History is a cruel judge of humanity, highlighting both her successes and failures. It is humanity’s failures that tend to hold the spotlight though, whether surviving as legends of things to avoid or the foundation of lessons yet to be learned. It has been said experience is the best teacher and failure is that vehicle. But how do these failures work? Are they all catastrophic failures, or are they the culmination of a series of seemingly insignificant errors? Maybe just one simple oversight?
In the early 20th century, the world was in love with airship technology and many believed these zeppelins would change the face of travel forever. This belief was so strong, the Empire State building had airship docks built on it. Part of the popularity was that airships were able to cross the Atlantic in approximately forty-three hours, compared to several days via ship. Passengers could travel long distances in relative comfort in a reasonably short period of time. The most famous of these lighter-than-air vehicles is the German airship, the Hindenburg. The Hindenburg carried more than 1,000 passengers between Germany and the United States in 1936 (History.com Editors, 2010).
Much like modern blimps, the Hindenburg was designed to use helium, not hydrogen. While both gases are lighter-than-air and would allow the airship to operate – hydrogen is terribly flammable. Unfortunately, due to German aggression in Europe – Nazi Germany had a difficult time importing helium due to trade restrictions. German engineers opted to use hydrogen instead of helium and on May 6th, 1937 the Hindenburg flew her last flight with 36 of the almost 100 passengers perishing in a terrible conflagration. While landing in New Jersey, static electricity ignited the hydrogen inside the Hindenburg. The tragedy was caught on film and memorialized, ultimately killing the use of zeppelins for commercial air travel.
How could this have happened? The engineers needed a lighter-than-air gas to support their aircraft. Helium, the standard, was unavailable or perhaps too expensive to acquire thanks to the trade restriction. However, hydrogen was readily available and would satisfy the business needs. From a marginal analysis perspective, the Hindenburg was a commercial entity and to continue making money it required the lighter-than-air gas. Costs and/or supply issues drove the company to seek an alternative.
While it is difficult to ascertain with full certainty, we can suppose the engineers considered the differentials between helium and hydrogen, including any potential retrofitting that would be required in their analysis. We can also suppose the engineers found it either cost-prohibitive or unnecessary to prepare the aircraft for potential ignition via static electricity.
Within the context of economics, what would you have done? Spend more on helium, making the operating costs prohibitive unless you raise the price of tickets? Retrofit the ship to compensate for the newly introduced risk? The Hindenburg flew 62 flights before the tragedy, the gamble paid off and the engineers must have felt their decision was sound. Unfortunately, this decision ultimately cost the lives of 37 people and killed an industry.
History.com Editors. (2010, February 09). Hindenburg. Retrieved January 15, 2021, from https://www.history.com/topics/great-depression/hindenburg
Zeppelin Hindenburg: Transatlantic workhorse. (n.d.). Retrieved January 15, 2021, from https://www.thehistorypress.co.uk/articles/zeppelin-hindenburg-transatlantic-workhorse/
So when we think of small mistakes at times are the stepping stones to large failures but I do not believe that it is always the truth. Each mistake is a lessoned learned in what not to do but if you never try how you can have success. But then on the other hand look at COVID-19 it started as a small region mistake and now it spread all across the globe. This week in our reading the main topic was marginal analysis. Marginal analysis is a cost-benefit study of business activity to see if the additional benefits may be increased by taking actions and it is worth the cost incurred to take the action. Which simply is an important tool for making an optimal decision. Many managers use this analysis as a profit-maximization or strategy that involves analyzing the cost benefits of taking on additional activities with all the effort to maximize company profits. Which we established last week the overall objective of a company is to maximize profits.
One example that we have seen of a small mistake that led to a company big failure is Blockbuster. Back in the 90’s this company Blockbuster, was the entertainment giant. Blockbuster was where you go to rent video games, and movies. As social media grew the company fell behind and eventually fell off entirely. It was two things that led to the end. It was a simple change to have DVD with a month-to-month subscription delivered to their doors. This process would have lowered overall cost and provide greater variety for the customers. They would not have been charged to rent a video but offered a subscription that avoided late fees. Because it would have been a subscription one could have watch the video for as long as they wanted and simply return and receive a new one. The other was turning down an offer from the co-founder of Netflix who came to Blockbuster CEO in 2000 with the hopes of selling the company. The Blockbuster executive team was made an offer to purchase their company (Netflix) for $50 million. Many saw this as a failure as pride thing, and at the time the CEO did not see the bigger picture. Blockbuster went bankrupt in 2010 and Netflix currently is worth over $28 billion dollars, which was about ten time more than what Blockbuster was worth. That was a hard lesson to learn.
Nash, B. (September 20, 2019). The tale of how Blockbuster turned down an offer to buy
Netflix for just $50M. Retrieved on January 12, 2021 from The Tale Of How Blockbuster
Turned Down An Offer To Buy Netflix For Just $50M (gqmiddleeast.com)
Satell, G. (September 5, 2014). A look back at why Blockbuster really failed and why it didn’t
have to. Retrieved on January 12, 2021 from https://www.forbes.com/sites/gregsatell