Quote of the Week

“The trouble with market research is that people don’t think what they feel, they don’t say what they think, and they don’t do what they say.”

— David Ogilvy

Avoiding Fragility

As Christmas approached, the eastern two-thirds of the United States experienced plunging temperatures with significant snowfall in many areas. Predictably, this caused all sorts of travel headaches during a particularly busy time of the year. Disrupted travel during the holidays is not just an ordinary hassle. It is an inherently emotional event because it ruins family plans and impacts long planned vacations.

All airlines experienced problems, but Southwest’s schedule was disrupted more severely than its competitors. The most significant factor was related to obsolete crew scheduling systems that failed and caused a system-wide meltdown.

When I read about Southwest’s technology problems, I was surprised because I have always found the company’s reservation system far easier to use compared to other airlines. Southwest’s policies have long been far more flexible and friendly as well. It is easy to book, change, and cancel flights. Flight credits are transparently displayed and simple to use. There are no annoying seat reservation or baggage fees. All of these factors have built up a significant amount of goodwill. I avoid flying on other airlines.

But apparently Southwest’s underlying technology platform is obsolete, at least when it comes to crew scheduling. The inability to reposition crews or even to communicate effectively using a manual process ended up costing the airline several days of revenue, but far more importantly, this eroded a great deal of customer goodwill.

Just as there is some level of necessary inefficiency when it comes to supply chains, airlines need to know when to accept a certain amount of slack in their network to allow for inevitable disruptions. Similarly, investing in technology may suppress financial results in the short run, but will help to preserve customer goodwill in the long run when airline operations are inevitably upended by severe weather.

Passengers will always grumble about delays, even those that are not an airline’s fault, but problems perceived to be due to acts of God are unlikely to impact economic goodwill in the long run. However, many passengers will not forgive problems that appear to be due to underinvestment or management incompetence. Southwest will be able to quantify the direct economic damages of this debacle in dollars and cents but it will be harder to estimate the long term damage to economic goodwill.

Leave a comment

Business Profiles

The Business Profile Library includes detailed reports on the following companies:

Progressive, Fastenal, Costco, Union Pacific, George Risk Industries, BNSF, CarMax, Tractor Supply, Investors Title, America’s Car-Mart, and DaVita.

The George Risk Industries and CarMax profiles are available as free samples.

Rational Reflections is a reader supported publication. Your paid subscription provides access to all business profiles and other exclusive content.

Your support is appreciated!

Subscribe now

Articles

Inside the Book-Writing Process: How I Wrote a Book in the ‘Edges of Time’ by , October 13, 2022. This is a great article for those of us who aspire to write a book but think we do not have the time. Many schedules do not easily yield large blocks of time for writing, but it is possible to reclaim time at the “edges”. It is inspirational to read about a writer who was able to find sufficient time to complete a book while caring for a newborn! The article also goes into the process of interacting with editors and publishers. (The Profile)

What Can We Learn from Barnes & Noble's Surprising Turnaround? by , December 28, 2022. In 2019, James Daunt was named CEO of Barnes & Noble and has engineered a turnaround. Daunt started out in the bookselling industry in 1990 when he opened a store in London. He shunned the typical promotional deals with publishers and believed that discounting cheapens the product. After making changes at Barnes & Noble, it appears that Daunt's strategy is working. (The Honest Broker)

Related article: How Barnes & Noble Went From Villain to Hero by Elizabeth A. Harris, April 15, 2022 (New York Times)

Schools Are Victims of their Own Success by David Perell, December 26, 2022. It is important to understand that the modern American school system was designed to fulfill the requirements of another era. In the past, the primary and secondary school system was designed to prepare students to become reliable manufacturing workers doing repetitive rote tasks. This model is not suited for the Information Age. David Perell provides a brief history of the evolution of the school system and proposes a new education paradigm better suited to the current environment. (Monday Musings)

On new-is-better bias by Rory Sutherland, December 3, 2022. “We like new, shiny things. Or, we simply pay disproportionate attention to them, and consequently rate them more important than they really are. But then something else happens, a trick of the mind. We start to pay far more attention to the specific ways in which the new is better than the old, to a point where we drown out any thought of how the old might have certain advantages that the new does not possess.” (The Alchemist from Rory Sutherland)

Book Review of Alchemy by Rory Sutherland, February 10, 2020 (Rational Walk)

Bob Gottlieb Is the Last of the Publishing Giants: The 91-year-old editor waits for his 87-year-old star writer, Robert Caro, to turn in his book by Matthew Schneier, December 22, 2022. Reading The Power Broker in 2020 was an eye opening experience. Robert Caro’s biographical and literary talents are unmatched. At 87, Caro is working to complete his five volume biography of LBJ. I have read the first four volumes and eagerly await the fifth. This profile of Caro’s longtime editor is interesting but does not provide a publication date for the final volume. (Vulture) h/t The Profile

Book Review of The Power Broker by Robert Caro, June 12, 2020 (Rational Walk)

Synthetic Meat Will Change the Ethics of Eating by Virginia Postrel, December 23, 2022. Plant-based “meat” has gained market penetration in recent years, but such products are actually highly processed foods with nutritional limitations. In contrast, synthetic meat is made out of meat cells grown in laboratory vats. While still an artificial process, synthetic meat products could be attractive to those who seek the nutritional profile and taste of actual meat but have an aversion to the slaughter of animals for food production. Although early taste tests appear to be promising, such products are not yet economically competitive with conventional meat. (WSJ)

