Marco Rubio, Campus Safe Space, Bloomberg, Oh My (From Wizard of Oz)

What a day in the news. While having my coffee this morning, my emotions traveled the whole spectrum. Marco Rubio’s comments on capitalism made me pensive, Daniel Payne’s opinion piece on intolerance and the university campus made me cry, and Bloomberg’s run for president gave me type to ponder the what ifs.

Recently Marco Rubio, one of the Senators from Florida, spoke at the Catholic University’s Busch School of Business. William McGurn summarizes Rubio’s comments as arguing that shareholder capitalism needs overhauling, and the solution is “politicians such as himself making more decisions about where capital gets invested.” I see this as no different than what John Hickenlooper and Elizabeth Warren have stated in the past. This is nothing more than State Capitalism. Don’t get me wrong, government should be a referee in the economy, but government should stay out of the day-to-day decisions associated with running a business. To ensure this occurs, business needs to make better decisions when it comes to stakeholders. I can’t say this too strongly, business needs to control its own destiny by supporting American workers in their business decisions. Make good business decisions and you keep government out of your face.

The article that made me cry involves the condition of our college and university campuses. Daniel Payne begins his editorial with, “Most Americans know that higher education has for several decades been in the grip of a deeply intolerant, fanatical and uncompromising strain of progressive activism. Students and sometimes even faculty members regularly chase heterodox speakers off campus, demand complete fealty from terrified campus bureaucracies, and denounce and destroy each other over the slightest and most inconsequential ideological deviations.” I think this may be a bit sensational, but I do see his point. Often conservative professors feel uncomfortable on college and university campuses. So much so, it impacts how they teach their classes. I do think Payne is using an accurate descriptor when he says, “The environment isn’t unlike George Orwell’s Animal Farm, a place where no one dared speak his mind, when fierce growling dogs roamed everywhere, and when you had to watch your comrades torn to pieces after confessing to shocking crimes.” I cried this morning because there is some truth to this analogy.

The topic though that has me thinking is Michael Bloomberg entering the presidential primary as a Democrat. The reason I say I am interested is because there is not one Democratic candidate I would even consider voting for, until now. I do have some issues with him. First, I don’t think he should have apologized for stop and frisk policing. First of all, the fill title to the policing method is stop, question, and frisk. The police would “stop people who they suspected of criminal behavior,” then ask them questions to determine if there were problems. It did help to lower the crime rate in New York City. However, I am not black or a Latino which if I were, I would probably see things differently.

Bloomberg, mayor of New York during the use of this method, “defended the policy for years” until just recently when he apologized for it. Whether he really believes what he said in his apology is one thing, but now that he is running for president, he needs to remove hinderances. Elizabeth Warren, Pete Buttigieg, and Joe Biden have all done the same thing.

What I do find so interesting about Bloomberg is the reason he has chosen to enter the race. The WSJ says Bloomberg has an “essentially limitless budget for his Democratic presidential bid.” He has announced his entry into the race as a centrist. But, just like the other Democratic candidates, Bloomberg stated he has entered the contest, “to defeat Donald Trump and rebuild America.” He is worth $54 Billion and can self-fund his campaign. I assume if he is elected president, he will donate his salary as president. Trump who is only worth $3.1, billion donates his, with this quarter’s paycheck going to fight the opioid crisis.

Will Bloomberg win? Probably not! He reminds me of Ross Perot. If I were a Democrat, and I am not (not a Republican either), I would find Bloomberg interesting. At 77 years old, which is eight years older than me, he seems a little old for me as president. However, he does look like he is in good shape. And if what was reported is true, and the majority of Democrats are centrist, then maybe I’ll be incorrect about him not winning the nomination?

If I were Bloomberg, the first thing I would do is tell my news agency to follow the company’s policies. In other words, how they investigate and deliver the news should not change. Yes, he is the owner, and yes, he is running as a Democrat, but to have his agency announce they would not investigate Democrats, just Trump is wrong.

