If you’re ever feeling negative about your worst personal finance decisions, chances are they weren’t nearly as costly as those decisions made by some of the world’s biggest companies. While you may just be one person, there are companies that have made poor decisions that have cost billions, despite enjoying the luxury of an army of financial advisors, accountants, investors and analysts. At the end of the day, companies are strikingly similar to people, even a robotics company like ABB Robotics with a revenue of over $34 billion is prone to making some very human mistakes – an internal oversight there led to a $64 million drop in profits. The people behind these companies make poor financial choices in the same way that anyone might, with the difference being that the consequences are often worth about nine figures. Behind each poor business decision is a lesson to be learned that anyone can benefit from. With that in mind, here are five of the worst business decisions ever made, and what we can learn from them.
New Coke: Stick to What Works
Few people would think of soft drink giant Coca-Cola as having ever suffered from financial woes. However, in 1985, struggling to halt a slide in sales, Coca-Cola decided to switch things up completely by switching the recipe for their beloved drink, with the new formula being re-branded as “New Coke”. The decision was made to celebrate the centennial of the company’s founding, but the customers certainly weren’t feeling the joy and sales immediately dropped by over 20% as a result. The executives quickly panicked and reverted back to the traditional formula that we know and love today. The lesson here: if something is working well for you, don’t change it.
Fox vs George Lucas: Don’t Get Greedy
While studio giant 20th Century Fox has undoubtedly made a killing on the global Star Wars franchise, they missed a billion-dollar opportunity for the sake of pocket change. Fox was reluctant to pay Star Wars creator George Lucas the salary he was demanding, so forced him to take a $20,000 pay cut in exchange for all of the merchandising rights for the franchise in perpetuity. While they may have saved a little bit of cash in the short-term, Lucas has made an estimated $5 billion from merchandise sales, of which Fox hasn’t seen a cent. The lesson: short-term greed can cause long-term pain.
Motorola Rejects Smartphones: Embrace Change
Remember Motorola? At the height of its success in 2006, the iconic Razr phone had captured an astonishing 22% market share and things were looking pretty rosy. What happened next was a mistake so monumental that it has earned its way into the annals of Betway Casino’s “worst business decisions in history” rankings: the company simply refused to develop smartphone technology, presumably thinking they wouldn’t catch on. The result was a drop in share value of 83% by 2010, and the company’s market share shrinking to a tiny fraction of what it once was. The lesson here: embrace change or risk losing out forever.
Kicking Out Steve Jobs: Creativity is Crucial
Steve Jobs was not always considered the pioneer and genius that he’s revered as today. In 1985, Peter Thiel (now known for his role in founding PayPal) fired Jobs from his role at Apple. The result was a decade of stagnation and poor revenues. Upon taking Jobs back a few years later, Apple was able to grow into the largest company on Earth, responsible for the iMac, iPhone, and iPad. The lesson here: you need to value creativity in order to make successful financial decisions.
Western Union Passes on the Telephone: Listen to Your Friends
Western Union may have long faded into irrelevance, but it wasn’t always that way. Famous for popularizing the telegram, the founder of the company was approached by Alexander Graham Bell in 1876, with an offer for them to buy his new invention, the telephone. Ignoring the advice of his friends, the founder declined to pay $100,000 for rights to the telephone, missing out on the greatest communications innovation in human history. The lesson here: when it comes to your personal finances, always take the time to listen to your friends.
The poor decisions made here represent around a trillion dollars in losses for those who made them. While the stakes may not be so high for you, the lessons you can take from them will help you on your way to secure and healthy personal finances.