15 Lessons From Businesses That Fell From Grace

Once they were giants. Now, their jokes from FTL trading to Kylie Cosmetics, Theranos, and beyond. We can learn a thing or two from businesses that scaled quickly and came crashing down faster than you can say billionaire. Some of these companies are still around, limping along and a shadow of what they once were. Some of them don't even exist anymore.

How did they reach the top so quickly, and why did they lose it all even faster? And perhaps to top all of this? What important lessons can we take away from them to make sure that we never lose everything in disgrace? Not in our personal lives, not in our careers.

Let's look at 15 lessons from businesses that fell from grace. Well, come to a Locke's.

First up is Research in Motion. You might know them better as BlackBerry. Right now, about 40% of you are watching this video on your iPhone or Android device. But that could have been a BlackBerry. There was a time when BlackBerry dominated the smartphone space when everyone else was focusing on sending expensive text messages. BlackBerry allowed us to send messages as data, which bypassed individual messaging charges.

On June 19th, 2008, the stock price closed at 147.55. These days, though, the company is virtually nonexistent, and the stock price hovers around $3 a share. So what happened? Well, they failed to innovate. iPhone came along with the same features and a better design. Instead of following the cultural tide, BlackBerry pushed against it, hoping their previous success and loyal customers would push with them. But that's not how it works.

Your customers don't owe you loyalty. You owe them innovation. Customers are loyal if you give them what they want; if something better comes along, they'll leave you in the dust.

Then there's Victoria's Secret. Now, Victoria's Secret was the ideal for people who had already smashed their goals: world-renowned supermodels who walked the runway for the biggest fashion houses. Being a Victoria's Secret angel was the ultimate victory. Their story eyes were everywhere. They were a part of a cultural zeitgeist of freedom and empowerment for women. But only skinny women.

When the pressure mounted to produce inclusive sizing, Ed Razek and Leslie Wexner, executives of L Brands, the parent company, all they said was no. And that was the beginning of the end. Their yearly fashion show was indefinitely paused. People moved on to other brands, and stores closed around the world. Sales have fallen by $6.4 billion.

The lesson here? Sometimes leaders will suck. Get rid of them. Loyalty to old ways doesn't bring in new customers.

Yahoo! If you're older than 25, chances are the first email address you had ended with @yahoo.com. Yahoo! stood toe to toe with the biggest names in tech: Google, Facebook, and MySpace. They were all there. The stock price soared during the dot-com boom, and by all accounts, they should be sharing the market space with Google right now. But they missed some important opportunities.

They failed to acquire Google. In the early 2000s, they rejected an acquisition offer from Microsoft. In 2008, their leaders kept changing, and every time someone new would come in, they would overhaul the mission and goals. Eventually, nobody knew what Yahoo was supposed to be anymore.

The lesson here, strangely, is that you have to hire younger. Yahoo was hiring businessmen while Google was run by fresh, hungry, barely there college graduates. They knew what emerging generations wanted. Yahoo! didn't.

Gap: Gap was a clothing brand. That was the clothing brand, especially in the nineties. The clothes were comfortable, stylish, and aimed at the most lucrative fashion market: teenagers. They scaled quickly and had the bright idea to move into Gap, Baby, and Gap Maternity.

You'd think that diversifying would open up opportunities, right? But teenagers don't want to wear the same clothes as their baby cousins or their pregnant aunts. That's the harsh truth. So they lost their core market. They couldn't produce the quality they needed to stay on top.

In the second quarter of 2023, they saw an 11% sales decline in online sales and 7% in store sales. They're still profitable, but the trendiness and popularity with the teen market has basically disappeared. They're just not cool anymore.

Theranos. Now, it's controversial to say that Theranos was ever actually at the top because their entire business was based on a massive lie. So they definitely fit the fall from grace part of this. Founder and CEO Elizabeth Holmes was once the richest self-made woman in the world. So there is that.

Theranos claimed to be able to revolutionize blood testing, but their method just wasn't possible. Holmes is now in jail for fraud. The company is defunct, and investors lost billions. The lesson here is pretty simple: Don't build your business on a lie, ever.

And speaking of ethics, we've seen in the comments of our videos, so we know that the fall of FDX affected a lot of you. It affected us. There were big dreams and a lot of money invested in Sam Bankman-Fried, and it all came crashing down.

FTX was one of the largest and most influential platforms in the cryptocurrency space. This came crashing down in November 2022 when it was discovered that Alameda Research, a trading firm founded by SBF, held a large number of tokens as their primary asset. This caused a bank run. Customers rushed to withdraw, and FTX didn't have the liquidity for customers to get their money.

You always need a plan for potential crises. The rapid downfall of FTX shows how quickly situations can change, and you don't want to be caught in the crossfire without a backup plan.

Toys R Us. The fall of Toys R Us was genuinely surprising. Children are always going to want toys, even though the landscape has shifted to electronic devices. Physical toys will always be popular. They had a massive share of the market, and there was no toy store even close to their popularity.

In 2005, Bain Capital and Vornado Realty Trust acquired Toys R Us, burdening it with $5 billion in debt. The debt limited the company's ability to invest in e-commerce, store improvements, and other important areas. Sales declined year over year, and they filed for bankruptcy in 2017.

And we learned that the negative impact of major debt is far more powerful than the positive impact of a strong company.

Lehman Brothers. Many companies fell from grace during the 2008 financial crisis, but none were more disgraceful than Lehman Brothers. It was the fourth-largest investment bank in the United States. They were handing out mortgages like candy during the housing boom.

