Monday, December 13, 2010

Putting a price on safety

My wife and I just got back into town after a weekend trip to Chicago, where we braved some pretty special weather conditions to watch my Patriots beat the Bears at frigid Soldier Field (visual evidence included at the end of this post). We were lucky to get back home without incident given the conditions, but also given our own lack of planning.

We arrived at the airport about 50 minutes before takeoff and immediately knew we had a problem. The American Airlines terminal at O'Hare (easily my least favorite airport in the country--I typically avoid it all costs) was absolutely jam-packed with people, and the security screening line was overflowing, at least 30 minutes long by our estimate. We should have seen that coming and left additional time--given that 1,700 flights were canceled in Chicago yesterday because of the weather--but alas, we didn't.


With little chance of making it through the security line in time to make our flight, we decided to plead with an American Airlines representative to allow us to bypass the line. She graciously allowed us to do so and ushered us to the front of the line (along with a couple of other passengers in similar predicaments), incensing the ID-checking TSA agent at his post. The tension between the American Airlines representatives and the TSA employees was palpable, as there was a protracted back-and-forth argument between the two. To me, this brief incident spoke to a more fundamental conflict between the airlines and the TSA, and between business profitability and safety more broadly.

From the standpoint of the American Airlines representatives, allowing us to cut the security line just made logical business sense. With so many passengers already stranded as a result of the weekend weather, adding two more standby passengers to the rolls certainly wouldn't help matters for the airline--allowing us to make our flight while keeping us happy was a slam-dunk from a customer service perspective. But the TSA could care less if any of us make it to our flights on time--they receive no additional benefits if we do, and they are incentivized only to make certain that the flights that do take off are as safe as possible.

You can say what you want about the TSA's tactics and the efficacy of their screenings in general (I certainly have a long list of personal gripes, better left for another post), but it is indisputable that the safety of the planes is their one and only concern. If they had it their way, security lines would probably always stretch for over an hour, and it would be the passenger's responsibility to budget enough time. But airline passengers (and the airlines themselves) clearly won't stand for that. With a growing number of protesters to the TSA's "enhanced security measures" (it's no coincidence that Amtrak ridership along the eastern seaboard is soaring of late), the tension between profitability and security is becoming more clear by the day.

Passengers will ultimately decide for themselves how much security they are comfortable with, and vote with their wallets in response. The TSA doesn't necessarily care if airline ridership decreases in the short term, but the airlines clearly do (and over the long run, if nobody's flying, there is no TSA). The airlines and the airports need to maximize ridership in order to survive--especially with high fuel costs and low-cost providers squeezing margins--and they therefore must aim to find the proper balance between making their planes safe and keeping the flight experience efficient and painless.

We might say things like "you can't put a price on safety", but in reality we do so unconsciously every day in the choices we make. We choose to drive to work instead of walking, even though we're clearly taking a safety risk by doing so. But we instinctively "know" that the benefits (both financial and otherwise) of driving outweigh the costs of somewhat compromised safety. We may not actively sit down and write an Excel model to determine the value that we place on our own safety, but this certainly does not mean that we don't actually do it.


I remember an economics course in my college days that spoke at length of the strange intersections between economics and morals, and a frequent question therein was "what is the value of a human life"? We may be tempted to answer that it is "infinite", but in reality we know that is not the case, either practically or economically speaking. At some point, we need to make a determination as to how much we are willing (or not willing) to spend or sacrifice in the name of enhanced security.

Many attempts have been made to quantify the value of human life--a task which, unseemly as it may be, is necessary in fields from insurance to air travel and beyond--with estimates ranging anywhere from $1.54 million to $5 to 8 million. To run a profitable business (including an airline), it is absolutely essential to understand what value potential employees and customers will place on their own lives, as well as the lives of others. If you value human lives too little, you will find yourselves outcast as corporate pariahs, and end up in the poorhouse. But at the other extreme, if you value safety significantly more highly than do your customers, you are almost certain to lose customers as well--such is the predicament that our airlines now face.

Simply put, the tighter and more onerous airport security procedures become, the less likely passengers will be to fly. I personally no longer fly to a destination that I can drive to in 10 hours or fewer, unless absolutely necessary--the time and hassle of the security measures just isn't worth it to me, and I'm certainly not the only one. I do recognize that there are risks to flying, but I'm simply not willing to paralyze myself in order to maximize my safety (I also think that, in an ironic twist, long security lines mean that the incredibly crowded "non-secure" areas in airports are officially among the most dangerous places you could possibly hope to be, but I digress).

We instinctively shy away from seemingly crass efforts to quantify the value of human life, but then we turn around and callously rely on risk/reward shortcuts with every choice we make in our daily lives--cooking with gas, talking on cell phones, eating fast food... all present safety risks, but in all cases we must decide if the benefits outweigh the costs. Safety does have a price, and figuring out what that price might be is a central and vital business planning problem. I'm just glad that--for one moment at least--profitability and practicality took the lead over safety and enabled me and my wife to make it to our flight on time. I'm glad to be home.

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