Lights Out Quotes

“Releasing the synergies that would come from eliminating redundancies—that is, people GE didn’t need anymore—would lead to higher earnings. As renewed attention led them to try to whip the industrial businesses into shape, Bornstein, Immelt, and the rest of the GE top brass soon settled on a name for the program they embarked on in 2013: Simplification.”
― Thomas Gryta, Lights Out: Pride, Delusion, and the Fall of General Electric

“Schmidt’s advice would come to define the methods of Comstock’s media and public relations operation. 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.”
― Thomas Gryta, Lights Out: Pride, Delusion, and the Fall of General Electric

“Instead of charging a small team with developing the best product and then letting the operation grow with the product’s evolution, GE set up a huge organization that wasn’t quite needed yet.”
― Thomas Gryta, Lights Out: Pride, Delusion, and the Fall of General Electric

“As one GE board member said, “The worst thing to happen to Jeff wasn’t 9/11. It was Sarbanes-Oxley.”
― Thomas Gryta, Lights Out: Pride, Delusion, and the Fall of General Electric

“Under Welch, GE was changing rapidly. He famously gave a speech in his first year as CEO titled "Growing Fast in a Slow-Growth Economy." With the power of the GE brand providing credibility to his strategy, the new CEO oversaw almost one thousand acquisitions, or about four deals a month over his two decades, with a value topping $130 billion. p17”
― Thomas Gryta, Lights Out: Pride, Delusion, and the Fall of General Electric

“So far in 2008, the company had spent more than $3 billion buying its own stock. And in 2007, GE had spent $15 billion on its shares. Over the entire period, GE paid an average price of about $37.50 for half a million shares worth more than $18 billion. Now, it would sell almost 550,000 shares back to the market for $22.25 a share in order to raise $12.2 billion. By selling shares back to the market at a much lower price, GE was wiping out more than twice the amount of cash that the deal with Buffett had yielded. It was a disastrous use of the equity markets, and it wouldn’t be the last time.”
― Thomas Gryta, Lights Out: Pride, Delusion, and the Fall of General Electric

“Another famous and controversial tactic—often called “rank-and-yank”—forced managers to come up with an annual ranking of the performance of their workers. The bottom 10 percent would be put on notice, and if they didn’t improve, they were fired. The constant pressure from this kind of tactic only added to employee tension. Rank-and-yank worked well for GE’s acquisitions, providing a formula for trimming fat and squeezing profits out of the operations. But some managers didn’t see it as helpful, especially after it had been used for a few years and some competent employees were ending up in the bottom 10 percent. You can trim fat only for so long. Also, some thought that the policy made workers fight each other for survival and inhibited managers’ ability to bring their workers together to operate as a team for the good of the company. One manager tried to subvert the system by putting an employee who’d recently died in the bottom 10 percent of the ranking list in order to save another employee’s job.”
― Thomas Gryta, Lights Out: Pride, Delusion, and the Fall of General Electric

“In the weeks and months after Immelt left GE in 2017, a parade of negative stories and embarrassing disclosures revealed major problems that sent the company’s stock into a long decline. Conversations about what happened inevitably shifted to blame, and Immelt was the obvious target. He had spent sixteen years at the top and, regardless of what Welch had left for him, he’d had plenty of time to fix it. But there was plenty of blame to go around. Perhaps most of it should be placed on the board of directors, the independent group that oversees the CEO. Board members claimed to have been unaware of problems and to have gotten bad guidance from external advisers, and they said they didn’t understand how the company went from good to bad seemingly overnight. Some directors had no experience in GE’s business lines, others had trouble staying awake during meetings, and many stumbled away from GE’s collapse wondering, How could we have known? It had been their job to know, however, and their job to ask the hard questions that weren’t fully answered, or were never asked at all. It was their job to oversee management, and it was their job to protect investors from fatal hubris. Still, the path ultimately leads back to Immelt. As chairman, he was also responsible for steering the board. There is no doubt that GE’s size and complexity, which grew exponentially under Immelt, made it difficult or even impossible to manage. The CEO of a company is responsible for its daily functions and for managing its operations, however vast. The chairman guides the board, which is responsible for overseeing management and the CEO. When the board chair and CEO are the same person, the top executive is essentially his own boss. It can only get worse with time if a chairman remakes the board to his own liking. Simply put, it is terrible governance to give so much power to a single person and so little voice to shareholders. That is one reason this governance structure has been slowly fading from corporate America since the Enron era.”
― Thomas Gryta, Lights Out: Pride, Delusion, and the Fall of General Electric

