Domain 08 · 24 cases
Decision-Making & Behavioral
Sunk cost, groupthink, incentives and bias, from Concorde and Kodak to Theranos, Wells Fargo, the Challenger launch and the planes that came back.
- Name the cognitive trap before it names your company
- Decide when to kill something you have already paid for
- Stress-test a metric by imagining the worst it could reward
Beanie Babies: A Manufactured Bubble
In the late 1990s, small bean-filled stuffed animals became objects of genuine financial speculation. People bought them by the case, sealed the tags in…
Bernie Madoff: Affinity Fraud and the Comfort of Consistency
For decades, Bernard Madoff ran the largest Ponzi scheme in history while hiding in plain sight, a former NASDAQ chairman delivering suspiciously perfect…
BlackBerry
In 2007, BlackBerry was the dominant smartphone, and Research In Motion's co-CEOs were publicly dismissive of the new iPhone: worse battery life, no physical…
Charlie Munger: Invert, Always Invert
Charlie Munger, Warren Buffett's longtime partner at Berkshire Hathaway, had a habit that sounds easy and is genuinely hard: faced with a tough problem, he…
Concorde
Britain and France spent decades and a fortune building the Concorde, a supersonic passenger jet that crossed the Atlantic in three and a half hours. By the…
Decca Records and the Beatles
On January 1, 1962, the Beatles auditioned for Decca Records, played about fifteen songs, and were turned down. The A&R executive picked a different act…
Deepwater Horizon: Production Pressure and Ignored Warnings
On April 20, 2010, the Deepwater Horizon rig exploded in the Gulf of Mexico, killing eleven workers and triggering the largest accidental marine oil spill in…
Enron
Enron had a code of ethics, an experienced board, and outside auditors. None of it mattered. Through the 1990s the energy company reinvented itself as a…
Ford Pinto
The Ford Pinto launched in 1971 with a fuel tank behind the rear axle that testing showed could rupture in rear-end collisions. A baffle to reduce the risk…
GameStop: The Meme-Stock Short Squeeze
In January 2021, a struggling video game retailer with emptying malls briefly became the most traded stock on Earth and forced multibillion-dollar hedge…
JCPenney: Ignoring How Customers Actually Think
In 2012, JCPenney hired Apple's retail star Ron Johnson with a mandate to transform a fading department store. He arrived with a clean, rational idea: scrap…
Lehman Brothers
A firm that outlived the Great Depression, two world wars, and a century of panics finally met a crisis it could not survive. Through the mid-2000s, Lehman…
Long-Term Capital Management
Two Nobel laureates, a roster of the most sophisticated quant traders alive, and a track record that printed money for years. Long-Term Capital Management,…
NASA Challenger
The night before Challenger launched on January 28, 1986, engineers at Morton Thiokol begged NASA to delay. Forecast temperatures were colder than any prior…
Pets.com: Story Over Substance in the Dot-Com Bubble
Pets.com had one of the most beloved mascots of its era, a sock-puppet dog that landed on Good Morning America and in a Super Bowl spot. The company went…
Sears: Denial and the Slow Decline
Sears was once so dominant it sold entire houses through its catalog — a retailer that doubled as a platform, owning Allstate, Coldwell Banker, and the…
Survivorship Bias: The WWII Planes That Came Back
During World War II, US analysts studying bullet holes on returning bombers recommended adding armor exactly where the planes were hit most. The logic was…
Sydney Opera House: The Planning Fallacy
When the Sydney Opera House broke ground in 1959, it was billed at four years and about 7 million Australian dollars. It opened in 1973, having cost roughly…
The Big Short: The Contrarians Who Saw 2008
In the mid-2000s, when Wall Street treated AAA-rated mortgage securities as bulletproof and national housing prices as something that simply never fell, a…
The Cuban Missile Crisis: Fixing Groupthink With Process
Eighteen months before the Cuban Missile Crisis, John F. Kennedy approved the Bay of Pigs invasion, one of the worst foreign-policy decisions in American…
Theranos
By 2015, Theranos was valued at roughly $9 billion on the promise of a machine that could run hundreds of tests from a single finger-prick of blood. There…
Tulip Mania
In 1630s Holland, a single tulip bulb of the right variety reportedly traded for the equivalent of a skilled craftsman's annual wages. A futures market…
Volkswagen Dieselgate
Volkswagen wanted to crack the U.S. market with clean, efficient diesel. There was one problem: its engineers couldn't hit American nitrogen-oxide limits…
Wells Fargo
Wells Fargo employees opened roughly 3.5 million bank and credit card accounts customers never asked for. They weren't a ring of rogue actors; they were…
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