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Comment by marcus_holmes | Hacker News Reader

This is what happens when you let the accountants run the business.

First the research goes. Then the product engineering drops. Then there's mass layoffs. Then the whole thing falls apart.

To an accountant, a drop in costs is as valuable to the business as a rise in revenue. To everyone else, this is obviously not true. Risking future profits to cut current costs is a great move according to an accountant. For everyone else, it's corporate suicide.

Edit: I realise COVID. But that's the excuse, not the reason.

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No, this is how Boeing has always operated. It's a cyclic industry. Google "boeing employment by year". The charts are practically a sine wave. "Hire 10,000 when demand is high, lay off 10,000 when demand is low" has been how they've operating since WWII.

There are many issues with Boeing management today (I used to work there so I love flaming them as much as anyone), but it's hard for me to imagine how any aircraft company could avoid this. All aerospace employers are laying off (or furloughing) workers by the thousands:

Airbus: https://www.reuters.com/article/us-health-coronavirus-airbus...

Bombardier: https://www.huffingtonpost.ca/entry/bombardier-layoffs-quebe...

Gulfstream: https://www.wtoc.com/2020/05/04/gulfstream-lays-off-employee...

No word from Embraer yet, but since their deal with Boeing fell through, I imagine it's only a matter of time.

Embraer is cutting 4000 jobs too :(

> No, this is how Boeing has always operated.

While I have no doubt Boeings business has been cyclical, many of the problems they face today can also be attributed to bad management.

These problems can be linked back to when Boeing merged with McDonnell Douglas, resulting in it's loss of engineering focus:

https://www.msn.com/en-za/money/news/how-the-mcdonnell-dougl...

If you read the wiki page for McDonnell Douglas it reads a lot like the modern day Boeing:

https://en.wikipedia.org/wiki/McDonnell_Douglas

This gives a hint as to how that merger help to infect Boeing (no pun intended) with it's current bad management culture.

> Boeing, which has been struggling for the past year with the safety of its 737 Max jet, has spent over $43 billion buying back stock over the past decade.

https://www.newsweek.com/boeing-airlines-under-fire-90-billi...

Step 1: Give billions in stock buy backs and ask for billions in tax cuts

Step 2: Demand that taxpayers to bail you out in a recession

Step 3: Repeat

It's like a heat pump, but for moneys. It's a MONEY pump!

Boeing's decay previously discussed here: https://news.ycombinator.com/item?id=20353342

Off topic but it's killing me: what is the pun there? I just don't see it.

"infect" Boeing

Am I crazy? I still don't see any word play. Is there a homonym, or specific phonetic reading I'm missing? Tried:

- Infect-being

- In fact being

- Etc.

Thanks for the help.

Covid infected humans. McDonnell 'infected' Boeing.

It's not a pun. Just a joke. Lots of people just say pun to refer to any wordplay. Wait till you find out "meme" is now starting to mean "joke" too.

COVID-19

Edit: To clarify one could argue Boeing's problems are due to COVID-19 infections not due to a MD infection.

Airbus cut 2,500 jobs in February.. I don't know how many more they cut since then. The reality is that the commercial airline industry is in a freefall and it's nobody's fault.

It's just the virus.

No this is not how Boeing has always operated. Boeing had a great engineering culture for most of its' history. A fundamental shift happened around the time that the company merged with McDonnell Douglas, a merger that was shepherded largely by the Department of Defense. Around this time began the "Financialization" of Boeing. The following is a good read on the shift within the company and how that new culture enabled the Dreamliner and the 737 Max debacles.

https://newrepublic.com/article/154944/boeing-737-max-invest...

Matt Stoller also talked about this cultural shift that enabled Boeings problems in an article a year ago.

https://mattstoller.substack.com/p/the-coming-boeing-bailout

Has anyone written about how exactly the acquired company (McDonnel Douglas) was able to take over the acquiring company? Sounds like it would be an interesting story.

I also wonder if there are similar accounts of the same happening in other companies.

When a company seeks to acquire another company, the executives of the target company are sometimes promised and given a disproportionate share of management roles in the reorganized entity as enticement to grease the acquisition. The alternative is more expensive payouts. And of course, no matter which approach is taken, cash will be tight post merger so there'll naturally be an emphasis on cost cutting and "synergizing", which McDonnell Douglas executives were well practiced in, likely drawing favor from the board, despite that it was still 2/3rds Boeing post merger.

Also, despite the narrative, it may very well have already been the case that Boeing's culture was going down the gutter, its acquisition of McDonnell Douglas a reflection of that rather than the root cause.

EDIT: Here's a 2002 article that suggests it was all of these phenomena--disproportionate leadership roles, a claim to cost control expertise, a skittish board, and evolving business strategies. https://www.seattlepi.com/business/article/Hard-nosed-Stonec... Some former McDonnell Douglas executives, like Boeing President and COO Harry Stonecipher, were well placed to take control when the inevitable cash crunch happened. Stonecipher replaced the Boeing CFO with a GM executive. See also this contemporaneous 1998 article describing the same event: https://archive.seattletimes.com/archive/?date=19980715&slug... That article says it was Stonecipher and the board chairman, Phil Condit, who forced the CFO out for his overly conservative accounting. Condit, AFAIU, was also CEO at the time and had been CEO of Boeing prior to the McDonnell Douglas merger. In fact, Condit led multiple acquisitions before MD, which suggests to me he and Boeing were already following the "acquire rather than innovate" playbook.

