Originally Posted by
WillowRun 6-3
If ... one main root of what went wrong is the corporate acquisition of McDonnell Douglas, then what is the lesson to be learned from such a massive misstep? Maybe the answer is "stakeholder capitalism" and a rejection of the Milton Friedman bedrock economic guidance.
The intervening points about the short time horizon of some stakeholders are well made. My thoughts are on the difficulty of applying what I'll loosely term 'corporate' management practices in aerospace. Had Boeing's risk management been perfect, the customer benefit of avoiding retraining would have been weighed up against the real and intangible costs of accident(s) and a different path would have been chosen. The difficulty is that the human mind has particular weaknesses in the way it approaches low-probability events, typically under-assessing the likelihood and impact of extreme outcomes (as explored in Nassim Taleb's body of work). This makes mechanistic application of 'corporate' risk management practices challenging in an industry replete with low-probability but high-impact risks, where investments can take decades to repay and where intangibles like reputation and customer confidence are important. And where hundreds of lives are at stake.
It is sometimes said that 'the first duty of a public company is to maximise shareholder profit'. I wonder how the make up of senior management and the application of 'corporate' practices to low-probability outcomes would change if a way was found of subjecting certain industries to an equal-first duty of care?