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As will this comment thread. We saw the same rhetoric on Holmes and Bankman-Fried. Once they were charged it was obvious they’d get off. Once convicted that they’d get a light sentence. Once sentenced that they’d have their sentences shortened, et cetera.
It’s a lazy learned helplessness that’s always potentially right because it feeds into a type of cynicism that has always been part of human nature in every culture since the beginning of history.
The gp's key argument for Boeing is based on the "Too Big To Fail" idea. I.e. Boeing's deep relationship with the government.
So far in this subthread, nobody has actually engaged with that specific part of his argument. Mentioning Theranos Holmes and FTX SBF who are _not_ deeply intertwined with the government like Boeing isn't really a counter to that.
The cynicism comes from previous "too big to fail" situations such as 2008 Financial Crisis and nobody from Goldman Sachs, etc going to prison for fraud. Fines and financial settlements as punishments -- yes. But jail time for those bank executives -- no.
It points to a subtle part of gp's comment I think replies are overlooking which is "corporation" vs "employees":
- Boeing Inc the corporate entity may be criminally charged and found guilty. The corporation then pays a punitive fine or settlement. (The proverbial "financial slap on the wrist.")
vs
- actual Boeing employees are found guilty and sent to jail. Gp's "this will go nowhere" frustration is based on this scenario which history has shown to be very unlikely to happen.
These are two separate concepts and you’re right, nobody has directly addressed them. Let me try.
Too big to fail “is a theory in banking and finance that asserts that certain corporations, particularly financial institutions, are so large and so interconnected that their failure would be disastrous to the greater economic system, and therefore should be supported by government when they face potential failure” [1]. A key part to it is financial institutions can’t meaningfully go bankrupt—they don’t materially have tangible assets, they just fail. (It’s why bad banks go into receivership.)
Boeing is not a bank. It’s not built almost solely on confidence. It, like the auto manufacturers, can go bankrupt without threatening its production. (GM and Chrysler went bankrupt [2]. Bankruptcy doesn’t mean we raze the factories.)
Put succinctly, Boeing is NOT too big to fail.
It does, however, have a deep and diverse relationship with government. Boeing has, by design, employees in every Congressional district. It’s strategically important to the U.S. and its allies and possesses an industrial-strength wheel greaser.
That broad base of employees protects the plants. But as we’ve already seen, financial failure and even prosecution of senior leadership doesn’t blow up the plants. The strategic importance, meanwhile, is a two-edged sword. Boeing has power because it’s useful. Not only is that usefulness preserved through reörganisation, but if someone can claim it’s increased through it, the usefulness becomes a source of weakness. (Nobody cares if Chik-fil-a is mismanaged. They do when Boeing creates a national embarrassment at the ISS.)
The only part that remains is the wheel greasing [3]. In this, Boeing is far from unique. It’s also unprotective against financial failure. Because, again, the wheels stay on if Boeing is reörganised. That may not be true if it continues on its current path.
Especially as we’re lining up for a potential war in the South China Sea, Boeing’s military-industrial ties may be what forces those who’d prefer to look the other way to stare down the problem. We can’t win that war, if we have to fight it, with Boeing a shitshow. And we’re more likely to have to fight it every time Beijing sees it’s a shitshow.
So yes, Boeing does have a deep relationship with government. But that doesn’t protect it from criminal prosecution or financial failure, and in some cases, may encourage the people pining for its reörganisation.
[1] https://en.m.wikipedia.org/wiki/Too_big_to_fail
[2] https://en.m.wikipedia.org/wiki/Effects_of_the_2008%E2%80%93...
[3] https://www.opensecrets.org/news/2023/05/revolving-door-lobb...
>[1] https://en.m.wikipedia.org/wiki/Too_big_to_fail
Dissecting the origin of "too big to fail" and the wikipedia cite isn't relevant to gp's argument because many journalists/observers in media already use "too big to fail" to characterize companies like Boeing:
https://www.google.com/search?q=boeing+%22too+big+to+fail%22
In other words, the "too big to fail" meme has already expanded beyond banking's original usage.