Yes. There's was a good article on this recently. I've provided the original URL and outline URL to get around the login wall:

>In the eyes of many Boeing employees, McDonnell Douglas executives seemed to do disproportionately well out of the merger: Many were given senior positions following the acquisition, with the company’s head, Harry Stonecipher initially appointed chief operating officer and holding more than twice the number of shares in the company as Condit, who remained CEO. Stonecipher and John McDonnell, formerly the chair of McDonnell Douglas’ board, were now the two largest individual shareholders of the merged companies."

In a 2007 interview, Ron Woodard, the former president of Boeing’s Commercial Airplane Group, bemoaned the changes the merger brought with it. “We thought that we’d kill McDonnell Douglas and we had it on the ropes,” he said. “I still believe that Harry outsmarted Phil and his gang bought Boeing with Boeing’s money."[1][2]

[1] https://qz.com/1776080/how-the-mcdonnell-douglas-boeing-merg...

[2] https://outline.com/gDseXY

> No, this is how Boeing has always operated. It's a cyclic industry.

Do the cyclic layoffs generally occur right when they're supposed to be building hundreds of planes? I think what's unusual about this round of layoffs is that it was caused by all their orders being cancelled.

If Boeing isn't alarmed by this situation -- if they chalk it up to an historic pattern -- I think that in itself is a sign of bad management.

I mean, that kind of makes sense. But instead, why not hire 5,000 when times are good, stash away the rest of the cash, and then just keep all the great people you have when business is down?

It seems like retaining people instead of hiring up a bunch of new people and possibly losing some of your best people would be a better approach.

Sure, the other guys might get ahead of you a bit during the boom times, but you'll get a good jump during the bust and be much better positioned to take advantage of the next boom.

> get ahead of you

You hit the nail in the head. When it rains, the moneyfolk want to hoard as much cash as they can (shareholders gotta buy that new Porsche).

It's like temporary employment in hotels and restaurants during summer in touristic places.

Only the cycle is 8y/2y (up/down) in the decade) of 4mo/8mo (up/down) in the year.

I think it would be more accurate to say this is what happens when you let the shareholders who are too far removed from the business itself run the business. Those are the people who'd like a company to be a simple growing-asset in their portfolio, who specifically don't want to be bothered with its nuances or long-term health, and who have the leverage to impose their ill-informed will on everyone else.

I have a pet theory that a large portion of the decay in our society can be traced back to the layers of abstraction between stakeholders and the things (and people) they have power over. Usually this kind of thing doesn't happen before a company has gone public.

Or who don't even care about the long-term health. Extract all you can today and dump the remains. Having a company that remains healthy and prosperous for generations is not an outcome that some investors seem to be optimizing for.

It's not an outcome that public investors are incentivized to optimize for. That's the problem.

On the one hand, from a systems perspective, this is obviously true.

But I wonder at what point you have to draw the line and quit excusing any and all behavior as the result of misaligned incentives, and simply hold people morally and ethically accountable for the choices they make?

I'm not excusing it, I'm only being pragmatic. It's well and good to push people to be more ethical, but relying on that trait is a separate question.

The human conscience doesn't do very well with abstractions. The further removed someone's actions are from the damage caused down the line, the weaker that moral signal gets. If we want to improve our society, we have to be realistic about these things and design our institutions to buttress against them.

Certainly, but shaming and shunning are interpreted by the human conscience as damage in very real ways. You're not wrong, but I think modern sensibility has such an adverse reaction to using shame as a deterrent that we refuse to call things out as shameful.

Sure, it only works if the people in question care about your opinion, but building consensus on what acts should be shunned only takes about a generation and a half. Segregation, dog fighting, the list is long. If we really think this is bad for society (and I do) then shrugging and talking about incentives isn't the way forward. Especially in the absence of a mechanic to actually change those incentives.

We absolutely rely on people to act ethically even with incentive systems. Every incentive system is prone to abuse. Also, people are motivated by different incentives. These often boil down to their own ethical/moral values.

>But I wonder at what point you have to draw the line and quit excusing any and all behavior as the result of misaligned incentives, and simply hold people morally and ethically accountable for the choices they make?

Your statement is contradictory, incentives are what hold people accountable.

>Having a company that remains healthy and prosperous for generations is not an outcome that some investors seem to be optimizing for.

There are plenty of buy-and-hold shareholders investing in bluechips.

To the point. Thanks. Modern capitalism is not good for companies, people and society as a whole.

Which system is better?

You say "Modern capitalism" as if there was a different capitalism before it. The system is the same (perhaps more optimized from longer innovation); the culture and the players are different.

I think he's saying that the modern economic shell game that is going on is actively damaging the economic welfare of a large body of people. From my perspective the "modern" part of it has become more extractive than generative. A lot of "innovation" has been to cut as many corners as possible while isolating wealth into fewer and fewer groups.

"Modern capitalism" might be better called "managerial capitalism". It is different from entrepreneurial capitalism, which preceded it.

Entrepreneurial capitalism was a constellation of small private enterprises, often family-owned. Managerial capitalism is characterized by the dominance of firms publicly traded on capital markets, and managed by professional managers who are often distinct from the shareholders.

Entrepreneurial capitalism, I believe, better aligns incentives by combining the shareholder and manager role. It also reduces dependence on capital markets, which can become a single point of failure during a financial panic. Lastly entrepreneurial capitalism makes coordination between competitors less likely, whereas such coordination is embraced by the mergers and acquisitions arms of banks in a mangerial capitalist system quite openly.

The only advantage of managerial capitalism is scale. Pooling capital in public markets permits massive economies of scale and their efficiencies.

