So originally, I was going to write a short post about my plans to drive cross-country from Philly to LA, but I've been so fascinated by the Airbnb "ransackgate" scandal, I figured I'd toss in my thoughts on it.
In case you're not familiar, a little background, Airbnb is a startup that allows people to rent their houses out to others for short periods of time. Basically, it allows you to turn your house into a self-serve Bed and Breakfast. So while you're on vacation yourself, you can rent your house out to others and make a little cash on the side.
Until recently, they'd been a very successful company raising over $100 million dollars, and reportedly having a $1B+ valuation.
But if you had any qualms over their business model, it would probably start with, "I'm renting my home out to complete strangers? How do I know my place will be safe?" and then the follow up question would be "If my place gets ruined, what will I do?"
Well, the worst possible scenario happened. A user named EJ reportedly rented her home for a week, whereupon it was systematically destroyed and robbed by one or more egregious robbers. But these kinds of things can happen - catastrophes, disasters. The character of a company depends on how they respond.
The self-backpatting responses [here and here] from Airbnb claiming that the situation was under control were then systematically picked apart by the victim, in which she tells how the company failed to help her once her initial blog post was out:
On June 29 I posted my story, and June 30 thus marks the last day I heard from the customer service team regarding my situation.
And then even talks about one of the co-founders attempts at silencing her and spinning the news:
During this call and in messages thereafter, he requested that I shut down the blog altogether or limit its access, and a few weeks later, suggested that I update the blog with a “twist" of good news so as to “complete[s] the story”.
Now, I'm not going to claim to know all the details, and there are two sides to every story, but from the outside looking in, it sure seems like the Airbnb founders missed the empathy bus.
The Airbnb disaster is just a small microcosm of how corporations have been failing people. From Wall Street greed to oil company ambivalence to nuclear company incompetence, there's been a non-stop stream of companies screwing up, covering their asses up, and then screwing up even more catastrophically. Many of those companies will recover financially, but the havoc they wreak on people's lives reverberates much longer.
Which brings me to my forthcoming MBA experience. Yeah, business is a heavily quantitiative field; the skills you need to succeed for your MBA only reinforce that. But I believe that the primary goal of businesses is to help people, not to make money. Helping people, doesn't necessarily mean charity. But the transactions take place, the products and services businesses sell, help people do what they need to do and live better lives. Making money? That's a peripheral result that comes from helping people. Too many companies forget this. Or write it in their mission statement and then never look at it again.
Johnson & Johnson's nationwide recall of Tylenol in 1982 is one of the most famous cases of business ethics. Several people died when Tylenol bottles were tampered with and laced with potassium cyanide. J&J determined that the cause wasn't at a production level, and that it likely occurred, because someone was tampering with bottles at retail stores. They could've tried to manage the situation at a local level, but instead they announced a nationwide recall of Tylenol, costing them over a $100 million. You think they didn't crunch those numbers and know they were going to be in the big red? It reminds me of a scene in Fight Club, where Jack is talking to some technicians about recall math:
I'm a recall coordinator. My job is to apply the formula. It's a story problem. A new car built by my company leaves somewhere traveling at 60 miles per hour. The rear differential locks up. The car crashes and burns with everyone trapped inside. Now: do we initiate a recall? Take the number of vehicles in the field, (A), and multiply it by the probable rate of failure, (B), then multiply the result by the average out-of-court settlement, (C). A times B times C equals X... If X is less than the cost of a recall, we don't do one.
A woman looks at him with wide eyes and asks, "Are there a lot of these kinds of accidents?" and Jack responds, "Oh, you wouldn't believe."
J&J made those recalls then because they valued people over the numbers. And the goodwill that resulted, among both consumers as well as the J&J employees, was invaluable. I mean, I worked with people at J&J who still talked with pride of their response, more than 20 years after it occurred.
Compare that to their tepid recall response over the past three years. From stories of them hiring people to secretly buy up bottles of Motrin, to Congress lambasting J&J CEO, Bill Weldon for dodging responsibility to a still ongoing steady stream of recall after recall, it's a continuing string of embarrassments from a company that once prided itself on its stellar disaster management. And while the cause of this recall wasn't nearly as serious as the 1982 recall, the willingness (or unwillingness) of the company to go beyond the bare minimum will be remembered.
Recalls, disasters, these are the obvious cases of having to choose between the people-first or numbers-first response. But little things on the day-to-day matter too. And ultimately, putting people first will help you make your numbers. So it's no surprise that companies with a strong reputation for doing so - Apple, Amazon, Southwest, Starbucks - are also some of the most successful companies.
Paul Carr sums it up perfectly:
And above all, it doesn’t mean we shouldn’t remind the current breed of entrepreneurs and investors that, in the final analysis, a billion dollars isn’t actually all that cool. What’s cool is keeping your soul, whatever the financial cost.
-Brian Sim
