Boeing: Failing at Moral Capitalism

Boeing, maker of airplanes, has paid $160 million to Alaska Air Group to compensate that customer for lost profits following the midair blowout of a door plug on a Boeing plane sold to that company.  The accident and subsequent forced grounding of Alaska Air’s jets had a negative impact on Alaska Air’s income.  Alaska Air said it expects more compensation from Boeing in the future.

Now that’s a great way to make a profit: sell your customers poor quality products and then compensate them for the inconvenience.  What was Boeing thinking?  What went wrong?  We get an answer from a recent interview by Chrisopher Rufo with a Boeing employee.  In short, Boeing’s corporate culture and its values drove it to acting stupidly, not taking care of stakeholders and in so doing, failing at capitalism 101.

Christopher Rufo: In general terms, what is happening at Boeing?

Insider: At its core, we have a marginalization of the people who build stuff, the people who really work on these planes.

So, right now, we have an executive council running the company that is all outsiders.  The current CEO is a General Electric guy, as is the CFO, whom he brought in.  And we have a completely new HR leader, with no background at Boeing.  The head of our commercial-airplanes unit in Seattle, who was fired last week, was one of the last engineers in the executive council.

The headquarters in Arlington is empty.  Nobody lives there.  It is an empty executive suite.  The CEO lives in New Hampshire.  The CFO lives in Connecticut.  The head of HR lives in Orlando. We just instituted a policy that everyone has to come into work five days a week – except the executive council, which can use the private jets to travel to meetings.  And that is the story: it is a company that is under caretakers.  It is not under owners.  And it is not under people who love airplanes.

In this business, the workforce knows if you love the thing you are building or if it’s just another set of assets to you.  At some point, you cannot recover with process what you have lost with love.  And I think that is probably the most important story of all.  There is no visible center of the company and people are wondering what they are connected to.

Rufo: If they have lost the love of building airplanes, what is the love, if any, that they bring to the job?

Insider: Status games rule every boardroom in the country.  The DEI narrative is a very real thing and at Boeing, DEI got tied to the status game.  It is the thing you embrace if you want to get ahead.  It became a means to power.

The radicalization of HR doesn’t hurt tech businesses like it hurts manufacturing businesses.

Service means you are spending the extra time to understand what’s really happening in the factory and in your supply chain.  There should be some honor in understanding that we inherited something beautiful and good and worth loving.

Boeing’s outgoing CEO, David Calhoun, for his leadership in 2023, received from the company $33 million in compensation, mostly from awards of stock and not company cash – only $1.4 million in salary.  But as discipline for the door plug blowout on a 737 MAX jet this past January, for 2024, Calhoun and other senior executives will get 22% less in shares of Boeing stock than originally proposed.  Calhoun also gave up a cash bonus for 2023 in the amount of $2.8 million.

Even with such reduced compensation, Calhoun is not hurting financially, but the company surely is.

From the Front Lines of American Capitalism

On March 22, Boeing’s biggest U.S. customers took their frustrations with poor company performance to the company’s board of directors.  The airline executives wanted Boeing’s board to take personal responsibility for quality control.  They wanted to express concern over the fuselage failure of an Alaska Airlines 737 MAX aircraft and production problems in the manufacture of airplanes.

Boeing’s CEO, David Calhoun, had apologized for Boeing’s mistakes and said that the company is working with customers and regulators to address their concerns.  Calhoun had come to Boeing to improve the company’s prospects after fatal crashes of two 737 MAX aircraft in 2018 and 2019.  Previously, he had worked at General Electric and Blackstone.

On March 25, Calhoun said he will leave his position as CEO at the end of the year.  Boeing also announced that the head of its commercial aircraft business will leave the company immediately and its board chair won’t stand for re-election.  An outsider will take over as chair and lead the search for a new CEO.

Secondly, the U.S. federal government and 15 states have gone to court to allege that Apple designs products to discourage consumers from integrating into their iPhones service features of competitors, which encourages consumers to pay more for cell phone use.  U.S. officials have already brought antitrust actions against Amazon, Google and Meta platforms to bring more market discipline to bear on the ability of those companies to make a profit.

Thirdly, a coalition of 41 states and the City of Washington, D.C. have filed lawsuits against Meta for intentionally selling products having addictive features that harm young users of Facebook and Instagram.  Teen users of the apps report that they feel addicted, knowing that “what they are seeing is bad for their mental health, but feel unable to stop themselves.”

The lawsuit uses documents which were part of a series of 2021 articles on Facebook in the Wall Street Journal.  ESG corporate stakeholder responsibility anyone?

