The world has seen several global banking crises – the Great Depression of 1929, the Sub-Prime Lending Crisis of 2008, and the current downturn, that is as yet an unnamed infant.
The failure of a large bank, say in the US, affects several large banks across the world, setting off a chain reaction of failures. The global economy is so centralized and tightly interconnected that a big failure sends ripples across the world.
However, we have never had a global restaurant crisis – one where restaurant businesses across the world pull the economy into a downward spiral. Sure, an economic downturn does affect restaurant businesses across the world, but the restaurants themselves won’t cause it.
Why do we have global banking crises, but not global restaurant crises?
Since each restaurant operates independently of the others, the failure of a restaurant doesn’t affect other restaurants much. Each restaurant (or chain of restaurants) are decoupled from the others, and such a system is robust to failures. In fact, the failure of a restaurant often benefits other restaurants in the neighbourhood. Further, the restuarant industry as a whole can learn from that failure and avoid the same mistakes. The failure of a restaurant doesn’t weaken the restaurant industry. Instead, such an event strengthens it.
Failing banks and restaurant teach us an important design principle. To create a robust system, you need the individual parts to fail separately. In the best designed systems, an individual failure strengthens the system as a whole.