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奇異衰敗學：百年企業為何從頂峰到解體？
自1892年創立以來，奇異就不只是間企業，更是美國商業標竿代表，進集團服務就像贏得樂透彩！百年、3個世紀以來屢創不敗神話：
驚人的二位數成長、世界級人才培育系統、風靡全球六標準差管理、長年保持股利至少2美元、讓投資人與華爾街有信心的財報、評等機構3A信用評價、穩占道瓊工業平均指數成分股、創造數十萬工作機會……
諷刺地，當神話一一破滅，大家仍未察覺奇異出了狀況。如同比爾．蓋茲所言：作者堅定地審視了這些錯誤，無論你哪種領導角色，在一般公司、非營利組織或是其他類型，都能在書中收穫良多。
從奇異的興盛到衰敗，透過本書你會發現 :
【組織領導的問題】
表面上：跨事業多元化經營，能為集團帶來各類龐大利益。
實際上：各事業領導人在經營與財務上各自為政，集團領導無法兼顧多方因而錯判。
表面上：當上奇異董事是職涯亮點，還能和奇異菁英共商決策。
實際上：強勢的集團領導讓董事會成為橡皮圖章，根本無法善盡監督責任。
【財務管理的問題】
表面上：收益年年達標，更長久保證2元股利，成為美國最好投資標的。
實際上：為保有集團高股價水準，在錯誤估值情況下，大量回購自家股票導致現金流不足。
表面上：完美財務報表深受投資人、評等與監管機構信任。
實際上：長年隱匿激進會計法，不違法地掩蓋許多交易與經營細節。
驚人的二位數成長、世界級人才培育系統、風靡全球六標準差管理、長年保持股利至少2美元、讓投資人與華爾街有信心的財報、評等機構3A信用評價、穩占道瓊工業平均指數成分股、創造數十萬工作機會……
諷刺地，當神話一一破滅，大家仍未察覺奇異出了狀況。如同比爾．蓋茲所言：作者堅定地審視了這些錯誤，無論你哪種領導角色，在一般公司、非營利組織或是其他類型，都能在書中收穫良多。
從奇異的興盛到衰敗，透過本書你會發現 :
【組織領導的問題】
表面上：跨事業多元化經營，能為集團帶來各類龐大利益。
實際上：各事業領導人在經營與財務上各自為政，集團領導無法兼顧多方因而錯判。
表面上：當上奇異董事是職涯亮點，還能和奇異菁英共商決策。
實際上：強勢的集團領導讓董事會成為橡皮圖章，根本無法善盡監督責任。
【財務管理的問題】
表面上：收益年年達標，更長久保證2元股利，成為美國最好投資標的。
實際上：為保有集團高股價水準，在錯誤估值情況下，大量回購自家股票導致現金流不足。
表面上：完美財務報表深受投資人、評等與監管機構信任。
實際上：長年隱匿激進會計法，不違法地掩蓋許多交易與經營細節。
432 pages, Paperback
First published July 21, 2020
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July 26, 2020
Reading this book was a trip down memory lane.
I had the privilege of working at GE for 20 years, so I had a front-row seat for many of the topics covered in this book. Already at GE for six years when Jeff Immelt became CEO, I can still remember sitting in a large conference room with many of my colleagues as we listened to Jeff Immelt's employee meeting his first full day on the job - September 10, 2011.
The authors captured the essence of what many employees inside the company saw including Jeff Immelt's endless optimism and the ability to cast a vision of where GE was heading.
We also watched GE acquire companies that had the potential to enhance our existing portfolio. Unfortunately, as the authors described, what we often saw was the eventual destruction of value that was reflected in company performance.
The one topic that the book did not cover was the exceptional talent and dedication of GE's employees. I recognize that this was not central to the book's focus, but I can unequivocally state that the engineers and scientists I had the privilege of working with every day were immensely talented.
Thanks for the memories!
I had the privilege of working at GE for 20 years, so I had a front-row seat for many of the topics covered in this book. Already at GE for six years when Jeff Immelt became CEO, I can still remember sitting in a large conference room with many of my colleagues as we listened to Jeff Immelt's employee meeting his first full day on the job - September 10, 2011.
The authors captured the essence of what many employees inside the company saw including Jeff Immelt's endless optimism and the ability to cast a vision of where GE was heading.
We also watched GE acquire companies that had the potential to enhance our existing portfolio. Unfortunately, as the authors described, what we often saw was the eventual destruction of value that was reflected in company performance.
The one topic that the book did not cover was the exceptional talent and dedication of GE's employees. I recognize that this was not central to the book's focus, but I can unequivocally state that the engineers and scientists I had the privilege of working with every day were immensely talented.
Thanks for the memories!
July 28, 2020
First let me put in context my interest in this book. I am a GE employee, not by choice, but through chance as the company I worked for was taken over 9 years ago (I was a bit disappointed that the takeover was not mentioned in the book, although I guess $3 billion dollars is small fare in this story). As such I lived within some of the story laid out here and for me it is fascinating to see what was going on behind the scenes at board level, since most of that was hidden as mere employees. Fascinating and slightly horrifying that a company with such a reputation as Ge could be so dysfunctional.
The book also echoes a lot of what I have learned about GE. The 1st thing you need to know is that there are two world views of GE. In America, GE status is almost mythological. This stems from the 60s and 70s when GE seemed to run American life from jets, power turbines to fridges and toasters. There was not a part of US life that GE did not touch. Not only that but it seemed very good at making money. Under their CEO Jack Welch, growth seemed limitless and the shares were the darling of pension plans offering a safe haven and guaranteed dividends. In the rest of the world however, GE does not have the same status. Yes it has a big presence in the other parts, but it was little known outside the niches.
The book starts off with GE history. If you work in GE you are told we are the child of Thomas Edison, the master inventor (in fact if you visit GE research in Niskyuna, you will find Edison's desk preserved in the entrance). However like a lot of the Edison story, this is not really true. As the book sets out, GE was a creation of failed Edison businesses joined together by the banker J.P.Morgan, and Edison had little to actually do with the company. So rather than a industrial company based on the ideals of industrial innovation, it was a company set up by a finance house for industrial domination. That characteristic forms a large part the rest of the story.
The story starts with the legendary chairman Jack Welch who set out transforming the company and become a byword for managerial excellence. However hidden under the success story is another one of shady accounting practices, labyrinths of financial deals and opaque structures which were used to maintain the myth of almost infinite growth.
As such the industrial side was supported by the rise of behemoth GE capital which tapped the financial instrument market to ensure a steady supply of cash. In doing so its tentacles spread wide to tap new lines of credit with little apparent appreciation of risk. It feels in hindsight that Jack Welch main talent was in timing and being able to ride the wave of fast growing economy while not having to be held into account for the consequences years into the future. I was also a little disappointed that there was little analysis of one of Jack Welch's worst legacy's, a system called stack ranking which rated everyone and the lowest 10% were forced to leave. This system which at the time was lauded, has been shown to be in the long term destructive as it creates a atmosphere of back stabbing and distrust in a business and was widely sited as one of the reasons that Microsoft lost there way in he the 90's. While no longer implemented, its shadow still sets the culture in GE today and may well have been partly to blame for the Ge capital risk taking culture.
In 2001, Jeff Immelt took over as CEO. Mr Immelt is a very charismatic character, however his background was sales rather than engineering and he struggled with running a company which was both large and schizophrenic in character. The capital side providing huge dividends, but with large risks while the industrial side being less profitable, but more stable. This came to ahead almost instantly he took over with the aftermath of the 9/11 attacks and the financial fallout meaning that the capital market shrank overnight. In some way Immelt could be considered unlucky, however the aftermath of a charismatic CEO meant that the board was no longer functioning and failed to rein in a CEO with limited experience. This was shown in two episodes.
Firstly was one of Immelt's main initiative, the industrial internet.
The idea of the industrial internet was the idea of connecting data from industrial sources to generate new industries around that data. In many ways the idea is a valid one, unfortunately the implementation under-estimated the cost and difficulties. As someone who was involved, I can attest to this. Rather than take a evolutionary approach, GE pumped money into it setting up GE software in California to drive it forward. There were two problems with this. Firstly the GE software department tried to do everything from writing the whole industrial stack to creating the entire data infrastructure to store the data. Despite GE's size it was not a software company and just did not have the resources to manage this. Instead it should of created partnerships to piggy back off someone like IBM. Amazon etc. Secondly there was a big ethos clash between the east coast traditional industries and the west coast new technology gurus. One was traditionally conservative (after all you can't have a jet engine fail in the air), while the other was more just try it and see. The lack of direction and misunderstanding of the two philosophies meant that money was being pored in with concrete objective, other than a vague sales slogan.
