It Could Happen Here - What’s the Matter With Boeing, Pt. 1: Shareholders Don't Build Airplanes

Episode Date: September 30, 2024

As Boeing workers strike and airplanes are grounded for new and terrifying reasons, Mia looks back at how the shareholder revolution crushed Boeing's engineers. Sources: The Utopia of Rules Liquidated An Ethnography of Wall Street The 1997 Merger That Paved the Way for the Boeing 737 Max Crisis The Long-Forgotten Flight That Sent Boeing Off Course Harry Stonecipher Speech Requiem for a Dreamliner Seeing like a CEO How Jack Welch’s Reign at G.E. Gave Us Elon Musk’s Twitter Feed The Merger That Brought Boeing Low Rise of the Red Engineers See omnystudio.com/listener for privacy information.

Hey guys, I'm Kate Max. You might know me from my popular online series, The Running Interview Show, where I run with celebrities, athletes, entrepreneurs, and more. After those runs, the conversations keep going. That's what my podcast, Post Run High, is all about. It's a chance to sit down with my guests and dive even deeper into their stories, their journeys, and the thoughts that arise once we've hit the pavement together. Listen to Post Run High on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.

Hi, I'm Ed Zitron, host of the Better Offline Podcast, and we're kicking off our second season digging into Tech's elite and how they've turned Silicon Valley into a playground for billionaires. From the chaotic world of generative AI to the destruction of Google search, Better Offline is your unvarnished and at times unhinged look at the underbelly of tech brought to you by an industry veteran with nothing to lose. Listen to Better Offline on the iHeartRadio app, Apple Podcasts, wherever else you get your podcasts from. I found out I was related to the guy that I was dating. I don't feel emotions correctly. I collect my roommate's toenails and fingernails. Those were some callers from my call-in podcast, Therapy Gecko. It's a show where I take phone calls from anonymous strangers as a fake gecko

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That's iHeart.com slash podcast awards. Calls on media. Welcome to It Could Happen Here, a podcast about things falling apart Call Zone Media but my family is from Seattle. Some of my aunts and uncles worked for Boeing in the 80s on the airline side. Some of our closest family friends worked there for much, much longer than that. I grew up on the periphery of this industry, and I have never seen the people in it and the people who have left as angry as they are now. People are pissed, and they should be. In the last six years, Boeing has killed 346 people. In the years to come, they may well kill more. And not a single one of them had to die. This is how it happened. What is Boeing? The short answer, obviously, is that it's a company that makes both civilian

and military airplanes. It also does some other things, including working on space travel, civilian, and military airplanes. It also does some other things, including working on space travel, but that's not our immediate concern here. The long answer, however, and it's the long answer that we need, is that Boeing is the poster child for the post-World War II labor-corporate militarist alliance. Boeing itself was a sometimes uneasy alliance of workers, engineers, and the army that made civilian and military airplanes. This is also not a terrible description of the entirety of the post-war United States, with the proviso that the airplanes the U.S. was making were dropping bombs at Vietnam. The unwinding of Boeing that we're all watching today, as doors fall off of planes and more and

more are grounded, is the unwinding of that America. Here, I turn to the anthropologist David Graeber from his book The Utopia of Rules. Quote, I think what happened is best considered as a kind of shift in class allegiances on the part of the managerial staff of major corporations, from an uneasy de facto alliance with their own workers to one with investors. As John Kenneth Galbraith long ago pointed out, if you create an organization geared to produce perfumes, dairy products, or aircraft fuselages, those who make it up will, if left to their own devices, tend to concentrate their efforts on producing more and better perfumes, dairy products,

or aircraft fuselages, rather than thinking primarily of what will make the most money for shareholders. What's more, since for most of the 20th century, a job in a large bureaucratic mega-firm meant a lifetime promise of employment, everyone involved in the process, managers and workers alike, tended to see themselves as sharing a certain common interest in this regard, over and against meddling owners and investors. This kind of solidarity across class lines even had a name. It's called corporatism. One mustn't romanticize it. It was, among other things, the philosophical basis of fascism. Indeed, one could well argue that fascism simply took the idea that workers and managers had interests in common, that organizations like corporations or communities formed organic holes, and that finances were an alien parasitic force and drove them to their ultimate murderous extreme. Europe, the attendant politics often came tinged with chauvinism, but they also ensured that the

