> Boeing is based on the "Too Big To Fail" idea. I.e. Boeing's deep relationship with government
These are two separate concepts and you’re right, nobody has directly addressed them. Let me try.
Too big to fail “is a theory in banking and finance that asserts that certain corporations, particularly financial institutions, are so large and so interconnected that their failure would be disastrous to the greater economic system, and therefore should be supported by government when they face potential failure” [1]. A key part to it is financial institutions can’t meaningfully go bankrupt—they don’t materially have tangible assets, they just fail. (It’s why bad banks go into receivership.)
Boeing is not a bank. It’s not built almost solely on confidence. It, like the auto manufacturers, can go bankrupt without threatening its production. (GM and Chrysler went bankrupt [2]. Bankruptcy doesn’t mean we raze the factories.)
Put succinctly, Boeing is NOT too big to fail.
It does, however, have a deep and diverse relationship with government. Boeing has, by design, employees in every Congressional district. It’s strategically important to the U.S. and its allies and possesses an industrial-strength wheel greaser.
That broad base of employees protects the plants. But as we’ve already seen, financial failure and even prosecution of senior leadership doesn’t blow up the plants. The strategic importance, meanwhile, is a two-edged sword. Boeing has power because it’s useful. Not only is that usefulness preserved through reörganisation, but if someone can claim it’s increased through it, the usefulness becomes a source of weakness. (Nobody cares if Chik-fil-a is mismanaged. They do when Boeing creates a national embarrassment at the ISS.)
The only part that remains is the wheel greasing [3]. In this, Boeing is far from unique. It’s also unprotective against financial failure. Because, again, the wheels stay on if Boeing is reörganised. That may not be true if it continues on its current path.
Especially as we’re lining up for a potential war in the South China Sea, Boeing’s military-industrial ties may be what forces those who’d prefer to look the other way to stare down the problem. We can’t win that war, if we have to fight it, with Boeing a shitshow. And we’re more likely to have to fight it every time Beijing sees it’s a shitshow.
So yes, Boeing does have a deep relationship with government. But that doesn’t protect it from criminal prosecution or financial failure, and in some cases, may encourage the people pining for its reörganisation.
Dissecting the origin of "too big to fail" and the wikipedia cite isn't relevant to gp's argument because many journalists/observers in media already use "too big to fail" to characterize companies like Boeing:
>Your counterargument is there are memes that say Boeing is TBTF, Q.E.D.?
I wasn't making any counterargument.
I can 100% agree with you that TBTF was originally associated with the banking industry but simultaneously show that this isn't the meaning that others are using for Boeing. This seems like an obvious fact from a neutral viewpoint of seeing how language usage evolves (e.g. see the google examples) so not sure why stating it is controversial.
> this isn't the meaning that others are using for Boeing
But that’s why it’s wrong. TBTF only works because financial institutions are built on confidence. You can’t reboot them through bankruptcy.
Boeing can be put into bankruptcy to facilitate reörganisation without causing ripple effects. (Like GM and Chrysler were.) TBTF as a general-purpose meme fundamentally doesn’t work.
As someone who is starting to work on a defense product, I can tell you that defense products are also built on confidence a lot more than you think. You have to make a lot of claims that your users can't test, so they rely on things like being able to audit your code and testing processes and/or your reputation. You also have to be able to make promises that your products and support (or something compatible) are going to be around for 10+ years.
Boeing has already lost some of this trust with the issues in the consumer aviation sector, but the space and defense side of Boeing is still going strong. A bankruptcy could risk Boeing's space and defense lines.
One big fault here is with Boeing's board. Boards are supposed to control the short-term greed of executives and protect stock value. Boeing's board should do a prophylactic firing of the C-suite (replace the CEO with someone who will fire the rest), putting the engineers back in charge, but I doubt they will do that.
Yes, all commerce involves confidence. The difference with banks is both sides of their balance sheet are not only entirely confidence based, they’re leveraged to the hilt on it.
Boeing can lose and re-gain confidence. (Albeit, at great risk.) A bank can’t; if it ever loses it, even momentarily, it fails. That is a dynamic that has increased as our world grew more interconnected, a dynamic we failed to fully appreciate until ‘08.
> bankruptcy could risk Boeing's space and defense lines
How? Worst case, guarantee BDS’s obligations as part of the bankruptcy.
Put another way: does restructuring threaten their defence line more than the status quo? I don’t know the answer, but I think it’s a valid question. (I’m familiar with their space lone and am halfway to writing it off.)
> big fault here is with Boeing's board
Totally agree. They seem clueless, more afraid of the bark than the bite.
