There are many issues with Boeing management today (I used to work there so I love flaming them as much as anyone), but it's hard for me to imagine how any aircraft company could avoid this. All aerospace employers are laying off (or furloughing) workers by the thousands:

Airbus: https://www.reuters.com/article/us-health-coronavirus-airbus...

Bombardier: https://www.huffingtonpost.ca/entry/bombardier-layoffs-quebe...

Gulfstream: https://www.wtoc.com/2020/05/04/gulfstream-lays-off-employee...

No word from Embraer yet, but since their deal with Boeing fell through, I imagine it's only a matter of time.

While I have no doubt Boeings business has been cyclical, many of the problems they face today can also be attributed to bad management.

These problems can be linked back to when Boeing merged with McDonnell Douglas, resulting in it's loss of engineering focus:

https://www.msn.com/en-za/money/news/how-the-mcdonnell-dougl...

If you read the wiki page for McDonnell Douglas it reads a lot like the modern day Boeing:

https://en.wikipedia.org/wiki/McDonnell_Douglas

This gives a hint as to how that merger help to infect Boeing (no pun intended) with it's current bad management culture.

https://www.newsweek.com/boeing-airlines-under-fire-90-billi...

Step 1: Give billions in stock buy backs and ask for billions in tax cuts

Step 2: Demand that taxpayers to bail you out in a recession

Step 3: Repeat

Edit: To clarify one could argue Boeing's problems are due to COVID-19 infections not due to a MD infection.

- Infect-being

- In fact being

- Etc.

Thanks for the help.

It seems like retaining people instead of hiring up a bunch of new people and possibly losing some of your best people would be a better approach.

Sure, the other guys might get ahead of you a bit during the boom times, but you'll get a good jump during the bust and be much better positioned to take advantage of the next boom.

You hit the nail in the head. When it rains, the moneyfolk want to hoard as much cash as they can (shareholders gotta buy that new Porsche).

It's like temporary employment in hotels and restaurants during summer in touristic places.

Only the cycle is 8y/2y (up/down) in the decade) of 4mo/8mo (up/down) in the year.

Do the cyclic layoffs generally occur right when they're supposed to be building hundreds of planes? I think what's unusual about this round of layoffs is that it was caused by all their orders being cancelled.

If Boeing isn't alarmed by this situation -- if they chalk it up to an historic pattern -- I think that in itself is a sign of bad management.

https://newrepublic.com/article/154944/boeing-737-max-invest...

Matt Stoller also talked about this cultural shift that enabled Boeings problems in an article a year ago.

https://mattstoller.substack.com/p/the-coming-boeing-bailout

I also wonder if there are similar accounts of the same happening in other companies.

Also, despite the narrative, it may very well have already been the case that Boeing's culture was going down the gutter, its acquisition of McDonnell Douglas a reflection of that rather than the root cause.

EDIT: Here's a 2002 article that suggests it was all of these phenomena--disproportionate leadership roles, a claim to cost control expertise, a skittish board, and evolving business strategies. https://www.seattlepi.com/business/article/Hard-nosed-Stonec... Some former McDonnell Douglas executives, like Boeing President and COO Harry Stonecipher, were well placed to take control when the inevitable cash crunch happened. Stonecipher replaced the Boeing CFO with a GM executive. See also this contemporaneous 1998 article describing the same event: https://archive.seattletimes.com/archive/?date=19980715&slug... That article says it was Stonecipher and the board chairman, Phil Condit, who forced the CFO out for his overly conservative accounting. Condit, AFAIU, was also CEO at the time and had been CEO of Boeing prior to the McDonnell Douglas merger. In fact, Condit led multiple acquisitions before MD, which suggests to me he and Boeing were already following the "acquire rather than innovate" playbook.

>In the eyes of many Boeing employees, McDonnell Douglas executives seemed to do disproportionately well out of the merger: Many were given senior positions following the acquisition, with the company’s head, Harry Stonecipher initially appointed chief operating officer and holding more than twice the number of shares in the company as Condit, who remained CEO. Stonecipher and John McDonnell, formerly the chair of McDonnell Douglas’ board, were now the two largest individual shareholders of the merged companies."

