Here's a company whose stock is trading at 1994 levels. It never recovered from the "dot-com" crash of 2001. The dividend yield is nowhere close to a US treasury at any maturity. It's losing money left and right. A good chunk of that was the pivot, under Jack Welch's leadership, from actually making stuff into financial services, shedding hundreds of thousands of jobs along the way. GE was therefore well-placed for full-impact during the GFC.
What gets me is how Jack Welch was held up as an amazing businessman and model for corporate flexibility for years while his changes utterly destroyed GE's future for short-term gains. I'd argue the same thing about the Clinton administration and Greenspan specifically. There's got to be a better mechanism to force companies and countries to focus on long-term rather than short-term improvements.
> There's got to be a better mechanism to force companies and countries to focus on long-term rather than short-term improvements.
Unions with a board seat. Employee ownership. Shares in the hands of pragmatic investors who value long term over extraction and dumping the carcass on the next fool. People like Welch and characters like Gordon Gecko aren’t heroes, they’re cautionary tales, the Frank Underwoods (House of Cards) of finance and corporate management.
I'd say he was the original LinkedIn style Thought Leader CEO. His statements and performance was never critically analyzed by mainstream media when he was at top job for decades.
In case anyone thinks it is past now. There is army of nincompoops who idolize him even today.
> I'd argue the same thing about the Clinton administration and Greenspan specifically.
I'm curious, what are the things that happened during the Clinton administration that you think were short-term gains at the expense of long-term improvements? I've always felt that many of the fiscal policies of Clinton were in favor of long-term stability (e.g. specifically his tax policies and balancing the budget).
Now, with monetary policy and Greenspan specifically, I 100% agree that the "Greenspan put" was absolutely a disaster for long-term stability, but Greenspan was in office from 1987 - 2006 (originally nominated by Reagan), so I see his choices as pretty orthogonal to whoever was president at the time.
There used to be strict leverage restrictions on funds that raised money from investors, as well as limits on who/what entities could invest in the funds. The article really goes into more detail but lawmakers and the Clinton administration eliminated these laws and birthed the modern private equity industry which is pretty much the definition of short term focus.
> fiscal policies of Clinton were in favor of long-term stability (e.g. specifically his tax policies and balancing the budget)
Of special note, the two BRAC rounds that were conducted under his presidency (93, 95), as well as one under H.W. Bush (91) and one under Reagan (88), substantially reduced the number of extraneous, pork barrel military bases across the US.
The 1988-2001 US defense budget decreases made a lot of hard and politically unpalatable choices that were fiscally responsible.
And since the US budget is ~15% DOD, that addressed a big chunk.
> I'm curious, what are the things that happened during the Clinton administration that you think were short-term gains at the expense of long-term improvements?
The dot com bubble forming and then popping is a notable one, Enron's fraudulent ascent is another.
> The dot com bubble forming and then popping is a notable one, Enron's fraudulent ascent is another.
While I agree with this, I interpreted the parent comment as saying there was something specific about the Clinton administration's policies that led to short term thinking. New technology boom and busts have been going on since the dawn of the Industrial Revolution (just look at early railroads and auto companies); the dot com bubble had nothing specifically to do with Clinton. Similarly, WTF did Enron have to do with the Clinton administration?
> the dot com bubble had nothing specifically to do with Clinton. Similarly, WTF did Enron have to do with the Clinton administration
Who is responsible for allowing these things to happen if not the President at the time? Sure, there are limitations to executive power but far more leeway in raising the alarm via the bully pulpit and plenty of scope for using the investigation and regulatory powers that did exist and it would have been a great opportunity for spending political capital to act or at least try. I’m not aware of any evidence of any of that being done and the notion that Clinton couldn’t have known or couldn’t have done anything at all about it is ridiculous. Therefore it’s the implicit Clinton policy of neglect or inaction which is where the culpability lies. I’m happy to be proven wrong and I’m not blaming Clinton alone or even primarily but he deserves plenty of blame nonetheless.
> Who is responsible for allowing these things to happen if not the President at the time?
The President is not God, or a king. People seem to be confused about the role and powers of the President in our system. What, exactly, do you wish the President had said on his bully pulpit about Enron??
I always find it bizarre that people blame the President for everything that happened on his watch, just as much as I think it bizarre that they give him all the credit. I mean, I generally think Clinton was a good president, but he also had much more than his fair share of luck in presiding during a booming economy (which would have boomed no matter who was president at that time).
> The dot com bubble forming and then popping is a notable one, Enron's fraudulent ascent is another.
Let's not forget WorldCom and Arthur Anderson, who later formed Deloitte if I'm not mistaken. We have them to thank in part for SOX and SOC audits as well as the PCAOB.
> There's got to be a better mechanism to force companies
I'd say the current version isn't terrible. Competition has lead to creative destruction. What would be real failure is GE sticking around with a bunch of moribund initiatives tying up skilled individuals and resources. Spinning out divisions is bad for GE shareholders (when the whole thing collapses) ... but I'm not sure it was actually bad for country, or for employees of new companies, or innovation in general.
Things sorta worked they way they are supposed to. Bad management decisions over time results in bankrupt companies and their resources being auctioned off to more efficient corporations.
Had a conversation with a financial professional just after Jack Welched announced his retirement.
The thinking was that GE was screwed. Welch had been in power too long and made too many changes. There was no obvious leader. And GE had very much become Jack Welch Inc.
Jack Welch was CEO of a different era. Remember when GE owned NBCUniversal? No? That was also under Welch. The WSJ lays some of the blame of GE's downfall at the feet of his successor, Jeff Immelt.
> GE’s precipitous fall, following years of treading water while the overall economy grew, was exacerbated, some insiders say, by what they call “success theater.” Mr. Immelt and his top deputies projected an optimism about GE’s business and its future that didn’t always match the reality of its operations or its markets, according to more than a dozen current and former executives, investors and people close to the company. [0]
Jack Welch didn't always make great decisions -- diversifying away from GE's core businesses into financial markets, media, etc. His last act of trying to acquire Honeywell failed. But it was Immelt who brought the company down. Immelt grew GE Capital from 40 to 55% of the company at the onset of the Great Recession, took government bailout money when it tanked, then divested it from the company when it was clearly a drag on profitability. He championed GE Digital which never materialized, and then made big bets on conventional energy just when renewables were taking off. I don't know if it could have been different in someone else's hands. But a little more truth-telling would probably have helped. Welch did think that appointing Immelt was his "biggest mistake" [1].
> Welch did think that appointing Immelt was his "biggest mistake"
It is because Jeff did not (or not allowed) to continue with scammy accounting practices encouraged by Jack Welch to keep stock price and earning per share high.
There was a recent book about Jack Welch : The Man Who Broke Capitalism: How Jack Welch Gutted the Heartland and Crushed the Soul of Corporate America—and How to Undo His Legacy
[Factoid] was coined in 1973 by American writer Norman Mailer to mean a piece of information that becomes accepted as a fact even though it is not actually true, or an invented fact believed to be true because it appears in print.[0]
One thing to think about when reading news like this (which is something I learned through the first solar boom): While counterintuitive, it can at the same time be true that a technology is booming and companies building that technology are struggling.
It's not that surprising once you think about it: Booming technologies means more companies enter the market. Some will be able to produce cheaper or better products than what's already there. If the old ones can't adapt they'll struggle.
I would say in climate tech it's a bit different. Yes companies can be suffering but typically for any of these energy technology companies they have significant manufacturing costs and long periods in which they have to deploy that capital to physically manufacture goods. It isn't necessarily the competition that sinks the companies its the market structure and timing.
In the case of solar what happened was that the Chinese government underwrote Chinese manufacturers who produced significant volumes of solar panels which they dumped on the global market for incredibly cheap prices which put pressure on all the other global manufactures and consolidated the market. That said a lot of the Chinese manufacturers also went bankrupt as they undercut each other on prices to fill out the manufacturer queue.
Also in energy tech you don't have infinite upside like technology -- as you deploy hard capital you have a finite range that you can get returns on. In the electricity markets you typically have to build technology and sell it for cheaper than what is currently available (i.e. project finance your project on a PPA < market rates). Already a fundamentally difficult structure to do well in - add in regulatory slowdown, political mandates, utilities as your clients (slow lead times).
this does not translate well to an industry like wind energy where there are multiple moving parts, literally and metaphorically.
the solar industry is literally zero moving parts. Panels and inverters are off-the-shelf commodities that are in a race to the bottom for price. this is further helped by the fact that they are largely interchangeable.
Wind turbines do not function like this and they are complicated, dynamic systems requiring continuous monitoring and regular maintenance.
The reality here is that the wind energy industry is and will continue to see a boom and order books are often full years into the future. Despite the headlines, onshore wind isn't going anywhere because there are many regions around the world where offshore wind does not work well.
Offshore wind is being hyped up by Europe - coincidentally, a region with relatively shallow seas and limited land area. Despite the boom, there are not that many manufacturers of wind turbines precisely because it is a capital intensive industry. This is not good news.
Warren Buffet has some quote on capital intensive industries like you say.
"The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money. Think airlines. Here a durable competitive advantage has proven elusive ever since the days of the Wright Brothers. Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down." [1]
The last sentence is a sarcastic quip, for those who aren't familiar with his personality.
I don’t think he’s particularly concerned with capital. It’s the lack of competitive advantage that is key. Insurance (the classic financial services industry that is Buffet’s life blood) is one of the most capital intensive industries.
Airlines lack substantial economies of scale, customer captivity, captive supply, or regulatory protections. The airline industry is a textbook case of an industry with no durable competitive advantages, thus the only performance factor is operational efficiency.
Insurance on the other hand, there are substantial economies of scale (large fixed costs and also larger insurance companies are more diversified thus less costly/risky) and high customer captivity (high switching cost, high search cost).
