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I once spoke to a hedge fund guy who had a large stake in Tesla going back at least 10 years at this point. I was curious... don't you get worried about every o

I once spoke to a hedge fund guy who had a large stake in Tesla going back at least 10 years at this point. I was curious... don't you get worried about every other company announcing a push into electric cars? GM and Ford are making big pushes, as are many of the European companies. His response: the best engineers want to build sexy new things and they don't want to live in Detroit. Construction Physics recently ran a great article on why companies don't design new aircraft from scratch (rather, you see 5 or 6 iterations of the 737) [1]. The gist of it is that it's extraordinarily expensive to design a new aircraft from the ground up and that changes to regulation or the global economy can have a huge impact on which planes are desirable (e.g., big vs small, fuel efficient vs fast), so any new plane is an enormous gamble. So I understand why the bean counters look at a build-from-scratch approach as a bad idea. At the same time, it is very hard to quantify the long term impact of losing the engineering culture that comes along with building new planes from scratch. There's a wealth of knowledge that you lose if you don't do it very often. You also get happier and better engineers when you give them tasks that are more interesting. This stuff doesn't show up on accounting statements, but it's hard to deny that there's a long term effect. Unfortunately, it doesn't really seem like a return to engineering culture is what they are going to do. The head of their commercial business [2] resigned according to this statement, but his replacement will be Stephanie Pope, a woman with an accounting/MBA background who has risen through the ranks at Boeing in primarily financial positions (she may indeed be very talented, but certainly doesn't have an engineering background). [1] https://www.construction-physics.com/p/a-cycle-of-misery-the-business-of https://www.construction-physics.com/p/a-cycle-of-misery-the... [2] Boeing is divided into four divisions: defense, commercial, boeing capital and global services (I'm not really sure what this last one does, but the division that we primarily think of when we think Boeing is their commercial one).