I believe capitalism can work well on a micro-scale when the products are simple enough that consumers can exert perceivable pressure on producers. Make a better hammer? I'll buy a better hammer.

Where modern capitalism falls down is complexity. There's 3 (non-niche) desktop operating systems, for example, and way more than 3 attributes that consumers care about in a computer. Or cars, or TVs, or airplanes, or anything else that costs more than $20. There's simply not enough levers by which consumers can send any meaningful signal through the market to producers. This breaks the Invisible Hand.

There was capitalism when communism was still a force. That capitalism had to offer something better to workers to keep them from thinking "Maybe communism is better?": https://www.ingentaconnect.com/content/cuny/cp/2020/00000052...

Nowadays, well, you got your Bezos and you got your Uber...

It’s the only system that relies on the willingness of two parties to exchange something of value in a way that it mutually beneficial. Every other system involves the use of force, either explicit or implicit to compel people to act in ways that are contrary to their own interests. Because if it were in their best interest, force wouldn’t be necessary. Capitalism requires a willing buyer and a willing seller. It’s the most free system there is. Inefficiencies obviously can create problems, but in those problems, there are yet infinite possibilities.

I'm not willing to go hungry or be homeless. What if my interest is art or playing video games all day, but then I'd be hungry and homeless. So I'm forced to work.

You're forced to work in other systems, too. I don't see your point. Unless you want UBI to be high enough that you needn't work?

> I have a pet theory that a large portion of the decay in our society can be traced back to the layers of abstraction between stakeholders and the things (and people) they have power over.

My pet theory is a specific instance of yours: MBAs wielding spreadsheets (and, more generally, analysts wielding databases) is the abstraction layer.

They also "boost productivity" by shortening schedules by 20%. More profit. More corners cut.

If you're interested in corporate governance, you might enjoy reading the book "Pay without performance"

One of the points it makes is that shareholders have very little power in practice, as even if you own a million dollars of Apple shares, that's only 0.00007% of the company. Not exactly enough to force through a motion on your own.

And if you think you'll build up a coalition to get a majority? Good luck doing that when you can't even find out the names of other shareholders.

Minority shareholder lawsuits? They're actually a negligible force; rare, unlikely to succeed, and low impact even when they do.

And that's without getting into 'preference shares' that grant CEOs outsized voting rights.

The book argues management can neglect shareholders' interests with impunity for these reasons.

Well there are two kinds of public shareholders, right. There may be a small number who own large enough shares to bother attending board meetings and voting, and then there are the millions with pensions, 401ks, index funds, etc. I think you're talking about the latter, who have the same issue but a slightly different version of it. In their case, the "ill-informed management" comes down to "price goes up, buy, price goes down, sell". Through share price they wield an extremely blunt version of the same weapon.

This is almost worse, because it very explicitly cares only about the short-term price. It's also a much harder problem to solve, because you can't just tell those people "think long-term and ethically when you're exercising your impact on the marketplace!". No matter how ethical they may be as individuals, most of them probably don't even know which companies they have stakes in, much less whether those companies are heading in the right direction!

> it very explicitly cares only about the short-term price.

There is no short term price in stocks. Stocks are valued at their perceived long term value. If shareholders suspect a company is sacrificing the long term for the short term, they're going to dump the stock until the price of it drops to reflect that.

This also implies that if you can reliably detect that a company is eating its seed corn before everyone else does, you can make a mint shorting it.

> There is no short term price in stocks. Stocks are valued at their perceived long term value.

Hogwash. Pretty much every company on the S&P 500 dropped 30% around March. Did their perceived long-term value change 30%? I doubt it. I think most people were fully aware that most companies in the S&P's 10 year value wasn't going to change much; certainly not 30%. Yet, it dropped 30%. And then the next month it has risen back up to about 10% of its all-time high. I don't think people seriously thought that Apple, Coca-Cola, Pepsi, etc. suddenly dropped in value 30% and then suddenly rose 20% (yes, I know, technically it was more). If you can have swings of +/- 30% over a period of two months, I don't think the value is reflecting the long-term prospects.

There is both short-term AND long-term pricing in stocks. "In the short-run, the market is a voting machine. In the long-run, the market is a weighing machine." Ben Graham

Hogwash. Pretty much every company on the S&P 500 dropped 30% around March. Did their perceived long-term value change 30%?

Double hogwash. That pricing reflected that people suddenly needed cash right now and was irrespective of what anyone thought about long term value. I will bet most of the sellers bitterly regretted it but saw no option but to sell at whatever price they could get because they had urgent immediate needs.

Yes, one good way to think about this was that there was very little change in the value (fully discounted long term etc.) of stocks but a large change in the price (current exchange rate with other participants facing temporal constraints) of cash.

Right, that's my point: prices don't perfectly reflect long-term value. You give an excellent example of why the currently price might not reflect long-term value, which I need to remember for next time!

The short term price theory requires that anyone selling at those short term high prices is selling to someone convinced that prices will go higher in the future, i.e. that you've tricked them.

Price volatility is an indication that either economic conditions are changing rapidly which affects the long term prospects, or that people are very unsure about what the long term prospects are.

It is not an indication that companies are being rewarded for eating their seed corn.

BTW, years ago, I knew a CEO who believed in manipulating the accounts to boost the short term at the expense of the long term. He made the mistake of telling the press he was doing this. The stock immediately tanked.

If the short term pricing theory was correct, the stock would have risen.

Then we have companies like Amazon, who explicitly say they are sacrificing short term profits for long term growth. The result? The stock price has soared to incredible heights.