All Success Is A Lagging Indicator by Ryan Holiday, December 28, 2022. “Writing is a byproduct of hours and hours of reading, researching, thinking, making my notecards. When a day’s writing goes well, it’s got little to do with that day at all. It’s actually a lagging indicator of hours and hours spent researching and thinking. Every passage and page has a prologue titled preparation. The solution to my writer’s block that day was not to write at all. It was to stop for the day and go research the topic more. It was to go for a run and a walk. It was to do the prep work.” (RyanHoliday.net)

Christmas Eve 1914, a soldier writes home by Shaun Usher, December 24, 2022. This article includes the text of a letter from a soldier who witnessed the famous Christmas Eve truce between British and German troops on the Western Front in 1914. Without any official truce in place, troops on both sides of the front not only put down their weapons but interacted peacefully, even exchanging gifts and singing carols. The truce lasted for a few days and involved approximately 100,000 men. (Letters of Note)

Rational Reflections is a reader supported publication. Weekly Digest is free for all readers. If you enjoy this type of content, the best way to encourage more of it is to purchase a subscription. With a paid subscription, you’re supporting all content and will also gain access to additional content including the business profile series.

Your support is appreciated!

Subscribe now

Podcasts

Berkshire’s Purchase of Taiwan Semiconductor Manufacturing, December 26, 2022. 46 minutes. This is a discussion of TSM’s business model, competitive advantages, the role of semiconductors in the economy, and risks associated with Berkshire’s recent investment. There is also a discussion of how geopolitical tensions between the United States and China might affect the investment thesis. (We Study Billionaires)

Henry Reardon on his Carvana Short Thesis, December 29, 2022. 53 minutes. Henry Reardon is a pseudonym for an investor who posts on Twitter at @integrity4mkts. In this discussion, Bill Brewster and Reardon discuss the situation facing online used car retailer Carvana and the challenges of short selling in general. (The Business Brew)

Andrew Carnegie, December 25, 2022. 59 minutes. David Senra discusses Andrew Carnegie’s autobiography in this episode. Carnegie is known for funding public libraries. Early in his life, Carnegie benefited tremendously from having access to a 400 volume private library: “In this way the windows were opened in the walls of my dungeon through which the light of knowledge streamed in. Every day's toil and even the long hours of night service were lightened by the book which I carried about with me and read in the intervals that could be snatched from duty. And the future was made bright by the thought that when Saturday came a new volume could be obtained.” (Founders Podcast)

The Autobiography of Estée Lauder, November 18, 2021. 1 hour, 24 minutes. After I heard host David Senra speak about Estée Lauder several times, I decided to listen to this older episode from the back catalog. Here’s a great lesson about the importance of positive visualization: “If you spend time with pictures of failure in your mind, you will orchestrate failure. Countless times, before the event, I have pictured a heroic sale to a large department store every step of the way and the picture in my mind became a reality. I've visualized success, then created the reality from the image. Great athletes, business people, inventors, and achievers from all walks of life seem to know this secret.” (Founders Podcast)

James Clear: Building & Changing Habits, November 8, 2021. 51 minutes. New Year’s Resolution? Listen to this podcast! “James Clear is the author of the New York Times bestseller Atomic Habits. His extensive research into human behavior has helped him identify key components of habit formation and develop the ‘Four Laws of Behavioral Change.’ In this episode, James provides insights into how both good and bad habits are formed, including the influence of genetics, environment, social circles, and more.” (Peter Attia M.D.)

Book Review of Atomic Habits, February 8, 2021. This is easily the best contemporary self-help book that I’ve ever read. The advice is simple and actionable for those who are interested in making changes. (The Rational Walk)

Twitter Thread of the Week

I really enjoy following The Cultural Tutor on Twitter. The account posts several interesting threads every week. This thread on the history and archeology of rock-cut churches carved into the ground was particularly interesting.

The Cultural Tutor @culturaltutor

This is Biete Giorgis, one of eleven rock-hewn churches carved into the volcanic hills of northern Ethiopia over 800 years ago...

Happy New Year!

New Year’s Eve, Times Square, December 31, 1949:

Times Square, December 31, 1949 (Source: AP)

If you found this Weekly Digest interesting, please click on the ❤️️ button and consider sharing this issue with your friends and colleagues.

Thanks for reading!

Subscribe now

Share

Leave a comment

Copyright and Disclaimer

This newsletter is not investment advice and all content is subject to the copyright and disclaimer policy of The Rational Walk LLC, publisher of Rational Reflections.

The Rational Walk website was founded by Ravi Nagarajan in 2009 who is the author of all its content. The website contains over a thousand articles covering topics ranging from personal finance and investing to book reviews and philosophy. In addition, there is an extensive archive of articles related to Berkshire Hathaway.

Your privacy is taken very seriously. No email addresses or any other subscriber information is ever sold or provided to third parties. If you choose to unsubscribe at any time, you will no longer receive any further communications of any kind.

The Rational Walk is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.

The Rational Walk

Weekly Digest - December 30, 2022