From Fabricated Knowledge[0]:
"Meet Greg. He’s the former CFO and EVP of operations at Boeing. He’s been on the board since 2017 and was an interim CEO at Boeing during 2020. He also sits on the American Airlines board and is Chairman there. He sits on the Sierra Nevada Space Corporation board as well.
He has almost no semiconductor experience and could probably be directly involved with the Boeing fiasco. He’s been on the board for the entire Intel disaster and, at one point, was interim CEO of Boeing, so he's likely not the most focused member."
"Most large investors vote alongside Glass Lewis and ISS recommendations, the two most prominent proxy solutions for investors. Most GL/ISS recommendations tend to vote with the board and don’t change much unless something drastic happens. If you’re a passive investor, you vote in line with the two proxy powerhouses."
>If you’re a passive investor, you vote in line with the two proxy powerhouses.
As a passive investor in SWPPX, an S&P 500 index mutual fund from Charles Schwab, "my" Intel stock votes are whatever Charles Schwab deems appropriate.
This is the correct answer. People still don't realise just how much power over virtually every public company in America (and therefore the economy) is concentrated in the hands of a handful of people at Vanguard you've never heard of, for example.
For those who may not be aware of what you are talking about: 3 fund companies (BlackRock, State Street, Vanguard) are the largest shareholder in over 80% of SP500 companies and collectively own around 28% of the SP500 market cap.
> Also, how did Blackrock get so wealthy so fast? They've only been around since 1988.
It is not their money. They have roughly $11.5 trillion of assets under management, but their market cap is only $161.5b (on net income of about $6b). Compare that to xAI, which has existed for less than two years and has a valuation around $50b.
I am interested in learning about what you are referring to, but you linked his entire Substack and Twitter account. Would you please link a specific post?
Yes. If they collectively decide stock price matters more than anything else (sustainability, the planet, long term viability of the business), they get it, whatever the short or long term costs.
There was a comparison between Amundi (France based) and BlackRock, and their voting patterns, and BlackRock was consistently voting against any ESG or in any way ecology related proposals. Anything that isn't directly about making more money is just not their thing. Contrast that with Amundi who overwhelmingly voted for ESG or similar measures.
Electronic trading and passive investing drove commissions to zero so Blackrock helped create ESG because ESG requires paying commission for the service of certifying an investment as ESG.
It's been a concern that I've had for a bit - if everyone recommends index funds, then you lose a lot of the underlying "value" behind them. You have fewer people making decisions about what stocks to buy. You get this really top heavy system.
It's not like most of the people making those decisions are doing any better than just throwing dice at a wall and seeing what sticks.
In the immortal words of Warren Buffett and Jack Bogle respectively: "The stock market is a device for transferring money from the impatient to the patient." and "The daily machinations of the stock market are like a tale told by an idiot, full of sound and fury, signifying nothing."
You can either gamble and blame yourself or ride the market (invest in index funds) and excuse yourself from losses. If you're just interested in making some money using some disposable cash, it makes even more sense to just ride the market.
Broad market index funds are the inflation protected asset due to US federal government bailout. Your savings account is not going to keep up with inflation, nor are TIPS or US treasuries (not for land/healthcare/education), but an SP500 fund will do a better job over the course of decades.
TIPS are literally designed to track inflation, Treasury I-Bonds are also designed to track and surpass inflation.
The US total stock market (ex-US stock market is a crapshoot) and its subset the S&P 500 index will generally do a better job than any bonds given a long enough timeframe, but that doesn't mean appropriate bonds can't do the job either.
That is why I specified land/healthcare/education. I guess I should have specified that it matters more for metropolitan areas, especially high cost of living regions.
TIPS won’t come close to making one be able to compete with other buyers in those markets for the non mass produced/imported resources.
If someone invested their money in TIPS over the last 30 or 40 years thinking they will be able to buy real estate because TIPS protected them from inflation, they would have been sorely disappointed for pretty much all non Midwest/interior northeast metros.
This is a demographic/political issue for all developed countries, they must reduce the purchasing power of their currency as a tax to be able to deliver the benefits expected by the more populous, older voting populace.