investor class was always seen as, to some extent, outsiders, against whom white-collar and blue-collar workers could be considered, at least to some degree, to be in a united common front. Now, as a product of the united front between workers and managers, the corporatist system of the post-war era had a very different conception of what a corporation is. It was a social entity composed of a variety of classes and had an obligation to take care of them. It had an obligation to its workers, to its engineers, to its customers, and even to its country by absorbing unions into the corporate system. The system itself had been forced to adapt a more sociological self-conception that vastly differed from the ways corporations

both view themselves and behave today. As Graeber notes, this class coalition largely wrote capitalists out of the equation, reducing them to mere holders of stock, not managers. In Boeing's case, those managers were engineers at basically all levels of the company. Now, we must note here that in the post-World War II era, engineers were extremely powerful. And this is not just true of capitalist nations. So, the US, to some extent, had an early start on the power of engineers in the running of New Deal programs like the Tennessee Valley Authority. Engineers are powerful in communist countries as well, and it's true in quasi-socialist countries that had just liberated themselves from the old European empires. These engineers were both

extremely well-paid and very influential everywhere. You can find them from Belgium to Peru. And the only real difference is whether they were trained by the Americans or the Soviets. Now, the fact that you, the listener, are not reporting to an engineer right now at your job is a sign that they didn't exactly hold on to power. In fact, the last vestiges of this class of extremely powerful engineers aren't really even at all. The most prominent remain of the great engineering international is Xi Jinping, who is part of a class in China known as the Red Engineers. If you want to know more about the Red Engineers, we unfortunately do not have time to really go into them here but see joel

andreas's book rise of the red engineers for the most famous treatment of them now in china the red engineers effectively seized control of the states and were the kind of second generation that ruled back the social changes of the revolution from the maoist. In the US, the story is a bit more complicated. In some places, the engineers as a class were rolled up and brutally destroyed in a war with a newly ascendant finance class. In others, engineers, feeling the disciplining effects of the market, effectively engineered their own destruction. The latter, engineers leading the company to financial ruin, is to some extent the story of Boeing. But to get there, we need to take a look at how the worker management alliance Graeber described came apart. I have talked at

length on this show about the economic crisis of the 70s, in which everything, the entire consensus that had held the post-war era together, fell apart. One of the key elements is that in the 1970s, manufacturing becomes zero-sum. If manufacturing output increases in one country, it can largely only come at the expense of production somewhere else. in one country, it can largely only come at the expense of production somewhere else. This is the product of a general crisis of structural overproduction and structural underconsumption. This meant that it was no longer possible to incorporate everyone into the capitalist welfare system while also retaining corporate profits. And so someone was going to have to lose everything. It was either going to be the capitalists or the workers. And the people who lost everything, as I think we're all aware living

in the world that we do now, were the workers whose power was systematically destroyed. But that largely, the story of the destruction of unions and destruction of the left more broadly, is a story for another day. For our purposes, the important class that was destroyed in the period of the 70s is the class of managerial engineers. And these engineers were destroyed by a takeover of corporate America by the shareholders the corporatist alliance had previously held at bay. The takeover of corporate America by finance ghouls had two mechanisms. The leveraged buyout, better known as corporate raiding, which was carried out by people like Michael Milken, and the internal movement of executives from inside the corporations themselves,

led by people like Jack Welsh. We will meet both of these people in detail later in the story. But the details of the process of how exactly the finance schools came to control corporate America turn out to be extremely important because Boeing is destroyed by both of the two mechanisms coming together at the same time. Now, as the 80s dawned, the world lived in fear of a new kind of financial device, the leveraged buyout. The exact mechanisms of the leveraged buyout are slightly complicated, but the short version is that Michael Milken, a bond salesman who I eventually am going to do a Fall Behind the Bastards episode on because oh my god is he evil and there simply is not space to elaborate on all the stuff that he did here including the stuff that eventually is going to send him to prison figured out a way for a person or a group to

with very little actual cash on hand to very quickly take on an unbelievable amount of debt use it to buy a company and then sell that company for parts to pay back the debt, pocketing the difference as profit. This was an instant existential danger to a corporate America. Previously, corporate takeovers were extremely difficult. Attempting to get $200 million to buy a company required you to have $200 million on hand. But now, with the leveraged buyout, a group of yahoos with a tiny amount of money could simply buy a company for higher than its stock price, loot it for parts, and destroy it. This completely changed the balance of power between shareholders and corporations.