Lukas Alpert reported in the WSJ that “Bloomberg news won’t do investigative reporting on any Democratic presidential candidates now that the news organization’s multibillionaire owner, Michael Bloomberg, has jumped into the 2020 race.” The news agency stated, “We will continue our tradition of not investigating Mike (and his family and foundation) and we will extend the same policy to his rivals in the Democratic primaries.” This so-called courtesy will not be extended to Trump. However, Bloomberg News will publish investigative articles by “other credible journalistic institutions on Mr. Bloomberg or other Democratic candidates.” Although I think this is admirable, I also think it is an ethical dilemma. I do think it will be interesting to see if the same conflict of interest argument rises as we have seen with Trump.

I do think the actions Bloomberg himself has taken to distance himself from his business is good. He has established a management committee to run Bloomberg LP, which is similar to what Trump has done.

I don’t have a problem with a wealthy person running for president. I don’t have a problem with our politicians being wealthy if they have done it ethically. What I do have a problem with is the lack of consistency on how the news media treats progressives over conservatives. It will be interesting to see how this plays out. Howard Shultz is long gone; we’ll see how long Bloomberg lasts, nd what the news media tries to do to him.

This is my thought for the day!

Peter Drucker: The Best Managed Companies In 2019

When I was a manager at Boeing, I remember a situation where an individual was transferred to our plant.  This person was given the responsibility of running our department. I kind of liked the person at first, but over time this person did some things that began to alienate others and eventually me. I understand that a manager doesn’t do the job to be liked, but as Peter Drucker pointed out, trust and employee engagement are critical to the high performance of an organization. As I read the Journal Report today on the best managed companies of 2019, I concluded that these companies are channeling what I learned by watching my peers at Boeing. Some of the managers just didn’t do well, for one reason or another, but the ones that did do well followed the principles illuminated by Peter Drucker.

Wartzman and Tang, The Business Roundtable’s Model of Capitalism Pays Off, start the Journal Report by presenting the new business model agreed to in August. “When the Business Roundtable said in August that its members had embraced a model of capitalism that takes into account the interests of all corporate stakeholders – and thereby renounced the idea that shareholders should always come first – it painted the move as one part affirmation, one part aspiration.” Some, as I have written earlier, are concerned that corporations are moving away from profit, but that is not the case.

181 CEO’s of the largest corporations signed the Business Roundtable statement. The statement called for, “meeting or exceeding customer expectations, investing in our employees by compensating them fairly and providing important benefits, as well as offering training and education so they can develop new skills for a rapidly changing world.” This statement reflects what Katzenbach and Smith, in their classic The Wisdom of Teams, calls high performance: Taking care of employees, who take care of customers, then take care of shareholders. Seems like a good thing.

My first question was, who are the companies? My second question, what was the criteria? In Chip Cutter’s journal report, he identified Amazon, Microsoft, Alphabet, Cisco Systems, Walmart, PepsiCo, UPS, Ford, Progressive, Boeing and many more. The article is clear to point out there are five different criteria, and even though a company has a good index result when looking at all five criteria together, there were many red flags. “While every company has flaws, the ranking aims to point out those firms that are particularly good at balancing what are often competing management priorities.” Now let’s answer the second question.

Peter Drucker is known as the father of modern management. I have read many of his books, and his management philosophy is sound and reasonable. If followed a company can be both profitable and a good place to work. The Drucker Institute, working with the Wall Street Journal, has created a “holistic measure of corporate effectiveness.” The institute defines this as “doing the right things well.” The institute describes why they are doing this, “the measure seeks to assess how well a company follows a core set of principle advanced by the late Peter Drucker, a professor, consultant, author, and longtime Wall Street Journal columnist.” As I stated, I have enjoyed Drucker’s work, and there is a vacuum in the business writing world since his death in 2005.

Drucker’s core principles were customer satisfaction, employee engagement and development, innovation, social responsibility and financial strengths. “These principles serve as touchstones for five dimensions of corporate performance,” used for the rankings. The scores are calculated to be statistically relevant. They describe this as using a range of 0 to 100 with the mean being 50, and a standard deviation of 10. This means, “If a company is one standard deviation above the mean (with a score of 60), its results are in the top 15% to 20% of a larger universe of companies assessed by the Drucker Institute.”

Each area of assessment has various indicators that are used to calculate the final number. The top 250 companies are a part of a larger population of 820 companies that represent the Dow Jones Industrial or the S&P Composite Index. The Drucker Institute uses appropriate statistical data collection and analysis methodology to ensure valid and reliable results. They do this to ensure it describes the companies accurately. It is not meant to be prescriptive. That is the job of those of us who analyze the results.

