‘This Has Been Going on for Years’: Boeing’s Manufacturing Mess(wsj.com)
wsj.com
‘This Has Been Going on for Years’: Boeing’s Manufacturing Mess
https://www.wsj.com/business/airlines/boeing-manufacturing-737-max-alaska-door-plug-spirit-18f7e233
321 comments
https://archive.ph/C9kRR
The paper from 2001 by Dr. LJ Hart-Smith, referenced in the article is just as interesting as the article itself https://www.documentcloud.org/documents/69746-hart-smith-on-...
If you squint, could apply some of those observation to the world of software.
For a TL;DR just skip to Hart-Smith's recommendations list at the end of the paper. Here are the ones I liked:
> Look continuously at the entire activity. Do not minimize costs in isolation. Understand that one global cost minimization is worth far more than even 20 sub-optimum cost reductions.
> Retain sufficient in-house production manufacturing that it is possible for future engineers to acquire the skills needed to develop new products, without which all businesses will fail. Even the work that is out-sourced requires internal expertise to write the specifications.
> Acknowledge that cost-saving techniques that work in other high-volume industries are often quite inappropriate for low-volume industries like aerospace.
> Listen more to your own employees about how to save cost than to any outside business consultants who have never run a factory producing your kind of product. In any event, if the advice they offer changes every year, it cannot possibly be correct.
If you squint, could apply some of those observation to the world of software.
For a TL;DR just skip to Hart-Smith's recommendations list at the end of the paper. Here are the ones I liked:
> Look continuously at the entire activity. Do not minimize costs in isolation. Understand that one global cost minimization is worth far more than even 20 sub-optimum cost reductions.
> Retain sufficient in-house production manufacturing that it is possible for future engineers to acquire the skills needed to develop new products, without which all businesses will fail. Even the work that is out-sourced requires internal expertise to write the specifications.
> Acknowledge that cost-saving techniques that work in other high-volume industries are often quite inappropriate for low-volume industries like aerospace.
> Listen more to your own employees about how to save cost than to any outside business consultants who have never run a factory producing your kind of product. In any event, if the advice they offer changes every year, it cannot possibly be correct.
> Retain sufficient in-house production manufacturing that it is possible for future engineers to acquire the skills needed to develop new products, without which all businesses will fail. Even the work that is out-sourced requires internal expertise to write the specifications.
That's the biggie. I think the entire US tech industry has done a gigantic face-plant, when it comes to this.
We have not only outsourced the work, but we have interrupted the transfer of knowledge and expertise.
I have friends that run manufacturing businesses, and they explained how they believe that the US will never regain what it has given away, in the last couple of decades.
That's the biggie. I think the entire US tech industry has done a gigantic face-plant, when it comes to this.
We have not only outsourced the work, but we have interrupted the transfer of knowledge and expertise.
I have friends that run manufacturing businesses, and they explained how they believe that the US will never regain what it has given away, in the last couple of decades.
I've seen a variation of this problem firsthand.
Working at a cable company where they contracted out to vendors most of their software development. They had a few internal systems that they developed in-house and would only hire 'senior' developers. I was curious how they expected to have a steady supply of 'senior' skills without ever hiring, training, and promoting a junior.
I also saw they had no idea how to manage their vendors, partly because they didn't have in-house skills to serve as a sanity check on what vendors were charging. As a result, their vendors profited hugely from the company's ignorance (I know because I also switched to work for one of the vendors).
Working at a cable company where they contracted out to vendors most of their software development. They had a few internal systems that they developed in-house and would only hire 'senior' developers. I was curious how they expected to have a steady supply of 'senior' skills without ever hiring, training, and promoting a junior.
I also saw they had no idea how to manage their vendors, partly because they didn't have in-house skills to serve as a sanity check on what vendors were charging. As a result, their vendors profited hugely from the company's ignorance (I know because I also switched to work for one of the vendors).
I've seen exactly the same thing at a couple of companies I've worked at in the past too. One specifically outsourced all of their development because it was deemed to be cheaper (which it was), but after a few years without any in-house technical expertise to oversee development they'd run into all kinds of issues with bugs, outages, slow load times, etc.
For a period when these issues occurred the business could say that they wanted the issues patched, but they never understood why there were so many issues to begin with. It was only until they brought a few people in house to try to bridge conversations between the business and the team of outsourced developers that it was finally raised that the code was completely unmaintainable. And following this an in house team was recruited to bring development back in-house. Of course, when we sorted 90% of the problems the business started questioning why we were needed again and we were all outsourced for a second time...
But this same thing obviously happens in a lot high-tech industries. Without people who are technically competent overseeing what's happening you can only dictate requirements at a high level. You cannot dictate all of the NFRs because you simply do not have the knowledge or ability to oversee them. So what you have is something that at a surface level does what you wanted, but the execution is so horrendous that it's unsatisfactory and no amount of saying "please fix this", "please fix that" will actually resolve the fundamental issue at play.
And the problem is even worse when you want to be an innovator because innovation is impossible when you don't know what is and isn't possible. To push boundaries you first need to know where the hard limitations are and what's just a engineering problem.
For a period when these issues occurred the business could say that they wanted the issues patched, but they never understood why there were so many issues to begin with. It was only until they brought a few people in house to try to bridge conversations between the business and the team of outsourced developers that it was finally raised that the code was completely unmaintainable. And following this an in house team was recruited to bring development back in-house. Of course, when we sorted 90% of the problems the business started questioning why we were needed again and we were all outsourced for a second time...
But this same thing obviously happens in a lot high-tech industries. Without people who are technically competent overseeing what's happening you can only dictate requirements at a high level. You cannot dictate all of the NFRs because you simply do not have the knowledge or ability to oversee them. So what you have is something that at a surface level does what you wanted, but the execution is so horrendous that it's unsatisfactory and no amount of saying "please fix this", "please fix that" will actually resolve the fundamental issue at play.
And the problem is even worse when you want to be an innovator because innovation is impossible when you don't know what is and isn't possible. To push boundaries you first need to know where the hard limitations are and what's just a engineering problem.
> You cannot dictate all of the NFRs because you simply do not have the knowledge or ability to oversee them
This is a key point, and I believe the reason why software projects are always late and why it’s impossible to estimate them generally, in a non-domain specific way.
You cannot aggregate all the estimates and recorded performance of past work and use regression towards the mean to have any predictive capacity of how long a new project will take or cost, even when it has similar high level requirements.
This is why 10xers exist, or the perception of them exists. There are people who have seen similar pitfalls in the implementation stage enough times to know how to avoid them and they don’t need to redo things as much.
This is why rewrites are dangerous, even when existing code bases are cumbersome to deal with and expensive to develop. The deep magic of low level NFRs will ruin attempts to replace them.
Some are clever and try to use linters and static analysis tools to avoid this, but these will always be opinionated, domain specific in some way, and incomplete. They can frustrate development when taken outside their domain.
This is a key point, and I believe the reason why software projects are always late and why it’s impossible to estimate them generally, in a non-domain specific way.
You cannot aggregate all the estimates and recorded performance of past work and use regression towards the mean to have any predictive capacity of how long a new project will take or cost, even when it has similar high level requirements.
This is why 10xers exist, or the perception of them exists. There are people who have seen similar pitfalls in the implementation stage enough times to know how to avoid them and they don’t need to redo things as much.
This is why rewrites are dangerous, even when existing code bases are cumbersome to deal with and expensive to develop. The deep magic of low level NFRs will ruin attempts to replace them.
Some are clever and try to use linters and static analysis tools to avoid this, but these will always be opinionated, domain specific in some way, and incomplete. They can frustrate development when taken outside their domain.
I think what you're saying is true, but a slightly broader issue around why software development is difficult more generally.
What I'm touching on here is more related to how outsourced teams typically lack the ownership and motivations that internal technical teams will generally have.
The specifics will vary depending on the outsourcing model, but outsourcing to a remote software development agency is typically the worse of all possible options. The reason for this is that code quality and maintainability is rarely ever a priority for an agency because they're typically judged purely on whether they can deliver what they promised to the client on time. It's very hard to tell a client that a feature is coming 3 months late and will cost extra, but that time is needed to ensure the developers are happy with the code quality.
Additionally, if there are any bugs that's often a good thing for a software development agency because not only will you now be paid for the initial feature development, but you'll also be paid for any subsequent bug fixes.
If outsourcing is done directly then the results are typically better because the remote team tends to have more agency. The business might still ask for a feature as soon as possible, but now the remote team isn't going to receive extra work for bug fixing the crappy code they deliver. They also don't have multiple clients and are going to be working solely on that single codebase so can't just hand off any issues to the next guy who comes along. With direct outsourcing the incentive to deliver crappy code no longer exists so typically the quality increases. Additionally the business might trust the remote employees enough to judge their own performance for which they can include NFRs instead of judging performance purely on the speed at which features are delivered.
However, even if directly outsourcing employees are rarely seen as equal to other employees at the company. The business basically just sees them as cheap code monkeys and the code monkeys know that's all they'll ever be too. Employees working at head office on the other hand might be motivated to go above and beyond because they want to be recognised by their bosses, and if they do a good enough job they might even get a promotion. This just never going to happen to a code monkey in India who can barely speak English no matter how competent they are.
Additionally, a team at head office is also likely to have more influence on business decisions and be able to feed technical input into the decision making where useful. This increased influence also means employees are more likely to care about the company since they feel closer and more involved in decision making.
The reason outsourced teams are bad isn't necessarily because they're not hiring enough 10x developers (although they're often not incentivised to do that either), it's more that there's usually little real reason for anyone to produce anything of quality. No one is going to be promoted, no one has any influence, developers are mostly just being judged on how fast they can deliver features because that's the only metric non-technical individuals can assess their productivity by, and finally they're disconnected in just about every possible way (location, culturally, hierarchically, etc).
I think what might work is have a great development team in house who can make all right high level technical calls, then outsource the grunt work while assessing them both on speed and on quality. A almost every company I've worked for there are talented people wasting time on nonsense like bumping project project dependencies and replacing deprecated code. I'd guess that work could be outsourced with near-zero downside and a significant cost saving.
What I'm touching on here is more related to how outsourced teams typically lack the ownership and motivations that internal technical teams will generally have.
The specifics will vary depending on the outsourcing model, but outsourcing to a remote software development agency is typically the worse of all possible options. The reason for this is that code quality and maintainability is rarely ever a priority for an agency because they're typically judged purely on whether they can deliver what they promised to the client on time. It's very hard to tell a client that a feature is coming 3 months late and will cost extra, but that time is needed to ensure the developers are happy with the code quality.
Additionally, if there are any bugs that's often a good thing for a software development agency because not only will you now be paid for the initial feature development, but you'll also be paid for any subsequent bug fixes.
If outsourcing is done directly then the results are typically better because the remote team tends to have more agency. The business might still ask for a feature as soon as possible, but now the remote team isn't going to receive extra work for bug fixing the crappy code they deliver. They also don't have multiple clients and are going to be working solely on that single codebase so can't just hand off any issues to the next guy who comes along. With direct outsourcing the incentive to deliver crappy code no longer exists so typically the quality increases. Additionally the business might trust the remote employees enough to judge their own performance for which they can include NFRs instead of judging performance purely on the speed at which features are delivered.
However, even if directly outsourcing employees are rarely seen as equal to other employees at the company. The business basically just sees them as cheap code monkeys and the code monkeys know that's all they'll ever be too. Employees working at head office on the other hand might be motivated to go above and beyond because they want to be recognised by their bosses, and if they do a good enough job they might even get a promotion. This just never going to happen to a code monkey in India who can barely speak English no matter how competent they are.
Additionally, a team at head office is also likely to have more influence on business decisions and be able to feed technical input into the decision making where useful. This increased influence also means employees are more likely to care about the company since they feel closer and more involved in decision making.
The reason outsourced teams are bad isn't necessarily because they're not hiring enough 10x developers (although they're often not incentivised to do that either), it's more that there's usually little real reason for anyone to produce anything of quality. No one is going to be promoted, no one has any influence, developers are mostly just being judged on how fast they can deliver features because that's the only metric non-technical individuals can assess their productivity by, and finally they're disconnected in just about every possible way (location, culturally, hierarchically, etc).
I think what might work is have a great development team in house who can make all right high level technical calls, then outsource the grunt work while assessing them both on speed and on quality. A almost every company I've worked for there are talented people wasting time on nonsense like bumping project project dependencies and replacing deprecated code. I'd guess that work could be outsourced with near-zero downside and a significant cost saving.
I feel like the executive business class of this country has this dystopian vision: that the future of American business is just a handful of CxO and SVP people running around making $xxM dollars a year with all the actual labor doing the actual products and services being done by as-cheap-as-possible, expendable offshore workers. This is the end game they are shooting for: They want us in an Elysium hellscape with a few of them enjoying everything and the remaining 8 billion people in squalor.
I agree with the perception, but I don't think that's the reality at all. In general I think they simply are not thinking about much of anything except how to increase next quarter's margins or hit their contractual benchmarks to unlock their options. They have no big picture thinking, whatsoever. It's all just 'make number go up' mentality.
You can also see this in their personal behavior. Those at the top of the top have enough money to do anything. And what they end up doing tends to be work until they drop dead, in some cases literally - with 93 year old Buffet being the poster boy there, engage in mundane hobbies and activities - same as anybody else, and then start directing lots of money towards philanthropy. But the myopia tends to again strike there often making the philanthropy awkward and largely ineffective in effecting any sort of meaningful and lasting change -- unforeseen and unintended consequences, alongside a simple mixture of inability, abounds. The philanthropy ran exactly as they ran their businesses.
You can also see this in their personal behavior. Those at the top of the top have enough money to do anything. And what they end up doing tends to be work until they drop dead, in some cases literally - with 93 year old Buffet being the poster boy there, engage in mundane hobbies and activities - same as anybody else, and then start directing lots of money towards philanthropy. But the myopia tends to again strike there often making the philanthropy awkward and largely ineffective in effecting any sort of meaningful and lasting change -- unforeseen and unintended consequences, alongside a simple mixture of inability, abounds. The philanthropy ran exactly as they ran their businesses.
That's exactly the problem. It's purely a status play, in the narrowest and meanest sense.
It's unthinkable and insulting that some of the lower orders might have actually have valuable skill or important agency.
The primary product of corporations has always been hierarchical status for the owners.
But sometimes there's been some sense of generosity and mutual obligation. Now there's none - just myopic selfishness which often leads to disastrous consequences, sometimes affecting those afflicted by it.
It's unthinkable and insulting that some of the lower orders might have actually have valuable skill or important agency.
The primary product of corporations has always been hierarchical status for the owners.
But sometimes there's been some sense of generosity and mutual obligation. Now there's none - just myopic selfishness which often leads to disastrous consequences, sometimes affecting those afflicted by it.
Most of them are going all-in for automation of everything these days, either classic robots or some fancy iteration of "AI". Chinese labor got too expensive, even Apple is fleeing, most of Asia is too unstable politically given the potential for multiple hot wars in the entire region (most involving China, but there's also India and Pakistan), Southern America is too unstable as well with either lunatic politicians or drug lords running the show, most of Africa just doesn't have the infrastructure required for either low-skill industry work or IT offshoring plus the looming effects of climate change and, again, multiple hot wars going on. Oh, and machines don't go on strikes or demand market wages.
So, the result will be even worse, with people not even having jobs and left to fight for scraps instead. Or maybe one of the hot wars will eventually go global and humanity will be nuked down to 1% of the population, Fallout style. Who knows.
So, the result will be even worse, with people not even having jobs and left to fight for scraps instead. Or maybe one of the hot wars will eventually go global and humanity will be nuked down to 1% of the population, Fallout style. Who knows.
Nukes arent even nrcessary for a drastic fall in population. A worldwide famine would be just enough do that
A worldwide famine would cause nukes - people don't quietly sit around and starve, they revolt. Meanwhile, if you're a head of state that needs more food (because you don't want to be lynched) then you go acquire more farmland.
You can't acquire more farmland by nuking the current owners - as it tends to be unusable as a result.
It's not the C–suite that’s the problem, they’re just doing the bidding of the “shareholder activists” and stock market geniuses who are so brutally focused on extracting every last cent of value from enterprises that sacrificing anything longer term than the next quarter is perfectly acceptable.
The CEO can really make a huge difference.
I've worked in a major company ( global - 10s of thousand of employees ) where the chairman and CEO were changed and it was like night and day.
The company changed from one that was driven too much by short term pressure from money men investors, to one that took a much longer term view and invested in R&D and inhouse skills.
Note the change in management was instigated by some of the larger, longer term investors ( pension funds etc ) - ie not all capital is short term.
The new CEO put together that long term vision - said investment now ( and so lower EPS now ) will result in substantial longer term bottom line growth - had to persuade the markets etc.
They were successful, and it's sort of self-fulling - the short term capital leaves and you get more longer term investors that matches that longer term vision ( obviously the spiral can go the other way ).
However - that's the easy bit - delivering growth - at some point it's not possible to sustain that level of growth - then selling the idea you need to invest to standstill is much harder.
The CEO - also have to fight-off opportunists - where the problem is the maths is often in favour of buying a company, stripping/milking the assets and sacking the people.
Note sometimes it's only capital efficient because the capital doesn't need to pay the full social costs of the company destruction - it's governments job to make sure they do.
I've worked in a major company ( global - 10s of thousand of employees ) where the chairman and CEO were changed and it was like night and day.
The company changed from one that was driven too much by short term pressure from money men investors, to one that took a much longer term view and invested in R&D and inhouse skills.
Note the change in management was instigated by some of the larger, longer term investors ( pension funds etc ) - ie not all capital is short term.
The new CEO put together that long term vision - said investment now ( and so lower EPS now ) will result in substantial longer term bottom line growth - had to persuade the markets etc.
They were successful, and it's sort of self-fulling - the short term capital leaves and you get more longer term investors that matches that longer term vision ( obviously the spiral can go the other way ).
However - that's the easy bit - delivering growth - at some point it's not possible to sustain that level of growth - then selling the idea you need to invest to standstill is much harder.
The CEO - also have to fight-off opportunists - where the problem is the maths is often in favour of buying a company, stripping/milking the assets and sacking the people.
Note sometimes it's only capital efficient because the capital doesn't need to pay the full social costs of the company destruction - it's governments job to make sure they do.
