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I think Jack Welch deserves a share of the blame as well—if you had to attribute GE’s fall to one thing (which you shouldn’t), it would probably be the funding

I think Jack Welch deserves a share of the blame as well—if you had to attribute GE’s fall to one thing (which you shouldn’t), it would probably be the funding crisis at GE Capital when they couldn’t roll their commercial paper at the height of the GFC. Jack loved GE Capital because it was the perfect cookie jar to reach into when he needed another penny or two of EPS to hit the Street consensus; just realize a capital gain somewhere in Capital, and voila, you’ve met your number again. But of course the article doesn’t discuss the financial crisis at all, or for that matter anything that happened during Jack’s tenure or the first half of Jeff Immelt’s. Or any non-Energy/now Vernova business lines.

arpinum 2y ago
It's an interesting thought experiment for how Jack would handle the financial crises. I don't think it would play out in the same way. Maybe I'm too much of a fan boy, but Jack would have seen the writing on the wall far sooner than Jeff and had more time to pivot.
- intuitionist 2y ago
  Maybe so, but I think the actual problem was too much of a black swan. There were certainly executives who voiced concerns about the asset side of Capital’s balance sheet and were vindicated in the crisis; Jack might have listened to them better than Jeff did. But I don’t think anyone really even considered the idea that you wouldn’t be able to find buyers for the commercial paper of a AAA-rated issuer pretty much until it was happening. That said, there were outside commentators who’d raised questions about GE’s liquidity in the 2000s (notably Bill Gross) which did get Immelt and co. to term out some of GE’s debt. Maybe Jack would have been foresighted enough to do more. But that would have hit earnings (you’d pay a higher interest rate on longer term debt), so it would have been a tough sell, I think.

arpinum 2y ago

It's an interesting thought experiment for how Jack would handle the financial crises. I don't think it would play out in the same way. Maybe I'm too much of a fan boy, but Jack would have seen the writing on the wall far sooner than Jeff and had more time to pivot.

intuitionist 2y ago
Maybe so, but I think the actual problem was too much of a black swan. There were certainly executives who voiced concerns about the asset side of Capital’s balance sheet and were vindicated in the crisis; Jack might have listened to them better than Jeff did. But I don’t think anyone really even considered the idea that you wouldn’t be able to find buyers for the commercial paper of a AAA-rated issuer pretty much until it was happening. That said, there were outside commentators who’d raised questions about GE’s liquidity in the 2000s (notably Bill Gross) which did get Immelt and co. to term out some of GE’s debt. Maybe Jack would have been foresighted enough to do more. But that would have hit earnings (you’d pay a higher interest rate on longer term debt), so it would have been a tough sell, I think.