Because it seems like our businesses have been producing some great stuff and generally improving standard of living. That doesn't mean that everything is perfect. But I'm not sure a system exists that is effective, efficient and prevents any possible bad outcome.
Every time something is criticized, someone tosses out the "nothing is perfect" defense, apparently arguing fallaciously that there are no alternatives except the status quo and perfection: https://en.wikipedia.org/wiki/Nirvana_fallacy
The HN submission was editorialized. The word "broken" doesn't actually appear in the article or the article title, "Boeing is a wake-up call".
The article argues that there's been a change in business culture and mentality over a number of decades: the view that corporations were responsible members of the community has been replaced with the view that "greed is good", and corporations have no purpose other than unmitigated profit maximization. So where do you think the fallacy is? Or are you just focused on the word "broken", which again doesn't appear in the article?
Nope, the article's title itself has been editorialized, it appears. I submitted this with the HN bookmarklet [1], so the submission title is untouched from what it was at that moment in time.
> apparently arguing fallaciously that there are no alternatives except the status quo and perfection
Huh? The above comment is not a thesis about the nature of economic systems. It's a simple observation that the word 'broken' has a meaning. One which does not justify the author's usage.
The blatant misuse of loaded words is a form of deception. It is worth calling out.
Also: "The United States ranks 1st in the world for incarcerated population and 5th for incarceration rate. The nation in 2nd place for population holds the 129th position for rate, imprisoning 1/5th as many people per capita. Which is this freedom-loving nation with, both absolutely and relatively, fewer prisoners than the US? China. The “land of the free” is more likely to imprison you than a regime so brutal that it has concentration camps." https://obviatethestate.substack.com/p/the-us-over-reliance-...
Not to take away from your point - but in France, Spain and Austria (and maybe others), everyone is an organ donor by default unless they opt out. So the EU may be an easier place to find an organ than the US (and not due to any nefarious reasons).
Nice. Next someone should mention how asset forfeiture allows local and state police to cart off more wealth annually than the actual thieves they're intended to police.
It certainly does. That graph charted along side wages over time vividly demonstrates the reasons why home ownership, savings, and social mobility are in the toilet. Medical outcomes too maybe, but there's too much hoop jumping involved for me to want to plant a flag on that hill.
It's uneven. Parts are broken. PE taking over medical practices and hospitals looks like a greed driven disaster. Boeing doing the Jack Welch thing, e.g. spinning out Spirit Aerosystems to goose up RONA while being a completely incoherent outsourcing decision, long after Jack Welch was discredited is a disaster.
Tech is pretty healthy on balance but is that because everyone prefers to work in tech because other industries are so much worse?
“It's not Americans I find annoying; it's Americanism: a social disease of the postindustrial world that must inevitably infect each of the mercantile nations in turn, and is called 'American' only because your nation is the most advanced case of the malady, much as one speaks of Spanish flu, or Japanese Type-B encephalitis. It's symptoms are a loss of work ethic, a shrinking of inner resources, and a constant need for external stimulation, followed by spiritual decay and moral narcosis. You can recognize the victim by his constant efforts to get in touch with himself, to believe his spiritual feebleness is an interesting psychological warp, to construe his fleeing from responsibility as evidence that he and his life are uniquely open to new experiences. In the later stages, the sufferer is reduced to seeking that most trivial of human activities: fun.”
Trevanian is a pen name, Shibumi is a book from 1979.
He was routinely critical of American culture, which is sometimes called Western culture. I'm not sure why some people think it's verbal vomit, but apparently it's disturbing enough that they feel the need to respond with vague antithetical statements. His writings incited emotional responses, intentionally.
It’s a profoundly non-nerdy book. The main character has so much disdain for the trite and linear ways of the Westerner that suffuses the entire narrative. I thought it was a brilliant achievement the first time I read it cover to cover, and still do.
Plenty of people like free-ish markets with a moderate amount of regulation to prevent disasters, unsafe business practices, particularly blatant consumer or employee exploitation, etc.
