If leadership gets stock as part of their compensation, they don't get to sell it off until long after their tenure in leadership is ended.
The time horizon of these jokers is too short. If they had a 10 or even a 5 year risk horizon, they would not make these short-sighted decisions. The Welchian approach isn't just value destruction, over a longer time horizon it's quantifiably unprofitable for the business as a whole.
Forgive me a tangent here, particularly relevant with the 737, about how leaders regularly mistake economies of scope for economies of scale.
Scale and Scope are fundamentally different things, but M&A specialists and related finbros often treat them as equivalent. This is unfortunate. Scalar efficiencies are largely functions of density - more people buying the same thing over a given space. Scope involves equivalence - more people buying things that are just similar enough. This is a trap. In order to evaluate equivalence, you need domain knowledge, but in order to consolidate operations, you've already jettisoned that same domain knowledge. Also known as "Why do I need fuselage experts in three different places? It's just a tube! Let's just hire one outsourced Fuselage Expert".
Economy of Scope takes a truly heroic amount of domain knowledge among the M&A team to make it work, but if you're already convinced that finance contains the secrets of the universe, you're probably going to be dismissing domain knowledge as a basic concept.
Again - not for the first time - I marvel at the structural similarities of end-stage Soviet industry and our own late-stage financier capitalism.
The time horizon of these jokers is too short. If they had a 10 or even a 5 year risk horizon, they would not make these short-sighted decisions. The Welchian approach isn't just value destruction, over a longer time horizon it's quantifiably unprofitable for the business as a whole.
Forgive me a tangent here, particularly relevant with the 737, about how leaders regularly mistake economies of scope for economies of scale.
Scale and Scope are fundamentally different things, but M&A specialists and related finbros often treat them as equivalent. This is unfortunate. Scalar efficiencies are largely functions of density - more people buying the same thing over a given space. Scope involves equivalence - more people buying things that are just similar enough. This is a trap. In order to evaluate equivalence, you need domain knowledge, but in order to consolidate operations, you've already jettisoned that same domain knowledge. Also known as "Why do I need fuselage experts in three different places? It's just a tube! Let's just hire one outsourced Fuselage Expert".
Economy of Scope takes a truly heroic amount of domain knowledge among the M&A team to make it work, but if you're already convinced that finance contains the secrets of the universe, you're probably going to be dismissing domain knowledge as a basic concept.
Again - not for the first time - I marvel at the structural similarities of end-stage Soviet industry and our own late-stage financier capitalism.