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In most giant companies it is a reasonable strategy. The critical difference is most large companies don’t need to innovate. United doesn’t design aircraft, a
by Retric 2y ago
In most giant companies it is a reasonable strategy.
The critical difference is most large companies don’t need to innovate. United doesn’t design aircraft, airports, etc they compete with other huge companies in an extremely capital intensive industry and execution is what matters.
FedEx, Walmart, Bank of America, etc all need to keep up with their competitors but there’s no need to make risky bets when slow and steady brings in billions of revenue and nothing external is going to drive them out of business quickly.
Intel essentially forgot just how ruthless their industry was and got crushed.
- cma 2y agoI think all major airlines have pretty much gotten to the point of bankruptcy without bailouts
- Retric 2y agoAgain a logical choice. Much like banks the boards of airlines are incentivized to have high levels of debt supported dividends / buybacks because it’s a highly volatile industry. Money isn’t clawed back from investors, but cash reserves disappear in a downturn. Really any high risk industry where profits can be extracted in good times faces the same issues. The possibility for concessions from governments or people they owe money to like retires and bond holders etc, then repeat the cycle while maintaining control incentives high risk strategies because they are leveraging other people’s money.