The second was the purchase of Alstom, a large French owned supplier of power generating equipment. Jeff Immelt set his reputation on purchasing this, however to virtually everyone else it seemed a strange purchase. Before becoming part of GE, we had been part of Alstom and we could attest that it was a company with big problems largely propped up by the French government. The more the negotiations went on and the bigger concessions GE had to make, the less sense it made. In fact the French government really out manoeuvred GE by getting GE to take a troubled nationalised industry off their hands and at the same timer guaranteeing no job losses for a long period, something that even now rankles in GE outside France. The fact that the board failed to rein Jeff Immelt in and Immelt himself could not see the issues pointed to a company no longer in full control or good governance.
Jeff Imelt's reign came to an end in 2017, and the CEO position was breifly held by John Flannery. However the excesses of the two previous CEO's and the lack of adaption to the changing market had pretty well made it an impossible job. Also some of the risks taken by Capital came back to haunt GE with a huge debt to finance health insurance policies taken out earlier. Also there had been huge investment in both gas turbines and oil production companies. However the rise in renewables had stopped any growth in the former, and the crash in the oil price had severely dented the latter. What Flannery did do however was a well overdue shake up of the board and remove some the excesses like the 2 planes Immelt had used to travel in.
My own story in GE, echoes much of this. In many ways I was there at the beginning. I had visited our CEO as part of a program to allow engineers to meet our then CEO. They had to regularly exit the room to take phone calls, and he asked our group whether our company should remain independent. Obviously he could got give details, but in hindsight they were being wooed by GE. And our company had been a success. We had grown to a billion dollar company in 5 years, by being agile, responsive and innovative. However what was stopping us growing was the lack of capital to take on larger projects. Being part of GE seemed to promise us that access.
A number of important things changed when we were taken over however. Firstly our CEO had always travelled on his own. The first meeting of our new boss, was when we were bussed to football stadium and he arrived flanked by about 20 flunkeys. The senior management team were sent to a hotel in Dubai, where a video was made of a speech that looked more like a evangelical rally than a conference. Our CEO had setup a system where you could directly ask him a question. While sometimes abused it provided a communication channel to raise issues and queries. This quickly stopped and it became clear that information would flow only from top to bottom. Our head office had been a single floor of a shared office in a industrial suburb of Paris. That apparently did not meet the image of GE, and was moved to a an expensive old building in central Paris. Or so I'm told because no one outside the top team were allowed to visit.
More importantly the management structure changed from a pyramid to a matrix. This meant there was no longer any direct decision making responsibility anymore. The management decided that they no longer wanted us to do the systems, but make products. Systems are more difficult to manage, but products require a whole different mindset. We were told that we were to transform GE, but we quickly found that other parts of GE either kept us at arms length because we threatened their jobs, or saw us as an easy sales win as part of the GE to GE program.
We had been bought because we were what GE was not, agile Innovative and not risk averse. After spending 3 billion to take us over, they then set about trying to make us more like GE. At the same time, costs were piled on us. GE companies are run more like franchises with each one paying for headquarter's services. So each excess of the board and each corporate jet was paid for by the businesses in a reduced bottom line. Another thing is that our CEO was an ex-engineer. They knew the product as well as the business. In GE, it seems to rise to the top you need to be from either sales of finance. Engineers have a managerial glass ceiling.
So back to the book. Generally it gives a fascinating insight into one of the worlds biggest companies and some idea on how it lost its way. Certainly it gave me insights in many of the things that affected me directly as an employee.
However I do feel that the authors missed a trick.
The GE story is actually an American story. How companies that made things got seduced away into the world of financial instruments. Where making money is mistaken for making wealth. The truth is the GE myth was a much based on sleight of hand that industrial excellent. It was only federal laws such as the Frank Dodds act that stripped away much of the obfuscation and allowed investors to get a true view of what was going on. Those laws however are under attack by the right wing de-regulation lobby who feel that governments should not have companies oversight. It would of been a useful last chapter for the authors to look at the present state of American capitalism and tie to the how it should change to meet the challenges of a rapidly changing world.
The GE story is the American story. How a company famous for making everything from toasters to aircraft engines forgot its roots and became an emperor with new clothes. It is a lesson on the dangers of the deification of CEO's, cosy wall street relationships and lack of business transparency. It is a lesson on how companies lose touch with their employees and how to big to fail is not actually a thing. In the end it is a lesson how America industry lost its way
The book also echoes a lot of what I have learned about GE. The 1st thing you need to know is that there are two world views of GE. In America, GE status is almost mythological. This stems from the 60s and 70s when GE seemed to run American life from jets, power turbines to fridges and toasters. There was not a part of US life that GE did not touch. Not only that but it seemed very good at making money. Under their CEO Jack Welch, growth seemed limitless and the shares were the darling of pension plans offering a safe haven and guaranteed dividends. In the rest of the world however, GE does not have the same status. Yes it has a big presence in the other parts, but it was little known outside the niches.
The book starts off with GE history. If you work in GE you are told we are the child of Thomas Edison, the master inventor (in fact if you visit GE research in Niskyuna, you will find Edison's desk preserved in the entrance). However like a lot of the Edison story, this is not really true. As the book sets out, GE was a creation of failed Edison businesses joined together by the banker J.P.Morgan, and Edison had little to actually do with the company. So rather than a industrial company based on the ideals of industrial innovation, it was a company set up by a finance house for industrial domination. That characteristic forms a large part the rest of the story.
The story starts with the legendary chairman Jack Welch who set out transforming the company and become a byword for managerial excellence. However hidden under the success story is another one of shady accounting practices, labyrinths of financial deals and opaque structures which were used to maintain the myth of almost infinite growth.
As such the industrial side was supported by the rise of behemoth GE capital which tapped the financial instrument market to ensure a steady supply of cash. In doing so its tentacles spread wide to tap new lines of credit with little apparent appreciation of risk. It feels in hindsight that Jack Welch main talent was in timing and being able to ride the wave of fast growing economy while not having to be held into account for the consequences years into the future. I was also a little disappointed that there was little analysis of one of Jack Welch's worst legacy's, a system called stack ranking which rated everyone and the lowest 10% were forced to leave. This system which at the time was lauded, has been shown to be in the long term destructive as it creates a atmosphere of back stabbing and distrust in a business and was widely sited as one of the reasons that Microsoft lost there way in he the 90's. While no longer implemented, its shadow still sets the culture in GE today and may well have been partly to blame for the Ge capital risk taking culture.
In 2001, Jeff Immelt took over as CEO. Mr Immelt is a very charismatic character, however his background was sales rather than engineering and he struggled with running a company which was both large and schizophrenic in character. The capital side providing huge dividends, but with large risks while the industrial side being less profitable, but more stable. This came to ahead almost instantly he took over with the aftermath of the 9/11 attacks and the financial fallout meaning that the capital market shrank overnight. In some way Immelt could be considered unlucky, however the aftermath of a charismatic CEO meant that the board was no longer functioning and failed to rein in a CEO with limited experience. This was shown in two episodes.
Firstly was one of Immelt's main initiative, the industrial internet.
The idea of the industrial internet was the idea of connecting data from industrial sources to generate new industries around that data. In many ways the idea is a valid one, unfortunately the implementation under-estimated the cost and difficulties. As someone who was involved, I can attest to this. Rather than take a evolutionary approach, GE pumped money into it setting up GE software in California to drive it forward. There were two problems with this. Firstly the GE software department tried to do everything from writing the whole industrial stack to creating the entire data infrastructure to store the data. Despite GE's size it was not a software company and just did not have the resources to manage this. Instead it should of created partnerships to piggy back off someone like IBM. Amazon etc. Secondly there was a big ethos clash between the east coast traditional industries and the west coast new technology gurus. One was traditionally conservative (after all you can't have a jet engine fail in the air), while the other was more just try it and see. The lack of direction and misunderstanding of the two philosophies meant that money was being pored in with concrete objective, other than a vague sales slogan.
The second was the purchase of Alstom, a large French owned supplier of power generating equipment. Jeff Immelt set his reputation on purchasing this, however to virtually everyone else it seemed a strange purchase. Before becoming part of GE, we had been part of Alstom and we could attest that it was a company with big problems largely propped up by the French government. The more the negotiations went on and the bigger concessions GE had to make, the less sense it made. In fact the French government really out manoeuvred GE by getting GE to take a troubled nationalised industry off their hands and at the same timer guaranteeing no job losses for a long period, something that even now rankles in GE outside France. The fact that the board failed to rein Jeff Immelt in and Immelt himself could not see the issues pointed to a company no longer in full control or good governance.
