WEBVTT - The GE of Today 0:00:04.240 --> 0:00:07.240 Welcome to tech Stuff, a production of I Heart Radios, 0:00:07.320 --> 0:00:13.960 How Stuff Works. Hey there, and welcome to tech Stuff. 0:00:14.080 --> 0:00:17.200 I'm your host, Jonathan Strickland. I'm an executive producer with 0:00:17.239 --> 0:00:19.120 How Stuff Works and I Heart Radio and I love 0:00:19.200 --> 0:00:23.079 all things tech. And we have come to the end 0:00:23.280 --> 0:00:27.080 of our journey covering the history of General Electric up 0:00:27.120 --> 0:00:30.520 to today, and just a heads up, this episode is 0:00:30.520 --> 0:00:33.839 going to focus a lot on the business side of 0:00:33.920 --> 0:00:38.080 General Electric rather than the tech side of General Electric. 0:00:38.560 --> 0:00:41.120 I could have ended the series with the last episode 0:00:41.320 --> 0:00:44.120 as far as the technological innovations go. Now, that's not 0:00:44.159 --> 0:00:47.800 to say GE hasn't continued to innovate in the post 0:00:48.040 --> 0:00:51.680 Jack Welch era, but rather that the innovations the company 0:00:51.760 --> 0:00:57.040 is most known for span the previous one hundred years 0:00:57.120 --> 0:01:00.880 of its existence. The last twenty year is the most recent. 0:01:00.920 --> 0:01:05.360 Twenty years have been more marked with controversy and business 0:01:05.400 --> 0:01:08.960 practices and market issues, and I think it's important to 0:01:09.000 --> 0:01:12.720 understand what's happened since two thousand one because g has 0:01:12.720 --> 0:01:17.840 been such an incredibly important part of the modern technological landscape. 0:01:18.160 --> 0:01:21.400 I mean, that's one of the main companies that helped 0:01:21.920 --> 0:01:25.560 spread the electrical infrastructure in the United States. You know, 0:01:25.640 --> 0:01:29.119 without GE, it would have taken much longer for that 0:01:29.160 --> 0:01:31.920 to have happened, and the world would be very different 0:01:32.040 --> 0:01:35.960 today if GE had not existed. But in the last episode, 0:01:36.319 --> 0:01:39.200 I told you guys about Jack Welch, the g E 0:01:39.360 --> 0:01:44.000 CEO who pushed the company to incredible profitability, mainly by 0:01:44.040 --> 0:01:47.760 selling off businesses where General Electric wasn't in first or 0:01:47.840 --> 0:01:50.920 second place in the industry. He sold off more than 0:01:51.120 --> 0:01:54.440 seventy of g S businesses just in his first two 0:01:54.520 --> 0:01:57.600 years of being CEO. He also laid off more than 0:01:57.720 --> 0:02:02.000 one hundred thousand employees, which earned him the nickname Neutron 0:02:02.160 --> 0:02:05.840 Jack because like a neutron bomb, he eliminated people without 0:02:05.960 --> 0:02:09.560 damaging the assets. And he also led efforts to acquire 0:02:09.639 --> 0:02:14.440 financial institutions like banks and insurance companies in order to 0:02:14.520 --> 0:02:18.040 launch this financial and insurance business, and that would end 0:02:18.120 --> 0:02:22.160 up giving g E an enormous revenue boost. It would 0:02:22.160 --> 0:02:26.800 become incredibly important for the company in the nineteen eighties 0:02:26.880 --> 0:02:32.680 and beyond for different reasons. Now. One exception to Welch's 0:02:33.040 --> 0:02:37.880 amazing victories was an acquisition of a securities firm called Kidder, 0:02:38.080 --> 0:02:42.960 Peabody and Company, which was actually an even older company 0:02:43.000 --> 0:02:46.400 than General Electric. If you looked at the origin for 0:02:46.520 --> 0:02:50.600 Kidder Peabody and Company, that firm traced its history all 0:02:50.639 --> 0:02:53.400 the way back to eighteen sixty five, more than a 0:02:53.520 --> 0:02:58.440 decade before even the earliest of companies that formed General Electric. 