I don't quite understand this. Boeing is a for-profit company that chose to try to optimize profits over anything else, and now that's biting them in the butt. What's to feel bad about? That the executives made the wrong decision?
Replace Boeing with Facebook/Google, and it still sounds strange to feel bad for the workers at those companies when the executives make bad decisions like chasing profits over all. I mean, why? People obviously like it there, otherwise they wouldn't work there, so why feel bad for them?
You can’t compare something like these massive pieces of hardware with people inside failing and taking all your work with it, with some software launch that maybe fails and takes a couple of bugs to be fixed before relaunch.
The Boeing story is tragic because they were a source of pride for America overall, played a huge part in winning WW2, made some great technological advances, but succumbed to MBAs fleecing all their goodwill. There are still world class aerospace engineers working there, and sure they could probably get a job somewhere else, but they might need to uproot their lives to do so.
I don't understand this sentiment at all. I know quite a few people who worked on the Google Domains team. It was a good team, a good product, and it sadly was all blown up by some senior executive decision that didn't make any sense.
Why can't I feel bad for the workers I knew whose product got deleted out from under their feet?? Some of them are in the process of getting laid off now!
Because there are people working at Boeing, people like you or me, who poured their heart into the project and the institution sapped their energy away and made their efforts ultimately worse than futile.
There was someone working at Boeing who spent years of their life qualifying those thrusters. They tried their very best. Perhaps they even batted for more testing. Or more analysis. Or perhaps they didn't because they didn't know better, but they still spent their best effort to do a good job.
And when they heard that the engines are acting up they probably felt like a trap door has opened under them. They felt that sinking feeling in the pit of their stomach. Either angry that they haven't caught this in testing, or angry that they haven't approved their request to test more.
Years and years ago they proudly told their mom/girlfriend/drinking buddies that they are working on a beautiful spaceship. And they were very proud of the project. And now all those people have heard that their spaceship is a liability. All that good feeling turned ash in their mouth.
There are people at Boeing who worked very very hard the last few weeks (months?) trying to uncover what is wrong with those thrusters. There are others who spent endless hours in meetings with NASA discussing risks and explaining tests and arguing persuasively that the space ship is fine enough to ride. And it is not really their individual fault that the spaceship is not fine.
And even worse, there are people who spent years of their life designing and building flawless systems. And they did a great job and built their subsystem really really well. Well made, high quality products. Yet nobody will think of their stuff positively because some other subsystem failed.
It is kind of like you are working on a beautiful great pyramid. (FYI pyramids were not built by slaves.) And you work hard, and quarry stone all day, and shape it, and push it and pull it and you really really do your best job. You are really a champ. And you should deserve to celebrate in the sun with your team mates the beautiful pyramid. But unfortunately you are not one of the lucky ones working on Khufu's pyramid, you are on the team which works the second pyramid built for Sneferu. And something is wrong with the plans. Or the foundations, or the site selection. Or the rocks are not strong enough. Nobody really knows but even though you are doing a great job individually the damn thing is collapsing in front of your eyes. And it will be known forever as the "bent pyramid". And it sucks. And you feel bad. And that is sad and we should feel bad for those people.
What do Boeing actually do?
The reality is often a lot more complex and nuanced.
The issue with Boeing is less any individual and more institutional decay. Over time, a spigot of effectively unconditional cash corrupts an organization, especially once anyone with enough internal weight to fight against it is no longer involved in the day-to-day. Give it 20 years, and SpaceX will be the same way.
<cough> 737MAX
> It doesn't excuse the decay and issues, but this isn't a case where everything they do is faulty. they're just held to an extremely high bar.
... only to the bar they set themselves with the older 737s?
We want it all to be a matter of just one or two incompetent individuals, because then the solution is simple. We just need to be aware that incompetent individuals exist, and through sheer force of will we can prevent them from destroying great things! But a much darker possibility is that it's something inherent to complex systems. Then, there's nothing to do to escape the inevitable cycle. Whatever brilliant schemes we come up with are doomed to failure, because the issue isn't individuals being stupid but institutional incapability to repair itself.
Apple is one of the halves of the phone duopoly sadly, so it will take a long time for them to pay for Cook's decisions this time.
I hope to be alive long enough to see how Toyota's story plays out. They seemed to have lost their way under Akio Toyoda. We'll see if Koji Sato can get them back on track.
I'm also keenly interested in Haier and its "Rendanheyi model". They're worthy of HBR style case studies, receiving at least as much attention as Apple, Sony, Honda, Toyota, etc. And yet we know so little about them. https://en.wikipedia.org/wiki/Haier
In 2021, Liang Haishan succeeded Haier's legendary CEO Zhang Ruimin. What happens next? Continued success? Long slow decline? Jump into a volcano?
I'd love to know.
But among other things they are subject to the dictator trap, and of course they have a best before date.
So a visionary leader is a good person to have during bootstrap, but then your processes need to become self-sustaining.
This has not been true at any job I’ve had, from working in fast food as a teenager to now being a data scientist. What you describe would be exceptional in almost any company, where things otherwise regress to the mean of these various aspects, or, in especially bad circumstances, go south of that. Boeing would seem to be in the latter category at this point.
I really want to know about studies being done in this area.
Sure, on an individual basis, you have pockets of amazing managers that can't overcome organizational inertia. I feel for them as well, but when organizational failures come into play, I'm certainly taking more pity on the employees then the managers.
It's possible for the underlings to be good despite bad management, but if the underlings are bad that is again a consequence of poor management.
The only exception would be deliberate sabotage, which is not unknown but incredibly rare.