Jeff Imelt's reign came to an end in 2017, and the CEO position was breifly held by John Flannery. However the excesses of the two previous CEO's and the lack of adaption to the changing market had pretty well made it an impossible job. Also some of the risks taken by Capital came back to haunt GE with a huge debt to finance health insurance policies taken out earlier. Also there had been huge investment in both gas turbines and oil production companies. However the rise in renewables had stopped any growth in the former, and the crash in the oil price had severely dented the latter. What Flannery did do however was a well overdue shake up of the board and remove some the excesses like the 2 planes Immelt had used to travel in.
My own story in GE, echoes much of this. In many ways I was there at the beginning. I had visited our CEO as part of a program to allow engineers to meet our then CEO. They had to regularly exit the room to take phone calls, and he asked our group whether our company should remain independent. Obviously he could got give details, but in hindsight they were being wooed by GE. And our company had been a success. We had grown to a billion dollar company in 5 years, by being agile, responsive and innovative. However what was stopping us growing was the lack of capital to take on larger projects. Being part of GE seemed to promise us that access.
A number of important things changed when we were taken over however. Firstly our CEO had always travelled on his own. The first meeting of our new boss, was when we were bussed to football stadium and he arrived flanked by about 20 flunkeys. The senior management team were sent to a hotel in Dubai, where a video was made of a speech that looked more like a evangelical rally than a conference. Our CEO had setup a system where you could directly ask him a question. While sometimes abused it provided a communication channel to raise issues and queries. This quickly stopped and it became clear that information would flow only from top to bottom. Our head office had been a single floor of a shared office in a industrial suburb of Paris. That apparently did not meet the image of GE, and was moved to a an expensive old building in central Paris. Or so I'm told because no one outside the top team were allowed to visit.
More importantly the management structure changed from a pyramid to a matrix. This meant there was no longer any direct decision making responsibility anymore. The management decided that they no longer wanted us to do the systems, but make products. Systems are more difficult to manage, but products require a whole different mindset. We were told that we were to transform GE, but we quickly found that other parts of GE either kept us at arms length because we threatened their jobs, or saw us as an easy sales win as part of the GE to GE program.
We had been bought because we were what GE was not, agile Innovative and not risk averse. After spending 3 billion to take us over, they then set about trying to make us more like GE. At the same time, costs were piled on us. GE companies are run more like franchises with each one paying for headquarter's services. So each excess of the board and each corporate jet was paid for by the businesses in a reduced bottom line. Another thing is that our CEO was an ex-engineer. They knew the product as well as the business. In GE, it seems to rise to the top you need to be from either sales of finance. Engineers have a managerial glass ceiling.
So back to the book. Generally it gives a fascinating insight into one of the worlds biggest companies and some idea on how it lost its way. Certainly it gave me insights in many of the things that affected me directly as an employee.
However I do feel that the authors missed a trick.
The GE story is actually an American story. How companies that made things got seduced away into the world of financial instruments. Where making money is mistaken for making wealth. The truth is the GE myth was a much based on sleight of hand that industrial excellent. It was only federal laws such as the Frank Dodds act that stripped away much of the obfuscation and allowed investors to get a true view of what was going on. Those laws however are under attack by the right wing de-regulation lobby who feel that governments should not have companies oversight. It would of been a useful last chapter for the authors to look at the present state of American capitalism and tie to the how it should change to meet the challenges of a rapidly changing world.
The GE story is the American story. How a company famous for making everything from toasters to aircraft engines forgot its roots and became an emperor with new clothes. It is a lesson on the dangers of the deification of CEO's, cosy wall street relationships and lack of business transparency. It is a lesson on how companies lose touch with their employees and how to big to fail is not actually a thing. In the end it is a lesson how America industry lost its way
August 10, 2020
I think that the writers did the best job possible with the subject matter. But it’s hard for me to love a book that is about arrogant people making poor decisions and still ending up absurdly wealthy.
July 7, 2024
If you've worked in the corporate world, this story of over-confidence, short-sighted cost cutting, ill-advised acquisitions, spin-offs, and wishful thinking about future revenues may sound familiar. I've certainly witnessed it, though I have simply been fortunate not to have had my career derailed by virtue of being around when a master-of-the-universe wunderkind in the C-suite drove the bus into the ditch. I am also familiar with the jovial but aggressive, non-detailed-oriented people who can end up in the CEO job in certain companies, as Jeff Immelt did at GE.
I worked for an ex-IBM VP (Hank) who was named general manager of a regional branch of the technology company where I was employed in the early 1990's. He resembled the Immelt described in this book....about 90% of the time. The other 10% of the time, he was an abusive, ranting narcissist. But he and Immelt shared an aversion to listening to details, even important details, along with a conviction that all that was really needed by a senior guy in any industry was the god-given ability to manage, and not any particular knowledge of the activity / business one was charged with managing. This approach led to Hank being removed by the board of directors after about three years.
Immelt's extreme confidence in himself and GE led him to simply ignore inconvenient facts and to not dig into suspicious accounting or dubious ventures. His story is similar to that of Carly Fiorina's at Hewlett Packard, who basically wrecked that wonderful company in about six years. Sadly, the cult of Jack Welch in the business world led many companies to pay big money to hire away the "geniuses" from GE to bring some of the Neutron Jack magic to their firms. Boeing is one example. The company I worked for during most of the 1990's followed this path as well, and as a result, it no longer exists. As facts came to light in the late 2000's, the Jack Welch "miracle" looked more and more like a combination of fancy accounting, and a willingness to cut fat each year until large chunks of muscle and bone were also being removed. And of course, Welch benefited from the amazing boom of the 1990's that lifted all ships.
Actually, so much of what I read sounded so familiar that after a while I grew a bit dispirited. It made me think about what the US needs in terms of industrial policy, and one thing that is clear to me is that we need a modification of the tax code or some other incentive to entice large companies to invest heavily in R&D, and not just chase the quarterly results every 90 days. Real innovation requires real money to be invested steadily, and what GE was doing under Welch and Immelt was not investment. The legerdemain of GE Capital hid many sins until sub-prime mortgage crisis exposed that shell game.
Maybe no company can last forever, but GE was doing pretty well for the first 100 years until the big-ego smart guys were put in charge instead of steady, boring engineers.
I worked for an ex-IBM VP (Hank) who was named general manager of a regional branch of the technology company where I was employed in the early 1990's. He resembled the Immelt described in this book....about 90% of the time. The other 10% of the time, he was an abusive, ranting narcissist. But he and Immelt shared an aversion to listening to details, even important details, along with a conviction that all that was really needed by a senior guy in any industry was the god-given ability to manage, and not any particular knowledge of the activity / business one was charged with managing. This approach led to Hank being removed by the board of directors after about three years.
Immelt's extreme confidence in himself and GE led him to simply ignore inconvenient facts and to not dig into suspicious accounting or dubious ventures. His story is similar to that of Carly Fiorina's at Hewlett Packard, who basically wrecked that wonderful company in about six years. Sadly, the cult of Jack Welch in the business world led many companies to pay big money to hire away the "geniuses" from GE to bring some of the Neutron Jack magic to their firms. Boeing is one example. The company I worked for during most of the 1990's followed this path as well, and as a result, it no longer exists. As facts came to light in the late 2000's, the Jack Welch "miracle" looked more and more like a combination of fancy accounting, and a willingness to cut fat each year until large chunks of muscle and bone were also being removed. And of course, Welch benefited from the amazing boom of the 1990's that lifted all ships.
Actually, so much of what I read sounded so familiar that after a while I grew a bit dispirited. It made me think about what the US needs in terms of industrial policy, and one thing that is clear to me is that we need a modification of the tax code or some other incentive to entice large companies to invest heavily in R&D, and not just chase the quarterly results every 90 days. Real innovation requires real money to be invested steadily, and what GE was doing under Welch and Immelt was not investment. The legerdemain of GE Capital hid many sins until sub-prime mortgage crisis exposed that shell game.
Maybe no company can last forever, but GE was doing pretty well for the first 100 years until the big-ego smart guys were put in charge instead of steady, boring engineers.
September 7, 2020
Taking a break from fiction to catch up with some nonfiction. This is the story of the recent decline of General Electric.