> If someone invested their money in TIPS over the last 30 or 40 years thinking they will be able to buy real estate because TIPS protected them from inflation
Does that change the reality that a 1997 30 year TIPS would have been ineffective at helping purchase what was once a below $100 per square foot home in 1997 that is now $300+ per square foot in most US population centers?
Replace home price change (or land price change) with education price change or healthcare price change. Probably even trades’ worker price change.
If a nursing home cost $x per month in 1997, and you thought putting away an equivalent amount of cash in TIPS will ensure you can afford a nursing home in 2027 or 2037, it’s probably not going to be fun to find out how much they cost now.
It worked great if you wanted to ensure being able to buy electronics, other manufactured goods, and probably groceries. But those are beneficiaries of automation and foreign labor.
3.6% annual return since Dec 2003. 1.036^20=2.0286.
Home prices have more than doubled since then, for a large portion of the US. Source for that is going to Zillow, searching a home in a major metro, and looking at price history.
Ok fair enough. But please explain like you might to a child, since these fund managers are exercising their power and since they are picking short term focused, parasitic, extractive boards like the Boeing/Intel ones, what impact are they trying to have on their funds? What fruit will the Vanguard 3030 fund reap when Intel and Boeing tank, say, maybe this year?
A fund manager can throw their weight behind short term gains, and when those gains dry up they can sell their Intel stake and put it in the next company to be sucked dry. They don’t have to care about long term success.
Fund managers are obligated to act according to their fund's prospectus[1], of which the specifics will vary with each fund.
For a TDF (Target Date Fund), because that was brought up (Vanguard 2030): Both actively and passively managed ones must generally be managed such that shareholders can start withdrawing adequate funds (selling shares) upon and after reaching the "target date".
For an S&P 500 index fund like the one I mentioned and hold (SWPPX), the fund manager is required to imitate the actual S&P 500 index as much as reasonably possible.
In short, "don't have to care about long term success" is not a generally usable argument for fund management.
If the prospectus says "follow the S&P 500" the fund manager is also not interested in long term success, they are interested in tracking the index.
But the fund managers tracking an index are not the main problem, they are just putting a lot of passive votes behind the funds that are actively working on electing board members in the interest of short term growth/profit (which brings more people to invest in their funds and gets them big bonuses).
You have to sell before the “gains dry up”, otherwise you won’t have much money to invest in a new company to have enough of a voice to suck it dry.
But for an index fund, there is no fund manager choosing when and if to sell. The investors of the fund are just following the markets, not really earning a lot (in real terms), but also not losing much.
It's not 20 years. Just 12 years ago Intel was launching Ivy Bridge on 22nm and was absolutely on top of the world.
It's true they've completely fallen off the pace. But people tend to forget how rapidly this happened. Even as late as the semi-aborted 2018 launch of Cannon Lake it seemed like it was just a routine burp they'd correct with a process respin. Then TSMC quietly reached parity with 7nm, shipped 5nm which was a better process, and by 2021 Apple had jumped ship and Intel was falling behind even AMD.
The disaster happened fast. Boards of Directors aren't that agile.
The 2017 "launch" of Cannonlake wasn't something that anyone inside or outside of Intel could have reasonably considered to be a "routine burp". It was a desperate move to avoid shareholder lawsuits and possible criminal prosecution. Intel had to ship something under the 10nm label before the end of the year, because they had made far too many (false) promises that 10nm would be working Soon. Cannonlake was a mostly-broken chip because their 10nm process did not work, and Intel never even tried to make significant revenue from it or ramp it to volume production (though they kept promising for months that they were going to ramp). And it was still two years late.
Meanwhile, Intel's chip designers kept targeting an unusable process, and wasted years that they should have been iterating on designs for the fab process that actually worked. Skylake shipped in 2015. They didn't deliver a new CPU microarchitecture on 14nm until 5.5 years later, a year and a half after they shipped that same microarchitecture in a mobile-only form when their 10nm finally started to be somewhat usable (but not fast enough for desktop).