Your counterargument is there are memes that say Boeing is TBTF, Q.E.D.?
I wasn't making any counterargument.
I can 100% agree with you that TBTF was originally associated with the banking industry but simultaneously show that this isn't the meaning that others are using for Boeing. This seems like an obvious fact from a neutral viewpoint of seeing how language usage evolves (e.g. see the google examples) so not sure why stating it is controversial.
But that’s why it’s wrong. TBTF only works because financial institutions are built on confidence. You can’t reboot them through bankruptcy.
Boeing can be put into bankruptcy to facilitate reörganisation without causing ripple effects. (Like GM and Chrysler were.) TBTF as a general-purpose meme fundamentally doesn’t work.
Boeing has already lost some of this trust with the issues in the consumer aviation sector, but the space and defense side of Boeing is still going strong. A bankruptcy could risk Boeing's space and defense lines.
One big fault here is with Boeing's board. Boards are supposed to control the short-term greed of executives and protect stock value. Boeing's board should do a prophylactic firing of the C-suite (replace the CEO with someone who will fire the rest), putting the engineers back in charge, but I doubt they will do that.
Yes, all commerce involves confidence. The difference with banks is both sides of their balance sheet are not only entirely confidence based, they’re leveraged to the hilt on it.
Boeing can lose and re-gain confidence. (Albeit, at great risk.) A bank can’t; if it ever loses it, even momentarily, it fails. That is a dynamic that has increased as our world grew more interconnected, a dynamic we failed to fully appreciate until ‘08.
> bankruptcy could risk Boeing's space and defense lines
How? Worst case, guarantee BDS’s obligations as part of the bankruptcy.
Put another way: does restructuring threaten their defence line more than the status quo? I don’t know the answer, but I think it’s a valid question. (I’m familiar with their space lone and am halfway to writing it off.)
> big fault here is with Boeing's board
Totally agree. They seem clueless, more afraid of the bark than the bite.
I'll give you that defense is not in the same league as banking if you'll give me that defense is not in the same league as SaaS (even enterprise/F500 SaaS). By the way, defense companies do get a lot of leverage based on their federal contracting lines. It's 2024, a bank can get you leverage on a ham sandwich, and companies are usually pretty big users of it (they are encouraged to be).
> Put another way: does restructuring threaten their defence line more than the status quo? I don’t know the answer, but I think it’s a valid question. (I’m familiar with their space lone and am halfway to writing it off.)
Yes. Defense contracts in general cannot be awarded to firms in bankruptcy or that have been in bankruptcy in the last 5-10 years. That is because financial solvency threatens acquisition timelines, and in a bankruptcy, anything can happen.
Sure, though I’m not sure what leagues we’re talking about.
> defense companies do get a lot of leverage based on their federal contracting lines
Circle back when they’re financing a $4tn of assets on $300bn equity and $2.4tn of ultra-short term liabilities [1].
> Defense contracts in general cannot be awarded to firms in bankruptcy or that have been in bankruptcy in the last 5-10 years
Is this in statute or a rule? Does the contract officer have any discretion?
> in a bankruptcy, anything can happen
Government contracts are decently protected in bankruptcy, e.g. via the Anti Assignment Act.
Going so strong that:
* The USAF really hates Boeing for pulling some Serious Legal Assfuckery(tm) to drop Airbus for the tanker program, only to then fail to provide tankers that can pump gas.
* They've failed to secure all but one fighter program sale, and that was only because Lockheed Martin (F-35) succeeded so hard they couldn't succeed any harder.
* They were laughed out of the bomber program, especially after the tanker failures.
* They keep crashing V-21 Ospreys, their most recent episode resulting in nationwide groundings in the US and Japan that were only recently cleared.
* The Starliner is increasingly looking unfit for human occupation.
The only reason Boeing is relevant in space and defense anymore is sheer inertia.
Indeed, criminally charging upper management hardly counts as the business “failing” at all.