It's not a tale of lurid flagrant fraud, as with Enron or Theranos. Nor of outright collapse, as with the Rogue Trader of Barings Bank in the 1990s. GE's decline is a story of gradual degradation of cash flow, aggressive accounting, dysfunctional managerial economics, poor capital allocation, dumb acquisitions, imprudent stock buybacks, too much complexity -- and most interesting to me, an overlooked massive liability relating to long term care insurance.
I once was a financial advisor, and around 2003 - 2004 one of the things we at my company promoted was long-term care (LTC) insurance, especially from GE (which supplied it at the time through GE capital). I spent a great deal of time crunching the numbers, and satisfied myself that these LTC policies were a pretty darned good deal, and that I should have no hesitation to pitch the policies to clients. Sure you might die first and get nothing out of it, but if you DID end up spending much time at all in a nursing home or assisted care facility or even certain types of home care, with the fat benefits these paid out you'd quickly recoup the premiums paid over time, and then amply more besides.
Well it turns out I was RIGHT -- in hindsight GE and other insurers had badly mispriced the premiums too low, while still having to adhere to the benefit obligations, which made these policies a great deal for people who bought them in the 2000s (in some cases, from me!). But also made them a huge problem for the LTC insurance industry.
GE was worse hit. Though spinning off the insurance business as Genuity in 2004, GE had had to agree to keep much of these LTC liabilities itself as part of the effort to cleanly launch the independent Genuity. This caused a festering liability at GE that was unknown to almost all GE executives (who all thought GE had "exited insurance" altogether), with the possible exception of CEO Immelt, who left in 2017, and his CFO who followed shortly thereafter. But by 2018 the chickens had come home to roost and the new short-lived CEO Flannery was startled to discover the problem he had on his hands and the amount of precious cash it suddenly would eat up to meet obligations and satisfy regulators by setting aside reserves. At which point he sorely regretted the billions in wasted cash that his predecessor had spent on stock buybacks.
Flannery wasn't given much time to fix things at GE and was soon booted in favor of Larry Culp, a former conglomerate CEO who was not a GE lifer. That's where things stand now.
Really I would have been happy to see a lot more specifics in this book, as the problems and criticisms were explained in broad strokes, but I can guess that might have bored a general audience. A worthwhile read that will entertain business geeks, though I'd say there's not much actionable stuff to learn from it.
It's not a tale of lurid flagrant fraud, as with Enron or Theranos. Nor of outright collapse, as with the Rogue Trader of Barings Bank in the 1990s. GE's decline is a story of gradual degradation of cash flow, aggressive accounting, dysfunctional managerial economics, poor capital allocation, dumb acquisitions, imprudent stock buybacks, too much complexity -- and most interesting to me, an overlooked massive liability relating to long term care insurance.
I once was a financial advisor, and around 2003 - 2004 one of the things we at my company promoted was long-term care (LTC) insurance, especially from GE (which supplied it at the time through GE capital). I spent a great deal of time crunching the numbers, and satisfied myself that these LTC policies were a pretty darned good deal, and that I should have no hesitation to pitch the policies to clients. Sure you might die first and get nothing out of it, but if you DID end up spending much time at all in a nursing home or assisted care facility or even certain types of home care, with the fat benefits these paid out you'd quickly recoup the premiums paid over time, and then amply more besides.
Well it turns out I was RIGHT -- in hindsight GE and other insurers had badly mispriced the premiums too low, while still having to adhere to the benefit obligations, which made these policies a great deal for people who bought them in the 2000s (in some cases, from me!). But also made them a huge problem for the LTC insurance industry.
GE was worse hit. Though spinning off the insurance business as Genuity in 2004, GE had had to agree to keep much of these LTC liabilities itself as part of the effort to cleanly launch the independent Genuity. This caused a festering liability at GE that was unknown to almost all GE executives (who all thought GE had "exited insurance" altogether), with the possible exception of CEO Immelt, who left in 2017, and his CFO who followed shortly thereafter. But by 2018 the chickens had come home to roost and the new short-lived CEO Flannery was startled to discover the problem he had on his hands and the amount of precious cash it suddenly would eat up to meet obligations and satisfy regulators by setting aside reserves. At which point he sorely regretted the billions in wasted cash that his predecessor had spent on stock buybacks.
Flannery wasn't given much time to fix things at GE and was soon booted in favor of Larry Culp, a former conglomerate CEO who was not a GE lifer. That's where things stand now.
Really I would have been happy to see a lot more specifics in this book, as the problems and criticisms were explained in broad strokes, but I can guess that might have bored a general audience. A worthwhile read that will entertain business geeks, though I'd say there's not much actionable stuff to learn from it.
September 28, 2020
This book got enough wrong in the places I have first hand knowledge to not be worth reading. I read it any way. It jumps around in time making it hard to follow the timeline. It's repetitive like it's written to read parts instead of cover to cover. It reports public information with nothing new or interesting. It is full of executives finger pointing at each other. It is not worth the time to read.
September 21, 2020
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https://www.goodreads.com/author/show...
After retiring from my career in the electric utility industry I wrote a book that describes the 130-year evolution of electricity service in America. My book begins with the story of Thomas Edison’s stubborn adherence to his direct current electric system and J.P. Morgan’s decision to undermine Edison and to merge his company with Thompson-Huston Company to create General Electric.
Having written about the birth of General Electric, I was anxious to read Lights Out: Pride, Delusion, and the Fall of General Electric by Thomas Gryta and Ted Mann. Gryta and Mann are reporters who followed GE for the Wall Street Journal. Their book tells the story of GE, beginning with Jack Welch’s final years as CEO. They focus primarily on the 16-year period when Welch’s successor, Jeff Immelt, was at the helm.
During the 20 years when Welch was CEO General Electric’s value increased from $14 billion to $400 billion. When Welch retired in 2001 GE was considered to be one of the greatest companies in the world and he was celebrated as a management savant. During Immelt’s 16 years as CEO GE’s fortunes reversed and its value fell from $400 billion to $175 billion. Largely because of actions taken by Immelt, that value has since fallen to close to $50 billion today.
As GE’s value was falling, GE management jealously watched as the value of newer companies soared. Gyrta and Mann describe how GE, under both Welch and Immelt, went down a dark path to try to regain GE’s position at the top of the corporate community. They show how GE management focused entirely too much on making their quarterly earnings targets, how they used questionable accounting methods to achieve those targets, and how they pressured financial analysts to maintain ratings on GE credit even when cracks started to show in GE’s finances. Most importantly for the reader, they clearly unravel GE’s most harmful attempt to stay on top - its continuing reliance upon GE Capital to boost earnings when needed.
I have read a number of books that describe the fall of previously high-flying companies. Few fully explain the inner workings of the company as well as Gryta and Mann. They paint a dramatic picture of GE’s world that is all too familiar to many of us who have spent time in corporate America. It is a world where employees who try to give bad news to management are intimidated, where members of the Board are too busy with their day jobs to spend the time necessary to fulfill their fiduciary duty to shareholders and where management operates in fear of financial analyst downgrades.
The story of GE, as told by Gryta and Mann, is basically a story of hubris. No matter how bad things got at GE the attitude of the company was that “our management team is the best and they can overcome any hurdles that are put in their path.” But Gryta and Mann finally show that, notwithstanding all of their Harvard MBAs and their gold plated management training programs, the fact is that many of the executives at GE are (pardon my oxymoron) just very average.
I give this book 4 stars and recommend it strongly for anyone interested in supplementing their own business education with an expertly written case study of how strong corporations with the best intentions can go off the rails without proper institutional safeguards in place.
https://www.goodreads.com/author/show...
After retiring from my career in the electric utility industry I wrote a book that describes the 130-year evolution of electricity service in America. My book begins with the story of Thomas Edison’s stubborn adherence to his direct current electric system and J.P. Morgan’s decision to undermine Edison and to merge his company with Thompson-Huston Company to create General Electric.
Having written about the birth of General Electric, I was anxious to read Lights Out: Pride, Delusion, and the Fall of General Electric by Thomas Gryta and Ted Mann. Gryta and Mann are reporters who followed GE for the Wall Street Journal. Their book tells the story of GE, beginning with Jack Welch’s final years as CEO. They focus primarily on the 16-year period when Welch’s successor, Jeff Immelt, was at the helm.
During the 20 years when Welch was CEO General Electric’s value increased from $14 billion to $400 billion. When Welch retired in 2001 GE was considered to be one of the greatest companies in the world and he was celebrated as a management savant. During Immelt’s 16 years as CEO GE’s fortunes reversed and its value fell from $400 billion to $175 billion. Largely because of actions taken by Immelt, that value has since fallen to close to $50 billion today.
