The Price of Losing Focus
The Price of Losing Focus
Peter Robison's "Flying Blind" tells us how a focus on financial wizardry over making things hollowed out Boeing - and America's economy
Over a span of less than six months in 2018 and 2019, two Boeing 737 MAX airliners fell from the skies over Indonesia and Ethiopia shortly after takeover and killed 346 people. As Bloomberg investigative journalist Peter Robison makes clear in his recent book Flying Blind: The 737 MAX Tragedy and the Fall of Boeing, these fatal crashes resulted almost entirely from the corporate hubris that came with Boeing’s shift in focus from building airplanes to inflating stock prices, enriching company executives, and pleasing Wall Street. In that respect, the story of Boeing’s decline and fall mirrors the shifts in America’s political economy away from making things and toward financial wizardry over the last several decades.
Robison concisely and convincingly explains how Boeing went from a company that relied on its own engineers and pilots to make sure it built safe and reliable airliners to one dependent on financial markets and cost-cutting measures. Boeing hollowed itself out in the process, leaving it able to pump up its own stock prices but unable to build usable airplanes. It’s a story that goes beyond Boeing’s own commercial aviation business and has unsettling implications for the way America has organized its national economy, consciously or not, over the past several decades. It also has some parallels in other aspects of American life today, including politics.
In its mid-century heyday, Robison reminds us, Boeing’s pilots and engineers held enormous sway over the company’s mission, culture, and operations. When Boeing’s first jet airliner, the iconic 707, developed problems during test flying, for instance, legendary test pilot Tex Johnston insisted the company’s engineers redesign the plane’s tail and rudder at considerable expense – and, in his telling, they did so without real complaint. Similarly, the chief engineer of the 747 jumbo jet project successfully resisted attempts to move production of the massive new plane from Boeing’s Seattle plant to a brand-new facility in California. Well into the 1990s, Boeing’s corporate culture continued to emphasize investment in the company’s workforce and proactive responses to safety issues that might arise.
Cutting corners and forgetting the core mission
But things began to change in 1997, when Boeing absorbed failing aerospace manufacturer McDonnell Douglas. Though the St. Louis-based company’s business practices contributed directly to its poor performance, it didn’t take long for these practices to take hold at Boeing. McDonnell Douglas refused to invest in new equipment, with Boeing engineers reporting that some machinery in the company’s Long Beach, California plant hadn’t been replaced since the Second World War. With former McDonnell Douglas executives now ensconced on Boeing’s board of directors, Robison relates, they began to import their own cutthroat business practices – including a monomaniacal focus on raising the company’s stock prices and extracting “value” to please Wall Street above all else.
Boeing soon adopted the “Walmart model,” shutting down its own plants that made specialized aircraft parts and contracting from “smaller, more vulnerable suppliers, whose costs could be squeezed and union benefits renegotiated or eliminated.” Some Boeing executives warned that the company wouldn’t get parts of the same quality from these other companies, and that Boeing wouldn’t have very close relationships with these cut-rate suppliers. One engineer in the company’s advanced projects section went so far as to say that outsourcing benefitted suppliers while shortchanging the company itself. Boeing went ahead full-steam with the practice for its new 787 Dreamliner commercial jet, only to have to bring the work back in-house at a cost of $50 billion.
Worse, Boeing began to deliberately break apart its own communities of engineering practice – starting with the move of the company’s headquarters from Seattle to Chicago in 2001. The company’s then-CEO rationalized the move by outright saying it’d be good for Boeing leadership to put some distance between its executives and what he called the “how-do-you-design-an-airplane stuff.” As Robison observes, previous Boeing corporate leaders involved themselves deeply in that sort of “stuff.” The end result was that Boeing as an institution became progressively weaker and unable to perform its main job – building airplanes – while the company’s executives got richer and richer.
Things fall apart – and planes fall from the sky
All these issues would come to a head with the 737 MAX tragedy. Initially conceived as a short-term cash grab to counter rival Airbus and keep Boeing a darling on Wall Street, the MAX strapped powerful new engines onto an airframe first designed in the late 1960s. These new engines changed the way the plane flew, requiring Boeing engineers to make changes to the plane itself. Some proposed redesigning the tail, but in the effort to keep costs down and the project on-schedule they eventually settled on software that would automatically correct the plane’s flightpath – the now-notorious MCAS software that caused both 737 MAX crashes in Indonesia and Ethiopia.
