Technology, Venture Capital, Private Equity

Perspectives from an Indian VC

Archive for January, 2009

Financial meltdown – an “outlier event”

Posted by Arun Uday on January 28, 2009

Just finished reading Malcom Gladwell’s “Outliers”, where he describes the role that unaccounted events/circumstances play in bringing about extraordinary results. He uses this mostly to elaborate on the achievements of exceptionally talented individuals, but what was also interesting is some of these examples that he uses to describe the causes for human accidents such as airplane crashes and industrial disasters. For example, he analyses the Three Mile Island nuclear accident in Pennsylvania in 1979. He states –

No single big event went wrong at Three Mile Island. Rather, five completely unrelated events occurred in sequence, each of which, had it happened in isolation, would have caused no more than a hiccup in the plant’s ordinary operation. The first minor problem was a blockage in the plant’s polisher (a giant water filter of sorts). This blockage caused moisture to enter the plant’s ventilation system which tripped closed two valves thus preventing cold water from entering the plant’s steam generator to control its temperature. These two problems by themselves would not have caused a problem since the plant had a backup cooling system set to activate in such a situation. However, for some unexplained reason, the valves of the backup system were closed that day. But this too should not have caused a problem since there was a light on the engineer’s control panel that illuminated indicating that the backup system’s valves were closed. Unfortunately, the warning light was blocked by a repair tag hanging from the switch above it. But there was still another backup system in place that should have cooled the reactor when it started heating up. But, as luck would have it, the relief valve wasn’t working properly that day either. It stuck open when it was supposed to close, and, to make matters even worse, a gauge in the control room that should have told the operators that the relief valve wasn’t working was itself not working. By the time Three Mile Island’s engineers realized what was happening, the reactor had come dangerously close to a meltdown.
Read the rest of this entry »

Posted in Uncategorized | 4 Comments »