Everything on this list is a testament to the fact that nothing is too big to fail. So let’s take a look behind the scenes of 15 businesses that fell from grace and discover the lessons they teach us.
They once were giants and now they’re jokes.
From FTX 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?
Why did they lose it all even faster?
And most importantly, what important lessons can we take from them to make sure that we never lose everything in disgrace—not in our personal lives or our careers?
Let’s look at lessons from 15 businesses that fell from grace.
Don’t worry if you don’t feel like reading; you can enjoy the video below or watch it on YouTube:
1
Blackberry (RIM)
First up is Research in Motion (RIM). You might know them better as 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 19, 2008, the stock closed at $147.55.
These days, the company is virtually nonexistent, and the stock price hovers at around $3 per share.
So, what happened?
Well, they failed to innovate. The 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.
2
Victoria’s Secret
Victoria’s Secret was ideal for people who had already smashed their goals.
For world-renowned supermodels who walked the runways for the biggest fashion houses, being a Victoria’s Secret Angel was the ultimate victory.
Their stores were everywhere.
They were part of a cultural zeitgeist of freedom and empowerment for women. But only skinny women.
When the pressure mounted to produce inclusive sizes, Ed Razek and Leslie Wexner, executives of L Brands, the parent company, said, “No.”
And that was the beginning of the end.
Their yearly fashion show was indefinitely paused, people moved to other brands, and stores across the world closed.
Sales have fallen by $6.4 billion. What’s the lesson here?
Sometimes your leaders stink. Get rid of them. Loyalty to old ways doesn’t bring in new customers.
3
Yahoo
If you’re older than 25, then the first email address you had probably ended with yahoo.com.
Yahoo stood toe-to-toe with the biggest names in tech: Google, Facebook, and Myspace.
They were all there.
Its stock price soared during the dot-com boom and by all accounts, it should share 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.
The lesson here, strangely, is that you have to hire young.
Yahoo was hiring businessmen, while Google was run by fresh, hungry, barely-there college graduates.
They knew what emerging generations wanted. Yahoo didn’t.
4
Gap
Gap was a clothing brand that was THE clothing brand.
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.
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 in-store sales.
They’re still profitable, but the trendiness and popularity in the teen market have disappeared. They’re just not “cool” anymore.
The lesson from Gap’s failing business model is: Know your audience and give them what they want!
5
Theranos
It’s controversial to say that Theranos was ever at the top because their entire business was based on a massive lie.
But founder and CEO Elizabeth Holmes was once the richest self-made woman in the world, so there’s 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.
6
FTX
We’ve seen the comments on our videos so we know that the fall of FTX has 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.
When it turned out that SBF-founded trading company Alameda Research had a sizable number of FTX tokens as their main asset, everything came tumbling down in November 2022.
This caused a bank run with customers rushing 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.
7
Toys ‘R Us
The fall of Toys ‘R Us was genuinely surprising.
Children are always going to want toys, and 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 or what was offered.
In 2005, Bain Capital and Vornado Realty Trust acquired Toys “R” Us, burdened 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-on-year; 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.
8
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 the 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.
The lesson we want you to get from Lehman Brothers’ failed business is that no matter how successful you are, humility is important.
Nobody is beyond failure.
9
Pan American World Airways
Pan American World Airways was known simply as Pan Am.
It was an iconic international airline in the 20th century.
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 guides 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 stabilise again.
10
Enron
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 are crucial because building success on deceit is unsustainable.
We must learn to never accept information at face value.
Ask questions and verify facts because blind trust can lead to serious consequences.
11
My Space
It wouldn’t be a proper fall from grace video without a mention of MySpace.
Although it’s still so fondly remembered, those familiar with MySpace don’t even want to hear about its downfall.
Launched in 2003, it was a pioneering social network that became the most visited website by 2006, 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 when 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 ideas for something, but if it doesn’t look good, people are going to jump ship.
The lesson from this business: The user experience is essential.
12
Revlon
The beauty brand Revlon was founded 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 and 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 Estee Lauder invested heavily in digital marketing, social media presence, and direct-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, but they’re nowhere near as successful as their former competitors.
Lesson from this business: keep up with young blood or become obsolete.
13
WeWork
WeWork was founded in 2010 and happily and 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 IPO (initial public offering).
However, 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 were fired, SoftBank, a major investor, bails them out, resulting in massive layoffs, and WeWork continues to limp along with less than half its staff.
This is a hard lesson to learn but we should know that just because you have the idea doesn’t mean that you have the business acumen.
Management and big ideas are 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.
14
Vine
Vine is a kind of cult classic.
It got big so quickly and declined even faster that a lot of people barely even had the opportunity to fully enjoy the app.
Vine launched in 2013 and became a social media app for sharing short, looping videos.
It helped 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 tanked. In 2016, Twitter, Vine’s parent company, shut it down for financial reasons.
Understandably, Vine didn’t want to follow MySpace’s method and fill the app with ads, but they needed to make money.
You need monetization when you’re running a business.
Before you even launch, that should be your number one concern, and they missed that boat.
15
X (Twitter)
Oh X, the company formerly known as Twitter.
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 the exact opposite has happened. There’s 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, and it just doesn’t seem to work as well as it once did.
It’s now valued at $19 billion, although some experts estimate that it could be as low as $8 billion.
That’s a staggering, unimaginable loss.
Maybe they can come back from it.
But the reputation damage is going to last for a long, long time.
Musk says that he signed the initial purchasing agreement before seeing the real numbers on Twitter.
Once he did, he realized that true user numbers were inflated, and he tried to withdraw, but legally, he couldn’t.
It’s so important to assess the downsides and challenges when taking any major action.
Before you commit to it, we need as much information as possible to understand what we’re getting into. The Twitter takeover is a pretty good example of why.
This list just goes to show that no matter how big you are or how much people love you at first, one major mistake can change everything.
Oh, but before we let you leave, in case you want to dive deeper into the realm of business decisions, you should definitely read this one. It’s about dumb business ideas that actually made a sh*t-ton of money. Enjoy it, it’s really fun and full of value.
We hope you enjoyed this collection of lessons from businesses that fell from grace. See you next time!