You're right! I was lazy with my words, it's definitely the durability that he's concerned with. The word durable, from the quote, is even emphasized in the original text.
Airlines have huge economies of scale due to network effects. Most customers will only buy a ticket if they can reach their final destination on a single airline with only one (or at most two) transfers. Code share agreements with partner airlines only partly mitigate this.
The other major factor which prevents airlines from ever sustaining high profits is pilot unions. The pilots will demand most of the extra profits, and usually get it because a strike instantly shuts down the entire airline.
Pilot unions have gotten the shit kicked out of them for years. 1970 wants its argument back.
Tickets are fungible and people will make insane choices to save a dollar. The constrained resource is gates. The network effects that make big airlines viable are expensive, so without regulation there’s always upstarts who drive the price as low as possible. That’s why Emirates is fancy.
If you live near NYC, there is an airport in Newburg that attracts weird financial engineering airlines that leverage leases to fly international cheaply. When I saw Hamilton, I flew Norwegian airlines from NY to London for $24. The long term parking cost more.
It’s an industry where the low barrier to entry ensures that the industry as a whole is barely profitable.
Economies of Scale and Network Effects are distinct business powers.
"Network Effects" means the Nth person doing business with the company generates more value for the business's service to everyone else, all else equal. I don't think airlines have network effects. There isn't much benefit to flying a highly-trafficked airline vs a lower-trafficked airline, provided they have the same routes. (If anything, this might be marginally inversely correlated? Small airlines seem to have a better experience than the big ones)
"Economies of Scale" means that cost of goods sold becomes a lower percentage of revenue as revenue grows. This doesn't hold true for airlines, because jet fuel & taxes thereon, and leasing gate space make up the biggest fixed costs IIRC. Bigger airlines don't have a lot of negotiating edge vs small ones, here. Plus, big airlines have an exponential logistical problem to solve, which is costlier to solve "at scale". Thus, profit scales basically linearly (some might argue sub-linearly) with revenue.
There are indeed regional economies of scale for those airlines that invest in monopolizing growing transit hubs. Virgin Airlines and Southwest built their businesses on them, and are well-studied examples. But they are not durable over a long enough time horizon, and don't "scale" up to bigger footprints.
Airlines "own" far too little of their costs, and startup cost is far too low, for them to be durable and large business.
The dynamic is terrible for value investors like BRK, but arguably quite great for consumers (fliers). And not too shabby for early-stage investors, either.
Having a higher route coverage is a function of size absolutely. However, it is definitely not a significant competitive advantage. Economies of scale is applicable in absolute and relative terms.
Airline A can have 100% coverage everywhere in the world and be the largest airline. But if Airline B enters a specific route, there is no advantage to a customer whether they ride with A or B for that specific route. This is why there are so many entrants into the industry.
The biggest factor to the lack of durable profits in the airline industry isn’t labor or unions. It’s the ease of entry into the market which puts tremendous pressure on price. There are no substantial barriers to entry, prices go down until profits are close to zero. So in classical value based investment lingo, it is an industry with no competitive advantages.
The airlines industry in aggregate has never had a ROIC greater than its cost of capital over the long term (>1 yr) for the lifetime of the industry.
There were attempts to introduce artificial scarcity with loyalty programs. I used to be a more frequent flyer and still fly enough that I will pay a premium (up to a point) to get the benefits - upgrades and free-personal travel. Locking in business-traveler loyalty has long been a key to profitability in airlines.
I think our definition of profits are different. You’re referring to financial profits, ie earnings. Yes loyalty programs increase customer captivity and can enable market leaders to make marginal financial profits through some periods.
However, for investors, we care about profits from capital deployment, or returns from invested capital minus cost of capital. The marginal earnings that leading airlines generate from loyalty programs and business traveler accounts do not make up for the huge demand for capital, thus insufficient to break even the cost of capital.
I think thats starting to tip. I fly spirit now, because is usually a couple hundred cheaper than delta et al and offers me the same exact service short of the 30 cent biscuit and 70 cent can of coke given out on the delta flight.
Spirit (and other airlines) innovated and temporarily enjoyed a large market share of a second modality of commercial flight (very low budget travel). But it isn't (and wasn't, if you compare their operating margin over time [1]) a durable advantage.
The reason is there's very little preventing you and I from starting Soul Airlines, and copy-pasting the Spirit playbook. Many airlines have, and more will. And this drives their prices down, which is great for you but not for long-term Spirit investors.
At the end of the business cycle, the logical limit of their operating margin has proven to be functionally indistinguishable from Delta's.
I wish an airline would copy and paste the Ted playbook. Every seat was basically business class (on the flights I took) and you had the open seating model of Southwest. I only flew on a couple Ted flights and I don't know if my experience was standard but those were comfortable flights.
My guess is that it was less consistently profitable than a more typical cabin arrangement.
The reality is it's harder to fully book a plane like the one you describe, than one with a distribution of seats that more closely resembles the distribution of the commercial airline customer population, especially when you consider how to pass on the cost of spiky jet fuel to the people in the cabin.
On a plan with 8 business class seats, you can pass on most of that price to those 8, and you'll still fill the rest of the cabin and make money on the flight. With "only" 30 business class seats, it's a different story. Missing 6 seats might cause you to lose money.
Wikipedia says Ted folded in 2008, amid a spike in fuel prices.
Oh I'm sure Ted was only marginally profitable at best. A flight would have the same fixed costs as a traditionally laid out plane with fewer paying seats. Since the cost of the seats wasn't much higher than other airlines' economy class, there weren't many avenues for Ted to make a profit.
I am just lamenting the loss of an airline where I, being taller than the average human economy seating is optimized for, was actually comfortable for the whole flight. The only times I've been comfortable on a plane have been in exit rows or the small number of times I've splurged and flown first class.
Midwest Express (YX) tried this (a whole plane of quasi-first-class seats for only a little more $$$ than coach on other airlines) for a decade or two and couldn't make a go of it either. It was great while it lasted, though.
That is actually kind of Buffets point. Airlines are mostly undifferentiated businesses selling a commodity service, which creates a race to the bottom with low margins. In combination with being capital intensive, that makes it hard to turn a profit.
You picking a cheaper airline with worse margins does not mean that airlines are a good business
That quip also acts as a healthy reminder that money is a tool, not an end. At the end of the day what matters is building a world that works and enables us to live meaningful lives. Money in a world where things don’t work and don’t enable us to use our time in meaningful ways means nothing.
I had to take 1 semester of Accountancy. The problem sets were like - "Acme Corp had revenue of 23,000,000$, profit of 2,000,000$, cost of materials 5,000,000,$ cost of labor 12,000,000$, cost of inventory...."
Ultimately the problem boiled down to plain arithmetic. Just addition, subtraction. Hard problems involved multiplication.
After like the tenth problem I lost my patience & raised my hand - why don't you just do these problems with small numbers ? Like 23-(5+12+4) = 2 ? Why are you making us do 23,000,000 - (5,000,000 + 12,000,000 + 4,000,000) = 2,000,000 ?
The Professor said - Accountancy is arithmetic. With Big numbers. That's money for you.
Also growth is hard to manage. And GE power has multiple business lines ( nuclear, hydrogen, off-shore wind) that might be better investments and higher margins than onshore wind.
Offshore wind is turning out to be a lot easier to sell.
Unfortunately, the skills involved in deploying on land don't transfer very easily to sea work. Doing anything at sea is a specialty of its own. So, people with long sea experience will learn to put up wind turbines.
That was problematic too because the overriding goal with an oil platform is to get it pumping asap due to the high value of the product and size of costs already sunk.
A wind turbine (even an extremely large one) otoh is only earning $400/hr so if you spend a million dollars getting it up 3mo earlier you've made a loss.
Jack Welch got very rich and maintains a great reputation as a business leader despite destroying the company, and wrote a book to brag about it. "Getting away with it" is a key part of a juvenile power fantasy that motivates a lot of people, and at least one political party.
It boggles my mind that in MBA circles Welch is still considered "one of the greats". He took an innovative company and destroyed it with finance shenanigans. In a properly-functioning society he'd have been tarred and feathered, and business schools would use his name as a warning example of what not to do.
> It boggles my mind that in MBA circles Welch is still considered "one of the greats".
Why? It’s the MBA dream to make out like a bandit and leave a trail of despair and destruction in your trail: any joy left over is value you failed to extract.
I really think the story of Percy Miller (https://en.wikipedia.org/wiki/Master_P) should be taught in business schools. Dude started out as a street-level drug dealer, and ended up becoming one of the most successful recording industry execs ever. He once paid Michael Jackson's lawyer $25K just to have lunch with him, so he could learn. He's not without controversy, but honestly, I'd rather learn about a true rags-to-riches story than a story about a slash-and-burn corporate tycoon.
>He took an innovative company and destroyed it with finance shenanigans.
How many times have we seen this exact thing play out?
Xerox, Kodak, IBM, HP, etc.
Some of it is due to technological change, but even that isn't necessarily the problem but rather the company's response to it (failing to invest, focusing on financial engineering rather than innovation, asset stripping, enriching executives at the expense of everyone else, etc.) is.
If you want to kill an engineering org, out the MBAs in charge and reward them over a quarterly time span. Never fails.
What isn’t apparent, is that at most orgs you can get a short lived lift in revenue by burning a technical asset for pennies on the dollar. 10% more revenue by reducing quality 50%, but the reduction in quality lags the revenue bump by a couple quarters. You look amazing and then move on.
See also: private equity firms that specialize in finding a business that is currently struggling for one reason or another so they can buy it out and siphon off all of the equity and jump ship before the regular creditors catch up. Lots of safe money to be made by dismantling the work of generations.
