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>The actions of management in manufacturing companies are being driven by the regulatory environment around energy and production. Care to elaborate? Because f

>The actions of management in manufacturing companies are being driven by the regulatory environment around energy and production. Care to elaborate? Because from where I'm sitting the actions of management are driven around quarterly stock-based incentives and a culture of short-term equity price rise by the boards and big investors

roenxi 3y ago
People have been claiming short term incentives for decades. If short term incentives were having long term negative impacts the corporate feedback mechanisms would have picked up on it by now. What I'm focusing on is that there are people who determine what the incentives of the managers are. Those people don't see an issue with short term incentives. They're identifying - correctly in my view - that there are limited opportunities for competitors to come in with higher quality products. Such a competitor would get crushed by a combination of regulation and costs.
- passwordoops 3y ago
  That's a different issue than the "regulatory environment around energy and production". And "If short term incentives were having long term negative impacts the corporate feedback mechanisms would have picked up on it by now" Tells me you either don't live in the real world or are being purposefully disengenious. Most real decision makers plan to remain in their role for at most 5 years before moving up. That definitely encourages short term success. And much more importantly, if the compensation structure of the CxO is such that 99% of monetary compensation comes from vesting on a quarterly basis only if the stocks price or earnings hit specific targets over that short term, how does this translate to long-term success? Real-world, concrete, linkable examples only, please
  - roenxi 3y ago
    > That's a different issue than the "regulatory environment around energy and production". The incentives are being set to take best advantage of the realities on the ground. Apart from Apple, no-one is taking over markets by fighting the general quality decline. You're arguing that there is a lot of shortermism going on. Fair enough. But shortermism is proving to be a good long term strategy, because the alternatives failed. Not for lack of interest, but because the regulatory state and harsh realities of energy constraints crushed them. > Most real decision makers plan to remain in their role for at most 5 years before moving up. I'm glad we've managed negotiate up from quarterly stock prices to 5 years. But note that China is run on 5 year plans - executing complex long term strategies is possible in 5 year steps with a reorientation every so often. 5 year time horizons can be compatible with long term planning. Note that this is in line with what the investors are comfortable with - they don't think there is an advantage to be gained from keeping CEOs long term. And they're right I expect, getting involved int he money printing exercise that the central banks have been pushing is generally much more important than focusing on technical outcomes and you don't need long-term incumbent CEOs for that. > ...how does this translate to long-term success? Unless you're 108, Boeing is older than you are. This has been their routine operating procedure since ... the 1980s? Sometime around that era. They're doing pretty well.
    - p_l 3y ago
      Boeing explicitly started changing their routine operating procedures in second half 1990s. Unlike some claim, it actually started with a Boeing "lifer", but who also bought into Jack Welch management thought. They have considerably changed in the last 24 years, with memos about dangers of it coming from Boeing since ~2001, and that it wouldn't be something immediate but "creeping" issue.
      - roenxi 3y ago
        I don't have anything much to say to that, but I can't resist observing in passing as a comment chain we've escalated from quarterly shortermism to a management transformation process that played out over 24 years at remarkable speed. If after a quarter-century Boeng have reduced their standards to still-better-than-road-safety, I don't think it is fair to say their management are doing anything that badly wrong.