It should rub you the wrong way. It denies both the agency and the moral obligation of the professionals working under the managers.
Managers too, though ultimately this failure must come down to management at some (presumably high) level.
So not everyone who is not a manager is good, but almost all top-level managers are bad. They need to be in order to make the decisions needed to advance short term profit before all else.
There are bad employees but they have less influence over the company overall.
From my limited experience with megacorps, and lots of reading, persons Director level and up are bat guano insane. Execs live in their own separate Machiavellian fantasy world bubble. Any nod to reality (eg rocket go boom) is a selfown for corporate ladder climbers.
Any productive work at an org like Boeing, post infection by MD's leeches, is in despite of "managagement"'s best efforts.
engineers on the bottom don't care about the politics. they design and implement the best they can.
It is a tragedy that what was even greater has been so badly diminished by the greed and incompetence of a few. Hating what’s happened to Boeing (and perhaps those responsible for it) is very different than hating Boeing.
That memo from 20 years ago talks about how Boeing management was optimizing their earnings to capital expenses ratio by selling off factories and manufacturing lines to their contractors. The idea was that this would make Boeing more efficient. In theory they would have the same profits but lower capital expenses. The memo points out how fallacious this is, because while it does improve _this year’s_ numbers, next year’s profits will drop because they no longer own the factory that makes the profits. The memo points out that the contractors will now be earning a larger and larger share of the profits that Boeing used to collect, while Boeing keeps all of the risks. When you buy a whole fuselage from one supplier and a pair of wings from another, you take on all the risk that they won’t fit together properly while the suppliers pad their profits by making you pay extra for every change you ask for.
Of course we taxpayers (corporate share of tax revenue is miniscule compared to 50 years ago) bailed them out...
https://www.nytimes.com/2020/04/24/business/coronavirus-bail...
It wasn't Boeing's fault that the governors shut down the economy, something that had never happened before in the US.
In Boeing’s case it has very little to do with coronavirus, which was just a related example: some businesses set aside enough seed corn to survive without help, and others didn’t.
Of course you can. There are thousands of examples around the world - not least the great success story of the last decade or so, Apple.
Minimising your cash holdings is a microoptimization. It might get you a fraction of a percent more return in good times, but that doesn't make it wise.
The purpose of being in business is to make more money than you could by putting the money in an interest-bearing account. Another way of saying it is there is no point to operating a business if you cannot make more than the "opportunity cost".
> Minimising your cash holdings is a microoptimization.
What businesses are in business to do is put cash to work earning more than the opportunity cost, often meaning about 15% ROI.
That certainly is not a microoptimization.
In fact, what most businesses do is borrow money at, say, 5%, and then invest the money so it earns, say, 20%, and therefore make 15% overall.
I do something similar with my investments. I borrow money and buy investments with the borrowed money.
It's similar to borrowing money to buy a house, and then selling the house at an appreciated price to make many multiples of your down payment.
Yes, minimizing uninvested capital --- or the extreme case of it, turning that negative through leverage --- is great, until it isn't.
Elon Musk at one point was within hours of personal bankruptcy with Tesla when he managed to secure more funding. He's the richest man in the world, and got that way by taking on enormous personal risk.
How wealthy would you be today if you put everything you had into Amazon stock the day of its IPO?
At some point, you're just hoping to get lucky, and to leave other people (debtors, governments) holding the bill if you don't. This is what people talk about when they criticize others for "privatizing profits, socializing risk."
Economists have a word for it, too: "moral hazard." https://en.wikipedia.org/wiki/Moral_hazard
Back to Boeing: Boeing put up really good numbers by gutting engineering and manufacturing organizations, hoping it would all turn out okay. For awhile it did, but then it didn't.
And it's questionable how much of these costs Boeing is going to bear, because there's a whole lot of talk in policymaking circles about how to keep an important defense manufacturer and top manufacturer alive (through contracts, tariffs, and supportive policy).
The moral hazard comes into play when the risk is forced on some unwitting bystander.
A degree of risk is priced into the interest rate. I still have a fiduciary duty to my lenders to not take undue, undisclosed risks. In practice, people get away with this except in the most egregious cases, but that doesn't make it less wrong.
Worse, systemic risk isn't priced into the interest rate, because the government tends to bail out the banks.
Everyone using leverage and betting on things going up forever is a really big part of how you get 2008. A lot of people made a ton of money in the run-up to 2008 (privatized profits); the population as a whole paid the costs (socialized losses).
edit: I wrote "borrowers" above when I meant lenders.
Getting more of your capital as debt is a microoptimisation (unless there are special circumstances like different tax treatment, and usually even then) - that's the classic Modigliani-Miller result. Holding more cash makes your nominal return on equity lower, but improves your cash position, and unless you push it to the point where you're taking a real risk of actually going bankrupt the two effects balance and your risk-adjusted return is the same.
> I borrow money and buy investments with the borrowed money.
Exactly. So it really doesn't make a lot of difference how levered a given company is, because an investor can always make a more or less levered investment in the company - if a company has a lot of cash then an investor can lever up a lot, if a company has a lot of debt that same investor levers less or not at all, and ultimately either way the investor gets the same level of risk and the same return.
> It's similar to borrowing money to buy a house, and then selling the house at an appreciated price to make many multiples of your down payment.
Not really - there are all sorts of special treatments for home mortgages (in particular the mortgage interest tax deduction, the most horribly regressive piece of the tax code) that mean you're genuinely disproportionately better off to do one. But it's rare for something like that to apply to corporate borrowing.
But can feel sorry for the rest of the organization and the subcontractors. Blameless parties are going to suffer a lot of collateral damage.