As GE’s value was falling, GE management jealously watched as the value of newer companies soared. Gyrta and Mann describe how GE, under both Welch and Immelt, went down a dark path to try to regain GE’s position at the top of the corporate community. They show how GE management focused entirely too much on making their quarterly earnings targets, how they used questionable accounting methods to achieve those targets, and how they pressured financial analysts to maintain ratings on GE credit even when cracks started to show in GE’s finances. Most importantly for the reader, they clearly unravel GE’s most harmful attempt to stay on top - its continuing reliance upon GE Capital to boost earnings when needed.
I have read a number of books that describe the fall of previously high-flying companies. Few fully explain the inner workings of the company as well as Gryta and Mann. They paint a dramatic picture of GE’s world that is all too familiar to many of us who have spent time in corporate America. It is a world where employees who try to give bad news to management are intimidated, where members of the Board are too busy with their day jobs to spend the time necessary to fulfill their fiduciary duty to shareholders and where management operates in fear of financial analyst downgrades.
The story of GE, as told by Gryta and Mann, is basically a story of hubris. No matter how bad things got at GE the attitude of the company was that “our management team is the best and they can overcome any hurdles that are put in their path.” But Gryta and Mann finally show that, notwithstanding all of their Harvard MBAs and their gold plated management training programs, the fact is that many of the executives at GE are (pardon my oxymoron) just very average.
I give this book 4 stars and recommend it strongly for anyone interested in supplementing their own business education with an expertly written case study of how strong corporations with the best intentions can go off the rails without proper institutional safeguards in place.
September 7, 2020
I worked twenty-five years for GE. The Company was full of incredibly smart, dedicated people who cared and loved their business. It is difficult and challenging to revisit the years leading up to GE’s tragic fall.
The authors do a good job in my estimation of capturing the broad strokes and specific strategic decisions that imperiled GE’s solvency and future.
The book is better in the second half than the first third, which felt a shade superficial. It is hard for an outsider to understand GE’s culture and the accountability people felt to their job and for GE.
In the end, this is a depressing journey through many ill thought out decisions and top leaderships’ unwillingness to make the hard, correct actions.
The authors do a good job in my estimation of capturing the broad strokes and specific strategic decisions that imperiled GE’s solvency and future.
The book is better in the second half than the first third, which felt a shade superficial. It is hard for an outsider to understand GE’s culture and the accountability people felt to their job and for GE.
In the end, this is a depressing journey through many ill thought out decisions and top leaderships’ unwillingness to make the hard, correct actions.
November 4, 2022
I'm at the tail end of the Baby Boom generation so I recall all sorts of GE appliances everywhere as I grew up. That's where my interest in the company's demise came about. I think the book's most enthusiastic readers would come from it's current and former employees but as a general consumer I enjoyed the stories and am glad I read it.
The book is 330 pages of narrative and includes 57 chapters, an epilogue and an afterward. It's a very easy book to pick up for short stretches. The chapters are very short and even include breaks throughout. I won't give the book an extra star for this but I'm a huge fan of the format. I find myself reading more when there are lots of breaks.
The bulk of the material tracks Jeff Immelt's 16 year tenure as CEO and Chairman of the BOD. Some early material follows Immelt's rise through GE during Jack Welch's rule and some of the later material covers the post-Immelt period through 2020 but this is a book about Immelt as much as it is about GE.
The coverage seems very fair and balanced, the criticism and praise feel well supported. There's a fair bit about accounting tricks that readers may find dry and unappealing particularly since it's more about the fuzzy application of rules rather than outright fraud. It was okay and accounts for my 3 star rating. (Plus the near constant talk of the stock price. Of course that's hugely important to management but for a reader it was a little too much.)
More interesting to me were the stories of the people of GE and the industries in which the business operated. It's really quite sprawling and far flung.
Random items of note to me:
* The familiar GE logo in the circle is affectionately referred to as the meatball. I thought that was funny and can't separate the image from the nickname.
* On the day I started reading Lights Out I saw an article in the Boston Globe that said GE was significantly reducing the footprint of its corporate HQ in Boston and had recently sold its famed training facility in Crotonville, NY. Looks like times are still tough at GE.
The book is 330 pages of narrative and includes 57 chapters, an epilogue and an afterward. It's a very easy book to pick up for short stretches. The chapters are very short and even include breaks throughout. I won't give the book an extra star for this but I'm a huge fan of the format. I find myself reading more when there are lots of breaks.
The bulk of the material tracks Jeff Immelt's 16 year tenure as CEO and Chairman of the BOD. Some early material follows Immelt's rise through GE during Jack Welch's rule and some of the later material covers the post-Immelt period through 2020 but this is a book about Immelt as much as it is about GE.
The coverage seems very fair and balanced, the criticism and praise feel well supported. There's a fair bit about accounting tricks that readers may find dry and unappealing particularly since it's more about the fuzzy application of rules rather than outright fraud. It was okay and accounts for my 3 star rating. (Plus the near constant talk of the stock price. Of course that's hugely important to management but for a reader it was a little too much.)
More interesting to me were the stories of the people of GE and the industries in which the business operated. It's really quite sprawling and far flung.
Random items of note to me:
* The familiar GE logo in the circle is affectionately referred to as the meatball. I thought that was funny and can't separate the image from the nickname.
* On the day I started reading Lights Out I saw an article in the Boston Globe that said GE was significantly reducing the footprint of its corporate HQ in Boston and had recently sold its famed training facility in Crotonville, NY. Looks like times are still tough at GE.
September 17, 2020
For me, a GE retiree in the same year as Jack Welch, this is a devastating read. The failures of leadership in later management and the board are hard to comprehend.
October 3, 2020
Rambling. Repetitive. seems written by a committee and then edited quite hastily.
May 24, 2021
GE "Bringing Good Things to Life" was pretty much the extent of what I knew about GE before reading this book. I remember growing up in the 1960's with GE appliances around the house. G.E. was a known a stable company whose wares could be trusted to provide good service.
This book documents the story of all the different things that happened in the world and within GE to cause its decline from a Fortune 500 Company to the shell that remains today. The book begins with the retirement of long time CEO Jack Welch. Under Welch shareholders did well and the stock all ways traded about $30.00 or more per share and always paid a dividend. Today, May 24, 2021, the stock is at $13.14 a share.
Many things contributed to this change in fortunes. Appliances from Japan and China began making inroads in the appliance market. The new CEO Jeff Immelt wanted to grow the business and take it to new heights. He acquired other business which often resulted in losses. He took the company into the the oil business just as the market was going down. The company also had a Financial Arm GE Capital that had investments in the subprime mortgage market. We all remember that crisis that shook the US economy. The company had a division that sold insurance (long term care policies). These of course, with the rising costs in the health care industry, cost more than the premiums paid in by insureds.
In addition to these outside problems, GE was also in the habit of using some dicey accounting strategies to balance its books and make it dividend payments. Under Immelt, the company was far from frugal in spending on itself and its executives. These 700 people got cars and $30,000 a year to spend on GE appliances. Immelt would fly around the world in the corporate jet, but in addition also had an empty corporate jet following him, so he would never be without a plane in case of breakdown.
The book contains short and easy to read chapters that explain the business world to rookies. If you read this book you will learn much about corporate hierarchies, boards of directors, deal making on a million dollar scale. Excellent reading.
GE is no longer bringing good things to life. It is "Building a World that Works"
This book documents the story of all the different things that happened in the world and within GE to cause its decline from a Fortune 500 Company to the shell that remains today. The book begins with the retirement of long time CEO Jack Welch. Under Welch shareholders did well and the stock all ways traded about $30.00 or more per share and always paid a dividend. Today, May 24, 2021, the stock is at $13.14 a share.
Many things contributed to this change in fortunes. Appliances from Japan and China began making inroads in the appliance market. The new CEO Jeff Immelt wanted to grow the business and take it to new heights. He acquired other business which often resulted in losses. He took the company into the the oil business just as the market was going down. The company also had a Financial Arm GE Capital that had investments in the subprime mortgage market. We all remember that crisis that shook the US economy. The company had a division that sold insurance (long term care policies). These of course, with the rising costs in the health care industry, cost more than the premiums paid in by insureds.
In addition to these outside problems, GE was also in the habit of using some dicey accounting strategies to balance its books and make it dividend payments. Under Immelt, the company was far from frugal in spending on itself and its executives. These 700 people got cars and $30,000 a year to spend on GE appliances. Immelt would fly around the world in the corporate jet, but in addition also had an empty corporate jet following him, so he would never be without a plane in case of breakdown.