One of the best accounts of this era is from the anthropologist Karen Ho in her book Liquidated in Ethnography of Wall Street. The book was a product of the field work she did at a Wall Street investment bank in the 90s, and I really cannot emphasize this book enough. This book is incredible. Everyone should read it. It is a book that genuinely changed my life. This book is incredible. Everyone should read it. It is a book that genuinely changed my life. And one of the things that she talks about is this moment, the moment of leveraged buyouts, and the way that it is constantly brought up by the people that she is working with at this bank when she's doing her anthropological fieldwork. Everyone she talks to talks about this moment where the corporate raiders really got going as the moment the shareholder revolution began.

Now, we talked earlier about how in post-war America, the corporation was a social entity with responsibilities to its workers and country. For the shareholders running the new shareholder revolution, corporations had exactly one job, getting them more money to raise stock prices. They called this shareholder value. And now, the disciples of shareholder value were able to wield the ability to simply buy companies out wholesale and bend them to the ends of shareholder value directly. This is what is known as the shareholder revolution. Now, do you know what else is a revolution in the ways that we all experience capitalism and mass culture at our jobs? It is the products and services that support this podcast. Hey guys, I'm Kate Max. You might know me from my popular online series, The Running Interview Show, where I run with celebrities, athletes, entrepreneurs, and more. After those runs,

the conversations keep going. That's what my podcast, Post Run High, is all about. It's a chance to sit down with my guests and dive even deeper into their stories, their journeys, and the thoughts that arise once we've hit the pavement together. You know that rush of endorphins you feel after a great workout? Well, that's when the real magic happens. So if you love hearing real, inspiring stories

from the people you know, follow, and admire, join me every week for Post Run High. It's where we take the conversation beyond the run and get into the heart of it all. It's lighthearted, pretty crazy, and very fun. Listen to Post Run High on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts. on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts. Hey, I'm Jack Peace Thomas, the host of a brand new Black Effect original series, Black Lit, the podcast for diving deep into the rich world of Black literature. I'm Jack Peace Thomas, and I'm inviting you to join me and a vibrant community of literary

enthusiasts dedicated to protecting and celebrating our stories. Black Lit is for the page turners, for those who listen to audiobooks while commuting or running errands, for those who find themselves seeking solace, wisdom, and refuge between the chapters. From thought-provoking novels to powerful poetry, we'll explore the stories that shape our culture. Together, we'll dissect classics and contemporary works while uncovering the stories of the brilliant writers behind them. Blacklit is here to amplify the voices of Black writers and to bring their words to life.

Listen to Blacklit on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts. Hola, mi gente. It's Honey German, and I'm bringing you Gracias, Come Again, the podcast where we dive deep into the world of Latin culture, música, películas, and entertainment with some of the biggest names in the game. If you love hearing real conversations with your favorite Latin celebrities, artists, and culture shifters, this is the podcast for you. We're talking real conversations with our Latin stars, from actors and artists to musicians and creators,

sharing their stories, struggles, and successes. You know it's going to be filled with chisme laughs and all the vibes that you love. Each week, we'll explore everything, from music and pop culture, to deeper topics like identity, community, and breaking down barriers in all sorts of industries. Don't miss out on the fun,

El Te Caliente and life stories. Join me for Gracias Come Again, a podcast by Honey German, where we get into todo lo actual y viral. Listen to Gracias Come Again on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts. Hi, I'm Ed Zitron, host of the Better Offline podcast, and we're kicking off our second season digging into how tech's elite has turned Silicon Valley into a playground for billionaires.

From the chaotic world of generative AI to the destruction of Google search, Better Offline is your unvarnished and at times unhinged look at the underbelly of tech from an industry veteran with nothing to lose. This season, I'm going to be joined by everyone from Nobel-winning economists to leading journalists in the field, and I'll be digging into why the products you love keep getting worse and naming and shaming those responsible. Don't get me wrong, though. I love technology. I just hate the people in charge and want them to get back to building things that actually do things to help real people. I swear to God things can change if we're loud enough. So join me every

week to understand what's happening in the tech industry and what could be done to make things better. Listen to Better Offline on the iHeartRadio app, Apple Podcasts, wherever else you get your podcasts. Check out betteroffline.com. On Thanksgiving Day, 1999, a five-year-old boy floated alone in the ocean. He had lost his mother trying to reach Florida from Cuba. He looked like a little angel. I mean, he looked so fresh. And his name, Elian Gonzalez, will make headlines everywhere. Elian Gonzalez. Elian Gonzalez.