ccorcos 3y ago
I’ve been thinking about this comment for a few days now because it’s so true! Pragmatic business decisions are often at odds with recruiting the best possible engineering talent which is probably not the best long term strategy…
jgalt212 3y ago
> the best engineers want to build sexy new things and they don't want to live in Detroit. Probably why many car "design centers" are not in Motown.
pizlonator 3y ago
> but his replacement will be Stephanie Pope, a woman with an accounting/MBA background who has risen through the ranks at Boeing in primarily financial positions An engineering company run into the ground by accountants is going to be run by another accountant. Yeah Boeing is fucked.
- jamincan 3y ago
  Muilenburg had an engineering background and he was at the helm for the MCAS issues with the 737 Max.
  - dralley 3y ago
    And Jack Welch came from an engineering background. As much as I sympathize with the notion that engineers make better CEOs, they're not immune to the same influences as everyone else.
    - paulryanrogers 3y ago
      No one is arguing it's a guarantee engineers are always good executives. Also looks like Welch was a chemical engineer before GE, so not sure how much of that knowledge transfers.
    - dylan604 3y ago
      I highly doubt that an engineer would make a great CEO, but a CEO with no engineering background isn't going to know when what the engineers are saying that goes against what the business people are saying will matter. The bean counters will always be against anything cutting into the profit margin even if that extra expense the engineers are pushing for will actually make or break the thing.
      - tivert 3y ago
        > The bean counters will always be against anything cutting into the profit margin even if that extra expense the engineers are pushing for will actually make or break the thing. I think they key point is: you can't competently make a tradeoff between two domains if you don't understand both of those domains. Engineers want to make the best engineered thing, and have a harder time prioritizing costs. Accountants/business types want to make some money number go up this quarter, and will reject good engineering ideas to penny-pinch. Someone needs to be able to (competently) keep both groups aligned.
shuckles 3y ago
If bean counters are useless and can’t value engineering, why do you start your comment with a story about a hedge fund guy’s opinion? They are the ultimate bean counters.
- JumpCrisscross 3y ago
  > hedge fund guy’s opinion? They are the ultimate bean counters Finance and accounting are totally different professions, especially when it comes to the dispositions of the people at the top.
  - shuckles 3y ago
    Calhoun was a Managing Director at Blackstone which, sure, isn’t a hedge fund but surely is not a glorified accounting firm. If he can be called a bean counter, so can Anonymous Hedge Fund Guy. There are plenty of extremely strategic CFOs that began their careers as “bean counters.” The terms of all this discussion and theorizing are purely in-group out-group confirmation bias nonsense.
    - JumpCrisscross 3y ago
      Totally different doesn’t mean you can’t have both. It just means one doesn’t confer the other. More broadly, I agree with you. Pretending everything would be better under a real engineer is a deluded combination of No True Scotsman and in-group signalling. As HN demonstrates, no group is immune to their siren calls.
    - dv_dt 3y ago
      And Btw Blackstone is probably making similar penny wise pound foolish errors only on the scale of the national economy.
- earthnail 3y ago
  Yes and no. They try to integrate more system thinking in order to justify larger risks. He explains it very well with the factors that the hedge fund guy considers that the accountant does not. Not that I’m a huge fan of hedge funds but I believe the OP’s point is very valid.
benwoodruff 3y ago
> global services (I'm not really sure what this last one does, but the division that we primarily think of when we think Boeing is their commercial one). Global services handles logistics/maintenance for airplanes, probably handles both defense and commercial which is why they spun their own division [1]. [1] https://services.boeing.com/about https://services.boeing.com/about
cft 3y ago
But they live in China. Eventually the trade war with China fails (unless there's a real war) and then Tesla is toast.
cmrdporcupine 3y ago
> His response: the best engineers want to build sexy new things and they don't want to live in Detroit. The problem with this is that to make it in the car industry in the long run it's not really about having the best core engineering in terms of product development, but actually having the best & most efficient manufacturing, and the best marketing and sales pipeline. Not a critique of Tesla here, just that I don't think it magically holds what is stated here. Labour costs, proximity to shipping, proximity to supply chains, etc. are absolutely key. The auto industry is concentrated in the corridor from here (S. Ontario) down to Michigan, etc. for historical reasons, but also logistical ones. Great lakes / St Lawrence shipping, rail connections, cheaper nearby Canadian labour for some things, parts suppliers & other factories etc. Big battery manufacturing plants are now being built across this whole region now, too.
jnsaff2 3y ago
My hot take on the MAX is that the decision to go for a clean sheet or modernization is immaterial here. Engineering and product development can come up with an analysis that points to the current design having enough room for improvement and be viable in the market. What was the really big problem and a clearly (in hindsight) wrong decision was to try and get past requirements for a new type certificate requirement for the pilots. Had they just stood firm and told the airlines that it's not safe to try and monkey-patch the thing to feel like the old one so no retraining however small would need to be made 346 people would not have been killed and the issues would be elsewhere.
- Shawnj2 3y ago
  Yeah the problem isn’t that they edited the 737 design instead of doing a clean sheet- they did it twice before with nearly no issues and making a 737+++ is what the airlines would prefer over a clean sheet- the issue is the staggering amount of corners they cut in the process. Pilot training is a start but also they clearly poorly thought out MCAS and have poor quality production with the door issues.
HumblyTossed 3y ago
> the best engineers want to build sexy new things and they don't want to live in Detroit. I don't believe that is always true.
- karaterobot 3y ago
  Yeah, that's a pretty poor analysis across the board. That great engineers require a sexy thing to work on is empirically false, that engineers won't move to Detroit is historically false, that there is some small cadre of engineers you must monopolize in order to make electric vehicles shows a deep misunderstanding.
- vineyardlabs 3y ago
  Agreed on both counts. I think I'm a great engineer (not so sure about "best") but my family/community are the most important things in my life and I would not sacrifice that to work on something sexy and new. Additionally, having spent a little bit of time in the suburbs of Detroit (Auburn Hills and Dearborn mostly) I found the area to be absolutely gorgeous and filled with things to do (again probably more for folks with families). Granted this was in Spring. I hear the winters are tough.
  - keiferski 3y ago
    It’s kinda far from Detroit but I thought Ann Arbor was one of the nicest college towns I’ve ever been to.
- hermanradtke 3y ago
  Also, vehicle R&D happens all over the world. Does the OP think GM or Toyota have a single R&D office in Detroit?
  - dtnewman 3y ago
    OP here. You can disagree with my conclusions, but yes, Toyota's North American R&D Headquarters are near Detroit (in Ann Arbor) [1] and GM's research headquarters are in Warren, MI, a suburb of Detroit. [1] https://www.toyota.com/usa/careers/research-development https://www.toyota.com/usa/careers/research-development [2] https://phmsociety.org/partner_profile/general-motors-global-rd/ https://phmsociety.org/partner_profile/general-motors-global...
hedora 3y ago
I didn’t read the article you linked, but it took Boeing 3 years to design and build the first 747: https://en.m.wikipedia.org/wiki/Boeing_747 https://en.m.wikipedia.org/wiki/Boeing_747 This was back in the 60’s, so they were probably using wind tunnels and scale models to do stuff that a modern computational fluid dynamics system can turn around in an hour. I’m sure it was very expensive back then, and wouldn’t be surprised if today’s Boeing couldn’t pull it off, but I doubt it’s fundamentally hard or expensive to do design a 747-class airliner using modern technology.
- acoard 3y ago
  True, but this ignores the fact that Boeing employees were actively "designing new planes" in that time, and thus had the skill set. From your wiki link, some choice excerpts (not one whole paragraph): > In 1963 [edit: 6 years before], the United States Air Force started a series of study projects on a very large strategic transport aircraft. Although the C-141 Starlifter was being introduced, officials believed that a much larger and more capable aircraft was needed, especially to carry cargo that would not fit in any existing aircraft > In 1965, Lockheed's aircraft design and General Electric's engine design were selected for the new C-5 Galaxy transport, which was the largest military aircraft in the world at the time.[1] Boeing carried the nose door and raised cockpit concepts over to the design of the 747. And from some other articles: > At Boeing, Sutter worked on many commercial airplane projects, including the 367-80 "Dash 80", 707, 727 and 737. He eventually became a manager for the new jumbo-sized wide body airplane, the four-engine Boeing 747. [0] My only point is they didn't go from zero to 747 in 3 years. They went from having an active culture of building jets, and doing R&D in this area, and having people that had successfully worked on other new jet design projects. They went from that to having a 747 in 3 years. Still incredibly impressive, but if we admit that culture is lacking now, it's entirely conceivable it'd take longer than 3 years to build a comparable jet today. (Look at how much slower north america builds rail now, or anything, compared to the 60s). [0] https://en.m.wikipedia.org/wiki/Joe_Sutter https://en.m.wikipedia.org/wiki/Joe_Sutter
  - hedora 3y ago
    Absolutely. I'm pointing out that this is a Boeing problem (and probably a regulatory capture problem), not an engineering problem. That goes double for trains in North America (but different companies and regulators are involved, of course).
kuschkufan 3y ago
I'm convinced there is some merit to this. So what would be the "Tesla" place for engineers to work at nowadays? Maybe Volocopter, Eviation, Boom Supersonic and the likes - there is plenty. Also, I'm convinced elevators and escalators are now more often broken than previously and always thought - what if that can be explained with loss of knowledge? Given how old this stuff is. There likely only ever is "innovation" in how to produce it for less cost and it results in mediocre technical "compromises".
- mrguyorama 3y ago
  This is nothing more than physical degradation, because replacing the escalator or elevator costs a lot of money, while hiring the cheapest repairperson to service it with spit and bubblegum costs only a little. America CAN still build stuff just fine, but everywhere you look, the upper management has stopped agreeing to pay for it. It always seems like management is happier to pay $$ every year for ongoing support costs over $$$ one time and $ every year after for an investment of some sort into future production.
- Shawnj2 3y ago
  Tesla, SoaceX, Rocket Lab, most of the other NuSpace companies, other EV companies like Rivian, the hardware departments of Silicon Valley companies, and defense startups like Anduril are what I immediately think of
  - kuschkufan 3y ago
    But we were talking planes..
    - Shawnj2 3y ago
      Planes and rockets are two sides of the same coin, an engineer can pretty much work at either if they want Well I guess there are some plane startups like Boom, companies working on green powered planes, and companies working on plane style drones but it’s a lot less common IMO