> Especially as we’re lining up for a potential war in the South China Sea, Boeing’s military-industrial ties may actually be what forces those who’d prefer to look the other way to stare down the problem. We can’t win that war, if we have to fight it, with Boeing a shitshow. And we’re more likely to have to fight it every time Beijing sees it’s a shitshow.
So this is a very interesting question, but it's not clear to me whether it can be resolved until the shooting actually starts. WW2 was a huge driver for fixing broken things (USN torpedoes didn't work reliably at the start, for example, in ways that only appeared under live conditions!). The Iraq war was on the other hand a huge opportunity for grift. Pallets of dollar bills vanished. Someone made a lot of money from non-functional mine detectors.
What's the difference? Well, the Iraq and Afghan wars were completely irrelevant and invisible to the Homeland, just a money and lives sink shown on TV, while WW2 kicked off with a bit of Actual America (Hawaii) being bombed.
The China war will probably have no real effects on the US until the GPUs stop arriving, at which point most of NVIDIA's $3tn market cap vanishes and Americans feel it in their retirement accounts. Then, and only then, will people take it seriously enough to overcome corruption.
Correct. But that’s still bankruptcy. It wipes out the shareholders and lets the creditors, which presumably includes the government, reörganise the company as it sees fit.
(I’d start with cleaving BDS from the rest of Boeing.)
> it's not clear to me whether it can be resolved until the shooting actually starts
Do you have a source on the torpedo story? Hadn’t heard that one before, and it sounds fun.
I recently read about how “the US went into [WWII] with fewer carriers than the Japanese, it was the US that was almost out of carriers in the Pacific in late 1942, and the US that had suffered the larger percentage of carrier losses—not the Japanese” [1]. We still won, as the author puts it, not with “the fleet that [we] started the war with,” but “the fleet that [we] ended it with.” How? Because “by December 8, 1941, the United States had already undergone 3 cycles of investment in only 8 years, with the last being one of the largest peace-time defense investments in US history.”
Put another way, it’s not clear we can wait until the shooting starts. What’s germane to this discussion is less whether that is true, but whether those in government with power over Boeing believe it is.
> China war will probably have no real effects on the US until the GPUs stop arriving
I’m not sure. Unless we try to fight it à la Ukraine, and it’s unclear that’s even an option, I expect the opening moves will involve the deaths of American soldiers. That brings it closer to “a bit of Actual America (Hawaii) being bombed.” (I assume a strike on a CVN would incur similar emotions, though that’s just a guess.)
[1] https://phillipspobrien.substack.com/p/war-and-deterrence-in...
I don't dispute your overall point, but I don't think this is right.
I couldn't read your source without a signup, so I went looking around. According to https://www.statista.com/statistics/1353080/wwii-japan-us-ai... the Japanese lost 14 carriers in the war, and ended with 18 in service, so they lost 14 out of 32. The US lost 5 and ended with 34 in service, so it lost 5 out of 39. That's really hard to turn into "the US suffered the larger percentage of carrier losses".
As I said, I don't disagree with your overall point.
As to the torpedo story: IIRC, there were two problems. The torpedoes themselves had an issue. I don't recall exactly, but it may have been that they didn't run at the depth they were supposed to. The second problem was the detonators. They didn't trigger if they hit square on, but only if they hit at an angle. So the better the shot on a ship, the less likely the torpedo was to actually explode. They didn't get consistently working torpedoes until September 1943.
Honestly worth the sign-up, but here you go in the meantime [1]. (Never mind, Substack got smarter.)
The greater loss ratio claim is limited to aircraft carriers in 1942. America lost as carriers as Japan that year and wound up the year in worse shape, numerically, despite Midway. What got us through wasn’t a decisive naval battle in June of ‘42 but the production infrastructure laid down in the decade prior. We built our way out of the hole, because in attritional war, stocks are less important than flows.
[1] https://web.archive.org/web/20240611165959/https://phillipsp...
> in attritional war, stocks are less important than flows.
