Once upon a time, there was a ship called the Essex. She was a sailing ship, rigged out as a whaler. Whalers were used to kill whales and recover the whale oil for use in oil lanterns and for other applications.

Over the years, whaling ships were sunk by whales – at least six of them. The Essex was one such ship. In 1820, she was in the South Pacific and was rammed by a whale and sank. The crew of the Essex took to the three whaleboats and decided to sail for the coast of Chile. After some time, they landed on Hendersen Island, where they found water and some food from foraging. They also found a cave with five skeletons, one of a child, apparently dead from thirst. It was considered that there was not enough for long-term feeding for all 20 men. Despite the discovery in the cave, three men remained behind on the island and the rest set off in the boats again. The men on the boats starved and cannibalised the dead and resorted to killing each other to obtain bodies. The men realised that the water on the island could also run out for them and the same fate awaited them. Finally, five men from the boats were rescued as well as three from the island.

So, what business lessons can we learn from all this? Let us consider the voyage of the Essex as a business investment. It employs staff and management and has a purpose, which is to sail to the South Pacific and return with whale oil. Whale oil was valuable – in 1856, it was $1.70 a gallon, which is the same price as petrol is today in the US. A reasonably sized whale could supply three tonnes of oil. The cost of the business operation is minimal, apart from the original investment in supplies – the crew are only paid on return to port and there are no running costs for a sailing ship. In addition, the crew will repair the ship’s rigging and sails during the voyage south to Cape Horn. The business risks are that the ship will sink and the business effectively go under (ha! ha!) and that the ship will be damaged and return with no oil.

What happens to the crew is immaterial to the backers of the business. The chances of the ship being struck by a whale and sinking would have been considered small. However, and importantly, the ship could have been made whaleproof. This may have been so expensive that it would have rendered the business unprofitable. But stop here: if successful, the Essex would have returned with at least 30 000 ℓ of oil at a rate of about $0.39/ℓ or a profit of about $10 000 after costs. In today’s terms, this is about $200 000. So perhaps the cost of whaleproofing could have been accommodated and spread over a few voyages.

Business lesson: insurance costs money, but, when you need it, you really need it. If there is a small chance that something will wreck your business . . . insure.

Now, what do we learn from the crew? The three who stayed on the island knew that water may run out, as could food. But realistically, the island was (and is) 37 km2 and they would certainly find food and water if they looked for it. It would be very unlikely that they would turn into cannibals. The men on the boats, however, made a poor decision – they had no long-term plan for food or water and chose the discomfort of a whale boat in the hope of reaching land in two or three weeks. All because they were impatient for rescue. Business lesson: rather wait for things to change than create danger while trying to make things happen faster. Just keep it all going as it is, do what you do and don’t take risks. Things will improve.