        p_l 3y ago
        In pursuing quarter by quarter benefits, in fact some of it happened across only 2 years, they have set up long-term disaster that impacted their ability to design, build, and deliver - first with 7E7 (now known as Dreamliner), then with 737 MAXX series and the inability of Boeing to either take on a new venture like 757 upgrade or a new plane based on 7E7 project but in smaller class (This is, btw, big part of how A350 happened - reusing results of investment in A380). Some things take long to build (or correct), and very short time to destroy. And with Boeing it's more that the ongoing disaster known as MAXX took away the blinders from wider population in very... brutal and public way.
        roenxi 3y ago
        That is a relatively consistent story across all the US-related industrial articles I take notice of on HN. The US can't build semiconductors, the US can't build ships, the US isn't building houses, struggles with infrastructure, etc. masks and ventilators through COVID. Now planes. This isn't being driven by management. Everyone can see what is happening from a mile away including shareholders. This is a rational response to the regulatory environment that US manufacturing operates in. And a specific symptom of that which is the US has failed to secure its access to cheap plentiful energy.
- deleted 3y ago
  [deleted]
- gnramires 3y ago
  > People have been claiming short term incentives for decades. If short term incentives were having long term negative impacts the corporate feedback mechanisms would have picked up on it by now. Maybe the mechanisms are working fine, the markets keep going up, as well as the long term profitability. But I think the incentives themselves are the wrong incentives: as a society, profits are just a (very useful) tool to help us trade and regulate resources. They're not an end goal. The end goal is the wellbeing of humans. The problem is when we forget that goal, we tend to believe predatory practices are fine, when they aren't. It may well be profitable, even long term, to make predatory (hyperpalatable, heavily processed) foods that make us unhealthy. The reasoning may well be 'Let's make enough money until consumers figure out we're being dishonest'. Getting the hands off the wheel doesn't seem like a sensible choice. I think the solutions are many. People need to realize those problems exists, not just be in denial -- people are the agents of society, and even if you think pure markets are ideal, you need individuals to make good choices for themselves. In this sense you might say there's an untapped market of consumer and large-scale social protection that balances out our interests and capabilities with corporations. Individuals don't have decades of food research (that's in many cases influenced by industry funding, to make things more complicated) in mind when making choices, and they're influenced by marketing. I do think ethics plays a large role here. It doesn't seem like a person, working in the food industry, should in good conscience be complicit in any scheme that harms the people eating your food. If the baker near your house started sneaking in addictive substances or subtly (and largely imperceptibly) altering ingredients to save costs, you should well claim that's a failure of ethics in the first place, not of markets. Part of the failing comes from the belief that profit is the be all end all mechanism of society. Being a good person to yourself and others is more important, fundamentally important. If you work in industry and start seeing those practices being used as a desperate attempt to keep you alive versus the competition, that should give you pause: something in our industry, and our society is broken. You should fight, even from within your company, and spearhead, a change to align your ethical incentives with financial sustainability: by demanding more (or just _better_!) regulation, but also by changing the narrative around marketing, by investing in consumer awareness (and organizations specialized in raising awareness and food research), and also investing in genuine unbiased research. You need to basically fight evil and not let the bad guys have their way. If you're complacent, the default mode is defeat, just like getting your hands off the wheel of a car the default mode is crashing.

