Negative-Sum Games

Burglars obtaining stolen goods must generally sell them for far less than their retail value; most of the victim's loss is transferred to the fence [or pawnbroker] or to the final receiver, while the burglar generally reaps only about 20% [M.A.R. Kleiman's guess; see footnote 4 here].

But this is almost marvellously efficient compared to the efforts of Mel Weiss and William Lerach. Having shaken down American corporations for a total of $45 billion in settlements, mostly under contingency arrangements giving their firm up to 30% of a settlement -- and generally taking much more -- one would expect the firm's leaders to have made billions. Apparently not:

On average, investors recovered only about 15 cents of every lost dollar, while Milberg Weiss routinely pocketed millions. Weiss and Lerach saw their personal takes soar from $3.4 million apiece in 1990 to $16 million in 1995. During the 1990s, both men earned more than $100 million. Bitter executives came to view it all as an extortion racket - they called it getting "Lerached."

It looks like these guys managed to siphon off less than 1% of what they extracted. What were they thinking?

[HT: David Bernstein.]