There are only two companies in the world capable of building and exporting the largest type of civilian aircraft, the "jumbo jet": Boeing and Europe's Airbus.
Since 1992, Boeing has gone from enjoying 70% market share to falling behind Airbus in orders and manufacturing.
2/n
Manufacturing aircraft is very expensive and technically challenging.
Only about a thousand large civilian aircraft are sold every year, so margins are small despite government subsidies, unlike say cars or microchips.
Any advantage or efficiency is crucial.
3/n
It was thus disastrous when, in 2018-19, two new Boeing airplanes crashed, killing 345 people in total.
And, since January 2024, Boeing planes have seen a series of incidents, some nearly catastrophic, including a mid-air nosedive that injured over fifty people.
4/n
These two series of incidents are unrelated.
But both stem from succession failure: when the power and skills to succeed in a position within an organization are not passed down from one person to their successor, especially including tacit and informal knowledge.
5/n
Succession failure in the engineering offices caused the two fatal crashes, as Boeing ended up designing and then delivering planes that, essentially, were programmed to crash themselves during a particular set of circumstances.
Which they then did, twice.
6/n
To date, nobody has been held responsible for the series of fatal errors.
But that is because no error on its own was fatal, just the combination of them, which no engineer at Boeing recognized in time or had the authority to act on, if they did recognize it.
7/n
Boeing is not the same company it once was.
Its non-technical managers and executives favored new factories in South Carolina rather than its core Seattle factories, where experienced workers were unionized and more expensive.
It is headquartered in DC now, not Seattle.
8/n
The political ascendance of consultants and “MBAs” over engineers, both at Boeing and in the U.S. generally, means that engineers are unable to overrule the decisions of consultants or MBAs and are themselves rewarded for making decisions like an MBA rather than engineer.
9/n
A brief intermission: if you have read this far, I highly recommend you become a paid subscriber to Bismarck Brief to read our full in-depth investigation of Boeing and get a new report on a key industry or individual every Wednesday.
What whistleblowers and regulatory audits describe at Boeing is a decline in industrial discipline, with basic norms and standards of competence, decorum, and work ethic falling.
10/n
From various Boeing factories over the years, there are reports of defective components being installed on purpose, debris being left in dangerous areas, workers abusing drugs during work, and so on.
Some Boeing employees said they would not fly on the planes they built.
11/n
This decline in discipline occurs when workers, technicians, and managers do not transfer their knowledge and skills.
It is happening both because of circumventing old factories and workforces with brand new ones, but also because Boeing's workforce is aging.
12/n
It has been a long time since manufacturing was seen as an attractive career path to American youth.
In 2018, over a third of employees represented by Boeing's machinists' union were over the age of 55 years old.
Now, Boeing is rapidly diversifying its workforce.
13/n
Minority hires are now 47.5% of new hires, up sharply from 37.2% in 2020.
Only 29.9% of Boeing interns were white males in 2022.
14/n
According to Boeing, they have fired 65 employees since 2020 for "behavior deemed to be racist or hateful." These are most likely older white male workers.
This rapid politically motivated change in Boeing's workforce implies that still more succession failure is happening right now.
15/n
Outsourcing, subcontracting, diversity policies, MBA-led decision-making, a focus on financial profits in low-margin heavy industry—these are all ultimately just different ways to accidentally cause succession failure, which in airplane manufacturing causes deaths!
16/n
With some 40% of U.S. military aircraft, a third of ICBMs, and U.S. passenger aircraft on its back, the U.S. government has a deep vested interest in returning Boeing to functionality.
But there is no reason to think it is capable of installing a live player in charge.
17/n
Which is perhaps why the U.S. military seems to be circumventing Boeing in favor of Lockheed Martin now.
Boeing's decay rather opens up the potential for a live player to start a new company that outdoes Boeing in civilian aircraft manufacturing.
18/n
To read the full analysis of Boeing, subscribe to Bismarck Brief here:
As far as I can tell, the most notable political science results of the 21st century is democracy cannot work well with low fertility rates.
All converge on prioritizing retirees over workers and immigrants over citizens escalating social transfers beyond sustainability.
I think this means we should try to understand non-democratic regimes better since they will represent the majority of global political power in the future.
It seems to me that the great graying and mass immigration simply are the end of democracies as we understood them.
Just as failure to manage an economy and international trade were the end of Soviet Communism as we understood it.
Such institutional selection theories are completely wrong.