Blackrock, Vanguard and State Street are reportedly on track to own half the shares of all American companies within 15 years.  How’s that for a concentration of power in a few hands?  According to Harvard Law Professor John Coates, private equity and index funds are concentrating wealth and power.

Lord Acton once said, “And remember, where you have a concentration of power in a few hands, all too frequently, men with the mentality of gangsters get control.  History has proven that.”

Fourth, when people have power, they can misuse it.  Bill Ackman, a billionaire hedge fund manager, has found that on Facebook, imposters have placed more than 90 different ads pretending to be him touting stock investments.  Other wealthy investors have also been impersonated.  The ads lure their marks into joining WhatsApp groups to get stock tips.

When complaints were filed, Facebook replied that the ads don’t go against its standards.
The Federal Trade Commission reported that imposter scam losses rose between 2019 and 2023 to $2.7 billion.

Social media platform X (formerly Twitter) blocked searches about the singer, Taylor Swift, after explicit, digitally fabricated fakes of her proliferated on the site.

As Lord Acton also said: “Power tends to corrupt and absolute power corrupts absolutely.”

Social media empowers people.  Having money empowers people.  What, then, keeps them from abusing their power: free markets?  The law?  Morality?  Fear of the Lord?

One Island, Two Very Different Countries

The other day, I read a short news report that the Dominican Republic is building a wall along its border with Haiti.  With the collapse of governance in Haiti, the Dominican Republic does not want a flood of Haitians fleeing their homeland seeking refugee across the border in the Dominican Republic.

This poses, yet again, the big question about emigration, asylum seekers and refugees: why do they flee?  Why has their homeland turned against them?

The generation of emigrants, refugees and asylum seekers is the failure of sovereignty.  Haiti and the Dominican Republic share the same island.  Why is one territory safe and prosperous and the other dangerous and poor?

Let’s compare the two societies on some internationally well-accepted metrics (low score is better):

  • Human Development Index: Dominican Republic 82, Haiti 158
  • Social progress Index: Dominican Republic 72, Haiti 159
  • World Bank 2020 Human Capital Index: Dominican Republic 112, Haiti 131
  • Economic Freedom index (high score is better): Dominican Republic 62.9, Haiti 48.2

The island which is now home to Haiti and the Dominican Republic was the first land in the Western Hemisphere to be colonized by Europeans.  Columbus landed there in 1492.  Columbus founded the first European settlement in the Americas, La Navidad, on what is now the northeastern coast of Haiti.

According to Wikipedia, the Dominican Republic has the seventh-largest economy in Latin America.  Over the last 25 years, the Dominican Republic has had the fastest-growing economy in the Western Hemisphere – with an average real GDP growth rate of 5.3% between 1992 and 2018.  GDP growth in 2014 and 2015 reached 7.3 and 7.0%, respectively, the highest in the Western Hemisphere.  Recent growth has been driven by construction, manufacturing, tourism and mining.  The country is the site of the third largest (in terms of production) gold mine in the world, the Pueblo Viejo mine.

The Dominican Republic is the most visited destination in the Caribbean.  The year-round golf courses and resorts are major attractions.

For Haiti, Wikipedia says:

Competing claims and settlements led to the west of the island being ceded to France in 1697, which was subsequently named Saint-Domingue.  French colonists established sugarcane plantations, worked by enslaved persons brought from Africa, which made the colony one of the world’s richest.  In the midst of the French Revolution, enslaved persons, maroons and free people of color launched the Haitian Revolution (1791–1804), led by a former slave and general of the French Army, Toussaint Louverture.  Napoleon’s forces were defeated by Louverture’s successor, Jean-Jacques Dessalines (later Emperor Jacques I), who declared Haiti’s sovereignty on 1 January 1804, leading to a massacre of the French.  The country became the first independent nation of Latin America and the Caribbean, the second republic in the Americas, the first country in the Americas to eliminate slavery and only country established by a slave revolt.

Both countries have experienced bad governments and American military occupations.  But what might explain their different social, political and economic outcomes?  Are there lessons for all nations in the answers to that question?

What in Heaven’s Name is in Store for Us All in 2024?

Midnight on February 10 began the new lunar year of the wood dragon.  It is believed, by some, that the intersecting flows of yin and yang, staring at that midnight and ending midnight before the first day of lunar 2025, will influence the doings and goings on of humanity every day of 2024.