Your example is hogswash. Absolutely, the perceived long term value dropped 30% as people feared a million deaths (with lockdown) and dead bodies piling up outside hospitals across the country (with lockdown, and not just New York City). The stock market is rising now that people realize the pandemic, while still bad, isn't going to be as bad as those predictions. Our perception/understanding of the pandemic has rapidly changed.

I think there’s a third class: Institutional investors like CalPERS or NYSLRS. CalPERS has something like $300B in assets. When they talk, companies listen.

While they might be implicitly in your first group, attending significant meetings AND ensuring long term growth are primary responsibilities.

Calpers is like a king with no pants everyone pretends to respect them but they are as dumb as money gets

> even if you own a million dollars of Apple shares, that's only 0.00007% of the company. Not exactly enough to force through a motion on your own.

And it shouldn't be. The board has only 24 hours in a day, not remotely enough time to debate every motion from every shareholder.

However, as a shareholder, you can dump your stock, which does send a message when many shareholders do this.

> as a shareholder, you can dump your stock

Indeed - but brundolf laments about the lack of shareholders "bothered with [Boeing's] nuances or long-term health" and having only a single one-bit message is not conducive to nuance.

Sends the message that it’s time for the company to buy more of their own stock.

share holders? The same "passive investors" that are buying an index fund that includes Boeing.

It's not about leverage it's about taking time and figuring out what you are investing in. Everyone wants the free ride of "investing" nobody actually wants to pick stocks by doing research into which companies have sustainable businesses and good governance.

Well then it will be really easy for those active fund managers to fleece the naive index rubes, right?

Active fund managers are worse, they have a different racket

closet indexing while charging high fees is the most common

starting a bunch of different funds, and then when one of them outperforms by chance, marketing that one as the one is another.

Otherwise known as the "democratic means of production" which can be measured by how many US citizens own equities (almost 50%). And let's not discount the "managerial revolution" that has occurred as management:labor ratios have exploded over time (and noted by the Pulitzer Prize winning The Visible Hand by Alfred D. Chandler, Jr.)

Were it up to me I'd personalize all liability, including legal. No more corporate fines. Fines levied against corporations should come directly from the personal fortunes of shareholders and legal malfeasance should always result in prison time for the decision makers, even if it's as little as a single week in jail.

Would anyone dare touch a stock market if they were personally responsible for liabilities of companies they invest in?

Particularly in the case of stock indexes - where a single company with a $xxT poorly written contract could wipe out the entire index and everyone who held it.

Proportionality. If you own one tenth of one percent of the stock you should have one tenth of one percent of the liability. No liability equals no responsibility equals no integrity. Being an amoral company should be just as likely to end in disaster as being an amoral person.

Why not? Insurance companies will skim some profit off, is all

Imagine some middle manager in some S&P 500 company approves a contract that says:

"Company A agrees to purchase for $1000 each product offered by company B which meet the specifications provided".

And Company B finds that the spec says "A quartz crystal between 1um and 1mm in diameter".

So company B goes and finds a beach, full of sand, calculates there are 1 billion grains of sand in each cubic meter of the beach, and the beach is 50m long, 50m deep, and 50m wide. Total amount is 50 * 50 * 50 * 1 billion * $1000 = $125 quadrillion.

Far more than all the money in the world.

That bankrupts the company, but since there is no liability limit, it bankrupts every other investor. Even if you have 0.0001% of the company, you're still bankrupt.

If you have insurance, the insurance company is bankrupt, and you're still on the hook for whatever remains, which bankrupts you too.

What in the world are you on about? I said shareholders should have to personally pay the fines when companies commit crimes.

Edit: ah, I should've been more specific about that. Still, I didn't say anything about the liability being unlimited.

> "Were it up to me I'd personalize all liability"

Contractual liability is a thing...

In what way has our society decayed?

> This is what happens when you let the accountants run the business.

You're shooting the messenger when the core issue is that Boeing, like all publicly traded companies do not have medium to long-term views for their business. It is always quarter-to-quarter. That is what management is judged on, because their job and their compensation is tied to maximize shareholder returns.

While generally true, The medium term view is why they need to let go in the first place .

I am guessing aircraft manufacturing is going to severely depressed in the medium term. Customers are delaying deliveries, canceling orders etc. Demand will likely not return to pre covid levels in even one year. Even if it does, airlines are not in any financial position to make significant purchases for few years. On top of it 737-MAX issues and resulting hold in manufacturing of that line has not left Boeing in a great shape.

This is one of the best arguments I can think of against having large corporations with "corporate person hood". It does enable large capital accumulation over time, but that capital accumulation eventually becomes so de-personalized in how it gets used that it becomes detrimental to society. A single private owner tends to care and have more purpose, more personal stake in real long-term growth, and can take the real risk of investment. Corporations, as we see more and more, get huge amounts of capital and then start gaming the system for short term executive bonuses.

Economies of scale are extremely valuable to the overall economy as mega corps tend to charge lower prices. Similarly, SpaceX as a high risk high cost investment is vastly more likely with group funding than a single private owner.

Clearly there are some downsides, but managing them via laws and regulations is possible.

There's a cost associated with this as well though. Those lower costs don't come for free - they come from increased efficiency which translates to fewer workers and less money being redirected into local economies.

Is more workers to achieve the same total outcome a desirable state? It seems like what you’re proposing doing there is literally wasting entire human work lives for zero productive output.