So when the subprime mortgage market collapsed in 2008, they were left holding a massive portfolio of worthless assets, leading to a loss in investor confidence. They declared bankruptcy in 2008, which brought the financial market to its knees. The effects of Lehman Brothers' unethical practices and carelessness are still felt to this day.

When you get greedy and bite off more than you can chew, the world will humble you no matter how successful you are. Humility is important. Nobody is beyond failure.

Pan American World Airways, or more simply known as Pan Am. It was an iconic international airline of the 20th century, but the company suffered from a public image crisis following the 1988 bombing of a Pan Am flight. Their business strategy focused on expansive growth during the crippling oil crisis of 1973, which put them into massive debt.

It just goes to show that even though the business guidebooks might push expansion and scale, sometimes it's just not the right time for it. Sometimes the risks aren't worth it, and it's better to lay low and wait for the market to stabilize again.

Then there's Enron. Now, Enron was an energy company based in Houston, Texas. It was founded in 1985 and grew rapidly. But there had always been massive fraud behind their success. They used accounting loopholes and poor financial reporting to hide billions of dollars in debt from failed deals and projects.

Their stock price was inflated and based on fraudulent financial statements. Enron taught us that integrity matters. Personal and professional integrity is crucial because building success on deceit is unsustainable. We must learn to never accept information at face value, ask questions, and verify the facts because blind trust can lead to serious consequences.

MySpace. It wouldn't be a proper fall from grace video without a mention of MySpace, although it is still so fondly remembered that those familiar with MySpace don't even want to hear about its downfall. It hurts too much. Launched in 2003, it was a pioneering social network that became the most visited website by 26, surpassing even Google.

You could connect with friends, share photos, and discover music. It was like a mix of Facebook, Instagram, and Spotify. Unfortunately, their platform wasn't very user-friendly. It was cluttered and full of ads, so users slowly migrated to other platforms, especially once Facebook came along.

News Corp bought MySpace in 2005 for $580 million and sold it in 2011 for 35 million. MySpace taught us that you can have the best, most innovative idea for something, but if it doesn't look good, people are going to jump ship. The user experience is essential.

Revlon. The beauty brand Revlon was founded back in 1932 and started with a single product: nail enamel. Their formula used pigments instead of dyes, which offered a broader range of richer, opaque colors. The company expanded its product line and became one of the largest and most recognized cosmetic brands in the world.

It was influential in setting beauty trends and a pioneer in mass media advertising, but they were incurring a large amount of debt. When new players entered the market and Revlon had to innovate, they were bound by financial constraints. They were slow to embrace online marketing and e-commerce.

While brands like L'Oreal and Estée Lauder invested heavily in digital marketing, social media presence, and direct-to-consumer sales models, they stayed in their brick-and-mortar spaces, so they failed to capture the attention of millennials and Gen Z. They're still around, mostly in drugstores, but they're nowhere near as successful as their former competitors.

WeWork. WeWork was founded in 2010 and happily steadily expanded over the next few years. By the end of 2018, they reported a valuation of $47 billion. They rebranded as the We Company and filed for an initial public offering. But their IPO filing showed massive losses, so investors started questioning their business model.

A year later, in October 2019, the company's valuation fell to $8 billion. They postponed the IPO. The CEO and founder was fired. SoftBank, a major investor, bailed them out, resulting in massive layoffs. And WeWork continues to limp along with less than half of its staff.

This is a hard lesson to learn, but we all need to know that just because you have the idea doesn't mean you have the business acumen. Management and big ideas are completely different parts of the brain, and not many people can do both of them well. You have to find the best person for each job, and if it's not you, then you should get out of the way.

Vine. You know, Vine was kind of a cult classic, right? It got so big so quickly and declined even faster that a lot of people barely even had the opportunity to fully enjoy the app. It was launched in 2013 and became a social media app for sharing short looping videos. It helped to launch the careers of some of the most popular YouTubers and Internet personalities.

But even though it was popular, they struggled with monetization and user retention. When Instagram and Snapchat launched similar features, interest in Vine, well, it tanked. In 2016, Twitter, Vine's parent company, shut it down for financial reasons.

It's understandable that Vine didn't want to follow MySpace's method and fill the app with ads, but they needed to make some money. You need monetization when running a business before you even launch. That should be your number one concern. And Vine, they missed that boat.

And finally, X, formerly Twitter. Is anyone really calling it X anyway? Where do we go from here? The world was excited in April 2022 when we heard that Elon Musk had offered to buy Twitter for a staggering $44 billion. He promised more freedom of speech on the platform and a crackdown on bots. But it seems like the exact opposite happened, right? There is less freedom of speech and more bots.

It was once the chosen platform for academics, politicians, researchers, and celebrities. It was far more personal than Instagram or Facebook. The harassment is rampant. It just doesn't seem to work like it used to. It's now valued at $19 billion, although some experts estimate that it could be as low as $8 billion.

That is a staggering, unimaginable loss, down from $44 billion. And look, maybe they can come back from it, but the reputation damage is going to last for a long, long time. Musk said he signed the initial purchasing agreement before seeing the real numbers from Twitter.

Once he realized that the true user numbers were inflated, he tried to withdraw, but legally he couldn't. The lesson here is it is so important to assess downsides and challenges when taking any major action. Before you commit to anything, you need to know as much information as possible to understand what you're getting yourself into.

The Twitter takeover is a pretty good example as to why. And that's a wrap for today, my friend. We hope you take these lessons with you throughout your personal life and careers. It just goes to show that no matter how big you are, no matter how much people love you at first, one major mistake from you and all of that can change.

We'll see you back here next time, my friend. Take care.