10 WORST Business Decisions EVER
We’ve all made bad decisions, but when was the last time your decision cost you millions? Though we know we have to live and learn sometimes, to do so at the cost of business stability and high profits is not quite the preferred method. For the executives behind these 10 poor decisions, we can’t assume they’d be too happy to relive their blunders through our "Top 10 Worst Executive Decisions" list.
Declining the Telephone
“What use could this company make of an electrical toy?” These fatal words were written to Alexander Graham Bell, who you may know as being credited with the inventon of the telephone. Even though it was later found that Italian inventor Antonio Meucci actually invented it – but we’ll that topic for another day. Regardless, those words were written by William Orton, president of the Western Union Telegraph Company, in response to Gardiner Greene Hubbard’s proposal to sell the patent for Bell’s invention. Hubbard had helped with funding and thought Western Union would look to update their system to a more convenient mode of communication. The patent was for sale for $100,000, which would have faired Orton better than the millions he spent trying to build his own telephone network. Today, Western Union only nets approximately $798 million, a number that could be far greater had Orton taken Hubbard up on his offer.
Blockbuster Turns Down Netflix
In probably another 5 or so years, if you go up to a youngin and ask them their thoughts on Blockbuster, you’re likely to be met with a look of confusion, as they mutter the words, “Netflix is on fleek”. Did I pronounce that right? Can someone explain to me what a “fleek” is? In 2000, the popular movie and game rental store was approached by an online iteration of itself called Netflix. At the time, Netflix was living in the shadow of Blockbusters 9,000 stores and knew if it could link up, it would be guaranteed success. Blockbuster’s then-CEO, John Antioco turned down the $50 million buyout, partially due to Netflix’s losses at the time. Instead, Blockbuster sought out deals with Enron Broadband Services and Circuit City. Yea, Circuit City. Ask someone from Generation Z where Circuit City is, and they’ll probably say it’s somewhere that those guys from Star Trek were from. Today, Netflix is worth over $19 billion. What’s the current state of Blockbuster’s, you ask? You may come across one of its 50 or so remaining locations if you look hard enough.
Carolyn Davidon’s Nike Swoosh
In 1971, Blue Ribbon Sports, who had been importing Onitsuka Tiger shoes, approached Carolyn Davidson to create a design for what they wanted to be their own brand of running shoes. With a half-dozen attempts in tow, Davidson brought the designs to BRS execs, who chose the current “Swoosh” logo, despite “not loving it”. For services rendered, Davidson was offered $35 – an offer that she gladly accepted. Nike currently brings in over $2 billion a year. Some would say that Davidson got hosed, but it’s okay. Three years after Nike went public, Phil Knight, the co-founder of Nike, presented her with a diamond ring engraved with the iconic logo and a portion of Nike stock. Check this one off as a happy ending.
Coke’s New Formula
Why did Coca-Cola decide to change the formula it used to make its popular soda? The push was meant to breathe some life into the Coca-Cola brand in the United States, but all it wound up doing was sending Coke drinkers into a literal panic. Nobody wanted the change, and those devoted to the original flavor did what they could to stockpile the current brand. When New Coke released, protest groups surfaced across the country, demanding that Coca-Cola return the beverage back to its original taste. Like a shaken can of Coke, people were ready to blow up at the seems and foam at the mouth. Signs that read “We want the real thing” and “Our children will never know refreshment” were reportedly seen at a Coca-Cola event in Atlanta, Georgia. We like to call this period of time “The Great Soda Panic of 1985.” Never forget.. Never forget….
The housing market is not something you want to take a gamble on. On a whim, it can rise and fall like the worst of roller coasters, a lesson learned by Lehman Brothers Holdings, Inc. Lehman Brothers was founded in 1850 by Henry and Emanuel Lehman, surviving a lengthy 158 years until a series of bad business decisions forced the company to file Chapter 11 bankruptcy protection in 2008. So what happened to Lehman? By 2007, the company was borrowing $31 for every $1 in equity it had to purchase mortgage-backed commercial real estate. When real estate was booming, it seemed like a great plan to purchase and sell off real estate for profit. As the recession hit and the market nearly crashed, Lehman felt the weight of their investments as properties became impossible to unload on, and the housing market fell faster than Dorothy’s house did on the wicked witch of the east. In the end, Lehman collapsed, unable to gain support to keep it up and running.
