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>E is "a case study in how rapidly and unexpectedly the global energy transition away from fossil fuels travels up the economic chain and destroys value in the

>E is "a case study in how rapidly and unexpectedly the global energy transition away from fossil fuels travels up the economic chain and destroys value in the power generation sector," the report says. It points the finger at large shareholders, like Vanguard, BlackRock, State Street and Fidelity, who IEEFA analysts say should be doing more to push companies away from fossil fuels. This is interesting way to phrase things? It's the fault of the index/hedge funds, who likely did not have any say, for the reason that the executives running GE weren't forward looking enough?

xiphias2 7y ago
I don't understand what's so unexpected in an almost perfectly exponential adoption curve. Maybe only if the best tool GE has is a linear estimator.
- toomuchtodo 7y ago
  Index funds and the institutional firms that solicit them (Blackrock, Vanguard) aren't designed to be activist investors. Their role is to simply track a basket of stocks. This is a deficiency in passive investing. When management drops the ball (such as what GE did, not just in nat gas generation forecasting, but also how poorly Welch [1] and Immelt [2] managed the firm), there are fewer checks and balances until the value is already gone. [1] https://www.bloomberg.com/news/articles/2019-06-12/reassessing-jack-welch-s-legacy-after-ge-s-decline-joe-nocera https://www.bloomberg.com/news/articles/2019-06-12/reassessi... (Bloomberg: Was Jack Welch Really That Good? General Electric’s legendary CEO was good—but he was also lucky.) [2] https://www.cnbc.com/2018/02/21/jeff-immelts-refusal-to-give-or-take-bad-news-defined-his-leadership-at-ge.html https://www.cnbc.com/2018/02/21/jeff-immelts-refusal-to-give... (CNBC: Jeff Immelt’s refusal to give or take bad news defined his leadership at GE)
  - jandrese 7y ago
    Maybe we could fault the investors if they were clamoring for safe reliable income from well proven legacy business models and grumbling when the company invested more in R&D, but that's stretching things a fair bit. Mostly the story seems to be "giant multinational company is slow to react to disruptive technologies", which is a story you will hear every year for all time. It is inevitable. No company wants to fund the R&D projects that will kill a cash cow. This is why disruptive tech almost always comes from small startups or scrappy underdogs.
    - deleted 7y ago
      [deleted]
    - xiphias2 7y ago
      > Mostly the story seems to be "giant multinational company is slow to react to disruptive technologies", which is a story you will hear every year for all time. It is inevitable. No company wants to fund the R&D projects that will kill a cash cow. This is why disruptive tech almost always comes from small startups or scrappy underdogs. This is true for non-technical management, but if you look at Alphabet / Facebook / Amazon / Tesla / NVIDIA, the leaders try really hard to change the product and/or create new cash cows that are comparable in size with their previous ones. The reason that I wouldn't invest in a company with a CEO without technical knowledge is that they have no means to reinvent their company fast enough.
ralph84 7y ago
It's absolutely not the role of index funds to dictate strategy to the companies they own. The whole premise behind an index fund is investors don't know which strategy is best, so just buy everything. Where funds could have an impact is tying more of management compensation to long-term results. Longer vesting schedules on stock compensation would be an easy place to start.
- basch 7y ago
  Theres an observer effect type thing going on either way. If they invest in certain behaviors, companies will start behaving that way to get investments. At the end of the day, the investors have agendas (the large stakeholders agenda is generally global stability aka lack of disruptive change) and they invest in ways to achieve said goal. GE fit that model AND their collapse is a great illustration of why attempts at safe passive investing eventually lead to stagnant and obsolete investments.

xiphias2 7y ago

I don't understand what's so unexpected in an almost perfectly exponential adoption curve. Maybe only if the best tool GE has is a linear estimator.

toomuchtodo 7y ago
Index funds and the institutional firms that solicit them (Blackrock, Vanguard) aren't designed to be activist investors. Their role is to simply track a basket of stocks. This is a deficiency in passive investing. When management drops the ball (such as what GE did, not just in nat gas generation forecasting, but also how poorly Welch [1] and Immelt [2] managed the firm), there are fewer checks and balances until the value is already gone. [1] https://www.bloomberg.com/news/articles/2019-06-12/reassessing-jack-welch-s-legacy-after-ge-s-decline-joe-nocera https://www.bloomberg.com/news/articles/2019-06-12/reassessi... (Bloomberg: Was Jack Welch Really That Good? General Electric’s legendary CEO was good—but he was also lucky.) [2] https://www.cnbc.com/2018/02/21/jeff-immelts-refusal-to-give-or-take-bad-news-defined-his-leadership-at-ge.html https://www.cnbc.com/2018/02/21/jeff-immelts-refusal-to-give... (CNBC: Jeff Immelt’s refusal to give or take bad news defined his leadership at GE)
- jandrese 7y ago
  Maybe we could fault the investors if they were clamoring for safe reliable income from well proven legacy business models and grumbling when the company invested more in R&D, but that's stretching things a fair bit. Mostly the story seems to be "giant multinational company is slow to react to disruptive technologies", which is a story you will hear every year for all time. It is inevitable. No company wants to fund the R&D projects that will kill a cash cow. This is why disruptive tech almost always comes from small startups or scrappy underdogs.
  - deleted 7y ago
    [deleted]
  - xiphias2 7y ago
    > Mostly the story seems to be "giant multinational company is slow to react to disruptive technologies", which is a story you will hear every year for all time. It is inevitable. No company wants to fund the R&D projects that will kill a cash cow. This is why disruptive tech almost always comes from small startups or scrappy underdogs. This is true for non-technical management, but if you look at Alphabet / Facebook / Amazon / Tesla / NVIDIA, the leaders try really hard to change the product and/or create new cash cows that are comparable in size with their previous ones. The reason that I wouldn't invest in a company with a CEO without technical knowledge is that they have no means to reinvent their company fast enough.

ralph84 7y ago

It's absolutely not the role of index funds to dictate strategy to the companies they own. The whole premise behind an index fund is investors don't know which strategy is best, so just buy everything. Where funds could have an impact is tying more of management compensation to long-term results. Longer vesting schedules on stock compensation would be an easy place to start.

basch 7y ago
Theres an observer effect type thing going on either way. If they invest in certain behaviors, companies will start behaving that way to get investments. At the end of the day, the investors have agendas (the large stakeholders agenda is generally global stability aka lack of disruptive change) and they invest in ways to achieve said goal. GE fit that model AND their collapse is a great illustration of why attempts at safe passive investing eventually lead to stagnant and obsolete investments.