Corporations don’t evolve through natural selection. That requires heritable variance under differential fitness. The culture, technical knowledge, and structure of organizations is captured by personnel not bylaws.
Unless personnel persists, corporations have nearly no heritable variance. This is perhaps a case for why we should clone exceptional employees but has nothing to do with organizational structure.
The origin of successful companies lies with exceptional founders who know how to assemble these organizations. These founders are the inventors of relevant social technologies.
Does this mean creative destruction doesn't have a role? No, not at all. The personnel and machinery in dysfunctional institutions are indeed wasted. They should be reallocated to functional firms. Everyone is better off when they do!
But it is a conceptual and empirical error to think this is the mechanism that creates such firms in the first place! It isn't.
Regardless of the particular measure we use, exceptional institutions do exist, but they are rare. Most things fail. Things that exist have avoided failure—so far. Institutions that we do see are functional enough to persist.
Those who aren't capable of social technology invention are at best making photocopies of functional organizations. The mistakes they make far outweigh any learning. Failure doesn't teach that much.
Dead organizations of the type Dwarkesh is describing make decisions by committee and try to iterate towards local optima. Live players who found and run functional institutions are capable of seeing, considering, and working toward a much broader range of outcomes and working toward novel global optima.
First principle companies lead by live players like SpaceX will *always* outperform bureaucratic or committee driven organizations like Boeing. We've seen this in hundreds upon hundreds of company case studies at @bismarckanlys.
In fact Apple is an instructive case. It is more profitable than ever. It faces no competition. Remember under perfect competition profits fall to zero. Yet, after the death of Steve Jobs it simply and persistently failed to innovate at the same level. Its vast profits are a market failure not a market success: they represent vast misallocation.
It is in fact a dead player, and a slowly decaying functional institution can keep on winning—until it breaks. Which Apple will one day. Unless taken over by a live player.
No committee ever appoints a live player if they can help it, simply because that's how committees work. It has to be somewhat of a hostile takeover like what happened to old Twitter when Elon took it over or what Carl Icahn did back in the day.
What does this mean for politics?
It is precisely because the stakes are so high, and because there is no inherent check on the sovereignty of great powers, that we must work very hard to avoid dysfunctional and extractive institutions in government.
It means we should have much much more creative destruction in politics. Because in politics too machinery, personnel, and, yes, territory are distributed inefficiently. Here too we should embrace first principles thinking and live players.
Great nations and the peoples of countries like the United Kingdom, France, and Germany are today misgoverned in a way very reminiscent of Boeing or RTX or Lockheed Martin or a dozen other companies run on the "portfolio theory of the firm." Those companies and governments are not at all like Nvidia, OpenAI, Anduril, or SpaceX.
And the world is poorer, less technologically advanced, more violent, and less free because of it.
Let's fix all dysfunctional institutions, be they private or public. Out with the portfolio theory of government! In with first principles thinking.
It really is looking like the Russia-Ukraine war permanently knocks Europe out of the running as a 21st century power.
Europe was set on track to be there 2005-2008. Even for much of the 2010s it was plausible it would recover from the 2008 financial crisis after a lost decade.
Now it looks like it would be necessary to have several live players working hard to achieve this. The default forecast is there aren't enough live players.
If you believe in GDP your intuition should be that Americans are much richer than Austrians AND that Austrians are much richer than Japanese. Per capita GDP:
United States 86,601
Austria 58,669
Japan 32,859
Asiapoors.
I'm originally from Slovenia. An Eastern European country.
It's GDP per capita recently surpassed that of Taiwan and Saudi Arabia.
Slovenia 34,544
Taiwan 33,234
Saudi Arabia 32,881
If Americans are the global Upper Middle Class Europeans are the middle class and Asians the working class.
Hungary is a developed liberal democracy that has been continuously ruled by populist, nationalist conservatives for 15 years.
Yet despite this, they have surprisingly not meaningfully changed the country's trajectory.
Read the new, very long @bismarckanlys Brief! (link below)
Long-time Hungarian Prime Minister Viktor Orban and his Fidesz party have turned repeated large electoral victories since 2010 into institutionalized power.
Orban skillfully empowered parliament over the courts, making it possible to reform Hungarian society by passing laws.
Orban has a reputation as a foreign policy contrarian who is not afraid to make deals with Russia or China, a strong social and fiscal conservative who introduced low taxes, and a visionary who is rejecting immigration and raising Hungarian birth rates with government policy…