I've heard that my whole life. If that were generally true, company stocks would be going steadily downwards.
[1] Power Failure: The downfall of General Electric - >>44102034 - May 2025
[2] Fatal Recklessness at Boeing Traces Back to Long-Standing C-Suite Greed - https://www.thenation.com/article/politics/boeing-corporate-... - April 9th, 2024
[3] HN Search: Boeing - https://hn.algolia.com/?dateRange=all&page=0&prefix=false&qu...
Companies have life cycles. They grow until they become unable to function efficiently anymore, then they go down.
It's not about prioritizing short term results.
> Boeing consistently went up for many decades prior to the MAX crisis. So did GE.
The point is they could have probably kept going up if they hadn't done that.
It's like how if you choose to eat your seed corn, you'll be fat and happy for a season, then you and your family will certainly starve to death next year. You'd most likely had lived if you hadn't made that short-term decision.
> Companies have life cycles. They grow until they become unable to function efficiently anymore, then they go down.
And how often are the "life cycles" really just the accumulation of bad short-term decisions catching up with the company?
You can kludge and kludge and kludge, but eventually that makes the app unmaintainable. Then you're in "total rewrite" or go under territory.
No company goes up forever. They all eventually strangle themselves with bureaucratic inefficiency.
So they should act to strangle themselves faster? It feels like your reasoning is equivalent to, "Eventually you'll die, so there's no point taking care of your health. Go save money by avoiding the doctor, take up smoking, and eat junk food all the time."
Boeing was forced by courts bolster safety, compliance, and quality programs as well as admitting to conspiracy to thwart FAA oversight. I don’t know about you, but my experience is that when companies undermine those types of oversight, it’s almost always due to schedule and price pressure (ie short term results). (Not to mention, the whole impetus for MCAS was to rush the design to market so they wouldn’t lose out on AA as a customer).
I suspect this is true to a certain extent, but IMO this narrative has been exaggerated to the point where it is completely useless. If Boeing execs were only focused on "short term profits," how did commercial aviation deaths decrease despite there being significantly more flights?
https://www.statista.com/chart/4854/commercial-aviation-deat...
Boeing 737 Max: The troubled history of fatal crashes and 346 deaths in 7 years - https://economictimes.indiatimes.com/news/international/busi... - July 8th, 2024
As Boeing looks to buy a key 737 supplier [Spirit AeroSystems], a whistleblower says the problems run deep - https://www.npr.org/2024/06/16/nx-s1-4998520/boeing-737-spir... - June 16th, 2024
Boeing’s Decline Traced to Decades of Catering to Shareholders Above All Others - https://bhr.stern.nyu.edu/quick-take/boeings-decline-traced-... - April 8th, 2024
Boeing’s long fall, and how it might recover - https://www.seattletimes.com/business/boeing-aerospace/boein... - April 7th, 2024
> the whole impetus for MCAS was to rush the design to market so they wouldn’t lose out on AA as a customer
The impetus for MCAS was to make the MAX behave like the previous 737 model to reduce the expense of retraining the pilots.
In general, flying is safer when pilots do not need to "code switch" when switching airplane models. Many crashes result from a pilot reflexively doing the right thing for the previous airplane they flew, rather than the one they are flying at the moment.
I.e. they've been reinventing the business. They were probably burned to the ground in WW2 and had to rebuild the business from scratch.
We probably agree that the stock will eventually reflect value. I think we’d quibble about how long that takes. As the saying goes, the market can remain irrational longer than you can remain solvent. In other words, don’t bet on the market always reflecting reality.
I’m not sure what you intend to convey with this statement. If price reflects reality, the current price should reflect the current reality, no? Whether the White Sox were the best team 100 years ago has little bearing on my prediction about their chances this year. I fail to see how Boeing’s prior culture prevents them from succumbing to short term incentives. I know your point is the downfall is a bureaucratic one, but the evidence does not point to that (they actually cut corners on bureaucratic requirements).
>The impetus for MCAS was to make the MAX behave like the previous 737 model to reduce the expense of retraining the pilots.
Go deeper. Why was this considered necessary?
(Hint: it’s because they wanted to rush the design to market with a less expensive (and lower quality) product. Ie cost and schedule pressure. You stopped at the proximate cause.)
But why?
The value of a stock is all pure speculation about how much you can sell it for later.
https://news.mit.edu/2024/study-flying-keeps-getting-safer-0...
In retrospect, it was exactly as unlikely as Madoff's numbers.
In a way it is, its logically a machine that makes money. The actual business doesn't matter if it's making money.
It's a long form rug pull, where you make money until the company no longer can and you hope you're not holding the bag.
It should be clear that is not what I meant. This reinforces my view that popular criticism towards Boeing is unhelpful and ironically is relevant to the posted essay. People care more about gotchas more than deep discussion.
If the 737 Max incidents were due to negligence on Boeing's part, the many of the incidents in the 70s were also due to negligence. You can't have it both ways.
Microsoft, for instance... or in more modern times, Tesla.
I wouldn't put Boeing into that category, though -- it took more than just a lack of good competition to accomplish what they did, back in the day.