roenxi 3y ago

People have been claiming short term incentives for decades. If short term incentives were having long term negative impacts the corporate feedback mechanisms would have picked up on it by now. What I'm focusing on is that there are people who determine what the incentives of the managers are. Those people don't see an issue with short term incentives. They're identifying - correctly in my view - that there are limited opportunities for competitors to come in with higher quality products. Such a competitor would get crushed by a combination of regulation and costs.

passwordoops 3y ago
That's a different issue than the "regulatory environment around energy and production". And "If short term incentives were having long term negative impacts the corporate feedback mechanisms would have picked up on it by now" Tells me you either don't live in the real world or are being purposefully disengenious. Most real decision makers plan to remain in their role for at most 5 years before moving up. That definitely encourages short term success. And much more importantly, if the compensation structure of the CxO is such that 99% of monetary compensation comes from vesting on a quarterly basis only if the stocks price or earnings hit specific targets over that short term, how does this translate to long-term success? Real-world, concrete, linkable examples only, please
- roenxi 3y ago
  > That's a different issue than the "regulatory environment around energy and production". The incentives are being set to take best advantage of the realities on the ground. Apart from Apple, no-one is taking over markets by fighting the general quality decline. You're arguing that there is a lot of shortermism going on. Fair enough. But shortermism is proving to be a good long term strategy, because the alternatives failed. Not for lack of interest, but because the regulatory state and harsh realities of energy constraints crushed them. > Most real decision makers plan to remain in their role for at most 5 years before moving up. I'm glad we've managed negotiate up from quarterly stock prices to 5 years. But note that China is run on 5 year plans - executing complex long term strategies is possible in 5 year steps with a reorientation every so often. 5 year time horizons can be compatible with long term planning. Note that this is in line with what the investors are comfortable with - they don't think there is an advantage to be gained from keeping CEOs long term. And they're right I expect, getting involved int he money printing exercise that the central banks have been pushing is generally much more important than focusing on technical outcomes and you don't need long-term incumbent CEOs for that. > ...how does this translate to long-term success? Unless you're 108, Boeing is older than you are. This has been their routine operating procedure since ... the 1980s? Sometime around that era. They're doing pretty well.
  - p_l 3y ago
    Boeing explicitly started changing their routine operating procedures in second half 1990s. Unlike some claim, it actually started with a Boeing "lifer", but who also bought into Jack Welch management thought. They have considerably changed in the last 24 years, with memos about dangers of it coming from Boeing since ~2001, and that it wouldn't be something immediate but "creeping" issue.
    - roenxi 3y ago
      I don't have anything much to say to that, but I can't resist observing in passing as a comment chain we've escalated from quarterly shortermism to a management transformation process that played out over 24 years at remarkable speed. If after a quarter-century Boeng have reduced their standards to still-better-than-road-safety, I don't think it is fair to say their management are doing anything that badly wrong.
      - p_l 3y ago
        In pursuing quarter by quarter benefits, in fact some of it happened across only 2 years, they have set up long-term disaster that impacted their ability to design, build, and deliver - first with 7E7 (now known as Dreamliner), then with 737 MAXX series and the inability of Boeing to either take on a new venture like 757 upgrade or a new plane based on 7E7 project but in smaller class (This is, btw, big part of how A350 happened - reusing results of investment in A380). Some things take long to build (or correct), and very short time to destroy. And with Boeing it's more that the ongoing disaster known as MAXX took away the blinders from wider population in very... brutal and public way.
        roenxi 3y ago
        That is a relatively consistent story across all the US-related industrial articles I take notice of on HN. The US can't build semiconductors, the US can't build ships, the US isn't building houses, struggles with infrastructure, etc. masks and ventilators through COVID. Now planes. This isn't being driven by management. Everyone can see what is happening from a mile away including shareholders. This is a rational response to the regulatory environment that US manufacturing operates in. And a specific symptom of that which is the US has failed to secure its access to cheap plentiful energy.
deleted 3y ago
[deleted]
gnramires 3y ago
> People have been claiming short term incentives for decades. If short term incentives were having long term negative impacts the corporate feedback mechanisms would have picked up on it by now. Maybe the mechanisms are working fine, the markets keep going up, as well as the long term profitability. But I think the incentives themselves are the wrong incentives: as a society, profits are just a (very useful) tool to help us trade and regulate resources. They're not an end goal. The end goal is the wellbeing of humans. The problem is when we forget that goal, we tend to believe predatory practices are fine, when they aren't. It may well be profitable, even long term, to make predatory (hyperpalatable, heavily processed) foods that make us unhealthy. The reasoning may well be 'Let's make enough money until consumers figure out we're being dishonest'. Getting the hands off the wheel doesn't seem like a sensible choice. I think the solutions are many. People need to realize those problems exists, not just be in denial -- people are the agents of society, and even if you think pure markets are ideal, you need individuals to make good choices for themselves. In this sense you might say there's an untapped market of consumer and large-scale social protection that balances out our interests and capabilities with corporations. Individuals don't have decades of food research (that's in many cases influenced by industry funding, to make things more complicated) in mind when making choices, and they're influenced by marketing. I do think ethics plays a large role here. It doesn't seem like a person, working in the food industry, should in good conscience be complicit in any scheme that harms the people eating your food. If the baker near your house started sneaking in addictive substances or subtly (and largely imperceptibly) altering ingredients to save costs, you should well claim that's a failure of ethics in the first place, not of markets. Part of the failing comes from the belief that profit is the be all end all mechanism of society. Being a good person to yourself and others is more important, fundamentally important. If you work in industry and start seeing those practices being used as a desperate attempt to keep you alive versus the competition, that should give you pause: something in our industry, and our society is broken. You should fight, even from within your company, and spearhead, a change to align your ethical incentives with financial sustainability: by demanding more (or just _better_!) regulation, but also by changing the narrative around marketing, by investing in consumer awareness (and organizations specialized in raising awareness and food research), and also investing in genuine unbiased research. You need to basically fight evil and not let the bad guys have their way. If you're complacent, the default mode is defeat, just like getting your hands off the wheel of a car the default mode is crashing.