ccorcos 3y ago

I’ve been thinking about this comment for a few days now because it’s so true! Pragmatic business decisions are often at odds with recruiting the best possible engineering talent which is probably not the best long term strategy…

jgalt212 3y ago

> the best engineers want to build sexy new things and they don't want to live in Detroit. Probably why many car "design centers" are not in Motown.

pizlonator 3y ago

> but his replacement will be Stephanie Pope, a woman with an accounting/MBA background who has risen through the ranks at Boeing in primarily financial positions An engineering company run into the ground by accountants is going to be run by another accountant. Yeah Boeing is fucked.

jamincan 3y ago
Muilenburg had an engineering background and he was at the helm for the MCAS issues with the 737 Max.
- dralley 3y ago
  And Jack Welch came from an engineering background. As much as I sympathize with the notion that engineers make better CEOs, they're not immune to the same influences as everyone else.
  - paulryanrogers 3y ago
    No one is arguing it's a guarantee engineers are always good executives. Also looks like Welch was a chemical engineer before GE, so not sure how much of that knowledge transfers.
  - dylan604 3y ago
    I highly doubt that an engineer would make a great CEO, but a CEO with no engineering background isn't going to know when what the engineers are saying that goes against what the business people are saying will matter. The bean counters will always be against anything cutting into the profit margin even if that extra expense the engineers are pushing for will actually make or break the thing.
    - tivert 3y ago
      > The bean counters will always be against anything cutting into the profit margin even if that extra expense the engineers are pushing for will actually make or break the thing. I think they key point is: you can't competently make a tradeoff between two domains if you don't understand both of those domains. Engineers want to make the best engineered thing, and have a harder time prioritizing costs. Accountants/business types want to make some money number go up this quarter, and will reject good engineering ideas to penny-pinch. Someone needs to be able to (competently) keep both groups aligned.

shuckles 3y ago

If bean counters are useless and can’t value engineering, why do you start your comment with a story about a hedge fund guy’s opinion? They are the ultimate bean counters.