0:02:58.919 --> 0:03:03.079 Welch led the acquisition effort in nineteen six, but then 0:03:03.120 --> 0:03:07.239 there were a series of scandals centered around insider trading 0:03:07.600 --> 0:03:10.320 that brought a lot of suspicion and scrutiny on Kider 0:03:10.360 --> 0:03:15.160 Peabodies business and therefore g E Capital the financial division 0:03:15.280 --> 0:03:19.000 of General Electric, and a year after the acquisition, the 0:03:19.080 --> 0:03:23.840 global stock markets crashed on October nineteenth seven and what 0:03:23.960 --> 0:03:27.920 was called Black Monday. The combination of events convinced Welch 0:03:28.080 --> 0:03:32.200 that he had made an error in judgment acquiring Kidder Peabody, 0:03:32.280 --> 0:03:36.600 and it took several more years and more scandals centering 0:03:36.600 --> 0:03:41.160 on Kidder Peabodies record keeping and allegations of reporting false profits, 0:03:41.360 --> 0:03:44.880 but GE would eventually sell Kidder Peabody off at a 0:03:45.080 --> 0:03:49.480 huge loss. Now that embarrassment aside, GE for the most 0:03:49.520 --> 0:03:52.960 part did very well in the eighties and nineties. The 0:03:53.000 --> 0:03:57.000 stock price for g E rose four thousand percent. Some 0:03:57.120 --> 0:03:59.880 sources state that when you take all the factors into consideration, 0:04:00.160 --> 0:04:04.360 it was more like five thousand two. Under Welch's command, 0:04:04.840 --> 0:04:07.320 he put off his retirement in order to secure an 0:04:07.320 --> 0:04:10.920 acquisition of Honeywell International. If you listen to my last episode, 0:04:11.320 --> 0:04:15.120 you know that didn't go well. The European Commission denied 0:04:15.320 --> 0:04:19.440 the merger for anti competitive reasons, and the man who 0:04:19.560 --> 0:04:22.320 hated to lose, Jack Welch, had to go out on 0:04:22.360 --> 0:04:25.800 a down note. But compared to GE, you could say 0:04:25.880 --> 0:04:29.159 Jack Welch got off easy. Now, this episode will cover 0:04:29.240 --> 0:04:33.040 what happened to General Electric since two thousand one, including 0:04:33.080 --> 0:04:36.880 the events that would create massive problems for the huge company. 0:04:37.240 --> 0:04:40.120 And there is ongoing disagreement as to whether most of 0:04:40.120 --> 0:04:43.800 the blame should fall on Welch's successor, or if Welch 0:04:43.880 --> 0:04:48.000 himself should shoulder some of that responsibility or some other party. 0:04:48.080 --> 0:04:52.440 So what the heck actually happened? Well, first, let me 0:04:52.480 --> 0:04:55.520 talk a little bit about g S stock, because that's 0:04:55.520 --> 0:04:58.040 going to come back around later in this episode. A 0:04:58.040 --> 0:05:01.520 few times. So, for years, g E paid out a 0:05:01.560 --> 0:05:05.279 dividend on its stock. Not all companies do this, and 0:05:05.320 --> 0:05:08.040 a dividend is a payment that a company makes to 0:05:08.160 --> 0:05:11.760 distribute some of its revenue to its shareholders. So a 0:05:11.800 --> 0:05:14.880 company makes money and then distributes some of that money 0:05:14.920 --> 0:05:17.800 amongst the people who hold shares in the company. It's 0:05:17.880 --> 0:05:21.560 usually not very much per share. In fact, it's typically 0:05:21.640 --> 0:05:25.520 less than a dollar. Gees case, it was around thirty 0:05:25.560 --> 0:05:28.400 one cents for a long time. In the US, there 0:05:28.440 --> 0:05:31.520 are no rules about how frequently a company actually pays 0:05:31.520 --> 0:05:35.280 out dividends. Most companies will do it quarterly, so you 0:05:35.279 --> 0:05:39.120 would get one quarter of your dividend four times a year. 0:05:39.279 --> 0:05:41.839 So if it was a dividend of forty cents, that 0:05:41.880 --> 0:05:44.200 means every three months you would get a check for 0:05:44.279 --> 0:05:46.960 ten cents for every share you own. So it's not 0:05:47.080 --> 0:05:49.000 very much, but if you own a lot of shares, 0:05:49.040 --> 0:05:52.640 it starts to add up. And besides distributing revenue, it's 0:05:52.720 --> 