A decade ago, the father of my kid's friend ran a PE firm and I'll never forget the day at lunch when he laughingly mocked how the lifelong employees of the large ($50M/y revenue) family business he was gutting were "whining" about having their healthcare plan cut (not scaled back -- just eliminated). Evil SOB.
tl;dr - He turned GE into a financial services company, destroyed the culture of engineering that had built it, and bumped up their stock price via financial engineering. After he left, it's been a slow, painful trip downwards.
Oh, and he fought hard against the EPA and scientists who said PCBs had bad health consequences so that GE could continue dumping them into the Hudson river and not have to pay for the cleanup until 30 years later (when he was long since retired).
Old boss golfed with him. Suddenly everyone was a 6-Sigma blackbelt, or assigned on a 6-Sigma track, even outside of manufacturing. That lasted like two whole years. Bad times.
The real problem with Welch is all his acolytes that spread his financial engineering to all kinds of other companies. It's like a metastasizing cancer.
I worked in a company that got bought by GE... was incredible how much waste and odd decisions were made. Felt like layers and layers of bureaucracy, and that their main reason for buying us was because they had billions offshore and didn't want to pay taxes to bring it back to USA.
Yes that is exactly what happened Welch came in started pushing the MBA way of doing things, pushed it throughout the entire industry, talked a big game. Tons of MBA programs were focused around the "GE Way" etc. It was when the Peter Principle, people are promoted to their level of incompetence, to the Dilbert Principle, idiots are promoted directly to keep them out of the productive flow.
The MBA ruined many things, it was scientific management brought back with a catchy name. Not creative enough to be in the artists? Lacking the intellectual discipline to become a real process engineer? It's okay you can become an MBA, learn no real skills, no real information and feel superior because then you can lord yourself over the serfs that decided to go into the silly practice of actually providing goods and services, when you can "manage" the people that actually contribute.
Note this shouldn't be taken as a tirade against management, there are good leaders out there that do make things better for those they lead, but my point is that an MBA is totally independent variable to whether or not someone will be a good manager. The problem is that an MBA basically trains people to see their work/world as a video game where they play with spreadsheets, choose the right dialogue options in the tree, and assign your workers to specific tasks, and then when the reality doesn't conform everything hits the fan.
I'll leave you to decide on the veracity of the claim, but he is suggesting that Welch invented the "MBA way of doing things", something that eventually made its way into MBA programs thanks to Welch pioneering it. So him being a chemical engineer by training isn't at odds with what is being suggested. After all, you can't go to school to learn about what you created yourself.
Unfortunately not. If the premise of the original comment is true, the comment I replied to doesn't work because Immelt would have become an MBA before Welch's "MBA way" made it into the MBA system, thus he wouldn't come from that school of thought. As the links in the other comment show, Immelt obtained his MBA around the same time Welch was just starting his leadership at GE, whereas the original comment suggested that Welch invented the "MBA way" while leading GE, and that eventually made its way into MBA programs.
It was a fun thought to ponder in a vacuum, but the real world has timelines.
> MBA basically trains people to see their work/world as a video game where they play with spreadsheets, choose the right dialogue options in the tree, and assign your workers to specific tasks, and then when the reality doesn't conform everything hits the fan
Accurate except the last part - when reality doesn't conform you come up with a 'transition plan' that involves you finding another group to run over a 3 month grace period while all the workers scramble with much less time than that
I interned at the GE Wind division in Greenville, South Carolina. It's under GE Energy, and it was a complete and utter disaster.
This was around 2005 and the entire GE Wind division was recently acquired from the Enron meltdown. Part of my job was to sort through a bunch of Enron manuals that had water damage sitting in the Tehachapi desert for 3 years in a warehouse. Surprisingly, the work done at Enron was quite good and bluebooks were really well done. They had already worked on a 5MW version of the turbine and had plans for 8MW. I'd say a third of it was water damaged and impossible to read. But, GE's management was a trainwreck happenning in slow motion beyond that. I worked a little bit with their Bangalore team that was working on wind turbine conceptual design framework. Essentially, GE's internal simulation tool for determining a whole bunch of design envelopes. There was little coordination between the US and Bangalore software team, often stepping on each other's toes. This program ended six months later after my internship. Basically, GE's wind turbine division at the time was Enron's zombie dressed up with nice clothes and trying to stand straight. Idk if things improved after that. I hated that internship so much, part of which was sifting through nasty boxes of molded design docs and then scanning them on a xerox machine.
I know several companies that flat-out refuse to sell components to them. Last I heard, their standard payment terms were net 90, and the word was that they would often overshoot this by another 90 days with smaller businesses. Not getting paid for half a year could easily bankrupt a small company.
I also work with companies that won't sell to GE (since the late 80s/early 90s) because of 1) ridiculous JIT bs with parts 2) extreme hoops to go through to get paid 3) just endless rigamarole at every step with them. It got so bad they switched to selling to Rolls Royce instead because it was easier (and if you know about working with Rolls..this should tell you how bad GE was)
IBM operated the same way back in the day (late 90's). I had a very modest ISV that sold a $5K custom device driver to IBM and it took me nearly a year to get paid. Everything was outsourced - even the accounts payable department.
20 years later in another life I did business with IBM as an enterprise customer. Same complete shitshow. Never again ...
What's a comparable example of an already huge, industry-spanning conglomerate American corporation of 1981 that's done better than GE over the past 40 years? IBM is probably the best "successful" comparison, but they were never as diverse as '80's GE.
That's a good one, but Berkshire had earnings of $40M in 1981[1]. I couldn't do better than the 1980 numbers for IBM ($3.5B)[2] and GE ($1.5B)[3] but safe to say in that era they dwarfed BH.
My point is that it would have been extremely difficult for any giant conglomerate adapted to the business environment of 1981 to transition successfully to the business environment of 2021 without changing nigh unrecognizably.
It is amazing how vertically integrated GM used to be - for a vehicle they made just about everything except the windshields, the paint, and the tires. They also made city buses, diesel locomotives, fractional HP electric motors, earth moving equipment, consumer kitchen products, and sold insurance. They even had their own university that awarded bachelors and masters degrees. All of that is long gone now.
My distilled belief is the finance guys managed to regain control of things from labor and manufacturing in the early 70's. After 1980 came the complete financialization of the American economy. Instead producing goods, services and jobs companies were pushed to create 'paper'.
That's why GE and GM both let the finance part of the business wag the dog.
GE is so big and diverse that the laws of thermodynamics apply. Some parts have local minima and others maxima, the entire company trending towards entropy, and no Maxwells demon in sight.
Theyve also either sold off divisions or license their names to other companies. GE doesnt make appliances anymore, Haier makes the product and slaps a GE logo on it.
Wasn't GE long ago taken over by MBA sociopaths that cooked books with financial shenanigans, and deemphasized all the actual productivity and technology?
IIRC then the house of cards collapsed right after Jack Welch and his management cult of personality retired?
Likely this is a "last gasp" financial bloodsuck to sell off what remains of the legitimate parts of the company.
The former VC / MBA who succeeded Jack Welch [1] is the one who discovered the cooked books and financial shenanigans. Welch was educated as a chemical engineer [2].
MBA programs just cargo cult whatever is appears to be working. They're like trend followers who just amplify whatever is already happening not trend setters.
There’s a lot of negativity here about MBAs. Perhaps some of this is merited, but I think MBA programs can be beneficial and aren’t as “cargo cult” as some commenters have suggested. I am a principal software engineer working on cloud projects, but decided to get a MBA in 2017. I learned a lot of valuable skills such as accounting, finance, negotiations, and HR that I had little to no exposure to in my undergraduate Computer Science program. Knowing how to read SEC filings and how to sell projects and ideas to executives has only helped me in my career. The MBA program I was in helped me get exposure to many business fundamentals. There’s a lot of negativity, but if you look at many MBA programs, most of them focus on the fundamentals.
The current CEO is doing a pretty good job, in my opinion. Has been very focused on fixing the debt situation and improving costs through process and manufacturing improvements rather than accounting non-sense. Comes off as very much a “manufacturing operations / kaizen” guy.
As posted elsewhere, the Danish government has almost no financial stake in Vestas.
If they did want to make Vestas their champion, they could make Ørsted, a global leader in offshore wind in which the government has a majority stake, buy Vestas turbines. As it is, Ørsted has historically only bought from Siemens and GE.
In reality, Vestas is based and rooted in Jutland “far” from the capitol.
Absolutely. The US unfortunately was too politically pigheaded to build manufacturing for solar and wind and continue to pay for it. Go thank your local GOP rep and global warming conspiracy theorist for handing out those jobs offshore.
The US shouldn't be subsidizing those jobs. What should be happening is that tariffs should be slapped on companies like Vestas that are basically government backed companies in order to even the playing field.
You get short-term subsidised infrastructure at the cost of cutting off all future local R&D and local manufacturing capacity. For a small country, this is probably worth it. For a global behemoth? Probably not. Like all things in life, there are trade-offs, and allowing the decimation of local capability on what should be of national concern (energy security) was short-sighted at best.
> While demand for clean energy options is rising as energy shortages continue to wreak havoc, analysts say it’s been difficult to make wind energy a cost-effective option. The recently passed Inflation Reduction Act does restore a tax credit for onshore wind, but some experts worry it came too late.
How many hours per day does a wind tower have to be working and during which lifetime to be able to pay up for all that steel, copper, aluminum, and a couple of rare earth metals, with their prices currently rising, and to offset the environmental impact of collecting and producing such materials?
Stuff like composites for the turbine blades don't have a clear recycling/resale story yet, although there have be recent attempts to grind them down and turn them into other useful things:
I don't know about the financial aspect, but there are many studies on the lifecycle emissions of a wind turbine that you can look up. How much CO2 a turbine offsets depends a lot on the grid it's connected to, so there's no single number for "time-to-carbon-negative".