JumpCrisscross 3y ago
> hedge fund guy’s opinion? They are the ultimate bean counters Finance and accounting are totally different professions, especially when it comes to the dispositions of the people at the top.
- shuckles 3y ago
  Calhoun was a Managing Director at Blackstone which, sure, isn’t a hedge fund but surely is not a glorified accounting firm. If he can be called a bean counter, so can Anonymous Hedge Fund Guy. There are plenty of extremely strategic CFOs that began their careers as “bean counters.” The terms of all this discussion and theorizing are purely in-group out-group confirmation bias nonsense.
  - JumpCrisscross 3y ago
    Totally different doesn’t mean you can’t have both. It just means one doesn’t confer the other. More broadly, I agree with you. Pretending everything would be better under a real engineer is a deluded combination of No True Scotsman and in-group signalling. As HN demonstrates, no group is immune to their siren calls.
  - dv_dt 3y ago
    And Btw Blackstone is probably making similar penny wise pound foolish errors only on the scale of the national economy.
earthnail 3y ago
Yes and no. They try to integrate more system thinking in order to justify larger risks. He explains it very well with the factors that the hedge fund guy considers that the accountant does not. Not that I’m a huge fan of hedge funds but I believe the OP’s point is very valid.

benwoodruff 3y ago

> global services (I'm not really sure what this last one does, but the division that we primarily think of when we think Boeing is their commercial one). Global services handles logistics/maintenance for airplanes, probably handles both defense and commercial which is why they spun their own division [1]. [1] https://services.boeing.com/about https://services.boeing.com/about

cft 3y ago

But they live in China. Eventually the trade war with China fails (unless there's a real war) and then Tesla is toast.

cmrdporcupine 3y ago

> His response: the best engineers want to build sexy new things and they don't want to live in Detroit. The problem with this is that to make it in the car industry in the long run it's not really about having the best core engineering in terms of product development, but actually having the best & most efficient manufacturing, and the best marketing and sales pipeline. Not a critique of Tesla here, just that I don't think it magically holds what is stated here. Labour costs, proximity to shipping, proximity to supply chains, etc. are absolutely key. The auto industry is concentrated in the corridor from here (S. Ontario) down to Michigan, etc. for historical reasons, but also logistical ones. Great lakes / St Lawrence shipping, rail connections, cheaper nearby Canadian labour for some things, parts suppliers & other factories etc. Big battery manufacturing plants are now being built across this whole region now, too.

jnsaff2 3y ago

My hot take on the MAX is that the decision to go for a clean sheet or modernization is immaterial here. Engineering and product development can come up with an analysis that points to the current design having enough room for improvement and be viable in the market. What was the really big problem and a clearly (in hindsight) wrong decision was to try and get past requirements for a new type certificate requirement for the pilots. Had they just stood firm and told the airlines that it's not safe to try and monkey-patch the thing to feel like the old one so no retraining however small would need to be made 346 people would not have been killed and the issues would be elsewhere.

Shawnj2 3y ago
Yeah the problem isn’t that they edited the 737 design instead of doing a clean sheet- they did it twice before with nearly no issues and making a 737+++ is what the airlines would prefer over a clean sheet- the issue is the staggering amount of corners they cut in the process. Pilot training is a start but also they clearly poorly thought out MCAS and have poor quality production with the door issues.