Fortunately, we have a diagnostic tool which can help us uncover just how yin and yang will affect our lives during the coming year.  It is the ancient Chinese text of the Yijing.  The Yi, as it is called, consists of 64 sets of lines, six each, called hexagrams.  Lines are either solid as a proxy for yang forces or broken as a proxy for yin forces.

Now, one can correlate each lunar year with a hexagram so that analysis of that hexagram brings insight into the action probabilities and possibilities inherent in that year.  The analysis can help us better place our energies and avoid contrary or unhelpful circumstantial modalities.

Last February, I analyzed the hexagram associated with 2023 in the cycle of years in the lunar calendar.  I then advised:

Precipitous action will lead to difficulties.  We are warned not to cross the stream, to stay where we are and make the most of our situation by restraining the serving of our needs and feelings out of tolerance of others.  We should not impose ourselves on them.

Hamas did not follow that course of action and the Palestinian people in Gaza have suffered grievously, thereby.  Israel’s counterattack against Hamas terrorism also was unrestrained in its bombing of targets in Gaza and by so doing, Israel lost significant sympathy for its cause.

With respect to the U.S., I counseled that:

this is not going to be a year of rest and success for narcissists and nihilists.  In the U.S., it may bring the peaking and then the initial decline of “wokeness” in business, education and government.  “Critical race theory” will continue to lose its hold over the public’s mind.  Diversity, equity and inclusion programs for differential treatment of individuals will encounter growing resistance.

Harvard University President Claudine Gay, who had advanced to that position by advocating critical race theory and diversity, equity and inclusion, was forced to resign her position.  And to the consternation of Democrats, Donald Trump, without an ounce of wokeness in him, grew more popular in opinion polls than President Joe Biden.

You might be interested in knowing that I learned the technique of consulting the Yijing many years ago in Vietnam from Mr. Duong Thai Ban, a friend of my father-in-law.

So, what does the Yijing foretell for 2024?

The hexagram associated with our current wood dragon year is #43 – Chia Jen.  The form of the hexagram is:

First, before starting on an interpretation of hexagram 43, we must note that every dragon year brings forth powerful yang energies.  A Chinese saying has it that, “If you ignore the dragon, it will eat you; if you confront the dragon, it will overpower you; but if you ride the dragon, you will deploy its might and power.”

A yang environment, not restrained by yin energies, is a call to action, a time to start big projects, to aim high.  It is a year that will reward vitality with success.  Those with courage, tenacity, confidence and enthusiasm will do well.

To me, this bodes well for Donald Trump in the forthcoming November election, but not for Joe Biden.  Trump is all energy and action.  Biden is, more and more, slowing down.

A recent report by Special Counsel Robert Hur adds credibility to the inference that Biden’s fortunes in this year of the dragon will be most problematic.  Hur concluded that, in effect, Biden is running a deficit of yang energies, saying the president is “a sympathetic, well-meaning, elderly man with a poor memory.”

I do not see either major American political party “riding the dragon” to capture majorities in the Senate or the House of Representatives, each party having a yang deficit in the caliber of its candidates – too much posturing and not enough courage.

The two major political parties would do well to heed the insights of hexagram 43 and concentrate on changing their ways of petty factionalism and grifting to speak to the great purposes of the American experiment in ordered liberty and to what Lincoln called “the better angels of our nature.”

Secondly, hexagram 43 has five solid – yang lines – and one broken – yin line – at the top.  The name given to this hexagram is “breaking with or separating with the past.”  It speaks to stalwartly taking a new direction, after recognizing the need to shift course in order to succeed, a breakthrough ending a long period of tensions.  It infers being decisive and resolute will lead to success.

One noted commentator proposed that the hexagram is a comment on the end of winter and the coming of spring, with the expectation of summer’s warmth coming after that.  Thus, the hexagram notes a parting with the past and the opening of a fruitful future for all.

Or the weak yin sixth line is a stand-in for an old, tired leader using his power to sustain a corrupt government, while pushing up from the bottom of the hexagram, five yang lines foretell new leadership breaking with the past and forming a new government.

The ancient written comment on hexagram 43 advises us to divulge and spread a sincere and truthful message moving in the direction of great leadership.  Any proclamation must come from the center of the domain, its capitol.  There will be no advantage in resorting to arms or repression, but in putting the past behind and espousing a new purpose and direction.

The hexagram supposes the flow of water parting or breaking through an obstacle, scattering whatever is in the way.  This will happen in a fortuitous coming together of supporters, say voters or investors.

In the American presidential election, again, this environment would seem to favor Trump, the challenger, over Biden, the incumbent.  Yet, will Trump provide a “sincere and truthful” message which will align with yang priorities?  Or will he pout and focus on himself, which are behaviors and casts of mind more aligned with yin attributes and so be out of sync with the times?