“While Immelt said that he encouraged debate, meetings often lacked rigorous questioning. One executive recalled being in a board meeting in which Keith Sherin was presenting the quarterly financial results to the group. The Power business had missed badly, but little specific detail was provided on what went wrong. This executive braced for the reaction from the directors, but it never came—none of them asked what went wrong. When Flannery committed to renewing and shrinking the board of directors, it included half a dozen current or former CEOs, the former head of mutual fund giant Vanguard Group, the dean of New York University’s business school, as well as a former chair of the Securities and Exchange Commission. The seventeen independent directors got a mix of cash, stock, and other perks worth more than $300,000 a year. The terms had been even more generous when GE still made appliances; the company allowed directors to take home up to $30,000 worth of GE products in any three-year period. The company matched the directors’ gifts to charity, and upon leaving the board, a director could send $1 million in GE money to a charity. Some directors admitted to having been sold by Immelt’s sweeping optimism, even if they knew he wasn’t the best deal-maker. But they knew he had a hard job, was playing with a tough hand, and had survived multiple major crises. Plus, they liked him. Immelt said that he did his best to keep directors informed, noting that he required them to make trips to GE divisions on their own, but he also knew that the complexity of the business limited their input. As they’d done under Welch, the board usually tended to approve his recommendations and follow his lead. Some felt that Immelt manipulated the board, and it was whispered that members were chosen and educated to see the company through his visionary eyes. There was concern that the board didn’t entirely understand how GE worked, and that Immelt was just fine with that. Like many CEOs who are also their company’s chairman, he made sure that his board was aligned with him.”
― Thomas Gryta, Lights Out: Pride, Delusion, and the Fall of General Electric

“The other major oil industry suppliers were similarly weary, trying to shore up earnings by slashing jobs, trimming project costs, and squeezing their own customers and suppliers wherever they could. (The wildcatters had it worse: many of the mom-and-pop operators of the American oil patch started to file for bankruptcy.) One year later, GE would merge its oil and gas unit into the oil-field giant Baker Hughes, keeping for itself a more than 50 percent stake in the company and spinning out a new public company to be run by Simonelli, under GE’s control. The transaction eased GE’s exposure to the ongoing oil rout and gave the new company, dubbed “Baker Hughes, a GE company,” vast new areas of redundant employees and operations to eliminate. With Baker Hughes, GE changed its tone a bit. The deal was transformational, but in which intended direction wasn’t made clear. GE execs like Bornstein would proclaim that the deal gave them “optionality,” but the reality was that investors were left in the dark on the strategy: Was GE doubling down on oil? Or was it preparing to exit the industry? The idea of holding such a long-term option was nice, but the game pieces in the positioning were people, and those who didn’t leave their job had no idea where the future of the company might be. The new arrangement didn’t spare Lufkin. The historic foundry was closed. The city’s annual financial report now just shows a blank line when listing the company’s employment tally, evidence of the more than four thousand jobs that evaporated after GE came to town. Between two Mondays—the day GE announced it was coming to Lufkin and the day the company said it would move on, leaving a shuttered foundry at the center of town—just 868 days had passed.”
― Thomas Gryta, Lights Out: Pride, Delusion, and the Fall of General Electric

“There was support for Immelt’s foray into software in the traditionally gritty industrial world. Marc Andreessen famously wrote in 2011 that “software is eating the world,” meaning that it was transforming and disrupting businesses and sectors throughout the economy. But the widespread innovation, he noted, wouldn’t be as destructive for certain companies. “In some industries, particularly those with a heavy real-world component such as oil and gas, the software revolution is primarily an opportunity for incumbents,” he wrote. “Over the next 10 years, the battles between incumbents and software-powered insurgents will be epic.” GE”
― Thomas Gryta, Lights Out: Pride, Delusion, and the Fall of General Electric