HumblyTossed 3y ago

> the best engineers want to build sexy new things and they don't want to live in Detroit. I don't believe that is always true.

karaterobot 3y ago
Yeah, that's a pretty poor analysis across the board. That great engineers require a sexy thing to work on is empirically false, that engineers won't move to Detroit is historically false, that there is some small cadre of engineers you must monopolize in order to make electric vehicles shows a deep misunderstanding.
vineyardlabs 3y ago
Agreed on both counts. I think I'm a great engineer (not so sure about "best") but my family/community are the most important things in my life and I would not sacrifice that to work on something sexy and new. Additionally, having spent a little bit of time in the suburbs of Detroit (Auburn Hills and Dearborn mostly) I found the area to be absolutely gorgeous and filled with things to do (again probably more for folks with families). Granted this was in Spring. I hear the winters are tough.
- keiferski 3y ago
  It’s kinda far from Detroit but I thought Ann Arbor was one of the nicest college towns I’ve ever been to.
hermanradtke 3y ago
Also, vehicle R&D happens all over the world. Does the OP think GM or Toyota have a single R&D office in Detroit?
- dtnewman 3y ago
  OP here. You can disagree with my conclusions, but yes, Toyota's North American R&D Headquarters are near Detroit (in Ann Arbor) [1] and GM's research headquarters are in Warren, MI, a suburb of Detroit. [1] https://www.toyota.com/usa/careers/research-development https://www.toyota.com/usa/careers/research-development [2] https://phmsociety.org/partner_profile/general-motors-global-rd/ https://phmsociety.org/partner_profile/general-motors-global...

hedora 3y ago

I didn’t read the article you linked, but it took Boeing 3 years to design and build the first 747: https://en.m.wikipedia.org/wiki/Boeing_747 https://en.m.wikipedia.org/wiki/Boeing_747 This was back in the 60’s, so they were probably using wind tunnels and scale models to do stuff that a modern computational fluid dynamics system can turn around in an hour. I’m sure it was very expensive back then, and wouldn’t be surprised if today’s Boeing couldn’t pull it off, but I doubt it’s fundamentally hard or expensive to do design a 747-class airliner using modern technology.

acoard 3y ago
True, but this ignores the fact that Boeing employees were actively "designing new planes" in that time, and thus had the skill set. From your wiki link, some choice excerpts (not one whole paragraph): > In 1963 [edit: 6 years before], the United States Air Force started a series of study projects on a very large strategic transport aircraft. Although the C-141 Starlifter was being introduced, officials believed that a much larger and more capable aircraft was needed, especially to carry cargo that would not fit in any existing aircraft > In 1965, Lockheed's aircraft design and General Electric's engine design were selected for the new C-5 Galaxy transport, which was the largest military aircraft in the world at the time.[1] Boeing carried the nose door and raised cockpit concepts over to the design of the 747. And from some other articles: > At Boeing, Sutter worked on many commercial airplane projects, including the 367-80 "Dash 80", 707, 727 and 737. He eventually became a manager for the new jumbo-sized wide body airplane, the four-engine Boeing 747. [0] My only point is they didn't go from zero to 747 in 3 years. They went from having an active culture of building jets, and doing R&D in this area, and having people that had successfully worked on other new jet design projects. They went from that to having a 747 in 3 years. Still incredibly impressive, but if we admit that culture is lacking now, it's entirely conceivable it'd take longer than 3 years to build a comparable jet today. (Look at how much slower north america builds rail now, or anything, compared to the 60s). [0] https://en.m.wikipedia.org/wiki/Joe_Sutter https://en.m.wikipedia.org/wiki/Joe_Sutter
- hedora 3y ago
  Absolutely. I'm pointing out that this is a Boeing problem (and probably a regulatory capture problem), not an engineering problem. That goes double for trains in North America (but different companies and regulators are involved, of course).

kuschkufan 3y ago

I'm convinced there is some merit to this. So what would be the "Tesla" place for engineers to work at nowadays? Maybe Volocopter, Eviation, Boom Supersonic and the likes - there is plenty. Also, I'm convinced elevators and escalators are now more often broken than previously and always thought - what if that can be explained with loss of knowledge? Given how old this stuff is. There likely only ever is "innovation" in how to produce it for less cost and it results in mediocre technical "compromises".

mrguyorama 3y ago
This is nothing more than physical degradation, because replacing the escalator or elevator costs a lot of money, while hiring the cheapest repairperson to service it with spit and bubblegum costs only a little. America CAN still build stuff just fine, but everywhere you look, the upper management has stopped agreeing to pay for it. It always seems like management is happier to pay $$ every year for ongoing support costs over $$$ one time and $ every year after for an investment of some sort into future production.
Shawnj2 3y ago
Tesla, SoaceX, Rocket Lab, most of the other NuSpace companies, other EV companies like Rivian, the hardware departments of Silicon Valley companies, and defense startups like Anduril are what I immediately think of
- kuschkufan 3y ago
  But we were talking planes..
  - Shawnj2 3y ago
    Planes and rockets are two sides of the same coin, an engineer can pretty much work at either if they want Well I guess there are some plane startups like Boom, companies working on green powered planes, and companies working on plane style drones but it’s a lot less common IMO