Lesson from GE: Financial engineering is not engineering.
Further lessons from GE:
* Gaming the system internally or externally is something a CEO needs to actively manage and defeat, not reward.
* Trying to turn businesses based on contracts for delivery (with lumpy revenue/risks) into contracts for service and recurring revenue is a dangerous game, because you take your eye off the ball that is delivering the products in the first place.
* Conglomerates of disparate businesses never work in the long term, primarily because of the points above. Google is an example of how that affects IT/cloud/services businesses. Microsoft is an example of how to re-orient the business to focus on a specific class of customers (Enterprise) and their direct needs.
You're suggesting the answer by asking the question, but yes, companies that consistently deliver moderate performance (are less extractive and don't maximize gains) would generally be better for the world as a whole than highly optimized, fragile corporations that deliver maximal returns by chewing up everything in their path.
They'd even, in the longer run, be better for their own shareholders and their descendants.
They might even help in closing (or reducing) the gap between the rich and the middle class. But, as there are no incentives for such behavior in society any longer, I doubt we will see widespread adoption until it is inevitable.
The question then becomes, are they moderately performant?
Japan’s bubble resulted in deflation because a bunch of zombie firms spent decades paying down balance sheet debts rather than resolving things quickly through bankruptcy. And the Japanese keiretsu structure mostly disadvantages businesses outside of the massive conglomerates, particularly small and medium enterprises.
But it is a holdings company, and their business model is to make returns on equity (and possibly loaning out capital to their subsidiaries) instead of directly managing their subsidiaries' operations and generating revenue.
> For example, Gryta and Mann report that GE would sometimes artificially boost quarterly profits by selling an asset (e.g., a diesel train) to a friendly bank, knowing that it could then buy back the asset at a time of GE’s choosing.
If you want to see another example, look into how airlines buy and lease aircrafts or how refrigeration systems of grocery stores are accounted for on accounting statements. Review accounting statements and quarterly/annual reports of large US public companies, you will find all sort of financial engineering. You will find a lot of such financial engineering cases discussed in any MBA Financial Reporting and Accounting classes.
I'd be interested in reading the book to get more detail on that. Sale and leasebacks (which often include buyback options) are a fairly common capital management measurement in the asset finance sector.[0] GE could have been committing fraud or this could be sensationalist reporting of a mundane financial management technique.
Great points. It depends on how confident you are in the claim that the primary purpose was “artificially boost quarterly profits.” No particular evidence presented in the excerpt.
Claiming the sales as a profit in the above situation is dubious. When I leaseback an asset I previously owned, I am taking a long term liability which is larger than the profit. This is totally fine in the case of something like an office building - a company probably won’t be around or be fit for the lifetime of the building - but dubious for core company assets.
For a car? A car will definitely not outlast most viable companies. What if it's cars for a car rental company? I believe the car would be a core company asset then. But if you don't label it as revenue, what DO you label it as? I'm not an accountant, only have rudimentary accounting knowledge, but don't see any options other than revenue there.
You got a better way to explain the transactions? If you're saying the transactions should be illegal, there are plenty of scenarios where these transactions wouldn't be weird or horrible. How to differentiate which are OK and which aren't?
GE exported a lot of the Welch insanity. Anyone unfortunate enough to be forced into Six Sigma training will attest to the agony. This was through their own and licensed training orgs, their people who left to run other companies, and this guy, a sort-of Erdős-for-business that spread a lot of the frobozztik into other C-level offices. (No idea how much of it he came up with.)
I was at a heavy equipment company that was sold on 6 Sigma. It was so bad. So much quality theater. Teams were culled of their “high potential” employees, who were sent off to become black belts and lead random projects with fancy story boards and amazing $$$ saved charts. I think it honestly was what seeded my departure a few years later.
We had a Six Sigma "Program Office" that sent out pompous announcements whenever a Black Belt got his/her wings. They tried to make it sound like Top Gun. These elite and best-of-the-best would empower the project squadrons to victory over defects.
Somehow the projects didn't feel like diverting people and budget to makework tasks that fit the Six Sigma model as opposed to their reality. It eventually faded to be replaced by other codswallop.