What were the chip designers doing for all those years? In 2015, Intel knew that 14nm had been harder to bring up than any previous fab process, and they knew that 10nm was proving even harder, but they refused to try making an updated CPU design for 14nm. How could the management not have realized that spending multiple consecutive years not shipping new designs would cause long-term damage to their capability to iterate on CPU designs? Not participating in the feedback loop of actually shipping left Intel with an oversized P-core design and an E-core design that wasn't well-matched to it, making Alder Lake awkward and slapdash when they finally got 10nm working well enough for desktop CPUs.
Sure ... THIS is what I don't get. Non-technical (ie. CEO + board before Gelsinger) people are responsible for a technical disaster. They did not, of course, stop creating new technical disasters. Which ended in complete panic and Pat Gelsinger on top.
They complain about arrogance, but even if you accept that, it was arrogance BEFORE Gelsinger, with Intel under the control of MBAs that they're talking about.
And can I just say, I've seen some seriously arrogant assholes in the tech departments I've worked ... but for absolute incredible arrogance, you need MBAs.
There was always a deep cultural problem in Intel - at least since otellini when I was there. But it's not just the management that was arrogant - engineers too were a bit arrogant because they were taught that Intel was the best. The cultural problem was Intel assumed that they did not need to look outside the company about how the world and tech landscape was changing, and really they assumed they could always depend on the semiconductor process advantage to cover design inefficiencies. So the whole company was living in the past. Plus they did not hire the best - either in terms of thought leaders or in terms of senior people who were really really innovative. Intel had or has this culture of hiring lots of recent college graduates who would push new designs that were iterative but they were not of the level of new patents, or truly an outcome of research. Whereas amd was being successful with a much smaller number of employees, because of new patents and hired mostly senior people.
Once Intel lost its research focus it became an extractive company extracting the riches that were already there, instead of creating true innovation. Case in point - Intel stopped doing it's research day long time ago.
Design pipelines are deep and Intel at the time famously had very node-specific designs without industry-standard PDKs. The moment engineers were told to switch a design to 14nm, it basically reset the 5 year design-to-product pipeline. Management failed because they did not hedge the risk by starting a parallel 14nm design effort at first sign of 10nm troubles. They likely were engaged in magical thinking or some variation of the "Are YOU going to tell him?" Silicon Valley scene. It does not help that information like that is considered actionable insider trading information. I bet a lot of people working on 10nm designs first heard the news about the delays from the quarterly investor calls.
> Design pipelines are deep and Intel at the time famously had very node-specific designs without industry-standard PDKs. The moment engineers were told to switch a design to 14nm, it basically reset the 5 year design-to-product pipeline.
Right. It was well-known publicly that Intel was running their business in a way that maximized the damage any fab troubles would have on their product roadmap. It was obvious a decade ago that Intel needed more flexibility to bring their CPU designs to other fab processes. It took them too long to start working on Rocket Lake, and too long to deliver it. But they have at least made some progress on the problem, since they've been selling x86 CPU cores made at TSMC for the past year.
(On a related note: Buying Altera and forcing them to port their entire roadmap over to a broken 10nm process was made even more stupid by the fact that Intel didn't have a usable PDK that outsiders and acquisitions could work with.)
The "even" makes the tone of your comment feel a tiny bit disrespectful towards AMD. By 2021, it was clear to me that AMD had their gloves off and were winning. Zen 3 was released in 2020 - the third generation of nearly flawless execution by AMD that Intel failed to respond to - outside of cutting the prices on some CPUs. For a while, Intel held onto the "fastest single-core speeds". Back in 2017, my first thought after being blown away by the performance of a first-gen Zen PC build was "I should buy shares in AMD" - AMD clearly had a superior product with an even better value proposition.
I think the point is that Intel had such a lead in the Bulldozer era that for AMD to overtake them was a tremendous failure.
I would not say that the first gen of Zen is was a clear winner over Skylake. It took a couple iterations before AMD clearly took the lead. AMD was simply so far behind that several large generational improvements were needed to do better than Intel.
> I would not say that the first gen of Zen is was a clear winner over Skylake.
In 2017, I would not have said that either for Zen 1 without qualification[1]. Zen 3 on the other hand, was a winner.