In looking at the list we can see the Amazon is number one. Microsoft is two, and Apple is number three. All tech companies that obviously reflect our economy. Facebook and IBM are tied for sixth. In that we see a mixture of old and new. Walmart is number fourteen, but it has a red flag in the area of employee engagement and development. The Boeing Company is number thirty-one. Its strengths are in the area of innovation and finance, while it is weakest in employee engagement. I think that is accurate. The farther we get down the list we see corporations that have been around for a while. Hershey, Clorox, Dell, Medtronic, Bristol-Meyers, and many more.

So, what is my point? If the narrative is correct that young people don’t want to work for corporations, then they are missing an opportunity to have a great career and explore many new possibilities. My work at Boeing definitely did that for me. If the millennials think they will find a perfect employer, then they are in for a huge disappointment. I like this assessment. It proves to me that forty years ago, those of us who were influencing the business world did our work well. When I started at Boeing in 1977, I was told in orientation that if I didn’t like my job don’t let the door hit you on the behind on my way out. They told me there was a 1,000 people who wanted my job. That does not happen today. Compared to that, the corporations of today have found employee engagement to provide better results. Valuing employees tend to be more productive than telling them to not let the door hit them in the butt on their way out.

And that is my thought for the day!

On My Birthday: Reflections Of My Life

I love Sundays. I love going to our Sunday gathering at the church building. Today Pastor David discussed what it means to be the Church in this day and age. It was an excellent exposition of Colossians chapter one. While he was speaking, I thought about my life. Next Tuesday is my 69th birthday, which may have had a part in why I was reflective this morning. Today’s blog will be a reflective analysis of my life.

Around March of 1973, the older I get the cloudier the past becomes, I was invited to Calvary Chapel in Costa Mesa, California. It was, and is, a large church at the corner of Sunflower and Fairview in Orange County. I was introduced to the person of Jesus Christ and responded by committing my life to Him. I have now walked with Jesus for almost 47 years. I am not perfect, but my life has been one of amazing blessing. I’d like to share with you my thoughts.

When I first began this life with Jesus, I did not understand all this entailed. Paul, the writer of the letter to the Ephesians, gave me a sense of this life in Jesus. The phrase he used was being “blessed with every spiritual blessing in the heavenly places.” I have found this statement to be true.  As a child of God, I am blessed, because even though I was a sinner he saved me a gave me a new life.

Prior to 1973 I was what Paul described in Ephesians chapter two as “dead in trespasses and sins,” and following “the prince of the power of the air, the spirit that is now at work in the sons of disobedience.” I did a lot of bad things, they may have been fun at the time, but in the light of 47 years of reflection, I recognize just how bad those things were. “But God being rich in mercy” made me alive with Christ when I began this walk with Him. By grace I was saved, but out of that came a life lived in response to God’s direction and support.

After a few years of attending Calvary Chapel, I felt the call to move to the Pacific Northwest. Some friends of mine had moved to La Center, Washington. They were describing the spiritual dryness of the area. Being naïve, I thought I would move to the Northwest and be used of God to do great things.

The first year of living in Vancouver, I attended a small church in Battleground. I was there one year, eventually becoming the youth pastor. It was a lot of fun, but I left due to some doctrinal differences. It was about this time a pastor of large church in Vancouver visited Calvary Chapel. Crossroads Community Church affiliated with Calvary Chapel in 1978, and I started attending. I attended Crossroads on and off for 25 years. I was very involved, but left to start a church in Ridgefield, Washington. After a few years, I Returned to Crossroads because pastoring a church was very hard on my marriage. I ended up losing that marriage, which was the most difficult time in my life. I had served God, and never thought this would happen to me. It did, and it was tough.

I began doing single parents ministry at Crossroads, which is where I met my current (and last) wife. We have been married now for 30 years, going through many ups and downs, but God has blessed our life together. I think it was after two years of marriage that we decided to attend another church to work on our marriage. This is where we met a wonderful man, Aaron Knapp. Pastor Aaron is one of the reasons my wife and I are still married. He pastored us through many difficult times.