Elian. Elian. Elian Gonzalez. At the heart of the story is a young boy and the question of who he belongs with. His father in Cuba. Mr. Gonzalez wanted to go home and he wanted to take his son with him. Or his relatives in Miami. Imagine that your mother died trying to get you to freedom.

At the heart of it all is still this painful family separation. Something that as a Cuban, I know all too well. Listen to Chess Peace, the Elian Gonzalez story, as part of the My Cultura podcast network, available on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts. wherever you get your podcasts. We're back. The first thing that the corporate raiders and the disciples of shareholder value did when they started to take over companies was look at the balance sheets of a company

and destroy everything that didn't immediately look to the Wall Street ghouls like they made money. Now, what are the assets on a balance sheet that do not immediately increase stock price? Because again, they look like costs, right? The two assets that don't immediately contribute are funds allocated for research and development and pensions. The darlings of the workers and engineers who comprise the previous corporatist regimes. Mass layoffs followed. Companies were reduced to

debt financing mechanisms for the corporate raiders who took on the debt to acquire them. Worse still, as Karen Ho observes, even companies ran by the old elite were forced to embrace the same methods the raiders were using because the only way to keep the raiders from buying your company was by increasing your stock price. And the only way to keep the raiders from buying your company was by increasing your stock price. And the only way to increase your stock price was to appease the shareholder value fanatics. Control of corporate America had shifted from the old managerial worker alliance to the new shareholder value financiers. Now, the problem with these shareholder value people running companies is that they are viscerally, physically incapable of long-term planning. Don't take my word for it. Here's

Karen Ho. Quote, to actualize their central identity as being immediately responsive to their own changing relationship with the market, including employees, products, and so on, their strategy is, in a sense, to have no strategy. Ironically, having no long-term strategy is contradictory and potentially self-defeating, in that investment banks often find themselves making drastic changes only to realize months or weeks later that those changes were unnecessary, premature, and extremely costly. For example, in chapter 5, I describe how investment bankers, in part because of their access to sensitive proprietary information, are not only fired in an instant, but must leave the physical premises of the building within 15 to 30

minutes. Given how crucial the control of knowledge and the protection of inside information are for Wall Street investment banks, it seems self-defeating that they do not place any premium on loyalty, despite the fact that firms try, above all, to enforce secrecy, they accept and maintain this volatility and revolving door policy. To make this clear, what Karen Ho is describing is that investment banks, on the one hand, turn over like a third of their staff every six months, and yet also they are so reliant on the secrecy of this proprietary information that they're using to make their investment decisions that they are kicking the people they are firing out of the

building in like 15 minutes so like they don't have time to like plan or leak information but again they're also just firing these people en masse so they're defeating the entire point of their of their operations these people cannot plan. And the reason that they cannot plan ahead isn't just that they're sort of like naked disciples of pure increase in stock price. What Liquidated describes is that these people believe that they are effectively constantly reacting to near instantaneous market changes, right? They can't sort of make any kind of long-term plan because the market is the thing that's making the plan.

Like the sort of mythical abstraction of the market is what is doing all of the actual allocations. So they just have to sort of like sit there and have no plan and quote-unquote respond to what the market is doing. Now, large corporations have always, to some extent, acted as long-term planning engines because they have to. Corporations have to do things like research and development. They have to plan product lines. They have to make long-term decisions about resource allocation. The shareholder value people are incapable of giving a shit about any of this because all they

care about is immediate stock price movement because they think that immediate stock price movement reflects the will of the great efficiency planning engine of the market and you can begin to see here why it would be a bad idea if these people who literally cannot create long-term plans did did something like, for example, take control of the world's largest manufacturer of commercial aircraft. Now, the shareholder value people also believe that people are effectively interchangeable. And they believe this because,

