Help me understand why Wall Street greed would prefer trains that derail to ones that don’t? (The machismo argument, sure, I get, though it’s unsubstantiated; one could just as easily try to pin it on urban environmentalists.)
But if the derailments are <X% of the trains, and the rest of the trains are more cost-effective enough to make up for those, especially if the costs of the derailment to the environment, communities, and employees and such are externalized away from the MBA making these decisions, then they may decide it is worthwhile.
This is one of the reasons so many people have varying levels of distaste aimed at "MBAs"... it's not that hard to train people to push numbers around in any number of industries. It's easy to equip somebody with an MBA capable of doing that. Heck, based on what I've seen of MBA training, it's trivial compared to an engineering degree, no offense particularly intended, but it really isn't that hard to tell whether this number is bigger than that number, even with some statistics thrown in. The problem is that there is no way to scale up understanding all the details that are not and perhaps even can not be in the numbers, and that's where the MBAs can go trampling over companies.
I'm sure the numbers on these jumbo trains look great, even accounting for the derailments. I'm sure of that because the fact they're running them is pretty much proof of that. If the numbers weren't good, they never would have become popular enough to be worth writing about in the first place. The question is, what about the things not in the numbers? That I can't speak to and must defer to people with experience in the industry. So must the MBAs, but they are trained, deliberately or otherwise, not to.
And the other is that a lot of the decisions that bring up anti-MBA shitstorms and flamewars make it more than obvious that ethics were not much of a part of the MBA program the offenders attended.
The most obvious example of ethics getting railroaded was Boeing, and look where it got them to.
Look at the Boeing MCAS and VW emissions scandals. Individual engineers and test pilots were named and faced repercussions. The MBAs that sustained the environment where this poor decision making happened? Aside from the very senior executives, we have no clue who they are. They were able to stay in role or slink off to another opportunity. They might not even think they had any culpability.
* Enron
* General Electric and the lord and savior of MBAs, Jack Welch
* Valeant Pharmaceuticals
* Sears
* IBM
* McDonnell-Douglas (and later Boeing)
* Intel
* Stock buybacks in the airline and retail industries
You managed to figure it out, so why blame unknown, unseen, unnamed "MBAs" when virtually anyone of modest competency can realize that achieving 100% perfection is not cost-effective? And certainly not isolated to rail transportation. Do FAANG (or any software companies) produce 100% bug-free software? Do stores attempt to achieve 100% theft reduction? Virtually everyone knows that going from 98% success to 99% is very expensive, to 99.9% even more so, and 99.99% ridiculously so. 3, 4, 5, 6-sigma, and all that. If lives are at risk in these derailments, that's an issue. But these are freight trains.
However, the author didn't definitely show that insanely long trains increase these dangers. They seemed frustrated that driving these trains sucks and talked about how frequently derailments occur and seems to believe the two things are related. The NHSTA numbers seem to indicate the trend for derailments is going down? Perhaps as train size increases, the number of trains decrease and the risk to the individual conductor goes up? Don't know enough about the subject matter to knowledgeably infer an answer, so I won't.
- they are harder to start and stop, because size. One mistake.. Shorter trains are easier to control, physically
- Crews are exhausted by these trains because they take too long in infrastructure not built for them (1940s yards), and adding to waiting time, making it much slower to add / move carriages / trucks around, and other logistically disproportional wastes of time
- The trains are too long for communication purposes too. radios don't have the distance. Safety and important messages get missed
...among other things.
Somehow if you take two thirds of an engineering degree and two thirds of an econ/mgt degree, two thirds of the work is the engineering degree.
Most of the reading in management is discovery channel style: lots of interesting things, there's no doubting that, but not real skills. They raise simple ideas to a level of respect that is not warranted by the content. Eg Porter's Five Forces can only really be a superficial checklist for strategy, it doesn't actually tell you anything about what matters in some industry, and you might come across some business where those five items are not so clear cut. Same with SWOT analysis and various other acronyms, they are simply trivial things that cannot stand next to the content of a technical degree.
There's also an inherent problem with MBA training: it assumes that there's a general training that is useful to every business. If you're going to apply the material, every grad will end up putting a round peg in a square hole. Fortunately there's not really anything to apply, you get the cool jobs because you're showing that you're smart and ambitious, not because you are qualified technically to do it.
Engineering on the other hand is quite hard to BS. We built a crappy radio in the first term, but it was a radio and it played the radio when you turned it on. You had to understand how radio spectrum worked and how to solder the little RLC components together to make it work.
Looking at both......the MBA is indeed trivially easy compared to my engineering degree. By an order of magnitude. Thanks for opening my eyes to that.
41 years later, we are probably now cutting bone instead of fat.
