4 ms·

To think that a company will police itself adequately in the face of losing money if rules are enforced correctly is naive in the extreme. Since when has big b

by SeanDav 14y ago

To think that a company will police itself adequately in the face of losing money if rules are enforced correctly is naive in the extreme. Since when has big business ever cared more about safety than the bottom line?

larrik 14y ago
Normally this would be totally true, but given that every airliner crash is worldwide headlines, safety IS their bottom line.
- SeanDav 14y ago
  Safety is always a compromise. The more you spend on safety, the less money you will make. Having the company itself decide when something is "safe enough" is a recipe for disaster, quite literally.
- MichaelApproved 14y ago
  You'd think that would make sense but when deadlines, profit margins and bonuses are on the line, people tend to take shortcuts and sacrifice safty. Easy example is BP oil spill. You'd think it would be in their best interest to double up on safty because a spill would cost massively more than the safty precautions to prevent it. You'd think. But we see that they take risks and cut corners to meet their deadline while disregarding safty.
- acdha 14y ago
  What about Challenger? Thiokol engineers wanted to scrub the launch but were overridden by their management over business concerns: http://www.npr.org/blogs/thetwo-way/2012/02/06/146490064/remembering-roger-boisjoly-he-tried-to-stop-shuttle-challenger-launch http://www.npr.org/blogs/thetwo-way/2012/02/06/146490064/rem... It's not exactly the same situation but I think it illustrates the need to have independent oversight from someone outside the same management hierarchy – otherwise it's just too easy to cut corners, particularly since the feedback usually isn't immediate.
  - neurotech1 14y ago
    It's worse than Challenger. NASA isn't a publicly traded corporation, airlines didn't buy shuttles and people didn't buy tickets on the shuttle. If a 787 crashes due to a design or manufacturing flaw, Boeing stock price will fall significantly, and customer airlines will be very hesitant to order them. A closer analogy would be the fallout to both McDonnell-Douglas and the FAA after a series of DC-10 crashes. These crashes doomed the company, and they were sold off to Boeing.
    - acdha 14y ago
      NASA isn't a public corporation – although it seems rather unlikely that a disaster getting Congressional attention would be much easier – but Thiokol was a private business and would thus theoretically have a strong incentive not to lose a key contract due to failures in their components. The problem was that they perceived the risk of perceived flaws as high enough that they chose not to act. Market incentives aren't always as simple as they might seem at first glance.
- anigbrowl 14y ago
  ...after you've eliminated other possibilities like pilot error, poor maintenance, extreme weather, sabotage and so on. When I hear of an aircraft crash, my first instinct is not to suspect the manufacturer.
- goostavos 14y ago
  The same thing could be said about pharmaceutics, but lo, the FDA now exists for a reason.
  - TylerE 14y ago
    Key difference: If a drug is found to be dangerous 10 years down the line, all the people who took it have had exposure to whatever risk, long term effects, etc. If an airliner gets grounded, people who have already flown on it aren't retroactively at risk, so the worst case (other than the one that actually crashes, of course...) is that some airlines have some very large, very expensive, paperweights.
- mikeash 14y ago
  But not their only bottom line. To Boeing, a 787 with a safety record so terrible that nobody buys it is equivalent to a 787 that ships so late that nobody buys it. When presented with a choice between risking a terrible safety record and the certainty of shipping late, which do they choose? In a case like this, from a purely financial standpoint, a company would choose to risk safety, and would be completely rational to do so. The public would prefer a 787 that was a certain failure to one that was a potential deathtrap, but Boeing's incentives aren't necessarily aligned with the public's desires. This is why we have regulation. All else being equal, Boeing certainly does have an incentive to improve safety, as you point out. But it's far from their only motive, and in many cases it won't be the strongest one.
protomyth 14y ago
I actually know a few "big companies" that will enforce safety (sometimes to the extreme - stand on chair = fired) because the consequences of a failure would destroy the bottom line. The cost of failure in the USA with our courts is pretty extreme. Look at Arthur Andersen LLP (who won its court battle on May 31, 2005) and the effect that had on accounting firms with a consulting arm.
1123581321 14y ago
The thing is that Boeing essentially created the FAA and wrote its rules, because nobody else could. And since then they have continued to lead the FAA because Boeing actually makes airplanes. The FAA will never become independent of Boeing unless it becomes an airplane manufacturer itself so it has an independent source of expertise.

by SeanDav 14y ago

larrik 14y ago

Normally this would be totally true, but given that every airliner crash is worldwide headlines, safety IS their bottom line.