However, remember that all power plants have materials, and wind has the second-lowest lifecycle emissions of all renewable technologies (https://www.nrel.gov/docs/fy21osti/80580.pdf), and of course is orders of magnitude better than non-renewables.
> to pay up for all that steel, copper, aluminum, and a couple of rare earth metals,
This sentence obfuscates that we're just talking about the dollar price here. Which is easily calculated
> offset the environmental impact of collecting and producing such materials?
Harder to decisively calculate but seems unlikely to be an actual issue; and trivial when compared to the opportunity cost of generating the same energy with fossil fuels.
"GE’s renewables segment is going to generate between $15 billion and $16 billion in revenue this year, and onshore wind will make up the vast majority, roughly 70%."
The returns are fine and growing, but GE is restructuring, and as the article points out, facing stiff competition and supply chain issues as well. Apparently they think losing 20% of their staff will help, and it doesn't necessarily have anything to do with how long it takes a new tower to become profitable.
The manufacturer (GE), and sometimes component manufacturers, the project lead/developer, financiers, insurers, the engineering lead, and sometimes specialists, the subcontractors who do the physical work. And probably more.
It's not uncommon for some of these to be financially stressed at times in PV. Not the financiers, though.
Jérôme Guillet has a series on financing offshore wind[1]. On-shore is along the same lines; I'm sure you can adjust.
People are trying build green power like crazy. But it's not like you can just create a power generation facility anywhere you want. It has to hook into the transmission system. Because this is somewhat hard to organize, you need a certain scale of investment to do it. You also of course need an area with enough wind and demand for the energy. And land you can use.
On shore wind is not as cost effective as solar or off shore wind either.
While this is true I‘d still like to see a source. Those numbers are hard to believe. I‘d guess it would take at least 5 years to recover $-costs, which is still good
Apologies my answer was not well stated. The less than one year referred to the energy payback period. The capital recoup time with some back of the envelope math would probably be more like 10 years.
Finland is having a boom, 70% increase in built wind power last year and 70% this year so far, and I checked the projects completed or completing this year. Most are Vestas and Nordex, some GE, and few outliers (Siemens, Eventus, Cypress one project each).
The payback period has been dropping over time and is now under a year, in some cases well under a year. This depends on many things including where it is placed, size of the tower and time of year.
Wind can compete favorably with solar on price when you have the right conditions, which are both starting to beat traditional sources of power. It is hitting the point where you would select either wind or solar for price, when ignoring the desire for stable output.
One current issue for wind power is what to do with the waste. The blades erode over time and need to be replaced, but mostly consists of fiberglass. It's not a huge problem, but each advancement in technology brings a new set of problems to be dealt with. Still, I'd rather deal with fiberglass than nuclear waste.
How long does a coal or natural gas plant have to be operating to offset the environmental impact of collecting and producing its construction materials?
Not just the plant, in the case of fossil fuels' physical environmental impact.
The wells, refining plant, and pipelines for gas, and the mines, railways, and ash disposal pits for coal. And the river intakes, detention ponds and so on needed for steam and cooling water.
I would imagine much less time than a huge power plant, with its much more steel, copper, aluminum, concrete, etc. Don't forget the extraction process for coal, gas, or clear cutting entire valleys to make damns.
You are comparing wind power to 'nothing'. You need to compare it to the alternatives.
The operative word here is onshore, for a variety of reasons, like the absence of road/tunnel/bridge permits, neighborhood Karen councils and local politicians, having to manage multiple lease arrangements, etc, etc.
I read an industry article mid-COVID that claimed the biggest barrier to offshore right now was the lack of ships to install them - alleviated somewhat by the introduction of floating offshore rigs, like these:
So yeah, it's gotta be way cheaper to drop a couple of those in the ocean than truck towers out to middle-of-nowheresville or digging a foundation at the bottom of the ocean or whatever.
Thanks for that X1Wind tetrahedron link - I saw a similar one recently that used a truncated pyramid construction, with the blades rotating between the front and back pairs of legs.
Interestingly with these size is not the be-all and end-all. If you make them so that they fit in the average port (towed by an average pair of tugs), the range of locations where they can be installed increases a lot. As does the availability of ships usable for the install.
> Meanwhile, General Electric is in the process of splitting into three publicly traded companies, focused on health care, aerospace and energy.
For some context, GE is kind of riches-to-rags story. Check out this chart of the share price:
https://www.tradingview.com/chart/?symbol=NYSE%3AGE
Here's a company whose stock is trading at 1994 levels. It never recovered from the "dot-com" crash of 2001. The dividend yield is nowhere close to a US treasury at any maturity. It's losing money left and right. A good chunk of that was the pivot, under Jack Welch's leadership, from actually making stuff into financial services, shedding hundreds of thousands of jobs along the way. GE was therefore well-placed for full-impact during the GFC.
What gets me is how Jack Welch was held up as an amazing businessman and model for corporate flexibility for years while his changes utterly destroyed GE's future for short-term gains. I'd argue the same thing about the Clinton administration and Greenspan specifically. There's got to be a better mechanism to force companies and countries to focus on long-term rather than short-term improvements.
> There's got to be a better mechanism to force companies and countries to focus on long-term rather than short-term improvements.
Unions with a board seat. Employee ownership. Shares in the hands of pragmatic investors who value long term over extraction and dumping the carcass on the next fool. People like Welch and characters like Gordon Gecko aren’t heroes, they’re cautionary tales, the Frank Underwoods (House of Cards) of finance and corporate management.
I'd say he was the original LinkedIn style Thought Leader CEO. His statements and performance was never critically analyzed by mainstream media when he was at top job for decades.
In case anyone thinks it is past now. There is army of nincompoops who idolize him even today.
Stack ranking was his baby, too.
Is that the same thing as 'rank and yank'?
Yes
Also known as playing double tennis against the people across the net along playing against the person besides you. Insane philosophy.
> I'd argue the same thing about the Clinton administration and Greenspan specifically.
I'm curious, what are the things that happened during the Clinton administration that you think were short-term gains at the expense of long-term improvements? I've always felt that many of the fiscal policies of Clinton were in favor of long-term stability (e.g. specifically his tax policies and balancing the budget).
Now, with monetary policy and Greenspan specifically, I 100% agree that the "Greenspan put" was absolutely a disaster for long-term stability, but Greenspan was in office from 1987 - 2006 (originally nominated by Reagan), so I see his choices as pretty orthogonal to whoever was president at the time.
Here is an interesting article outlining some specific Clinton-era laws that were an enormous help to private equity: https://prospect.org/economy/cut-off-private-equitys-money-s...
There used to be strict leverage restrictions on funds that raised money from investors, as well as limits on who/what entities could invest in the funds. The article really goes into more detail but lawmakers and the Clinton administration eliminated these laws and birthed the modern private equity industry which is pretty much the definition of short term focus.
Some people pin the repeal of Glass–Steagall (99) as a source of what happened in 08.
> fiscal policies of Clinton were in favor of long-term stability (e.g. specifically his tax policies and balancing the budget)
Of special note, the two BRAC rounds that were conducted under his presidency (93, 95), as well as one under H.W. Bush (91) and one under Reagan (88), substantially reduced the number of extraneous, pork barrel military bases across the US.
The 1988-2001 US defense budget decreases made a lot of hard and politically unpalatable choices that were fiscally responsible.
And since the US budget is ~15% DOD, that addressed a big chunk.
https://en.m.wikipedia.org/wiki/Base_Realignment_and_Closure
> I'm curious, what are the things that happened during the Clinton administration that you think were short-term gains at the expense of long-term improvements?
The dot com bubble forming and then popping is a notable one, Enron's fraudulent ascent is another.
> The dot com bubble forming and then popping is a notable one, Enron's fraudulent ascent is another.
While I agree with this, I interpreted the parent comment as saying there was something specific about the Clinton administration's policies that led to short term thinking. New technology boom and busts have been going on since the dawn of the Industrial Revolution (just look at early railroads and auto companies); the dot com bubble had nothing specifically to do with Clinton. Similarly, WTF did Enron have to do with the Clinton administration?
> the dot com bubble had nothing specifically to do with Clinton. Similarly, WTF did Enron have to do with the Clinton administration
Who is responsible for allowing these things to happen if not the President at the time? Sure, there are limitations to executive power but far more leeway in raising the alarm via the bully pulpit and plenty of scope for using the investigation and regulatory powers that did exist and it would have been a great opportunity for spending political capital to act or at least try. I’m not aware of any evidence of any of that being done and the notion that Clinton couldn’t have known or couldn’t have done anything at all about it is ridiculous. Therefore it’s the implicit Clinton policy of neglect or inaction which is where the culpability lies. I’m happy to be proven wrong and I’m not blaming Clinton alone or even primarily but he deserves plenty of blame nonetheless.
> Who is responsible for allowing these things to happen if not the President at the time?
The President is not God, or a king. People seem to be confused about the role and powers of the President in our system. What, exactly, do you wish the President had said on his bully pulpit about Enron??
I always find it bizarre that people blame the President for everything that happened on his watch, just as much as I think it bizarre that they give him all the credit. I mean, I generally think Clinton was a good president, but he also had much more than his fair share of luck in presiding during a booming economy (which would have boomed no matter who was president at that time).
> The President is not God, or a king.
Keeping Presidents accountable doesn't mean expecting Godlike powers.
> The dot com bubble forming and then popping is a notable one, Enron's fraudulent ascent is another.
Let's not forget WorldCom and Arthur Anderson, who later formed Deloitte if I'm not mistaken. We have them to thank in part for SOX and SOC audits as well as the PCAOB.