I honestly think this is because the framing as "free market" is bullshit propaganda, just like anti union regulation is touted as "freedom to work" as if people are champing at the bit to be crushed by their employees and be exploited. The real term for conservative free markets is an unregulated market. The freedom in free markets is for corporations to do as they please
Many people like an Econ-101 "free market", with perfect information, competition, and zero barriers to entry for competition or lock-in for customers. This never exists 100% in real life but often it's close enough. Here, not so. For aircraft construction, a specialized field with long lead times and expensive products, the barrier to entry is huge. So competition is thin.
Which is all a good argument for regulation, and why the FAA exists, maybe our aircraft safety standards need some updates.
This isn't exactly great for shareholder value either...
IMO, this is the system WAI: Boeing pushed the limits, had a high profile incident (in which injuries were minor), and is now reeling to rebuild their reputation with regulators and in the market.
Of course Boeing self-certifies planes. Who else is better equipped or incentivized to not fuck this up?
The FAA can't wave a magic wand and declare a jet safe, and frankly they never have. Air safety is now and always has been the result of collaboration between the FAA, aircraft manufacturers, and pilots.
The bolts in that door plug weren't installed; it was a one-off due to some maintenance work. Do you propose the FAA systemically review every bolt in an airplane before they declare it airworthy? Every third bolt? Every third bolt of every third plane?
At what point do you just accept that fundamentally, nobody other than Boeing has the resources to check that a plane is safe?
The party to blame here is Boeing. The FAAs job is not to make sure they never step out of line, it's to correct them when they _do_ step out of line.
The FAA is doing their job just fine - I'll remind you, again, that even flying on the 737 MAX is quite safe and you still run a higher risk of death on the drive to the airport than on the plane.
I mean that's a pretty solid take if you elide the raft of engineers at Boeing that have raised any number of concerns over the last few years. Quis custodiet ipsos custodes and all that jazz...
The fundamental concept of ANY business is to make money. Businesses everywhere, not just America, don’t care about anyone or anything except making money. That is where the role of the government comes in. “Pure capitalists” don’t like regulation, but regulation done right, not only protect everyone from excessive greed, but also businesses themselves from excessive greed.
In case of Boeing, regulations exist but were left to be self enforced. If they were enforced correctly, Boeing would not have the opportunity to cut corners and would’ve been saved from the consequences of their own greed.
Nonsense… businesses are run by humans, and the goals and values of the business are whatever the leaders and or owners are.
Running a business often requires making hard choices to keep the doors open, but those choices, and the choice to stay open at all, depend on who is making them.
The modern publicly traded company (effectively owned and operated by Wall Street traders) is somewhat unusual in the history of business, in being structured specifically to require everyone to act solely for shareholder value or profit. But it is a choice to structure a business in this way, and things like B corps, co-ops, etc. are different structures designed to optimize for different goals and values.
Thank you. The modern usage of corporate structure as a complete get-out-of-consequences card, combined with the fact that every politician is just a warm body filling a suit at which corporations throw money to rubber stamp regulations...written for the lawmaker by the corporation are the problems. Problems. I'll say it again for the kindergarteners that still think Libertarianism is cogent. These are problems.
True for the US and the UK, where finance is king and Chicago school economists dominate. I've always felt that economists here are the modern equivalent of soothsayers: they tell their patrons what they want to hear, massaged with enough mathematical nonsense to disguise that there is nothing there but raw self-interest.
By contrast, in Germany 1/2 of the seats on the board of a public company must be elected by workers. So there finance and money can't just replace engineering.
While the basic idea of this is, of course, not new, its prevalence is.
For most of human history, "businesses" have been primarily about providing a service or producing a good—farming was about producing food, carpentry was about creating products out of wood, etc. The money was, of course, the incentive for them to produce this specific thing for that specific person, but the purpose of the business was still to produce the best damn wooden chairs they could make (or whatever).
