Lights Out: Pride, Delusion, and the Fall of General Electric

by Thomas Gryta

Under Immelt, there had been a buzzy, vague, optimistic spin that not only often failed to hold up under scrutiny but had eroded GE’s credibility with Wall Street and its workers alike.

Flannery had taken to uttering a new mantra around the company’s shiny new offices in Boston: “No more success theater.”

Power had sold service guarantees to many of its customers that extended out for decades. By tweaking its estimate of the future cost of fulfilling those contracts, it could report boosts to its profit as needed.

“What is the role of a GE board member?” “Applause,” the older director answered.

There is no science to picking the CEO of a company. Predicting a single person’s success at juggling uncertain events in dynamic markets spread across world economies can only be done with a time machine.

“My second day as chairman, a plane I lease, flying with engines I built, crashed into a building that I insure, and it was covered with a network I own,” he said just weeks afterward.

The Edison Conduit, however, had another, more important purpose: it was used to buy assets from GE Capital at prices higher than the recorded book value, creating gains that could be used to improve earnings. Of course, GE wasn’t transferring the risk of owning the assets, so it was really selling them to itself to produce earnings. But at the time, this wasn’t an accounting violation.

She believed that taking risks brought rewards but also punishment. In other words, if someone made a bad bet, they should lose their money.

The campaigns of both politicians and companies, Schmidt told GE, were not “won by the candidate or company with the best character, or product, but by the one with the simplest and most clearly told story.” In Comstock’s summary: “Pick a simple story . . . and tell it again, and again, and again.”