10 Big Business Blunders
Ego and greed: a common recipe for executive error
For AOL, the deal was probably a lifesaver. Case was able to use AOL's lofty stock price to buy a highly profitable company with more than 70 years of publishing experience. On the other hand, Time Warner's bigwigs "got silly and drank the convergence Kool-Aid," says business book author Roger Lowenstein. And they're still recovering from the hangover.
The Hunt Brothers
Hi-Ho Silver
The little old ladies lined up outside of London's Hatton Garden jewelry stores in the fall of 1979 should have worried Bunker and Herbert Hunt. If enough of them were willing to sell their silver heirlooms for scrap, then the Hunt brothers' attempt to corner the world's silver supply was surely doomed.
But Bunker Hunt, second-oldest son of Texas oil tycoon H. L. Hunt, was convinced he could turn silver into gold. A big-betting oilman, Bunker became one of the richest men in the world at age 35. Beginning in the early 1970s, he and younger brother Herbert made a tidy little sum on 200,000 ounces of silver they purchased, as silver prices doubled from $1.50 to $3 an ounce.
Figuring bigger is better, over the rest of the decade they purchased an additional 59 million ounces, roughly a third of the world's supply, pushing the price to $50 an ounce and earning the Hunts a paper profit of about $4 billion. But the high prices sparked increased supplies of scrap silver and mining investment. Prices dropped.
Tapped out of cash and unable to liquidate their silver hoard without driving the price down even faster, the Hunts watched as the price fell 80 percent in a matter of days. The following year, the two were named Boneheads of the Year by the Bonehead Club of Dallas. Its motto: "To learn more and more about less and less, until eventually we shall know everything about nothing."
New Coke
It's the Real Thing ... Not!
Coca-Cola executives figured they had finally found the solution for their ailing brand. Concerned that the Pepsi Challenge campaign was dangerously eroding Coke's market share (which had fallen by nearly half since the 1950s), they formulated New Coke in 1985, then gathered focus groups to compare the two in blind taste tests. When the new formula beat Pepsi hands down, they figured they had a winner. Yet within hours of its rollout, it was clear that something had gone sour. "Damn!" exclaimed the wife of a Coca-Cola bottler upon her first sip. "This will never sell!"
Thousands of complaints flooded the company in the weeks after New Coke hit the streets. At first, the company's marketing chief called such complaints "relatively insignificant." But three months and 400,000 angry calls and letters later, New Coke faded from store shelves in favor of "Coke Classic."
Conspiracy theorists believed the whole episode was merely a deft marketing ploy to reinvigorate the brand. After all, Coke's decision to reverse itself was soon rewarded by growing sales and a stock price that reached an all-time high. The truth, however, was that while the focus group leaders had asked whether tasters liked New Coke better than Pepsi, "they never bothered to ask people how they would feel if old Coke was taken away," says Constance Hays, author of The Real Thing: Truth and Power at the Coca-Cola Company.
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