Collision Course: How Good Business Decisions Sank the Titanic

Titanic was built to make money but not on the backs of immigrants as some claim. Instead they were designed to make money from wealthy passengers who would travel both ways. Second class was designed for tourists and professionals who traveled less often but wanted the comforts such a ship offered. And finally you had third class (steerage back then) who paid the smallest fare but proportionally were the largest in numbers. However despite their numbers, they were a smaller revenue generator compared to first class passengers.

Joseph Mortati in Collision Course:How Good Business Decisions Sank the Titanic and Why refutes the standard thinking by going through the concept of the new White Star ships and how they were designed to make money. Cunard, which had the faster ships of the day that broke records, sacrificed speed for comfort. The line was also subsidized by the British government to prevent it from being bought out by a foreign entity. That gave them a 2-1 advantage over White Star. They had speed and government backing. Ismay had to come up with a way to compete that would make money. Competing on speed would be difficult and expensive. They could still market to immigrants seeking to cross over to United States but they knew it was a diminishing trade over time.

Focusing on repeat travelers then became important. And not just any repeat travelers but ones who were very wealthy and willing to pay extra for comfort. They could charge higher tickets for them and provide amenities a hotel on land would provide. It was a daring and bold plan that hinged on getting the wealthy to buy tickets. It required a marketing campaign to convince them that ships like Olympic or Titanic were the ships to be on and be seen on. What Mortati found was that Olympic compared to Lusitania would make 40% more per round trip because of those higher ticket prices. And while immigrants still comprised 50% of passengers aboard, revenue from them was 20%. Which means 80% came from first and second class passengers and mostly from first class.

Now that debunks the myth. Had Olympic, Titanic, or Brittanic been built to make lots of money from immigrants, the proportions would have been very different. Instead you would have third class being the significant revenue generator and first and second class bringing around 20% combined of the total revenue.

Source:
Mortati, Joseph Collision Course – How Good Business Decisions Sank the Titanic and Why (2013, Amazon Kindle Edition)

As we approach the 101st anniversary of Titanic sinking, a new book argues bad decisions were ultimately to blame for Titanic’s demise. Joseph Mortati, according to the press release, examines the whole Titanic story in a new way–from a business perspective.

Starting with the hours before the crash and working back through time, the author takes the reader into the planning and implementation stages of a decade of decisions that ultimately and unknowingly rendered Titanic vulnerable. These sound but fatal business choices were made by stakeholders from the international holding company that owned Titanic down to the engineers, marketers, and ship’s officers.

I have no idea whether his arguments are good or not, that will have to be determined later. I suspect other books have taken a look at the business practices but from a historical rather than a business perspective. So why the book? From the book website, titaniccollisioncourse.com, he states the following:

However, these views largely miss the fact Titanic is fundamentally a business venture. By looking at the ship through this lens, it will become abundantly clear that far from being the classic case study of reckless decision-making, the people involved actually make smart business choices. After presenting this view to thousands of businesspeople and business students over the past few years in the Washington, DC area, every audience collectively says, “We would have made the same decisions they did.” If so many people today would have done the same things, that tells us Titanic is actually a story of good decisions that result in bad outcomes.

Mortati raises a valid point here. We think of Titanic in a particular way but forget easily forget it was a business. Sure we know of J.P. Morgan, Bruce Ismay, Harland & Wolff. And we know that Titanic and other steamships of that era made money moving passengers and cargo. That was how they paid for the officers, ship crews, all the administrative and support staff, and of course the salaries for those running the shipping line. Mortati is focusing on how good decisions led to a bad outcome and there is a lesson to be learned.

So his book is not a history book in the traditional sense, but an examination of the Titanic business. Presumably that means looking into the thinking behind ships like Titanic, how they were marketed, and how successful they were and whether the really understood the risks involved. We know the final outcome: Titanic sank. It’s sister ship Britannic also sank (due to a mine most likely), and only Olympic survived until old age and was eventually sold off for scrap. White Star Line was eventually folded into Cunard during the Great Depression and the age of steamships has since faded into history. Perhaps there really is a business lesson to be learned here. Unfortunately the problem of assessing risk is still a big one. No one considered a small O-ring a major risk until after Richard Feynman demonstrated it but putting one in ice water during the Rogers Commission hearings on the space shuttle Challenger disaster.

Collision Course: How Good Business Decisions Sank the Titanic
Joseph Martati
ISBN 978-0-9854291-1-9, 141 pages
Available as eBook at Amazon (exclusive)

Sources:

1. New Book Describes How Good Business Decisions Sank the Titanic(27 Mar 2013, Reuters via PRNewswire)

2. Wikipedia:Space Shuttle Challenger disaster

2. Richard Feynman site (Feynman Online)

Collision Course – How Good Business Decisions Sank the Titanic and Why

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