In international affairs, the hexagram portends more weakening and fragmentation of the post- World War II order centered on the United Nations and respect for international law.  The new direction might well be provided by the BRICS alliance led by Russia and China, centering legitimate action on the prerogatives of “civilization” states.

The European Union will be challenged to “break” with its current ennui and find a new elan based on its “civilization” heritage.

The hexagram advises the Israelis to shift course and reach out to Palestinians seeking some kind of covenantal relationship in the Abrahamic tradition.  Correspondingly, the hexagram advises that the Palestinians should break with their past demand for unilateral authority to rule the territory “from the river to the sea” and reach out to Jews with the mercy and compassion called for in Quran.

The hexagram advises Ukrainian President Volodymyr Zelenskyy to similarly shift course and make a decisive decision as to the border between Ukraine and Russia.  Such a decision, implies the hexagram, will break through Putin’s rigid insistence on conquest.

Putin is already in a yang mode of resolute determination, so his position will not weaken.

2024 will not be fortuitous for Xi Jinping in China.  He has committed himself to old ways – demanding that all kowtow before “Xi Jinping thought” and putting party regulators in the position of saying yea or nay to economic and financial decisions.  Xi seems unable to break with his past and his perception of what he needs to retain power.  For China, he could be the weak sixth line at the top of the hexagram, one that will be removed by the forward movement of the bottom five lines reflecting the yang energies and aspirations of the Chinese people.

In economics and finance, breaking with the past, as President Javier Milei is attempting in Argentina, would argue for reducing national budget deficits and sovereign debt.  Lower inflation and stronger currencies are also called for.

To take advantage of this wood dragon year, it will be important to align with constructive, higher aspirations.  The wise person, to be successful, will spread enduring emoluments to those below.  One who has an office and is virtuous to use those two assets well, will stay reserved and self-contained.

A question for all of us to ponder is whether the innovative and creative yang qualities of AI will bring widespread adoption of that technology.

CNBC just made this report: “Saudi Arabia’s sovereign wealth fund is in talks with American venture capital firm Andreessen Horowitz and potentially others to create a $40 billion fund to invest in artificial intelligence, according to reporting by the New York Times, which was later confirmed by CNBC sources.”

I conclude that those who will stand up to problems, think of ideals and of what the common good requires, who will not flinch from difficulty or risk, will find the times favorable to their efforts, with significant people coming to their assistance.

Moral Capitalism, Coupled with Moral Government, Open Doors to Human Development Achievement

There is a very strong inverse correlation among countries between achievement and crony capitalism/abuse of elite power.  The higher the achievement of a society, the lower its corruption.  Corruption tends to flourish in settings of cronyism and abuse of elite power and privilege.  Also, corruption tends to flourish where the rule of law is ignored.

Thus, achievement reduces corruption and attendant abuses of elite power, while corruption and attendant abuses of elite power forestall achievement – and generate emigration flows to high achieving countries.

I recently saw this correlation graph in the March 9th issue of The Economist:

Countries which have achieved a UNDP Human Development Index score of .9 are less corrupt, as measured by Transparency International.

This, to me, is reliable proof that moral capitalism coupled with moral government provides the best outcome for human well-being.

We might, therefore, most appropriately ask exactly what are the cultural and social drivers of moral capitalism and moral government?

And we can ask, what can countries without those drivers do to incorporate them into the foundational system structures of their societies?

I found a confirming graph on Google Images:

“Th’ abuse of greatness is when it disjoins remorse from power.” – Shakespeare

In 44 BCE, Julius Caesar was assassinated in a political maneuver to remove him from power on the Ides of March – March 15.

Caesar was punished for fear that he would abuse power, become a tyrant, a king.  Shakespeare wrote a play about it.  As Shakespeare had Brutus explain: “Th’ abuse of greatness is when it disjoins remorse from power.”

Shakespeare, thus, conjoined morality with governance and law, just as the Caux Round Table proposes in its Principles for Government.

Government is law.  Government works through law and regulation.  Law is what government tells us to do.  Government calls the tune and we are to dance, with punishment hanging over our heads as the cost of possible disobedience, negligent or not.

But as John Locke put it, government is a trust, not a tyranny.  Not every law is necessarily just and legitimate; not every government proceeding is necessarily just and fair.

Government disciplined by the rule of law, which respects the moral agency of the people, their rights, is good government; bad government cages and disciplines the people through rule by law – again from Shakespeare: “When Caesar says do this, it is performed.”