Naturally, as I said, there have always been people who want to make the most money for the least effort. We have clay tablets from the ancient city-state of Ur, nearly 4000 years ago, complaining about a copper merchant who was (supposedly) fraudulently selling low-grade copper ingots as highest-quality ingots. But for most of human history, that has been the exception.
In the past few decades (I'd be hesitant to try drawing a bright line as to when), I feel that this has flipped, and people who think that the purpose of a business is to make as much money as possible (with providing a good or service being a necessary evil to that end) have taken over, at least in the US.
I also very strongly believe that this is an unhealthy, destructive mindset to have about the purpose of a business, and continuing to hold it up as the ideal is part and parcel of the problems of inequality and its effects that have plagued us in recent decades.
Making money is required for organization to keep existing and do their job. But the job doesn't have to be to make the most money. We need to allow organization with other purposes or to make steady money over longer time period.
A good example are utilties, which should have the purpose to providing service, and make limited profit. Publicly owned utilities that try to make the most money are problematic because of the natural monopoly.
There are plenty of businesses that could make more money, but that don't want to expand. Lots of businesses come in units, like a single restaurant, that can be managed by one person. Expanding is risky and require more work than owner wants to expend.
The problem with current companies is wanting to make the most money in the short-term. Most investors have a long term horizon to retirement and need value in decades. Chasing short-term profits might end up risky and destroy future value.
Boeing is a quintessential example of America’s rotting business culture over the past 40 years.
It’s also questionable whether other major companies with a similar maximize-shareholder-value-at-all-costs ethos will learn from the mistakes. But it’s clear that what Boeing — and the entire American corporate body politic — needs is nothing short of a philosophical counterrevolution.
An investigation into battery fires on Boeing’s 787 Dreamliner in 2013 found that it wasn’t allowing engineers to stress test its products enough, that it wasn’t catching manufacturing defects, and that passengers could be in danger as a result.
A manager lamented to one of Robison’s sources that people would “have to die” before Boeing made changes to the aircraft.
At the root of this shake-up was the influence of the economist Milton Friedman of the University of Chicago....One of Friedman’s disciples, the economist Michael Jensen, took the theory a step further in 1976 and argued that the corporation should be built to serve the interests of shareholders.
The CEO who best personified this ideology was Jack Welch, who helmed General Electric from 1981 to 2001...But a corporation can run on past innovation only for so long. In 2018, after over 100 years of prestige, GE was dropped from the Dow Jones Industrial Average because of the work Welch did to hollow it out.
In 2019, the Business Roundtable, an advocacy group formed in the 1970s for corporations, read the populist tea leaves and published a statement that said the purpose of a corporation was to serve all stakeholders, “customers, employees, suppliers, communities and shareholders.”
But more fundamentally, it will take a total rethink of America’s corporate incentive structure. Instead of favoring shareholders and playing a quarterly game with Wall Street, C-suites should prioritize sustainable, long-term businesses that employ as many productive workers as possible.
This all makes sense... Companies trade with market caps 20X their yearly earnings and get huge subsidies/bailouts from the government. Why would they court customers when the real money is in courting financial institutions.
I'm pretty sure buybacks have become so popular just because the tax structure incentivizes them over dividends. Although even if that were fixed, it likely means too much money going to investors and not enough to employees or product-quality.
Buybacks being more tax efficient are a part of the story, but I don't think that's the primary reason companies use them. They're also a lot more flexible. If you pay a dividend you set the expectation that you will continue to pay that dividend and cutting the dividend crushes your share price. Buybacks don't carry the same expectation so in lean times you're not forced to signal to the market that management is not confident in the company's future earnings. They also offer a way of artificially propping up the company's stock price in bad times by using cash reserves to buy back shares. They also artificially increase earnings per share and a lot of executives have bonus targets tied to that.
You either do industry or finance. If the general trend, not only Boeing was this:
> Money that could have been spent investing in workers or products instead went straight to investors
then you were doing finance.