The book contains short and easy to read chapters that explain the business world to rookies. If you read this book you will learn much about corporate hierarchies, boards of directors, deal making on a million dollar scale. Excellent reading.
GE is no longer bringing good things to life. It is "Building a World that Works"
October 31, 2020
It is so interesting to me to read stories of companies, especially the mega brands. I can always pull out lessons learned or things to apply within my own career, which is great. Reading all the 'dirty laundry' we aren't supposed to know makes me want a shame bell. The C suite should be the best people in the company, yet rarely true.
Well written, exposed a lot, worth a read!
Well written, exposed a lot, worth a read!
This entire review has been hidden because of spoilers.
January 14, 2021
8th book of 2021: GE- Not the Company we Want, but the Company We Deserve
GE was born not of Edison's invention, but from JP Morgan's financial acumen. Jack Welch took a sleepy industrial giant and turned it into a financial superpower by combining American Investor credulity, ruthless management, and a healthy dose of testosterone. Under his reign GE shares returned 5200%, and this is where Lights Out begins.
Like the rest of the American economy, GE and its capitalist muse Welch discovered that financialization was the easiest way to make money. But when Welch left, the internet bubble collapsed, and Enron's similar but just-too-shady dealings came to light, GE's luster faded. A black box conglomerate blessed with the magic of Jack became a byzantine assemblage of parts with unknown risks under Immelt. Between 2001 and 2008, Immelt was able to rehabilitate the image if not the core of GE's profit making abilities, but like the rest of the financial sector was thoroughly drubbed through the financial crisis. Even the financial crisis wasn't the end of the bleeding with a multibillion dollar insurance liability coming due years after GE tried to exit the boom-and-bust financial industry.
Most interesting to me was how GE was undone both by internal fraud and complexity -- the pressure to hit numbers led to gaming numbers in a way that top executives were not equipped to investigate or verify. Worse, things like the $6.2 billion dollar write-down emerged from parts of the business that nearly nobody knew enough about to accurately measure. In sum, GE serves as an example of the complexity upper bound of an effective business, and a reason why conglomerates usually trade at a discount.
With such an interesting story, the authors drop the ball. Certain facts are repeated near verbatim in different sections (such as the cars that 900 GE executives had provided) making me wonder if the authors even read the book all the way through. Key changes, such as the transition from Flannery to Culp come suddenly and with little narrative. Yet this is still a story worth telling, and I'mm not sure anybody has yet told it better.
GE was born not of Edison's invention, but from JP Morgan's financial acumen. Jack Welch took a sleepy industrial giant and turned it into a financial superpower by combining American Investor credulity, ruthless management, and a healthy dose of testosterone. Under his reign GE shares returned 5200%, and this is where Lights Out begins.
Like the rest of the American economy, GE and its capitalist muse Welch discovered that financialization was the easiest way to make money. But when Welch left, the internet bubble collapsed, and Enron's similar but just-too-shady dealings came to light, GE's luster faded. A black box conglomerate blessed with the magic of Jack became a byzantine assemblage of parts with unknown risks under Immelt. Between 2001 and 2008, Immelt was able to rehabilitate the image if not the core of GE's profit making abilities, but like the rest of the financial sector was thoroughly drubbed through the financial crisis. Even the financial crisis wasn't the end of the bleeding with a multibillion dollar insurance liability coming due years after GE tried to exit the boom-and-bust financial industry.
Most interesting to me was how GE was undone both by internal fraud and complexity -- the pressure to hit numbers led to gaming numbers in a way that top executives were not equipped to investigate or verify. Worse, things like the $6.2 billion dollar write-down emerged from parts of the business that nearly nobody knew enough about to accurately measure. In sum, GE serves as an example of the complexity upper bound of an effective business, and a reason why conglomerates usually trade at a discount.
With such an interesting story, the authors drop the ball. Certain facts are repeated near verbatim in different sections (such as the cars that 900 GE executives had provided) making me wonder if the authors even read the book all the way through. Key changes, such as the transition from Flannery to Culp come suddenly and with little narrative. Yet this is still a story worth telling, and I'mm not sure anybody has yet told it better.
October 14, 2020
This was a fantastic exploration into the inner workings of GE. I personally have had lots of affinity for the company as I came to the United States by way of a H1-B visa my father received to work in a GE plant in Southern Virginia in the early 90s under Jack Welch. He would point at some of the management hypocrisies even back then. He sensed the insular culture and incompetence of senior management as GE capital became the dominant source of "paper productivity" in the company. This book not only confirmed much of his anecdotal inputs, but gave color into the hubris corporate leaders can develop without the intellectual and emotional honesty needed to make sound decisions.
The story of GE reads with all the idiocy of the financial crisis but spread over the past 30 years. Companies that consistently run on commercial paper and "balance sheet profits" are probably destroying value. CEOs like Jeff Immelt who literally have two jets follow them wherever they go, and have staff bend at their every beck and call are too inward focused to be servant leaders. I highly recommend this read to anyone working for or investing in larger corporations. The most important phrase from the book that I am taking away is "success theater". It's the feigning of "winning" to preserve our emotional security without an honest look at our shortcomings. Boy do we have a lot of it in our nation today.
The story of GE reads with all the idiocy of the financial crisis but spread over the past 30 years. Companies that consistently run on commercial paper and "balance sheet profits" are probably destroying value. CEOs like Jeff Immelt who literally have two jets follow them wherever they go, and have staff bend at their every beck and call are too inward focused to be servant leaders. I highly recommend this read to anyone working for or investing in larger corporations. The most important phrase from the book that I am taking away is "success theater". It's the feigning of "winning" to preserve our emotional security without an honest look at our shortcomings. Boy do we have a lot of it in our nation today.
June 29, 2021
I usually enjoy the books on the Bill Gates summer reading list, but this one fell flat for me. Several times I asked myself, did someone edit this book? There is so much repetition about the basics of the GE culture and the well-known personal characteristics of the two CEOs featured, Jack Welch and Jeff Immelt, that it bored me. I would have liked more insight into the culture (and cult) of GE that prompted so many managers to think it was okay to receive (rather than offer) revenue targets and do “whatever it takes” to reach the numbers. I wondered why they would work there from an ethical and moral standpoint. I expected the authors to offer explanations via asking hard questions of those involved about why the authors concluded there was a head-nodding board of directors and why so many executives tolerated the ruse of consistent earnings. I was not convinced that it was pride and delusion as implied by the title: something else caused many, many smart people who knew what was going on to participate, and that would make a good book - what were they thinking and feeling? what did they say to their life partners? What quiet conclusions did they draw with their coworkers?
July 5, 2021
Done - what I leaned? 👇🏽
Story of great General Electric started by Tomas Edison. All the ceo from 2000 to 2020.
How they work, how they need to do some under the tabel works. need to show results every quarter of year😅. so some illigal things here and there. Division of division are shut down. Companies are bought and sold to increase market share. it was fascinating.
Such a great and old company collapsed. shares down to $7 in 2019 from $40 in 2000.
Nothing is for sure ( all the long term investors 😅😅)
Story of great General Electric started by Tomas Edison. All the ceo from 2000 to 2020.
How they work, how they need to do some under the tabel works. need to show results every quarter of year😅. so some illigal things here and there. Division of division are shut down. Companies are bought and sold to increase market share. it was fascinating.
Such a great and old company collapsed. shares down to $7 in 2019 from $40 in 2000.
Nothing is for sure ( all the long term investors 😅😅)
August 7, 2022
Your business school professor, your boss, or your colleagues have all probably told you about GE and how great that company was. Like me, you have heard of Jack Welch and all his achievements during his tenure at GE and so, it was surprising when I came across a book with the following statement on its front cover “…and the fall of General Electric”. I immediately got interested and I must admit, I was not disappointed.
This book covers events that happened after Jack left GE and Jeff Immelt ascended to the GE “thrown”. The book is well written and has a lot of details so you will need to take your time – although the authors did a good job of making the chapters short and to the point. It is evident after reading this that GE is not where it once was and this can be attributed to a number of factors the first of which, was GE's complexity. I will have to re-read this book just to understand the complexity that was GE. The company, in my view, was simply doing too many things at any given time. Obviously, this created complexity which covered some of its inefficiencies, a phenomenon common with big organizations. Over time, these inefficiencies caught up with Jeff and he could not simply find a way around them.