and this is a very key part of why the shareholder value people and why these sort of finance people have reshaped the world the way they do they have reshaped the world in their own image and all of these sort of investment bankers are interchangeable right all of these fucking bankers are fired all of the time and they move from firm to firm and it is fine for them. But the thing is, you can't do this with the design of your entire aircraft. Because unlike in finance, where every single one of these clowns is really just a replacement level bozo whose qualifications are being able to stumble through the chain rule and vaguely remember calculus, kiss ass, and play golf, aerospace engineers actually do a difficult job. And it requires extraordinarily large bodies of embedded knowledge to do this job correctly. Now, bringing in a bunch of people who

think you can just fucking replace aerospace engineers will have no negative influences on Boeing in the future. Pay no attention to the man behind the mirror. Everything is fine. Do you know what else is fine? It is the products and services that support this podcast. The Running Interview Show, where I run with celebrities, athletes, entrepreneurs, and more. After those runs, the conversations keep going. That's what my podcast, Post Run High, is all about. It's a chance to sit down with my guests and dive even deeper into their stories, their journeys, and the thoughts that arise once we've hit the pavement together. You know that rush of endorphins you feel after a great workout? Well, that's when the real magic happens. So if you love hearing real,

inspiring stories from the people you know, follow, and admire, join me every week for Post Run High. It's where we take the conversation beyond the run and get into the heart of it all. It's lighthearted, pretty crazy, and very fun. Listen to Post Run High on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts. Hey, I'm Jack Peace Thomas, the host of a brand new Black Effect original series, Black Lit, the podcast for diving deep into the rich world of Black literature. I'm Jack Peace Thomas, and I'm inviting you to join me and a vibrant community of literary enthusiasts dedicated to protecting and celebrating our stories. Black Lit is for the page turners, for those who listen to audiobooks while commuting or running errands, for those who

find themselves seeking solace, wisdom, and refuge the chapters from thought provoking novels to powerful poetry. We'll explore the stories that shape our culture together. We'll dissect classics and contemporary works while uncovering the stories of the brilliant writers behind them. Blacklit is here to amplify the voices of black writers and to bring their words to life. Listen to Blacklit on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts. Hi, I'm Ed Zitron, host of the Better Offline podcast, and we're kicking off our second season digging into how Tex Elite has turned Silicon Valley into a playground for billionaires. From the chaotic world of generative AI to the destruction of Google search,

better offline is your unvarnished and at times unhinged look at the underbelly of tech from an industry veteran with nothing to lose. This season, I'm going to be joined by everyone from Nobel-winning economists to leading journalists in the field, and I'll be digging into why the products you love keep getting worse and naming and shaming those responsible. Don't get me wrong, though. I love technology. I just hate the people in charge and want them to get back to building things that actually do things to help real people. I swear to God things can change if we're loud enough, so join me every week to understand

what's happening in the tech industry and what could be done to make things better. Listen to Better Offline on the iHeartRadio app, Apple Podcasts, wherever else you get your podcasts. Check out betteroffline.com. and entertainment with some of the biggest names in the game. If you love hearing real conversations with your favorite Latin celebrities, artists, and culture shifters, this is the podcast for you. We're talking real conversations with our Latin stars, from actors and artists to musicians and creators, sharing their stories, struggles, and successes. You know it's going to be filled with chisme laughs and all the vibes that you love. Each week, we'll explore everything from music and pop culture

to deeper topics like identity, community, and breaking down barriers in all sorts of industries. Don't miss out on the fun, el té caliente, and life stories. Join me for Gracias Come Again, a podcast by Honey German, where we get into todo lo actual y viral.

Listen to Gracias Come Again on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts. On Thanksgiving Day, 1999, a five-year-old boy floated alone in the ocean. He had lost his mother trying to reach Florida from Cuba. He looked like a little angel. I mean, he looked so fresh. And his name, Elian Gonzalez, will make headlines everywhere.

Elian Gonzalez. Elian. Elian. Elian. Elian. Elian Gonzalez. At the heart of the story is a young boy and the question of who he belongs with. His father in Cuba.

Mr. Gonzalez wanted to go home and he wanted to take his son with him. Or his relatives in Miami. Imagine that your mother died trying to get you to freedom. At the heart of it all is still this painful family separation. Something that as a Cuban, I know all too well. Listen to Chess Peace, the Elian Gonzalez story, as part of the My Cultura podcast network, available on the iHeartRad Radio app, Apple Podcasts, or wherever you get your podcasts.

