Digging to the Essence & the Final Resolution: Rebuilding the "Incentive Structure"

The failure of three attempts forced a complete turn in thinking. People stopped asking "what happened on the ship" and instead examined "who stood to gain" and "what is the payment rule." At that point a long-overlooked piece of silent evidence finally surfaced: dead convicts cannot speak, yet their deaths were economically "a good deal" for the shipowner.

The investigators discovered that the government paid shipowners freight based on the number of convicts "at the time of departure from Britain." This meant the shipowner's revenue was locked in the moment the ship left port. A convict's death did not cost them a cent — it merely saved the cost of that convict's rations, indirectly even adding to their profit.

At last the essence of the problem was dug out: the root cause was not that shipowners were "cruel-hearted," but that the system itself was "encouraging" them to be indifferent to life.

On the back of this insight, the final solution was simple and powerful: change the payment rule. The government no longer paid by "the number departing" but by "the number who arrived in Australia alive."

This single change instantly tied the shipowner's interests to the convicts' survival. To collect the full freight, shipowners took it upon themselves to improve the diet, optimize sanitation, and hire the best surgeons. Historical data shows that after this policy, mortality on convict voyages plunged sharply — approaching zero.

This case is a powerful reminder that digging out the essence of a problem often demands that we pierce the fog of appearances and examine the hidden incentive structure that lies behind them.