So you pillage company after company and you couldn't care less about them, much like companies are said not to care much about the people working for them.
Then those pillaged companies start to fail at delivering good products because they don't have the resources to build them or the board doesn't actually care about products. They coasts and run on fumes for a while, then fail. Finance moves on to the next victims.
You apply this to a whole country and you eventually have some very rich people in a country without a meaningful industrial base and a lot of very poor people around you. Maybe you move to some paradise abroad where poor and angry people can't touch you. You left a wasteland behind. Congratulations. You won the game or you lost it, it depends on what was the game.
Replacing egalitarian hiring policies with diversity hires is the main problem. Did they start it because of greed? Maybe, however they should realize by now that it doesn't work.
56 comments
[ 1.8 ms ] story [ 112 ms ] threadBecause it seems like our businesses have been producing some great stuff and generally improving standard of living. That doesn't mean that everything is perfect. But I'm not sure a system exists that is effective, efficient and prevents any possible bad outcome.
The article argues that there's been a change in business culture and mentality over a number of decades: the view that corporations were responsible members of the community has been replaced with the view that "greed is good", and corporations have no purpose other than unmitigated profit maximization. So where do you think the fallacy is? Or are you just focused on the word "broken", which again doesn't appear in the article?
[1]: https://news.ycombinator.com/bookmarklet.html
Maybe it's because everyone went crazy over the word "broken", like in these very HN comments LOL.
Huh? The above comment is not a thesis about the nature of economic systems. It's a simple observation that the word 'broken' has a meaning. One which does not justify the author's usage.
The blatant misuse of loaded words is a form of deception. It is worth calling out.
The article author did not actually use the word 'broken'. The HN submission was editorialized.
https://fred.stlouisfed.org/series/A939RX0Q048SBEA
I suspect that we won't be able to agree on anything, but that chart says something very important -- however you might want to interpret it.
Tech is pretty healthy on balance but is that because everyone prefers to work in tech because other industries are so much worse?
― Trevanian, Shibumi
Many people like an Econ-101 "free market", with perfect information, competition, and zero barriers to entry for competition or lock-in for customers. This never exists 100% in real life but often it's close enough. Here, not so. For aircraft construction, a specialized field with long lead times and expensive products, the barrier to entry is huge. So competition is thin.
Which is all a good argument for regulation, and why the FAA exists, maybe our aircraft safety standards need some updates.
IMO, this is the system WAI: Boeing pushed the limits, had a high profile incident (in which injuries were minor), and is now reeling to rebuild their reputation with regulators and in the market.
Of course Boeing self-certifies planes. Who else is better equipped or incentivized to not fuck this up?
The bolts in that door plug weren't installed; it was a one-off due to some maintenance work. Do you propose the FAA systemically review every bolt in an airplane before they declare it airworthy? Every third bolt? Every third bolt of every third plane?
At what point do you just accept that fundamentally, nobody other than Boeing has the resources to check that a plane is safe?
The party to blame here is Boeing. The FAAs job is not to make sure they never step out of line, it's to correct them when they _do_ step out of line.
The FAA is doing their job just fine - I'll remind you, again, that even flying on the 737 MAX is quite safe and you still run a higher risk of death on the drive to the airport than on the plane.
In case of Boeing, regulations exist but were left to be self enforced. If they were enforced correctly, Boeing would not have the opportunity to cut corners and would’ve been saved from the consequences of their own greed.
Running a business often requires making hard choices to keep the doors open, but those choices, and the choice to stay open at all, depend on who is making them.
The modern publicly traded company (effectively owned and operated by Wall Street traders) is somewhat unusual in the history of business, in being structured specifically to require everyone to act solely for shareholder value or profit. But it is a choice to structure a business in this way, and things like B corps, co-ops, etc. are different structures designed to optimize for different goals and values.
As soon as the business is publicly traded, the goals and values are just money.
