The Second Arrangement

The Second Arrangement was one of Katz and Nichols's favorite songs from the Gaucho sessions. In late December 1979, after weeks of work on a version, roughly three-quarters of the track was accidentally erased by an assistant engineer who had been asked to ready it for listening. Nichols's widow Connie told the Guardian that the song had already cost about $80,000 and many months, and that her husband came home pale and unable to talk for a minute. The band tried to recut it, then gave it up and turned to Third World Man.

Steely Dan played it live only once, at a rarities show at the Beacon Theatre in 2011, where Fagen said they had tried to reconstruct it but did not have the heart to do it over. Demos and an instrumental recreation circulated for years among fans. In August 2020 Nichols's daughter Cimcie posted a photo of a cassette from his archive, and in 2021 the family had it digitised. The recording is cassette quality and is missing the first line of vocal. A separate DAT tape labeled with the song title was also preserved. The cassette recording was released in June 2023 in the newsletter Expanding Dan.