That said, 1st gen Zen had better bang-for-buck than Intel, for multicore workloads - in my case, I had built a workstation and thr equivalent intel build would have cost much more, expensive Ryzen motherboards notwithstanding.
1. In my comparison as I buyer, I didn't compare Intel and AMD processors by core count, but by what I'd get with my budget. The AMD build I eent with was better than an intel build for the same amount of money.
Mobile phones were picking up a lot of steam by the mid 2000s, and it doesn’t seem like Intel bothered to even investigate developing more power efficient chips.
Seems like the leaders just lost the stomach for taking risks, a long time ago. No forays into mobile or GPUs, at least not in the billions of dollar and many years scale that was needed. No stomach to pay the competitive salaries necessary to compete with Apple, Microsoft, Alphabet, Meta, Amazon, Netflix, etc for talent.
They did as recently as 2016 and then gave up on it: "Intel could be on the verge of exiting the market for smartphones and standalone tablets, wasting billions of dollars it spent trying to expand in those markets. The company is immediately canceling Atom chips, code-named Sofia and Broxton, for mobile devices, an Intel spokeswoman confirmed."
(https://www.pcworld.com/article/414673/intel-is-on-the-verge...)
Yeah, Otellini famously turned down Steve Jobs' request to make the chip for the first iPhone, thinking the market wouldn't be big enough. When he got pie in his face, he tried to correct course. By the time he needed to retire, the board wanted to give up on mobile, thinking they would never catch up, and double down on data center.
AFAICT, this was a self-serving bit of reverse myth-making from Otellini. If there really had been a single binary decision Intel got wrong—saying no to Jobs when they might have said yes—then their collapse looks like bad luck: Nobody bats 1.000.
But the way Apple insiders tells this story, there was no way Intel was even being considered in the (short!) window when the original iPhone was being built. Intel was in the middle of selling Xscale, and even that design was too power-hungry.
Intel missing mobile was a long history of poor strategic and tactical choices, not one bad call.
Jobs had two iPhone teams working in secret against each other, and was setting up things on the side. He likely approached Otellini before either team was far along.
They did more than investigate. Nokia, at that time still market leader in mobile phones, wasted a lot of time and effort because management wanted them to move to Intel. Nokia engineers did not believe that Intel would ever reach the required power efficiency. Whether it was self-fullfilling prophecy or just technically impossible is anyone's guess. (No, Nokia did not fail because of Intel, but that miss certainly made the disaster more complete.)
Intel connection was not the sole reason for Nokia's demise in phones, but it contributed on the failure of their effort to recover from the tailspin. Symbian their old mobile platform was clearly due to be replaced and they had a pretty viable in-house Linux platform, Maemo, that already shipped with N900 in 2009. Instead of iterating on that, they decided to "join forces" with Intel and merged Maemo with Intel MobLin to create MeeGo. They wasted at least a year on that and not with a lot to show for it as the Intel chips they planned for never materialized.
Obviously it was going to be very difficult to compete as a third platform with the behemoths iOS and Android become during those years. At least the MeeGo and Windows Phone cards were not the winning ones.
That's the software part of the story, which became fully public in form of MeeGo.
But there was also a hardware story how Nokia would start Intel silicon. I don't think anything of that has ever been publicly annouced before it failed. Wasting a year seems to be massive underestimate. I believe it must have been much longer. After Nokia started to fail Intel hired former Nokia engineers. I have no reliable insights what they did there, but I believe at least in the beginning they still worked with phone hardware on low-level software.
Atom has always been a laptop chip. They tried to shoeshorn it to handhelds but it sucked for obvious reasons.
Think Apple's chips started in iPhone, then iPads and finally very recently ramped up to Macbooks. Even Snapdragon has only very recently released a laptop worthy chip because of the design they've acquihired from Nuvia.
"didn't beat" puts it mildly. Every attempt Intel made at entering the smartphone business was doomed because they were years behind ARM. Paul Thurrott confirmed this with HP when discussing the Elite x3 smartphone:
The true embarrassment was when SMIC (read: China) reached 7nm and thereby surpassed Intel last year (or was that 2022?).
