Have you ever watched that TV programme, Deal or No Deal? If you have, then here is something you may not have thought of about the show. It illustrates one of the key contradictions in the way the economy works.

The odds in that programme are skewed in favour of the banker. There are 22 boxes, each containing a sum of money. The banker, who plays the game every day, knows that if every contender played the game to the end, then on average the amount of money he gives away would equate to the mean. This is in fact £25,712.16 per contestant.

But, for each contestant, who plays the game just once, the likelihood is that he or she will win an amount of money equating to the median. In this case between £750 and £1,000.

As the game progresses, and boxes are selected, the banker makes various offers to the contestant, offering to pay them an amount of money to make them walk away. The money he offers is almost always less than the mean, and usually around the median. If each contestant was braver, then the total amount of money won over the course of the series would be much higher.

And that illustrates a more fundamental truth about the economy. If we all took more risks, most of us would be worse off. But the economy as a whole would be better off. It is just that the fruits of the successful gambles would be owned by a small number of the population.

Given this, it seems that we need to be encouraged to take more risks, but the benefits from our risk taking need to be spread more evenly across the population.

See in terms of another popular TV programme, Dragons Den.

It would be interesting to take a look at the businesses that successfully raise money from the five dragons – or business angels as they used to be called – in, say, ten years’ time. Here is a prediction. Most of the businesses will have failed. But the ones that succeed will have made enough money to easily compensate the dragons for the failed ventures.

The downside of this, most of the entrepreneurs will have failed. Their dream will be in tatters.

And that is the sad truth about the world of entrepreneurs. Most entrepreneurial businesses fail. It is just that the few successes make up for this.

This also has another implication. It suggests the odds are skewed in favour of investors.

There is another implication, bank lending to entrepreneurial businesses makes no sense. The best the banks can hope for is a return based on a rate of interest. But if most new start ups fail, then most bank loans to these types of business will go wrong, and the money they make from the successes will never compensate them for the failures.

And what can we conclude? Well, being an entrepreneur is illogical for the individual concerned, but good for society. In short, the future of business is dependent on irrational beings called entrepreneurs.

The tax system, by the way, is completely upside down. It incentivises investors through all kinds of tax breaks, such as EIS, but punishes the entrepreneur through a tax system that works against all those whose income fluctuates wildly from one year to the next. (If you have two people, who each earn the same amount of money over five years – but one enjoys 90 per cent of total income in, say, years three and five, and the other has the same income each year, then the one with the income that varies will pay much more tax.)

So if taking risk is so illogical, why do we do it? To understand that, we need to consider Genghis Khan and the successes he enjoyed, not so much in conquering the world, but in fathering so many children.

See: for full set of articles on this theme

Bring back risk – it’s too risky not to
Why risk is skewed against risk takers
How Genghis Khan can explain the credit crunch
Do you hve the brian of an entrpreneur?
The innovative brain