We often find ourselves faced with difficult decisions. Standing on the precipice of “do” and “don’t,” it’s easy to make hasty decisions that, in retrospect, we come to regret. Is the expired milk in the refrigerator a suitable companion for your morning cereal? Can your car make it to the next gas station when the fuel light blinks on? Should you even bother with the third Matrix movie after the disaster that was The Matrix Reloaded?
Hindsight can be a cruel mistress even on the smallest scale, so it’s no surprise that major decisions can yield major consequences if handled poorly. One of history’s most foolish sales — Russia’s sale of Alaska to the United States — appeared fine on paper. Russia, afraid of losing the territory if war broke out with Britain, unloaded the territory for the bargain-basement price of $7.2 million. Even in America, the sale was harshly criticized and dubbed “Seward’s Folly,” after Secretary of State William H. Seward, who negotiated the deal.
Of course, years later the land was found to be rich in both oil and gold deposits. That’s hindsight, and it will get you.
In the world of business, bad decisions typically fall under two categories: failing to act and acting without thinking. In the former, a company may miss out on a profitable venture. In the latter, they may pour resources into a bottomless vessel. In both cases, we look back and ask, “what were they thinking?” The answer, often, is that they simply thought they were making the right choice given present circumstances.
From our vantage point in the future, it’s not difficult to throw stones at decision-makers of the past. Though we may strike their egos, we can learn from their long-healed wounds. After all, those who don’t learn from history are doomed to repeat it and it is with that thought in mind that we present five of the worst business decisions in history.
Excite Passes On Google
In the mid-90s, the Internet was different. Before Google, Yahoo and Excite were the big search engines on the block. Boasting a then-staggering 1.5 million indexed pages, Excite was one of the most visited sites on the web and enjoyed a revenue exceeding $150 million. While Excite was content to rest on its laurels, however, a new contender slowly gathered momentum.
By 1998, Google had indexed well over 60 million pages. Earning a reputation as the most innovative search engine in cyberspace, Larry Page and Sergey Brin had begun the company as a research project. The pair discovered — rather quickly — that they had stumbled upon a thing of enormous, immeasurably vast potential.
And this is where our two key players meet. Page and Brin, believing that the project was distracting them from their research, approached Excite and offered to sell Google to them for $1 million. George Bell, the CEO of Excite, refused the offer and — tragically — struck out a second time when he again refused Google’s second offer, $750,000.
Today, Google rakes in a cool $50 billion annually and produces cars that drive themselves while Excite — now part of Ask.com — offers the “Speedbar,” a toolbar that miraculously allows users to “search the Web from anywhere on the internet.”
The Ship Sails On Star Wars
Though he may owe his fame to the Star Wars movies, a large portion of George Lucas’ wealth is the result of a single decision made in 1973. Approaching the executives at 20th Century Fox, Lucas presented an offer: he would forego a 300% pay raise in exchange for the film’s merchandising rights. Fox saw the deal as a no-brainer after the epic failure of 1967’s Dr. Doolittle merchandise had left a bad taste in their mouths.
When the film was released in 1977 it became a monumental box office success, grossing $220 million in its first six months alone. Over 35 years later, fans still salivate at the thought of expanding the Star Wars universe. However, Lucas’ fortune is more a product of the theater of the imagination than the silver screen. Children and adults alike flooded toy stores in droves, searching out Star Wars action figures, vehicles and play sets. In the year following the film’s release, $100 million worth of toys had been sold. As of this year, Star Wars merchandise brings in over $3 billion annually.
Hoover’s Bad Trips
In 1992, The Hoover Company’s warehouses were overstocked with washing machines and vacuum cleaners. In one of the most extreme promotions ever, the company offered a pair of round-trip tickets to Europe — and later the USA — to any customer who purchased more than $167 worth of their products.
Since the cost of the airline tickets themselves was substantially greater than the meager $167 requirement laid out by Hoover, over 200,000 consumers bought in to the promotion. In short order, Hoover ran out of two items crucial to the promotion’s success: vacuum cleaners and airline tickets. The company, scrambling to keep up with demand, worked their factories around the clock.
In the end, Hoover spent an estimated $84 million on a promotion that earned it only $50 million. For years the company was the target of a series of campaigns and lawsuits that criticized its unwillingness to deliver on its promises. Finally, in what could be construed as an act of corporate mercy, appliance manufacturer Candy purchased the British division of Hoover.
Decca Records Signs Bryan Poole
By now, everyone has heard of Bryan Poole and the Tremeloes but have you heard of The Beatles? Wait, strike that. Reverse it.
In 1961, as the New Year dawned, music icons Paul McCartney, John Lennon, George Harrison, and Pete Best played a one-hour set for Tony Meehan, a producer at Decca Records. Largely performing a collection of covers, the group was received coldly by Decca, which passed on the act under the belief that “guitar groups [were] on the way out” and instead signed Bryan Poole and the Tremeloes.
The company’s blanket statement that “the Beatles have no future in show business,” would prove to be one of the costliest misjudgments in music history. Two years later, the “British Invasion” was in full swing and Beatlemania was poised to take the world by storm. The group’s first single, “I Want To Hold Your Hand,” was released to a waiting audience, with over one million advance orders. In the following years, the group toured internationally, starred in hit films, and released a stable of albums that many would consider integral to the history of rock and roll.
M&Ms & E.T.
One of the most endearing instances of product placement in film history, E.T. being guided to lonely Elliot’s room by a trail of Reese’s Pieces, was originally intended to feature M&M’s. For unknown reasons, Mars — the candy’s maker — turned down the opportunity. Maybe they failed to see the merit of a film focusing on a precocious young boy and his extraterrestrial friend, or perhaps the idea of product placement — a new concept, at the time — discomfited them.
Whatever the reason, Mars’ loss was Hershey’s gain, as the company paid nothing to have their product featured. Reese’s Pieces, its newest confection, were suddenly a hot ticket item, as much as tripling their sales within two weeks of the movie’s release. Impressed by the initial boost, Hershey quickly penned a deal to feature E.T. on its packaging, which proved a lucrative endeavor for both parties.
While the circumstances of Mars’ misgivings is unknown, the success of the coupling born out of their rejection is often credited as being responsible for illustrating the legitimate benefits of product placement.