As a serious statistics person, 6-sigma drove me nuts with it's own separate from reality probability tables, and their own separate terminology from the entire history of statistics, and their reasoning methods were simplistic and their role titles were immature nonsense: "black belt"?!?! It really felt to me like a massive fraud. But oh JACK WELCH endorsed it, he's a GAWD! Yeah, I smelt that shitty decay long ago, and I probably got somewhat of a bad reputation for bad mouthing 6-sigma during it's hay days. One of my in-laws was seriously into 6-sigma, had his "black belt", and is a bit of a giant dope, so that did not help...
I worked at GE for a bit when I was in college right at the end of Jack Welsh's tenure. The bizarre culture blew my mind and in a big way steered me away from pursuing a career at big businesses.
It was at the height of the 6 sigma management craze. I had 8 managers between me and the CEO. All of them were pitted against each other in a race to climb the corporate ladder. Internal competition wasn't the fundamental problem. It was how it created a culture of backstabbing in order to hit KPI targets. Managers would intentionally withhold important information from each other or hold back projects just to make their own quarterly reports look good. The general idea was you did a 2 year run at GE, climb as quickly as possible, then leave to pursue a consultant career teaching other companies the GE system of management.
The culture was driven from the top down by Jack. It looked good on paper but was eating away at the company's longevity.
The pinnacle example of the corrosive culture was when a female manager sent one of my female coworkers home because she wasn't wearing pantyhose. She pulled her into her office to explain how GE is a "dog-eat-dog" world, and women in particular need to act and dress a certain way to get ahead. And she wasn't wrong. Everyone was hyper focused on conforming to "the culture" driven ultimately by the quarterly reports, at the expense of all else. It was surreal with many parallels to a personality cult with Jack at the top.
Strangely, I enjoyed working there and seeing how the sausage got made. But OMG, if GE didn't fail, I would have lost my faith in true meritocracy... not to mention a bit of humanity.
I forgot to mention... it was a HUGE deal when Jack came to visit a local GE subsidiary. Like Tom Cruise or the President visiting. People kinda worshipped him. He was Elon Musk for his day... but without social media or a focus on innovation.
I'm the same age as Gates, so was equally immature back when Welch took over GE but I was not fooled for very long at all. Welch was 20 years older at the time, I was not impressed with the lack of acumen he had developed.
It was plain to see from almost the begining that Welch was ruining the company, he just didn't have what it takes naturally.
This was Edison's company.
>It’s also not a case of outright fraud, like Enron. It’s a textbook case of mismanagement of an overly complex business.
Resulting in financial shenanigans, like Enron.
It's just a matter of where regulators (and any underlying regulations) are functionally drawing the line between technically illegal and merely unethical financial manipulation at the time.
Due to that friendship, I doubt the book has real value. It's propaganda for those in GE that ought to be in jail, or at least recognized as at least the "good game players that played by the dubious rules until the field was destroyed."
An interesting datapoint: comparison between GE HealthCare and its competitor [0]. To sum it up, here are the propotion of revenues reinvested in R&D:
Philips: 12%
Siemens: 8%
GE: 5%
Having used equipment from all 3, it feels like Siemens 50%, Philips 5% and GE stole some shit and glued it together as a joke someone paid them to perform.
I use MRI scanners and a huge part of my experience could be a local issue with service and application support.
What happened to GE? Simple. Jack Welch killed the golden goose. During his tenure he shifted focus and money away from long-term R&D in the name of boosting quarterly profits. Product development took a back seat to selling "services", i.e. focus more on selling contracts around maintaining your turbines than you do on developing and manufacturing good turbines in the first place. I won't even get into the heavy borrowing and use of GE Capital to turn the company into a casino that happens to make a few things on the side.
Put another way, if you took every shortsighted MBA-driven business fad of the 80's and 90's and turned it into a person, you'd get Jack Welch. Sadly, his methods were very very good at juicing short to medium term profits, so firms all over the U.S. were quick to copy his methods, which did more damage to American innovation than any foreign power could dream of.
There was a time when American corporations discovered that financial services were more profitable than manufacturing. The biggest division of GM was GMAC.
The "profits" were at least partially fraudulent -- division managers cooking the books in order to make their numbers. I seem to recall that some of them went to prison.