"Shareholder activists" are just following their own incentives, though, just like the C-suite. At a certain point, you have to either blame the people doing the things or blame it on capitalism in general.
The theory that enterprises are all sacrificing the long term for the next quarter's success doesn't explain why companies do better year after year.
Companies usually do better year after year until they reach market saturation or until the competition kills them.
Once one of those things happens, they start to squeeze blood from the stone. The quality of the product drops, the prices are inflated, jobs are outsourced or eliminated, they pivot into providing other goods and services (which will also get worse later), etc.
None of these things are mutually exclusive with that "next quarter" mindset.
I actually blame the stock market for a lot of this. Private companies can, in theory, settle for just making a nice profit year after year. As long as they come out profitable they don't need to expand. Once you're publicly traded though, you have no choice but constant expansion.
The boom and bust cycle has been happening for a long time now.
Once one of those things happens, they start to squeeze blood from the stone. The quality of the product drops, the prices are inflated, jobs are outsourced or eliminated, they pivot into providing other goods and services (which will also get worse later), etc.
None of these things are mutually exclusive with that "next quarter" mindset.
I actually blame the stock market for a lot of this. Private companies can, in theory, settle for just making a nice profit year after year. As long as they come out profitable they don't need to expand. Once you're publicly traded though, you have no choice but constant expansion.
The boom and bust cycle has been happening for a long time now.
Stockholders are owners. If they suspect the company is sacrificing the long term for the next quarter, they are going to dump the stock as soon as they get a whiff of that.
The value of a stock is base on its long term value, not its short term value. Sabotaging the future of the company to drive short term results is something you'd have to keep secret.
The value of a stock is base on its long term value, not its short term value. Sabotaging the future of the company to drive short term results is something you'd have to keep secret.
> The boom and bust cycle has been happening for a long time now.
Is part of the problem, that people making the decisions have asymmetric incentives - the gain from the boom is greater than the penalty from the bust?
Is part of the problem, that people making the decisions have asymmetric incentives - the gain from the boom is greater than the penalty from the bust?
Bro this isn't a vision, it's been happening, as fast as the global economy could allow, since the 1990s.
there have been some clawbacks -- government regs, realizations that low-cost means you get what you pay for -- but it was going hard before, and will keep going.
a significant portion of HN is either automating, offshoring, or else working next to these trends (if they're not making them happen).
there have been some clawbacks -- government regs, realizations that low-cost means you get what you pay for -- but it was going hard before, and will keep going.
a significant portion of HN is either automating, offshoring, or else working next to these trends (if they're not making them happen).
> I was curious how they expected to have a steady supply of 'senior' skills without ever hiring, training, and promoting a junior.
You can do it, but since you're relying on others to build the pipeline, you're going to have to pay a lot more salary to the seniors than you would if you promoted them.
Maybe that makes up for the salaries of juniors and the portion of time spent by seniors on mentoring juniors. But then some seniors want to do mentoring, and you're not providing that opportunity, so more reason for them to demand more pay.
IMHO, it's workable, if not necessarily desirable, if you want a small team. If you want a big team staffed with only seniors, I think it's going to be a challenge.
You can do it, but since you're relying on others to build the pipeline, you're going to have to pay a lot more salary to the seniors than you would if you promoted them.
Maybe that makes up for the salaries of juniors and the portion of time spent by seniors on mentoring juniors. But then some seniors want to do mentoring, and you're not providing that opportunity, so more reason for them to demand more pay.
IMHO, it's workable, if not necessarily desirable, if you want a small team. If you want a big team staffed with only seniors, I think it's going to be a challenge.
> You can do it, but since you're relying on others to build the pipeline, you're going to have to pay a lot more salary to the seniors than you would if you promoted them.
Not really, because people aren't loyal to companies, it's not the 1980s.
If Company A trains a junior to a senior and fails to pay senior rates, what stops that new senior moving to Company B?
Company A and Company B thus have to pay roughly the same, who did the Junior->Senior transition doesn't matter
Not really, because people aren't loyal to companies, it's not the 1980s.
If Company A trains a junior to a senior and fails to pay senior rates, what stops that new senior moving to Company B?
Company A and Company B thus have to pay roughly the same, who did the Junior->Senior transition doesn't matter
Inertia helps. It's common knowledge that you'll get paid more if you switch jobs. Which means Company A gets a discount until the person leaves (but maybe they'll take a matching offer)
That's the normal stickiness of a job, but if you are a junior and you've levelled up to senior you'll likely be looking at a wide number of roles far more than a senior staying still.
Some things are easy wins for retention -- my company gives extra holiday as tenure extends for example, and people of a certain age still have a defined benefits retirement plan which has significant value. The extra holiday costs companies nothing, but an extra day each year really helps, start with say 28 days, but after 5 years you're on 33 days. It's harder to put a monetary value an extra day off, so harder to make the jump-ship calculation.
Some things are easy wins for retention -- my company gives extra holiday as tenure extends for example, and people of a certain age still have a defined benefits retirement plan which has significant value. The extra holiday costs companies nothing, but an extra day each year really helps, start with say 28 days, but after 5 years you're on 33 days. It's harder to put a monetary value an extra day off, so harder to make the jump-ship calculation.
This has been my pet peeve for a long time now. Just about every job listing insists on seniors only and they companies complain there aren't enough developers.
> seniors only
But under 35 (they don't usually say that part, out loud, though).
That's my pet peeve.
But under 35 (they don't usually say that part, out loud, though).
That's my pet peeve.
In software in particular, thresholds have fallen. Maybe "Senior" today is like a junior 15 years ago. (Some interns out of college are really sharp, and some can basically work at the "senior" level immediately. Basically, they think logically, and they know how to write software, which they've been practicing through high school and some college.)
Put another way ... most companies just really suck at hiring software engineers, and the ones they hired before weren't good enough, so it seems they need to hire at a higher level ...
Put another way ... most companies just really suck at hiring software engineers, and the ones they hired before weren't good enough, so it seems they need to hire at a higher level ...
> I know because I also switched to work for one of the vendors)
Is that legal in the United States? In many European countries, you can't just leave your employer and go work for a client/partner due to the potential of you using the business secrets to disadvantage your former employer
Is that legal in the United States? In many European countries, you can't just leave your employer and go work for a client/partner due to the potential of you using the business secrets to disadvantage your former employer
Absolutely. You can leave your employer any time you want, and there is nothing they can do about it. You don’t even have to give notice, although it is polite to do so. And you can go work for their competitors too, unless you signed a contract ahead of time in which you promised that you wouldn’t. Even then, that may not be enforceable.
This statement is true in some US states (California for example) However, it is not universally true.
From the FTC rule finding (1/2023): https://www.ftc.gov/legal-library/browse/federal-register-no...
> "About one in five American workers—approximately 30 million people—are bound by a non-compete clause and are thus restricted from pursuing better employment opportunities. A non-compete clause is a contractual term between an employer and a worker that blocks the worker from working for a competing employer, or starting a competing business, typically within a certain geographic area and period of time after the worker’s employment ends. Because non-compete clauses prevent workers from leaving jobs and decrease competition for workers, they lower wages for both workers who are subject to them as well as workers who are not. Non-compete clauses also prevent new businesses from forming, stifling entrepreneurship, and prevent novel innovation which would otherwise occur when workers are able to broadly share their ideas. The Federal Trade Commission proposes preventing employers from entering into non-compete clauses with workers and requiring employers to rescind existing non-compete clauses. The Commission estimates that the proposed rule would increase American workers’ earnings between $250 billion and $296 billion per year. The Commission is asking for the public’s opinion on its proposal to declare that non-compete clauses are an unfair method of competition, and on the possible alternatives to this rule that the Commission has proposed. "
From the FTC rule finding (1/2023): https://www.ftc.gov/legal-library/browse/federal-register-no...
> "About one in five American workers—approximately 30 million people—are bound by a non-compete clause and are thus restricted from pursuing better employment opportunities. A non-compete clause is a contractual term between an employer and a worker that blocks the worker from working for a competing employer, or starting a competing business, typically within a certain geographic area and period of time after the worker’s employment ends. Because non-compete clauses prevent workers from leaving jobs and decrease competition for workers, they lower wages for both workers who are subject to them as well as workers who are not. Non-compete clauses also prevent new businesses from forming, stifling entrepreneurship, and prevent novel innovation which would otherwise occur when workers are able to broadly share their ideas. The Federal Trade Commission proposes preventing employers from entering into non-compete clauses with workers and requiring employers to rescind existing non-compete clauses. The Commission estimates that the proposed rule would increase American workers’ earnings between $250 billion and $296 billion per year. The Commission is asking for the public’s opinion on its proposal to declare that non-compete clauses are an unfair method of competition, and on the possible alternatives to this rule that the Commission has proposed. "
Even in Europe it can be legal, depending on exact contracts. Especially moving along outsourced "trusted" companies, sometimes it's seen as essentially divestiture of business unit into another company, etc.
I came to say much the same thing, but specifically about IT.
I used to run architectural ideas by operations people who would - and occasionally did - tell me I was full of shit. Maybe 1 in 10 of us are brave enough to to this, 1 in 6 if we are generous, but now there is nobody to tell us we are being stupid before we steer the ship toward an iceberg.
I used to run architectural ideas by operations people who would - and occasionally did - tell me I was full of shit. Maybe 1 in 10 of us are brave enough to to this, 1 in 6 if we are generous, but now there is nobody to tell us we are being stupid before we steer the ship toward an iceberg.
Yes, it feels like a certain project that was foisted upon me.
Fixed price SOW with a vendor to build a thing my firm didn't have domain knowledge in.
Paid them to design a thing, then paid them to implement the design, as well as project manage themselves. SOW lacked meaningful acceptance criteria / objective tests.
Of course, it was non-stop debacle of new things being discovered during implementation. Weekly status calls just turned into recrimination sessions with fingers pointed in all directions as to who is responsible for the time/cost.
You can't rent knowledge.
Paid them to design a thing, then paid them to implement the design, as well as project manage themselves. SOW lacked meaningful acceptance criteria / objective tests.
Of course, it was non-stop debacle of new things being discovered during implementation. Weekly status calls just turned into recrimination sessions with fingers pointed in all directions as to who is responsible for the time/cost.
You can't rent knowledge.
More simply: don't outsource activities that have a complex interface to your organisation.
Having to write complex specs for an outside organisation to implement is an anti-pattern, because:
- the more complex a spec the harder it is to write and understand
- there's potential for endless disagreements / lawsuits on what was actually promised and delivered
- the overhead of having a complex spec that must be understood by people in both orgs.
Having to write complex specs for an outside organisation to implement is an anti-pattern, because:
- the more complex a spec the harder it is to write and understand
- there's potential for endless disagreements / lawsuits on what was actually promised and delivered
- the overhead of having a complex spec that must be understood by people in both orgs.
Same in Europe.
I've worked at 2 companies now that have been eaten by bigger ones and pretty much instantly moved to lower income countries. Both in manufacturing, one in aerospace.
I've worked at 2 companies now that have been eaten by bigger ones and pretty much instantly moved to lower income countries. Both in manufacturing, one in aerospace.
> they explained how they believe that the US will never regain what it has given away, in the last couple of decades.
Sure we can. It requires pivoting into stealing or otherwise replicating China's insane level of industrialization, but it's a little funny seeing people become despondent at the idea of merely losing clear economic hegemony over the world and becoming #2. We didn't lose anything in the last 5 decades we can't gain back faster.
Here's hoping China's reign comes with fewer invasions.
Sure we can. It requires pivoting into stealing or otherwise replicating China's insane level of industrialization, but it's a little funny seeing people become despondent at the idea of merely losing clear economic hegemony over the world and becoming #2. We didn't lose anything in the last 5 decades we can't gain back faster.
Here's hoping China's reign comes with fewer invasions.
I believe in something called "Social Infrastructure"[0]. That's basically what folks might label "tribal knowledge," but it goes far deeper.
This is something that takes generations to build, but can get lost, very quickly.
Folks, these days, aren't actually any smarter than our ancestors. We just have a vast social infrastructure that raises the baseline for our starting point.
[0] https://littlegreenviper.com/miscellany/infrastructure/
This is something that takes generations to build, but can get lost, very quickly.
Folks, these days, aren't actually any smarter than our ancestors. We just have a vast social infrastructure that raises the baseline for our starting point.
[0] https://littlegreenviper.com/miscellany/infrastructure/
> This is something that takes generations to build, but can get lost, very quickly.
Sure, hence my assessment of 5 decades.
Sure, hence my assessment of 5 decades.
The US has not lost industry. We have lost unskilled and semi-skilled grunt labors, but there is a lot of manufacturing happening here and a lot of expertise. If you want to cut a piece of metal by hand to high accuracy - sorry we have moved all that to CNC (often laser) cutters and nobody remembers how to do it anymore. However if you want to take those cut parts and assemble them into something - there is plenty of expertise to be had.
> If you want to cut a piece of metal by hand to high accuracy - sorry we have moved all that to CNC (often laser) cutters and nobody remembers how to do it anymore.
That's just the tooling keeping up with the times. The Chinese don't do this by hand either.
They're just way better at doing it at volume.
That's just the tooling keeping up with the times. The Chinese don't do this by hand either.
They're just way better at doing it at volume.
One cnc today machine does the work of 100 1950s men. (1950 so no women) that is the point, those factories still exist in the us, but with far less people in manufacturing
> The US has not lost industry.
Compared to China's absolutely staggering industrialization it has!
Compared to China's absolutely staggering industrialization it has!
yes, as it should have.
first of all, there's no point in having all kinds of low-added-value industry in high-income places as long as there are millions of people willing and able to do it all in the same place close to a port.
second, US industry suffers from two major problems. protective tariffs keeping productivity low, and the 'exorbitant privilege' of the USD being reserve currency of the world, which counterintuitively hurts export of every non-finance sector
first of all, there's no point in having all kinds of low-added-value industry in high-income places as long as there are millions of people willing and able to do it all in the same place close to a port.
second, US industry suffers from two major problems. protective tariffs keeping productivity low, and the 'exorbitant privilege' of the USD being reserve currency of the world, which counterintuitively hurts export of every non-finance sector
First of all, yes there is, because it creates a culture of hands-on expertise, and appreciation for how the real world works outside of a spreadsheet.
Second, productivity in the US is fine. The problem is the profits are very unevenly distributed.
You can't run a consumer economy by underpaying your consumers, forcing them into debt, and bankrupting them with - for example - health care costs.
Third, the kindest thing you can say about outsourced manufacturing is that it's strategically unwise. It's good if you want cheap Chinese chips with unknown abilities in your military and civil infrastructure, but not so good if you stop to wonder if perhaps that isn't all that good an idea.
Second, productivity in the US is fine. The problem is the profits are very unevenly distributed.
You can't run a consumer economy by underpaying your consumers, forcing them into debt, and bankrupting them with - for example - health care costs.
Third, the kindest thing you can say about outsourced manufacturing is that it's strategically unwise. It's good if you want cheap Chinese chips with unknown abilities in your military and civil infrastructure, but not so good if you stop to wonder if perhaps that isn't all that good an idea.
the claim was that the US has lost its industry compared to China. which is ridiculous when looking at the numbers, but understandable if someone is misinformed (because they only know about the rust belt, let's say)
what I'm trying to point out is that having a first-class industrial base, with enough experts, well running supply-chains, and so on, is different from eclipsing China in straight to trash gadget output.
that said, of course, as the article and the comment section clearly shows there are a lot of high profile cases where the trope of bean counters ran the business into the ground has been very unfortunately true.
productivity of the whole economy is fine, but aggregates hide a gigantic mountain of first- and second-order effects that hurt millions directly and indirectly. (as you mention wealth, income, health and other kinds of inequalities are mostly reinforced by a lot of powerful systems. and, just to emphasize this, US social mobility is on par with Spain's, despite the latter known for generous welfare programs, but almost all developed countries have serious tensions between rural-urban groups, generational wealth transfer due to real estate prices spiraling out of control, and so on.)
there are other countries besides China, and there are other sectors besides pew-pew and let's say nuclear power plants, or train safety systems.
the obvious (well, of course not to everyone) problem is that there's no serious effort for economic integration with US allies. the US still has a lot of protectionism dressed up as national security. from the Jones Act shenanigans (oh think of the shipbuilders, oh only one left basically in a zombie state), and the baby formula oopsie (oh think of the horror of Canadian baby formula or European, but no Abbott knows best), and there's some pork for the textile industry too, and so on.
what I'm trying to point out is that having a first-class industrial base, with enough experts, well running supply-chains, and so on, is different from eclipsing China in straight to trash gadget output.
that said, of course, as the article and the comment section clearly shows there are a lot of high profile cases where the trope of bean counters ran the business into the ground has been very unfortunately true.
productivity of the whole economy is fine, but aggregates hide a gigantic mountain of first- and second-order effects that hurt millions directly and indirectly. (as you mention wealth, income, health and other kinds of inequalities are mostly reinforced by a lot of powerful systems. and, just to emphasize this, US social mobility is on par with Spain's, despite the latter known for generous welfare programs, but almost all developed countries have serious tensions between rural-urban groups, generational wealth transfer due to real estate prices spiraling out of control, and so on.)
there are other countries besides China, and there are other sectors besides pew-pew and let's say nuclear power plants, or train safety systems.
the obvious (well, of course not to everyone) problem is that there's no serious effort for economic integration with US allies. the US still has a lot of protectionism dressed up as national security. from the Jones Act shenanigans (oh think of the shipbuilders, oh only one left basically in a zombie state), and the baby formula oopsie (oh think of the horror of Canadian baby formula or European, but no Abbott knows best), and there's some pork for the textile industry too, and so on.
> which is ridiculous when looking at the numbers
show me the numbers
> what I'm trying to point out is that having a first-class industrial base, with enough experts, well running supply-chains, and so on, is different from eclipsing China in straight to trash gadget output.
Absolutely true! But we're nowhere near able to do the latter, so what's the point in caring?
> social mobility
Unrelated, but this is a misnomer. The correct term would be "economic mobility". Social concerns are necessarily orthogonal (i.e. intersectional) to economic ones. I understand that social mobility is the common term but it's extremely disingenuous when it only intersects with social interests through economic interests.
