Boeing Disaster Proves Americans Businesses Greedy Mentality Is Broken
businessinsider.com
businessinsider.com
> Money that could have been spent investing in workers or products instead went straight to investors
then you were doing finance.
So you pillage company after company and you couldn't care less about them, much like companies are said not to care much about the people working for them.
Then those pillaged companies start to fail at delivering good products because they don't have the resources to build them or the board doesn't actually care about products. They coasts and run on fumes for a while, then fail. Finance moves on to the next victims.
You apply this to a whole country and you eventually have some very rich people in a country without a meaningful industrial base and a lot of very poor people around you. Maybe you move to some paradise abroad where poor and angry people can't touch you. You left a wasteland behind. Congratulations. You won the game or you lost it, it depends on what was the game.
Boeing is a quintessential example of America’s rotting business culture over the past 40 years.
It’s also questionable whether other major companies with a similar maximize-shareholder-value-at-all-costs ethos will learn from the mistakes. But it’s clear that what Boeing — and the entire American corporate body politic — needs is nothing short of a philosophical counterrevolution.
An investigation into battery fires on Boeing’s 787 Dreamliner in 2013 found that it wasn’t allowing engineers to stress test its products enough, that it wasn’t catching manufacturing defects, and that passengers could be in danger as a result.
A manager lamented to one of Robison’s sources that people would “have to die” before Boeing made changes to the aircraft.
At the root of this shake-up was the influence of the economist Milton Friedman of the University of Chicago....One of Friedman’s disciples, the economist Michael Jensen, took the theory a step further in 1976 and argued that the corporation should be built to serve the interests of shareholders.
The CEO who best personified this ideology was Jack Welch, who helmed General Electric from 1981 to 2001...But a corporation can run on past innovation only for so long. In 2018, after over 100 years of prestige, GE was dropped from the Dow Jones Industrial Average because of the work Welch did to hollow it out.
In 2019, the Business Roundtable, an advocacy group formed in the 1970s for corporations, read the populist tea leaves and published a statement that said the purpose of a corporation was to serve all stakeholders, “customers, employees, suppliers, communities and shareholders.”
But more fundamentally, it will take a total rethink of America’s corporate incentive structure. Instead of favoring shareholders and playing a quarterly game with Wall Street, C-suites should prioritize sustainable, long-term businesses that employ as many productive workers as possible.
Because it seems like our businesses have been producing some great stuff and generally improving standard of living. That doesn't mean that everything is perfect. But I'm not sure a system exists that is effective, efficient and prevents any possible bad outcome.
The article argues that there's been a change in business culture and mentality over a number of decades: the view that corporations were responsible members of the community has been replaced with the view that "greed is good", and corporations have no purpose other than unmitigated profit maximization. So where do you think the fallacy is? Or are you just focused on the word "broken", which again doesn't appear in the article?
Maybe it's because everyone went crazy over the word "broken", like in these very HN comments LOL.
Huh? The above comment is not a thesis about the nature of economic systems. It's a simple observation that the word 'broken' has a meaning. One which does not justify the author's usage.
The blatant misuse of loaded words is a form of deception. It is worth calling out.
The article author did not actually use the word 'broken'. The HN submission was editorialized.
https://fred.stlouisfed.org/series/A939RX0Q048SBEA
I suspect that we won't be able to agree on anything, but that chart says something very important -- however you might want to interpret it.
Tech is pretty healthy on balance but is that because everyone prefers to work in tech because other industries are so much worse?
Many people like an Econ-101 "free market", with perfect information, competition, and zero barriers to entry for competition or lock-in for customers. This never exists 100% in real life but often it's close enough. Here, not so. For aircraft construction, a specialized field with long lead times and expensive products, the barrier to entry is huge. So competition is thin.
Which is all a good argument for regulation, and why the FAA exists, maybe our aircraft safety standards need some updates.
IMO, this is the system WAI: Boeing pushed the limits, had a high profile incident (in which injuries were minor), and is now reeling to rebuild their reputation with regulators and in the market.
Of course Boeing self-certifies planes. Who else is better equipped or incentivized to not fuck this up?
The bolts in that door plug weren't installed; it was a one-off due to some maintenance work. Do you propose the FAA systemically review every bolt in an airplane before they declare it airworthy? Every third bolt? Every third bolt of every third plane?
At what point do you just accept that fundamentally, nobody other than Boeing has the resources to check that a plane is safe?
The party to blame here is Boeing. The FAAs job is not to make sure they never step out of line, it's to correct them when they _do_ step out of line.
The FAA is doing their job just fine - I'll remind you, again, that even flying on the 737 MAX is quite safe and you still run a higher risk of death on the drive to the airport than on the plane.
― Trevanian, Shibumi
In case of Boeing, regulations exist but were left to be self enforced. If they were enforced correctly, Boeing would not have the opportunity to cut corners and would’ve been saved from the consequences of their own greed.
Running a business often requires making hard choices to keep the doors open, but those choices, and the choice to stay open at all, depend on who is making them.
The modern publicly traded company (effectively owned and operated by Wall Street traders) is somewhat unusual in the history of business, in being structured specifically to require everyone to act solely for shareholder value or profit. But it is a choice to structure a business in this way, and things like B corps, co-ops, etc. are different structures designed to optimize for different goals and values.
As soon as the business is publicly traded, the goals and values are just money.
If the goals and value aren't money, then eventually the people making decisions will be replaced with people who value the money.
By contrast, in Germany 1/2 of the seats on the board of a public company must be elected by workers. So there finance and money can't just replace engineering.
For most of human history, "businesses" have been primarily about providing a service or producing a good—farming was about producing food, carpentry was about creating products out of wood, etc. The money was, of course, the incentive for them to produce this specific thing for that specific person, but the purpose of the business was still to produce the best damn wooden chairs they could make (or whatever).
Naturally, as I said, there have always been people who want to make the most money for the least effort. We have clay tablets from the ancient city-state of Ur, nearly 4000 years ago, complaining about a copper merchant who was (supposedly) fraudulently selling low-grade copper ingots as highest-quality ingots. But for most of human history, that has been the exception.
In the past few decades (I'd be hesitant to try drawing a bright line as to when), I feel that this has flipped, and people who think that the purpose of a business is to make as much money as possible (with providing a good or service being a necessary evil to that end) have taken over, at least in the US.
I also very strongly believe that this is an unhealthy, destructive mindset to have about the purpose of a business, and continuing to hold it up as the ideal is part and parcel of the problems of inequality and its effects that have plagued us in recent decades.
A good example are utilties, which should have the purpose to providing service, and make limited profit. Publicly owned utilities that try to make the most money are problematic because of the natural monopoly.
There are plenty of businesses that could make more money, but that don't want to expand. Lots of businesses come in units, like a single restaurant, that can be managed by one person. Expanding is risky and require more work than owner wants to expend.
The problem with current companies is wanting to make the most money in the short-term. Most investors have a long term horizon to retirement and need value in decades. Chasing short-term profits might end up risky and destroy future value.