Multiple companies have turned into glorified financial firms with their core product becoming auxillary. Look at airline credit cards, Starbucks loyalty cards, Block's Bitcoin repository, AMZN investing in Rivian and so on.
Even technology feels a little bit like that. Anybody with moderate success - either as a founder or leader at a successful startup - seems to turn into an investor. Over time, the industry turned into an inverted pyramid with more money managers than operators. 2% management fees are easy money, and 20% of gains encourages gambling. So much capital burning a hole in the pockets of novice investors drove bad investments, and ultimately the most recent financial downturn happened as LPs wised up.
We glorify operators who keep operating - such as Elon, Zuck, and Bezos - but, few people seem to do it.
Starbucks is a terrible example. That's like claiming the Costco membership makes the Costco retail business the auxillary. Or that Kroger/CVS/Walgreens membership/rewards cards do the same for those retail businesses (when in fact all they do is drive higher rates of return visits and higher sales).
The Starbucks business remains almost entirely their retail service business.
That sounds like "cars are just a way to make people come to the car dealership". Technically, this is true, but "just" here is not playing a good role. The whole point of the thing is the cheap bulk goods, so "just" is not really applicable there. You can't remove it without making all the rest utterly pointless.
In fact, for all these companies the retail operation is a secondary business. Their main business is to prop up the stock. They do that using all kinds of accounting and financial tricks, the reward cards being one of them. These companies will do anything to increase short term valuation, such as stock buybacks (totally useless for the business), announcing vaporware/initiatives that have little impact on business but look good for investors, etc.
>There was a time when American corporations discovered that financial services were more profitable than manufacturing. ... The "profits" were at least partially fraudulent -- division managers cooking the books in order to make their numbers.
Regardless of how it happened in individual cases back then, this is still the case now, and if anything has accelerated, so it's not as worth mentioning as the wider phenomenon: Why are so many different companies in so many different industries putting out much worse business/consumer products these days? Because they're not in the business of selling to customers any more, but in the business of selling non-commodity money products to the financial sector in a little-known industry called "The New York Stock Exchange" so funds, or individuals, can bridge their shortfall between compounding obligations and shrinking currency value. GE isn't in the business of selling turbines, GM doesn't sell cars, Microsoft doesn't sell software, Broadcom doesn't sell components, Moderna doesn't sell pharmaceuticals, and Pepsico doesn't sell sugar water to children. All of them are in the primary business of selling money that's not on a pre-expected inflationary schedule, and everything else they do is just a particularly long-run guerrilla marketing campaign for that money over the other guy's in the corporate headquarters down the street. If they wanted to be in some other business, they'd either not go public in the first place or buy back their stock so they didn't have to serve two market masters any more.
This explains why going public can be such a Faustian bargain for so many otherwise successful companies that quickly and seriously trips them up; it's essentially a decision to pivot the business from a product market fit to a new sector most of the building usually knows nothing about, just because it will let them double-dip on monetizing their hard work. Is there any other situation where a move that extreme, or the same pivot for any other reason, wouldn't get laughed out of the room? I can't think of one. It turned out to work for a couple of years for google by letting them attract top talent to the advertising products of anything not called search or ads (before they've now been losing the plot just like everyone else), and combined with the good timing of running their business through the first quarter of this century made their pivot very successful, but most companies aren't called google.
It also explains a lot of surface-level counterintuitive behavior: why are too many arch-capitalists not nearly as interested in investing in innovations that price their competitors out of the market as we'd like them to be? Because they wouldn't be mostly investing in innovation but in advertising, since you can't innovate a piece of paper with "1 share" written on it (without running afoul of the SEC and co. at some point). Advertising isn't really an investment; it's more like gambling, and most of the financial sector sees gambling as an uncomfortable risk (for their suppliers anyway) even if you happen to be up a bit right now. They'd much rather see a steady "blue chip" growth pattern that's half a point above the index than the wild swings in revenue and spending that come from experimentation, so it only happens in C-suites with a culture of tolerating more gambles and their associated stock spikes. Why are so many companies moving to the same business model of skeleton operational costs and recurring subscriptions instead of trying to carve out different niches for different consumers? Because the financial world, by dollars, largely prefers the advertisement that that's how their suppliers increase the attractiveness of their quarterly reports, so the customer is always right. Why are even accelerating startups entering the big leagues so much more eager to get bought up by the bigger, more ossified old guard than try to replace them, even as it puts them at more and more legal risk? Because gaining a footing through advertising is an absolute slog of a business to cut against the grain in, much more than tech or manufacturing or grocery services or logistics or what have you, and in this age it's tougher than ever, so they make the reasonable decision to throw in the towel and drift off someone who's already got momentum.