* The people that live along the tracks should be grateful that the trains are crashing and spilling stuff on their land because they "create jobs" (hundreds of miles away not affecting anyone associated with the normal land use).
* The religion of "regulation is always bad". Usually associated with blame that the existing regulations are really the problem - the increase in accidents after loosening the regs is just coincidence.
* The cost of derailments is less than the extra profit of running unsafely. Anyone complaining about their dead overworked family members can be pointed at a different exhuasted worker making a mistake, so it's not like they have any culpability.
* Maintenance costs too much and would hurt our bottom line! (also look over here instead: record profits!)
Which makes it particularly strange that the author asserts that they are "far removed from laissez faire economics, or the neo liberal model, coming out of the 1980s", since every one of these is a natural consequence of the incentive structure created by that economic model. (Unless I'm misunderstanding and the author is using "far removed" in a sense approximating "left to fester", but laissez faire incentivized those things even when fresh)
I think some businesses out there do a lot of things because it personally entertains the men who own them, but not sure about freight trains.
I don't know if it is true that they _prefer_ trains that derail vs ones that do not. I can try to understand their _incentives_ though.
I would assume that they are incentivized to make money _this quarter_ or _this year_. I would also assume that they aren't really _caring_ about consequences that are not _fiscal_.
Given these two incentives, if someone asked me "Should we ship this train that might derail?" I wouldn't say "no". I would ask "what are the fiscal consequences if it does?" and "How much does it cost to not?"
Famous Fight Club quote about recalls and such. Same thing with companies breaking the rules in exchange for some sort of fine. It's not that they _want to break the rules_ it's that it's they are _incentivized_ to make the choice that _increases their odds of fiscal growth_.
When he's saying he's backing a 3-mile train into a depot, that's nothing to shake a stick at. That means nearby residents have to endure rail noise for the entire time the train overshoots the entrance and while it backs in, it means signals within a given radius must be down, even though a train may not be inbound, it means that the heavier a train gets the more unstable it's load can become on certain track and when it derails can cause catastrophic devestation to the environment (he mentioned carrying hazmat).
These all used to be pretty blueprint safety evaluations from what I knew. If things have changed then our perspective or priorities have changed, and I think that's what the author is getting at.
Took about 45 minutes for the ambulance to get the lady off the train and the hospital was literally a 5 minute drive away. They just couldn't get to her.
More subtle is when the people making decisions (ie in the c-suite, board) have payoff curves that are substantially different from the company's payoff curve. Risking train derailment strikes me as being in this category. These schemes can be deeply convoluted. The author implies that there is substantial, uninsurable risk to cities that is implicitly taken on by any freight carrier. Holding everything else equal, increasing revenue while increasing the potential damage to a city is a potential source of profit.
I think the point of the article is that given the hazardous nature of much of the cargo being transported, there's no room for such gambling here, and yet it's being done routinely.
Here is a just so story:
Lets say you are CEO of a train company. You need $500M in income each quarter to pay salaries and stay solvent. You are barely breaking even, and if you have to borrow money it will be at terrible terms that you realistically can't afford to pay back. Your competitor starts running trains that are 3 times longer, and therefore can undercut you on price. If you don't lower your prices you will get almost no business and you will have to lay off workers or take a loan you can't pay back to meet payroll. If you lower prices you will lose money on every shipment and will have to take a loan. You decide to just start running the longer trains as well. You may have a suspicion that this is unsafe and that long term the costs of increased insurance and repairs to tracks and lawsuits to dead workers will cost far more than what you save running longer trains, but also you aren't sure of that. It will take years to know for sure, and you don't have the capital stay in business long enough to bet that your competitor will go bankrupt.
This scenario is plausible in isolation, but not really related to the rail industry in the US.
Great story, except everything you said is factually wrong. Railroads have monopolies in their corridors, are printing money, and are challenged only by trucking companies who are struggling to survive due to labor and fuel problems.
It can't be factually wrong, it was explicitly made up (see https://en.wikipedia.org/wiki/Just-so_story), I was just illustrating how market forces can lead to seemingly irrational decisions.
They calculated that the cost of lawsuits from people hurt by the car defects will be lower than the cost of fixing the defect itself.
Simply put: if they can externalize costs on society, they will.
Derailments are still infrequent enough that the company can be insured against the losses, so if derailments happen, there’s effectively zero cost to the company.
That would change if this class of train made incidents so frequent that insurance companies were no longer willing to sell insurance for derailments incidents involving this type of train. At that point, they’d be phased out of the fleet (as they crashed out of service) and then individually written off as a tax-deductible loss.
Bonuses are paid quarterly, insurance premiums are negotiated yearly. PHB gets their cheddar before the bill comes due.
The long term fix is to properly reconnect incentives, so that PHBs making risky decisions also carry that risk.
