In our last article, we discussed several great companies of Western civilization and why a poignant few of them, that were building game-changing technology, disappeared. Metaphorically they can be envisioned as having been buried in the proverbial Raiders of the Lost Ark warehouse, never to be seen again.
THE ALPHA AXP
The DEC Alpha chip, also known as the Alpha AXP, was first released in the early 1990s. The concepts behind the DEC Alpha chip were easily decades ahead of their time. It was an early adopter of 64-bit processing at a time when most processors used 32-bit. In the ’90s, it suffered a price-to-performance penalty compared to systems running Intel chips. That fact, along with the contemporary scarcity of applications that could exploit the power of the Alpha chip, resulted in an awkward, albeit temporary and artificial, market entry boundary.
Compaq Corp. acquired Digital Equipment Corp., and its respective technology, and then made the all-too-common decision to abandon the product and its technology. The Alpha chip is now somewhere in that government warehouse with Indy’s Ark. This commonplace philosophy, one could argue, is a consequence of the fixation on short-term thinking and even shorter-term temporary stock share price.
At the time this article was written, in late March 2024, a single NVIDIA share crossed the $800 threshold, giving NVIDIA a market capitalization of more than $2 trillion.
Before its merger with Hewlett-Packard (HP) in 2002, Compaq’s market capitalization was approximately $24.2 billion, with an estimated share price of $14.68. That $24-billion value included the worth of Compaq’s hardware business assets as opposed to the more focused value of NVIDIA, which only sells processors, most prominently the Graphical Processing Unit, or GPU.
That valuation is multiple orders of magnitude inferior to NVIDIA’s $2 trillion market cap. What the industry colloquially refers to as AI is changing the world around us at a frantic pace. That is only possible due to the incredibly powerful chips being made by NVIDIA, which, a few short years ago, were primarily used for video games. Intel and AMD are competing by offering the Intel Infrastructure Processing Unit (IPU) and the AMD Pensando Data Processing Unit (DPU), but they are both far behind in terms of market share and partnerships. Even a decade ago, this would have all been implausible outside a grade-B science fiction series. Imagine where the world would be today if Compaq had continued to move forward with the Alpha chip and the Six Cities of Silicon Valley had the capabilities of a mature Alpha chip more than a decade earlier.
Let’s consider some other industries and unfortunate shifts in philosophy from not only the technological perspective but everything else.
BOEING—HISTORICALLY KNOWN FOR QUALITY AND SAFETY
Established in 1916, Boeing quickly emerged as a leading manufacturer of commercial airplanes, and its reputation for safety and quality was a significant factor in its success. The company’s approach to safety included impeccable design, flawless aircraft manufacturing processes, and extensive training for pilots and maintenance crews. Continuous oversight of aircraft performance was an innately accepted practice and standard.
Throughout many decades, Boeing aircraft, such as the 707, 747, and 777, became symbols of safe and reliable air travel, setting industry standards for quality and performance. However, Boeing’s reputation for safety and quality has faced recent challenges, particularly after the two 737 MAX crashes in 2018 and 2019. Recently, faulty door plugs resulted in an emergency exit door separating from the passenger jet while in flight. For those inclined toward conspiratorial considerations, it gets worse. Full-blown, late-night TV conspiracy theories dominate not only the insomniac’s early mornings but also social media postings of all political persuasions. On March 9 of this year, John Barnett, a Boeing whistleblower and former Boeing quality control manager, was found dead under strange circumstances.
FACTORS THAT CONTRIBUTED TO BOEING’S DECLINE
Boeing’s decline in its focus on quality and safety can be attributed to a combination of factors, including shifts in corporate culture, business strategies, and specific program failures.
Here is a timeline of events leading to where we are now:
- Merger with McDonnell Douglas in 1997: This merger is often cited as a pivotal moment in Boeing’s history, marking a shift from a culture that deeply valued engineering excellence to one more focused on cost-cutting and financial performance. The leadership and corporate strategy changes that followed this merger emphasized shareholder value and profit margins over the engineering-driven culture that had previously defined Boeing.
- Society of Professional Engineers strike of 2000: Boeing is a highly unionized company and has experienced many strikes throughout its history. However, the engineers’ strike in 2000, which occurred in the proximity of other cultural changes at the company, may have incentivized or even persuaded Boeing executives to accelerate the change of focus from engineering excellence to financial performance.
- Outsourcing and supply chain complexity: Boeing increasingly relied on outsourcing significant portions of its design and manufacturing to reduce costs and speed up production. The 787 Dreamliner program is often cited as a case in which this strategy led to significant quality control issues, delays, and cost overruns. The complexity of managing a global supply chain, which is sometimes fragile, also introduces risks and challenges in maintaining consistent quality and safety standards.
- Pressure to compete with Airbus: The intense competition with Airbus, a company that receives significant government subsidies, created a different type of pressure. The rivalry, especially in the single-aisle aircraft market, may have pushed Boeing to rush the development and certification of the 737 Max. The need to deliver a new product that could compete effectively with the Airbus A320neo led to decisions that have been criticized for compromising on safety and adequate pilot training for new flight control systems.
- Regulatory oversight issues: Investigations following the 737 Max tragedies revealed concerns about the FAA’s oversight and the level of influence Boeing had in the certification process, raising other questions about transparency and regulatory effectiveness.
- Corporate and leadership priorities: Leadership decisions and corporate priorities have also been scrutinized. Critics argue that the company’s leadership prioritized short-term financial gains and stock performance over long-term investments in quality, safety, and engineering. This includes substantial stock buybacks and dividends instead of reinvesting in research, development, and employee training.