I could go on, but I already feel like a broken record and it's mostly more of the same. There's plenty of historical particulars to consider, But what happened to GE from a 10,000-foot perspective? The same thing that happened to everyone else: the index hit 4-7٪, the appeal of being on the top of that pile looked like a mirage of water across the desert, and they pivoted, to unanimous applause until they either made it or the wheels came off. Everything else is the same story in a different setting.
The interesting part is that Jack Welch wasn't an MBA - he was a (PhD) chemical engineer who'd worked at GE for his whole life after getting out of grad school. He'd had several management positions in the company before he got to CEO, so it's not like he didn't understand how the company worked and kinds of things it did.
Wasn't Welch the one who was using "sack 10% of the managers each year" as a strategy? That one was obviously long-term stupid; I can see it being healthy for maybe a cycle or 2, but after that it would just kill off all the intangibles of management. At some level, every company relies on a culture of people doing the right thing to thrive over the long term.
Although I do think that it is a mistake to just pin blame on Welch for that. There is a pretty solid amount of evidence that the WWII-era-boom US started falling apart from the early 1970s; there were a lot of ugly trends that took hold after US traditional oil production peaked. One of the symptoms is that nobody important seems to see a model where the States are a world class manufacturer. If nobody sees a way to run manufacturing companies at as high-performance entities then it won't happen. There is a lot of blame to be assigned to the space between the CEOs.
That is to say, my thesis is that management is optimising correctly in context - but they are in a context where US manufacturing excellence doesn't make as much sense as it once did.
The reason US manufacturing excellence doesn't make sense is because we let it rot.
We don't have cities like Shenzhen, where everything you need to get a product to market is within same-day courier range. I understand this was a feature of the old "hardware-centric" Silicon Valley, and it made fast iterations on new products a lot more viable. I wonder if we could even build a hub like that today, with property speculators and NIMBYism blocking anything short of grabbing a cornfield in Iowa and declaring it our new national manufacturing centrepiece.
We've completely ceded on education, and that was realistically where we could have competed. We could never match the labour prices of China or Viet Nam, but we could offer better trained workers. Our schools are a disaster, and it feels like we've completely lost a focus on competitiveness. It was only a few years ago, we were very fixated about being beaten in test scores, but now the focus has been lost to social battles (scares over LGBTQ+ content) which suck all the oxygen out of the room when people want to ask about actual student achievement.
We don't have the right backing for moonshot inventions. The way we lost solar panels to the PRC should be a freaking embarrassment. We knew for 40 years that people are going to want these things. Moreover, it was a new technology-- you didn't need to fight with entrenched players that didn't want to retool (like EVs)-- all you needed was a stream of seed capital and friendly loans to make sure people built here first.
This might be helped with some more government intervention-- strong industrial development finance products with a VC-esque mentality of "90% of them will fail, but a few will pay off 50-fold". The state is a good backer here, because they can take the "50-fold" in forms other than raw stock appreciation, like "securing an industrial edge for our country."
The US seems to have transitioned to a fully financial economy. Nixon and Reagan left to you a legacy that eventually will be America's downfall, just look how the Southern Strategy has eroded USA's democracy, Reagan's economic policies propping up the whole finance sector.
Nothing else matters more than finance, and it's shareholder value above everything else (consumer value, employees' well being, return to society be damned) is the ideology Welch instilled in generations of MBAs that went to control most corporations.
When everything is judged on a single metric it ends up eaten by Goodhart's Law, the corporate game is to manipulate the books well enough to increase share value, the finance market does not care if layoffs will impact the company's competitiveness in 5-10 years, the finance market does not care if the company is eroding their customers trust (e.g.: Google killing off products willy-nilly), if the books look good and costs are down while revenue is up then share price go up.