Intel then proceeded to waste CHIPS monies and other aid on five digit layoffs and now ousted the one CEO who ostensibly at least had the right idea.
At this point I want to see Intel fail (and Boeing too), American Exceptionalism(tm) absolutely needs to have its longass Pinocchio nose broken in half before we have any hope of rebooting ourselves.
As in many large projects, even more so with a large company,
the point is not to react when the problems are happening,
it is to preempt these problems, foresee them and prevent their happening.
So indeed, by 2018, even though Intel has not yet fallen, it's actually already late.
The roots of the problems seems to be earlier, and that's where the CEO, and the Board, should have reacted.
So the boards don't have totally unchecked power. But despite that policy being 22 pages long, it doesn't pay any attention to companies' individual circumstances.
Vanguard's voting policy doesn't have an opinion on EA's lootboxes, or Intel's 18A node, or Disney's approach to Star Wars.
You can’t easily dismiss the problem by pointing to history.
In those historic times, stock ownership was much more restricted to rich investors (not a good thing) who are far more opinionated in AGMs (a very good thing) than some faceless index fund or Robin Hooder who doesn’t even realize they should vote at all.
So boards used to perform but they also used to have pressure to perform. Will they still perform on autopilot? Maybe, but chaos always wins unless there’s a forcing function (your votes at the AGM).
> So when a company's ownership reaches 50%+ of index funds
well luckily, this isn't the case. And most index funds do ask index fund holders for the vote, tho not individually. But if the majority holders end up not following the board recommendations, the index fund would vote that (at least with vanguard - not sure about others).
Great, that. However the point of capitalism is that people who know the business would invest and make good decisions. In the situation that index funds hold most of the capital accountants will be making all decisions.
The point of capitalism is that the businesses that have people who know the business and make good decisions eventually win out over the businesses that don’t.
The way modern stock ownership is structured makes it almost impossible for shareholders to exercise any meaningful control.
Shareholders have no access to insider, commercially confidential information - so shareholders don't get to change the captain until after the ship's hit the iceberg. If I have shares in a video game company and the inept boss didn't organise enough testing so the game's got loads of major bugs? Well, I only find out after the damage is done. Is Gelsinger fucking up the delivery of 18A? I have no idea!
Meanwhile, individual shareholders' power is incredibly diffuse. The smart investor has a diversified portfolio, and even if I've literally got a million dollars invested in Intel, I still only own 0.0011% of the company.
Maybe I should coordinate with the other investors, you say? Get together with 1000 other similar investors, and we've got 1% between us? It's impossible, because they're all anonymous. There isn't anywhere I can rally the other shareholders.
And on top of that, loads of companies have dual-class share structures specifically designed to stop shareholders having any say. Whether you're invested in Facebook, FitBit or Ford - good luck exercising control when insiders' shares have 10x the votes yours have.
And that's without getting into passive investors and pension funds.
If I don't like Intel's current board, just selling my shares is far, far simpler than exercising any sort of meaningful active governance.
Note this is only true for companies registered under US law, especially under Delaware law. (And UK law to a lesser extent)
Which puts the onus of proof on the minority shareholders, to demonstrate they have a bonafide need for such information.
Most US states do so, which ironically makes the US one of the most authoritarian and dictatorial countries when it comes to minority shareholder rights.
Compare it with say Japan or China where the onus of proof is on the company to demonstrate why the requests of minority shareholders should be denied.
And the only real restriction is that any group of shareholders making such requests have to own at least 3% to 5% of the total shares.
The ETFs actually do own the underlying securities and vote the shares. They typically have a mechanism for ETF owners to vote internally on how to vote externally, but the vast majority of ETF owners ignore it so whatever the ETF recommends (which is often from a third party) almost always is what happens.
The board might've been deliberately planted there to tank the stock in the long run.
Wouldn't be the first time hedge funds do this, but to be fair they prefer small pharma (famously cancer research/meds) startups or generally smaller companies to do it. Wouldn't be surprised though.
Literally, Gregory Smith, former Boeing CFO is a member of the board.