SeanDav 14y ago
Safety is always a compromise. The more you spend on safety, the less money you will make. Having the company itself decide when something is "safe enough" is a recipe for disaster, quite literally.
MichaelApproved 14y ago
You'd think that would make sense but when deadlines, profit margins and bonuses are on the line, people tend to take shortcuts and sacrifice safty. Easy example is BP oil spill. You'd think it would be in their best interest to double up on safty because a spill would cost massively more than the safty precautions to prevent it. You'd think. But we see that they take risks and cut corners to meet their deadline while disregarding safty.
acdha 14y ago
What about Challenger? Thiokol engineers wanted to scrub the launch but were overridden by their management over business concerns: http://www.npr.org/blogs/thetwo-way/2012/02/06/146490064/remembering-roger-boisjoly-he-tried-to-stop-shuttle-challenger-launch http://www.npr.org/blogs/thetwo-way/2012/02/06/146490064/rem... It's not exactly the same situation but I think it illustrates the need to have independent oversight from someone outside the same management hierarchy – otherwise it's just too easy to cut corners, particularly since the feedback usually isn't immediate.
- neurotech1 14y ago
  It's worse than Challenger. NASA isn't a publicly traded corporation, airlines didn't buy shuttles and people didn't buy tickets on the shuttle. If a 787 crashes due to a design or manufacturing flaw, Boeing stock price will fall significantly, and customer airlines will be very hesitant to order them. A closer analogy would be the fallout to both McDonnell-Douglas and the FAA after a series of DC-10 crashes. These crashes doomed the company, and they were sold off to Boeing.
  - acdha 14y ago
    NASA isn't a public corporation – although it seems rather unlikely that a disaster getting Congressional attention would be much easier – but Thiokol was a private business and would thus theoretically have a strong incentive not to lose a key contract due to failures in their components. The problem was that they perceived the risk of perceived flaws as high enough that they chose not to act. Market incentives aren't always as simple as they might seem at first glance.
anigbrowl 14y ago
...after you've eliminated other possibilities like pilot error, poor maintenance, extreme weather, sabotage and so on. When I hear of an aircraft crash, my first instinct is not to suspect the manufacturer.
goostavos 14y ago
The same thing could be said about pharmaceutics, but lo, the FDA now exists for a reason.
- TylerE 14y ago
  Key difference: If a drug is found to be dangerous 10 years down the line, all the people who took it have had exposure to whatever risk, long term effects, etc. If an airliner gets grounded, people who have already flown on it aren't retroactively at risk, so the worst case (other than the one that actually crashes, of course...) is that some airlines have some very large, very expensive, paperweights.
mikeash 14y ago
But not their only bottom line. To Boeing, a 787 with a safety record so terrible that nobody buys it is equivalent to a 787 that ships so late that nobody buys it. When presented with a choice between risking a terrible safety record and the certainty of shipping late, which do they choose? In a case like this, from a purely financial standpoint, a company would choose to risk safety, and would be completely rational to do so. The public would prefer a 787 that was a certain failure to one that was a potential deathtrap, but Boeing's incentives aren't necessarily aligned with the public's desires. This is why we have regulation. All else being equal, Boeing certainly does have an incentive to improve safety, as you point out. But it's far from their only motive, and in many cases it won't be the strongest one.

protomyth 14y ago

I actually know a few "big companies" that will enforce safety (sometimes to the extreme - stand on chair = fired) because the consequences of a failure would destroy the bottom line. The cost of failure in the USA with our courts is pretty extreme. Look at Arthur Andersen LLP (who won its court battle on May 31, 2005) and the effect that had on accounting firms with a consulting arm.

1123581321 14y ago

The thing is that Boeing essentially created the FAA and wrote its rules, because nobody else could. And since then they have continued to lead the FAA because Boeing actually makes airplanes. The FAA will never become independent of Boeing unless it becomes an airplane manufacturer itself so it has an independent source of expertise.