The story of GE is also about how different circumstances in the external environment can make or break a CEO. Jack had a good run during his tenure which can be partly attributed to his management style and partly to the environment in which GE operated during the time he was its CEO. Jack managed GE at a time when patriotism for locally US-produced goods was high. In stark contrast, the circumstances in which Jeff found himself were different. Given, Jeff has taken some responsibility for some of the bad choices he made during his time as CEO. However, it was clear that consumer sentiments had shifted at the time Jeff was at the helm of GE, which meant GE had to work twice as hard as their competitors to keep making money.
Other than just the environment, the story of GE is also one of costly miscalculations like the gas and oil business GE decided to pursue but never worked out. The struggle to change and “fit in” with 21st-century companies meant GE had to morph into something it was not. GE was not a Silicon Valley company in the general sense yet it tried to be one with disastrous results. All these things could only be covered up so long before they caught up with the once mighty GE and Jeff.
It is easy to write reviews about a giant that has gone down but being a corporate guy, I understand how things make sense at the moment when decision “X” is made. In the epilogue, the people who worked with Jeff seem to agree that he was a friend or a good guy who things just did not work out for. Since I started working, I have learnt that there are a lot of things that contribute to the success of a CEO – a great team, new government regulations favoring businesses, good sales, etc. The same things may completely change when the next guy takes over. Jeff has written a book, which I intend to read, to explain his side of the story. Looking from the outside, there are many reasons I can advance but I know leadership is not as easy when you are not in the inner workings and this book is a good reminder of that.
This book covers events that happened after Jack left GE and Jeff Immelt ascended to the GE “thrown”. The book is well written and has a lot of details so you will need to take your time – although the authors did a good job of making the chapters short and to the point. It is evident after reading this that GE is not where it once was and this can be attributed to a number of factors the first of which, was GE's complexity. I will have to re-read this book just to understand the complexity that was GE. The company, in my view, was simply doing too many things at any given time. Obviously, this created complexity which covered some of its inefficiencies, a phenomenon common with big organizations. Over time, these inefficiencies caught up with Jeff and he could not simply find a way around them.
The story of GE is also about how different circumstances in the external environment can make or break a CEO. Jack had a good run during his tenure which can be partly attributed to his management style and partly to the environment in which GE operated during the time he was its CEO. Jack managed GE at a time when patriotism for locally US-produced goods was high. In stark contrast, the circumstances in which Jeff found himself were different. Given, Jeff has taken some responsibility for some of the bad choices he made during his time as CEO. However, it was clear that consumer sentiments had shifted at the time Jeff was at the helm of GE, which meant GE had to work twice as hard as their competitors to keep making money.
Other than just the environment, the story of GE is also one of costly miscalculations like the gas and oil business GE decided to pursue but never worked out. The struggle to change and “fit in” with 21st-century companies meant GE had to morph into something it was not. GE was not a Silicon Valley company in the general sense yet it tried to be one with disastrous results. All these things could only be covered up so long before they caught up with the once mighty GE and Jeff.
It is easy to write reviews about a giant that has gone down but being a corporate guy, I understand how things make sense at the moment when decision “X” is made. In the epilogue, the people who worked with Jeff seem to agree that he was a friend or a good guy who things just did not work out for. Since I started working, I have learnt that there are a lot of things that contribute to the success of a CEO – a great team, new government regulations favoring businesses, good sales, etc. The same things may completely change when the next guy takes over. Jeff has written a book, which I intend to read, to explain his side of the story. Looking from the outside, there are many reasons I can advance but I know leadership is not as easy when you are not in the inner workings and this book is a good reminder of that.
October 19, 2021
One of the best reads in the past couple of years. The book details how GE moved through decades and how it is now a shadow of it's former self. The pull of profits / top-down culture / charismatic leadership which does not tolerate dissent, showcases how a company like GE bit the dust. Like always, we see that individuals like Immelt / Bornstein etc, get away scot free with boards not being responsible at all.
Highly recommend reading this one!!
Highly recommend reading this one!!
September 9, 2022
A pretty gripping read, especially considering the amount of accounting terms and practices being thrown around.
An interesting look at what makes a great leader. I came away thinking about what the right balance is between being optimistic, inspirational, rallying the troops behind dreams, vs being transparent about current state, challenges, headwinds, etc.
An interesting look at what makes a great leader. I came away thinking about what the right balance is between being optimistic, inspirational, rallying the troops behind dreams, vs being transparent about current state, challenges, headwinds, etc.
February 21, 2022
Intriguing and shocking (too!)
October 13, 2020
I chose to read this book because I, like many people, always thought of GE as this amazing business success story. The GE “meatball”
Was known for ever evolving enterprise that was so big and dependable as an investment, nobody thought it could ever be brought down. They had very iconic leadership, Jack Welsh and Jeff Immelmann followed in the glow of the founding executives include Thomas Edison whose lightbulbs were synonymous of American legends, invention and innovation.
I was a coop student in marketing when I did my BComm in Edmonton and I believed the spin that this company sold, and Idolized its goals of trying to be a Bank.
Not until I read this book, 15 years after my time there, and in this day and age of all the crookedness that we have seen emerge from, what was thought to be very successful companies whose business models spanned generations, GE was another company who bit the dust. Not because they wanted to be a bank and take over the world, but because they were a bank and used their capital divisions to “smooth over” Gains and losses to the and make it look like they were ruling the world, from their shareholders perspective.
The book crystallized for me the harm, when you are only after the shareholders love and the bahavior of your stock price as the be all and end all metric of success.
It’s funny how in 2020 we now have hindsight. Perfect vision in now, in 2020, in the midst of a global pandemic that will likely not end for some time, that all of the business units that GE held, their customers, industrial businesses units making jet engines and gas turbines and MRI machines, whose customers are big government contracts, airlines or health care providers that have come to a screeching halt.
They never focused on their customers, at least from the books perspective they were so laser focused on their shareholders that they just moved money around on paper to create the illusion of success and gains jn business.
In my MBA we spent more than one entire course learning about Corporate Governance and Strategy by digging deep into he dirty money, which is a series on Netflix now. But I personally got graded on my shakedown off Diesegate and the VW scandal.
As I business person, your goal is supposed to be to make more money than you spend, that is the definition of profit, but after all I have learned about these great companies, including GE, that I idolized so much, I am questioning if making so much money at the expense of lying and cheating and stealing to your shareholders, managers, employees and customers, if it is really worth it...does the great wealth of the world have to at the expense of destroying the world?
Was known for ever evolving enterprise that was so big and dependable as an investment, nobody thought it could ever be brought down. They had very iconic leadership, Jack Welsh and Jeff Immelmann followed in the glow of the founding executives include Thomas Edison whose lightbulbs were synonymous of American legends, invention and innovation.
I was a coop student in marketing when I did my BComm in Edmonton and I believed the spin that this company sold, and Idolized its goals of trying to be a Bank.
Not until I read this book, 15 years after my time there, and in this day and age of all the crookedness that we have seen emerge from, what was thought to be very successful companies whose business models spanned generations, GE was another company who bit the dust. Not because they wanted to be a bank and take over the world, but because they were a bank and used their capital divisions to “smooth over” Gains and losses to the and make it look like they were ruling the world, from their shareholders perspective.
The book crystallized for me the harm, when you are only after the shareholders love and the bahavior of your stock price as the be all and end all metric of success.
It’s funny how in 2020 we now have hindsight. Perfect vision in now, in 2020, in the midst of a global pandemic that will likely not end for some time, that all of the business units that GE held, their customers, industrial businesses units making jet engines and gas turbines and MRI machines, whose customers are big government contracts, airlines or health care providers that have come to a screeching halt.
They never focused on their customers, at least from the books perspective they were so laser focused on their shareholders that they just moved money around on paper to create the illusion of success and gains jn business.
In my MBA we spent more than one entire course learning about Corporate Governance and Strategy by digging deep into he dirty money, which is a series on Netflix now. But I personally got graded on my shakedown off Diesegate and the VW scandal.
As I business person, your goal is supposed to be to make more money than you spend, that is the definition of profit, but after all I have learned about these great companies, including GE, that I idolized so much, I am questioning if making so much money at the expense of lying and cheating and stealing to your shareholders, managers, employees and customers, if it is really worth it...does the great wealth of the world have to at the expense of destroying the world?
April 16, 2022
Shallow book. I’m experienced in Merger & Acquisitions and got the impression that the book was written by someone who just googled what Buyback, EPS and EBITDA means, talked to a bunch of people and thought it was enough to assess whether complex financial transactions were right or wrong. You can almost feel a hint of anti-capitalism judgement with simplistic generalizations about “expensive” M&A transactions, demonizing buybacks as a means to boost share price (it fails to mention that dividends per share is increased to the outstanding shareholders if the payout ratio is kept constant, since treasury shares are not assigned dividends), and others.