And we are back. The shareholder value fanatics, the investors who've now taken control of corporate America, also believe that mass firings make companies more valuable because it makes them more efficient. They believe that offshoring makes a company more valuable because it makes it more efficient. It doesn't actually matter what the effect these moves have on the company and its ability to produce products and its ability to produce money. It doesn't matter at all because that's how the people who can control stock prices by buying the stocks think the world works. And so if you do these things, the stock price will go up. All quote unquote creating shareholder value means is convincing

a bunch of dipshit quants working 120 hours a week that your company is valuable, so they buy it for a higher price. And these are the people who reshape American capitalism to their whims. Now, importantly for our story, they're also the people who ran the second phase of the corporate raiding era, the mergers and acquisitions boom. Through the 90s, and really to this day, Wall Street bankers began to encourage companies to buy out other companies as a mechanism of raising their stock price. This is, you know, the acquisitions and mergers and acquisitions. They also heavily push merging companies together. In the 90s, the buzzword behind this was quote-unquote synergy. Buying companies or

merging companies could quote leverage synergies between companies to grow shareholder value. Outside of the shareholder value fantasy land, most of these mergers and acquisitions either did nothing to help the company if the acquisitions were small or were a complete disaster that destroyed both companies. The bankers who orchestrated these mergers and acquisitions didn't give a shit though, because they got paid on commission. It did not matter to them what happened afterwards. All that matters is that the deal goes through. And this is where we return to Boeing. Because in 1997, Boeing made an acquisition that would fuck the company forever. They bought one of their longtime rivals, an aircraft company

known as McDonnell Douglas. Now, hitherto, Boeing had been relatively insulated from the shareholder revolution. McDonnell Douglas, however, was not. Its CEO was a man with the incredible name Harry Stonecipher. Stonecipher is different from most aerospace executives because he wasn't a McDonnell Douglas corporate man. He came from Jack Welch's General Electric. And it's here we need to introduce the other mechanism through which the shareholder revolution was realized. A new breed of CEOs led by the man himself, Jack Welch. Now, we are not going to spend an enormous amount of time talking about Jack Welch in this episode, because Hit Cool Zone Media Podcast Behind the Basserts has three hours of episode about this man, which you should go listen to. They're good. The short version of it

that we're going to give here is that Jack Welch is the man who invented the bass layoff. He was one of the first CEOs to figure out that, again, you could raise stock prices by selling off profitable divisions and firing workers who are making the company money because shareholders are ideologically driven maniacs who would believe Welch's manipulated balance sheets that showed the company was doing better than ever, even as it sold off all of its assets. He was also one of the first people to start practicing mass outsourcing, replacing workers directly employed by General Electric with contractors. Soon, he was outsourcing entire divisions. Offshoring followed. Welsh moved jobs from highly paid and

highly trained union employees in the US to ununionized workers in places like India and Mexico. I think people generally kind of understand that offshoring lowers quality, but why does that actually happen? It's not about something like the natural skill of the workers, which is the way it can kind of be presented in these sort of nationalist accounts. It is about the level of violence that can be inflicted on people. In places like India and Mexico and China, there is an extraordinary amount of violence that can be inflicted on the working class. And because of this violence, because of their ability to destroy unions, because of their

ability to force people into poverty by taking their land, people get paid less money to work faster. And those people who are being paid less money to work faster with worse training are going to be worse at a job than people who are paid more to do it better slower. And Jack Welch wants this. He wants to sell shitty low-cost products because they're cheaper to make than anything that actually works. The long-term consequences of this are a disaster. Welch drove General Electric, one of the greatest engines of American capitalism for a century, into the ground. Even after a massive government bailout in 2008, it barely exists today. Harry Stonecipher, the CEO of the company Boeing was about to buy,

said this about Jack Welch, quote, certainly Jack Welch is one of the great leaders in my mind. And of course, he was selected as CEO of the great leaders in my mind and of course he was selected as ceo of the century by fortune magazine a couple years ago and of course about 20 years ago that same magazine coined the phrase neutron jack and of course they vilified him at every turn neutron jack by the way refers to like a neutron bomb because effectively what he was doing was firing all the workers and leaving only the sort of like physical capital assets, like leaving all the machines intact, which is what a neutron bomb is supposed to do. Let's go back to the quote. Quote, Jack had a style that was one of trying to change the environment, not to just deal with the environment.