It will crumble, it's not sustainable, the main issue is when will it crumble and how destructive it will be for normal people.
Aren't all of them quantitative instead of qualitative? Every trader I know in Big Finance is basically creating/using statistical models based on books' numbers vs other books, not analysing a company's products and labour potential on a human level.
> I wonder if we could even build a hub like that today, with property speculators and NIMBYism blocking anything short of grabbing a cornfield in Iowa and declaring it our new national manufacturing centrepiece.
Why is that a problem? Isn't that what "building" a hub means?
What do you think Shenzhen was before it got the SEZ designation?
Industry was already lost when solar panels started to become a thing. That was never going to be a possibility for the USA, unless it changed its course.
Exactly, you weren't going to get talented, committed smart young persons into the solar industry in the late 2000s - early 2010s, all the money was in internet tech. No solar company could have competed with the 600k yearly comps provided by companies like Google to middle-rank engineers.
Tesla and everything Musk-associated bucked the trend for a while because of the literal personality cult surrounding him back then (a thing easily forgotten by now when everyone likes to hate him), that's why his companies were still able to get young talented engineers and working them very hard while not paying Google-like comps.
Not every talented engineer is eager for the cut-throat hustle to chase a 600k comp package (which ends up at 70k when the stock implodes). I'd think it might even be slightly less common when you get into research and greenfield stuff-- you've got people motivated by a vision and the opportunity to deliver it.
Messaging like "We have the financial and structural backing to keep the project alive indefinitely" and "This is a job for life-- if it takes you 20 years to make the breakthrough, we're willing to wait" might appeal to those people, even if the compensation is a bit lower.
I agree that there are other knobs to bee turned, but housing will most probably get in the way of that, as the people earning 600k per year will chase out of the housing market the people who will go with their passion.
Similar (and related) discussion when it comes to education, people earning 600k per year will be able to provide better education opportunities to their children compared to the passionate but earning-less-money people, and if you're part of the second group at some point it will become harder and harder to explain to your spouse that your kids won't get the same chances in life compared to your friends' children because you're going for passion over money, unlike said friends.
I know that all this sounds very mundane but it's part of day to day life, maybe the Soviets had a good idea when they basically built scientists-only cities in the middle of Siberia or somewhere like that.
> Our schools are a disaster, and it feels like we've completely lost a focus on competitiveness.
I do wonder how much of an attitude of "we don't need everyone to be successful, we just need enough" there is among policy makers. At this point, it seems that it's more cultural than a mere policy reorientation could fix to make the average student academically competitive again.
The correct description is death by Wall Street. Despite recent attempts, there is no way to revive industry in the USA because industrial companies cannot make the amount of profits that Wall Street wants. They are interested on monopoly power exemplified by Google and Apple, which are able to generate the juicy returns that investors want.
* Becoming unproductive from the 1970s. The difference is one of velocity rather than location. If we're talking "global manufacturing excellence" the trends have been favouring Asia for a while.
See also https://wtfhappenedin1971.com/ where a bunch of important changes are showcased. Modern management styles that aren't good make a lot of sense sense when considering a lot of those graphs. Financial shenanigans have a lot more payoff than manufacturing, and manufacturing gets harder as the energy squeeze happens.
I’m under the impression of having read that Immelt inherited some semi cooked books and had to undo some of those things. Under Jack the accounting was not up to par.
It's interesting, isn't it. Jack Welch must have had very many superb characteristics, to be as revered as he was. Or is it an element that the profits of golden-goose-killing created the mystique?
You've seen how celebrity worship works -- how often does it involve "very many superb characteristics?" Yes, the pumped up numbers helped, but there will always be a market for selling validation to assholes.
It's horrifying. The man destroyed one of the most profitable and productive companies in the world to make himself look good, and make huge quantities of money for himself. From a business standpoint, he has no good qualities, as long as you are assessing over a longer period than ten years. He's really quite terrible at running a business, but great at making it appear that the business is doing better than ever while it rots away. Frankly, it's close enough to fraud that it should be a criminal offense.
If this is really Bill Gates talking about Jack Welch, we're in real trouble.
It's simplistic to think there was a single cause of failure. Sure, toadyism might delay bad news, but how exactly did they lose their market and product advantages in each of their businesses?
