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The Managerial Crisis Is A Systemic Crisis

The Managerial Crisis Is A Systemic Crisis

Apr 11, 2024
Marty's Ƀent

The Managerial Crisis Is A Systemic Crisis

Videos of Boeing planes disintegrating in real time have taken the internet by storm over the first few months of the year. It feels like we can't go two days without another instance of a door blowing out mid-flight, a wheel falling off upon takeoff, or a clip from a passenger sitting in a window seat near one of the wings that shows some sort of engine malfunction. It'd be comical if the stakes weren't so damn high. I don't know if we're experiencing some sort of recency bias that is being excentuated by passengers looking for internet clout or if this slew of accidents is truly an outlier.

From what I can tell, they seem to be outliers driven by a complete failure of Boeing to run a company that actually produces reliable products that people can depend on. This is evidenced by the fact that the company decided to use more than 81% of their profits over a 20 year period to buy $61B worth of stock back instead of reinvesting in their core product lines.


To make matters worse, they shook up the corporate culture and replaced their engineer-heavy management team, which had been filled with operators who understood what it took to build planes that don't fall apart, with a bunch of McKinsey zergs who pivoted the company away from focusing on their core competency and toward their stock price.

via Samo Burja on X

By shifting their focus the McKinsey zergs probably thought they were moving the company in a direction that would lead to a glowing Hardvard Business Review case study because of all the value they created for shareholders. And if stock price is the only barometer used for value created for shareholders, Boeing executive certainly did that over the course of the first two decades of this century. By the beginning of 2019 their stock buybacks had been massively beneficial as is evidenced by their performance bench marked to the S&P 500.

What the McKinsey zergs didn't realize is that consultants focused on "shareholder value" based purely on a stock price that is easily manipulated via things like stock buybacks doesn't actually create fundamental value for the market. And when you forget the reason why your business exists in the first place, to provide the market with reliable air crafts that safely and efficiently get hundreds of people from Point A to Point B in a timely manner, and neglect to continue providing that service to the market there isn't a price level in the stock market that can save your company. You have successfully turned your company, which has been around since 1916, into a shell of its future self that will prove very hard to rebuild. Was the two decades of relative out performance worth the implosion of an iconic American brand? A brand that had historically flown on the back of its reliable aerial vehicles.

The fucked up part is that to the McKinsey zergs the outcome is probably justified by the two decades of stock market out performance. And here lies the problem. The economy has become so fake and convoluted due to the proliferation of easy money which has flooded the market that it has enabled companies to place MBAs who read some HBR case studies and think they actually know how to build companies in positions of power. When in reality, they don't. And make no mistake, the fiat monetary system is at the center of all of the problems we see throughout the economy. Boeing isn't the only company with this problem. It's just the easiest one to pick on at the moment.

The MBAs wouldn't exist without a university system that has abused access to cheap debt in the form of student loans.

The MBAs wouldn't be taught that stock price is the only thing that matters if the stock market was a properly functioning market that forced people to focus on cash flows and profits instead of institutional money flows - driven by easy money and an attempt by people who are able to save money to find financial assets to shove it in to beat inflation - and mechanisms that can be used to manipulate prices higher.

This game has led Boeing, a company that has been around for over a century, and many others who have pursued similar strategies to the slaughter house. They are the zombie companies that people write about and they are limping toward ugly deaths.

Money corrupts, and the fact that the board of directors at Boeing didn't have the wherewithal to recognize that replacing the engineers who built the heavy machinery that drives your business with consultants was a bad move is extremely disconcerting. And it should be stressed that this is not only a problem for Boeing. The pervasiveness of DEI and ESG policies throughout corporate America is indicative of a broader trend. These completely idiotic alphabet soup initiatives could only be thought up and pushed on the market by a bunch of Stanford MBAs who have never produced actual value outside of the stock market.

The world is finding out really fast where the actual value lies; in the goods and services that meet the demands of the market at any given point in time. People are currently demanding the ability to get on a plane to travel from one part of the world to another safely and Boeing is absolutely failing to deliver. Many other companies are too. This isn't to say that rising stock prices can't be a good thing. They certainly can be if they're rising because of the value being driven by a company successfully and consistently meeting the demands of the market. When a company over indexes toward the price of its stock at the detriment of the good or service it provides the market it leads to massive problems. Literally dangerous problems that put people's lives at risk in some cases. Certainly in the case of Boeing.

The managerial class crisis is a systemic crisis and the only thing that can save it is ripping easy money away from the markets so that companies are forced to allocate capital better. The MBAs may not like hearing this, but this is the truth.

Final thought...


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