Economic mobility is also strictly less interesting than wealth disparity—being able to move up the social ladder doesn't matter much if there's still self-aggrandizing ghouls controlling most of the economy and the market fails to represent the public.
show me the numbers
> what I'm trying to point out is that having a first-class industrial base, with enough experts, well running supply-chains, and so on, is different from eclipsing China in straight to trash gadget output.
Absolutely true! But we're nowhere near able to do the latter, so what's the point in caring?
> social mobility
Unrelated, but this is a misnomer. The correct term would be "economic mobility". Social concerns are necessarily orthogonal (i.e. intersectional) to economic ones. I understand that social mobility is the common term but it's extremely disingenuous when it only intersects with social interests through economic interests.
Economic mobility is also strictly less interesting than wealth disparity—being able to move up the social ladder doesn't matter much if there's still self-aggrandizing ghouls controlling most of the economy and the market fails to represent the public.
https://fred.stlouisfed.org/series/INDPRO industrial output is almost at the 2018 level
> market fails to represent the public
what are you talking about? the public buys shit from China and uses Amazon, and votes for idiots who then dismantle the rest of the system around them. sure, we can console ourselves that it's not the majority, but hundreds of millions of them are part of the problem.
> market fails to represent the public
what are you talking about? the public buys shit from China and uses Amazon, and votes for idiots who then dismantle the rest of the system around them. sure, we can console ourselves that it's not the majority, but hundreds of millions of them are part of the problem.
Millions of people doing low level things learn higher level things from their experience.
If you can’t completely automate something, there are by definition, still useful things to learn.
Outsourcing the advancement of low level work to automated work puts a business’s competitive edge in jeopardy.
If you can’t completely automate something, there are by definition, still useful things to learn.
Outsourcing the advancement of low level work to automated work puts a business’s competitive edge in jeopardy.
... if you automate it there's even more things to learn, of course.
this is not a black-and-white thing, outsourcing makes sense in many cases and doesn't in others. the automotive industry does it for quasi-standardized components. (and there's a competitive market, for airplane parts, not so much it seems.)
and on top of all this for things that have inherent safety critical aspects there is no real difference between outsourcing or doing it in-house, there's a need for controls (organizational, quality, independent testing lab with random sampling).
the fucked up process of gutting companies for short-term profits happened just as well for non-outsourced departments too.
as industries mature, companies grow and became organizationally more complex training and advancement itself becomes a challenge. (and many companies just put their heads in the proverbial sand, and hire clueless recruiters - or outsource it - and end up with paper tigers, who have absolutely no idea WTF is going on in the company, but quarterly reports look amazing.)
...
finally, if market forces push for short-term thinking (and simple, wrong, but fancy 'solutions') that's what we'll end up. and if society and politics also has the same mindset it's not surprising that industry will mirror it. (and to overuse the overused cliché gestures wildly )
this is not a black-and-white thing, outsourcing makes sense in many cases and doesn't in others. the automotive industry does it for quasi-standardized components. (and there's a competitive market, for airplane parts, not so much it seems.)
and on top of all this for things that have inherent safety critical aspects there is no real difference between outsourcing or doing it in-house, there's a need for controls (organizational, quality, independent testing lab with random sampling).
the fucked up process of gutting companies for short-term profits happened just as well for non-outsourced departments too.
as industries mature, companies grow and became organizationally more complex training and advancement itself becomes a challenge. (and many companies just put their heads in the proverbial sand, and hire clueless recruiters - or outsource it - and end up with paper tigers, who have absolutely no idea WTF is going on in the company, but quarterly reports look amazing.)
...
finally, if market forces push for short-term thinking (and simple, wrong, but fancy 'solutions') that's what we'll end up. and if society and politics also has the same mindset it's not surprising that industry will mirror it. (and to overuse the overused cliché gestures wildly )
Not inherently true, there is not really a path from manual sheet metal work to CNC for example.
Sounds like a useful problem to solve - with a different approach perhaps.
I think it is fair to expect that everything will get automated in an economically advantageous way.
And if the solution is novel & challenging, it is likely to provide valuable unexpected side benefits & capabilities.
The automation question is just: when, how, and by who.
I think it is fair to expect that everything will get automated in an economically advantageous way.
And if the solution is novel & challenging, it is likely to provide valuable unexpected side benefits & capabilities.
The automation question is just: when, how, and by who.
> there's no point in having all kinds of low-added-value industry in high-income places
The point is economic and social stability. If you don't value that over short-term economic efficiency (i.e. profits), of course, I can understand why you would be resistant to this line of thought.
Also, this betrays your belief that "high income places" have significant-added-value compared to low income places! I don't believe this is true, especially over the long term. This is an illusion formed from wealth-extraction.
The point is economic and social stability. If you don't value that over short-term economic efficiency (i.e. profits), of course, I can understand why you would be resistant to this line of thought.
Also, this betrays your belief that "high income places" have significant-added-value compared to low income places! I don't believe this is true, especially over the long term. This is an illusion formed from wealth-extraction.
[deleted]
Whats most interesting to me, is he's a former DAC person not a former Boeing one, and he saw first hand how outsourcing harmed DAC/MDC - particularly this section which caught my attention:
"The correctness of the author's position' on these matters is easily confirmed by two facts. It was the suppliers who made all the profits on the extensively out-sourced DC-10s, not the so-called systems-integrating prime manufacturer. (The same thing has happened on aircraft assembled by Boeing, in Seattle, too.) Also, when plans were being formulated for the proposed MD-12 very large transport aircraft, almost all potential suppliers indicated a preference for being subcontractors rather than risk-sharing "partners". Could they have known more about maximizing profits, minimizing risk, etc., than the prime manufacturer who sought their help even though it could borrow money at lower rates of interest than potential suppliers could? The DC-8 was manufactured and assembled almost entirely within the Long Beach plant, with only the nose coming from Santa Monica. That policy was changed after the acquisition of the former Douglas Aircraft Company by the former McDonnell Aircraft Company, but the change did not improve the company's profitability. It is time for Boeing to reverse this policy."
This closing also caught my eye -
"The fate of the former Douglas Aircraft Company, which was reduced to a systems integrator in the early 1970s by excessive outsourcing of DC-10 production, is a clear indicator of what will happen to other companies which fail to sustain the conditions under which it is possible to launch new products. It is hoped that this sacrifice can save the new and expanded Boeing from a similar fate."
Boeing in the end took the track that led to DAC functionally going out of business, putting thousands out of work in the end. It's not too late to undo it however - buying Spirit back would be one way to go about doing it - but I dont know if the Boeing management is aware enough being that the headquarters is in Arlington, VA, far away from any engineering or manufacturing centers that this is what must be done.
Whats even more astounding to me, this made the Seattle Times in 2003(!), https://archive.seattletimes.com/archive/?date=20030309&slug...
"The correctness of the author's position' on these matters is easily confirmed by two facts. It was the suppliers who made all the profits on the extensively out-sourced DC-10s, not the so-called systems-integrating prime manufacturer. (The same thing has happened on aircraft assembled by Boeing, in Seattle, too.) Also, when plans were being formulated for the proposed MD-12 very large transport aircraft, almost all potential suppliers indicated a preference for being subcontractors rather than risk-sharing "partners". Could they have known more about maximizing profits, minimizing risk, etc., than the prime manufacturer who sought their help even though it could borrow money at lower rates of interest than potential suppliers could? The DC-8 was manufactured and assembled almost entirely within the Long Beach plant, with only the nose coming from Santa Monica. That policy was changed after the acquisition of the former Douglas Aircraft Company by the former McDonnell Aircraft Company, but the change did not improve the company's profitability. It is time for Boeing to reverse this policy."
This closing also caught my eye -
"The fate of the former Douglas Aircraft Company, which was reduced to a systems integrator in the early 1970s by excessive outsourcing of DC-10 production, is a clear indicator of what will happen to other companies which fail to sustain the conditions under which it is possible to launch new products. It is hoped that this sacrifice can save the new and expanded Boeing from a similar fate."
Boeing in the end took the track that led to DAC functionally going out of business, putting thousands out of work in the end. It's not too late to undo it however - buying Spirit back would be one way to go about doing it - but I dont know if the Boeing management is aware enough being that the headquarters is in Arlington, VA, far away from any engineering or manufacturing centers that this is what must be done.
Whats even more astounding to me, this made the Seattle Times in 2003(!), https://archive.seattletimes.com/archive/?date=20030309&slug...
The problem is that Spirit is much bigger then it was, and Boeing doesn't really have the money to buy Spirit. And in addition, Spirit is supplier to Airbus as well, and they wouldn't want Boeing to have it. They might even buy Spirit themselves.
Boeing has ~25b cash on hand and Spirit's market cap is ~3b.
I saw another one of his gems the other day in another thread:
> “The performance of the prime manufacturer can never exceed the capabilities of the least proficient of the suppliers,” Hart-Smith wrote. “These costs do not vanish merely because the work itself is out-of-sight.”
https://news.ycombinator.com/item?id=38980098
> “The performance of the prime manufacturer can never exceed the capabilities of the least proficient of the suppliers,” Hart-Smith wrote. “These costs do not vanish merely because the work itself is out-of-sight.”
https://news.ycombinator.com/item?id=38980098
That line is quoted in the article (and in fact the comment cites the article)
> Retain sufficient in-house production manufacturing that it is possible for future engineers to acquire the skills needed to develop new products, without which all businesses will fail. Even the work that is out-sourced requires internal expertise to write the specifications.
Damn, that really reminds me of a previous company I worked for, that wanted to replace important core internal libraries with open source libraries. My argument was always that we should always have in-house knowledge of the core technologies. I think a lot of companies fail to think long-term.
> Listen more to your own employees about how to save cost than to any outside business consultants who have never run a factory producing your kind of product. In any event, if the advice they offer changes every year, it cannot possibly be correct.
This one is the difference between management-driven company and engineers-driven company.
Damn, that really reminds me of a previous company I worked for, that wanted to replace important core internal libraries with open source libraries. My argument was always that we should always have in-house knowledge of the core technologies. I think a lot of companies fail to think long-term.
> Listen more to your own employees about how to save cost than to any outside business consultants who have never run a factory producing your kind of product. In any event, if the advice they offer changes every year, it cannot possibly be correct.
This one is the difference between management-driven company and engineers-driven company.
Open source is different, in that you as a company can become maintainer and therefore expert of that component _and_ profit of other work being upstreamed. In case the library is not your USP, I think it's not that clear cut.
USP?
Unique Selling Proposition. If the thing the library implements does not substantially differentiate your company from others, it's a candidate to be maintained as open source project. For example, just become an expert ffmpeg user if you're a live streaming service. Your USP is your content, transcoding just needs to work. In contrast, if you're Dolby, that would probably not be the right strategy.
Or in the context of Boeing, Boeing shouldn't be in the business of making its own bolts. An internal lack of bolt expertise isn't what caused the door plug to fly out.
I can hire people who have expertise in oss libraries. I have to build people who have expertise in our in house stuff.
Importantly, we can sit around and bond over bitching about how bad one of those libraries is. If the authors are or were internal, we are now being divisive and unprofessional.
Importantly, we can sit around and bond over bitching about how bad one of those libraries is. If the authors are or were internal, we are now being divisive and unprofessional.
Its the fundamental flaw of outsourcing manufacturing abroad. You cede all growth from innovation.
Yeah, but the numbers for this quarter and next quarter look great on paper. The future is just someone else's problem to these assholes.
> Retain sufficient in-house production manufacturing that it is possible for future engineers to acquire the skills needed to develop new products, without which all businesses will fail. Even the work that is out-sourced requires internal expertise to write the specifications.
This x1000 is what has led so many large government projects - no matter if in IT, construction, healthcare, military - go completely nuts.
When there is no one to write the specifications, the "consultants" writing the specifications instead will write them in a way that allows their closely related industry friends to deliver bullshit, and since the government doesn't have experts any more (because they are "too expensive" for shoestring budgets), it can't realize that it's being led by the nose.
When there are no experts to audit a project, no one can detect bullshit being designed, built or delivered until it's such a colossal failure that it cannot be hidden any more.
When there are no experts to maintain a project that miraculously got completed and delivered after years of delays and billions of overruns, eventually even the best project will go and rot.
And even in the private sector, this same concept holds. Just ask any F500 employee whose company "outsourced" their IT or anything else not "core of the business" to India or Pakistan to the cheapest bidder, or their building cleaning service or facility management, about what service quality they receive and how much upper management cares about that.
The general ideology of outsourcing everything that's not "core of the business" is the single utter scourge of modern ultra-capitalism.
This x1000 is what has led so many large government projects - no matter if in IT, construction, healthcare, military - go completely nuts.
When there is no one to write the specifications, the "consultants" writing the specifications instead will write them in a way that allows their closely related industry friends to deliver bullshit, and since the government doesn't have experts any more (because they are "too expensive" for shoestring budgets), it can't realize that it's being led by the nose.
When there are no experts to audit a project, no one can detect bullshit being designed, built or delivered until it's such a colossal failure that it cannot be hidden any more.
When there are no experts to maintain a project that miraculously got completed and delivered after years of delays and billions of overruns, eventually even the best project will go and rot.
And even in the private sector, this same concept holds. Just ask any F500 employee whose company "outsourced" their IT or anything else not "core of the business" to India or Pakistan to the cheapest bidder, or their building cleaning service or facility management, about what service quality they receive and how much upper management cares about that.
The general ideology of outsourcing everything that's not "core of the business" is the single utter scourge of modern ultra-capitalism.
This point (I put it in italics) should be discussed more:
> At the time, then-Boeing executive Alan Mulally said selling the factory to a private-equity firm would let Boeing focus on final assembly, where it could add the most value to its airplanes.
By now I think we’ve learned that products made in factories owned by PE firms should carry warning labels. They are proactively anti-quality organizations, focused on extracting the maximum cash out in the short term at the cost of long term value.
> At the time, then-Boeing executive Alan Mulally said selling the factory to a private-equity firm would let Boeing focus on final assembly, where it could add the most value to its airplanes.
By now I think we’ve learned that products made in factories owned by PE firms should carry warning labels. They are proactively anti-quality organizations, focused on extracting the maximum cash out in the short term at the cost of long term value.
But this is not just PE - this is the Jack Welch school of business. Ascend to the top of the company, attach to it like a parasite, and suck it dry over time.
Short to mid term, "woah, the stock is going up, this guy is a genius!"
Until there is no more company left to juice the shares with buybacks. This is how the GE engineering culture was destroyed as well.
Private Equity is like that, only much accelerated. There is no pretense of "management".
Short to mid term, "woah, the stock is going up, this guy is a genius!"
Until there is no more company left to juice the shares with buybacks. This is how the GE engineering culture was destroyed as well.
Private Equity is like that, only much accelerated. There is no pretense of "management".
I wonder if we’ll ever get the guts to outlaw PE somehow, or at least make it so unprofitable it’s very rare.
Nothing good ever seems to come from it, despite their claims.
Nothing good ever seems to come from it, despite their claims.
It makes a lot of rich people more rich at the expense of workers and retail investors. I don't think you'll ever be able to get rid of it.
One solution is to make sure the owners pay the social costs of company destruction.
Don't let them avoid pension commitments - force them to pay decent redundancy or support employees in finding new jobs.
Stop them splitting off liabilities and then having that part go bankrupt etc etc.
Don't let them avoid pension commitments - force them to pay decent redundancy or support employees in finding new jobs.
Stop them splitting off liabilities and then having that part go bankrupt etc etc.
Ended the carried interest deduction would be low hanging fruit if we want to discourage purely rent-seeking financial behavior.
Would be nice. I think the main fix would be making sure that debt used to buy companies can never be transferred to the company purchased. I understand that money is fungible, but accounting is often there to deal with the most egregious abuses of fungibility. It would at least make leveraged buyouts much more expensive. Especially since now, the purchased company needs to maintain some kind of profitability over several years to be able to service this debt. Oh, and make it so the purchased company cannot borrow money for several years after purchase. If the purchaser wants to borrow money and infuse it into the company that's fine. I know there's still all kinds of accounting shenanigans that can be played to payout to PE purchasers, but that'd be a good first step I think.
> I wonder if we’ll ever get the guts to outlaw PE somehow
PE is just a type of company that participates in the act of buying and selling businesses.
You can't outlaw buying and selling businesses. You can't outlaw people working together to buy companies with financing.
Yes, there are a lot of PE horror stories, but there are also 100X more invisible private equity style buyups that you never hear or think about because nothing is going wrong.
Many of them actually improve when they roll up the company. My local eye doctor was bought out by a PE firm. They came in and installed all new diagnostic equipment that was standardized across their locations. They now nail my prescription on the first try and it's faster than ever before. The service is also more streamlined. This is the kind of thing that nobody ever thinks twice about, but it happens all over the place.
PE is just a type of company that participates in the act of buying and selling businesses.
You can't outlaw buying and selling businesses. You can't outlaw people working together to buy companies with financing.
Yes, there are a lot of PE horror stories, but there are also 100X more invisible private equity style buyups that you never hear or think about because nothing is going wrong.
Many of them actually improve when they roll up the company. My local eye doctor was bought out by a PE firm. They came in and installed all new diagnostic equipment that was standardized across their locations. They now nail my prescription on the first try and it's faster than ever before. The service is also more streamlined. This is the kind of thing that nobody ever thinks twice about, but it happens all over the place.
> You can't outlaw buying and selling businesses.
Sure you can, and I'll argue that we should.
Competition is the only thing that keeps businesses honest, and acquisition is the antithesis of competition. Shut it down and force companies to compete rather than for the richest to snap up their competitors, and to force startups to dream of sustainability rather than a fat exit.
Sure you can, and I'll argue that we should.
Competition is the only thing that keeps businesses honest, and acquisition is the antithesis of competition. Shut it down and force companies to compete rather than for the richest to snap up their competitors, and to force startups to dream of sustainability rather than a fat exit.
So companies should live and die with the founder? Or only be able to be transferred to their heirs? That's going to be amazingly unstable compared to a system that allows businesses to change ownership.
> Sure you can, and I'll argue that we should.
That really makes no sense at all. That would mean you can't sell your stake in any company which not only makes IPOs, and having a stock market in general, impossible, it would also kill VC funding of start-ups. The only thing that would still be possible is bootstrapping your own company, because you also cannot get any bank loans as using the company as collateral is impossible. This idea is a guaranteed way of completely destroying your economy.