If you took this to an unrealistic extreme, where 100% of all jobs are automated, every cent of profit flows into the hands of owners and shareholders, and there's literally no job that labour can take, that's clearly and obviously worse. The flipside, where efficiency is at it's lowest, and every single product ever is hand-crafted with a tremendous amount of labour seems obviously bad too.

Of course, those are both ridiculous extremes - the answer to what balance is healthiest for an economy I'm sure is immensely complicated. I'm just saying that efficiency doesn't come without costs, and we shouldn't design our entire economy completely around the interests of shareholders of major corporations.

It seems like your automated example allows a welfare state to provide a better quality of life than we currently enjoy. Having people do pointless jobs for the same income at that point seems inherently worse.

That said, I have serious doubts that everything can be automated as that suggests all human labor would be providing zero value.

If large companies didn't plan beyond the quarter, a lot more of them would be failing all the time.

You can't even build a factory in a quarter.

In reality larger companies usually prosper for many decades, because they do plan long term.

I think you're conflating job losses with not prospering.

Boeing's stock is up on the news. Lost jobs = lower payroll = improved cash flow. That's the bottom line. Shareholders couldn't care less how you arrive there, just that you do.

Quarterly pressure from Wall Street is not a good excuse. That just means that the CEO and other C-level execs are just ineffective leaders. People who are too far removed from the product, i.e. bean counters with little passion for the technology and industry, tend to make bad leaders for firms like Boeing.

>like all publicly traded companies do not have medium to long-term views for their business

Why do people keep repeating this garbage over and over and over? It just isn't true.

Amazon literally didn't make profits for 10 years. Many other tech companies haven't made a cent yet, but investors are looking 5-10 years into the future for those.

Some businesses just make bad decisions, others make good decisions. Overall the free market/public corporation system is a resounding success. Just because boeing messed up doesn't say anything about the rest of the system.

>Overall the free market/public corporation system is a resounding success.

We don't have a free market. The market is not allowed to implode. Mega corporations and banks are not allowed to fail. Boeing is not allowed to fail, and that fact, more than anything else, explains why they are such a poorly run company. Where you see a "resounding success" I see an absolute failure that is closer to a scam or a ponzi scheme than a legitimate system.

Bear Stearns, Washington Mutual, WorldCom and many others are evidence to the contrary. I'm not sure if Boeing will be "allowed" to fail if it's on that path, but your statement that "Mega corporations and banks are not allowed to fail" is simply false.

Yeah every decade or so we let a company fail just to set an example to the rest. WaMu, in particular, is a pretty hilarious example. We, the public, bailed out JP Morgan and with those funds they purchased WaMu at pennies on the dollar.

What a deal!

Boeing is not allowed to fail, and that fact, more than anything else, explains why they are such a poorly run company.

So the mass layoffs are just a mirage, and not a failure at all, are they?

Failure here is obviously defined as ceasing to exist. Deliberately missing the point of their argument does not strengthen yours.

You’re right, we don’t have a free market. We don’t have the freedom to leave our homes and shop at will. Stores don’t have the freedom to be open. People don’t have the freedom to provide services. So until our government overlords deem it ok, allowing businesses to fail at-will in the existing climate makes little sense.

Most stores are permitted to be open, no healthy American is currently locked in their home, delivery services will bring anything you want to your doorstep, and only a few services are currently shut down.

Yet for some reason, nobody's buying from the stores that are open.

We should offer to businesses what we offered to individuals. A check of inconsequential value and a hearty “go fuck yourself.”

Boeing isn't allowed to fail because they're a national security risk. The government doesn't want Boeing's most talented aerospace engineers to move to a foreign company like Airbus or Comac. The government will happily allow businesses like Macy's or Uber go under.

Boeing didn't take the money anyways, so I don't know why people are so riled up about it.

AFAIK, Airbus won’t hire American nationals. Boeing will hire Europeans, at least on the commercial side.

The defense part of Boeing used to be a separate company (McD). DoD could easily let commercial fail and spin out McD again, or just shrink to defense only. For a long time, Airbus has claimed that the DoD spending subsidizes the commercial side. So TBH, letting commercial fail would result in more bang for the DoD buck.

About Airbus and American nationals, you might want to check out John Leahy: Head of Sales from 1985 until 2017, sold 16000 planes, brought Airbus inside US airlines, and overall probably the most well known Airbus executive.

Regarding military activities, I don't doubt that there are engineering synergies between commercial aviation and military aviation. However I've always heard that from a commercial perspective the two are at odds: for a defense organization you want to make sure to keep as little cash on hands, as it's fairly easy to ask for more. There are always scope changes, delays and shit happening. The last thing you want is to have a war chest that your customers will ask you to tap in to cover the costs of contradictory requirements, feature creep and original underbidding to win the contract. See the A400M as an example: the civil side of Airbus is coughing up quite a lot of cash for that clusterfuck.

On the other hand, developing civil airliners requires cash. A lot of cash. You can't ask American Airlines to cough up some extra cash because your 787 is delayed and is costing more to produce than anticipated. In fact the opposite is true: because your 787 is delayed, your customers will pay much less, and only when you can actually deliver the product (for the most part). Bombardier didn't have pockets deep enough to sustain the CSeries...

> Amazon literally didn't make profits for 10 years. Many other tech companies haven't made a cent yet, but investors are looking 5-10 years into the future for those.

Amazon went public in 1997. Boeing went public in 1962.

You get leeway as a young-ish public company, which will expire once you are an established player. How do you think markets are going to react if the bottom falls out of Amazon's business in 2055?

Just maintain the underdog start-up public perception, like Google, and all will be forgiven in 2055.

