  The lifetimes of bottom and charmed hadrons are analyzed within the framework
of the heavy quark expansion (HQE). Lifetime differences arise from the
spectator effects such as weak $W$-annihilation and Pauli interference.
Spectator effects originating from dimension-7 four-quark operators are
derived. Hadronic matrix elements of four-quark operators are parameterized in
a model-independent way. Using the dimension-6 bag parameters recently
determined from HQET sum rules and the vacuum insertion approximation for meson
matrix elements of dimension-7 operators, the calculated $B$ meson lifetime
ratios $\tau(B^+)/\tau(B^0_d)=1.074$ and $\tau(B^0_s)/\tau(B^0_d)=0.996$ are in
excellent agreement with experiment. Likewise, based on the quark model
evaluation of baryon matrix elements, the resulting baryon lifetime ratios
$\tau(\Xi_b^-)/\tau(\Lambda_b^0)$, $\tau(\Xi_b^-)/\tau(\Xi_b^0)$,
$\tau(\Omega_b^-)/\tau(\Xi_b^-)$ and the $\Lambda_b-B^0$ lifetime ratio
$\tau(\Lambda_b^0)/\tau(B^0_d)=0.955$ also agree well with the data. Contrary
to the bottom hadron sector where the HQE in $1/m_b$ works well, the HQE to
$1/m_c^3$ fails to give a satisfactory description of the lifetimes of both
charmed mesons and charmed baryons. This calls for the subleading $1/m_Q$
corrections to spectator effects. The relevant dimension-7 spectator effects
are in the right direction for explaining the large lifetime ratio of
$\tau(\Xi_c^+)/\tau(\Lambda_c^+)$.