That really makes no sense at all. That would mean you can't sell your stake in any company which not only makes IPOs, and having a stock market in general, impossible, it would also kill VC funding of start-ups. The only thing that would still be possible is bootstrapping your own company, because you also cannot get any bank loans as using the company as collateral is impossible. This idea is a guaranteed way of completely destroying your economy.
You haven't thought about how bizarre this would be. All growth and declines would have to be organic, so rather than the obvious winner just buying the market loser and cutting 20% of staff, the loser would bleed-out over years. Companies also couldn't sell divisions they're not interested in, so rather than finding someone who cares, they'd have to go through the motions to not lose money while letting it slowly die. It'd be a lot of zombie companies.
I'm not necessarily onboard with what OP was proposing, but as a counterpoint to your hypothetical, what is stopping those losing businesses from simply closing rather than just bleeding out until death? The way this is phrased makes it sound like a company is obligated (required?) to slowly wither and die.
They'll close once they start losing money, but that might be drawn-out, and since you can't sell, the incentive is to draw it out as long as you can.
I don't know if this is something that is prevented by our current system. This is more or less what GM was doing before the 2008 bankruptcy (The vague story I remember from the time was that they knew they had to get rid of money losers like Pontiac and Oldsmobile, but decided dealing w/ the dealerships wasn't worth it)
[deleted]
it is probably easier to just put limits on the kind of ownership that is possible. like, a worker-owned business can't really do this kind of thing
> My local eye doctor was bought out by a PE firm.
All new equipment and better service is great for you. There are serious disadvantages for your eye doctor though: he no longer enjoys the autonomy and freedom of his own medical practice. Lack of autonomy is a major cause of insatisfaction in medicine. Hopefully he got some fat stacks of cash to compensate for that. As a society though, nothing compensates for the fact we're approaching the fabled "you'll own nothing" future.
All new equipment and better service is great for you. There are serious disadvantages for your eye doctor though: he no longer enjoys the autonomy and freedom of his own medical practice. Lack of autonomy is a major cause of insatisfaction in medicine. Hopefully he got some fat stacks of cash to compensate for that. As a society though, nothing compensates for the fact we're approaching the fabled "you'll own nothing" future.
It's also early days - see in 10 years whether they're still doing a good job, or if they cut costs to the bone to preserve profitability.
Outlawing PE would be incredibly difficult. Instead we should focus on punishing individual executives, board members, and even share holders that cause harm from cutting costs. It could be a criminal case, or even a culture of directly naming, shaming, and tracking people so that they can't get involved in another company without the share price instantly tanking.
There a lot of people willing to trash a company for $20 who won’t care.
It would also be an incredibly bad idea.
As usual, the underlying issue is a lack of government regulation and enforcement (and thus the fault of the people). And, frankly, most people don't care about these problems because they're abstract (to them) and the price of goods on the local multinational corporation's shelves are what they really care about.
I personally spend an awful lot of time being careful about what I buy and who I buy it from. Most people even if they have the resources to do so and spend 2x-5x the low price will just refuse to do any research in the first place.
As usual, the underlying issue is a lack of government regulation and enforcement (and thus the fault of the people). And, frankly, most people don't care about these problems because they're abstract (to them) and the price of goods on the local multinational corporation's shelves are what they really care about.
I personally spend an awful lot of time being careful about what I buy and who I buy it from. Most people even if they have the resources to do so and spend 2x-5x the low price will just refuse to do any research in the first place.
I feel a lot of similar recommendations on HN are to ask the left hand to slap the right or even slap the mouth that feeds them.
The point is, they don't care about us. We are just clogs on a machines and we are one type of resources just like coal and iron.
The only way to struck fear is by some collective methods but then everyone got spooked by "Socialism", so the whole thing becomes a perfect loop for the aristocratics.
The point is, they don't care about us. We are just clogs on a machines and we are one type of resources just like coal and iron.
The only way to struck fear is by some collective methods but then everyone got spooked by "Socialism", so the whole thing becomes a perfect loop for the aristocratics.
Why would a law preventing the purchase of a struggling company through raising large amounts of debt which is immediately stuck on their books so that they those same investors can immediately sell everything of value for profit off the scraps leaving a dead shell of a company that has to fire all their employees a bad thing?
If things are so bad just let the company go bankrupt and sell off their assets. If things are recoverable then PE isn’t going to help because they’re going to put on too much debt.
It doesn’t make anything better. It doesn’t fix the companies that are too far gone. It doesn’t fix the companies that could still be saved. All it does is make the investors a bunch of money at the expense of everyone else.
If things are so bad just let the company go bankrupt and sell off their assets. If things are recoverable then PE isn’t going to help because they’re going to put on too much debt.
It doesn’t make anything better. It doesn’t fix the companies that are too far gone. It doesn’t fix the companies that could still be saved. All it does is make the investors a bunch of money at the expense of everyone else.
I don't think it will be effective. The root cause is not PE, but human nature: greed, complacency, myopia, and etc. We can outlaw PE, but Boeing can simply invent another way to maximize their profit at the cost of product quality. It looks to me the only cure is to encourage competitors, so that long before Boeing becomes this rotting organization, their talented employees can join another competitor to beat the shit of Boeing. Unfortunately there's so much regulatory capture and intertwined interests between Boeing and governments that I don't think we will see any meaningful competition for years to come.
I wasn’t thinking of Boeing specifically. Plenty of companies that seem like they should have been able to survive, at some scale, were destroyed by PE. Like Toys R Us.
> By now I think we’ve learned that products made in factories owned by PE firms should carry warning labels. They are proactively anti-quality organizations, focused on extracting the maximum cash out in the short term at the cost of long term value.
I'd say basically the same thing but from a different perspective. Outsourcing is used to simplify management, as it allows companies to shift away from building quality organizations into the easier task of using coersion towards external organizations to drive down cost and avoid any liability due to loss of quality. Outsourcing is a cheat code for managers, and one which invariably causes serious harm to the company while shielding any decision-making exec from being held liable for nuking the company.
I'd say basically the same thing but from a different perspective. Outsourcing is used to simplify management, as it allows companies to shift away from building quality organizations into the easier task of using coersion towards external organizations to drive down cost and avoid any liability due to loss of quality. Outsourcing is a cheat code for managers, and one which invariably causes serious harm to the company while shielding any decision-making exec from being held liable for nuking the company.
> Outsourcing … invariably causes serious harm to the company while shielding any decision-making exec from being held liable…
OK I posted that spinning off a portion of your manufacturing is bad, but I think your statement overstates the issue. Ford used to be so vertically integrated that they raised sheep for the wool in their seats! It makes sense to buy bearings from companies that specialize in the metallurgy and precision of good bearings. Focus on what you’re good at and what really makes the difference to your customer.
I once visited a home generator factory in India. They bought billets of aluminium and copper and manually machined the two stroke engines, drew the wire and made the generators, and so on. They hadn't updated their design since the 80s. If they’d sourced the engine from an engine company and the generator from a generator company the two could have advanced separately based on the demands of a larger customer base.
OK I posted that spinning off a portion of your manufacturing is bad, but I think your statement overstates the issue. Ford used to be so vertically integrated that they raised sheep for the wool in their seats! It makes sense to buy bearings from companies that specialize in the metallurgy and precision of good bearings. Focus on what you’re good at and what really makes the difference to your customer.
I once visited a home generator factory in India. They bought billets of aluminium and copper and manually machined the two stroke engines, drew the wire and made the generators, and so on. They hadn't updated their design since the 80s. If they’d sourced the engine from an engine company and the generator from a generator company the two could have advanced separately based on the demands of a larger customer base.
> OK I posted that spinning off a portion of your manufacturing is bad, but I think your statement overstates the issue.
I was addressing the statement of "(...) selling the factory to a private-equity firm would let Boeing focus on final assembly (...)", which corresponds to outsourcing manufacturing of everything and anything used in a plane, up until the last step of the manufacturing process.
It's one thing to leverage existing third-party products in your own product line. It's an entirely different thing to aim for an Ikea-like approach of buying everything and just put the thing together once you get all the parts.
I was addressing the statement of "(...) selling the factory to a private-equity firm would let Boeing focus on final assembly (...)", which corresponds to outsourcing manufacturing of everything and anything used in a plane, up until the last step of the manufacturing process.
It's one thing to leverage existing third-party products in your own product line. It's an entirely different thing to aim for an Ikea-like approach of buying everything and just put the thing together once you get all the parts.
Perhaps it's the one common feature of air travel (safety & reliability) that they may start playing with to "reduce costs" elsewhere. Imagining two flights from L.A. to Vegas, one on an Airbus that costs $100, and one on a Boeing that's $5 but you have to sign a waiver going onboard.
It's perfectly possible that that cost difference is massively exaggerated. It might well just be 95$ vs 100$. But if you don't have the information that one is far more risky, then you always pick the 95$ option, don't you?
> if you don't have the information that one is far more risky, then you always pick the 95$ option, don't you?
Air travellers by and large choose their travel based on price. If a subset started paying a premium for Airbuses, the market would sort them and remain relatively equally profitable for those flying Boeings.
Air travellers by and large choose their travel based on price. If a subset started paying a premium for Airbuses, the market would sort them and remain relatively equally profitable for those flying Boeings.
"The market would work if only consumers had perfect information, and infinite capacity to analyze it"
I decided about 10 years ago I'm willing to pay the premium for economy plus seats (more leg room). I don't fly often enough for the market to notice me, but when I fly I notice that those seats do sell out faster, if nothing else I can still pay extra for those seats. I can also pay extra for first class - however the premium is high enough that I cannot afford it despite wanting to.
> those seats do sell out faster
Given how quickly Delta's Comfort+ seats sell, I'd be surprised if they don't install more of those. Given their brand, a row or two of Basic Economy (for e.g. college students), a small main, a healthy Comfort+ and a solid front cabin might be the play.
Given how quickly Delta's Comfort+ seats sell, I'd be surprised if they don't install more of those. Given their brand, a row or two of Basic Economy (for e.g. college students), a small main, a healthy Comfort+ and a solid front cabin might be the play.
I wonder if they're selling out or being consumed as upgrades? Domestically, I almost always buy an economy ticket on Delta and get upgraded to Comfort+ within 15 minutes of buying the ticket. That means the bus routes (between hubs) probably have a lot of these Skymiles high-tier members taking up the seats without charge.
That data, which I'm sure Delta has and looks at, could strongly influence how many overall rows of seating to remove in order to fit more rows of Comfort+.
That data, which I'm sure Delta has and looks at, could strongly influence how many overall rows of seating to remove in order to fit more rows of Comfort+.
Outside of veblen goods, aren't most consumer choices driven by price?
I have never flown top tier air travel, but even the best experience is somewhere on the scale of cattle-car-in-the-sky. It is a necessary evil to get me to somewhere in a way that is faster than driving. Paying a premium has rapidly diminishing returns when you are stuck in a shared space with the public.
I have never flown top tier air travel, but even the best experience is somewhere on the scale of cattle-car-in-the-sky. It is a necessary evil to get me to somewhere in a way that is faster than driving. Paying a premium has rapidly diminishing returns when you are stuck in a shared space with the public.
> aren't most consumer choices driven by price?
To varying degrees. Air travel is a product where cost dominates more than with other services.
> even the best experience is somewhere on the scale of cattle-car-in-the-sky
This is most Americans. I personally find lay-flat seats worth the premium from time to time, though not always.
To varying degrees. Air travel is a product where cost dominates more than with other services.
> even the best experience is somewhere on the scale of cattle-car-in-the-sky
This is most Americans. I personally find lay-flat seats worth the premium from time to time, though not always.
[deleted]
>It is a necessary evil to get me to somewhere in a way that is faster than driving.
I don't see it that way. I see it as a necessary evil to get me somewhere in a way that is much, much, much faster than a ship.
I don't see it that way. I see it as a necessary evil to get me somewhere in a way that is much, much, much faster than a ship.
I'd pay $5 more for a ticket on a better airplane, but not $50. Unsure where I'd draw the line
Hopefully it doesn't come to this. Something I really like about the airline industry is it doesn't compete on safety.
I can see Ryanair going for this!
They are all Boeing.
I just get hung up on being an airplane company that doesn't manufacture the plane. How is that possibly not a core competency for the design and manufacture of airplanes?
The trick is figuring out what is a core competency and what should not be. Boeing should obviously not make the light bulbs in their planes. Should they make the engines? How about the seats or carpet? What about the plastic bezels in the cockpit? At that point is something a thing they should do in house and when is it something to outsource? There is no easy answer, and often the best answer changes over time.
> The trick is figuring out what is a core competency and what should not be.
Spirit in particular just feel like financial engineering bullshit. From a quick google, in 2020, the 730 max accounted for more than 50% of Spirit's annual revenue. I struggle to understand how it's good for Boeing or Boeing's customers for T Rowe Price and Vanguard to own a supplier like that.
Spirit in particular just feel like financial engineering bullshit. From a quick google, in 2020, the 730 max accounted for more than 50% of Spirit's annual revenue. I struggle to understand how it's good for Boeing or Boeing's customers for T Rowe Price and Vanguard to own a supplier like that.
What is the difference between a division and an independent company? Eventually you reach a point where head of a division and CEO have about the same responsibilities so why not spin them off - by doing this the CEO doesn't have to exercise as much oversight on the operations of that division/supplier. The supplier can diversify a bit too which means if you have a downturn the suppler may have enough other business to survive while if they were in house they wouldn't look for that and thus make your financials worse when they are already nearing bankruptcy. It is very common for companies to exists where they have one major customer that is all or almost all of their business.
What is right is a very complex question that can never be answered with 100% confidence. However your simplistic analysis isn't helpful in figuring this out.
What is right is a very complex question that can never be answered with 100% confidence. However your simplistic analysis isn't helpful in figuring this out.
It’s a matter of degree. Are they supposed to run a chip fab to make all the chips that go into their plane?
That said, fuselages do seem to be a core aspect of making planes!
That said, fuselages do seem to be a core aspect of making planes!
Funnily enough, one of the major avionics vendor (Honeywell), while they no longer own fabs, they do design their own CPUs for use in aircraft (a licensed version of AMD29050)
That's not an apt comparison.
Lots of people and companies use identical chips. Only boeing uses boeing airplane bodies.
Lots of people and companies use identical chips. Only boeing uses boeing airplane bodies.
Given the chip shortages of the past few years maybe they should have. For that matter given how often perfectly good chips go obsolete maybe they should just so they don't have to spend $$$ redesigning a perfectly good circuit.
AMD and Apple don’t run chip fabs and Boeing will.. People in here will literally argue any point no matter how stupid
What others do is not relevant. Intel does run their own chip fabs. There are pros and cons. How they fall out can be different for different actors. Boeing can probably accept the compromise that they are forever locked on an older process that can't scale to 500mhz.
I was there when Mulally was and people already knew what a horse’s ass he was.
Most of this is his fault, and the board who hired him.
Most of this is his fault, and the board who hired him.
> we’ve learned that products made in factories owned by PE firms should carry warning labels
Source? The data I’ve seen don’t show quality differences based on ownership model except when there is family ownership.
Source? The data I’ve seen don’t show quality differences based on ownership model except when there is family ownership.
You could say the same about publicity traded companies.
It all depends on who is in charge... And unfortunately self-serving people tend to reach the top more easily in both scenarios. You don't get Dan Price's very often (relatively).
In public companies, there is more public information, but that doesn't stop a company from doing "bad" things of the short term stock movement is good enough.
Look at all the merger promises that are broken. They all know what they are doing. Uphold the promise a year, then it's to late to undo the merger when you start to ignore the promise.
Can also look at all the fines companies get for willfully breaking laws (or treading the line).. (fine < profits)? success!
It all depends on who is in charge... And unfortunately self-serving people tend to reach the top more easily in both scenarios. You don't get Dan Price's very often (relatively).
In public companies, there is more public information, but that doesn't stop a company from doing "bad" things of the short term stock movement is good enough.
Look at all the merger promises that are broken. They all know what they are doing. Uphold the promise a year, then it's to late to undo the merger when you start to ignore the promise.
Can also look at all the fines companies get for willfully breaking laws (or treading the line).. (fine < profits)? success!
I think the PE companies have a specifically pathological and parasitic business model. There is more info about public companies and the majority of them don't suffer from the things you mention (which are real phenomena), and when they occur in the majority they do more from incompetence than malice. (I'm not talking about microcap companies).
The PE model is: - buy company with debt. - after purchase company assumes the debt (pays off PE company) and pays further fees to acquirer - company therefore cannot make a profit, cuts staff which cuts output over time - company goes bankrupt
This is the canonical business model from the big PE companies like Bain (Romney), KKR, Blackstone, CVC, Carlyle, etc.
The PE model is: - buy company with debt. - after purchase company assumes the debt (pays off PE company) and pays further fees to acquirer - company therefore cannot make a profit, cuts staff which cuts output over time - company goes bankrupt
This is the canonical business model from the big PE companies like Bain (Romney), KKR, Blackstone, CVC, Carlyle, etc.
How does your comment square with fact that it was Boeing, a publicly listed company, that decided to outsource its manufacturing in order to reduce costs and liability and knowingly sacrificing quality?
The model of most PE firms is to buy a company and sell it for a higher price later.
What you said happens various times, especially with the big PE firms, but it’s not the norm.
You really think banks will be lending to PE deals if the business model is to make the company bankrupt?
What you said happens various times, especially with the big PE firms, but it’s not the norm.
You really think banks will be lending to PE deals if the business model is to make the company bankrupt?
Yes, that is the model. Large short term profits can be made if costs are cut. The idea is that the PE firm loads the target asset with debt, then drastically cuts labor, capital maintenance and other costs. The balance sheet looks good, and profits rise for a few years. The PE firm then sells the asset for profit.
The buyer, and sometimes even taxpayers, are left holding the bag when things start breaking. The PE firm knows exactly what it's doing
Thames Water is the classic example:
https://www.dailymail.co.uk/news/article-12245021/Thames-Wat...
The large PE asset management firms don't need the banks to lend them money.. they have more than enough capital to fund their investments.
The buyer, and sometimes even taxpayers, are left holding the bag when things start breaking. The PE firm knows exactly what it's doing
Thames Water is the classic example:
https://www.dailymail.co.uk/news/article-12245021/Thames-Wat...
