Intel Recall and Drug Companies

Intel issued a recall of its latest Sandy Bridges chipsets. A flaw in the new Intel 6 series support chip can cause problems with a computer’s DVD and hard drives. Analysts say the recall will cost Intel $700 million in revenue.

What I find interesting is how companies respond to these recalls. It is a recall. It is $700 million (hear that in Dr. Evil’s voice). You would think the stock price would take a blow. Not at all. Wall Street lets it roll off its back and Intel stock ended in the green.

This is a computer chip. No big deal. Just economic loss. But pharmaceutical companies act the same way. Scores of lawyers dedicate their lives to prosecuting and defending drug and medical device cases and, in the scheme of financial things, it is small potatoes to these companies.

At least arguably, the problem is not that litigation is slowing down American businesses. It is that it is not slowing them down enough. Because it does not seem to be a meaningful incentive to change behavior if the stakes are not high enough.