After three years we returned to Crossroads, where we stayed for several years. My son ended up on staff, and I did some ministry, things were good. Eventually my son left Crossroads, and my wife and I felt the need to move on to another church.

I like to joke about having attended almost every church on 78th street. Vancouver Church, New Heights, and Crossroads are all on 78th. But, after Crossroads I never felt I was home. I met some wonderful people at each of these churches, but after 25 years at one church, it was difficult to find a home. Now we are attending Summit View on the Westside, and we are home. It has been a blessing. I enjoy the opportunity to support the ministry there, while I do what God has called me to do, teach.

I told you I moved to Vancouver to serve God. However, I did not move here without financial means to take care of my family. I started working for the Boeing Company in 1977. I started as a Quality Control person, moving into Statistical Process Control, and then Quality Auditing. I had a wonderful time doing those jobs, but it was after I finished my Bachelor’s degree that my career at Boeing took off.

The Quality Control job at Boeing and my ministry work at Crossroads and the little church in Ridgefield were occurring simultaneously. After I left the little country church, and experienced a divorce, I decided to continue my formal education. In 1994 I earned a BS in Business Administration, and immediately was promoted into management at Boeing. After a few stumbles, I learned to enjoy managing people, and did pretty well. So well, I decided to get my MBA.

After earning my MBA, I went back to Warner Pacific University, where I had done pretty well, and asked if I could try teaching for them. In 1997 I taught my first class in their adult program and have been teaching for them since. I decided I would retire early from Boeing and teach full time. However, I knew to make any money in academia I needed to earn a PhD. In 2003, I finished my MA and PhD work, while working full time for Boeing and teaching periodically at Warner Pacific in their adult program.

In 2006, I started teaching half time on the traditional campus, in addition to an occasional adult class, which led to a 2008 retirement from Boeing and a full time teaching position at Warner. I did that work until 2018 when I retired. I am now teaching occasional classes at both Warner and Multnomah University.

47 years ago, I began a journey with Jesus. I have had some exciting times, and some very difficult times. I can truly say that in all of this I am blessed. I have tried to pattern my life on the person mentioned in Psalms 1. “Blessed is the man who walks not in the counsel of the ungodly, nor stands in the way of sinners.” I have tried to delight in God’s word, read it and meditate in it day and night. I hope to hear the words “well done, good and faithful servant” when I leave this world for the next. Some days I feel like I am a tree planted by streams of water that yields its fruit in due season. Some days I feel pretty dry.

My life has been filled with joy and sorrow, but because Jesus is in control of my life, I am blessed, regardless of how I feel.

And that is my thought for the day!

Boeing, Agency Theory, Shareholders, And The Community

The other day a couple of my friends read my blog on Boeing and asked what I thought about a recent article from The Atlantic. The article, “The Long-Forgotten Flight That Sent Boeing Off Course,” was written by Jerry Useem. He is a contributing writer at the Atlantic and covers business issues for the New York Times. He has written about Boeing before, and I even used some of his information in my dissertation years ago. In this article he is writing about an event I remember vividly. The day Boeing changed from being a Washington State based company to a Chicago based company with facilities in different national locations.

Useem describes the action taken by CEO Phil Condit and President Harry Stonecipher as, “putting some distance between themselves and the people actually making the company’s planes.” By locating the recently merged Boeing and McDonnell-Douglas company in Chicago, leaders could distance themselves from the day-to-day business operations. Useem says this decision has resulted in the 737 Max fiasco, because the company leaders divorced themselves from the “firm’s own culture.” Leaders no longer listened to engineers but to each other. I think he is right.

I was a Boeing employee when Condit and Stonecipher merged the two companies. I remember how we used to joke that McDonnell-Douglas had taken over Boeing using Boeing’s own money. I have even written in previous writings how the merging of the McDonnell-Douglas MBA weenie culture with the Boeing goggle-head culture was problematic. Useem describes this time in this Atlantic article, “Condit was still in charge, yes, and told me [Useem] to ignore the talk that somebody had captured him and was holding him hostage in his own office. But Stonecipher was cutting a Dick Cheney-like figure, blasting the company’s engineers as arrogant and spouting Harry Trumanisms (I don’t give em hell; I just tell the truth and they think it’s hell) when they shot back that he was the problem.” I think this is an amazing description of the time.