Where is our world going?

In a recent Zoom meeting with some of our fellows, several commented in line with many opinion leaders that the post-World War II global order is fragmenting.

A parallel can be drawn between our times and the 1930s, which saw the desuetude of the League of Nations and a world becoming hostile to constitutionalism and just democracy.

Now, as then, we see the “hard” men rising and more gentle folk slip-sliding away in their capacity for leadership.

This is true in the U.S., as we lose our psycho-social moorings and, more and more, float on currents of intolerance, anti-racism racism, fear and reliance on compulsion instead of persuasion.

As I was taught by my grandfather, a lawyer and in the Harvard Law School of yesteryear, the barrier we erect against prejudice, intolerance, dictatorship, arbitrary and capricious use of state authority is the moral concept of the rule of law, a normative standard of justice by which to measure lawfulness.

I attach here a short essay on the abuses of “greatness,” which we now face, more and more, and why, therefore, we all need the rule of law – morning, noon and night.

When You Walk in Cicero’s Footsteps, You Can’t Be All Wrong

I was recently re-reading Cicero’s De Officiis (On Moral Responsibility) and in a pleasant surprise, found that Cicero had embraced an important Caux Round Table Principle for Government.

The principles rest on a premise of responsibility, using the concept of office as a trust.

I was reading Walter Miller’s translation from the Latin and was quite surprised to see, for the first time, that Cicero had advocated the same moral vision for those in government as does the Caux Round Table.

Cicero wrote:

For the administration of the government, like the office of a trustee, must be conducted for the benefit of those entrusted to one’s care, not of those to whom it is entrusted.  Now, those who care for the interests of a part of the citizens and neglect another part, introduce into the civil service a dangerous element – dissension and party strife. (Book I, XXV, 85)

The Caux Round Table Principles for Government start with this standard of conduct:

Fundamental principle: Public power is held in trust for the community.

Power brings responsibility.  Power is a necessary moral circumstance in that it binds the actions of one to the welfare of others.

Therefore, the power given by public office is held in trust for the benefit of the community and its citizens.  Officials are custodians only of the powers they hold.  They have no personal entitlement to office or the prerogatives thereof.

Holders of public office are accountable for their conduct while in office.  They are subject to removal for malfeasance, misfeasance or abuse of office.  The burden of proof that no malfeasance, misfeasance or abuse of office has occurred lies with the officeholder.

The state is the servant and agent of higher ends.  It is subordinate to society.  Public power is to be exercised within a framework of moral responsibility for the welfare of others.  Governments that abuse their trust shall lose their authority and may be removed from office.

It is reassuring to discover that our approach has an excellent precedent.

How many problems do we face in country after country caused by governments that do not live up to their responsibilities of serving the common good as faithful stewards of life-giving moral capitals?

The Last Act: Age Can Be a Problem

Age can be a problem.

As Shakespeare wrote in “As You Like It”:

All the world’s a stage,
And all the men and women merely players;
They have their exits and their entrances;
And one man in his time plays many parts,
His acts being seven ages.

Last scene of all,
That ends this strange eventful history,
Is second childishness and mere oblivion;
Sans teeth, sans eyes, sans taste, sans everything.

The premise that justifies faith in the efficacy of morality holds that individuals 1) have a moral sense and 2) can use it to inspire and to discipline their actions and so serve a good greater than individual willfulness and personal advantage.  The moral sense, as understood by Confucius, Mencius, the Buddha, Aristotle, Jesus and more prosaically, Adam Smith, is made possible by biology and psycho-social prowess.

Now, as we don’t expect robust activation of the moral sense without cultivation, we demand more from adults than from children.  But what of old age?  Does the moral sense weaken as our other corporal powers decline as the years pass and experience takes its toll on our happiness and optimism?

Recently, I saw a study that correlated age with less efficacious leadership in the current Harvard Business Review as depicted in this chart:

My first thought after accepting the accuracy of the correlation was of American politics – Joe Biden is 81 and Donald Trump is 77 – and each, in his own way, are stubborn, irascible and insistently self-promoting.

If our minds tend to close down as we age, then what should be our highest and best use of our mature moral sense and accumulated wisdom?

More Short Videos on Relevant and Timely Topics

We recently posted more short videos on relevant and timely topics.  They include:

AI is Not Quite There Yet

Doers and Thinkers

How is the Daily Bread?

The Ups and Downs of Markets

On 20 Years of Facebook

All our videos can be found on our YouTube page here.  We recently put them into 9 playlists, which you can find here.

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