Ultimately, Boeing lost $21 billion in direct costs as a result of the two 737 MAX disasters – more than the $20 billion it might have cost to design and build an entirely new airplane to compete with Airbus. Some six hundred MAX orders had been canceled by the end of 2020, resulting in another $33 billion in losses. Despite the human toll of these crashes and the financial losses sustained by the company itself, Robison notes that “the people who made the most damaging decisions, and laid on the impossible demands, kept rising to the top… Boeing became a collection of assets to be shuffled as managers saw fit to make the most beneficial combination for stockholders, not customers or employees.”
Beyond this damning main message, Robison’s narrative offers additional lessons – some more general, others more specific.
Culture matters – a lot. As Robison argues, internal cultures of organizations play an enormous role in the success or failure of their efforts. Much also depends on what a given institution or organization sees as its primary mission. In Boeing’s case, the company’s top leaders saw its own central goal as pumping up stock prices to please Wall Street – not building safe and capable airplanes. Over the past twenty-five years or so one of America’s great companies has been hollowed out as a result.
Policy shifts can create and shape markets in unpredictable ways. An important if understated element of Robison’s narrative is the way certain policy changes altered the market for commercial aircraft in the United States and around the world. Airline deregulation in the late 1970s, for instance, eventually created new hub-and-spoke airline business models – and these models led to new demand for smaller, short-haul airliners like the original 737 and the Airbus A320. It’s an example of the power of public policy to create or shape markets in certain ways and directions, however unintended or unanticipated those changes may have been in the moment.
Regulatory capture is a political choice, not an inevitability. As Robison explains, political choices made by Congress and presidential administrations from the mid-1990s onward stripped the Federal Aviation Administration of much of its authority and handed it over to the very aerospace companies the agency was supposed to regulate. Contra some conservatives and libertarians, this sort of capture isn’t a natural or inevitable result of regulation itself. Congress delegated much of the FAA’s authority to Boeing in a law passed in 2018, only to claw much of this authority back in a new law passed at the end of 2020. It’s an important first step to correcting the defects in safety regulation revealed by the 737 MAX tragedy, one that depends on strong and steady implementation.
But Boeing’s failures matter for reasons that go well beyond aviation safety, important as it is, or even the distorted political economy that’s prevailed in the United States over recent decades. When a company like Boeing falters as badly as it has, that has negative implications for America’s national security and economic competitiveness – to say nothing of national pride and prestige.
While reading Flying Blind, it’s hard not to think about the severe problems that have plagued various Boeing-led programs in recent years. Issues with the KC-46 Pegasus aerial refueling tanker, for instance, probably won’t be resolved until later this decade at best, leaving the Air Force with a partially working tanker to replace its superannuated 1960s-vintage models. Likewise, Boeing’s Starliner crewed spacecraft has suffered repeated technical setbacks and only completed its first full test flight at the end of May 2022. Boeing’s poor performance on the massive Space Launch System rocket – the one intended to take American astronauts back to the Moon later this decade – has, according to NASA’s Inspector General, more than doubled the cost of its core stage.
These setbacks have some parallels in other aspects of American life, particularly politics. Some political parties have lost sight of their core mission of organizing programs and articulating policies that respond to the needs of the vast majority of working Americans. Other institutions and organizations have likewise chosen to subordinate their own declared missions to the latest activist fads, leaving them flat-footed as the Supreme Court directly attacks causes like reproductive rights and climate policy they ostensibly exist to defend and advance.
In other words, America has a severe Boeing problem that it would do well to address sooner rather than later. As a result, the U.S. military and NASA pay more for airplanes, spacecraft, and rockets that do less than the company promised. That may be good for Boeing’s shareholders, but it’s not good for American taxpayers. As things stand now, however, Boeing offers an important cautionary tale about the way we’ve allowed financial wizardry to substitute for proficiency – and hollow out our national economy along with a number of our most distinguished companies in the process.