On this day in economic and business history...
Johnson & Johnson (NYSE:JNJ) initiated one of the largest drug recalls in history on Oct. 5, 1982, when it withdrew Tylenol from the market in response to a rash of murderous package tampering that had resulted in seven deaths from cyanide poisoning. It would mark the beginning of an industry transition toward tamper-proof packaging and a more tamper-resistant pill form. The company's swift, decisive response earned it a great deal of praise in the media, blunting the severe damage its brand suffered through the scandal.
The country found itself fascinated with the "Tylenol murders." The FBI assigned nearly 30 agents to the case. An extortion letter surfaced shortly after the first recall announcements, demanding a $1 million payment from Johnson & Johnson in exchange for an end to the cyanide tampering. By this point Johnson & Johnson had already offered full exchanges for all outstanding supplies of Tylenol. Several people were arrested in connection with the tampering and related extortion attempt by the time Johnson & Johnson revealed the recall's costs -- $100 million -- at the end of October. But no murderer was ever found and brought to trial.
Johnson & Johnson has come under fire several times since for its response to later quality-control crises. The company battled more than 100 lawsuits in the '90s over deaths and liver damage from Tylenol overdoses. It recalled many over-the-counter drugs in 2009 and 2010 for multiple reasons, including potential bacterial contamination, unpleasant odors, and tiny shards of metal in the medicine. The company's more recent responses to problems wholly under its control have been unfavorably compared to the swift action taken in response to issues outside of its direct influence. The 1982 Tylenol recalls remain a public-relations high point for the drug industry.
Dent in the universe
Steve Jobs, founder of Apple (NASDAQ:AAPL), died on Oct. 5, 2011, after losing a long battle with pancreatic cancer. The 56-year-old executive and product visionary left behind a legacy of innovation and a legion of mourners around the world. Well-wishers left flowers and tributes at Apple Stores, and luminaries as diverse as President Barack Obama and Bill Gates issued statements honoring Jobs. Gates' statement read: "For those of us lucky enough to get to work with Steve, it's been an insanely great honor. I will miss Steve immensely."
Jobs' impact on the technology industry is best summed up by four products: iMac, iPod, iPhone, and iPad. All were developed during Jobs' tenure as CEO, which ran from 1997 to 2011. Apple's share price grew by nearly 6,800% under Jobs' leadership, and the iPhone, which set the standard for smartphones after its launch in 2007, grew into a juggernaut with more annual revenue as a product than any other company in Silicon Valley.
Running out of steam
The Dow Jones Industrial Average (DJINDICES:^DJI) collapsed by 7.2% on Oct. 5, 1932 -- one of the steepest percentage declines ever recorded in the index's history. Most news of the day gave at least some blame to political causes. The previous day, President Herbert Hoover was faulted for a speech in Iowa that lacked the proper degree of positive prescriptions for a return to economic growth. Much of Hoover's speech laid blame for the Great Depression on Europe's doorstep, ignoring entirely the impact American speculation had on the rest of the world and trumpeting the importance of America's defense of the gold standard, which had largely ended elsewhere in the world after a British withdrawal in 1931:
Our own speculative boom had weakened our own economic structure, but the critical assaults and dangers swept upon us from foreign countries. We were therefore plunged into a battle against invading forces of destruction from abroad, a battle to preserve the financial integrity of our Government, to counteract the terrific forces of deflation aligned against us, to protect the debtor class who were being strangled by the contraction of credit and the demands for payment of debt, to prevent our being pushed off the gold standard, which in our country would have meant disaster to every person who owed money, and finally to preserve the savings of the American people.
We were fighting to hold the Gibraltar of world stability, because only by holding this last fortress could we be saved from a crashing world with a decade of misery and the very destruction of our form of government and our ideals of national life.
When 18 months ago the financial systems of Europe were no longer able to stand the strain of their war inheritances and of their after-war economic and political policies, of their debt and their political and military actions, an earthquake ran through 40 nations. Financial panics; governments unable to meet their obligations; banks unable to pay their depositors; their citizens, fearing inflation of currency, seeking to export their savings to foreign countries for safety; citizens of other nations demanding payment of their loans; financial and monetary systems either in collapse or remaining only in appearance. The shocks of that earthquake ran from Vienna to Berlin, from Berlin to London, from London to Asia and to South America. From all those countries they came to this country, to every city and farm in it.
These words rang hollow to the American electorate, which overwhelmingly voted against Hoover a month later in the election that brought Franklin D. Roosevelt to the White House. But there were some green shoots to be seen in the moribund American economy: Steel and electricity production both showed year-over-year growth in reports released that week, and railroad freight volumes also showed a reversal in their multiyear declines. But the Los Angeles Times reported, "Many in Wall Street, however, feel that a rapid, spectacular recovery is probably too much to expect, and that whatever victories have been scored against the depression and however significant recent gains may be, the digging-out process will inevitably encounter obstacles."
Those Wall Street insiders must have surely been shocked by the near-400% surge in Dow values that actually began in July 1932 and did not end until the start of Roosevelt's second term in office. This rebound exceeded the Roaring '20s in its ferocity, as the average trading day of the "Roosevelt rebound" produced greater gains than that experienced in any other long-running bull market in Dow history.
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