Such amateurism can be found in the following affirmation in chapter 42: “The reduced number of shares would boost Earnings per Share and cut the total cost of the quarterly dividend, offsetting the loss of GE capital”. The increase in EPS derives from a simple arithmetic calculation: if the denominator of a fraction is lower, the result will increase if the numerator is kept constant. Market analysts know how this works and this is not mistaken by larger market cap, as you’re only dividing the same pie in fewer (and hence thicker) slices. As for the cut in cost of dividends, first of all, dividends are basically net income that is distributed to shareholders. It does not represent a cost for the company and neither is determined by the number of outstanding shares. It’s rather a cash flow transaction resulting from a payout decision to be proposed by the board of officers for the approval by the board of directors. Also, distribution of dividends cannot offset losses of business units by the mere fact that it is not a P&L(profit & losses) component.
On the positive side, it does acknowledge the absent role of the board of directors in properly vetting the strategic decisions of the company. It amazes me that after all GE has been through it still maintains the bad governance practice of having the same executive accumulating both CEO and chairman of the board roles.
Such amateurism can be found in the following affirmation in chapter 42: “The reduced number of shares would boost Earnings per Share and cut the total cost of the quarterly dividend, offsetting the loss of GE capital”. The increase in EPS derives from a simple arithmetic calculation: if the denominator of a fraction is lower, the result will increase if the numerator is kept constant. Market analysts know how this works and this is not mistaken by larger market cap, as you’re only dividing the same pie in fewer (and hence thicker) slices. As for the cut in cost of dividends, first of all, dividends are basically net income that is distributed to shareholders. It does not represent a cost for the company and neither is determined by the number of outstanding shares. It’s rather a cash flow transaction resulting from a payout decision to be proposed by the board of officers for the approval by the board of directors. Also, distribution of dividends cannot offset losses of business units by the mere fact that it is not a P&L(profit & losses) component.
On the positive side, it does acknowledge the absent role of the board of directors in properly vetting the strategic decisions of the company. It amazes me that after all GE has been through it still maintains the bad governance practice of having the same executive accumulating both CEO and chairman of the board roles.
August 28, 2020
I noticed that a number of present and former GE employees gave this book a high rating so I can feel comfortable that the author did his research and due diligence in telling the story. Maybe it was just me, but I found the telling of the story a bit "dry." To be fair there were a number of anecdotes but this read like a textbook in parts. Also GE appeared to be a fairly buttoned up organization, especially under Immelt. There were a few "scandals" but nothing that severely impacted the future of the company. Mistakes were primarily bad financial and strategic decisions. Based on this book, I would remove any thought of adding Jack Welsh to the business CEO Mt Rushmore class.
Good textbook for business students; so-so read for the general reader.
Good textbook for business students; so-so read for the general reader.
May 7, 2021
The first part of the book reads like a thriller novel - with the opening chapter detailing a visit by Flannery to the Power HQ in Schenectady - when the shady business of pumping the profitability numbers becomes evident - the reader is then treated to a roller coaster ride of the Jeff Immelt era with a back drop of GE’s history of becoming a financial business masquerading as an industrial company. In the end, it is a Greek tragedy of the American Corporation - where pride leads to the hero’s downfall and mere mortals are left to clean up the mess.
June 28, 2021
Amazing book about how things like aggressive accounting can get normalized at any company
January 25, 2022
Truly well written. Deep analysis in the Making of bad decisions that can drive a great company like GE down to almost nothing .
January 6, 2021
GE, a company synonymous with corporate america and the original Industrial Conglomerate, is a much revered and awe inspiring company that has always had a fascination for me, especially for its famed management expertise and its claim as the cradle of leadership of corporate america, by the past legendary CEO Jack Welch.
This book is a great read on the fall of GE from those lofty pedestals. Not dwelling much into the long history of the company the book neatly compiles to story of the fall from the last years of Jack Welch and focusses much of its content on Jeff Immelt and the choices he made as a leader of this company. While many an economic catastrophic events occurred during that period, there was no doubt that GE's position as a leader, and the business it was in was badly positioned to ride it though.
The book also exposes the false claim of the company's claim of having succeeded due to its leadership and management expertise, and clearly comes across as a firm that was unmanagable, and in the wrong business at the wrong time, and more importantly bleeding money while pretending it was all fine, through its accounting shenanigans and management jargon driven media image management.
One minor gripe, the book lets Jack Welch off the hook while blaming the entire mess mostly on Jeff Immelt. That the seeds of the downfall were sowed by Jack Welch seems to have been lost on the author. Overall a very good read.
This book is a great read on the fall of GE from those lofty pedestals. Not dwelling much into the long history of the company the book neatly compiles to story of the fall from the last years of Jack Welch and focusses much of its content on Jeff Immelt and the choices he made as a leader of this company. While many an economic catastrophic events occurred during that period, there was no doubt that GE's position as a leader, and the business it was in was badly positioned to ride it though.
The book also exposes the false claim of the company's claim of having succeeded due to its leadership and management expertise, and clearly comes across as a firm that was unmanagable, and in the wrong business at the wrong time, and more importantly bleeding money while pretending it was all fine, through its accounting shenanigans and management jargon driven media image management.
One minor gripe, the book lets Jack Welch off the hook while blaming the entire mess mostly on Jeff Immelt. That the seeds of the downfall were sowed by Jack Welch seems to have been lost on the author. Overall a very good read.
August 6, 2021
If you have read the book "Jack: Straight from the Gut" by Jack Welch which goes on to talk about formative (rather growing) years of General Electric, it will be a delight to read this book. After having read the book by Jack where he talks about being No 1/2 in all segments of business where one is present, its a pain to read this book which talks about financial engineering and creative accounting that GE had adopted to manage the wall street. The book by Jack Welch is about the Jack Welch Era and this book is post Jack Welch era.
Successor of Jack Welch is not able to take GE out of the woods comes a person who doesn't like dissent. False promises to the investors, creative accounting and large acquisition without evaluating synergies in Immelt era has gotten GE to a difficult situation in which it is currently.
The book is having negative bias towards Jeff because I am sure that he must have done somethings right in 17 years which included the global financial crisis of 2008 and 9/11 when he had just taken over as the CEO.
One serious issue with the book is the chronology of events. There are missing linkages with the chapters in the book. For example, in one of the chapters the author is talking about Alstom acquisition and the chapter following that he would start talking about other event not at all linked to Alstom. Suddenly, after two chapters he would again start talking about Alstom acquisition. This is a serious feedback for the author which I am sure would be coming from many other readers.
Successor of Jack Welch is not able to take GE out of the woods comes a person who doesn't like dissent. False promises to the investors, creative accounting and large acquisition without evaluating synergies in Immelt era has gotten GE to a difficult situation in which it is currently.
The book is having negative bias towards Jeff because I am sure that he must have done somethings right in 17 years which included the global financial crisis of 2008 and 9/11 when he had just taken over as the CEO.
One serious issue with the book is the chronology of events. There are missing linkages with the chapters in the book. For example, in one of the chapters the author is talking about Alstom acquisition and the chapter following that he would start talking about other event not at all linked to Alstom. Suddenly, after two chapters he would again start talking about Alstom acquisition. This is a serious feedback for the author which I am sure would be coming from many other readers.
January 20, 2022
Overall, an interesting read. I knew nothing about GE, aside from general Jack Welch veneration. The specifics are intriguing - how did a hundred year old conglomerate go from over $400 billion in market cap at the turn of the 21st century to just $100 billion today? How did a company that at one time controlled plastics, healthcare, aviation, power, NBC, and was essentially the third largest bank in the country get to where it is today - divested of most departments and on a path to become three separate companies in the future?
The broader implications for any leader are worth learning about today. Obviously a lot of things happened under Jeffrey Immelt's tenure (his second day was Sept 11, 2001), but the biggest throughline underlined in the book is his unstinting optimism and a belief that pure willpower and desire could overcome all. A good reminder of the value of dissent and the fine line between ambition and delusion.
The broader implications for any leader are worth learning about today. Obviously a lot of things happened under Jeffrey Immelt's tenure (his second day was Sept 11, 2001), but the biggest throughline underlined in the book is his unstinting optimism and a belief that pure willpower and desire could overcome all. A good reminder of the value of dissent and the fine line between ambition and delusion.
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