> Amazon literally didn't make profits for 10 years.

Yeah, and they caught never-ending flak for it until AWS starting turning a profit and eventually dragged Amazon into the black. Amazon was/is the exception, not the rule.

In my experience at the executive level of a company this was never the case. There were always 1 year, 3 year, and 5 year plans in place.

Long range plans get re-evaluated periodically because things change, both technology and markets but I have never experienced them being either ignored or thrown out in pursuit of the quarterly 'numbers.'

That said, if your senior management doesn't understand all aspects of your product value, they will make poor choices both in the short term and for the long term.

This thread reminds me of one I saw on here this morning re: the netflix quikster debacle.

I would imagine that it is easy to push a narrative that execs are greedy, short sighted and barely competent. I would imagine this can be true, but more than likely its a bunch of factors that aren't public that led to less than optimal decision making.

Here is the software engineering equivalent:

- golf buddy convinces CEO of well-run software shop: your company is way too inefficient "your per-employee ratios are off the charts low!"

- golf buddy gets hired as Chief Strategy Officer, hires a bunch of high paid underlings

- they decide the freeze wages, reduces bonuses, reduces benefits for software engineers. Lots of savings to show! (unless you also count inflated salaries of new management)

- Software engineers demoralized, best ones move on to better jobs, adverse selection, more demoralization

- Golf buddy hires more project managers -- because obviously the answer to underpaid SWEs is to hire more managers. Beatings will continue until morale improves.

- Now the company really does have bad metrics. Decisions are made to offshore half the staff -- save 30%, but increase work for onshore staff. Offshore staff is great, but at a disadvantage due to distance and not having context/proximity to business.

- Golf buddy hires product managers to better define specs, more project managers to produce more reports.

- Gold buddy, his friends, ride off with their big paychecks to spoil the next company

Innovative CEO, a sales centric MBA who's never written a line of code, now overseeing acquired software company, imposes the golf buddy's investor pleasing "blended shore" model, the outsourcing of core knowledge work to noobs coupled with shipping the actual skilled labor to lowest cost locales, against the advice of everyone who's ever successfully shipped software, who are all now branded "seditious", and managed out of the company they built up from zero.

Been there, been done like that.

Your crude caricature relies on the existing CEO, and the board, to be incompetent and easily swayed by bogus numbers. If they were indeed incompetent, its not exactly a shock if the company implodes then is it?

It's not the accountants' fault. The only force binding together the thousands of people that make up a corporation is the accounting (accountability). Before the advent of accounting, there were not corporations, as any concentration of capital would be immediately diffused through fraud. It would be great if society could figure out how to be accountable to metrics other than profit and revenue, but so far we haven't figured out how to measure anything else, so we can't optimize for it.

The person you're replying to isn't saying not to have accountants. That would be absurd.

They are saying, clearly: don't let the accountants run the business.

Accountants don't run the business. They provide accounting information to those that run the business.

This is what happens when you let the accountants run the business.

This is so completely not true. Worked with the Finance Dept heavily at my last job. The accountants keep track of the expenses, and make sure everyone is sticking to the budgets...but the accountants don't make the budgets. Management does. The accountants are the ones making sure that the company can actually pay for everything.

To an accountant, a drop in costs is as valuable to the business as a rise in revenue.

This is also false. To an accountant, a drop in costs is literally the exact opposite of a rise in revenue. (For comparison, it would be like saying that to a software developer having a more powerful computer is the same as writing your software to be more efficient.) A drop in costs is only valuable to the accounting team if there's not enough money to pay for everything, because then the drop in costs makes it possible to pay for more of the bills that the rest of the company incurs. The Finance Dept would absolutely prefer to see more revenue over a drop in costs, because revenue is repeatable and sustainable, while reducing costs is not.

Management are the folks that only cares about the bottom line regardless of how it's reached.

Blame management.

> Blame management.

By "blame accountants" the OP was referring to management being accountants. Nobody sincerely believes that accountants have the power to do layoffs, but managements that were previously accountants won't see the long term destruction in value, only the short term profits.

If anyone understands the concept of investment, it is someone in finance. To claim they only care about cutting costs maximizing revenue today at the expense of the future is ridiculous.

People in finance don’t really understand or care about engineering R&D and long term investment in engineering culture, possibly because the effects of these things haven’t been quantified scientifically. It’s simply another line item. They do acutely understand the effects of numbers on their stock compensation though.

and people in engineering R&D and "engineering culture" (whatever that means) are completed disconnected from reality when it comes to making payroll. And i say this as a software engineer myself.

Im not sure what your point is except to state a contrary position. Try to contribute better next time.

The typical techbro understanding of corporate finance is shockingly shallow

the typical accountant's understanding of technology and product development even if they're in a company that does that is shockingly shallow

An amazingly uninsightful truism: people have a shallow understanding of topics that they are not intimately familiar with.

Perhaps this is why accountants and MBA types run businesses and software devs continue to just develop software for their bosses. You know, the ones who understand business more deeply. Because that's what they do. To misappropriate Sorkin: if software devs are so fucking smart, how come they lose so goddamn always?

The difference is, accountants aren't telling the software engineers that they don't know how computer science works.

There is a world of difference between accountants, and the MBAs who are running the show.

The problem is that the management that we are referring to were accountants.

They were engineers.

Yes, the guys who had the bright idea to just cut R&D and all capital investment were engineers, not accountants.

I don't disagree with the main point you are making, but I would consider this argument to be a bit weak "For comparison, it would be like saying that to a software developer having a more powerful computer is the same as writing your software to be more efficient."