Yeah. And a prolonged war turns into an attritional war. And the US isn't in a great place for that right now.
One good thing about the Ukraine war is that it pointed this out to the US, now, while we're not directly involved.
Classic example of "anything inadqeuately tested turns out not to work": the torpedoes were "too expensive" to test in realistic scenarios. So they weren't. That meant a cascade of problems - wrong depth, early magnetic detonation, failed impact detonation - all of which showed up in live fire as "miss", which could be blamed on individual commanders until the problem became too big to ignore.
There's a very high chance that something which is a critical fancy weapons system that has not been used in anger will turn out not to work in actual combat.
B) it's still lazy learned helplessness
Source? I sort of pay attention to it, and it seems a lot of folks are still hoping it solves itself.
And I doubt that Boeing will ever be given a cost-plus contract ever again.
Plenty of people comprehend it, from the JCoS through the GAO.
> If they go down, so does our country. It's that simple.
Sure. The same isn’t true about Boeing going bankrupt. (Bankruptcy doesn’t, like, blow up the factories.)
Part of the system’s vastness is its ability to survive some heads rolling.
Bankruptcy? There's indirectly trillions of dollars on the line if Boeing goes bankrupt. This is why I'm telling you, nothing significant will happen. Don't be an contrarian, just think about it. "Too Big to Fail", it's a real thing bud.
In a Boeing bankruptcy, roughly $100b of its paper money market cap may be "wiped out" (but for the company to go bankrupt that paper money would have to be worthless anyways), but the factories would keep producing. No "trillions" are on the line, even in that extreme case.
The company and its assets don't just evaporate when some executives go to prison.
The Joint Chiefs of Staff are literally above those compartments [1].
> No one person or internal unit can truly understand the inner workings of this machine
But they do! Not down to every nut and bolt. But we can say that about, like, a modern gaming console.
> indirectly trillions of dollars on the line if Boeing goes bankrupt
No? Silicon Valley tends to be naïve on how precise bankruptcy can be. Boeing going bankrupt doesn’t mean every supplier fails.
> Don't be an contrarian, just think about it
I assume you’re also personally familiar with the leadership of multiple Boeing suppliers?
I’m not saying that to dismiss you, but to give pause to your thinking anyone who disagrees with you just hasn’t thought.
Anyway i was thinking more along the lines of fighter jets, etc…but then i realized that Lockheed manufactures most of the new advanced jets.
And point taken regarding bombs.
If you’re intentionally mis-using the term WMDs your comment is in bad faith.
Military industrial complex takes down the USA?
Stop hyperventilating John Oliver’s talking points and look into the numbers.
Each big military contractor is a public company. You can read their detailed financial reports online, for free, right now.
The big ones range from 50B-120B each. At best they all add up to about 1T - absolutely nothing compared to total US wealth.
Yes, but why would they collapse? General Motors also had a web of suppliers when it went bankrupt. Preserving the value of a struggling company while it reörganises is why we invented modern bankruptcy.
Not for nothing, but Bankman's exposure was 110 years. He got 25 and that is after a massive public outcry, due to glove treatment resulting in him[2] and his parents[3], apparently, trying to derail investigation. Normally, as I understand it, the system would clamp down on anyone trying to subvert it. So the guy did get a light sentence given the circumstances.
Holmes I had less exposure to so I don't want to rely on just search engine since I am not sure what I am looking for.
<< It’s a lazy learned helplessness that’s always potentially right
I would argue that it shows simple pattern recognition. Some of us are just tired and therefore cynical. Join my podcast to go over trending ww3 news.
[1]https://www.justice.gov/opa/pr/samuel-bankman-fried-sentence... [2]https://www.cnbc.com/2023/01/27/sam-bankman-fried-tried-to-i... [3]https://www.washingtonpost.com/business/2023/11/11/sam-bankm...
Everyone likes to point to the McDonnell Douglas acquisition as Boeing’s downfall but the truth is that Boeing executives had already gutted the company.