If the goals and value aren't money, then eventually the people making decisions will be replaced with people who value the money.
By contrast, in Germany 1/2 of the seats on the board of a public company must be elected by workers. So there finance and money can't just replace engineering.
For most of human history, "businesses" have been primarily about providing a service or producing a good—farming was about producing food, carpentry was about creating products out of wood, etc. The money was, of course, the incentive for them to produce this specific thing for that specific person, but the purpose of the business was still to produce the best damn wooden chairs they could make (or whatever).
Naturally, as I said, there have always been people who want to make the most money for the least effort. We have clay tablets from the ancient city-state of Ur, nearly 4000 years ago, complaining about a copper merchant who was (supposedly) fraudulently selling low-grade copper ingots as highest-quality ingots. But for most of human history, that has been the exception.
In the past few decades (I'd be hesitant to try drawing a bright line as to when), I feel that this has flipped, and people who think that the purpose of a business is to make as much money as possible (with providing a good or service being a necessary evil to that end) have taken over, at least in the US.
I also very strongly believe that this is an unhealthy, destructive mindset to have about the purpose of a business, and continuing to hold it up as the ideal is part and parcel of the problems of inequality and its effects that have plagued us in recent decades.
A good example are utilties, which should have the purpose to providing service, and make limited profit. Publicly owned utilities that try to make the most money are problematic because of the natural monopoly.
There are plenty of businesses that could make more money, but that don't want to expand. Lots of businesses come in units, like a single restaurant, that can be managed by one person. Expanding is risky and require more work than owner wants to expend.
The problem with current companies is wanting to make the most money in the short-term. Most investors have a long term horizon to retirement and need value in decades. Chasing short-term profits might end up risky and destroy future value.
Boeing is a quintessential example of America’s rotting business culture over the past 40 years.
It’s also questionable whether other major companies with a similar maximize-shareholder-value-at-all-costs ethos will learn from the mistakes. But it’s clear that what Boeing — and the entire American corporate body politic — needs is nothing short of a philosophical counterrevolution.
An investigation into battery fires on Boeing’s 787 Dreamliner in 2013 found that it wasn’t allowing engineers to stress test its products enough, that it wasn’t catching manufacturing defects, and that passengers could be in danger as a result.
A manager lamented to one of Robison’s sources that people would “have to die” before Boeing made changes to the aircraft.
At the root of this shake-up was the influence of the economist Milton Friedman of the University of Chicago....One of Friedman’s disciples, the economist Michael Jensen, took the theory a step further in 1976 and argued that the corporation should be built to serve the interests of shareholders.
The CEO who best personified this ideology was Jack Welch, who helmed General Electric from 1981 to 2001...But a corporation can run on past innovation only for so long. In 2018, after over 100 years of prestige, GE was dropped from the Dow Jones Industrial Average because of the work Welch did to hollow it out.
In 2019, the Business Roundtable, an advocacy group formed in the 1970s for corporations, read the populist tea leaves and published a statement that said the purpose of a corporation was to serve all stakeholders, “customers, employees, suppliers, communities and shareholders.”
But more fundamentally, it will take a total rethink of America’s corporate incentive structure. Instead of favoring shareholders and playing a quarterly game with Wall Street, C-suites should prioritize sustainable, long-term businesses that employ as many productive workers as possible.
> Money that could have been spent investing in workers or products instead went straight to investors
then you were doing finance.
So you pillage company after company and you couldn't care less about them, much like companies are said not to care much about the people working for them.
Then those pillaged companies start to fail at delivering good products because they don't have the resources to build them or the board doesn't actually care about products. They coasts and run on fumes for a while, then fail. Finance moves on to the next victims.
You apply this to a whole country and you eventually have some very rich people in a country without a meaningful industrial base and a lot of very poor people around you. Maybe you move to some paradise abroad where poor and angry people can't touch you. You left a wasteland behind. Congratulations. You won the game or you lost it, it depends on what was the game.