> There's got to be a better mechanism to force companies
I'd say the current version isn't terrible. Competition has lead to creative destruction. What would be real failure is GE sticking around with a bunch of moribund initiatives tying up skilled individuals and resources. Spinning out divisions is bad for GE shareholders (when the whole thing collapses) ... but I'm not sure it was actually bad for country, or for employees of new companies, or innovation in general.
Things sorta worked they way they are supposed to. Bad management decisions over time results in bankrupt companies and their resources being auctioned off to more efficient corporations.
@geodel posted Gates' review of "Lights Out: Pride, Delusion, and the Fall of General Electric" below:
https://news.ycombinator.com/item?id=33114049
Had a conversation with a financial professional just after Jack Welched announced his retirement.
The thinking was that GE was screwed. Welch had been in power too long and made too many changes. There was no obvious leader. And GE had very much become Jack Welch Inc.
At least they were less inclined to double speak; in Greenspan’s day they wrote about their goal to fuck the worker bees: https://www.nytimes.com/1997/02/27/business/job-insecurity-o...
Jack Welch was CEO of a different era. Remember when GE owned NBCUniversal? No? That was also under Welch. The WSJ lays some of the blame of GE's downfall at the feet of his successor, Jeff Immelt.
> GE’s precipitous fall, following years of treading water while the overall economy grew, was exacerbated, some insiders say, by what they call “success theater.” Mr. Immelt and his top deputies projected an optimism about GE’s business and its future that didn’t always match the reality of its operations or its markets, according to more than a dozen current and former executives, investors and people close to the company. [0]
Jack Welch didn't always make great decisions -- diversifying away from GE's core businesses into financial markets, media, etc. His last act of trying to acquire Honeywell failed. But it was Immelt who brought the company down. Immelt grew GE Capital from 40 to 55% of the company at the onset of the Great Recession, took government bailout money when it tanked, then divested it from the company when it was clearly a drag on profitability. He championed GE Digital which never materialized, and then made big bets on conventional energy just when renewables were taking off. I don't know if it could have been different in someone else's hands. But a little more truth-telling would probably have helped. Welch did think that appointing Immelt was his "biggest mistake" [1].
[0] https://www.wsj.com/articles/how-jeffrey-immelts-success-the...
[1] https://finance.yahoo.com/news/jack-welch-one-regret-general...
> Welch did think that appointing Immelt was his "biggest mistake"
It is because Jeff did not (or not allowed) to continue with scammy accounting practices encouraged by Jack Welch to keep stock price and earning per share high.
> Jack Welch didn't always make great decisions
Big, if true.
So basically Six Sigma will now be split into 3 Two Sigmas
There was a recent book about Jack Welch : The Man Who Broke Capitalism: How Jack Welch Gutted the Heartland and Crushed the Soul of Corporate America—and How to Undo His Legacy
https://www.goodreads.com/book/show/59366216-the-man-who-bro...
Thank you. I will not miss to read this one. Last year I read https://www.gatesnotes.com/Books/Lights-Out
One of my favorite radio shows / podcasts (Fresh Air) interviewed the author of "The Man Who Broke Capitalism" back in June: https://www.npr.org/2022/05/31/1102165413/did-jack-welch-bre...
Factoid: Of the ten largest companies in America before the Great Depression, only GE was still in business after the Depression.
A quick google search tells me this is false. Everyone of of those companies was certainly in business after the depression, most are today
Company 1929 Revenues
Standard Oil (New Jersey) $1,523 (SO NJ > Exxon > merged with Mobil Oil to form ExxonMobil)
General Motors $1,504 (Reorganized in 2008, Still in Business)
Ford Motor $1,143 (Privately held until 50's Still in Business)
US Steel $1,097 (Still in Business)
Great Atlantic & Pacific Tea $1,054 (Out of Business 2015)
Swift & Co. $1,000 (Still in Business, Acquired by JBS SA in 2017 to form JBS USA)
Armour & Co. $1,000 (Bought by Greyhound in 1970, divested many ways, impractical to explain without a diagram - probably counts as out of business)
Standard Oil (Indiana) $495 (Amoco > Acquired by BP)
Sears, Roebuck $444 (Alive? maybe a zombie business)
General Electric $415
[Factoid] was coined in 1973 by American writer Norman Mailer to mean a piece of information that becomes accepted as a fact even though it is not actually true, or an invented fact believed to be true because it appears in print.[0]
[0] https://en.wikipedia.org/wiki/Factoid
I guess he used it correctly ;-)
Seems dubious based on this: https://history.stackexchange.com/questions/58635/what-were-...
One thing to think about when reading news like this (which is something I learned through the first solar boom): While counterintuitive, it can at the same time be true that a technology is booming and companies building that technology are struggling.
It's not that surprising once you think about it: Booming technologies means more companies enter the market. Some will be able to produce cheaper or better products than what's already there. If the old ones can't adapt they'll struggle.
I would say in climate tech it's a bit different. Yes companies can be suffering but typically for any of these energy technology companies they have significant manufacturing costs and long periods in which they have to deploy that capital to physically manufacture goods. It isn't necessarily the competition that sinks the companies its the market structure and timing.
In the case of solar what happened was that the Chinese government underwrote Chinese manufacturers who produced significant volumes of solar panels which they dumped on the global market for incredibly cheap prices which put pressure on all the other global manufactures and consolidated the market. That said a lot of the Chinese manufacturers also went bankrupt as they undercut each other on prices to fill out the manufacturer queue.
Also in energy tech you don't have infinite upside like technology -- as you deploy hard capital you have a finite range that you can get returns on. In the electricity markets you typically have to build technology and sell it for cheaper than what is currently available (i.e. project finance your project on a PPA < market rates). Already a fundamentally difficult structure to do well in - add in regulatory slowdown, political mandates, utilities as your clients (slow lead times).
this does not translate well to an industry like wind energy where there are multiple moving parts, literally and metaphorically.
the solar industry is literally zero moving parts. Panels and inverters are off-the-shelf commodities that are in a race to the bottom for price. this is further helped by the fact that they are largely interchangeable.
Wind turbines do not function like this and they are complicated, dynamic systems requiring continuous monitoring and regular maintenance.
The reality here is that the wind energy industry is and will continue to see a boom and order books are often full years into the future. Despite the headlines, onshore wind isn't going anywhere because there are many regions around the world where offshore wind does not work well.
Offshore wind is being hyped up by Europe - coincidentally, a region with relatively shallow seas and limited land area. Despite the boom, there are not that many manufacturers of wind turbines precisely because it is a capital intensive industry. This is not good news.
Warren Buffet has some quote on capital intensive industries like you say.
"The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money. Think airlines. Here a durable competitive advantage has proven elusive ever since the days of the Wright Brothers. Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down." [1]
The last sentence is a sarcastic quip, for those who aren't familiar with his personality.
[1]: warning, pdf link: https://www.berkshirehathaway.com/letters/2007ltr.pdf
I don’t think he’s particularly concerned with capital. It’s the lack of competitive advantage that is key. Insurance (the classic financial services industry that is Buffet’s life blood) is one of the most capital intensive industries.
Airlines lack substantial economies of scale, customer captivity, captive supply, or regulatory protections. The airline industry is a textbook case of an industry with no durable competitive advantages, thus the only performance factor is operational efficiency.
Insurance on the other hand, there are substantial economies of scale (large fixed costs and also larger insurance companies are more diversified thus less costly/risky) and high customer captivity (high switching cost, high search cost).
You're right! I was lazy with my words, it's definitely the durability that he's concerned with. The word durable, from the quote, is even emphasized in the original text.
Airlines have huge economies of scale due to network effects. Most customers will only buy a ticket if they can reach their final destination on a single airline with only one (or at most two) transfers. Code share agreements with partner airlines only partly mitigate this.
The other major factor which prevents airlines from ever sustaining high profits is pilot unions. The pilots will demand most of the extra profits, and usually get it because a strike instantly shuts down the entire airline.
Pilot unions have gotten the shit kicked out of them for years. 1970 wants its argument back.
Tickets are fungible and people will make insane choices to save a dollar. The constrained resource is gates. The network effects that make big airlines viable are expensive, so without regulation there’s always upstarts who drive the price as low as possible. That’s why Emirates is fancy.
If you live near NYC, there is an airport in Newburg that attracts weird financial engineering airlines that leverage leases to fly international cheaply. When I saw Hamilton, I flew Norwegian airlines from NY to London for $24. The long term parking cost more.
It’s an industry where the low barrier to entry ensures that the industry as a whole is barely profitable.
Economies of Scale and Network Effects are distinct business powers.
"Network Effects" means the Nth person doing business with the company generates more value for the business's service to everyone else, all else equal. I don't think airlines have network effects. There isn't much benefit to flying a highly-trafficked airline vs a lower-trafficked airline, provided they have the same routes. (If anything, this might be marginally inversely correlated? Small airlines seem to have a better experience than the big ones)
"Economies of Scale" means that cost of goods sold becomes a lower percentage of revenue as revenue grows. This doesn't hold true for airlines, because jet fuel & taxes thereon, and leasing gate space make up the biggest fixed costs IIRC. Bigger airlines don't have a lot of negotiating edge vs small ones, here. Plus, big airlines have an exponential logistical problem to solve, which is costlier to solve "at scale". Thus, profit scales basically linearly (some might argue sub-linearly) with revenue.
There are indeed regional economies of scale for those airlines that invest in monopolizing growing transit hubs. Virgin Airlines and Southwest built their businesses on them, and are well-studied examples. But they are not durable over a long enough time horizon, and don't "scale" up to bigger footprints.
Airlines "own" far too little of their costs, and startup cost is far too low, for them to be durable and large business.
The dynamic is terrible for value investors like BRK, but arguably quite great for consumers (fliers). And not too shabby for early-stage investors, either.
