The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [412]
Herbert Allen, never one to sit patiently on the sidelines, called Ivester and asked, Why on earth don’t you get over there and show your face? And Ivester said, I’ve sent a team over, plus, those kids aren’t really sick. Allen exploded in frustration. Look, he said, these aren’t kids who marched around and said, “I’m going to ‘get Coca-Cola’ by saying I’m sick.” They think they’re sick. Whether they’re sick or not, what harm would it do to go over and sit down with their parents and give them a lifetime supply of Coke?23
But it seemed to him that Ivester didn’t understand any of that. As he saw it, Coca-Cola was not at fault. And that was that.
For weeks, the local bottlers kept trying to reassure the public that Coca-Cola products were safe. But then it turned out that maybe they weren’t. The company admitted it had found mold and chemical contaminants in the bottling plants. But it insisted these were aberrations, surely not serious enough to sicken children. Buffett was horrified. The arrogant response played right into Coca-Cola’s vainglorious image. Ivester had already had difficulty dealing with the European Union. Coca-Cola’s über-American style and the company’s strategy of seeking exclusive marketing deals had earned it a reputation for extraordinary hubris. Over and over, European government officials slapped around Coca-Cola representatives in a Punch and Judy show. All over the world, headlines blared, and customers’ trust in their beloved product dwindled.24
Weeks later, Ivester showed up in Europe and apologized in finely crafted legalese that never actually said, “We’re sorry.” The headlines died, and the Coke machines were plugged back in all over the continent. But the incident cost more than a hundred million dollars and impossible-to-measure damage to Coke’s reputation. Buffett stewed.
Herbert Allen was stewing as well. Closer to the day-to-day management of the company, he questioned whether Coca-Cola was running off the rails. Despite the declining sales, at least 3,500 new employees had marched into Coca-Cola Plaza in Atlanta in the last two years. Allen looked at the burgeoning payroll and saw “a cancerous growth on the company.”25 The company’s strategy of adding on the periphery, growing by acquisition, and hiring thousands of new staff was not working. Quarter after quarter, Ivester promised to improve growth rates; quarter after quarter, Coca-Cola fell short. One day in Ivester’s office, Allen asked him, What are you going to do? And Ivester said he didn’t know; had no solution.26 “It had just overwhelmed him. Everything together had overwhelmed him. He did not know what to do,” Allen says.
Floating above it all like the Goodyear blimp was Coca-Cola’s millennially named Project Infinity. This “was one of those projects where everybody’s computer would be linked up to the men’s room so they’d know how much soap they were taking out of the dispensers,” says Allen. Even the name, Project Infinity, seemed to refer to out-of-control spending in pursuit of ever-diminishing returns.27 It drove Allen nuts. He wanted to know what Coca-Cola was getting for its billion dollars. How was Infinity going to solve the company’s basic problems?
Buffett was displeased but resigned to being displeased. He had encountered this on some scale at almost every company where he sat on the board. Therefore, he sighed to himself, “They all do it. The people who run information-technology departments always want the latest and greatest whiz-bang thing. No matter how smart you are, no matter how much you know, who can challenge them?
“We probably aren’t going to sell any more Coca-Cola because of some computer project, and we will add more people instead of cutting jobs. The vendors have it rigged to make us update the software and hardware every couple of years or the system will stop working. So it isn’t even a onetime expense.
“Controlling technology spending is