A railroad engineer is going to value longevity/consistency, and lives to minimize (rather than capitalize) risk.
The two are not going to make good bed fellows.
Sure some people do trading, but a long term view is both the right one and the most profitable one.
On what do you base that? My immediate reaction is that you are being naive.
Because they can offload most of the costs of the derailments as externalities while pocketing the money from larger trains.
Are derailments cash-flow neutral? (Honest question. Could be, if the public foots clean-up and insurance the train and lost revenue.)
The solution here would seem to be penalizing derailments using a large fine that is proportional or progressive to weight or length.
If there was damage to private property, a hazmat spill contaminating private land, or injury or loss of life, the railroad is going to get sued.
Not all the externalities mentioned are specific to derailments, but also apply to the general difficulty of our infrastructure in supporting such long trains.
And a derailment sounds like a massive cost to a rail company. You need to clear the tracks (which can't be used until you do), probably pay higher insurance costs for the material you are transporting that is lost, etc, etc
I mean, sure you can legally, but you’re still a harmful entity with a problem.
I can't see what's wrong with calling out people for unethical, shitty and harmful behaviour however.
Even if this is only about maximum train length, which it isn't, the underlying dynamics, as they are perceived by and affect all the stakeholders, are complex.
This is what I mean by complex systems: https://en.m.wikipedia.org/wiki/Complex_system
Is this what you mean?
Of course that is not the only stakeholder in the situation. Now for each key stakeholder, including railroad companies, railroad employees, shipping companies, the purchasing public, and landowners near tracks, what would be your professional opinion on the correct outcome?
It is pretty clear that what you see depends on where you sit.
Now step back even further and imagine you are an omniscient being that can truly comprehend all of the above perspectives. How would you go about deciding the correct outcome? It will depend on your notion of good and fairness. I think for many definitions of good, you'll find that considerable analysis is involved.
[1] https://en.m.wikipedia.org/wiki/National_Transportation_Safe...
There is no regulation that will prevent all derailments with 100% effectiveness.
> Longer trains are harder to stop, harder to control, less robust to disturbances.
All other things equal, this seems plausible, but I’m no expert on trains. So if I studied it, I would likely agree in most cases.
However, I do wonder if longer trains, being more massive, do offer some benefits in some cases. Perhaps a disturbance affecting only one car would have less effect because the other cars have more inertia and resist change.
This of course relates the question of the design criteria. Clearly trains should be designed with a cost benefit analysis such that more common disturbances can be handled. What kinds of disturbances can and should be planned for?
Engineering rail systems so that derailments do not happen at all is a reasonable shorthand for almost never. It is engineering malpractice to run things so close to the edge that fatalities or serious property damage are to be expected next month instead of sometime in the next few decades or so.
Hopefully you can see (in retrospect, at least) that this language is not going to build goodwill or help understanding.
Some people dismiss complexity theory without giving it a chance.
> As a mechanical engineer, my professional opinion is that trains should not be derailing, period.
I was also trained as an engineer. Part of that training is understanding probability and risk. There is going to be some risk of derailment. How do you go about deciding the acceptable risk of development? Have you done such a calculation before? What is it based on?
(No opinion if this actually is the cause, or what the dynamics are here; I don't know anything about trains or the businesses surrounding them.)
If there is some kind of a moral incentive not to drop eggs, it is not reflected in the profit incentive.
So trains are optimised for profit. Now if your trains never derail, that means you may still have safety margin. There may be profit for the taking!!!
So keep optimising till it goes wrong. Then, figure out the cost of "going wrong". Figure that into your margins. If you get 99% delivery with 110% profit, does that beat 100% delivery for 100% profit?
TL;DR: that's how free markets work in capitalism. They optimise for profit.
The equation here is more like “I can increase margins 3% this quarter to get my bonus, but increase the risk of an incident that may harm or result in the death of an employee or disaster affecting the public by 15%”
The long game is that the railroad will lose money when they create a 9-figure incident. The short game is the management makes their money.
I suppose you don’t live near one of these lines or have to worry about some terrible accident or even a town-destroying explosion. (https://en.m.wikipedia.org/wiki/Lac-M%C3%A9gantic_rail_disas...)
My uncle worked for one of the large railroads for 32 years. He retired last year, along with every eligible employee in his division. The workplace injury rates in that division had climbed to the point that it didn’t make sense to do the job and risk death or serious injury.
Even if they do (and this is a BIG if when we see how many companies get bailed out of their bad decisions) they still have caused a 9 figure incident. Which could be a chemical spill or any number of other things that could cause serious environmental damage to the local communities. A fine that results in the destruction of the company is great and all, but they've still made the planet markedly worse through their negligence.