Having a higher route coverage is a function of size absolutely. However, it is definitely not a significant competitive advantage. Economies of scale is applicable in absolute and relative terms.
Airline A can have 100% coverage everywhere in the world and be the largest airline. But if Airline B enters a specific route, there is no advantage to a customer whether they ride with A or B for that specific route. This is why there are so many entrants into the industry.
The biggest factor to the lack of durable profits in the airline industry isn’t labor or unions. It’s the ease of entry into the market which puts tremendous pressure on price. There are no substantial barriers to entry, prices go down until profits are close to zero. So in classical value based investment lingo, it is an industry with no competitive advantages.
The airlines industry in aggregate has never had a ROIC greater than its cost of capital over the long term (>1 yr) for the lifetime of the industry.
There were attempts to introduce artificial scarcity with loyalty programs. I used to be a more frequent flyer and still fly enough that I will pay a premium (up to a point) to get the benefits - upgrades and free-personal travel. Locking in business-traveler loyalty has long been a key to profitability in airlines.
I think our definition of profits are different. You’re referring to financial profits, ie earnings. Yes loyalty programs increase customer captivity and can enable market leaders to make marginal financial profits through some periods.
However, for investors, we care about profits from capital deployment, or returns from invested capital minus cost of capital. The marginal earnings that leading airlines generate from loyalty programs and business traveler accounts do not make up for the huge demand for capital, thus insufficient to break even the cost of capital.
I think thats starting to tip. I fly spirit now, because is usually a couple hundred cheaper than delta et al and offers me the same exact service short of the 30 cent biscuit and 70 cent can of coke given out on the delta flight.
It's true that Spirit has competed well recently.
Spirit (and other airlines) innovated and temporarily enjoyed a large market share of a second modality of commercial flight (very low budget travel). But it isn't (and wasn't, if you compare their operating margin over time [1]) a durable advantage.
The reason is there's very little preventing you and I from starting Soul Airlines, and copy-pasting the Spirit playbook. Many airlines have, and more will. And this drives their prices down, which is great for you but not for long-term Spirit investors.
At the end of the business cycle, the logical limit of their operating margin has proven to be functionally indistinguishable from Delta's.
[1]: https://www.macrotrends.net/stocks/stock-comparison?s=operat...
I wish an airline would copy and paste the Ted playbook. Every seat was basically business class (on the flights I took) and you had the open seating model of Southwest. I only flew on a couple Ted flights and I don't know if my experience was standard but those were comfortable flights.
My guess is that it was less consistently profitable than a more typical cabin arrangement.
The reality is it's harder to fully book a plane like the one you describe, than one with a distribution of seats that more closely resembles the distribution of the commercial airline customer population, especially when you consider how to pass on the cost of spiky jet fuel to the people in the cabin.
On a plan with 8 business class seats, you can pass on most of that price to those 8, and you'll still fill the rest of the cabin and make money on the flight. With "only" 30 business class seats, it's a different story. Missing 6 seats might cause you to lose money.
Wikipedia says Ted folded in 2008, amid a spike in fuel prices.
Oh I'm sure Ted was only marginally profitable at best. A flight would have the same fixed costs as a traditionally laid out plane with fewer paying seats. Since the cost of the seats wasn't much higher than other airlines' economy class, there weren't many avenues for Ted to make a profit.
I am just lamenting the loss of an airline where I, being taller than the average human economy seating is optimized for, was actually comfortable for the whole flight. The only times I've been comfortable on a plane have been in exit rows or the small number of times I've splurged and flown first class.
Midwest Express (YX) tried this (a whole plane of quasi-first-class seats for only a little more $$$ than coach on other airlines) for a decade or two and couldn't make a go of it either. It was great while it lasted, though.
That is actually kind of Buffets point. Airlines are mostly undifferentiated businesses selling a commodity service, which creates a race to the bottom with low margins. In combination with being capital intensive, that makes it hard to turn a profit.
You picking a cheaper airline with worse margins does not mean that airlines are a good business
How does any of that make Spirit a good business?
Lots of companies provide valuable services, yet are crappy businesses from a FCF standpoint.
How is it starting to tip? Spirit Airlines stock is down 40% the last 5 years while the overall US market is up 40%.
That quip also acts as a healthy reminder that money is a tool, not an end. At the end of the day what matters is building a world that works and enables us to live meaningful lives. Money in a world where things don’t work and don’t enable us to use our time in meaningful ways means nothing.
I had to take 1 semester of Accountancy. The problem sets were like - "Acme Corp had revenue of 23,000,000$, profit of 2,000,000$, cost of materials 5,000,000,$ cost of labor 12,000,000$, cost of inventory...."
Ultimately the problem boiled down to plain arithmetic. Just addition, subtraction. Hard problems involved multiplication.
After like the tenth problem I lost my patience & raised my hand - why don't you just do these problems with small numbers ? Like 23-(5+12+4) = 2 ? Why are you making us do 23,000,000 - (5,000,000 + 12,000,000 + 4,000,000) = 2,000,000 ?
The Professor said - Accountancy is arithmetic. With Big numbers. That's money for you.
Absolutely - it's just an abstraction layer over the idea of exchange. If there's nothing to exchange, there's no need for money!
Also growth is hard to manage. And GE power has multiple business lines ( nuclear, hydrogen, off-shore wind) that might be better investments and higher margins than onshore wind.
Disruption creates winners and losers.
Offshore wind is turning out to be a lot easier to sell.
Unfortunately, the skills involved in deploying on land don't transfer very easily to sea work. Doing anything at sea is a specialty of its own. So, people with long sea experience will learn to put up wind turbines.
I read somewhere that companies who build platforms for oil rigs were getting into it since they already have the necessary expertise.
That was problematic too because the overriding goal with an oil platform is to get it pumping asap due to the high value of the product and size of costs already sunk.
A wind turbine (even an extremely large one) otoh is only earning $400/hr so if you spend a million dollars getting it up 3mo earlier you've made a loss.
I'm sure some have adapted though.
Labor is adaptable, management less so.
Jack Welch destroyed the company and wrote a book to brag about it.
Jack Welch got very rich and maintains a great reputation as a business leader despite destroying the company, and wrote a book to brag about it. "Getting away with it" is a key part of a juvenile power fantasy that motivates a lot of people, and at least one political party.
It boggles my mind that in MBA circles Welch is still considered "one of the greats". He took an innovative company and destroyed it with finance shenanigans. In a properly-functioning society he'd have been tarred and feathered, and business schools would use his name as a warning example of what not to do.
> It boggles my mind that in MBA circles Welch is still considered "one of the greats".
Why? It’s the MBA dream to make out like a bandit and leave a trail of despair and destruction in your trail: any joy left over is value you failed to extract.
> any joy left over is value you failed to extract
One of the greatest lines ever
I really think the story of Percy Miller (https://en.wikipedia.org/wiki/Master_P) should be taught in business schools. Dude started out as a street-level drug dealer, and ended up becoming one of the most successful recording industry execs ever. He once paid Michael Jackson's lawyer $25K just to have lunch with him, so he could learn. He's not without controversy, but honestly, I'd rather learn about a true rags-to-riches story than a story about a slash-and-burn corporate tycoon.
Why not both?
>He took an innovative company and destroyed it with finance shenanigans.
How many times have we seen this exact thing play out?
Xerox, Kodak, IBM, HP, etc.
Some of it is due to technological change, but even that isn't necessarily the problem but rather the company's response to it (failing to invest, focusing on financial engineering rather than innovation, asset stripping, enriching executives at the expense of everyone else, etc.) is.
Boeing.
If you want to kill an engineering org, out the MBAs in charge and reward them over a quarterly time span. Never fails.
What isn’t apparent, is that at most orgs you can get a short lived lift in revenue by burning a technical asset for pennies on the dollar. 10% more revenue by reducing quality 50%, but the reduction in quality lags the revenue bump by a couple quarters. You look amazing and then move on.
Oh man really? I liked this guy so much I got a book signed by him in early 2000s. Where can I read more
https://globalpi.org/research/how-jack-welch-destroyed-sloan...
https://www.ft.com/content/3f1ac0e6-f204-478d-8b64-54a699a12...
https://www.npr.org/2022/06/01/1101505691/short-term-profits...
https://www.axios.com/2022/05/31/jack-welchs-questionable-le...
https://www.simonandschuster.com/books/The-Man-Who-Broke-Cap...
Turns out that if you hollow out a giant company you can turn out huge profits and it takes awhile for the corpse to fall.
See also: private equity firms that specialize in finding a business that is currently struggling for one reason or another so they can buy it out and siphon off all of the equity and jump ship before the regular creditors catch up. Lots of safe money to be made by dismantling the work of generations.
A decade ago, the father of my kid's friend ran a PE firm and I'll never forget the day at lunch when he laughingly mocked how the lifelong employees of the large ($50M/y revenue) family business he was gutting were "whining" about having their healthcare plan cut (not scaled back -- just eliminated). Evil SOB.
You can always check his Wikipedia page, where the "Criticism" section is longer than the "CEO" section.
tl;dr - He turned GE into a financial services company, destroyed the culture of engineering that had built it, and bumped up their stock price via financial engineering. After he left, it's been a slow, painful trip downwards.
Oh, and he fought hard against the EPA and scientists who said PCBs had bad health consequences so that GE could continue dumping them into the Hudson river and not have to pay for the cleanup until 30 years later (when he was long since retired).
Old boss golfed with him. Suddenly everyone was a 6-Sigma blackbelt, or assigned on a 6-Sigma track, even outside of manufacturing. That lasted like two whole years. Bad times.
Jack Welch is evil incarnate. He ought to be universally condemned for moral bankruptcy.
