Third Order Effects and Unintended Consequences of Decisions in Our Lives

by Hank Coleman

In the past, I have talked about unintended consequences in the United States government actions.  But, the same thing applies in business and also in our everyday lives.  We all have the best intentions at heart…..just like the federal government believe it or not.  But, our best laid plans often run amuck.Many of the supporting companies that surround the Harry Potter franchise learned this the hard way.  Warner Brothers movie studio postponed the release of the newest Potter movie, “Harry Potter and the Half Blood Prince”.  The movie was originally supposed to be released by the studio this month before the holidays, but Warner Brothers recently announced that it was postponing the release until next summer to smooth out its lineup. 

That is all well and good except that there are a slew of other companies that release licensed products in conjunction with the movie’s release in theaters around the country.  Because the studio delayed the opening, companies like EA Games, FAO Schwarz, and Elope will see significant revenue declines as opposed to what was expected.  An extra decline in revenue, just want retailers need now, right?  Elope earns approximately $250,000 in Potter merchandise like wands and wizard hats.  Electronic Arts video game manufacturer will take a $120 million hit while it delays the release of the already completed video game tie in.  FAO Schwarz will delay recognizing revenue of $120,000 that is expected from Potter merchandise. 

Movie theaters across the country will miss out on tens of millions in ticket sales that will not happen before the holidays.  Scholastic, the Potter books’ publisher, will also miss out in hundreds of millions of dollars in book sales.  When a new movie comes out, any Potter products like books and toys increase over their normal amount.  There are so many products intertwined with the distribution of a new mega-movie.  A lot of businesses will be affected by its delay.

The same third order effects can be seen in our own personal finances.  I know of a family who was supporting a child throughout college, graduate school, and now while the child hunts for a job in our challenging economy.  The parents are delaying retirement from jobs that they now hate in order to keep helping the child.  Many families are hamstrung like this as decisions we make trickle down through our financial lives.

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