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It's the dose that makes the poison. Drinking too much water will kill you by messing up your electrolyte balance, yet nobody says drinking water is unusual.

by gumby 3y ago

It's the dose that makes the poison. Drinking too much water will kill you by messing up your electrolyte balance, yet nobody says drinking water is unusual. There were indeed plenty of missteps, but the imbalance due to GE Capital was the wrecking ball for the company. > The effective end of GE Capital is the end of an important era for the former conglomerate. > The company has been trying to become leaner and more profitable in recent years, selling off its appliance business in 2016, its NBC Universal entertainment unit in 2011 and its light bulb business in 2020, among other divisions. > And while those businesses had a higher public profile than GE Capital, no business was more important to the conglomerate during its heyday than GE’s finance arm. It provided financing on many of its industrial products, such as jet engines and electric power plants, as well as a key source of financing for small business and consumers. It even became a major player in the subprime mortgage business. > But when the housing bubble burst and the subsequent meltdown in financial markets in 2008, no part of the GE business was wounded more than GE Capital, and what had once been a key driver of the company’s success became an albatross... (https://www.cnn.com/2021/03/10/investing/ge-capital-close-aircraft-leasing-sale/index.html https://www.cnn.com/2021/03/10/investing/ge-capital-close-ai...) Or "GE dismantles the business that ended its dominance a decade ago" referring to GE Capital: https://abc17news.com/money/2021/03/10/ge-dismantles-the-business-that-ended-its-dominance-a-decade-ago/ https://abc17news.com/money/2021/03/10/ge-dismantles-the-bus... Or "How decades of bad decisions broke GE" which sounds like your basic thesis (and I agree there were many problems) but describes GE Capital as "the finance company that dealt GE a near-fatal blow during the 2008 crisis." https://money.cnn.com/2017/11/20/investing/general-electric-immelt-what-went-wrong/index.html https://money.cnn.com/2017/11/20/investing/general-electric-... GMAC / Ally Bank likewise distorted GM, but the example of one company is enough for now.

happytiger 3y ago
But to generalize GE as a case study is still incorrect. They are an atypical example. We can find any metaphor we want, cite one or two example companies like GE (and it was bad company management not the fact that they were in finance that sank them IMO — I was a customer of theirs and they were so poorly run), but it won’t make up for more than a century of the practice working across most major industries without problems. I’ve read several books about the GE failure and am widely aware of the problems, but disagree with the mainstream analysis. Nobody wants to pin it on the management but they deserve the criticism. Read * Lights Out: Pride, Delusion, and the Fall of General Electric* if you haven’t — it’s worth the time. Don’t you agree that narrowing down the argument that financing your own product is bad because GE took themselves out with a finance division becoming too critical to their business and then blowing up their business with poor management choices to be overly specific as an example? Broadly, private financing works, and works well.
- gumby 3y ago
  Jeez, I feel like you’re arguing a point to make a point that nobody is contesting. During the internet boom people accepted and even celebrated the vendor financing because it is a common mechanism without bothering to pay attention that the recipients were themselves not solvent. Sun, Cisco, Nortel and so many others were using this mechanism to juke the stats. And I gave the GE and GM examples to show that it the same sort of thing can happen with major corporations too. But nobody is claiming that it’s 100% inherently bad. It’s just you trying to refute this non-position.
  - happytiger 3y ago
    Certainly not my intention to waste time or focus on issues that aren’t relevant like your insinuating. Let’s leave it here and keep it polite as I respect your point and appreciate the real effort to talk about it with me. I don’t want you to feel that way. :( Be well and thank you.

by gumby 3y ago

happytiger 3y ago

But to generalize GE as a case study is still incorrect. They are an atypical example. We can find any metaphor we want, cite one or two example companies like GE (and it was bad company management not the fact that they were in finance that sank them IMO — I was a customer of theirs and they were so poorly run), but it won’t make up for more than a century of the practice working across most major industries without problems. I’ve read several books about the GE failure and am widely aware of the problems, but disagree with the mainstream analysis. Nobody wants to pin it on the management but they deserve the criticism. Read * Lights Out: Pride, Delusion, and the Fall of General Electric* if you haven’t — it’s worth the time. Don’t you agree that narrowing down the argument that financing your own product is bad because GE took themselves out with a finance division becoming too critical to their business and then blowing up their business with poor management choices to be overly specific as an example? Broadly, private financing works, and works well.

gumby 3y ago
Jeez, I feel like you’re arguing a point to make a point that nobody is contesting. During the internet boom people accepted and even celebrated the vendor financing because it is a common mechanism without bothering to pay attention that the recipients were themselves not solvent. Sun, Cisco, Nortel and so many others were using this mechanism to juke the stats. And I gave the GE and GM examples to show that it the same sort of thing can happen with major corporations too. But nobody is claiming that it’s 100% inherently bad. It’s just you trying to refute this non-position.
- happytiger 3y ago
  Certainly not my intention to waste time or focus on issues that aren’t relevant like your insinuating. Let’s leave it here and keep it polite as I respect your point and appreciate the real effort to talk about it with me. I don’t want you to feel that way. :( Be well and thank you.