Worse than Al "Chainsaw" Dunlap? I think it's neck and neck.
The real problem with Welch is all his acolytes that spread his financial engineering to all kinds of other companies. It's like a metastasizing cancer.
Did Al Dunlap leave a massive gap in tons of pension funds?
I'd say NBCUniversally.
I worked in a company that got bought by GE... was incredible how much waste and odd decisions were made. Felt like layers and layers of bureaucracy, and that their main reason for buying us was because they had billions offshore and didn't want to pay taxes to bring it back to USA.
My faith in anything they do is very low.
When did GE fuck up so royally? They seemed to be cutting edge in all their sub-parts, and now they are subpar everywhere. Did the MBAs take over?
Yes that is exactly what happened Welch came in started pushing the MBA way of doing things, pushed it throughout the entire industry, talked a big game. Tons of MBA programs were focused around the "GE Way" etc. It was when the Peter Principle, people are promoted to their level of incompetence, to the Dilbert Principle, idiots are promoted directly to keep them out of the productive flow.
The MBA ruined many things, it was scientific management brought back with a catchy name. Not creative enough to be in the artists? Lacking the intellectual discipline to become a real process engineer? It's okay you can become an MBA, learn no real skills, no real information and feel superior because then you can lord yourself over the serfs that decided to go into the silly practice of actually providing goods and services, when you can "manage" the people that actually contribute.
Note this shouldn't be taken as a tirade against management, there are good leaders out there that do make things better for those they lead, but my point is that an MBA is totally independent variable to whether or not someone will be a good manager. The problem is that an MBA basically trains people to see their work/world as a video game where they play with spreadsheets, choose the right dialogue options in the tree, and assign your workers to specific tasks, and then when the reality doesn't conform everything hits the fan.
> pushing the MBA way of doing things
This is a bad, if commonly-made, attribution [1].
[1] https://news.ycombinator.com/item?id=33111247
I'll leave you to decide on the veracity of the claim, but he is suggesting that Welch invented the "MBA way of doing things", something that eventually made its way into MBA programs thanks to Welch pioneering it. So him being a chemical engineer by training isn't at odds with what is being suggested. After all, you can't go to school to learn about what you created yourself.
It’s a nice counter argument but the comment you’re replying to is essentially a slam-dunk on this entire MBA discussion.
Confirmation bias truly is a juggernaut.
Unfortunately not. If the premise of the original comment is true, the comment I replied to doesn't work because Immelt would have become an MBA before Welch's "MBA way" made it into the MBA system, thus he wouldn't come from that school of thought. As the links in the other comment show, Immelt obtained his MBA around the same time Welch was just starting his leadership at GE, whereas the original comment suggested that Welch invented the "MBA way" while leading GE, and that eventually made its way into MBA programs.
It was a fun thought to ponder in a vacuum, but the real world has timelines.
> MBA basically trains people to see their work/world as a video game where they play with spreadsheets, choose the right dialogue options in the tree, and assign your workers to specific tasks, and then when the reality doesn't conform everything hits the fan
Accurate except the last part - when reality doesn't conform you come up with a 'transition plan' that involves you finding another group to run over a 3 month grace period while all the workers scramble with much less time than that
Out of curiosity, how would you define the role of a “real process engineer” and how is it fundamentally different?
I interned at the GE Wind division in Greenville, South Carolina. It's under GE Energy, and it was a complete and utter disaster.
This was around 2005 and the entire GE Wind division was recently acquired from the Enron meltdown. Part of my job was to sort through a bunch of Enron manuals that had water damage sitting in the Tehachapi desert for 3 years in a warehouse. Surprisingly, the work done at Enron was quite good and bluebooks were really well done. They had already worked on a 5MW version of the turbine and had plans for 8MW. I'd say a third of it was water damaged and impossible to read. But, GE's management was a trainwreck happenning in slow motion beyond that. I worked a little bit with their Bangalore team that was working on wind turbine conceptual design framework. Essentially, GE's internal simulation tool for determining a whole bunch of design envelopes. There was little coordination between the US and Bangalore software team, often stepping on each other's toes. This program ended six months later after my internship. Basically, GE's wind turbine division at the time was Enron's zombie dressed up with nice clothes and trying to stand straight. Idk if things improved after that. I hated that internship so much, part of which was sifting through nasty boxes of molded design docs and then scanning them on a xerox machine.
I know several companies that flat-out refuse to sell components to them. Last I heard, their standard payment terms were net 90, and the word was that they would often overshoot this by another 90 days with smaller businesses. Not getting paid for half a year could easily bankrupt a small company.
I also work with companies that won't sell to GE (since the late 80s/early 90s) because of 1) ridiculous JIT bs with parts 2) extreme hoops to go through to get paid 3) just endless rigamarole at every step with them. It got so bad they switched to selling to Rolls Royce instead because it was easier (and if you know about working with Rolls..this should tell you how bad GE was)
Turbine engine parts, I assume?
Yup, and aircraft engine parts
IBM operated the same way back in the day (late 90's). I had a very modest ISV that sold a $5K custom device driver to IBM and it took me nearly a year to get paid. Everything was outsourced - even the accounts payable department.
20 years later in another life I did business with IBM as an enterprise customer. Same complete shitshow. Never again ...
I negotiated GE from net-75 to net-30 (what our other clients paid us) and got so much hate for it.
"[The fall of GE] arguably begins with the arrival of the legendary Jack Welch as CEO in 1981."
Ref: "The fall of GE" https://theweek.com/articles/761357/fall-ge (2018)
What's a comparable example of an already huge, industry-spanning conglomerate American corporation of 1981 that's done better than GE over the past 40 years? IBM is probably the best "successful" comparison, but they were never as diverse as '80's GE.
Rockwell peaked at a similar time frame & then exploded into a 1000 tiny pieces:
https://en.wikipedia.org/wiki/Rockwell_International#Apex_an...
Some are in fact successful companies to this day.
Berkshire Hathaway
That's a good one, but Berkshire had earnings of $40M in 1981[1]. I couldn't do better than the 1980 numbers for IBM ($3.5B)[2] and GE ($1.5B)[3] but safe to say in that era they dwarfed BH.
My point is that it would have been extremely difficult for any giant conglomerate adapted to the business environment of 1981 to transition successfully to the business environment of 2021 without changing nigh unrecognizably.
[1] https://www.berkshirehathaway.com/letters/1981.html
[2] https://www.upi.com/Archives/1981/01/16/IBM-reports-sharply-...
[3] https://www.nytimes.com/1981/01/23/business/ge-had-small-gai...
General Motors became a finance company that sold cars on the side.
It is amazing how vertically integrated GM used to be - for a vehicle they made just about everything except the windshields, the paint, and the tires. They also made city buses, diesel locomotives, fractional HP electric motors, earth moving equipment, consumer kitchen products, and sold insurance. They even had their own university that awarded bachelors and masters degrees. All of that is long gone now.
Also nuclear reactors and the uranium fuel rod assemblies those required.
My distilled belief is the finance guys managed to regain control of things from labor and manufacturing in the early 70's. After 1980 came the complete financialization of the American economy. Instead producing goods, services and jobs companies were pushed to create 'paper'.
That's why GE and GM both let the finance part of the business wag the dog.
In other areas GE is not doing so badly: for example, it will be the engine supplier for the joint European UAV Eurodrone. [0]
[0] https://www.defensenews.com/global/europe/2022/03/25/us-owne...
GE is so big and diverse that the laws of thermodynamics apply. Some parts have local minima and others maxima, the entire company trending towards entropy, and no Maxwells demon in sight.
When foreign electronic companies came in, same goes for RCA.
>GE is also in the process of splitting into three publicly traded companies, focused on health care, aerospace and energy.
First I have heard of this!
Theyve also either sold off divisions or license their names to other companies. GE doesnt make appliances anymore, Haier makes the product and slaps a GE logo on it.
Wasn't GE long ago taken over by MBA sociopaths that cooked books with financial shenanigans, and deemphasized all the actual productivity and technology?
IIRC then the house of cards collapsed right after Jack Welch and his management cult of personality retired?
Likely this is a "last gasp" financial bloodsuck to sell off what remains of the legitimate parts of the company.
> by MBA sociopaths
The former VC / MBA who succeeded Jack Welch [1] is the one who discovered the cooked books and financial shenanigans. Welch was educated as a chemical engineer [2].
[1] https://en.wikipedia.org/wiki/Jeff_Immelt
[2] https://en.wikipedia.org/wiki/Jack_Welch#Early_life_and_educ...
Yes. The problem is not MBAs, the problem is management incentives and shareholder incentives.
Because MBAs are morally and ethically rudderless sociopaths that only align to personal financial incentives and don't have any real integrity?
Unless you're trying to say that there were NO MBAs under Jack Welch's management team and organization?
MBAs are absolutely the problem.
MBA programs just cargo cult whatever is appears to be working. They're like trend followers who just amplify whatever is already happening not trend setters.
There’s a lot of negativity here about MBAs. Perhaps some of this is merited, but I think MBA programs can be beneficial and aren’t as “cargo cult” as some commenters have suggested. I am a principal software engineer working on cloud projects, but decided to get a MBA in 2017. I learned a lot of valuable skills such as accounting, finance, negotiations, and HR that I had little to no exposure to in my undergraduate Computer Science program. Knowing how to read SEC filings and how to sell projects and ideas to executives has only helped me in my career. The MBA program I was in helped me get exposure to many business fundamentals. There’s a lot of negativity, but if you look at many MBA programs, most of them focus on the fundamentals.
Two wrongs make it right?
The current CEO is doing a pretty good job, in my opinion. Has been very focused on fixing the debt situation and improving costs through process and manufacturing improvements rather than accounting non-sense. Comes off as very much a “manufacturing operations / kaizen” guy.
