Is BP an evil corporation, hellbent on purposely destroying the Gulf of Mexico and everything else it can get its capitalist paws on? Hardly. I don’t believe that for a second, and you shouldn’t either. But I do believe that there is a way that corporations, especially large ones, go about making decisions that this whole episodes spotlights. Corporations have a propensity to underestimate high-impact, low probability events. They pursue strategies that work 99.99% of the time. But when the other 0.01% comes around, watch out.
That’s exactly what we have seen these past months from Toyota. That company made decisions about the design and safety of their vehicles, decisions that will work just fine almost all the time. But not all the time. Same thing in the financial sector: the mortgage-backed derivatives fiasco is another case in point. As long as there is not a massive drop in real estate values, all is well. Until it happens. Enron, the same thing. Over and over and over.
There is a classic parable about gambling, supposedly a foolproof way to make money. Here is the scenario. Suppose you play a game with more or less 50% odds of winning each bet — blackjack, for example. Bet $5 on the first hand. If you lose, double your bet on the next hand — $10. Keep doubling until you win. Eventually, you’re going to win a hand, right? When you do — whether it’s on the very first hand, or the 100th — you will recoup all your cumulative losses, plus earn a profit equal to your original bet. So you can’t go wrong. Here’s the problem, though. Sooner or later you will encounter a string of losses sufficient to break your bank. Mathematically, it always happens, sooner or later. Eventually, there always is a Gulf Oil disaster, or a steep drop in real estate values, or a string of safety defects. Any model of governance that is premised on the risk being zero is folly.
So, let’s not demonize BP. Let’s understand this as the inherent behavior of pretty much any large business enterprise. And therefore, let us further understand that, when the decisions of these enterprises have the capacity to wreak havoc far beyond the provincial borders of the corporate suites, it is incumbent on our government to impose intelligent regulatory boundaries on their behavior.
From the Center Square 
June 3, 2010 at 12:38 am
I don’t know, I think BP may be a special kind of bad. Do you know how many “egregious, willful” safety violations BP has had in the last 5 years? 760!
Now do you know how many “egregious, willful” safety violations the next highest oil company (who I would assume have the same profit motives as BP)? 8!
That tells me that there is something very wrong culturally in that corporation, that goes beyond typical “big business” decision-making.
I do get what you are saying, as I do think that there is a level of inherent behavior of large business enterprises that can be detrimental to society. But I don’t think the existence of such inherent behavior precludes a given organization from making extraordinary bad decisions that goes beyond typical and is thus deserving of criticism that some may call demonization.
Maybe BP falls into that category.
June 3, 2010 at 2:57 am
[…] at The Centered Square’s place he’s talking about BP. And for almost. every. single. word. He’s got me. Is BP an evil corporation, hellbent on […]
June 8, 2010 at 1:51 pm
I take issue with the premise that this type of event — or any of the others described in the article — has a less than 1/10th of a percent likelihood of happening. The ugly, hard truth of all of these events is this: they were foreseeable. Corporate leaders simply chose not to take a hard look at the risks. And lets face it: perhaps the risks to BP the corporation are less than we would like to believe. Clearly, the company didn’t devote sufficient resources to planning how to clean up a worst-case scenario, but I bet their legal department hasn’t been slacking. Is BP “too big to fail” too?
June 9, 2010 at 2:36 am
A blogger that I admire most profoundly wrote: “And, to top it all off, the BP oil spill, which will almost certainly become the greatest single environmental catastrophe in history, and will eventually be proven to have as its root cause a series of throw-caution-to-the-wind shortcuts chosen by middle-managers desperate to earn miniscule performance bonuses.” (http://conscienceofaprogressive.com/2010/06/04/the-wages-of-cynicism/)
Yes, these things can be foreseen. But they are not deliberate. And there is a profound difference.
June 9, 2010 at 4:53 am
The real irony is that today was “world oceans day”.