There's a lot of companies out there that just throw some more hardware at a problem.

I don't blame anyone. I want the world to evolve into one where our society puts human welfare first. Blaming does not help that happen at all.

It is easy to get caught in a trap thinking heavily about money. When thinking about things we own, the emotion and fear centers are aroused far more than when we think about other people. To avoid this, I believe our society must be trained away from neoliberal and 'greed is good' thought.

Blaming people for this state of events, or the addictive qualities of facebook, or the dangerous misinformation spread designed to take advantage of cognitive flaws of the human mind - these practices will get us nowhere. One thing that businesses started doing right was the blameless postmortem.

Find the problem, fix it. Move on.

Yep. When you're at a growth company that enters cost reduction mode, it's a good time to start looking for another opportunity. "Why is AWS going up? Get that cloud bill down. Do you really need all these monitoring services? Cancel them." They should be focusing on revenue, like you said.

I find it amazing how much good companies will sacrifice for a good quarter or so of "growth". Great R&D can be unprofitable for a long time until it's suddenly Bell Labs. That doesn't happen without some infrastructure, but an accountant rocks up and suddenly the company is a husk, time and time again.

Even Bell Labs wasn't suddenly Bell Labs though. Even when Bell Labs was "Bell Labs", was it ever profitable for those who were footing the bill (as opposed to society at large, which it obviously was)?

Bell labs was good precisely because I doubt it ever made anyone much money. Hmmmm.....

Someone could make some good money by explaining how this squares with the conventional wisdom that optimizing for profit also optimizes for the good of mankind.

That's "conventional wisdom"? It sounds like a pretty implausible proposition to me.

hahaha I (think I) see what you did there

Wasn't Bell Labs funded by a tax/surcharge on people's phone bills? I believe there was some restrictions on commercializing its developments as well. It could do research, create things for internal use at AT&T, but not traditional product development.

Almost nobody who has a say has any incentive to think long term. For a CEO the next few years are important, shareholders can jump ship anytime. It’s a total alienation of somebody’s actions from the long term consequences.

Most shareholders are in it for the long term. They can dump Boeing, but only by putting money into something they think will do better. They won't put the money in a mattress or such.

Most shares belong to 401k retirement accounts of the middle class.

401k owners generally have no say due to low number of shares. And most likely they are not in a position to make a judgement of the decision a management makes.

Who is looking out for them? Not the CEO and I don’t think the board either. You need to have a lot of shares before you have an influence.

You don’t need a vote to sell your shares and drive the stock price down, which executives absolutely do care about.

ISS[0], Vanguard, and other fund families absolutely have massive say (powered by those 401k balances) over corporate conduct.

[0] - https://www.issgovernance.com

Their corporate governance teams are surprisingly small. Vanguard has only something like 35 people overseeing thousands of companies and voting on hundreds of thousands proposals each year.

As a result, some of that voting is running - literally - on autopilot, see https://www.issgovernance.com/solutions/proxy-voting-service... and https://corpgov.law.harvard.edu/2018/11/29/the-realities-of-...

The entire point of having ISS (or Glass Lewis) advise on voting and offer options like autopilot is to give the collective power of all those tiny 401K balances to a single unifying entity who can help drive shareholder-friendly terms (or at least provide a partial balance to what might otherwise become too boardroom-friendly terms). I view that the voting is on autopilot as a potentially positive control not the negative that you seem to believe it to be.

Some fund companies commit to following ISS advice across the board or on certain topics. Others like Vanguard delegate the voting power to fund managers (who have access to ISS reports but aren't obliged to follow it slavishly).

My point was that Vanguard et al have massive power, but they are not using it, e.g. https://www.reuters.com/article/us-usa-funds-index-specialre...

I would expect the overwhelming majority of actively managed funds to vote with management recommendations. If they didn’t agree with management, it’s much quicker and more effective to decline to invest rather than invest and then vote against them.

It is bizarre and disappointing to see this as the highest-ranked comment.

Do you have any evidence that “accountants” made this decision? Or that COVID is merely an excuse?

It is blindingly obvious that Boeing has been quite adversely affected by this pandemic and that global travel is unlikely to return to normal levels for at least 2-3 years. No amount of extra spending on R&D or product engineering is going to save your airplane company when people don’t want to get on the plane.

Here is a great article that addresses the issue : https://www.theatlantic.com/ideas/archive/2019/11/how-boeing...

Boeing lost their way in the 90s when the MD merger turned them into an accountant-managed company whereas they were previously engineering-managed. The resulting 737MAX disaster is the main source of their problems today, not COVID.

You're blaming the accountants for something the article clearly says is the result of management decisions...made by an engineer...

(McDonnell's Stonecipher was an engineer that rose into management ranks and was the one that thought up the brilliant idea to just cut costs regardless of the consequences.)

more mindset than actual qualifications. The point is really about losing sight of what the company does and focusing purely on the money

I think this is yet another manifestation of online discussions amplifying shallow and simplistic "analysis" that appeals to human biases and stereotypes. So I'd say it's not bizarre, but another sign of our times.

Accountants? Really? Accountants just provide the reports and do the diligence. Executives are the ones making these calls.

The problem is not with accountants per se but when accountants get promoted to executive positions. They will always run the business purely on a short term profit/cost basis, whereas operations and engineering managers who get promoted will know from experience that you need to spend money in the short term to make money in the long term.

This is a pretty simplistic view of the world. The idea that accountants don’t understand R&D is silly.