In a 2007 interview, Ron Woodard, the former president of Boeing’s Commercial Airplane Group, bemoaned the changes the merger brought with it. “We thought that we’d kill McDonnell Douglas and we had it on the ropes,” he said. “I still believe that Harry outsmarted Phil and his gang bought Boeing with Boeing’s money."[1][2]

[1] https://qz.com/1776080/how-the-mcdonnell-douglas-boeing-merg...

[2] https://outline.com/gDseXY

It's just the virus.

I have a pet theory that a large portion of the decay in our society can be traced back to the layers of abstraction between stakeholders and the things (and people) they have power over. Usually this kind of thing doesn't happen before a company has gone public.

One of the points it makes is that shareholders have very little power in practice, as even if you own a million dollars of Apple shares, that's only 0.00007% of the company. Not exactly enough to force through a motion on your own.

And if you think you'll build up a coalition to get a majority? Good luck doing that when you can't even find out the names of other shareholders.

Minority shareholder lawsuits? They're actually a negligible force; rare, unlikely to succeed, and low impact even when they do.

And that's without getting into 'preference shares' that grant CEOs outsized voting rights.

The book argues management can neglect shareholders' interests with impunity for these reasons.

This is almost worse, because it very explicitly cares only about the short-term price. It's also a much harder problem to solve, because you can't just tell those people "think long-term and ethically when you're exercising your impact on the marketplace!". No matter how ethical they may be as individuals, most of them probably don't even know which companies they have stakes in, much less whether those companies are heading in the right direction!

While they might be implicitly in your first group, attending significant meetings AND ensuring long term growth are primary responsibilities.

There is no short term price in stocks. Stocks are valued at their perceived long term value. If shareholders suspect a company is sacrificing the long term for the short term, they're going to dump the stock until the price of it drops to reflect that.

This also implies that if you can reliably detect that a company is eating its seed corn before everyone else does, you can make a mint shorting it.

Hogwash. Pretty much every company on the S&P 500 dropped 30% around March. Did their perceived long-term value change 30%? I doubt it. I think most people were fully aware that most companies in the S&P's 10 year value wasn't going to change much; certainly not 30%. Yet, it dropped 30%. And then the next month it has risen back up to about 10% of its all-time high. I don't think people seriously thought that Apple, Coca-Cola, Pepsi, etc. suddenly dropped in value 30% and then suddenly rose 20% (yes, I know, technically it was more). If you can have swings of +/- 30% over a period of two months, I don't think the value is reflecting the long-term prospects.

There is both short-term AND long-term pricing in stocks. "In the short-run, the market is a voting machine. In the long-run, the market is a weighing machine." Ben Graham

Price volatility is an indication that either economic conditions are changing rapidly which affects the long term prospects, or that people are very unsure about what the long term prospects are.

It is not an indication that companies are being rewarded for eating their seed corn.

BTW, years ago, I knew a CEO who believed in manipulating the accounts to boost the short term at the expense of the long term. He made the mistake of telling the press he was doing this. The stock immediately tanked.

If the short term pricing theory was correct, the stock would have risen.

Then we have companies like Amazon, who explicitly say they are sacrificing short term profits for long term growth. The result? The stock price has soared to incredible heights.

Double hogwash. That pricing reflected that people suddenly needed cash right now and was irrespective of what anyone thought about long term value. I will bet most of the sellers bitterly regretted it but saw no option but to sell at whatever price they could get because they had urgent immediate needs.

And it shouldn't be. The board has only 24 hours in a day, not remotely enough time to debate every motion from every shareholder.

However, as a shareholder, you can dump your stock, which does send a message when many shareholders do this.

Indeed - but brundolf laments about the lack of shareholders "bothered with [Boeing's] nuances or long-term health" and having only a single one-bit message is not conducive to nuance.

But I wonder at what point you have to draw the line and quit excusing any and all behavior as the result of misaligned incentives, and simply hold people morally and ethically accountable for the choices they make?

The human conscience doesn't do very well with abstractions. The further removed someone's actions are from the damage caused down the line, the weaker that moral signal gets. If we want to improve our society, we have to be realistic about these things and design our institutions to buttress against them.

Sure, it only works if the people in question care about your opinion, but building consensus on what acts should be shunned only takes about a generation and a half. Segregation, dog fighting, the list is long. If we really think this is bad for society (and I do) then shrugging and talking about incentives isn't the way forward. Especially in the absence of a mechanic to actually change those incentives.

