8 ms·
What Happened to GE? (2021)
- fmajid 3y agoGates is flat-out lying, because Microsoft is notorious for managing its earnings, just in the opposite direction of GE: https://www.cringely.com/2009/01/22/bob-the-impaler/ https://www.cringely.com/2009/01/22/bob-the-impaler/ > 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.
- jrflowers 3y agoThey messed up when they sold NBC to Kabletown
- jprd 3y agoThe amount and subtlety of inside-GE jokes in the first year or two of 30 Rock were just "chefs-kiss". Also, Jack Welch. :(
- spondylosaurus 3y agoThe fake-but-also-real product placement for GE appliances was pretty funny. As was the promo for other NBC shows (like the ill-fated Smash...)
- nuclearnice1 3y ago> 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. So fraud?
- tharne 3y agoIt's fraud, but it's legal in the same way insider trading is legal so long as you're a member of congress.
- redandblack 3y agoRemember Lehman CFO did the same at month/quarter end using repos - not ethical, but legal
- antupis 3y agoIt is fraud when you don't tell that openly and pad books by it, but it is an okay tactic as a hedging risk as long as you are open about it.
- candiodari 3y agoMeaning as long as you mentioned it in the fine print on page 497 of your financial statement?
- PakG1 3y agoYou 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?
- NoboruWataya 3y agoI'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. 0: https://en.wikipedia.org/wiki/Leaseback https://en.wikipedia.org/wiki/Leaseback
- QuadmasterXLII 3y ago
- tharne 3y agoWhat 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.
- analog31 3y agoThere 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.
- deleted 3y ago[deleted]
- hackernewds 3y agoMultiple 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.
- adventured 3y agoStarbucks 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.
- 1970-01-01 3y agoGE is General Electric Corporation
- nine_zeros 3y agoGE is the textbook for "The fate of a company that focuses too much on optics and forced stack-ranked attrition". And yet, companies these days follow the same path and predictably crash and burn.
- coliveira 3y agoWatch for Amazon next. They have the same drive for high attrition, as if this was a good thing.
- jrmg 3y agoWhen 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. *https://www.geappliances.com/appliance/GE-Profile-ENERGY-STAR-4-8-cu-ft-Capacity-UltraFast-Combo-with-Ventless-Heat-Pump-Technology-Washer-Dryer-PFQ97HSPVDS https://www.geappliances.com/appliance/GE-Profile-ENERGY-STA...
- rcyeh 3y agoGE no longer owns or operates the GE Appliances business. Haier bought GE Appliances in 2016. https://en.wikipedia.org/wiki/GE_Appliances https://en.wikipedia.org/wiki/GE_Appliances
- yodon 3y agoHaier is a remarkable company. It's not an accident that GE appliances took off after Haier purchased it.
- Analemma_ 3y agoIt'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.
- ProjectArcturis 3y agoMy 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.
- poulsbohemian 3y agoBut 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
- permanent 3y agoWhile GE price has gone up in the last 2 years, your statement doesn't take account for a reverse split—a 1-for-8 stock split in 2021. https://www.forbes.com/advisor/investing/ge-stock-split/#:~:text=GE's%20Reverse%20Stock%20Split,billion%20to%20about%201.1%20billion https://www.forbes.com/advisor/investing/ge-stock-split/#:~:....
- thfuran 3y agoHow does a reverse split work for holders of fewer shares than the ratio?
- redandblack 3y agoUsually cash for the remaining value at the split-stock price level
- phonon 3y agoGE's stock price was between about $70 to $87 in 2021.
- icedchai 3y agoAnd that's only because they did an 8:1 reverse split: https://www.nasdaq.com/articles/ge-stock-split%3A-what-you-need-to-know https://www.nasdaq.com/articles/ge-stock-split%3A-what-you-n...
- quickthrowman 3y ago
- wespiser_2018 3y agoI'd like to think karma. Nothing with spoil your perception of a company faster than a toxic waste dump of GE manufactured PCBs in your hometown. I'll never be able to understand the "Genius of Jack Welsh", but I don't suppose I'm really missing that much :)
- swells34 3y agoOh, 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.
- farhanhubble 3y agoSince Welch climbed the corporate ladder over the years, this says a lot about the rot predating him as well.
- victor22 3y ago[flagged]
- redandblack 3y agofor the curious on Jack Welch's management style - https://www.performyard.com/articles/jack-welch-management-style https://www.performyard.com/articles/jack-welch-management-s... 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
- FredPret 3y agoOne huge advantage the US has is the variety of thriving industries. It’s highly likely at least one will be thriving at a given time.
- quartesixte 3y agoThe 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.