Sounds like GE is being taken to task by Vestas which is essentially a government backed private company.
Vestas is a public company and the Danish government isn't even in the top 10 shareholders...
https://m.marketscreener.com/quote/stock/VESTAS-WIND-SYSTEMS...
As posted elsewhere, the Danish government has almost no financial stake in Vestas.
If they did want to make Vestas their champion, they could make Ørsted, a global leader in offshore wind in which the government has a majority stake, buy Vestas turbines. As it is, Ørsted has historically only bought from Siemens and GE.
In reality, Vestas is based and rooted in Jutland “far” from the capitol.
The Danish government I assume?
Same thing happened in solar, so I'm not entirely sure why anyone is surprised by this?
You can't compete against a nation state. Best you can do is have nation states agree to let you in on the action.
Absolutely. The US unfortunately was too politically pigheaded to build manufacturing for solar and wind and continue to pay for it. Go thank your local GOP rep and global warming conspiracy theorist for handing out those jobs offshore.
It's heartbreaking that alternative energy has been so horribly politicized -- we all win with its success.
The US shouldn't be subsidizing those jobs. What should be happening is that tariffs should be slapped on companies like Vestas that are basically government backed companies in order to even the playing field.
Vestas is not a government backed company, see my other comment.
Go look at public policy in denmark to support vestas.
If there is public policy support, it needs to exist for all manufacturers. Otherwise it's not legal in the EU.
Why? If the Danish taxpayer is going to subsidize my country's wind infrastructure, why should I stop them?
You get short-term subsidised infrastructure at the cost of cutting off all future local R&D and local manufacturing capacity. For a small country, this is probably worth it. For a global behemoth? Probably not. Like all things in life, there are trade-offs, and allowing the decimation of local capability on what should be of national concern (energy security) was short-sighted at best.
> While demand for clean energy options is rising as energy shortages continue to wreak havoc, analysts say it’s been difficult to make wind energy a cost-effective option. The recently passed Inflation Reduction Act does restore a tax credit for onshore wind, but some experts worry it came too late.
The cost effective struggle is largely against solar and off shore wind fwiw. Clean energy is booming.
How many hours per day does a wind tower have to be working and during which lifetime to be able to pay up for all that steel, copper, aluminum, and a couple of rare earth metals, with their prices currently rising, and to offset the environmental impact of collecting and producing such materials?
Is their a study that answers these questions?
> How many hours per day does a wind tower have to be working
You are asking about the capacity factor, but that's governed more by when wind is available, and is about 40-50% for onshore wind.
> and during which lifetime to be able to pay up
This is the payback time and there are several to consider.
For the embodied greenhouse gases of the wind turbine, about 5.3 months on average: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6686152/
> for all that steel, copper, aluminum, and a couple of rare earth metals
About 6-7 years for the economic payback of capital costs (not counting the unaccounted avoided $ externalities of displaced fossil fuels).
https://www.semprius.com/how-long-does-it-take-a-wind-turbin...
Turbines last about 20 years.
>> all that steel, copper, aluminum, and a couple of rare earth metals
> About 6-7 years for the economic payback of capital costs (not counting the unaccounted avoided $ externalities of displaced fossil fuels).
Presumably, all that steal and other material is still around in 20 years to be resold?
How much do materials like these depreciate over 20 years? I'd guess in REAL terms not even 50%.
> How much do materials like these depreciate over 20 years? I'd guess in REAL terms not even 50%.
Historically (since 1975) metals have appreciated about 5x after inflation. Here is the 50 year price of scrap steel futures:
https://www.investing.com/commodities/steel-scrap-historical...
Stuff like composites for the turbine blades don't have a clear recycling/resale story yet, although there have be recent attempts to grind them down and turn them into other useful things:
https://cen.acs.org/environment/recycling/companies-recycle-....
If you are honestly interested in an answer (which I doubt) here are some studies linked for the carbon impact payback: https://www.newscientist.com/lastword/mg24332461-400-what-is...
It's around 6 to 9 months.
Thank you for the link.
I don't know about the financial aspect, but there are many studies on the lifecycle emissions of a wind turbine that you can look up. How much CO2 a turbine offsets depends a lot on the grid it's connected to, so there's no single number for "time-to-carbon-negative".
However, remember that all power plants have materials, and wind has the second-lowest lifecycle emissions of all renewable technologies (https://www.nrel.gov/docs/fy21osti/80580.pdf), and of course is orders of magnitude better than non-renewables.
Typically less than one year.
> to pay up for all that steel, copper, aluminum, and a couple of rare earth metals,
This sentence obfuscates that we're just talking about the dollar price here. Which is easily calculated
> offset the environmental impact of collecting and producing such materials?
Harder to decisively calculate but seems unlikely to be an actual issue; and trivial when compared to the opportunity cost of generating the same energy with fossil fuels.
One year? With ROCE like that these things would be build everywhere and GE wouldn‘t downsize. Do you have a source for those numbers?
> GE wouldn't downsize.
"GE’s renewables segment is going to generate between $15 billion and $16 billion in revenue this year, and onshore wind will make up the vast majority, roughly 70%."
The returns are fine and growing, but GE is restructuring, and as the article points out, facing stiff competition and supply chain issues as well. Apparently they think losing 20% of their staff will help, and it doesn't necessarily have anything to do with how long it takes a new tower to become profitable.
> With ROCE like that
There are several businesses in the chain.
The manufacturer (GE), and sometimes component manufacturers, the project lead/developer, financiers, insurers, the engineering lead, and sometimes specialists, the subcontractors who do the physical work. And probably more.
It's not uncommon for some of these to be financially stressed at times in PV. Not the financiers, though.
Jérôme Guillet has a series on financing offshore wind[1]. On-shore is along the same lines; I'm sure you can adjust.
1.https://wfo-global.org/financing-offshore-wind-part-1/
People are trying build green power like crazy. But it's not like you can just create a power generation facility anywhere you want. It has to hook into the transmission system. Because this is somewhat hard to organize, you need a certain scale of investment to do it. You also of course need an area with enough wind and demand for the energy. And land you can use.
On shore wind is not as cost effective as solar or off shore wind either.
While this is true I‘d still like to see a source. Those numbers are hard to believe. I‘d guess it would take at least 5 years to recover $-costs, which is still good
Apologies my answer was not well stated. The less than one year referred to the energy payback period. The capital recoup time with some back of the envelope math would probably be more like 10 years.
No direct answers but you can back out some timelines from these https://www.energy.gov/sites/default/files/2022-08/offshore_...
https://weatherguardwind.com/how-much-does-wind-turbine-cost...
Finland is having a boom, 70% increase in built wind power last year and 70% this year so far, and I checked the projects completed or completing this year. Most are Vestas and Nordex, some GE, and few outliers (Siemens, Eventus, Cypress one project each).
GE is not the only builder. Siemens for example is a big company that is building a lot of wind turbines.
The payback period has been dropping over time and is now under a year, in some cases well under a year. This depends on many things including where it is placed, size of the tower and time of year.
Links to articles that reference the studies: - https://www.windpowerengineering.com/wind-turbine-carbon-pay... - https://www.newscientist.com/lastword/mg24332461-400-what-is...
Wind can compete favorably with solar on price when you have the right conditions, which are both starting to beat traditional sources of power. It is hitting the point where you would select either wind or solar for price, when ignoring the desire for stable output.
One current issue for wind power is what to do with the waste. The blades erode over time and need to be replaced, but mostly consists of fiberglass. It's not a huge problem, but each advancement in technology brings a new set of problems to be dealt with. Still, I'd rather deal with fiberglass than nuclear waste.
How long does a coal or natural gas plant have to be operating to offset the environmental impact of collecting and producing its construction materials?
...
Not just the plant, in the case of fossil fuels' physical environmental impact.
The wells, refining plant, and pipelines for gas, and the mines, railways, and ash disposal pits for coal. And the river intakes, detention ponds and so on needed for steam and cooling water.
I would imagine much less time than a huge power plant, with its much more steel, copper, aluminum, concrete, etc. Don't forget the extraction process for coal, gas, or clear cutting entire valleys to make damns.
You are comparing wind power to 'nothing'. You need to compare it to the alternatives.
1000 flocks of seagulls
edit: HN not being able to take a joke as usual.
That joke was so bad, I ran. I ran so far away.
I was one of the 20%, fun times!
The MBA cargo cult managers appear to have collectively decided to lay of 20% of the US workforce.
I was one of the 20%, fun times. (Crap I accidentally double posted this)
Oh, that's funny. Can't drill for oil, and wind energy isn't cost effective. What's next? Foot pedaled cars?
The operative word here is onshore, for a variety of reasons, like the absence of road/tunnel/bridge permits, neighborhood Karen councils and local politicians, having to manage multiple lease arrangements, etc, etc.
I read an industry article mid-COVID that claimed the biggest barrier to offshore right now was the lack of ships to install them - alleviated somewhat by the introduction of floating offshore rigs, like these:
https://www.x1wind.com/
So yeah, it's gotta be way cheaper to drop a couple of those in the ocean than truck towers out to middle-of-nowheresville or digging a foundation at the bottom of the ocean or whatever.
Thanks for that X1Wind tetrahedron link - I saw a similar one recently that used a truncated pyramid construction, with the blades rotating between the front and back pairs of legs.
Interestingly with these size is not the be-all and end-all. If you make them so that they fit in the average port (towed by an average pair of tugs), the range of locations where they can be installed increases a lot. As does the availability of ships usable for the install.
You're going to be shocked that I peddled to work today, and saw a ton of deliveries done by people peddling!
* pedaled
Freudian slip.
> Foot pedaled cars?
These have been around longer than fossil fuel powered ones. They're called bikes.