Your statement is contradictory, incentives are what hold people accountable.

There are plenty of buy-and-hold shareholders investing in bluechips.

My pet theory is a specific instance of yours: MBAs wielding spreadsheets (and, more generally, analysts wielding databases) is the abstraction layer.

Particularly in the case of stock indexes - where a single company with a $xxT poorly written contract could wipe out the entire index and everyone who held it.

"Company A agrees to purchase for $1000 each product offered by company B which meet the specifications provided".

And Company B finds that the spec says "A quartz crystal between 1um and 1mm in diameter".

So company B goes and finds a beach, full of sand, calculates there are 1 billion grains of sand in each cubic meter of the beach, and the beach is 50m long, 50m deep, and 50m wide. Total amount is 50 * 50 * 50 * 1 billion * $1000 = $125 quadrillion.

Far more than all the money in the world.

That bankrupts the company, but since there is no liability limit, it bankrupts every other investor. Even if you have 0.0001% of the company, you're still bankrupt.

If you have insurance, the insurance company is bankrupt, and you're still on the hook for whatever remains, which bankrupts you too.

Edit: ah, I should've been more specific about that. Still, I didn't say anything about the liability being unlimited.

Contractual liability is a thing...

It's not about leverage it's about taking time and figuring out what you are investing in. Everyone wants the free ride of "investing" nobody actually wants to pick stocks by doing research into which companies have sustainable businesses and good governance.

closet indexing while charging high fees is the most common

starting a bunch of different funds, and then when one of them outperforms by chance, marketing that one as the one is another.

Entrepreneurial capitalism was a constellation of small private enterprises, often family-owned. Managerial capitalism is characterized by the dominance of firms publicly traded on capital markets, and managed by professional managers who are often distinct from the shareholders.

Entrepreneurial capitalism, I believe, better aligns incentives by combining the shareholder and manager role. It also reduces dependence on capital markets, which can become a single point of failure during a financial panic. Lastly entrepreneurial capitalism makes coordination between competitors less likely, whereas such coordination is embraced by the mergers and acquisitions arms of banks in a mangerial capitalist system quite openly.

The only advantage of managerial capitalism is scale. Pooling capital in public markets permits massive economies of scale and their efficiencies.

Nowadays, well, you got your Bezos and you got your Uber...

Where modern capitalism falls down is complexity. There's 3 (non-niche) desktop operating systems, for example, and way more than 3 attributes that consumers care about in a computer. Or cars, or TVs, or airplanes, or anything else that costs more than $20. There's simply not enough levers by which consumers can send any meaningful signal through the market to producers. This breaks the Invisible Hand.

You're shooting the messenger when the core issue is that Boeing, like all publicly traded companies do not have medium to long-term views for their business. It is always quarter-to-quarter. That is what management is judged on, because their job and their compensation is tied to maximize shareholder returns.

Why do people keep repeating this garbage over and over and over? It just isn't true.

Amazon literally didn't make profits for 10 years. Many other tech companies haven't made a cent yet, but investors are looking 5-10 years into the future for those.

Some businesses just make bad decisions, others make good decisions. Overall the free market/public corporation system is a resounding success. Just because boeing messed up doesn't say anything about the rest of the system.

We don't have a free market. The market is not allowed to implode. Mega corporations and banks are not allowed to fail. Boeing is not allowed to fail, and that fact, more than anything else, explains why they are such a poorly run company. Where you see a "resounding success" I see an absolute failure that is closer to a scam or a ponzi scheme than a legitimate system.

Boeing didn't take the money anyways, so I don't know why people are so riled up about it.

The defense part of Boeing used to be a separate company (McD). DoD could easily let commercial fail and spin out McD again, or just shrink to defense only. For a long time, Airbus has claimed that the DoD spending subsidizes the commercial side. So TBH, letting commercial fail would result in more bang for the DoD buck.

Regarding military activities, I don't doubt that there are engineering synergies between commercial aviation and military aviation. However I've always heard that from a commercial perspective the two are at odds: for a defense organization you want to make sure to keep as little cash on hands, as it's fairly easy to ask for more. There are always scope changes, delays and shit happening. The last thing you want is to have a war chest that your customers will ask you to tap in to cover the costs of contradictory requirements, feature creep and original underbidding to win the contract. See the A400M as an example: the civil side of Airbus is coughing up quite a lot of cash for that clusterfuck.