“It was a pure interpretation of how markets should work and a major topic of debate around the financial crisis. The markets needed to have winners and losers. Intervening in the markets to help those who made bad decisions, no matter how calculated, distorted the risk taken by participants. That could have an impact on future investment behavior if risk was seen as having finite limits while returns had no corresponding ceiling.”
― Thomas Gryta, Lights Out: Pride, Delusion, and the Fall of General Electric

“Under Immelt, the company believed that the will to hit a target could supersede the math, even when hundreds of thousands of livelihoods—those of investors, customers, and suppliers, to say nothing of workers, retirees, and their families—hung in the balance”
― Thomas Gryta, Lights Out: Pride, Delusion, and the Fall of General Electric

“Immelt wanted division heads to generate imaginative new product and service concepts, which in turn would generate the new organic revenue on which his vision depended. It was a tall order: a handful of product ideas that would each pull in $100 million in new sales for each business. More important, Immelt wanted these “breakthrough” sessions to be led by each unit’s marketing department—to have the division that usually dictated advertising and branding stepping into the role that had been the province of product engineers. Immelt’s inspiration for the directive was an article he read about a smaller industrial conglomerate called Danaher Corporation that had formed an internal incubator to develop new ideas that could drive revenues and profits. Its CEO was a young whiz named Larry Culp who, at age thirty-seven, was even younger than Immelt had been when he took the reins.”
― Thomas Gryta, Lights Out: Pride, Delusion, and the Fall of General Electric

“The doubters soon realized that “Imagination at Work” wasn’t just advertising. Immelt was intent on putting marketing at the heart of GE strategy to dictate not just how the company sold the things it made but what it made in the first place. Much as Welch had before them, Comstock and Immelt hatched new jargon to express the process they wanted the company to follow. GE business leaders would now convene to come up with “Imagination Breakthroughs”—that is, ideas about products the company should design and sell.”
― Thomas Gryta, Lights Out: Pride, Delusion, and the Fall of General Electric

“At the same time that there was less oversight of GE finance operations, Immelt quietly reduced the board’s involvement with financial complexities. In 2002, he disbanded the finance committee of the board, which had been tasked with oversight of “retirement plans, foreign exchange exposure, airline financing and other matters involving major uses of GE funds.” He gave no reason.”
― Thomas Gryta, Lights Out: Pride, Delusion, and the Fall of General Electric

“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.”
― Thomas Gryta, Lights Out: Pride, Delusion, and the Fall of General Electric

“We’re a very complex, diverse company that no one from the outside looking in can reasonably be expected to understand in complete detail,” he said. “Our story to the investing world is, we have a lot of diverse businesses, and when you put them all together they produce consistent, reliable earnings growth.”
― Thomas Gryta, Lights Out: Pride, Delusion, and the Fall of General Electric

“Welch would say that he learned from this episode that it accomplishes nothing to step on the neck of someone who is already down. Despite his reputation for ruthlessness, Welch wasn’t heartless; he understood that a good coach knows when to keep his mouth shut and let the lesson be taught on the field.”
― Thomas Gryta, Lights Out: Pride, Delusion, and the Fall of General Electric

“GE melded Thomas Edison’s workbench with J. P. Morgan’s financial might to create a juggernaut that, in powering the nation’s middle class, its military might, and its explosion of financial wealth, marched in step with the rise of modern America.”
― Thomas Gryta, Lights Out: Pride, Delusion, and the Fall of General Electric

“He was a hunter—for killer deals and hidden risks, for undiscovered roadside taverns serving lunch.”
― Thomas Gryta, Lights Out: Pride, Delusion, and the Fall of General Electric

“The board had largely followed the chairman’s lead. One newcomer to the board under Welch was surprised by the CEO’s command of the boardroom and the sparse debate among the group. Confused by how the meeting transpired, the new director asked a more senior colleague afterward, “What is the role of a GE board member?” “Applause,” the older director answered.”
― Thomas Gryta, Lights Out: Pride, Delusion, and the Fall of General Electric

“As an example, if GE was trading at a price-to-earnings ratio of 40, that meant that, if its stock was $40, it was earning $1 per share every year. If GE then bought a company with a price-to-earnings ratio of 10—that company was earning $4 per share for every $40 of stock—GE was essentially trading $1 of earnings for $3 of new earnings without doing anything except making the deal.”
― Thomas Gryta, Lights Out: Pride, Delusion, and the Fall of General Electric