So he inspired people. So he certainly won. So Stone Cipher is a disciple of Welch. And he immediately starts running the Jack Welch playbook. And lo and behold, McDonnell Douglas was failing when Boeing bought it for $14 billion. And again, like,

Boeing at this point controls like 65% of the commercial aviation market. McDonnell Douglas controls like five, right? So this should have been like Goliath eating David for breakfast. But the merger didn't go as planned. Instead of the massive Boeing running the tiny McDonnell Douglas, McDonnell Douglas executives effectively hijacked Boeing and installed themselves in positions of power. Stonecipher and his cadre

of shareholder value fanatics began to consolidate their position and drive out the previous Boeing regime. The capstone of this project was moving Boeing headquarters from Seattle, where it had been since William E. Boeing founded the company in 1916, to Chicago as a way to shift the physical center of power of the company away from Boeing's engineers and workers and towards the McDonnell Douglas finance schools. Then they began to run the Jack Welch playbook on Boeing in earnest. Every single account of Stonecipher's takeover that I've written quotes this exact same line. Quote, when people say I changed the culture of Boeing,

that was the intent, so that it's run like a business rather than a great engineering firm. And what Stonecipher is really talking about here, and what everyone is really saying when they talk about the culture shift of Boeing in this period, what this really is, is a change in the balance of powers between the engineers and workers who actually make the planes and the finance ghouls who own the company. Stonecipher wanted to crush the engineers and workers so he could run Boeing like a business. And when he says, like a business, he doesn't actually mean run it like a business. He means run the company like a finance guy. And finance guys don't build planes, which is what Boeing had previously been doing. Finance guys create shareholder value, which is to say that they make stock prices go up. So if you're just trying to raise stock prices, you don't actually need to make an airplane.

You can outsource the different parts of building the airplane to a bunch of random shops around the world, who work extremely fast, don't have much of an idea of what they're doing, and do a terrible job. Long term, of course, this is an absolute disaster. There are very good reasons to keep the production line for something as complicated as commercial aircraft in-house. Efficiency, consolidation of knowledge, quality control, etc. But outsourcing is great for the stock price. And it's the Jack Welch model. Selling shitty products for cheap works, kind of, if you're General Electric making a light bulb.

But when Boeing uses these same principles to build an aircraft, people begin to die. And in the next episode, we are going to tell that story, how Boeing killed 346 people. Or check us out on the iHeartRadio app, Apple Podcasts, or wherever you listen to podcasts. You can now find sources for It Could Happen Here listed directly in episode descriptions. Thanks for listening. athletes, entrepreneurs, and more. After those runs, the conversations keep going. That's what my podcast, Post Run High, is all about. It's a chance to sit down with my guests and dive even deeper into their stories, their journeys, and the thoughts that arise once we've

hit the pavement together. Listen to Post Run High on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts. Hi, I'm Ed Zitron, host of the Better Offline podcast. And we're kicking off our second season digging into tech's elite and how they've turned Silicon Valley into a playground for billionaires. From the chaotic world of generative AI to the destruction of Google search, Better Offline is your unvarnished and at times unhinged look at the underbelly of tech brought to you by an industry veteran with nothing to lose. Listen to Better Offline on the iHeartRadio app,

Apple Podcasts, wherever else you get your podcasts from. I found out I was related to the guy that I was dating. I don't feel emotions correctly. I collect my roommate's toenails and fingernails. Those were some callers from my call-in podcast, Therapy Gecko. It's a show where I take phone calls from anonymous strangers as a fake gecko therapist and try to learn a little bit about their lives.

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sponsored by Gilead, now on the iHeart Radio app or wherever you get your podcasts. New episodes every Thursday. The 2025 iHeart Podcast Awards are coming. This is the chance to nominate your podcast for the industry's biggest award. Submit your podcast for nomination now at iHeart.com slash podcast awards. But hurry, submissions close on December 8th. Hey, you've been doing all that talking. It's time to get rewarded for it. Submit your podcast today at iHeart.com slash podcast awards.

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