Partly I think it's just too easy to steal expertise once it can be packaged and processed, whether business or engineering or manufacturing. A lot of very expensive value probably just walked out the door. I suspect that has been the business strategy for most of the up-and-coming engineering and product companies today. I wonder if there's some way to quantify that hypothesis?
The article written by Bill Gates very much glosses over anything Welch did, with the notable exception of praising him as someone who wrote a bunch of books and who was looked at as a visionary.
He goes on to mention a few things for the downfall:
* Lack of understanding of financial investments by the management and executives
* Encouraging hearing 'good news' and hiding 'bad news' by leadership, which meant they were ignorant of many festering problems that needed fixing
* Diversity in enterprise -- lack of ability for anyone to understand how all the pieces fit together
* Cooking the books to keep Wall Street happy
I think perhaps you took something from the article that wasn't present, or I missed the part where he attributed 'simplistic' causes.
However, in my personal opinion I think Gates is too close to the situation and the actors to have a qualified and unbiased opinion. Refusing to blame Welch for anything besides being slightly ignorant of financial complexities illustrates that he isn't willing to look at Welch's leadership critically.
I suspect that Bill Gates knows that it's simplistic to think there was a single cause of failure. In the book Breaking Windows, the author quotes Bill Gates complaining about people who think that companies fail because of one simplistic reason. I think he understands that it's complex.
GE washing machines and dishwashers are solid and the distributor service network still backs them. Haier (the company that owns GE Appliance) sells Haier-branded appliances that aren't bad for the money, too.
Commercial appliances are the way to go for reliability. They are 3-4x the cost but for some appliance categories that's palatable. E.g., we were able to buy a Speed Queen but haven't found a commercial fridge we're comfortable buying.
Commercial isn't all upsides, either, since you are committing to owning the same unit for longer and paying for a series of repairs over time (or DIY if you have time and expertise.) The bulk of the retail market would rather put that money into a new unit every 8-10 years. We're with the crowd in some appliance categories, not all.
Chinese companies have been buying reputable brands, and building new reputable ones (not the disposable random-name spamming brands that Amazon lets ruin searches).
Maybe Samsung will figure out how to compete in the demand for good quality. As a consumer, I started to think they were moving in that direction in some categories, from their earlier budget-brand rep in computer products, but looks like maybe not.
(Example: There's been price-gouging for remaining new-old-stock Samsung 2.5" Pro SSD, because Samsung discontinued it. By reputation, people consider it better quality than any brand's current 2.5" SSD offerings.)
Were Samsung appliances ever like that? I've never owned any but I do remember that their washing machines had a reputation for catching fire (there was a recall if I remember). Perhaps also their fridges, or maybe I'm remembering some other issue with those...
I am personally dealing with this right now with Maytag. It was under warranty and they sent someone, but they are taking their sweet time. The people I live with are getting extremely upset with me. Never again. I just bought it a few months ago and I am still paying the damn thing off. I purposely picked a simple model with no ice maker or screens so this doesn't happen. Joke is on me, I guess.
I worked at Samsung for seven years. The culture at Samsung (mobile software division) was exactly as bad as GE. They had thousands of "engineers" fixing the same bugs over and over while the R&D was busy pushing absolute horseshit Powerpoints. I've owned Samsung ACs, TVs, phones, washers and dishwashers and most of them went kaput a year or two after installation.
I've got one of the last good Samsung TVs (my opinion). It's pushing 10 years old, one of the first 4k models. There's a separate box for the inputs and it has no ads. I am really reluctant / not sure what I'm going to do the day it goes bad.
> The real problem at Microsoft is one that every other public company would love to have – they make too much profit. So unlike every other public company, Microsoft traditionally manages its earnings not by cutting expenses but by increasing spending. It’s a legacy technique invented years ago by legendary CFO Frank Gaudette and embraced by Bill Gates and Jon Shirley because it accomplished the task of meeting Wall Street expectations, allowed the company to hide spectacular true profit margins, while still generally keeping anti-trust officials off Microsoft’s back.
When researching washing machines recently, I was surprised to see that probably the most innovative mass-market systems available right now are from GE.
They’ve brought out a heat-pump based low-energy use combined washer/dryer* that supposedly performs great - something that can’t be said for existing combo or low energy systems.