The large PE asset management firms don't need the banks to lend them money.. they have more than enough capital to fund their investments.
[deleted]
>Large short term profits can be made if costs are cut.
What else can a "businessperson" do if they don't have the acumen to build up corporate value at all compared to those who came before and laid the foundations to begin with?
The purpose of the stock exchange was to make it possible for a diverse bunch of investors to come together and fund the growing needs of a growing country.
IOW the type of shareholders that this was designed to be suitable for are those who are actually investing in the registered corporations so those corporations can level up to accomodate unmet demand and grow capabilities to reach a more prosperous stability, thereby providing a fair but lucrative return for the investors over time. As the corporations grow in value so do the shares, naturally.
OTOH once the market has been established, and especially in case it grows faster than the underlying value for a long enough period of time (like longer than one human lifetime, or longer than a single business career[0]), then a sizable amount of "investment" capital can end up manipulating the system to extract established value through their trading[1]. Especially when it comes to things like voting shares and mergers & acquisitions. Probably the longer a corporation has been publicly traded can figure prominently since that can be a corporation living longer than a human lifetime too.
So rather than investing value beneficially, you end up with large chunks of capital actively working to extract value parasitically[2], which is like a double-whammy, and eventually the stock exchange and the market it spawned are not working as intended at all.
Maybe just the opposite.
IOOW with Boeing the value was lost a long time ago with an unfavorable merger, and every stakeholder has been doing without ever since. It's just becoming unbearably impossible to ignore any more.
It just so happens that with an aircraft company, it's not only the shareholders, employees, and customers of Boeing who make up the majority of stakeholders. The flying public (who pays for it all to begin with) participates in far greater numbers and depends on the product aircraft with more of a life-or-death risk factor than the stakeholders who are on the financial receiving end.
And it all comes down to integrity.
Some business operators are still traditionally astute enough to create value where everyone financially involved gets their money's worth.
Others never will be able to accomplish this, and lots of them know who they are from the beginning and have had a lifetime focusing their efforts on ways not to give people their money's worth. Sometimes with the most insidious strategies.
And that's merely from poor integrity, even when ethics are not fully compromised.
Now look what happens when the ethics go out the window too . . .
Well that whooshed by and most people never saw it coming.
[0] where some may rake it in and retire early from a relatively short career.
[1] often including long-ago established value or utility that is now irreplaceable economically or legally.
[2] from anything smaller or less powerful in their path, with who knows what kind of motivation not aligned with the growing needs of a growing mother country.
What else can a "businessperson" do if they don't have the acumen to build up corporate value at all compared to those who came before and laid the foundations to begin with?
The purpose of the stock exchange was to make it possible for a diverse bunch of investors to come together and fund the growing needs of a growing country.
IOW the type of shareholders that this was designed to be suitable for are those who are actually investing in the registered corporations so those corporations can level up to accomodate unmet demand and grow capabilities to reach a more prosperous stability, thereby providing a fair but lucrative return for the investors over time. As the corporations grow in value so do the shares, naturally.
OTOH once the market has been established, and especially in case it grows faster than the underlying value for a long enough period of time (like longer than one human lifetime, or longer than a single business career[0]), then a sizable amount of "investment" capital can end up manipulating the system to extract established value through their trading[1]. Especially when it comes to things like voting shares and mergers & acquisitions. Probably the longer a corporation has been publicly traded can figure prominently since that can be a corporation living longer than a human lifetime too.
So rather than investing value beneficially, you end up with large chunks of capital actively working to extract value parasitically[2], which is like a double-whammy, and eventually the stock exchange and the market it spawned are not working as intended at all.
Maybe just the opposite.
IOOW with Boeing the value was lost a long time ago with an unfavorable merger, and every stakeholder has been doing without ever since. It's just becoming unbearably impossible to ignore any more.
It just so happens that with an aircraft company, it's not only the shareholders, employees, and customers of Boeing who make up the majority of stakeholders. The flying public (who pays for it all to begin with) participates in far greater numbers and depends on the product aircraft with more of a life-or-death risk factor than the stakeholders who are on the financial receiving end.
And it all comes down to integrity.
Some business operators are still traditionally astute enough to create value where everyone financially involved gets their money's worth.
Others never will be able to accomplish this, and lots of them know who they are from the beginning and have had a lifetime focusing their efforts on ways not to give people their money's worth. Sometimes with the most insidious strategies.
And that's merely from poor integrity, even when ethics are not fully compromised.
Now look what happens when the ethics go out the window too . . .
Well that whooshed by and most people never saw it coming.
[0] where some may rake it in and retire early from a relatively short career.
[1] often including long-ago established value or utility that is now irreplaceable economically or legally.
[2] from anything smaller or less powerful in their path, with who knows what kind of motivation not aligned with the growing needs of a growing mother country.
Yes, the pattern seems to be to quickly transfer value from the company to the PE firm, or directly into the pockets of the PE managers and friends, even if it hollows out the company and leaves it a shriveled mess.
As an example, the PE firm owning our company recently mandated that we switch our tooling from X to a more expensive Y, because Y is owned by the PE firm, and doing so makes the PE firm more money, at the expense of our company. This pattern repeated for multiple solutions we used.
Sometimes the PE firm will literally tear the company apart to sell the pieces, inventory, equipment, etc. The goal is to make money. That might come from making the company stronger and more competitive long-term, but in my experience and observation, that is not how a lot of PE firms approach the goal
As an example, the PE firm owning our company recently mandated that we switch our tooling from X to a more expensive Y, because Y is owned by the PE firm, and doing so makes the PE firm more money, at the expense of our company. This pattern repeated for multiple solutions we used.
Sometimes the PE firm will literally tear the company apart to sell the pieces, inventory, equipment, etc. The goal is to make money. That might come from making the company stronger and more competitive long-term, but in my experience and observation, that is not how a lot of PE firms approach the goal
Sounds like an aggressive liquidation when all the stock holders suddenly don't want the company to continue anymore and want their money back. Most of the time I thought asset value << market cap though so if someone makes profit it's definitely on the expense of others.
Sounds plausible. I assume they could cobble together a strategy where the company limps along zombie-like while interest rates are very low, then when rates go up they lots of companies go bankrupt simultaneously, a crisis is declared and the public takes on the losses. There are some obvious risks, but the middle managers don't have to worry to much and the big shot callers are presumably secure in their ability to influence politicians.
That was pretty much Silicon Valley Bank as I recall. Very high risk business model; turns out the plan when the bomb exploded was to change the regulations so that someone else held the risk.
That was pretty much Silicon Valley Bank as I recall. Very high risk business model; turns out the plan when the bomb exploded was to change the regulations so that someone else held the risk.
SVB’s failure was due to the same trigger but opposite impact. Banks in the US have to hold a percentage of their deposits in something safe and liquid. SVB made a big bet on low interest rates, buying a lot of government debt (safest available), but when interest rates went up the value of those bonds went down ( who’d buy one that paid low interest rate when higher was on offer?).
> You really think banks will be lending to PE deals if the business model is to make the company bankrupt?
Yes, just like banks sold houses to unqualified buyers and packaged them up as overinflated securities to dump on the public. The people authorizing the deals get bonuses now and leave other suckers holding the bag later.
Yes, just like banks sold houses to unqualified buyers and packaged them up as overinflated securities to dump on the public. The people authorizing the deals get bonuses now and leave other suckers holding the bag later.
> You really think banks will be lending to PE deals if the business model is to make the company bankrupt?
Sure, as long as they get their money back before bankruptcy occurs.
Sure, as long as they get their money back before bankruptcy occurs.
Something does not add up. Banks would not lend to PE firms of they would all then go on to default.
Banks get their money back. Debt is second in line (after taxes) in bankruptcy.
It’s syndicated. The initial lenders make money off of a variety of tax and other schemes.
That's missing a lot of steps... Like how to profit by not being paid back for the money you loaned!
It’s siphoned off the acquisition target
The initial lenders aren't idiots. This is a multi-billion dollar business. They sell the obligation to another sucker, who will often bundle it with a bunch of other debt (good or bad) and sell it to institutional investors.
Your 401k in 2008 or whatever had some shitty balanced fund that held 0.5% of assets in some toxic shit like Sears/K-Mart for the "high yield" portion of the fixed income component. So you make some money on government, agency and Apple/Exxon bonds, and get a high yield on K-Mart that goes poof a year later.
Your 401k in 2008 or whatever had some shitty balanced fund that held 0.5% of assets in some toxic shit like Sears/K-Mart for the "high yield" portion of the fixed income component. So you make some money on government, agency and Apple/Exxon bonds, and get a high yield on K-Mart that goes poof a year later.
the business goes bankrupt and the bank is ahead of customers and employees in line for who gets paid first.
So the scheme is to get in debt to unsophisticated lenders (employees and customers), take the money out, and finally default?
[deleted]
Please explain these mysterious tax schemes you’re hinting at…
You're completely right that it does not add up. PE detractors really need to be able to explain how this observation fits in with their analysis.
It's been explained multiple times in this thread.
tl;dr: the "observation" is made-up and false.
tl;dr: the "observation" is made-up and false.
Somehow I haven't been able to find an explanation that I find convincing.
Given how many people explained the same thing, that lack of understanding may be more attributable to you than to everyone else.
In any case, I and several others were able to find many, so it's okay that you weren't. Sometimes a person who has made up their mind and doesn't want to change it, ignores anything that might, and further effort committed to them is just a lost cause.
In any case, I and several others were able to find many, so it's okay that you weren't. Sometimes a person who has made up their mind and doesn't want to change it, ignores anything that might, and further effort committed to them is just a lost cause.
Could you please stop posting flamewar comments? You've done it repeatedly and we've already had to ask you about this. Crossing into personal attack is particularly unwelcome.
If you'd please review https://news.ycombinator.com/newsguidelines.html and stick to the rules when posting here, we'd appreciate it.
If you'd please review https://news.ycombinator.com/newsguidelines.html and stick to the rules when posting here, we'd appreciate it.
I'm sorry, I may have missed the first time, but didn't miss this. I'll change tone.
Appreciated!
Thanks for the reassuring words. Can you point to an explanation you find convincing?
I would need to first see proof that the "observation" that banks would go bankrupt is true in the first place.
I don't see any evidence it is, so the "observation" seems made up, and thus there is nothing to explain. It's possible you misunderstand how the process works.
I don't see any evidence it is, so the "observation" seems made up, and thus there is nothing to explain. It's possible you misunderstand how the process works.
The observation wasn't that the banks would go bankrupt. The observation was that if the practice was reliably so destructive to the value of the purchased businesses that the loans couldn't be repaid (including interest), the banks would stop choosing to make loans for that purpose. I think that observation is probably true. I also think that there are possible ways to accommodate that observation while preserving the main thrust (or perhaps even the entirety) of the criticisms, but I don't know which of those match reality (if any) or to what degree.
> The observation was that if the practice was reliably so destructive to the value of the purchased businesses that the loans couldn't be repaid...
That is the observation which is false. Nobody claimed that would happen to the extent that the bank loans couldn't be repaid, with interest and fees. I'm not sure where you got that idea. The value destruction comes from the fact that the company is destroyed in the process, and even though the banks got more than they would have if they kept the company alive, the total value is less.
tl;dr: banks are willing to tolerate the company value going down as long as they make money, which they do, because they, like the private equity firms, are effectively transferring value from the company accounts into their accounts.
That is the observation which is false. Nobody claimed that would happen to the extent that the bank loans couldn't be repaid, with interest and fees. I'm not sure where you got that idea. The value destruction comes from the fact that the company is destroyed in the process, and even though the banks got more than they would have if they kept the company alive, the total value is less.
tl;dr: banks are willing to tolerate the company value going down as long as they make money, which they do, because they, like the private equity firms, are effectively transferring value from the company accounts into their accounts.
Thanks, yes, that's a good summary. I think if the original claim was that the PE business model is pathological and parasitic because it is (economic) value-destroying then the claim must be false. Other financial stakeholders wouldn't participate, because they would make an economic loss.
If the claim is that it is pathological and parasitic because it leaves employees and customers worse off that's another argument, and I could see myself agreeing, but it's a value judgement, not a financial or economic one. In principle there's nothing that PE can't do that owner-operators can't also do. The objection is to the outcome, not the means they use to get the outcome.
If the claim is that it is pathological and parasitic because it leaves employees and customers worse off that's another argument, and I could see myself agreeing, but it's a value judgement, not a financial or economic one. In principle there's nothing that PE can't do that owner-operators can't also do. The objection is to the outcome, not the means they use to get the outcome.
Do you mean you would need to see proof that the observation is correct before you can link evidence that it's incorrect? If so that seems somewhat difficult to achieve.
It seems weirder to ask for proof the observation is false before it's proven that it wasn't made up in the first place.
Again, who said banks would go bankrupt?
Again, who said banks would go bankrupt?
-edit- I realized that part of it is that you are conflating "the big PE firms" and "all of PE". I guess the TL:DR of my comment is: don't' do that. The big firms are not all of PE and you should probably avoid ascribing what they do to all of PE as a category. Ok, the rest is my original comment.
You just can't generalize like that. My step dad was brought on as the CEO of a small Ag manufacturing company when it was acquired by a PE firm. He is an engineer. He's been in charge now for close to 10 years. He has developed new products, invested in procedures and protocols, and in general focused on an increase in quality and repeatability of procedures while bringing new products into development. He cares deeply about the company (and has in fact tried at least once to buy it from the PE firm)
This might very well be a non-central example (I certainly don't have industry wide stats to argue either way), but the point is that there is nothing inherent to PE that means companies have to be cut to the bone and stripped for parts. Yes, it absolutely can and does happen, but it's not because it's PE that's doing it.
I'm fully willing to believe that the big PE firms that everyone thinks of when they make statements like yours have exactly the track record you claim. But it's not because they are PE. Smaller PE firms like the one my step dad works for is proof-by-existence that responsible PE is not an oxymoron.
You just can't generalize like that. My step dad was brought on as the CEO of a small Ag manufacturing company when it was acquired by a PE firm. He is an engineer. He's been in charge now for close to 10 years. He has developed new products, invested in procedures and protocols, and in general focused on an increase in quality and repeatability of procedures while bringing new products into development. He cares deeply about the company (and has in fact tried at least once to buy it from the PE firm)
This might very well be a non-central example (I certainly don't have industry wide stats to argue either way), but the point is that there is nothing inherent to PE that means companies have to be cut to the bone and stripped for parts. Yes, it absolutely can and does happen, but it's not because it's PE that's doing it.
I'm fully willing to believe that the big PE firms that everyone thinks of when they make statements like yours have exactly the track record you claim. But it's not because they are PE. Smaller PE firms like the one my step dad works for is proof-by-existence that responsible PE is not an oxymoron.
PE is notorious for buying firms with debt and then driving them into bankruptcy by loading them with that debt. It’s the only thing they’re notable for. They’ve essentially killed all traditional US brick and mortar retail — it wasn’t Amazon alone; it was crushing debt load and/or profits siphoned off to the PE firm instead of reinvesting in the business.
If you don’t want your stepdad associated with those monsters, find a different term to describe his work.
If you don’t want your stepdad associated with those monsters, find a different term to describe his work.
This is just way out of touch. How do you think Elon raised funds for buying Twitter? PE is the only way to fundraise outside of going public.
The whole Twitter debacle isn't an example of PE being good for anything, you know.
Well it’s true there’s a spectrum: venture capital is a tiny corner (really just a pimple) of the private equity space. But there are tiny PE buyout funds doing the same — look at Bending Spoons who is discussed on HN for how they manage acquisitions like Evernote.
> And unfortunately self-serving people tend to reach the top more easily in both scenarios. You don't get Dan Price's very often (relatively).
Oh boy do I have bad news for you.
https://www.seattletimes.com/business/seattle-celebrity-ceo-...
Oh boy do I have bad news for you.
https://www.seattletimes.com/business/seattle-celebrity-ceo-...
Appreciate the additional info. I do find it interesting that the Seattle Times has basically no positive coverage of Dan Price, despite numerous accounts I've read of prosperity from the change. That said, there is likely merit in the complaints, and it's good to remember that there are often two sides to stories.
Falcon 9 is also produced by a PE firm and it is very reliable. German Mittelstand corporations are often family-owned for generations, and they are known for high-quality products.
As in everything, humans and their motivations cannot be ignored. Firms are conglomerates of people, and it matters which people are on the top.
As in everything, humans and their motivations cannot be ignored. Firms are conglomerates of people, and it matters which people are on the top.
Are you calling SpaceX a PE firm or am I missing something?
https://en.wikipedia.org/wiki/Falcon_9
https://en.wikipedia.org/wiki/Falcon_9
Maybe I understand the term wrong, but I was under the impression that PE means "not publicly traded, in private hands". Which is what SpaceX is.
Thete's a big difference between a private firm and a private equity firm.
Private firm - no public trading of stocks.
Private equity - a business model created by syndicates that borrow money to buy companies, saddle the companies with that borrowing, demand a quick return (-> layoffs, selloffs, and wage cuts), then bankrupt the company when all the value and productivity have been extracted.
Private firm - no public trading of stocks.
Private equity - a business model created by syndicates that borrow money to buy companies, saddle the companies with that borrowing, demand a quick return (-> layoffs, selloffs, and wage cuts), then bankrupt the company when all the value and productivity have been extracted.
Crucially the money which is never repaid is not borne by the banks that put that money up front, they chop it up and sell it off with other things so nobody even knows who loses the money.
It's the sub prime mortgage thing all over again
It's the sub prime mortgage thing all over again
It is somewhat depressing that when you accidentally make a comment that attracts a lot of downvotes, you can't even delete it and have to watch them rolling.
The truth is that by a literal definition of the words private equity, SpaceX does qualify. All private companies are equity that is private. But when people use the _phrase_ private equity, they're referring to people who are specifically starting with a pot of money and then shopping around for companies they think they can flip for a profit, often with the normal trappings of private equity, for example, `carry` and particular tax and business strategies (debt, etc). So because SpaceX was started by a founder with an actual mission and grown from zero, and because their goal is primarily to build rockets and not make a quick buck, most would simply call it a 'private company' to avoid confusion.
To demonstrate that I'm not an economist: PE is a more specific than just private company. Boeing sold its Wichita division to an "investment firm". An investment firm is essentially a company that buys and sells companies. Typically they're focused on short-term profits to juice the stock price before it's sold.