> Yes, all commerce involves confidence. The difference with banks is both sides of their balance sheet are not only entirely confidence based, they’re leveraged to the hilt on it.
I'll give you that defense is not in the same league as banking if you'll give me that defense is not in the same league as SaaS (even enterprise/F500 SaaS). By the way, defense companies do get a lot of leverage based on their federal contracting lines. It's 2024, a bank can get you leverage on a ham sandwich, and companies are usually pretty big users of it (they are encouraged to be).
> Put another way: does restructuring threaten their defence line more than the status quo? I don’t know the answer, but I think it’s a valid question. (I’m familiar with their space lone and am halfway to writing it off.)
Yes. Defense contracts in general cannot be awarded to firms in bankruptcy or that have been in bankruptcy in the last 5-10 years. That is because financial solvency threatens acquisition timelines, and in a bankruptcy, anything can happen.
That's a rule, not a law, and I am not sure about how exceptions are made. And existing contracts will be fine, but new contracts will just not be awarded.
>Boeing has already lost some of this trust with the issues in the consumer aviation sector, but the space and defense side of Boeing is still going strong.
Going so strong that:
* The USAF really hates Boeing for pulling some Serious Legal Assfuckery(tm) to drop Airbus for the tanker program, only to then fail to provide tankers that can pump gas.
* They've failed to secure all but one fighter program sale, and that was only because Lockheed Martin (F-35) succeeded so hard they couldn't succeed any harder.
* They were laughed out of the bomber program, especially after the tanker failures.
* They keep crashing V-21 Ospreys, their most recent episode resulting in nationwide groundings in the US and Japan that were only recently cleared.
* The Starliner is increasingly looking unfit for human occupation.
The only reason Boeing is relevant in space and defense anymore is sheer inertia.
I think the comment well addresses why this situation is different than the situation with banks - Boeing’s manufacturing and employees would not be harmed by a prosecution of its management.
Indeed, criminally charging upper management hardly counts as the business “failing” at all.
> Especially as we’re lining up for a potential war in the South China Sea, Boeing’s military-industrial ties may actually be what forces those who’d prefer to look the other way to stare down the problem. We can’t win that war, if we have to fight it, with Boeing a shitshow. And we’re more likely to have to fight it every time Beijing sees it’s a shitshow.
So this is a very interesting question, but it's not clear to me whether it can be resolved until the shooting actually starts. WW2 was a huge driver for fixing broken things (USN torpedoes didn't work reliably at the start, for example, in ways that only appeared under live conditions!). The Iraq war was on the other hand a huge opportunity for grift. Pallets of dollar bills vanished. Someone made a lot of money from non-functional mine detectors.
What's the difference? Well, the Iraq and Afghan wars were completely irrelevant and invisible to the Homeland, just a money and lives sink shown on TV, while WW2 kicked off with a bit of Actual America (Hawaii) being bombed.
The China war will probably have no real effects on the US until the GPUs stop arriving, at which point most of NVIDIA's $3tn market cap vanishes and Americans feel it in their retirement accounts. Then, and only then, will people take it seriously enough to overcome corruption.
> continuity of supply is why forcing them into real non-operating bankruptcy is inconceivable. Nothing more onerous than Chapter 11
Correct. But that’s still bankruptcy. It wipes out the shareholders and lets the creditors, which presumably includes the government, reörganise the company as it sees fit.
(I’d start with cleaving BDS from the rest of Boeing.)
> it's not clear to me whether it can be resolved until the shooting actually starts
Do you have a source on the torpedo story? Hadn’t heard that one before, and it sounds fun.
I recently read about how “the US went into [WWII] with fewer carriers than the Japanese, it was the US that was almost out of carriers in the Pacific in late 1942, and the US that had suffered the larger percentage of carrier losses—not the Japanese” [1]. We still won, as the author puts it, not with “the fleet that [we] started the war with,” but “the fleet that [we] ended it with.” How? Because “by December 8, 1941, the United States had already undergone 3 cycles of investment in only 8 years, with the last being one of the largest peace-time defense investments in US history.”
Put another way, it’s not clear we can wait until the shooting starts. What’s germane to this discussion is less whether that is true, but whether those in government with power over Boeing believe it is.
> China war will probably have no real effects on the US until the GPUs stop arriving
I’m not sure. Unless we try to fight it à la Ukraine, and it’s unclear that’s even an option, I expect the opening moves will involve the deaths of American soldiers. That brings it closer to “a bit of Actual America (Hawaii) being bombed.” (I assume a strike on a CVN would incur similar emotions, though that’s just a guess.)