Fox Sells Star Wars Merchandising Rights
While Fox Studios is doing fairly well for itself, a decision was made nearly 30 years ago that essentially lost the studio billions of dollars. You may have heard of a small amature film called Star Wars, a little nothing sci-fi adventure that spawned a film franchise, comic books, countless action figures, and enough apparel to clothe a 3rd world country. All of the money made from the vast assortment of merchandise could have gone straight to Fox, but the company instead handed the rights over to George Lucas. The initial split of 60-40 for merchandising lasted two years until Lucas retained full rights of Star Wars merchandise, a deal that has netted him over $4 billion to date. Apparently Fox took the quote “I’ve got a bad feeling about this” a little too seriously.
Motorola’s Delay on Smartphones
When the Razr phone came out, it was all the rage. Motorola had created a phone that people could not resist. It was sleek, stylish, and extremely compact and having one made you feel and look like an elite. Try to pass that look on today and you’ll be laughed back to the early 2000’s. Honestly, the few people who still tote pagers will have a chuckle or two at your expense. By 2007, Motorola was offering their Razr phone at a discount, until 2010 when the company finally decided to release a new device. It was too little too late, as the market had already been flooded with iPhones and Blackberries. Motorola’s delay to update their cellular device caused a 90% drop in shares, from $107 to $13 over the course of 3 years.
Turning Down the Beatles
The Fab Foursome had to start somewhere, and while the world knows them for the superstars they are, Decca once saw no potential of the group over 50 years ago. “Guitar groups are on their way out,” words that were allegedly uttered to the auditioning group’s manager, Brian Epstein, before Decca passed up on a massive payoff. After a 15 song set, Decca sent the British group walking, and while it may have seemed like a rash decision, the group’s own manager at Parlophone, George Martin, stated that, based on those demos, he would have turned them down, too. Decca went on to sign the Rolling Stones years later, but there’s a certain stigma that comes with being the record label that turned down The Beatles. I’m sure there is a “world’s smallest violin” joke to be made here, but Hey Jude, Tomorrow Never Knows when Penny Lane and Eleanor Rigby will Come Together on Abbey Road..
Kodak Shrugs Off Digital
If history of business management shows anything, it’s that a company that refuses to change with the times is likely to not be around for much longer. In the case of Kodak, the decision to continue manufacturing film while the world moved onto the digital age was a large factor in the inevitable bankruptcy protection it eventually had to file. Even if Bill Cosby invested his Jello Puddin Pops revenue checks into this fiasco, Kodak still would have eventually went bankrupt. To make up for the lack of sales on film, Kodak turned to selling printers at a lower cost than its competitors, but as the market was already flooded with higher quality Canon, Epson, and HP printers, it was difficult to catch on. Eventually, Kodak faced facts and began a tremendous downsize until finally filing chapter 11 in 2012.
Murdoch Murders MySpace
If Rupert Murdoch knows at least one thing, it’s social media… right? In 2005, Rupert Murdoch’s News Corporation purchased MySpace for $580 million and, only six years later, sold it for $35 million. That’s some good business right there. Wait, 35 is lower than 580.. who wrote this script? I’m going to lose my credibility for this.. <sigh> What led to the fall of MySpace was a combination of heavy competition from Facebook and Murdoch’s inability to monetize the platform without alienating its users. Facebook was running on an ad-free campaign, allowing users a cleaner social networking experience. Murdoch went into MySpace overconfident, claiming it would do “$1 billion of revenue and $250 million in profit.” Instead of those astounding numbers, former MySpace co-founder Chris DeWolfe, blames Murdoch for squandering $15 billion of shareholder money.