Spirit was created and sold to the investment firm (Onex) in 2006, and Onex turned around and sold its the last of its stake in Spirit in 2014. Onex got over $3 billion for their initial $375 million stake in Spirit. The cost, as we're rediscovering, is that quality of Spirit's product went to shit and the long-term viability of Spirit is in question.
Spirit was created and sold to the investment firm (Onex) in 2006, and Onex turned around and sold its the last of its stake in Spirit in 2014. Onex got over $3 billion for their initial $375 million stake in Spirit. The cost, as we're rediscovering, is that quality of Spirit's product went to shit and the long-term viability of Spirit is in question.
If it was so bad why did people pay so much more for Spirit stock in 2014?
> If it was so bad why did people pay so much more for Spirit stock in 2014?
Fact that it sold for more doesn't mean it was in good shape. There are many potential reasons why people would pay more, even if Spirit was in bad shape.
Fact that it sold for more doesn't mean it was in good shape. There are many potential reasons why people would pay more, even if Spirit was in bad shape.
Since the late 90s/early 00's this type of concerns / horrible culture shifts and strategic mistakes were known and by the time the Dreamliner came out it was common knowledge even in the mainstream. Of course when the Max 8's started to fall and killing people everybody pretended to be shocked and surprised again.
And of course the "incidents" are always "different and not related", but as any very complex system goes, these "incidents" always end up happening due to the same root cause.
And yet again another evidence nobody learned anything with the latest big scandal of 2018/19, Boeing actively lobbied to reduce and get even more exceptions for QA and safety rules AFTER 2019.
During the 00's it was already clear many of their planes were clearly not the best on the market for various reasons, but a few phone calls from key people in the US government to the prospective buyers would always "help" the customer to make the "right buying decision", so new orders were always arriving, money coming in, stock and compensations for the big wigs was obviously sky high so anyone who raised any concerns was always ignored or fired, but by that time Boeing was already rotten.
I just pray I'm wrong and all of those planes don't crash until they are retired, but the new ones seem to be even worse.. so I don't know..
And of course the "incidents" are always "different and not related", but as any very complex system goes, these "incidents" always end up happening due to the same root cause.
And yet again another evidence nobody learned anything with the latest big scandal of 2018/19, Boeing actively lobbied to reduce and get even more exceptions for QA and safety rules AFTER 2019.
During the 00's it was already clear many of their planes were clearly not the best on the market for various reasons, but a few phone calls from key people in the US government to the prospective buyers would always "help" the customer to make the "right buying decision", so new orders were always arriving, money coming in, stock and compensations for the big wigs was obviously sky high so anyone who raised any concerns was always ignored or fired, but by that time Boeing was already rotten.
I just pray I'm wrong and all of those planes don't crash until they are retired, but the new ones seem to be even worse.. so I don't know..
I have an inside story about the Dreamliner. I know a person that was part of buying a few for an airliner. To my understanding there were 2 factories that made them, Seattle and somewhere in the South. There was a huge difference between the quality of the two. Everyone buying tried to get a plane that was made in Seattle and not in the South (can't remember exactly where it was).
South Carolina.
Also Boeing doesn’t have any factories in Seattle. They have factories in Renton and Everett. The 787 used to be made in Everett. Renton is kind of a suburb of Seattle but Everett isn’t even particularly close.
Also Boeing doesn’t have any factories in Seattle. They have factories in Renton and Everett. The 787 used to be made in Everett. Renton is kind of a suburb of Seattle but Everett isn’t even particularly close.
I think when people say "Seattle", they are generally referring to the Seattle metro area which frequently encompasses Seattle, Everett, Tacoma and the eastside (e.g. Bellevue), but for some conversations Tacoma is considered a separate metro area.
Seattle people get touchy about referring even to Seattle suburbs as Seattle but Everett isn’t even close. Calling Everett Seattle is like calling Santa Cruz San Francisco.
Or referring to Beaverton, Oregon City, or Gresham (and similar) as Portland. That makes sense, locals absolutely see the distinction, but if I told someone in another state (other than perhaps Washington) where I lived, I'd just say "Portland" even though I don't live anywhere near the city limits. But the actual Portland people are quick to jump on me if we're in a call and I say I'm from Portland :).
Yes. For I long time I thought Microsoft is based in Seattle, which is not correct (Redmond) but not completely wrong either
Redmond is at least a suburb of Seattle. It’s not an entirely different city an hour and a half away like Everett.
But I do find it weird that nobody claims that Apple, Google, and Facebook are all based in SF.
But I do find it weird that nobody claims that Apple, Google, and Facebook are all based in SF.
I think you may be overestimating the distances here. It is 35 mins from downtown Seattle to the Boeing facility in Everett and 25 mins to Redmond.
Everett isn’t in Seattle, but considering it part of the metro area isn’t a stretch. You never leave dense burbs between the two.
Everett isn’t in Seattle, but considering it part of the metro area isn’t a stretch. You never leave dense burbs between the two.
You do, but it’s for a minute or two, if you don’t hit a traffic jam.
It’s hard to think of a traffic jam as being in a rural area.
Everett itself is farther north, but the turn to the factory and Paine field is before you hit town (but after you hit Everett speed traps)
It’s hard to think of a traffic jam as being in a rural area.
Everett itself is farther north, but the turn to the factory and Paine field is before you hit town (but after you hit Everett speed traps)
It's interesting, I kinda buy the 'Everett is part of the Seattle metro' but I'd have said Marysville is not. But clearly it is, and my perception is wrong.
> It is 35 mins from downtown Seattle to the Boeing facility in Everett
It’s an hour and a half in traffic.
> Everett isn’t in Seattle, but considering it part of the metro area isn’t a stretch. You never leave dense burbs between the two.
On the other coast, you don’t leave dense burbs anywhere between Boston and DC. Therefore Boston is part of the NYC metro area.
It’s an hour and a half in traffic.
> Everett isn’t in Seattle, but considering it part of the metro area isn’t a stretch. You never leave dense burbs between the two.
On the other coast, you don’t leave dense burbs anywhere between Boston and DC. Therefore Boston is part of the NYC metro area.
Used to be that Silicon Valley - Santa Clara, Sunnyvale, Milpitas, etc. - was distinctly different from San Francisco.
Actually, it's weird to see headquarters in SF being called in SV ...
Actually, it's weird to see headquarters in SF being called in SV ...
The Renton and Everett plants are almost equidistant from my actually-Seattle house. The trip to Everett is estimated to be a couple of minutes shorter, but both are currently less than 40 minutes.
The airport at the Everett facility, Paine field (PAE), was recently renamed "Seattle Paine Field International Airport"
The airport at the Everett facility, Paine field (PAE), was recently renamed "Seattle Paine Field International Airport"
There’s less than a mile of wooded area from where you leave “Seattle” and run into Everett highway patrol speed traps. They’ve practically merged at this point. One more boom cycle.
[deleted]
Is the dreamliner bad?
I was under the impression it was quite nice and had partially eaten the lunch of Airbus' A380 by making longer flights with smaller plane economically advantageous.
I was under the impression it was quite nice and had partially eaten the lunch of Airbus' A380 by making longer flights with smaller plane economically advantageous.
The 787 is not bad. Its a great aircraft and they have sold a shit-ton of them.
But it was also a program that went hilariously over budget. Nearly costing as much as the A380. It had a whole bunch of problems and still has problems today. Lots of production issues.
This had lead to a situation where they will need to sold literally 1500 or more planes to break even on the program. And 1500 is a gigantic amount of wide-bodies.
The 787 didn't really eat A380s lunch. Its more like 2 companies both thought about what the best investment would be for the future. Boeing picked the right plane. Airbus picked the wrong plane. The competitor to the A380 was the 747-8 and the 777.
Had Airbus not totally misread the market and invested in totally the wrong market. The Dreamliner could have backfired on Boeing. If Airbus had a 787 serious competitor out at the same time, the 787 might never have sold more then 1500 times. They already have total order of around 1800 and there are likely gone be many more because Airbus doesn't have a perfect competitor plane.
In the wide-body market, Boeing is still totally competitive with Airbus. Its the narrow body market where Airbus is kicking Boeing ass.
But it was also a program that went hilariously over budget. Nearly costing as much as the A380. It had a whole bunch of problems and still has problems today. Lots of production issues.
This had lead to a situation where they will need to sold literally 1500 or more planes to break even on the program. And 1500 is a gigantic amount of wide-bodies.
The 787 didn't really eat A380s lunch. Its more like 2 companies both thought about what the best investment would be for the future. Boeing picked the right plane. Airbus picked the wrong plane. The competitor to the A380 was the 747-8 and the 777.
Had Airbus not totally misread the market and invested in totally the wrong market. The Dreamliner could have backfired on Boeing. If Airbus had a 787 serious competitor out at the same time, the 787 might never have sold more then 1500 times. They already have total order of around 1800 and there are likely gone be many more because Airbus doesn't have a perfect competitor plane.
In the wide-body market, Boeing is still totally competitive with Airbus. Its the narrow body market where Airbus is kicking Boeing ass.
I thought the A350 was Airbus’s answer to the 787. Curious why that’s not a ‘perfect competitor’?
It's a bit larger, more in the range of the 777 than the 787.
Roughly, it used to be A330 vs 767 and A340 vs 777, the A330 and the 777 were the winners in these segments. The 787 was built to beat the A330, and it did, and the A350 was built to beat the 777, and it might.
Airbus reacted to the 787 with a re-engined A330, the A330neo, which was not a great success, but not a total flop. Boeing re-engined and enlarged the 777 to create the 777X, whose smaller variant positioned against the A350 is a slow seller, but whose larger variant, which has no direct competitor, has seen some sales - if Boeing manages to get it out of the door, the program is again hugely delayed and over budget.
Roughly, it used to be A330 vs 767 and A340 vs 777, the A330 and the 777 were the winners in these segments. The 787 was built to beat the A330, and it did, and the A350 was built to beat the 777, and it might.
Airbus reacted to the 787 with a re-engined A330, the A330neo, which was not a great success, but not a total flop. Boeing re-engined and enlarged the 777 to create the 777X, whose smaller variant positioned against the A350 is a slow seller, but whose larger variant, which has no direct competitor, has seen some sales - if Boeing manages to get it out of the door, the program is again hugely delayed and over budget.
I'm always amazed at how many capacity niches gets filled between different models and variants.
Yeah, essentially Boeing has 3 aircraft, 737, 787, 777.
Airbus had 3 as well. Those are A320, A330, A350. Then added A220.
That basically covers the majority of the market.
Airbus had 3 as well. Those are A320, A330, A350. Then added A220.
That basically covers the majority of the market.
> A220
RIP C-Series
RIP C-Series
> and they have sold a shit-ton of them
Incidentally, that also sold a shit-ton of 737 MAX. Maybe not the best metric to choose.
> Had Airbus not totally misread the market and invested in totally the wrong market.
Missed the market by so much, they are pulling the A380s out of storage.
> They already have total order of around 1800 and there are likely gone be many more because Airbus doesn't have a perfect competitor plane
The A350 _is_ the perfect competitor. The two planes are, by their design, not competing in the same segments.
Incidentally, that also sold a shit-ton of 737 MAX. Maybe not the best metric to choose.
> Had Airbus not totally misread the market and invested in totally the wrong market.
Missed the market by so much, they are pulling the A380s out of storage.
> They already have total order of around 1800 and there are likely gone be many more because Airbus doesn't have a perfect competitor plane
The A350 _is_ the perfect competitor. The two planes are, by their design, not competing in the same segments.
> Incidentally, that also sold a shit-ton of 737 MAX. Maybe not the best metric to choose.
You have to think about the difference between narrow and wide bodies.
Yes they sold many 737 MAXs but not compared to Airbus narrow bodies.
> Missed the market by so much, they are pulling the A380s out of storage.
Sure. Nice for them. But that doesn't change anything for Airbus, they are not gone sell more of them. There was never a question if A380 would go away competently, its the right aircraft for many airlines.
Lets be real, Airbus sold 250 A380 and is never gone build more. Boeing sold 1800 787s and will sell many more. Its not really a competition what was the better investment.
> The A350 _is_ the perfect competitor. The two planes are, by their design, not competing in the same segments.
Sure if you don't understand the industry.
The very biggest 787 is slightly competitive with the smallest A350. But that is not the focus of either of those planes design.
Airbus deliberately did not build a 787 competitor, they believed the market would would already be mostly captured. So they build a competitor to the 777 instead, with the goal of replacing older wide bodies like the 777, 747 and 380.
The A330 NEO is the more direct competitor to the 787 core business.
You have to think about the difference between narrow and wide bodies.
Yes they sold many 737 MAXs but not compared to Airbus narrow bodies.
> Missed the market by so much, they are pulling the A380s out of storage.
Sure. Nice for them. But that doesn't change anything for Airbus, they are not gone sell more of them. There was never a question if A380 would go away competently, its the right aircraft for many airlines.
Lets be real, Airbus sold 250 A380 and is never gone build more. Boeing sold 1800 787s and will sell many more. Its not really a competition what was the better investment.
> The A350 _is_ the perfect competitor. The two planes are, by their design, not competing in the same segments.
Sure if you don't understand the industry.
The very biggest 787 is slightly competitive with the smallest A350. But that is not the focus of either of those planes design.
Airbus deliberately did not build a 787 competitor, they believed the market would would already be mostly captured. So they build a competitor to the 777 instead, with the goal of replacing older wide bodies like the 777, 747 and 380.
The A330 NEO is the more direct competitor to the 787 core business.
> Missed the market by so much, they are pulling the A380s out of storage.
A380s are being pulled out of storage because they, like many other types of planes, were parked due to COVID and travel restrictions and are now returning to their previous service.
What does that have to the airliner market?
A380s are being pulled out of storage because they, like many other types of planes, were parked due to COVID and travel restrictions and are now returning to their previous service.
What does that have to the airliner market?
> A380s are being pulled out of storage because they, like many other types of planes, were parked due to COVID
Yes, but not quite. They were put into storage with the understanding that it would be their final resting place, as the hub-and-spoke demand Airbus had anticipated lost, pre-COVID, to the point-to-point model. The airlines losing money during COVID and trying to save costs was the final nail in their coffin.
What they are finding out post-COVID is that, on some segments, the number of passengers grew more than the available slots. That, coupled with "sluggish" deliveries of other wide-body aircrafts, suddenly means that the capacity and economics of the A380 don't look that bad after all. To the point that some airlines are pushing for a re-engining, which would, despite the costs of running a 4-engine aircraft, be quite a game-changer. One of the issues with the A380 is that it came into service just at the time engine manufacturers made a generational leap in engine efficiency, making its economics worse than what they could be.
Yes, but not quite. They were put into storage with the understanding that it would be their final resting place, as the hub-and-spoke demand Airbus had anticipated lost, pre-COVID, to the point-to-point model. The airlines losing money during COVID and trying to save costs was the final nail in their coffin.
What they are finding out post-COVID is that, on some segments, the number of passengers grew more than the available slots. That, coupled with "sluggish" deliveries of other wide-body aircrafts, suddenly means that the capacity and economics of the A380 don't look that bad after all. To the point that some airlines are pushing for a re-engining, which would, despite the costs of running a 4-engine aircraft, be quite a game-changer. One of the issues with the A380 is that it came into service just at the time engine manufacturers made a generational leap in engine efficiency, making its economics worse than what they could be.
> They were put into storage with the understanding that it would be their final resting place, as the hub-and-spoke demand Airbus had anticipated lost, pre-COVID, to the point-to-point model.
Several of the words in this sentence are doing very heavy lifting.
The point-to-point model DID clearly and significantly win over the hub-and-spoke model for the majority of air traffic. But life is not a zero-sum game and becoming the dominant model does not magically mean that all other models promptly cease to exist, nor does it magically change the Earth's geography. It makes zero sense to claim all A380s were being parked forever because point-to-point won out when airlines like Emirates and Qantas are basically nothing but hub-and-spoke (and cannot really be anything else).
And that's besides the fact that words mean things. A plane being stored is not an "understanding" that that's its final resting place, it means exactly what it says: that it's being stored. If an airline really wanted to send a plane to its final resting place it would retire it, as e.g. Air France did with its A380s (and you'll notice that none of them have been "pulled out of storage", because there actually was no intention of bringing them back into service).
Several of the words in this sentence are doing very heavy lifting.
The point-to-point model DID clearly and significantly win over the hub-and-spoke model for the majority of air traffic. But life is not a zero-sum game and becoming the dominant model does not magically mean that all other models promptly cease to exist, nor does it magically change the Earth's geography. It makes zero sense to claim all A380s were being parked forever because point-to-point won out when airlines like Emirates and Qantas are basically nothing but hub-and-spoke (and cannot really be anything else).
And that's besides the fact that words mean things. A plane being stored is not an "understanding" that that's its final resting place, it means exactly what it says: that it's being stored. If an airline really wanted to send a plane to its final resting place it would retire it, as e.g. Air France did with its A380s (and you'll notice that none of them have been "pulled out of storage", because there actually was no intention of bringing them back into service).
The 787 is an innovative aircraft, but its existence is a comedy of errors. It was never competition for the A380 though. The problem is that Boeing bit off more than they could chew when they tried to innovate in three areas: concept, design, and execution. They outsourced the latter two and provided insufficient oversight.
Concept: Lithium-ion batteries are great tech.
Design: Boeing outsourced the electrical system design work to Thales, and the first production airliner designed around lithium-ion batteries seemed like a great idea until they started catching fire.
Execution: Relying heavily on sub-contractors to build big chunks of the 787 was a great idea to save money, until the subs couldn't maintain the pace Boeing wanted for the price Boeing was willing to pay. So Boeing bought the South Carolina facility.
And Boeing keeps insisting on learning the hard way. Last year the FAA halted deliveries of the 787 for a few months due to quality issues.
Concept: Lithium-ion batteries are great tech.
Design: Boeing outsourced the electrical system design work to Thales, and the first production airliner designed around lithium-ion batteries seemed like a great idea until they started catching fire.
Execution: Relying heavily on sub-contractors to build big chunks of the 787 was a great idea to save money, until the subs couldn't maintain the pace Boeing wanted for the price Boeing was willing to pay. So Boeing bought the South Carolina facility.