As I reflect on those days working for Boeing as a manager, I remember how even managers didn’t like Stonecipher’s philosophy. We were worried that he would not approve the manufacturing of the 787, which he eventually did. However, we also know that he didn’t care about making a lot of planes, he just wanted to make a buck. This was the tension between Boeing, an engineering company symbolized by the goggle-head, and McDonnell-Douglas, symbolized by the MBA weenie.  I remember the Boeing corporate leaders coming to the Portland plant telling us that we were no longer a family – but a team. We in Portland did not like that.

The tension that Useem is writing about is nothing new. This article got me thinking about Agency Theory. In every for-profit business there are principles, owners, and agents, managers. The theory discusses the tension that naturally occurs between these two entities. Principles delegate the owner’s authority to the agent, manager, to run the business in a way that makes money for the principle. Managers want to run the company in a way where they get good bonuses. Often the goals are different between the two entities. In our example about Boeing, the engineers wanted to successfully create flying machines, while Stonecipher represented the ownership goal of making lots of money. Companies that negotiate both profitability and long-term sustainability have happy stakeholders.

I don’t think Agency Theory is the problem, I think the changing reality of company ownership is the issue. When Bill Boeing started the company in 1917, he had a stake in the company. In other words, he was actively involved in the day-to-day operations of the company. He was personally impacted by the results. Today Boeing is owned by shareholders. If they don’t like what Boeing is doing and are not getting a sufficient return on their investment, they can move their money to something else. Who cares about the employees, the community, or other stakeholders?

About the move, I think Useem is right. Boeing leadership had separated itself from the day-to-day business of the company, and as a result business has become just a number. They don’t walk through the factory and say good morning to Lakeesha, John, or Jose. They look at spreadsheets and decide the future without any thought of community impact. Is it any wonder that corporations have a bad reputation? Useem is describing events surrounding the Boeing Company, but I think it relates to the existential crisis affecting corporations in the United States.

I don’t agree with Elizabeth Warren that corporate boards should be forced to have a certain number of union, or employee, representation. I don’t not like government intrusion in the running of businesses (unless necessary), so to keep the government out, corporations and shareholders need to adjust for the good of our economic health and improved social capital in their relationship with the community.

I enjoyed my career at Boeing. I met many wonderful people and was able to create a comfortable retirement for my wife and I. Throwing the corporate model out is wrong, and I think the Millennials are missing an incredible opportunity for a wonderful career by not wanting to work for corporations. There are many corporations currently operating in a manner that demonstrates a positive business model. So, the concept is there, and other corporations can adjust if they choose to.

And that is my thought for the day!

 

Bravo Fred Smith: FedEx And Corporate Tax Rates

I am very excited about writing again. I find it both cathartic and stimulating. I would rather think and reflect, then emote on social media. Today I want to discuss taxation. I want to look at it from the Corporate, or business, perspective, and the wealthy person’s position. I think they are two different elements. Generally, taxes are an important responsibility. However, I also think government can be wasteful. I distrust the government’s ability to stop at just taxing the wealthy. I also believe what Robert Heinlein said, “There is no worse tyranny than to force a man to pay for what he does not want merely because you think it would be good for him.” That said, taxation is a necessary reality, like death.

What role does government play in the economy? First, let’s explore how the economy works. In our economy we have firms and households. The households demand products or services and the firms supply the needed commodities. In order to produce, or provide these goods, the firm hires people from the households to produce the goods or services. In the process, the firms pay a wage to the people from the households who in turn buy the products from the firm. To hire people, or gather other resources, the firm goes to the factors market. This is where acquire the needed resources to transform inputs into outputs. The firm’s outputs are then sold at the goods and services market. The mechanisms of value, money, is exchanged for either labor or goods. This economic value travels in a circular motion. The government operates in the middle of all of this, to ensure asymmetry does not occur. In other words, nobody cheats. At least too much.

