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Comment by asdfasgasdgasdg | Hacker News Reader

It's true that not all of the value is destroyed, but it is still very inefficient compared to a well functioning business. Whether it's less efficient than bailing folks out is I think an open question. Maybe with a case-by-case answer.

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Sure, compared to a well run business. I think the point is they aren’t well run.

Giant asteroid extincts a bunch of species... Sure, the now vanished mega fauna were not adapted to asteroids. But as a once in a hundred thousand years event, it doesn't mean they were otherwise unfit.

The last time all their planes were sitting about was 9/11, and they were openly talking about the need to be prepared for another such occurrence. This seems like something we should expect on the scale of decades, rather than some vast timescale.

The thing is that rare events occur frequently enough on evolutionary time scales that not being able to handle them as a species is equivalent to not being fit. This is connected to one of the theories of why humans evolved our rather strange intellectual capacities. It was a way to be fit in a rapidly changing environment. We may not have been the fittest in any specific situation, having no claws, bad eyes and weak stomachs and all, but when the environment changed we were able to retool ourselves better than animals that were optimized for specific and no longer existing environmental conditions.

Whoa whoa who says humans have bad eyes? Our color vision is like animal kingdom best practices, and we invest a ton of brainpower into visual processing.

Humans are great at throwing too, and traveling long distances.

They were unfit because a giant asteroid is as much a part of the environment as anything else.

I question whether it is possible to be "fit" in this analogy, or just lucky.

Also, let's not forget that "fitness" and "conformance to our values" are separate dimensions. It is not necessarily the case that we humans want to optimize companies for their ability to withstand once in ???? year events without government assistance. Companies optimized along such criteria would be more fit for an environment where government assistance doesn't exist, but crucially that is not necessarily the actual environment that companies exist in in the real world. And it is not obvious to me that the citizenry benefits from companies optimized that way.

Homogeneity leads to effecency and hedrogeneity leads to resiliance. The stability the fed provides allows them to do what they want in hugely optimized and complex ways, it just turns out what they want to do doesn't align with the interests of the population sometimes. I don't think they would be any less likely to do what they are doing they would just do it less effecently.

The fed doesn't want to use the stick anymore, and business gets a carrot when it throws a tantrum. The insentives are perverse.

It's a good analogy because fit and lucky are hard to tell apart in evolution too.

I don't know. I don't necessarily think it's efficient for businesses to keep cash on hand for weathering events of a magnitude that have literally never happened in the history of their industry. I think that's a little too conservative and people would not like the drag that imposes on the economy if the rule were to be applied universally. I don't think it's a sign of poor management that the airlines did not foresee the possibility their whole industry would be entirely shut down for a year or more.

I don't think we need to apply absolutes here. It can be true both that it would be very difficult for airlines to keep cash reserves to cope with an event of this scale and that keeping essentially zero cash reserves (in fact, American has been borrowing like crazy) is absolute negligence.

If airlines are considered essential enough to the functioning of the country that they must be bailed out, they should also be run in a way that reflects that importance to society.

And yet, it is not the point that management/owners could not have foreseen this, and so do not deserve to have the company go under.

Even if the company goes under, there will still be airlines afterwards regardless of who owns them. Should we all pay to keep the ones that happen to be there, or let new players have a go?

Dinosaurs didn't hedge themselves either, in terms of evolution. But life went on anyway, and mammals dominate now.

I'm not knowledgeable enough to know which is best. Is it more efficient for these companies to go under, and for luckier rivals to buy their assets and consolidate? Or is it more efficient for the government to provide capital (for some consideration of course) and smooth out the dip? Whichever leads to better outcomes is what we ought to do.

I'm not a pure capitalist. I don't subscribe to the theory that market forces always lead to optimal outcomes. As such I don't buy the notion that bailouts are always the wrong decision.

> Whichever leads to better outcomes is what we ought to do.

The question is: better for ... the shareholders? The tax payers? The environment? The pilots? The passengers? The airline managers?

You'll find that "better" is often at odds for different groups.

For low frequency, high impact events there's a thing called insurance.

The problem is exemptions—like "Acts of God"—which I think should generally be illegal. Higher premiums suck but they'll accurately account for risk (which now goes uncovered).

This is just shifting the problem to a different industry. The insurance industry would not have been sufficiently capitalized to weather this storm.

> I don't necessarily think it's efficient for businesses to keep cash on hand for weathering events of a magnitude that have literally never happened in the history of their industry.

It is not "cash". It is "cash and cash equivalents" i.e. short term highly liquid securities such as money market funds, or super short term government debt.

No sane CFO keeps cash in DDA accounts in excess of the immediate need if it falls outside the FDIC coverage limits.

At risk of reinventing a wheel I'm not aware of ...

What about just mandating that they all pay some fraction of revenues into a common insurance fund that pays out "holding pattern" costs (furlough wages, hangar rental, etc) in times of travel-restricting emergencies.

That way, no airline could gain a competitive advantage by running with a dangerously fragile buffer.

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