Home Bookend - Where reading meets review Meltdown: What Plane Crashes, Oil Spills and Dumb Business Decisions Can Teach us About How to Succeed at Work and Home – Chris Clearfield and Andras Tilcsik

Meltdown: What Plane Crashes, Oil Spills and Dumb Business Decisions Can Teach us About How to Succeed at Work and Home – Chris Clearfield and Andras Tilcsik

by Venky

(Image Credit: Penguin Random House)

In December 2012, Starbucks launched an ambitious PR campaign to enhance their brand value. In collaboration with Twitter, the hashtag #SpreadTheCheer was launched, and the tweets were displayed live on a giant screen at the Natural History Museum in London, where Starbucks also sponsors the ice skating rink. What should have been an otherwise gala affair soon became the beverage giant’s worst nightmare. An avalanche of tweets alluding to Starbuck’s controversial tax avoidance strategies marred the hashtag campaign and all efforts to mitigate the damage failed as there was a software sabotage.

While all that was lost in the pear shaped PR campaign of Starbucks was reputation, tragedy of an unimaginable magnitude struck the citizens of Fukushima, in Japan on March 11, 2011. A massive earthquake followed by a raging Tsunami caused immense damage to the Fukushima-Daiichi nuclear power plant, thereby leading to the worst nuclear disaster since Chernobyl in 1986. A post-mortem analysis revealed that backup generators to keep cooling the plant in the event of main power loss were constructed in low-lying areas, which were susceptible for flooding during a tsunami, something which a proper hazard analysis would have identified.

American global financial service firm Knight Capital lost $460 million in 45 minutes on August 1st, 2021, due to an incredulous algorithmic fiasco. The company deployed a new version of a software on their production servers. At 9.00 A.M on the 1st of August, the New York Stock Exchange opened for trading. Within 45  minutes, Knight Capital had “involuntarily” executed a whopping 4 million trades through their servers, thereby finding itself teetering on the brink of bankruptcy. Traditional trading wisdom dictates that an individual should buy shares when the price is low, and sell when the price is high. However, in the case of Knight Capital’s servers, a programme named ‘The Power Peg’ was designed to buy a stock at its ask price, and then immediately sell it again at the bid price, losing the value of the spread. Although a few cents may not seem significant, when a computer is spitting out thousands of trades per second, the cumulative value results in a cataclysmic outcome.

So what links the Starbucks PR disaster, with the Fukushima nuclear plant meltdown, and Knight Capital’s malfunctioning bug? Former derivatives trader and licensed commercial pilot Chris Clearfield and Canada Research Chair in Strategy, Organisations, and Society at the University of Toronto, Andras Tilcsik, in their fascinating book, “Meltdown” attempt to prise out the common fault lines that characterise major disasters.

In their endeavour, the authors bank on the work of famed sociologist Charles Perrow. Perrow shot into the limelight with his analysis of the Three Mile accident that flooded suburban Pennsylvania with toxic nuclear waste in 1979. A routine maintenance metamorphosed into a thermodynamic crisis, causing an absolute scare before being reigned in. As Clearfield and Tilcsik illustrate, at the heart of every major catastrophe lies a “tightly coupled” system. The tighter the system, lower the slack time and margin for error. Multiple moving parts pose the danger of a domino effect. Malfunctioning or failure of a single part leads to a cascading impact on the remaining parts. A veritable train wreck waiting to happen.

Often times the most complicated of problems suffer from the simple absence of imagination. A classic example being the monumental blunder at the Oscar awards 2017. The movie La La Land was wrongly named the best picture instead of the actual winner, Moonlight, thereby plunging the Awards ceremony in a sea of ignominy. While Accounting firm PricewaterhouseCoopers (PwC), responsible for handling ballots for the Academy Awards for more than 80 years, was to be squarely blamed for the snafu since the PwC partners handed over the wrong ballot, the underlying cause for the blunder was the design of the envelopes themselves. While the category of the awards itself was set out in minuscule print, the underlying movie was set out in garishly bold font. Hence when Warren Beatty and Faye Dunaway announced La La Land as the winner, the category was in fact for the best actress. Emma Stone bagged the award for the movie – you guessed it right – La La Land!

One tried and tested way to avoid the perils of a tightly coupled system, as Clearfield and Tilcsik exhort is to adopt an “outside in” perspective. Diversity and inclusivity instead of homogeneity also helps. The fall of the storied medical diagnostic company Theranos and its flamboyant founder Elizabeth Holmes is a case in point. The elaborate deception in the process of drawing blood samples, committed by Holmes was completely lost on a Board of Directors that was completely made up of distinguished and elderly males who had no clue of what the company or its founder was up to.

The authors also identify myriad and variegated practices that can enable an organisation to come out of the rut of groupthink and also to work around the complexities embedded within a system. Employing more accurate risk-forecasting tools; obliterating groupthink by nurturing dissent in decision-making; laying down rules for diverse workforces are a few factors that attenuate complacency and birth the creation of valuable perspectives for managing operations and strategy.

In an incredibly interconnected age, where once seemingly esoteric concepts such as Internet Of Things are commonplace and ubiquitous impressions, Meltdown is an essential and timely read. It is also a warning to shed the last vestige of complacency.

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