Jeffery Sachs, in his book The End of Poverty, describes how the government interacts with the economy. On page 247 Sachs describes in Figure 1: The Basics of Capital Accumulation. On the left there is Household Income and on the right of the figure, capital per person. In between the two graphics there is an arrow moving from left to right titled Household Savings. The implication is that as households earn more, savings increase with the result of greater capital accumulation per person. This means there is economic growth. Economic growth stimulates greater household income, and we have a positive spiral. The lower part of the graphic describes how households make tax payments that feed the public budget that also feeds capital accumulation, feeding economic growth, leading to households being better off.

During a downturn, like we had in 2008, Tax payments go down, leading to zero public investment, reinforcing negative economic growth, resulting in less capital accumulation per person. Economists measure this economic activity by tracking GDP. Gross Domestic Product (GDP) as a measure encompasses consumption, business investment, government expenditures, and net exports. If everything is working well, people are consuming, business is investing in new capital, government is building and repairing roads, and we import and export goods, GDP should be growing, and everyone is better off.

Recently, Democrats complained that Trump’s tax breaks were resulting in FedEx not paying any taxes. This is a part of a bigger grouse about tax cuts for the wealthy. The fact is, the economy is doing well, and Trump Derangement Syndrome is driving people to find fault in these cuts. Frederick Smith, the CEO of FedEx, did a good job in the WSJ today explaining economic realities to the folks who are complaining.

Smith states that FedEx operates in 220 countries throughout the world, “and appropriately make our views known on” on government topics that impact them as a company. He also stated that in each of these countries FedEx pays the appropriate taxes.

In discussing the company’s actions in the U.S., “During the Obama administration, and more recently the Trump administration, we worked consistently to change U.S. corporate tax policies. As one country after another lowered corporate tax rates, the U.S. stood by and allowed wide sways of this country to be deindustrialized due in large measure to its globally uncompetitive business tax rates.” Smith goes on to demonstrate how this has impacted high-school-educated blue collar workers. He used the word victim.

As a result of these tax cuts FedEx has increased capital expenditures, remember that action stimulates GDP growth, and when economic growth occurs households save more and pay more taxes. FedEx purchased 24 Boeing wide-bodies freighters, “put additional funds in our pension plan, and increased wages by more than $200 million.” The 24 planes they purchased were 777F and 767F. Each 777F ordered, according to Smith, “injects about $540 million into the U.S. economy, supports 1,850 jobs, and generates roughly $45 million in federal, state and local taxes.” The tax cuts have resulted in many companies doing this same thing, and reports have stated that personal wages for all have increased.

All this sounds good, but I was curious about our new 25.7% average combined federal and state corporate tax rate, and how it ranks internationally. What is the corporate tax rate for other countries? Is 25.7% completely out of line? According to Heritage.Org, “every Organization for Economic Cooperation and Development country has a corporate tax rate under 35%.” France has the highest rate of 34.4%, and Hungry has the lowest at 9%. The “unweighted average corporate tax rate of those highly developed and wealthy countries is just 23.8%, still lower than the 25.7% average combined federal and state corporate tax rate after passage of the Tax Cuts and Jobs Act in the United States.”

Ms. Warren wants to create a Billionaire wealth tax. I don’t have a problem with that at all. I was curious what the tax rates are for taxes due April, 2020. If you make from 0-$19,400 married filing jointly taxes are 10%. The Federal tax rate progresses from 12%, 22%, 24%, 32%, 35%, and 37% for those making $612,351 or more. I am not too sure how a Billionaire is paying less tax than I do, but I think whatever amount they are paying is a lot more than I pay.

My only concern with raising taxes for one group, is the government will eventually want to take more from the rest of us. An example of this is how the Washington State government is trying to negate what the people decided when we voted to lower the tax on registering automobiles. Who cares what the people think!

Bottomline, I am glad the corporate tax rates have been lowered to help American compete with the rest of the world, but I do think the wealthy can pay a bit more. Ultimately though, I worry the government will only want more.

And that is my thought for the day

 

Boeing, Boeing, Gone!

The financial condition of many states throughout our country has become perilous. Many states struggle with pension liabilities for teachers and other state employees, and other factors creating bankruptcy scenarios. I understand the fear that retirees in these states may have about losing part of all of their fixed income. The company and union that pay my pension are currently struggling, which creates a pressure in me about the future. The other day on the golf course, a friend of mine and I had an interchange where we discussed the 737 Max issues and how we are worried about the future of the company. As I ponder this today, I am drawn to the fact that customers have lost confidence in Boeing, and the question of how Boeing should get that confidence back?

