Governance decision are subject to human frailties as are other decisions. I’ve made my share of bad decisions, and one case in point is a yellow Ford Pinto. Here’s a picture of a car like the one I purchased brand new in July 1976. What was I thinking? I was concerned about the “known unknowns.” My budget was a bit tight and I was concerned about the unknown cost of repairs on my old car. The low monthly payment fit my budget and helped mitigate the risk of expensive repairs. That worked until the warranty expired. Additionally, gas was about $.59 a gallon then but I worried that another a gas crisis would come again soon. It did come again a few years later, after I sold the Pinto.
Then there was an “unknown unknown.” In the summer of 1976, it was not commonly known that Pintos had a problem with fuel tank explosions when rear-ended. When this became public information a couple of years later, the resale value of the Pinto plummeted. I sold the Pinto in December 1978 and after 30 months of ownership I lost 2/3 of the value of the car. The cost ownership for the Pinto was higher than the big red Ford Galaxie XL convertible that I sold to make the purchase.
Here is how I went wrong with the Pinto decision. First, I mitigated my short term risks of unexpected repair bills and gas price increases by signing up for three years of payments that exceeded any possible gas price increases or repair costs for my old car. A better solution would have been to focus on creating an emergency fund. Most importantly, my decision to buy the Pinto was contrary to my “vision” of driving a nice car. I learned from my experience and even today I ask myself, “are you buying another Pinto?”