Lessons from the Delta Implosion

Last week, I spoke at an event in Austin, Texas. This week, I’m headed to Mount Pleasant, Michigan. Next week, I’ll be in Eau Claire, Wisconsin and Omaha, Nebraska. In short, our efforts to spread the Strong Towns message have me traveling a lot. At any one time, I’ll have a half dozen airline tickets purchased and awaiting use, almost always from Delta, the airline that dominates my local market.

So last week’s Delta implosion really messed up my life, along with the lives of thousands of my traveling companions. For those of you unaffected and unaware, a brief summary: A severe storm in the Atlanta region – Delta’s main hub – shut down the airport for a day. I don’t know exactly how many flights that was – a very large number – but the number was not the most critical thing, the connectivity was.

Not being able to fly in and out of Atlanta meant that planes were not where they should have been once traffic resumed. Flight crews were not in place. Maintenance staff and parts were not where they needed to be. To get those pieces into the proper place took time and effort, time and effort not devoted to moving passengers. Each hour of delay added to the massive backlog of stranded passengers.

Sadly, once people were in place, the time and effort they spent getting there meant they were now mandated to have down time – we don’t want drowsy people operating and maintaining an airplane – and so, more delays. More passengers added to the backlog. It quickly became clear to me that the only way to dig out of this cascading failure was for Delta to simply cancel flights with no intention of ever going back and picking them up.

They can’t run more planes – they are already scheduled to run their planes at full capacity – and they can’t add those stranded passengers to upcoming flights (assuming they get them going) fast enough to clear the backlog, because they routinely overbook (a normally smart business strategy I’m not calling into question). There would just never be the room to catch things up—a sad fact that was clear by the facial expressions of the kind woman working the Delta Sky Priority counter in Austin.

So Delta was forced to do a CTRL-ALT-DEL reboot of their system, stranding me and thousands of others in the process. It was that or cease functioning as an airline. There really wasn’t a choice here.

There is probably going to be a lot of finger pointing and blame shifting here as Delta executives, board members and investors try to figure out what happened. I can explain it very easily: Delta is a hyper-efficient airline. They are well run, well managed and extremely good at what they do. And what they do is move thousands of people every day in an extremely complicated and tightly-wound system of air travel.

As Nassim Taleb, the Patron Saint of Strong Towns Thinking, has taught us, the operational opposite of efficiency is not inefficiency, it’s redundancy. It’s spare parts. It’s slack in the system. For example, the human body is not very efficient. We have two kidneys when we only need one. We have more brain power and lung capacity than we routinely use. If economists – or Delta efficiency experts – designed the human body, they’d get rid of all that redundancy. It keeps us from operating at peak efficiency.

As we all understand, however, that redundancy also keeps us alive. When we look at natural systems – systems that are complex as opposed to merely complicated like Delta airlines – what we find is that redundancy is a critical survival strategy. The ability to take reserve capacity and utilize it for adaptation during times of stress is essential.

Someone named Louis Hyman, an “economic historian”, wrote an opinion piece for the Sunday New York Times called The Myth of Main Street. In it, he explains how those who want Main Street businesses, as opposed to globalization and corporate chains, are simply not understanding both the power and the opportunity that economic efficiency presents:

But nostalgia for Main Street is misplaced — and costly. Small stores are inefficient. Local manufacturers, lacking access to economies of scale, usually are inefficient as well. To live in that kind of world is expensive.

And he is right. If what we care most about is efficiency – getting the most stuff today at the lowest possible price today – then his theories are exactly what we need. And, in fact, we’ve been following that playbook for more than a couple of generations now. Delta Airlines follows that playbook, which is why I was stranded in Austin last week.

Let me draw one simple distinction: The private sector is the place for efficiency. The public sector is not.

“If a business becomes so hyper-efficient that it cannot adapt when stressed, then it will either fail and make way for a competitor to fill the gap or it will force people to alternatives.”

When failure, along with creative destruction, creates the conditions for innovation and increases in productivity, then efficiency is the way to go. If a business becomes so hyper-efficient that it cannot adapt when stressed, then it will either fail and make way for a competitor to fill the gap or it will force people to alternatives, like forcing me to rent a car, drive to Dallas and take a flight on American Airlines.

I believe that, without government bailouts and subsidies, a functioning marketplace would naturally create many mid-sized and small organizations, but few of the too-big-to-fail corporations (none of them long-lived). However, that is debatable. Whether I’m right on that or not, failure – the spawn of efficiency – is a feature, not a flaw, of a competitive marketplace.

For government, however, failure is not an option. If my hometown of Brainerd fails, we don’t liquidate its assets and sell them to the next town. There’s no learning from that kind of experience. There’s just misery.

Government – particularly local government – needs to be about redundancy, not efficiency. We need spare parts. We need slack in the system.

For example, Main Street may not be as efficient as a collection of big box stores, but it is incredibly adaptable (and productive). Things may be more expensive – not always – but there is the ability to adapt to all kinds of changes in the marketplace. The big box store fails – as we see many of them doing – and there is no Plan B. There’s no way to recover from that, despite how cheap things were for years before the failure.

Cities focused on their long-term future would be wise to build redundancy in a fine-grained, interconnected downtown and surrounding economic ecosystem rather than build efficiency by running miles of pipe, asphalt and concrete out to a new mega-project. It might be more expensive in aggregate (although more affordable when done incrementally), but it’s very unlikely to fail. And remember, for government, failure is not an option.

Last week on my personal Facebook page, I shared a photo of a tractor trailer stuck in a Dairy Queen drive through where the driver subsequently delivered about a dozen boxes – two dolly loads – of supplies. Some of my friends protested my complaint by arguing that this was a very efficient way to deliver supplies; one truck could deliver to many stores.

Yet now the city must ensure ($$) that every street is wide enough for a semi to travel at speed while fully loaded. All our intersections must have wide turns ($$). This makes walking dangerous and so, even though thousands of people live within blocks of our downtown, we tear down buildings and turn them into parking lots ($$) to stay competitive with the places the semis deliver to. We’re focusing on the wrong set of metrics.

Governments: Be financially solvent and run your systems with enough redundancy so they will never fail. You should never risk anything that you can’t afford to lose, especially with the misery of others on the line. Allow the private sector to adapt to what you need to do to stay financially solvent. They are efficient and will figure it out.

Then you’ll have the best of both worlds: a stable government and an efficient private sector. You’ll have a Strong Town.

(Top photo from nesnet.)

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