Boeing has always had competitors. Lockheed, Douglas, then McDonnell-Douglas, and now Airbus. Lockheed and McDonnell-Douglas are gone, at least on the commercial side of the industry, and now there is just one competitor, Airbus. Airbus is a much more formidable competitor, and has given Boeing a real battle, but it wasn’t Airbus that brought Boeing to its knees, it was Boeing’s arrogance that did with the 737 Max fiasco.

 

The Dubai Air show has just wrapped up. In past years hundreds of airplanes were sold by both Boeing and Airbus, but this year was a little different. Instead of several large orders being booked, 300 airplanes were sold. Airbus booked ¾’s of those sales. Boeing sold a few 787’s, several 777X, and even some 737 Max’s to Air Astana from Kazakhstan. Boeing was supposed to complete a sale to Emirates, but according to the WSJ they did not finalize the order. It appears Airbus is now the number one airplane manufacturer in the world by both orders and deliveries. The question I am thinking about is can Boeing successfully respond to this crisis? And if so, how will this occur?

Boeing is not failing. In June, Boeing reported a 5,964 backlog of aircraft needing to be built and delivered. They will be building airplanes for years to come. Airbus has a similar backlog. I do think this is why the Dubai Air Show did not have as many sales as in the past. The airlines are waiting for their current orders to be realized. The airlines desperately need these planes delivered.

On the other hand, as the WSJ journal stated this morning, flying “passenger traffic has been growing [at] an annual rate of 7% over the past five years but has now fallen below 4%.” I am sure the unrest throughout the world has contributed to this fall. Thus, there does seem to be a bit more uncertainty in the airframe manufacturing business at this time.

When I started working for Boeing in 1977, uncertainty was a reality in the airframe business. There were always cycles of hiring and layoffs. It was just the reality of working in aerospace. I remember a man named Clay Jotblad, my boss at the McCulloch Corp in Los Angeles, telling me not to work in Aerospace. He told me this because I was getting laid off from McCulloch’s and believed the aerospace industry was too unpredictable. I am glad I did not listen to him. My career at Boeing funds my retirement life.

This retirement income is why my golf partner and I were worried about Boeing. So, what does Boeing need to do to regain the confidence of its customers? The loss of confidence is the result of the 737 Max. Two horrible crashes have led to the questioning of the lack of redundant designs, pilot training, and a lack of response from the company. I do think part of the problem is an overall distrust of corporations in general, but that will be the subject of another blog. What does Mr. Muilenburg need to do?

First, he needs to go to Boeing Field and the Renton plant in Seattle and look at all the parked 737 Max’s. That should sufficiently motivate him to solve the problem. The amount of revenue sitting on the runways is staggering. I think all the major stockholders should also visit. The recertification of the Max is taking way too long. However, I know there is another player in the mix, the FAA.

Second, Boeing and the FAA should sit down and discuss the type certificate process to ensure it is robust. There are three type certificates associated with airframe manufacturing. The first certificate is related to type design. The FAA awards this certificate after reviewing initial design information. This allows the company to build prototypes of an aircraft. The second certificate is the Production Certificate. This is awarded to the production system associated with building aircraft. The FAA requires anyone that builds aircraft to meet certain production requirements, ensuring that there are sufficient controls in place for precision and safety. In other words, the FAA wants the production system to produce a consistent and accurate product meeting type design. The last certificate is the airworthiness certificate. The FAA awards this to each aircraft that is completed before it is delivered to the customer. Boeing and the FAA should look at this process to determine if there are any weaknesses.

Third, Boeing should increase pilot simulator time for each new aircraft. When I worked for Boeing, we initiated a process involving Root Cause Analysis. We did this to migrate from just pointing to operator error for defects, to looking for a true root cause to the problem. It does appear that in the two crashes that pilot error was part of the problem. However, if they weren’t trained properly, then the real root cause is training. Boeing may have tried to cut cost a bit too much.