(GE also took substantial time to fall apart, but with no deaths to my knowledge)
You seem to think the assumption "all companies die" means you can simplify away their journey, but it matters if they get there faster or slower (at least to society, if not the decision-makers to maximize their personal profit while hoping to not being the ones left holding the bag).
Surely, there is some amount of income that a business’s owner is allowed to pocket without bad intentions, which may or may not come at the cost of long term investments. Especially in stable/declining businesses.
(1) consider how many stocks are delisted and/or go out of business. We might be thinking with survivorship bias. A cook google gave this headline "America has lost 43% of listed companies since 1996" (though, more research would be needed to really be sure that's accurate and to determine any more nuances that might be important).
(2) If there are an ever-present amount of short term rewards/results, then we would get growth. A series of short term growth would be hard to distinguish from long term growth.
(3) Long term and short term growth can be mixed, and the strategy does not have to be static. A company could hop back and forth between them. This point contradicts the premise a bit, at the same time we can't discount long term from the noise that we see (it could be signal).
(4) Stock price is not necessarily always tied to financial results. It's supposed to be the sum of all future revenue divided by the number of shares (or something like that), thus, stock price is in part also the expectation of revenue and not actual revenue. Tesla is a notable example, the price of their stock is still very high, with anticipation of amazing revenue gains, but recently their revenue has not been growing by a ton.
Some fight it off longer than others.
In practice, financial results are driven by transactions, and so any mediocrity that doesn’t lead to the customer going elsewhere isn’t going to show up in the financial results. You need an actual competitor to risk losing money to sucking. But I’ll note that in cases where there is an actual competitor to sclerotic old industries, one that actually does care, the investors in the competitor tend to become fabulously wealthy and the investors in the old industry go broke.
Look at Tesla. They're doing extremely poorly right now and have been for about a year, and if you look at their stock price you wouldn't think that. They're valued more than, like, every other auto manufacturer combined. Looking at that you'd expect them to hold 50% of the market in all markets they're in. But they don't get anywhere close to that.
The stock market is just gambling. You can't see the other person's hand.
> It's not about prioritizing short term results.
Why did they need to grow in the first place though? If a company is already profitable, and growing will end up making them less functional and eventually erode profits, that sounds like it's due to prioritizing short-term results over long-term stable profits.
They don’t necessarily have to be classified as the same contributing factors. The de Haviland Comet may have failed due to our lack of understanding of metal fatigue with a pressurized cabin. That was engineering ignorance. If a manufacturer did the same today, it’s negligence because those are known engineering principles.
Boeing was knowingly not following their own procedures for safety critical design. They also admitted to conspiracy to circumvent FAA oversight. Which of the above categories would you put those in?
I do think technical debt is a real problem, but to play devils advocate, the “life-cycle” is often a pivot from “innovation” to “maintenance”. Companies rightly begin to focus on the aspects of business that make them money and will often cannibalize R&D to focus on high-margin areas. That’s why “mature” companies often focus on innovation via acquisition.
There's at least a clear relationship if the dividend is reinvested.
If the dividend is spent, though, eg by someone in retirement, then they're different. Under buybacks, the retiree would have to sell some shares to get cash, and would eventually run out. Under dividends, the retiree would be able to continuously pocket money.
Part of that is probably embedded in the environment. The market favors risk-taking. Everyone is dipping into their seed corn, hoping they can use the extra energy they have now to secure some new corn and cover for the surplus. Sometimes they can't, and they starve. More importantly though, anyone who didn't dip into their seed corn is no longer there - risking a bit gives you a competitive advantage over those who risk less.
This dynamics plays at multiple levels in large companies, and arguably is deeply embedded in the overall business culture.
It's not totally irrational either - "eating your seed corn" sounds stupid in isolation, but the calculus changes when every village around you is at war with you and everyone else, all while the whole region gets hammered by natural disasters. Saving the seed corn to survive the next year may end up killing you next week.
That's what they say, but I don't think it's true (at the high end, at least). For instance: if Boeing dies, the market will not replace it. It'll be an Airbus monopoly for large jets, and maybe the the communists will eventually build a competitor (Comac). IIRC, it's too expesnive for Embraer to make the jump into that market.
if the stock goes up 10%, sell 10%. The value you hold is the same.
And the "solution" to any level of this kind of criticism is really easy: do less, eventually do nothing at all anymore. But, in truth, that's even more destructive, in fact that that's happening is what this whole thread is about.
We need a balance. There needs to be some tolerance for risk, certainly at companies like Boeing.
But all of them do it. Facebook/Meta, Amazon, Netflix, Google, Apple. Even the non-FANG fangs like Tesla, Twitter, ... and all have stories about faking it. Most are advertising and that's easy to fake on both sides (buy your own adertising, and of course fake engagement), Amazon has zero profit so they proudly declare they're faking it for the government (but, of course, they're not cheating you), Netflix has steadily rising subscriber numbers where everyone else has failed, even Apple's growth has switched to subscriber growth, the part of their business that would be the easiest to fake.
In fact this is quite common in the whole S&P 500, including outside of the US, with numbers not quite as dramatic as the FANGs, but still going up.