On the other hand, developing civil airliners requires cash. A lot of cash. You can't ask American Airlines to cough up some extra cash because your 787 is delayed and is costing more to produce than anticipated. In fact the opposite is true: because your 787 is delayed, your customers will pay much less, and only when you can actually deliver the product (for the most part). Bombardier didn't have pockets deep enough to sustain the CSeries...

What a deal!

Yet for some reason, nobody's buying from the stores that are open.

So the mass layoffs are just a mirage, and not a failure at all, are they?

Yeah, and they caught never-ending flak for it until AWS starting turning a profit and eventually dragged Amazon into the black. Amazon was/is the exception, not the rule.

Amazon went public in 1997. Boeing went public in 1962.

You get leeway as a young-ish public company, which will expire once you are an established player. How do you think markets are going to react if the bottom falls out of Amazon's business in 2055?

Long range plans get re-evaluated periodically because things change, both technology and markets but I have never experienced them being either ignored or thrown out in pursuit of the quarterly 'numbers.'

That said, if your senior management doesn't understand all aspects of your product value, they will make poor choices both in the short term and for the long term.

I would imagine that it is easy to push a narrative that execs are greedy, short sighted and barely competent. I would imagine this can be true, but more than likely its a bunch of factors that aren't public that led to less than optimal decision making.

You can't even build a factory in a quarter.

In reality larger companies usually prosper for many decades, because they do plan long term.

Boeing's stock is up on the news. Lost jobs = lower payroll = improved cash flow. That's the bottom line. Shareholders couldn't care less how you arrive there, just that you do.

Clearly there are some downsides, but managing them via laws and regulations is possible.

Of course, those are both ridiculous extremes - the answer to what balance is healthiest for an economy I'm sure is immensely complicated. I'm just saying that efficiency doesn't come without costs, and we shouldn't design our entire economy completely around the interests of shareholders of major corporations.

That said, I have serious doubts that everything can be automated as that suggests all human labor would be providing zero value.

I am guessing aircraft manufacturing is going to severely depressed in the medium term. Customers are delaying deliveries, canceling orders etc. Demand will likely not return to pre covid levels in even one year. Even if it does, airlines are not in any financial position to make significant purchases for few years. On top of it 737-MAX issues and resulting hold in manufacturing of that line has not left Boeing in a great shape.

- golf buddy convinces CEO of well-run software shop: your company is way too inefficient "your per-employee ratios are off the charts low!"

- golf buddy gets hired as Chief Strategy Officer, hires a bunch of high paid underlings

- they decide the freeze wages, reduces bonuses, reduces benefits for software engineers. Lots of savings to show! (unless you also count inflated salaries of new management)

- Software engineers demoralized, best ones move on to better jobs, adverse selection, more demoralization

- Golf buddy hires more project managers -- because obviously the answer to underpaid SWEs is to hire more managers. Beatings will continue until morale improves.

- Now the company really does have bad metrics. Decisions are made to offshore half the staff -- save 30%, but increase work for onshore staff. Offshore staff is great, but at a disadvantage due to distance and not having context/proximity to business.

- Golf buddy hires product managers to better define specs, more project managers to produce more reports.

- Gold buddy, his friends, ride off with their big paychecks to spoil the next company

Been there, been done like that.

They are saying, clearly: don't let the accountants run the business.

This is so completely not true. Worked with the Finance Dept heavily at my last job. The accountants keep track of the expenses, and make sure everyone is sticking to the budgets...but the accountants don't make the budgets. Management does. The accountants are the ones making sure that the company can actually pay for everything.

To an accountant, a drop in costs is as valuable to the business as a rise in revenue.

This is also false. To an accountant, a drop in costs is literally the exact opposite of a rise in revenue. (For comparison, it would be like saying that to a software developer having a more powerful computer is the same as writing your software to be more efficient.) A drop in costs is only valuable to the accounting team if there's not enough money to pay for everything, because then the drop in costs makes it possible to pay for more of the bills that the rest of the company incurs. The Finance Dept would absolutely prefer to see more revenue over a drop in costs, because revenue is repeatable and sustainable, while reducing costs is not.