The fourth and final action, is a complete review of Boeing’s management system.  The company needs to ensure that there is appropriate checks and balances mitigating pressures to compromise on design and build of the aircraft. I worked for Boeing and recognize the immense pressure of a multi-million-dollar piece of equipment being delivered late. However, I also recognize, and every Boeing employee I know feels the same way, that no one at Boeing wants an aircraft to crash. All of us who worked for Boeing and are now retired cared very deeply about the safety of our customers, and I am sure every Boeing employee feels the same today from management down to Hillary the janitor.

In this difficult time, Boeing management has a fiduciary responsibility to reassure its stakeholders of the integrity of the Boeing product. Management needs to make this priority number one. This means lots of communication. I hope they do better than they have, or it will be Boeing, Boeing, Gone!

And that is my thought for the day!

Greg Jayne And His New Scapegoat: Baby-Boomers

I was feeling a little cranky this weekend. So, it didn’t help when I read Greg Jaune’s editorial in the Sunday Columbian, our local newspaper. I am not a fan of his editorials because they typically demonstrate how the Columbian has shifted focus over the years. Many of my friends have quit take the Columbian calling it fish-wrap, fit for a bird cage, and other derogatory descriptors. Myself, I like to read local news, and I like to support a local newspaper. We get too much of our news in narrative style either by a CNN liberal type news source, or a Fox type source on the right. So, I think my combo of CNN, Fox, the Columbian, and the Wall Street Journal give me a nice collection of information that I can use to make up my own mind.

However, when I read Jayne’s Sunday’s article, I got even more cranky. The usual blamers are now taking on the Baby-Boomers. They’ve canceled the American past calling it Colonialism, genocide, and other horrible characterizations, determining that America’s past is evil. Don’t get me wrong, America has made mistakes, and as a Christian I know we are all inherently sinners, but over the many years of human history, I think we in America have tried to do the best we could under the circumstances. Now the blamers are focused on Baby-Boomers.

Jayne begins his editorial by telling us he missed being a Boomer by one year. Jayne says, “Technically, sociologists say, I’m not a baby boomer. I just missed it, by a year, which is probably a good thing.” That way he can attack the Boomers, because he is not one. After telling us what people are saying, “your generation screwed things up and it is time to let some forward-thinking people take charge,” which according to him “probably isn’t a bad thing.”  Then he proceeds to equate all Boomers with Republicans, through George Bush, and every bad thing that has happened in the history of humankind.

He is relying on comments made by Bruce Gibney about the Boomers. “The Boomers inherited a rich, dynamic country and have gradually bankrupted it. They habitually cut their own taxes and borrow money without any concerns for future burdens. They’ve spent virtually all our money and assets on themselves and in the process have left a financial disaster for their children.” This is contrarian to what others say is about to occur. “Over the next several decades, baby boomers – the wealthiest and one-time largest, generation in U.S. History – will pass down an estimated $30 Trillian in assets to their children” (CNBC). So, which is it?

In both cases the press is sensationalizing and generalizing the truth. I very seldom read Greg Jayne’s editorials because he is not objective in his analysis. He is biased and does his best to undermine conservatism. He self-identifies as a Millennial. “So, to be honest, it is easy to empathize with Generation X and Generation Z and long for change in the American power structure. They might not be my generation but, as the saying goes, you’re only as old as you feel.”

Well Mr. Jayne, I am a Boomer, and I am proud of it. Yes, I am selfish. It would be foolish to deny that Boomers are not self-interested. However, the Boomers changed history. Civil rights, women’s rights, and other sociological events, including the Jesus People movement, occurred making the world a better place. During our watch the United States has become one of the richest countries in the world. Technology has changed the world for better. Extreme poverty has been reduced all over the world. Do we have issues? Absolutely, but so did previous generations. However, I get why you said what you said. You want to pander to the Millennials so they will read your newspaper.

I have lived in Vancouver, Washington for 42 years. It was and is a wonderful place to live. My wife and I travel a lot, and we have talked about moving to warmer climates. However, our kids are here, and we love the summers in the Couv. So, we have decided this is where we will live, and during our grey winters travel south with all the other snowbirds. But I know my city and county is changing along with the rest of the left coast. Greg Jayne reflects that change. Just like so many others in his self-identified generation, he wants to blame somebody else for the problems, because obviously he has not contributed.

And that is my thought for the day!