And Boeing keeps insisting on learning the hard way. Last year the FAA halted deliveries of the 787 for a few months due to quality issues.
The outsourcing and the SC facility are also motivated by Boeing’s decades-long war with its unions in Washington. Unfortunately for Boeing, the unionized workers in Renton and Everett were really good at their jobs compared to the workers in SC and at the subs, to the point that customers specifically demanded only to receive 787’s that were built in Everett.
I am not, in general, a pro-union guy, so I’m arguing against my natural bias here. But Boeing fucked up big time moving production out of Washington.
I am not, in general, a pro-union guy, so I’m arguing against my natural bias here. But Boeing fucked up big time moving production out of Washington.
It seems like McDonnell Douglas thinks unions are the biggest threat to Boeing, not IP. Big parts of the 787 design did not require the ridiculous gantry crane to move and place.
I could see that the point of that was to be able to spin up new production sites effectively, and the main value in that was not building a million planes but leverage against the unions.
I think buying SC was crocodile tears at best.
I could see that the point of that was to be able to spin up new production sites effectively, and the main value in that was not building a million planes but leverage against the unions.
I think buying SC was crocodile tears at best.
It's an impressive level of cognitive dissonance to describe union workers as more competent and customers demanding union-built planes because those planes are better built, and then still feel the need to throw in a "unions suck" comment.
Not at all. I don't think the union makes the Boeing workers in Washington more competent. It's the decades of experience and tribal knowledge that have been passed down in the Renton and Everett factories that make those workers more competent.
At any rate, I'm not trying to start an argument about unions. I only brought it up to underscore my point that despite completely sympathizing with their motivations, I still think Boeing's management made a mistake. It's not cognitive dissonance to have a nuanced view of the world and to acknowledge that there are real world exceptions to what I might otherwise believe based purely on my general biases. If that's difficult for you to understand, I am genuinely sorry for you.
At any rate, I'm not trying to start an argument about unions. I only brought it up to underscore my point that despite completely sympathizing with their motivations, I still think Boeing's management made a mistake. It's not cognitive dissonance to have a nuanced view of the world and to acknowledge that there are real world exceptions to what I might otherwise believe based purely on my general biases. If that's difficult for you to understand, I am genuinely sorry for you.
Maybe people getting paid a decent salary just care more about the product and the quality than people getting paid shit wages
You people really get triggered when someone casually states an opinion you disagree with, don’t you? Not taking the bait, sorry. The mere fact that you are so tedious and defensive about this point only makes me more determined not to be associated with your position.
You and Kenny are coming across as the type of people who see everything in simplistic black-and-white terms in which everything that ever goes wrong in the world, goes wrong because someone went against with your opinions which are Obviously Right And Impossible To Disagree With In Good Faith. That’s not how I see things and I am glad to make crystal clear that my criticism of Boeing’s decision is not rooted in any sort of unthinking pro-union tribalism, but rather in a considered appraisal of the situation in which I am willing to not only question but even reject the easy answers my own biases would otherwise lead me to.
You and Kenny are coming across as the type of people who see everything in simplistic black-and-white terms in which everything that ever goes wrong in the world, goes wrong because someone went against with your opinions which are Obviously Right And Impossible To Disagree With In Good Faith. That’s not how I see things and I am glad to make crystal clear that my criticism of Boeing’s decision is not rooted in any sort of unthinking pro-union tribalism, but rather in a considered appraisal of the situation in which I am willing to not only question but even reject the easy answers my own biases would otherwise lead me to.
Considering the length and tone of the comments in this thread, I don’t think it is the people you call “you people” that are triggered.
There's this article about a Boeing quality manager that raised very similar safety and QA issues (and general culture issues) during the 787 development:
https://www.corporatecrimereporter.com/news/200/john-barnett...
https://www.corporatecrimereporter.com/news/200/john-barnett...
They took more risks than they should've. Which is a strategy that pays off until it doesn't, as we're seeing now.
The 787 is fine. It's by far the most comfortable aircraft I've ever ridden, and the batteries-going-up-in-flames issue was short-lived and if I recall stemmed from some manufacturing deficiencies at the Japanese OEM (I am brainfarting their name).
That being said however, the kind of workmanship negligience we have reason to suspect of Boeing means absolutely no Boeing aircraft manufactured during the timeframe(s) concerned can be considered safe until inspections are done.
For now we don't have reason to suspect this extends beyond 737 MAX 9, but that could change drastically depending on what FAA finds.
That being said however, the kind of workmanship negligience we have reason to suspect of Boeing means absolutely no Boeing aircraft manufactured during the timeframe(s) concerned can be considered safe until inspections are done.
For now we don't have reason to suspect this extends beyond 737 MAX 9, but that could change drastically depending on what FAA finds.
> For now we don't have reason to suspect this extends beyond 737 MAX 9
Boeing in 2023 deferred 787 deliveries again because the manufacturing process was found to not have been properly followed. In the past they also found debris left on planes.
Maybe this issue specific to the MAX 9 but manufacturing issues at Boeing are not at all an isolated thing.
Boeing in 2023 deferred 787 deliveries again because the manufacturing process was found to not have been properly followed. In the past they also found debris left on planes.
Maybe this issue specific to the MAX 9 but manufacturing issues at Boeing are not at all an isolated thing.
Ya, 787 quality issues have been publicized for a few years now, especially at the South Carolina facility. I also remember the DoD temporarily stopping deliveries of planes from Being due to quality, possibly last year or the year before.
While I'm a fan of airbus they're not perfect either. Consider the paint flaking issues at Qatar airlines. Even though airbus says this shouldn't be a safety issue, it is really a serious quality problem.
To add to the manufacturing issues, there are also other 787 issues to be concerned about. The lithium-ion debacle, for one. It's only by shear luck that the original design issues didn't end in fatalities. And the fix is.. ..meh.. The redesign of the lightening protection system to save costs is also something that has been overlooked until now.
Boeing intentionally spread its operations to as many states as possible in the US to guarantee itself some level of privilege amongst a large number of politicians from both major parties. There are clearly downsides to having manufacturing split up like this but the decision wasn't made for its engineering perks. Boeing is a sinking ship but nobody is eager to rock the boat lest their part of the ship take on more water than the others.
That’s not really any different from how Airbus works (and explicitly so).
But I learned that Boeing literally outsourced the fuselage and that makes you wonder if they are really fit to build airplanes…
Boeing outsourced the fuselage to Boeing in Wichita, which had always built them. Boeing spun off that branch into a separate company now called Spirit, which is still basically Boeing except for its name.
If it's "still Boeing except for the name", that still smells funny.
They got something out of spawning a new corporate entity. Without a convincing TL;DR I think most of us will assume it's for reasons that sound good to Boeing business people, but not to outside people. (I. e. being a "new entity" to avoid existing labour contracts, or serving as a liability firewall in the event chunks of plane start flying off)
They got something out of spawning a new corporate entity. Without a convincing TL;DR I think most of us will assume it's for reasons that sound good to Boeing business people, but not to outside people. (I. e. being a "new entity" to avoid existing labour contracts, or serving as a liability firewall in the event chunks of plane start flying off)
Spirit is not just Boeing. Since the Spin-out Spirit has been buying many other companies and they are a supplier to both Boeing and Airbus. About 65% of their costumer base is Boeing. Spirit is a totally independent company.
Do you have an article or two where I could start the airbus rabbit hole?
Here's a growing list of approved suppliers for Airbus.
https://www.airbus.com/sites/g/files/jlcbta136/files/2023-04...
Their larger planes are assembled in Toulouse, but smaller planes are made globally.
Their larger planes are assembled in Toulouse, but smaller planes are made globally.
[deleted]
Lockheed Martin similarly has operations spread out to curry favors, but they also seem to build reliable stuff...
The F-35 has been plagued with defects. Even the ejector seat had a defect.
Breaking the pilots neck is indeed a defect! [0]
There were also serious issues with ejector sear components that affected dozens of other aircraft. [1]
Here's a depressing read: "All The Ways The F-35 Tried To Kill Its Pilot Prior To Eglin AFB Crash" [2]
[0] https://www.defensenews.com/breaking-news/2015/10/14/usaf-ac...
[1] https://www.defensenews.com/air/2022/08/15/all-us-air-force-...
[2] https://www.thedrive.com/the-war-zone/36970/all-the-ways-the...
There were also serious issues with ejector sear components that affected dozens of other aircraft. [1]
Here's a depressing read: "All The Ways The F-35 Tried To Kill Its Pilot Prior To Eglin AFB Crash" [2]
[0] https://www.defensenews.com/breaking-news/2015/10/14/usaf-ac...
[1] https://www.defensenews.com/air/2022/08/15/all-us-air-force-...
[2] https://www.thedrive.com/the-war-zone/36970/all-the-ways-the...
> Breaking the pilots neck is indeed a defect! [0]
I love how the URL says "breaking news". It literally is.
I love how the URL says "breaking news". It literally is.
They have so many defects, they stopped communicating about them (since 2021 if I recall properly?), and until that point, the list had only been ever-increasing.
By the time they stopped communicating about the (800+) unsolved issues, they had more than 2 dozens potentially lethal for the pilots.
For the fun: https://archive.is/eA7Rr
By the time they stopped communicating about the (800+) unsolved issues, they had more than 2 dozens potentially lethal for the pilots.
For the fun: https://archive.is/eA7Rr
...okay then, looks like I was wrong. Guess they have a better PR department?
They were "smart" enough to get out of the airliner business after the rather spectacular failure of the L-1011 and the whole wings falling off thing they went through with the Electra.
The military has a much higher tolerance for bullshit. The wings keep falling off the C-130 and the military keeps flying them (and the C-5).
The military has a much higher tolerance for bullshit. The wings keep falling off the C-130 and the military keeps flying them (and the C-5).
I can't find a lot about c130 wings falling off. I found this which implies a known problem for c130a's wingbox which has a billion to retrofit with a new design - https://theaviationgeekclub.com/the-sad-story-of-tanker-130-...
Any more information?
Any more information?
Not much more information, but it's happened a few times.
https://www.iprr.org/comps/T82story.htm
https://encyclopediaofarkansas.net/entries/c130-crash-of-197...
https://www.defensedaily.com/hercules-crash-in-baghdad-point...
https://www.iprr.org/comps/T82story.htm
https://encyclopediaofarkansas.net/entries/c130-crash-of-197...
https://www.defensedaily.com/hercules-crash-in-baghdad-point...
But the most recent incident you've cited is 18 years old. I'd hardly say "they keep falling off and they keep flying them" for that.
For context the Electra, Lockheed's penultimate airliner, lost its wings twice. After that airlines stopped buying it. Meanwhile the FAA put out another wing related AD for the C-130 in 2021.
https://www.federalregister.gov/documents/2021/05/14/2021-10...
https://www.federalregister.gov/documents/2021/05/14/2021-10...
Boeing's (aeronautic business) end-users are millions of passengers, Lockheed Martin's end-users are Defense and Intelligence. No need for damage control if mum's the word.
A couple of points about the F-35.
The requirements of a commercial airliner are a lot different than those of a cutting edge fighter jet. The F-35 ejection seat is too powerful and might injure smaller pilots, sure. But if I’m flying in contested airspace with enemy air defenses and fighter jets trying to shoot at me, I’d still feel a lot safer in an F-35 than in an Airbus.
There has been a lot of FUD about the F-35 spread around the press, but a surprising amount of this FUD comes straight from Boeing. You see, Boeing makes the Super Hornet, and every F-35 sale Lockheed Martin makes is a potential Super Hornet sale that Boeing has lost. Don’t get me wrong, the Super Hornet is an awesome fighter, but despite what Boeing would have you think, it doesn’t come close to the capabilities of an F-35.
Obviously I would much prefer my country and its allies to buy fighter jets from some perfect aerospace company that makes completely flawless aircraft, even when those aircraft contain groundbreaking innovations at the bleeding edge of what is technically possible. Fingers crossed that enough lessons were learned that when NGAD comes out, it’s a lot faster and smoother than the F-35 process, but this stuff is hard for everyone and for all the deserved criticism that the American military-industrial complex gets, nobody else in the world actually does a better job of making fighter jets.
The requirements of a commercial airliner are a lot different than those of a cutting edge fighter jet. The F-35 ejection seat is too powerful and might injure smaller pilots, sure. But if I’m flying in contested airspace with enemy air defenses and fighter jets trying to shoot at me, I’d still feel a lot safer in an F-35 than in an Airbus.
There has been a lot of FUD about the F-35 spread around the press, but a surprising amount of this FUD comes straight from Boeing. You see, Boeing makes the Super Hornet, and every F-35 sale Lockheed Martin makes is a potential Super Hornet sale that Boeing has lost. Don’t get me wrong, the Super Hornet is an awesome fighter, but despite what Boeing would have you think, it doesn’t come close to the capabilities of an F-35.
Obviously I would much prefer my country and its allies to buy fighter jets from some perfect aerospace company that makes completely flawless aircraft, even when those aircraft contain groundbreaking innovations at the bleeding edge of what is technically possible. Fingers crossed that enough lessons were learned that when NGAD comes out, it’s a lot faster and smoother than the F-35 process, but this stuff is hard for everyone and for all the deserved criticism that the American military-industrial complex gets, nobody else in the world actually does a better job of making fighter jets.
> Boeing intentionally spread its operations to as many states as possible
Interestingly, it is the senators who forced Boeing's hand, according to the ACQ podcast on Lockheed Martin. The senators were responsible to approve all kinds of government budgets for Boeing, and they wouldn't approve it unless Boeing also created jobs in their states.
Interestingly, it is the senators who forced Boeing's hand, according to the ACQ podcast on Lockheed Martin. The senators were responsible to approve all kinds of government budgets for Boeing, and they wouldn't approve it unless Boeing also created jobs in their states.
Eventually, Boeing management will probably decide it is cheaper to just buy planes from Airbus with the word "Boeing" conspicuously engraved on various components.
American management style is to focus on marketing as the source of all revenue to be exalted. Engineering, design and manufacturing are expenses to be minimized and controlled.
Right now, Boeing management is looking hard to find reasonable manufacturing scapegoats and when they do, heads will roll. Clearly, management had no involvement.
Gives you that warm, fuzzy and safe feeling doesn't it?
American management style is to focus on marketing as the source of all revenue to be exalted. Engineering, design and manufacturing are expenses to be minimized and controlled.
Right now, Boeing management is looking hard to find reasonable manufacturing scapegoats and when they do, heads will roll. Clearly, management had no involvement.
Gives you that warm, fuzzy and safe feeling doesn't it?
> Boeing management is looking hard to find reasonable manufacturing scapegoats
Bit like when the two planes fell out of the sky and the third world pilots were blamed / strongly hinted at as being inferior
Bit like when the two planes fell out of the sky and the third world pilots were blamed / strongly hinted at as being inferior
There was some truth to that. The 737 MAX is a hot aircraft (a light airframe with new powerful engines) that could quickly get away from you. Most US pilots come from the military and are typically top notch. Third world pilots to be quite honest, don't measure up in all areas.
Why would an airline buy an Airbus, or a Boeing branded Airbus with Boeing markup?
Because they have no choice. There are currently 2 aircraft companies in the world that make commercial jets: Boeing and Airbus (we'll ignore Comac for now). If Airbus somehow bought up all of Boeing's manufacturing facilities and capability, leaving Boeing as just a re-badger, then airlines would have no choice but to buy an Airbus that either has an Airbus badge or a Boeing badge.
In a word ---- marketing.
For the same reason people currently buy "American" autos (and planes) built from parts sourced around the world.
In American management culture, marketing is the knee jerk solution to any problem and the holy grail from which all revenue is gifted. They are true believers in the "magic" of being able to "game" people into making decisions based on something other than logic.
This same culture explains how/why the internet we have today is built around privacy invasion and (wait for it) ... marketing.
For the same reason people currently buy "American" autos (and planes) built from parts sourced around the world.
In American management culture, marketing is the knee jerk solution to any problem and the holy grail from which all revenue is gifted. They are true believers in the "magic" of being able to "game" people into making decisions based on something other than logic.
This same culture explains how/why the internet we have today is built around privacy invasion and (wait for it) ... marketing.
They’re already buying an Airbus branded Bombardier with an Airbus markup so why not?
People do strange things, like buying John-Deere-badged excavators manufactured by Hitachi, or JD-badged dozers manufactured by Liebherr.
Or JD-badged lawnmowers built by MTD.
> Why would an airline buy an Airbus
Because they're the best planes available?
> or a Boeing branded Airbus with Boeing markup?
Because the Boeing markup is less than the US import tariff?
Because they're the best planes available?
> or a Boeing branded Airbus with Boeing markup?
Because the Boeing markup is less than the US import tariff?
Boeing's core capability is regulatory arbitrage and getting gov contracts, so it makes sense for them to outsource everything non-core, like building planes. Similar to NASA.
Boeing did the correct thing outsourcing the actual building of planes, so they could focus on their core competency. Standard tech industry advice.
Boeing did the correct thing outsourcing the actual building of planes, so they could focus on their core competency. Standard tech industry advice.
I'm sick and tired of "core competency" rhetoric. Business management should not rigidly follow the UNIX philosophy, there's plenty of reasons you wouldn't want to outsource everything.
Furthermore, while those core competencies might sound correct to Boeing, they wouldn't sound like it to Boeing's customers. You're paying Boeing for a plane and support, not a trading company that can find five other companies who can outsource each task to a different firm that delegates responsibility to...
Furthermore, while those core competencies might sound correct to Boeing, they wouldn't sound like it to Boeing's customers. You're paying Boeing for a plane and support, not a trading company that can find five other companies who can outsource each task to a different firm that delegates responsibility to...
I remember someone on this forum argued at some point that business management is basically just flip flop between "things are bad, we need more vertical integration" or "things are bad, we need more core focus".
So, the problem isn't outsourcing bad or vertical integration bad. Vertical integration has benefits for things that can differentiate you (e.g. Apple's custom silicon and operating system software). If it's not differentiating, then buy instead of build.
The problem is that there's a mismatch between the customers and management as to what the core focus of the business actually is. Every business wants to become a weirdly shaped futures trader that just arbitrages on other people's work - i.e. one that has no core competency whatsoever. Everything gets outsourced so that cost pressure can be used to obfuscate fraud.