- crowcroft 3y agoJack Welch set some time bombs, but Immelt had a team ready to diffuse them and chose not to.
- hnthrowaway0328 3y agoI 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.
- mook 3y agoIsn'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.
- hnthrowaway0328 3y agoI wonder where did they get the ideas from, hmmm...
- OldGuyInTheClub 3y agoI posted this in a separate reply: One of the many consultants spreading the plague if not inventing it. https://money.cnn.com/magazines/fortune/fortune_archive/2007/04/30/8405482/index.htm https://money.cnn.com/magazines/fortune/fortune_archive/2007...
- jacamera 3y agoThe secret to Jack Welch's success was squeezing the sweetest juice from his employees' mind grapes.
- simple10 3y agoI 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.
- simple10 3y agoI 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.
- angiosperm 3y ago[flagged]
- OldGuyInTheClub 3y agoGE 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.) https://money.cnn.com/magazines/fortune/fortune_archive/2007/04/30/8405482/index.htm https://money.cnn.com/magazines/fortune/fortune_archive/2007...
- fmajid 3y agoHere's a great article by NBC journalist John Hockenberry on how Six Sigma was enforced by GE where it didn't make any sense: https://web.archive.org/web/20120102065056/http://www.technologyreview.com/printer_friendly_article.aspx?id=19845 https://web.archive.org/web/20120102065056/http://www.techno...
- LVB 3y agoI 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.
- OldGuyInTheClub 3y agoWe 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.
- raverbashing 3y agoSix Sigma is Feng Shui for MBA heads
- 3y ago
- cratermoon 3y agoI'm surprised no one has yet mentioned that Boeing management after the merger with McDonnell-Douglas has mostly been, and continues to be, GE alumni.
- kristianp 3y ago(2021)
- BMc2020 3y agoJack Welch: "PCBs don't last forever." PCBs: "Neither does Jack Welch."
- dang 3y agoDiscussed (a bit) at the time: What Happened to GE? - https://news.ycombinator.com/item?id=27535173 https://news.ycombinator.com/item?id=27535173 - June 2021 (3 comments)
- datavirtue 3y ago"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. They are stuck in a perpetual performative.
- neilv 3y agoAfter suffering through a new (lemon) GE-branded fridge, I don't see myself ever buying a GE-branded thing again. Fool me once. I have some hope that Samsung will learn from GE, and decide not to fully discard its more recent-era reputation for quality and excellence.
- applied_heat 3y agoToo late, Samsung appliances are disposable garbage now.
- neilv 3y agoMaybe Samsung could come back from that? 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.)
- dv_dt 3y agoThe original GE sold off the GE appliance brand to a Chinese industrial company many years ago.
- 1123581321 3y agoGE 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.
- rswail 3y agoLesson 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.
- Swizec 3y ago> Conglomerates of disparate businesses never work in the long term Tell that to Yamaha, Mitsubishi, Siemens, 3M, etc
- rgmerk 3y agoAren’t the Japanese conglomerates perpetually underperforming businesses that get away with it because Japanese shareholders are toothless?
- bobthepanda 3y agoYes, because due to unorthodox monetary policy the Bank of Japan is the largest shareholder in the country. https://www.bloomberg.com/news/articles/2020-12-06/boj-becomes-biggest-japan-stock-owner-with-434-billion-hoard https://www.bloomberg.com/news/articles/2020-12-06/boj-becom...
- simula67 3y agoBerkshire Hathway is also a conglomerate, but it does perform fairly well.
- SOVIETIC-BOSS88 3y ago
- skywal_l 3y agoAn 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% [0]: https://www.linkedin.com/posts/rezazahiri_revenue-valuation-economics-activity-7151623701480771584-G8X8?utm_source=share&utm_medium=member_android https://www.linkedin.com/posts/rezazahiri_revenue-valuation-...
- lostlogin 3y ago> 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.
- deleted 3y ago[deleted]
- w10-1 3y agoIf 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?
- PakG1 3y agoI 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.
- Eisenstein 3y agoThe 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.
- gttalbot 3y agoWhat's striking about this article is Gates's refusal, even now, to say anything bad about Welch. Why is that? The vast majority of the bar culture problems are traceable to Welch, as is the shadiness of GE Capital.
- black_13 3y ago[dead]
- bsenftner 3y agoDue 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."
- maroonblazer 3y agoWhich friendship? Gates didn't write the book, two WSJ journalists did.
- fuzzfactor 3y ago>What Happened to GE? Nature took its course, as charted by Jack Welch. 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.
- smartmic 3y agoAnything changed since 2021 or new developments / insights?
- htrp 3y ago> 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. Great to see the self awareness here.