> I recently read about how “the US went into [WWII] with fewer carriers than the Japanese, it was the US that was almost out of carriers in the Pacific in late 1942, and the US that had suffered the larger percentage of carrier losses—not the Japanese”
I don't dispute your overall point, but I don't think this is right.
I couldn't read your source without a signup, so I went looking around. According to https://www.statista.com/statistics/1353080/wwii-japan-us-ai... the Japanese lost 14 carriers in the war, and ended with 18 in service, so they lost 14 out of 32. The US lost 5 and ended with 34 in service, so it lost 5 out of 39. That's really hard to turn into "the US suffered the larger percentage of carrier losses".
As I said, I don't disagree with your overall point.
As to the torpedo story: IIRC, there were two problems. The torpedoes themselves had an issue. I don't recall exactly, but it may have been that they didn't run at the depth they were supposed to. The second problem was the detonators. They didn't trigger if they hit square on, but only if they hit at an angle. So the better the shot on a ship, the less likely the torpedo was to actually explode. They didn't get consistently working torpedoes until September 1943.
Honestly worth the sign-up, but here you go in the meantime [1]. (Never mind, Substack got smarter.)
The greater loss ratio claim is limited to aircraft carriers in 1942. America lost as carriers as Japan that year and wound up the year in worse shape, numerically, despite Midway. What got us through wasn’t a decisive naval battle in June of ‘42 but the production infrastructure laid down in the decade prior. We built our way out of the hole, because in attritional war, stocks are less important than flows.
Classic example of "anything inadqeuately tested turns out not to work": the torpedoes were "too expensive" to test in realistic scenarios. So they weren't. That meant a cascade of problems - wrong depth, early magnetic detonation, failed impact detonation - all of which showed up in live fire as "miss", which could be blamed on individual commanders until the problem became too big to ignore.
There's a very high chance that something which is a critical fancy weapons system that has not been used in anger will turn out not to work in actual combat.
Not sure if the last paragraph was sarcasm. One third of global shipping passes through the South China Sea. If war breaks out and it becomes unsafe to ship along those trade lanes, it will be absolutely cataclysmic for the global economy, and while the US will be more insulated from the worst shocks than many other countries, Americans will absolutely feel it hit their wallets on day one.
These are two separate concepts and you’re right, nobody has directly addressed them. Let me try.
Too big to fail “is a theory in banking and finance that asserts that certain corporations, particularly financial institutions, are so large and so interconnected that their failure would be disastrous to the greater economic system, and therefore should be supported by government when they face potential failure” [1]. A key part to it is financial institutions can’t meaningfully go bankrupt—they don’t materially have tangible assets, they just fail. (It’s why bad banks go into receivership.)
Boeing is not a bank. It’s not built almost solely on confidence. It, like the auto manufacturers, can go bankrupt without threatening its production. (GM and Chrysler went bankrupt [2]. Bankruptcy doesn’t mean we raze the factories.)
Put succinctly, Boeing is NOT too big to fail.
It does, however, have a deep and diverse relationship with government. Boeing has, by design, employees in every Congressional district. It’s strategically important to the U.S. and its allies and possesses an industrial-strength wheel greaser.
That broad base of employees protects the plants. But as we’ve already seen, financial failure and even prosecution of senior leadership doesn’t blow up the plants. The strategic importance, meanwhile, is a two-edged sword. Boeing has power because it’s useful. Not only is that usefulness preserved through reörganisation, but if someone can claim it’s increased through it, the usefulness becomes a source of weakness. (Nobody cares if Chik-fil-a is mismanaged. They do when Boeing creates a national embarrassment at the ISS.)
The only part that remains is the wheel greasing [3]. In this, Boeing is far from unique. It’s also unprotective against financial failure. Because, again, the wheels stay on if Boeing is reörganised. That may not be true if it continues on its current path.
Especially as we’re lining up for a potential war in the South China Sea, Boeing’s military-industrial ties may be what forces those who’d prefer to look the other way to stare down the problem. We can’t win that war, if we have to fight it, with Boeing a shitshow. And we’re more likely to have to fight it every time Beijing sees it’s a shitshow.
So yes, Boeing does have a deep relationship with government. But that doesn’t protect it from criminal prosecution or financial failure, and in some cases, may encourage the people pining for its reörganisation.
[1] https://en.m.wikipedia.org/wiki/Too_big_to_fail
[2] https://en.m.wikipedia.org/wiki/Effects_of_the_2008%E2%80%93...
[3] https://www.opensecrets.org/news/2023/05/revolving-door-lobb...