I was surprised to see innovative appliances from GE! I thought they had been reduced to re-badging cheap, mediocre systems produced by other manufacturers. I hope this means the company is on the right track again.
It's darkly amusing that, at least for me and others on this thread, keeping the "GE" brand label is probably costing them sales. I also wouldn't even glance at a GE-branded home appliance if I were in the market, on the assumption it was cost-cutting trash, but if it's true that a different company has bought the brand and is making good stuff under it, now suddenly I might be interested. Which is the opposite of how buying the rights to a "classic" brand is supposed to work.
My 2020 GE dishwasher broke after less than a year, and they claimed it had been more than a year so I wouldn't be covered by warranty. Fortunately I had an email receipt, but it certainly soured me on anything labeled GE.
Haier has rebranded the top-of-the-line as "Café". My Café range has absolutely no GE branding on it. The most charitable interpretation I have for that is that they are looking to the future (2056) when their right to use the GE brand expires.
We needed a ventless dryer because the vent our dryer was using was incredibly illegal. The only ones sized for a family of 6 available in the US were GE branded. The thing works great, but I would have bought any other brand if it were available.
People who know about appliances say "Never buy a Samsung appliance or an LG refrigerator." Curiously enough, the most-hawked appliances at Home Depot are...
Asko has that and a condensing dryer that is more efficient. GE makes great products that but in my experience engineered their parts to last about 8 years.
I sometimes wonder if there is a single group of advisors, probably from the financial institutions, that gives advise to CEOs periodically, and then they just follow along to build a trend.
Isn't that the actual function of (big-brand) consultants? They roam from company to company, sharing current "best" practices, and tout that as one of the advantages of hiring consultants.
> Although Steve Ballmer and I made our share of strategic mistakes, we were maniacal about making sure our numbers were rock solid and avoiding incentive systems where people could cram a lot of sales into a quarter in order to look good or meet some quota.
There were many fans/followers through out US corporate boards - just like sports coach lineage, there were Jack's lieutenants taking over US corps. I have not followed their success/failures. All I remember was my then boss's total admiration for his management approach - I did not stick around.
I always assumed he caught the great bond bull market run at the right time and GE Capital made him the captain of US industry - his is one of the main reasons of US decline in manufacturing. If not for silicon valley - we/US will be in a poor state
The USA, like all of us, lives in an industrial world and have maintained their supremacy in that world by being the pre-eminent industrial military power.
The loss of American manufacturing directly threatens this pre-eminence, which in turn threatens a lot of what made this world the way it is.
Oh, the Genius of Jack Welch is simple. Lie to investors while dismantling the company you're in charge of. Use the profits from selling off the dismantled bits to cook the books so it looks like you're becoming more profitable, this will get you lots of bonuses and you'll become super rich, then just walk away before anyone figures out your bullshit. Sure you've destroyed hundreds of thousands of jobs, and ruined one of the most profitable companies in the world, but you're rich now, so fuck it. Pure genius.
"Success theatre" went supernova at GE. You would think that since everyone points it out that the needle would be moving in a new direction. It's not.
But somehow nothing ever changes - when this article was written back in 2021, the financial analysts had a buy rating and the price per share was hovering around $10. Today it’s at $129, despite significant competition in all aspects of their business. Bill Gates can say he didn’t see it coming, but all that signals is business as usual - the giants of industry are so woven together they seldom see the train coming
GE isn’t up 1290% in 2-3 years; the split adjusted price was $70-90 during 2021.
GE’s all time high share price (split adjusted) is $377.68 on 8/28/2000. It has lost nearly two-thirds of its value in the past 23 years, and that doesn’t account for inflation.
Further lessons from GE:
* Gaming the system internally or externally is something a CEO needs to actively manage and defeat, not reward.
* Trying to turn businesses based on contracts for delivery (with lumpy revenue/risks) into contracts for service and recurring revenue is a dangerous game, because you take your eye off the ball that is delivering the products in the first place.
* Conglomerates of disparate businesses never work in the long term, primarily because of the points above. Google is an example of how that affects IT/cloud/services businesses. Microsoft is an example of how to re-orient the business to focus on a specific class of customers (Enterprise) and their direct needs.