Management are the folks that only cares about the bottom line regardless of how it's reached.

Blame management.

By "blame accountants" the OP was referring to management being accountants. Nobody sincerely believes that accountants have the power to do layoffs, but managements that were previously accountants won't see the long term destruction in value, only the short term profits.

Perhaps this is why accountants and MBA types run businesses and software devs continue to just develop software for their bosses. You know, the ones who understand business more deeply. Because that's what they do. To misappropriate Sorkin: if software devs are so fucking smart, how come they lose so goddamn always?

They were engineers.

Yes, the guys who had the bright idea to just cut R&D and all capital investment were engineers, not accountants.

It is easy to get caught in a trap thinking heavily about money. When thinking about things we own, the emotion and fear centers are aroused far more than when we think about other people. To avoid this, I believe our society must be trained away from neoliberal and 'greed is good' thought.

Blaming people for this state of events, or the addictive qualities of facebook, or the dangerous misinformation spread designed to take advantage of cognitive flaws of the human mind - these practices will get us nowhere. One thing that businesses started doing right was the blameless postmortem.

Find the problem, fix it. Move on.

There's a lot of companies out there that just throw some more hardware at a problem.

Most shares belong to 401k retirement accounts of the middle class.

Who is looking out for them? Not the CEO and I don’t think the board either. You need to have a lot of shares before you have an influence.

[0] - https://www.issgovernance.com

As a result, some of that voting is running - literally - on autopilot, see https://www.issgovernance.com/solutions/proxy-voting-service... and https://corpgov.law.harvard.edu/2018/11/29/the-realities-of-...

Some fund companies commit to following ISS advice across the board or on certain topics. Others like Vanguard delegate the voting power to fund managers (who have access to ISS reports but aren't obliged to follow it slavishly).

Do you have any evidence that “accountants” made this decision? Or that COVID is merely an excuse?

It is blindingly obvious that Boeing has been quite adversely affected by this pandemic and that global travel is unlikely to return to normal levels for at least 2-3 years. No amount of extra spending on R&D or product engineering is going to save your airplane company when people don’t want to get on the plane.

Boeing lost their way in the 90s when the MD merger turned them into an accountant-managed company whereas they were previously engineering-managed. The resulting 737MAX disaster is the main source of their problems today, not COVID.

(McDonnell's Stonecipher was an engineer that rose into management ranks and was the one that thought up the brilliant idea to just cut costs regardless of the consequences.)

See, for example, Juicero, Bird, Boosted, Magic Leap, Theranos, etc.

However, some of your examples aren't great IMO. Theranos should have been ONLY R&D, as it was never a product that was ready to bring to market. Same with Magic Leap.

I think also due to Boeing's business of making tin cans move hundreds of miles of hour thousands of feet in the air, means the engineering department should be their primary focus as well, thus all the outrage at the company.

It's received wisdom that MD did a reverse takeover of Boeing, that Condit got snookered by Stonecipher.

Have many friends, family, neighbors who've worked at Boeing, from 1960s thru this year. This version of the post mortem is a good starting point.

https://www.theatlantic.com/ideas/archive/2019/11/how-boeing...

Hutzpah is begging the court's leniency, claiming to be an orphan, after murdering one's parents. Or eating the seed corn and then being surprised by the famine.

You get the idea.

I have zero sympathy for the wrecking crew who destroyed an American icon and rage on behalf of all the workers, families, and taxpayers who paid the price.

Do more with less, learn how to solve hard problems so you don't have to pay other people who maybe won't actually fix those problems.

The sudden shift in staffing comes from the sudden shift in demand.

Demand for planes has cratered due to COVID. That's a 100% valid reason to cut jobs, not an "excuse".

Many studies show that private equity owned companies, which typically run businesses the leanest, actually perform better.

Also:

>Public-to-private buyouts involve greater leverage and bankruptcy risk but few advantages in financial returns, at least in recent decades. Private-to-private buyouts appear more likely to create value by relaxing financial constraints and improving management practices.

Public-to-private buyouts are generally the ones people get angry about, and it seems that they're economically bad in addition to the social consequences. I don't think people generally object to one private equity firm buying from another.

https://news.ycombinator.com/newsguidelines.html