In 1979, during recording sessions for their album Gaucho, the band Steely Dan had originally intended a composition known as "The Second Arrangement" to be included among the tracks. "The Second Arrangement" had been a favorite of producer Gary Katz and engineer Roger Nichols.
In late December 1979, after weeks of working on a particular recording of the track, approximately 75% of the song was accidentally erased by a junior engineer who had been asked by Katz to ready the track for listening. It was Nichols who broke the bad news about the assistant's mistake to the band; when Donald Fagen was told the news, he walked out of the studio without saying a word. 
There were attempts to re-record the song but none of those takes were satisfactory to core band members Walter Becker and Donald Fagen, who are both well-known perfectionists, so they abandoned the song altogether. "The Second Arrangement" was dropped in favor of a demo song they wrote called "Were You Blind that Day", which would form into "Third World Man" on the final album.
Given that the song was erased before being placed on any duplicate tapes or spread, the song is truly lost, though there is the possibility that Becker and Fagen made up the story to avoid releasing a different version of Gaucho that included "The Second Arrangement".
Demo Versions and Live Performances
Via bootleg albums leaked in the underground market and subsequently onto the internet, demos of the song exist along with many other rough recording sessions of other songs that were abandoned in favor of others.
- Version One: This version is simply played on piano with a keyboard section with minimum, if any other instruments with Donald Fagen vocalizing. The lyrics on this version are noticeably different compared to the final demos, such as "Here's to reckless lovers! We all need somebody! Stashed in the Yellow Jag, I've got my life and laundry in a Gladstone bag! You should know the program! Just one Red Rose and a Tender Goodbye" being "Ciao, Bonjourno, baby. It's been a lovely night, the wine was right. I am a refugee, and I like things just the way they used to be. I'm the same damned fool that you knew years ago, so broken hearted."
- Version Two: The Second and more well known demo is clearly further along in production than the previous one, being less raw in terms of mixing and music. This one has more instruments including a drum and guitar section with Fagen doing the vocals as usual, but with female vocals singing along with Fagen as he sings "So I run to the Second Arrangement!". The lyrics are altered here as compared from the previous version as mentioned above.
- Incomplete Version: A Third version out there is simply a 18 second demo. Given that no version any longer than this has been found, it is generally assumed that this piece of music is all left or a fragment of the allegedly erased tape. It has also been assumed that it may be a demo of one of the failed recording sessions after the loss of the song. The song starts off similarly but different from the other two demo versions, before fading away at 7 seconds.
On September 17, 2011, Steely Dan, for the first time played the song at a rarities show on their Shuffle Diplomacy Tour.