Entropy versus warranty: how companies figure out how breakable their products are

The current Wired has a long feature by Robert Capps on the significant changes in product testing and warranty service brought about by the combination of highly accurate computer modelling and disclosure laws that force firms to publish details of the costs of their warranty plans. The latter was most interesting to me, as it offers insight into what had formerly been a black box for gadget-watchers.

One of the world’s foremost experts on the cost of product failure lives and works in a fifth-floor apartment on a modest block in Forest Hills, Queens. His name is Eric Arnum, and he runs a one-man newsletter titled Warranty Week. Tall and soft-spoken, he can (and often does) talk about warranty accruals, payment rates, and reimbursement policies for hours without stopping. Most of his days are spent in his small office, working on a vast array of spreadsheets and PowerPoint slides—files that contain detailed warranty information for 1,107 companies. Collectively, these sheets hold perhaps the most comprehensive accounting of product failures on the planet.

Warranty information is one of the most closely guarded secrets in corporate America. Companies are loath to share how much they spend on warranties and why. It’s understandable, as talking about warranties is the same as talking about the fact that your products break when they’re not supposed to. Because of this, nobody just gives data to Arnum. He has to dig it out, one company at a time.

Arnum owes his livelihood to Enron. In the wake of the scandal that took down the energy juggernaut, the Financial Accounting Standards Board made changes to the Generally Accepted Accounting Principals—the rules that, among other things, govern how companies write financial statements. As of November 2002, companies were required to provide a detailed reckoning of their guarantees, including their warranty reserves and payments, in quarterly and yearly filings. The result was that, for the first time in history, someone could look at, and compare, how US public companies handle claims—how much they pay out, how much they hold aside for future payments.

Why Things Fail: From Tires to Helicopter Blades, Everything Breaks Eventually


  1. I read once (maybe apocryphal, I dunno) about Henry Ford inspecting auto junkyards. The parts in the junkyards outlasted the cars.

    So he learned which parts were overbuilt and changed them to be less durable.

    1. Making them use less metal, thus less resources, reducing the price of the car as well as reducing the weight, which in turn improves handling and fuel efficiency. I really don’t care if my bumper lasts 50 years beyond my car, it’s not doing me any good at that point.

      There’s no point hanging a tank shell off my sedan suspension – I’m not trying to invade France here, just commute.

      1.  The bumper is probably the one of the worst parts you could choose as an example.  It’s designed to take an impact and protect the rest of the car, so it tends to be more durable than the rest of the car.  Changing the bumper so that it won’t last as long would be a bad idea.

  2. “In 2009, Mohawk Industries—one of the largest makers of carpeting in the country—was forced to discontinue an entire line of carpet tiles when the tiles failed unexpectedly”

    How do carpet tiles fail unexpectedly? I’m so perplexed.

  3. I look forward to passing this article around the office tomorrow. My group does durability research for Boeing… (No, I can’t give you any more details about that 737 than have already been made public). Yes, we’re fatigue-testing the 787.

    Many people in our field, by the way, are big fans of the poem “The Deacon’s Masterpiece“, about a one-horse shay “that was built in such a logical way, it ran a hundred years to a day, and then of a sudden… went to pieces all at once — all at once, and nothing first — just as bubbles do when they burst” because each part was exactly as durable as the other, no more, no less.

  4. Tired of coffee makers that die? Get a teakettle and a filter holder and carafe. I’m willing to expend a little more of my time to avoid replacing a morning necessity every year or so.
    I’m typing on a 10-year-old Powerbook, which serves my needs, after a hard-drive replacement with no loss because I had backup.
    On the other hand, I’m better off not having a ’55 Chevy as a daily driver, for cost and safety reasons.
    As money, energy and petrochemicals become more dear, the “mil-spec” properties of products that are not affected by technological advances will gain value.

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