It has been my experience as a consultant and in-house that engineering departments significantly overvalue the R&D they perform. R&D has value, but nowhere near what the engineers think it does, especially when all of the costs of bringing that R&D to market are taken into consideration.

See, for example, Juicero, Bird, Boosted, Magic Leap, Theranos, etc.

Putting this dissenting opinion on HN will likely get you downvoted, but I for one appreciate it. There is a balancing act of profit vs development that us engineers to overlook.

However, some of your examples aren't great IMO. Theranos should have been ONLY R&D, as it was never a product that was ready to bring to market. Same with Magic Leap.

I think also due to Boeing's business of making tin cans move hundreds of miles of hour thousands of feet in the air, means the engineering department should be their primary focus as well, thus all the outrage at the company.

How many accountants are making these executive decisions?

The CEO of Boeing graduated with an accounting degree. He is literally an accountant.

He was appointed just a number of weeks ago. The CEO for the past number of years was an engineer by trade.

The current CEO was appointed in January. It is currently the end of May. I guess we could still count that in weeks, but most would use months at this point.

Lost track of time, but point is he didn't create the crisis at hand. He's been at the helm a short period of time.

The financiers, not the accountants. To wit, Boeing was doing stock buybacks while also "cutting costs" and shaking govts down for more cheddar.

It's received wisdom that MD did a reverse takeover of Boeing, that Condit got snookered by Stonecipher.

Have many friends, family, neighbors who've worked at Boeing, from 1960s thru this year. This version of the post mortem is a good starting point.

https://www.theatlantic.com/ideas/archive/2019/11/how-boeing...

Hutzpah is begging the court's leniency, claiming to be an orphan, after murdering one's parents. Or eating the seed corn and then being surprised by the famine.

You get the idea.

I have zero sympathy for the wrecking crew who destroyed an American icon and rage on behalf of all the workers, families, and taxpayers who paid the price.

Boeing has been run by engineers for decades. I'm tired of us accountants getting the blame for every downturn.

Tell that to Amazon? Frugality is one of the top principles of the company.

Do more with less, learn how to solve hard problems so you don't have to pay other people who maybe won't actually fix those problems.

"I realise COVID. But that's the excuse, not the reason." I would tend to agree. From what I understand Boeing has spent some 70%+ of their free cash flow on buybacks for the past 10 years; some 40+ billion dollars worth. They spent so much money trying to boost their own share prices (legal market manipulation?) it's no wonder they have no money.

Based on the article it sounds like a lot of these are line staff and support staff which is a direct result of a decline in the number of orders. Unfortunately I think there's not much they can realistically do about that.

The sudden shift in staffing comes from the sudden shift in demand.

Ok. So they don’t have the orders. What should they do, keep paying those people for nothing?

Slight correction: "To an accountant, a drop in costs is MORE valuable to the business as a rise in revenue." This is because an increase in revenue of 1M does not increase profits by 1M, but a cost cut of 1M can.

That's not how any accountant I know behaves. That's prime MBA territory right there.

I know a bunch of accountants. Yeah they aren't as stupid as MBA's or economists.

What do you do when two of your biggest products flop as badly as the 737-MAX and the 787 have?

Hire more engineers and let them make decisions

I cannot agree more, and yet it’s hard to keep these people out of going concerns.

boeing is having really hard times. Even if it were not for a pandemic that directly effects them, the max issues were going to hurt. I dont know if they had to lay off those workers, but I am not surprised at all.

kinda the point. If they were still run by engineers they wouldn't be having those Max issues. They might be having other issues, of course, but making planes that can't take off without crashing wouldn't be one of them

i think the boeing executives are better equiped to measure future demand. i'm sure they wouldn't be cutting costs unless they knew there would be future decline in demand.

As someone who lives in Seattle, and has several friends working for Boeing (I think still?), this comment hits the nail on the head.

Serious question: Has a company run by engineers ever failed?

Seriously? By the tens of thousands.

I guess maybe I am too new here. I thought poor decisions were the realm of marketing people, managers, and accountants. Perhaps it is possible that an engineer is working in marketing/accounting and therefore has to accept some of the blame?

Companies that focus on doing the thing they do well tend to do well. Companies that focus on messing about with their finances to keep the investors happy tend to fail.

Do engineer ever do thing bad?

Define "bad"

> I realise COVID. But that's the excuse, not the reason.

Demand for planes has cratered due to COVID. That's a 100% valid reason to cut jobs, not an "excuse".

it cratered for Boeing's planes before that because of the Max disaster

I've worked on many cost cutting projects in the past, in consulting and private equity where cost-cutting was the norm. These statements very easy to say in retrospect.

Many studies show that private equity owned companies, which typically run businesses the leanest, actually perform better.

For which measure of better?

Can you link to any of those studies?

This is one of the most comprehensive studies: https://bfi.uchicago.edu/wp-content/uploads/BFI_WP_2019122.p...

Yeah, that's the only one I could find. I definitely don't have the background to understand the whole paper, but it doesn't seem to paint a very positive picture. If you cut employment by 13% and grow labor productivity (output per employee) by 8%, aren't you worse off? At best, you're producing the same amount while benefiting society less and the owners more.

Also:

>Public-to-private buyouts involve greater leverage and bankruptcy risk but few advantages in financial returns, at least in recent decades. Private-to-private buyouts appear more likely to create value by relaxing financial constraints and improving management practices.

Public-to-private buyouts are generally the ones people get angry about, and it seems that they're economically bad in addition to the social consequences. I don't think people generally object to one private equity firm buying from another.

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