The problem is that there's a mismatch between the customers and management as to what the core focus of the business actually is. Every business wants to become a weirdly shaped futures trader that just arbitrages on other people's work - i.e. one that has no core competency whatsoever. Everything gets outsourced so that cost pressure can be used to obfuscate fraud.
The key think for Boeings customers is finance.
If you can get 70 airframes for five years in a way that means that you just have to borrow a nubbin of cash and then make regular payments that's what you will do. All your actual money can go to the shareholders and exec compensation. If the business (airline) folds the airframes go back to Boeing and you go on to the next gig - who cares...
If Boeing will take the risk the banks are happy to fund, local airlines - well the banks will be nervous. Every other consideration is either imposed by regulation or of no interest at all.
If you can get 70 airframes for five years in a way that means that you just have to borrow a nubbin of cash and then make regular payments that's what you will do. All your actual money can go to the shareholders and exec compensation. If the business (airline) folds the airframes go back to Boeing and you go on to the next gig - who cares...
If Boeing will take the risk the banks are happy to fund, local airlines - well the banks will be nervous. Every other consideration is either imposed by regulation or of no interest at all.
Core competency is a reminder, otherwise you start doing things like making your own chat system and word processing software when you should be just buying slack and google workspace while you are a B2B database company.
Kelly Johnson of Lockheed (designer and PM for record breaking aircraft) had a very strong position on core competency. It had to be protected and advanced at all costs.
Yeah they did the correct thing, only to get their airplanes falling like apples.
Airplanes falling like apples isn't a bad thing; the only bad thing is delivering poor shareholder value. If some planes crash as a result of improved shareholder value, that's fine. Just ask the FAA (or just look at how the FAA "punished" Boeing for these failures that cost the lives of hundreds).
Apparently for some people the correct thing is profit over safety/quality which is quite sociopathic and the cancer that is killing our society.
Agree with #1. Number #2 should be qualified: Good for Wall St and Boeing execs, at the expense of everyone else.
Then State House Rep Reuven Carlyle was the point person for negotiating WA state's $11.4b (?) tax breaks for Boeing. With non-binding terms like agreeing to create jobs. Boeing's negotiators completely lost their shit when Carlyle tried to add good government amendments like transparency (to the public) about the actual monetary value of tax breaks.
Similar to the US Sen Al Franken's inside baseball version of wrestling with corporations over the mergers of telecoms & cables. The corps demanded all, conceded nothing, had no intention of honoring their promises, completely lost their minds when Franken tried to get future promises in writing.
The USA is a Corporatocracy. Partisanship, culture wars, moral panics, food fights, etc. all serve to obscure that central fact.
Then State House Rep Reuven Carlyle was the point person for negotiating WA state's $11.4b (?) tax breaks for Boeing. With non-binding terms like agreeing to create jobs. Boeing's negotiators completely lost their shit when Carlyle tried to add good government amendments like transparency (to the public) about the actual monetary value of tax breaks.
Similar to the US Sen Al Franken's inside baseball version of wrestling with corporations over the mergers of telecoms & cables. The corps demanded all, conceded nothing, had no intention of honoring their promises, completely lost their minds when Franken tried to get future promises in writing.
The USA is a Corporatocracy. Partisanship, culture wars, moral panics, food fights, etc. all serve to obscure that central fact.
There's an entire paper about why this is nonsense, written by someone AT Boeing, 23 years ago.
https://www.documentcloud.org/documents/69746-hart-smith-on-...
https://www.documentcloud.org/documents/69746-hart-smith-on-...
GP was being sardonic.
Isn't their core competency supposed to be building airplanes?
Note: Alan Mulally, CEO of Boeing, was briefly in the running for CEO at instead of Satya. Just shocking to think how bad a choice that would have been.
* https://www.businessinsider.com/alan-mulally-as-microsoft-ce...
* https://www.businessinsider.com/alan-mulally-as-microsoft-ce...
Very interesting, I had no idea.
After all these years, I'm still stunned that Microsoft got a new CEO who didn't run it into the ground. They used to make so many bone-headed decisions at the top levels.
After all these years, I'm still stunned that Microsoft got a new CEO who didn't run it into the ground. They used to make so many bone-headed decisions at the top levels.
They were comically thin skinned in the Ballmer era. My boss used to have us flaunt MacBooks and iPhones when we would have senior MS execs come in to get yelled at or for a hard negotiation.
They’d get visibly agitated. It was funny.
They’d get visibly agitated. It was funny.
They did but running it into the ground they did not. Questionable business practices sure, but they were successful.
I'm still amazed they ended up with 0% market share in mobile phones. That took a some effort, considering they had Windows CE and Windows Mobile for years. Then Windows Phone, and they kept changing the APIs with every release so that nothing was ever backwards compatible. In a CMD shell I still have to use the goddamned backslash because of slavish compatibility with CP/M from 1974, but on the phone they create an incompatible set of APIs with every release. Congratulations, guys, well done.
Bad? That would have been a great choice! I wish I could see the parallel universe where Mulally became CEO of Microsoft. Even better, it'd be nice to see him as CEO of Apple.
I don't think this will change until Boeing's compensation committee cuts pay and bonuses for their execs. Even then they'll just move on to the next corporate job and the new execs will negotiate bonuses based on improving metrics which can be gamed.
In the mean time airlines are stuck with Boeing planes (at least part of) the public thinks of as ticking time-bombs. Some (many? most?) are stuck with planes that they've sunk a fair bit of cash into. Or, more likely, the airlines' corporate parents own a company that owns planes that leases them back to the operating airline for tax reasons. And while that might seem to reduce pressure on the carriers, it's unlikely their corporate parents will want to walk away from that investment.
The last time we had a problem with the 737-900 MAX's, Alaska started flying Airbusses. This time my monthly SEA -> SJC flight is on an Embraer. This can't be good for anyone (except Airbus and Embraer.)
Maybe it's time for corporate America to get serious and only pay the c-suite bigbux if they don't destroy the company.
In the mean time airlines are stuck with Boeing planes (at least part of) the public thinks of as ticking time-bombs. Some (many? most?) are stuck with planes that they've sunk a fair bit of cash into. Or, more likely, the airlines' corporate parents own a company that owns planes that leases them back to the operating airline for tax reasons. And while that might seem to reduce pressure on the carriers, it's unlikely their corporate parents will want to walk away from that investment.
The last time we had a problem with the 737-900 MAX's, Alaska started flying Airbusses. This time my monthly SEA -> SJC flight is on an Embraer. This can't be good for anyone (except Airbus and Embraer.)
Maybe it's time for corporate America to get serious and only pay the c-suite bigbux if they don't destroy the company.
Embraer isn't competition for Boeing or Airbus; they only make very small regional jets, nothing even close to the size of a 737 let alone one of the larger jets.
Blaming "outsourcing" sounds like passing the buck.
The MCAS software debacle and penny pinching walk-back on the MCAS remediations shows that the rot has set in within Boeing.
The MCAS software debacle and penny pinching walk-back on the MCAS remediations shows that the rot has set in within Boeing.
See also early (1960s) CAD/CAM saving a Boeing project in https://inria.hal.science/hal-01526813/document
> “I just can’t get the wing data to match the body data, and time is no longer on my side.” “Show us your wing data. Hey where did you get this stuff?” “From the body project.” “But they’ve given you old data; you’ve been trying to fit an old wing onto a new body.” (The best time to make a design change is before you’ve actually built the thing!) An hour later life was restored and the 727 became a single numerical entity.
> “I just can’t get the wing data to match the body data, and time is no longer on my side.” “Show us your wing data. Hey where did you get this stuff?” “From the body project.” “But they’ve given you old data; you’ve been trying to fit an old wing onto a new body.” (The best time to make a design change is before you’ve actually built the thing!) An hour later life was restored and the 727 became a single numerical entity.
A lot of people blame the current toxic culture on the McDonnell Douglas merger that happened in the late 90s.
One of the reasons that merger needed to happen though, was that Boeing didn't know how to be profitable in a non-government regulated market (post deregulation of the airlines).
It's easy to make well engineered planes when the government has a hand in guaranteeing you good profit margins and you don't have to worry too much about costs.
One of the reasons that merger needed to happen though, was that Boeing didn't know how to be profitable in a non-government regulated market (post deregulation of the airlines).
It's easy to make well engineered planes when the government has a hand in guaranteeing you good profit margins and you don't have to worry too much about costs.
A parallel discussion here: https://news.ycombinator.com/item?id=38978705
Ken Thompson in the most recent Sharp Tech podcast also talked about the management style of Boeing after their merger with McDonnell Douglas. They mentioned that when Boeing's HQ was still in Chicago, their CEO boasted that the HQ was thousands miles away from Seattle so that the management didn't have to get involved in day-to-day operations. This is just staggering how arrogant Boeing's the executives could be. Contrasting this with how old Boeing worked, how old Lockheed worked, how Elon Musk worked. No wonder Boeing has been in decline. It's just sad that so many talented engineers are stuck in this monopoly, when they could've leave the company and build something groundbreaking. For that matter, I feel extremely lucky that the IT industry have had a bustling culture of startups, so corrupted companies can die and new companies can innovate. I also feel extremely sad that how aviation industry has become complacent and ossified. I also worry that the US's industries are going the British way, as how British government forced their auto industry to consolidate many years ago, ending up destroying their the entire auto industry.
Indeed years - Al Jazeera 2014 documentary / exposé:
https://youtu.be/rvkEpstd9os?si=YdVyOoYTNKkPBn6w
https://youtu.be/rvkEpstd9os?si=YdVyOoYTNKkPBn6w
[deleted]
This is what happens when the people who build the world we all live in are contravened by people who think they run the world we all live in.
I just love how we can have a critical study about a failure that could have possibly led to the death of dozens if not 100+ people, a failure in something as routine and critical as flying in an airplane, and the article is behind a paywall.
We're getting very close to the point where the combination of the competency crisis and the greed crisis are going to start causing more people to think twice about doing things that were once common, like flying commercial.
Personally, I cancelled my flight later this month and am going to start getting in the habit of doing long road trips again.
Just-as-if-not-more dangerous? Maybe, but at least I have a higher chance of my fate being in my own hands (swerving out of the way of an oncoming truck vs being sucked out from a fuselage plug failing).
More inconvenient? Yep, don't care.
More expensive? Maybe, don't care.
We're getting very close to the point where the combination of the competency crisis and the greed crisis are going to start causing more people to think twice about doing things that were once common, like flying commercial.
Personally, I cancelled my flight later this month and am going to start getting in the habit of doing long road trips again.
Just-as-if-not-more dangerous? Maybe, but at least I have a higher chance of my fate being in my own hands (swerving out of the way of an oncoming truck vs being sucked out from a fuselage plug failing).
More inconvenient? Yep, don't care.
More expensive? Maybe, don't care.
[deleted]
Seems like a really good case study in how complex engineering technologies become unknowable overtime and this leads to a collapse as understanding of the core product declines.
Boeing's competitors seem to be doing just fine. Rather, this is a clear case of poor management leading to a degraded engineering culture.
Boeing just has one big competitor in the civiiian space and it would be really interesting to know what management and organizational differences exist. Because Airbus is known to be pretty complex too in terms of manufacturing in different sites with staff speaking a dozen languages and so on. Are they doing the same thing better or something fundamentally different (such as outsourcing merely distributing work among their own facilities)?
We could label that the 'Mad Max' theory of how safely building airplanes inexplicably became arcane lost knowledge...
Anyway in reality, look at how post-merger, McDonnell Douglas’s professional managers hollowed out Boeing’s legendary engineering. And the stock market cheered that.
Anyway in reality, look at how post-merger, McDonnell Douglas’s professional managers hollowed out Boeing’s legendary engineering. And the stock market cheered that.
Can someone explain why the tiny risk of death associated with Boeing's safety issues matters at all compared with the far greater risks that we take for granted (driving, etc.)?
I don't get it. It seems like we all make riskier tradeoffs whenever we buy a used car instead of a newer, safer one, or when we buy a slightly less safe new car instead of the safest new car. By not spending more on a safer vehicle, we're saying that we're willing to trade a certain amount of savings for a certain amount of risk.
How much more are we willing to spend to make aviation safer, when it's already so much safer than driving?
One argument I've seen on HN is that most car accident deaths are preventable by a responsible driver, while passengers have no control.
Ok, even if 99% of car accident deaths were preventable, that leaves 1% that are unpreventable. 1% of the ~35,000 car accident deaths in the US each year = 350.
Compare that to ~zero commercial aviation deaths/year in the US over the last decade or so. Source: https://injuryfacts.nsc.org/home-and-community/safety-topics....
If we include Boeings 737 MAX overseas deaths, that adds ~350 deaths. https://en.wikipedia.org/wiki/List_of_accidents_and_incident...
Which doesn't seem to change the picture.
I don't get it. It seems like we all make riskier tradeoffs whenever we buy a used car instead of a newer, safer one, or when we buy a slightly less safe new car instead of the safest new car. By not spending more on a safer vehicle, we're saying that we're willing to trade a certain amount of savings for a certain amount of risk.
How much more are we willing to spend to make aviation safer, when it's already so much safer than driving?
One argument I've seen on HN is that most car accident deaths are preventable by a responsible driver, while passengers have no control.
Ok, even if 99% of car accident deaths were preventable, that leaves 1% that are unpreventable. 1% of the ~35,000 car accident deaths in the US each year = 350.
Compare that to ~zero commercial aviation deaths/year in the US over the last decade or so. Source: https://injuryfacts.nsc.org/home-and-community/safety-topics....
If we include Boeings 737 MAX overseas deaths, that adds ~350 deaths. https://en.wikipedia.org/wiki/List_of_accidents_and_incident...
Which doesn't seem to change the picture.
As long as you're comparing cars and air travel, I'll point out that the aviation industry lies with statistics when they present the numbers.
When comparing safety within aviation, they talk about deaths per departure.
When comparing safety between aviation and cars, they suddenly change their metric and talk about deaths per mile, making aviation look much better.
I'm not saying aviation is worse than cars if you do a fair comparison; I haven't done the math. Maybe it's still better. But still they are fudging things in their own favor.
When comparing safety within aviation, they talk about deaths per departure.
When comparing safety between aviation and cars, they suddenly change their metric and talk about deaths per mile, making aviation look much better.
I'm not saying aviation is worse than cars if you do a fair comparison; I haven't done the math. Maybe it's still better. But still they are fudging things in their own favor.
per departure comparison makes sense if the risks are concentrated in things that are 1:1 with departures. https://accidentstats.airbus.com/statistics/accident-by-flig...
Comparing different operators within aviation, using a rate per departure makes sense I think.
Comparing different operators within aviation, using a rate per departure makes sense I think.
Because people are emotional and don't respond to statistics like that. 2 planes crashed over a single, critical software usability defect. Now Boeing is a complete trash company and is doing many things wrong. Airbus is perfect and does nothing wrong. With such a small sample size, it could very well be that Airbus is much worse than Boeing. But that's just not how people will perceive it. These businesses know that and know they need absolute perfection.
There are many news articles about Boeing's shoddy manufacturing quality out there, that have nothing to do with software, and they already got many times in trouble with the regulators for it.
> One argument I've seen on HN is that most car accident deaths are preventable by a responsible driver,
A false argument that keeps getting pushed in the US despite being false.
You are right but the solution is not to say 'Boeing is fine' but rather, the way driving is treated is fucking batshit insane crazy.
A false argument that keeps getting pushed in the US despite being false.
You are right but the solution is not to say 'Boeing is fine' but rather, the way driving is treated is fucking batshit insane crazy.
because a plane falling out of the air has much larger potential for distruction than car running into another.
Because its easier to regulate 30,000 planes owned by a few dozen airlines made by a handful of manufacturers, than it is to regulate over a billion cars owned and maintainted by hundreds of millions of drivers and made by hudreds of manufacturers.
Because its easier to regulate 30,000 planes owned by a few dozen airlines made by a handful of manufacturers, than it is to regulate over a billion cars owned and maintainted by hundreds of millions of drivers and made by hudreds of manufacturers.
You want KFC for dinner.
Down the street are 2 different KFCs.
One uses oil that sometimes, a very small percentage of the time, will instantly kill you. The other does not. They arrived at using the riskier oil because it saves them 5c a day and it makes the books look better.
Are you really asking why anyone would even bother differentiating these two because the drive to the KFC carries more risk?
Why would you as a consumer want to fly on something with an ever worsening safety record?
Why would you as an airline want the bad press, loss of revenue, and loss of reputation associated with a safety incident?
Down the street are 2 different KFCs.
One uses oil that sometimes, a very small percentage of the time, will instantly kill you. The other does not. They arrived at using the riskier oil because it saves them 5c a day and it makes the books look better.
Are you really asking why anyone would even bother differentiating these two because the drive to the KFC carries more risk?
Why would you as a consumer want to fly on something with an ever worsening safety record?
Why would you as an airline want the bad press, loss of revenue, and loss of reputation associated with a safety incident?
If the danger KFC is closer and chance of instant oil death is low enough, I would go to that one.
And to answer your second question, I would fly on the airplane with the worsening safety record if its other characteristics made up for it (price, timing, etc).
Why would an airline want the bad press, reputation effects, etc? That's a circular question to mine. My question was: why do people care so much about this minuscule increase in a minuscule risk? I agree that the game theory of such caring about caring (https://en.wikipedia.org/wiki/Keynesian_beauty_contest) makes sense, but I still wonder why HN readers care about it as individuals, not as Boeing execs.
And to answer your second question, I would fly on the airplane with the worsening safety record if its other characteristics made up for it (price, timing, etc).
Why would an airline want the bad press, reputation effects, etc? That's a circular question to mine. My question was: why do people care so much about this minuscule increase in a minuscule risk? I agree that the game theory of such caring about caring (https://en.wikipedia.org/wiki/Keynesian_beauty_contest) makes sense, but I still wonder why HN readers care about it as individuals, not as Boeing execs.
That would be very foolish because the tiny, known chance of death may just be the tip of the iceberg.
Boeing delivered planes with loose bolts. If you bought a car with loose wheel bolts you would be upset. Cars are a much larger industry than aeroplanes and instead of “groundings” they have “recalls”, sometimes in the millions.
Right, sorry for the poor choice of words. I agree with the groundings, I'm just surprised by the enormous response in the popular press and HN.