0:05:57.200 also meant to incentivize shareholders to reinvest and buy more 0:05:57.320 --> 0:06:00.920 shares of stock in that company. So the idea is, oh, 0:06:01.120 --> 0:06:03.240 you got a dividend payout, it's enough for you to 0:06:03.279 --> 0:06:05.479 buy another share in the company, so you spend that 0:06:05.560 --> 0:06:09.920 dividend buying another share. That's the logic there. Well, when 0:06:09.960 --> 0:06:14.960 Welch first took over g E stock wasn't doing so great, 0:06:15.360 --> 0:06:18.520 it wasn't super high. A lot of investors thought of 0:06:18.560 --> 0:06:22.479 the stocks as essentially a dividend payout and not much else. 0:06:22.600 --> 0:06:25.480 So you wouldn't buy g E stocks with the idea 0:06:25.520 --> 0:06:28.440 of selling them at a higher price later on the road. 0:06:28.560 --> 0:06:31.120 You know, you weren't thinking, I'm gonna buy now, because 0:06:31.279 --> 0:06:34.120 in five or ten years this stock is going to 0:06:34.200 --> 0:06:36.839 be worth two or three times as much. You bought 0:06:36.920 --> 0:06:40.120 g E stock because it paid out a dividend, so 0:06:40.600 --> 0:06:42.840 it would take a long time, but you would eventually 0:06:42.920 --> 0:06:46.000 make more money than you invested if that dividend were 0:06:46.040 --> 0:06:50.080 to hold steady. Now, when Welch took over, the stock 0:06:50.120 --> 0:06:53.080 price actually dipped a little bit after he had been 0:06:53.160 --> 0:06:56.120 running GE for a year or two, But another year 0:06:56.200 --> 0:06:59.599 later the entire stock market took a turn and it 0:06:59.600 --> 0:07:02.360 started climb and value. This would be the beginning of 0:07:02.800 --> 0:07:06.560 eighteen years of a climbing market, a bull market. In 0:07:06.600 --> 0:07:10.240 other words, even with events like Black Monday in Night 0:07:10.400 --> 0:07:13.040 seven taken into account, so you had moments where the 0:07:13.080 --> 0:07:16.280 market was not bullish, where it was crashing, but it 0:07:16.280 --> 0:07:20.920 would recover and then go back on its bullish route trajectory. 0:07:20.920 --> 0:07:24.920 If you will now, collectively the SMP five hundred index 0:07:25.680 --> 0:07:29.520 it would climb by two thousand and this was the 0:07:29.560 --> 0:07:32.440 same time that we started seeing packages like four oh 0:07:32.440 --> 0:07:36.960 one K plans replaced traditional retirement plans. Now that meant 0:07:37.480 --> 0:07:41.120 that stock market performance would become far more important to 0:07:41.320 --> 0:07:44.600 weigh more people. Like in the old days, it was 0:07:44.640 --> 0:07:47.600 just people who traded in stocks, and largely it was 0:07:47.640 --> 0:07:50.440 a lot of businesses that did that trading. Your average 0:07:50.440 --> 0:07:53.800 person didn't play the stock market that much. But now 0:07:53.960 --> 0:07:58.400 stuff like our retirement was tied directly into stock market performance. 0:07:58.680 --> 0:08:03.080 So suddenly everybody was really really focusing on the stock market, 0:08:03.760 --> 0:08:07.040 and it meant that it became far more important for 0:08:07.080 --> 0:08:10.360 stocks to do well. See before the nineteen eighties, stock 0:08:10.440 --> 0:08:13.600 market performance was you know, it was an indicator of 0:08:13.640 --> 0:08:16.560 a company's overall health, but most people didn't consider it 0:08:16.840 --> 0:08:20.920 the metric against which all companies should stand. You would 0:08:20.960 --> 0:08:23.840 worry more about the company's profitability, how much revenue is 0:08:23.880 --> 0:08:26.400 it bringing in, how much does it cost to do business, 0:08:26.480 --> 0:08:29.640 and how much profit is the company making. The share 0:08:29.680 --> 0:08:33.040 price wasn't as big a deal. That changed around the 0:08:33.080 --> 0:08:35.800 same time that Welch took over at g E and 0:08:35.840 --> 0:08:39.920 Welch's philosophy happened to match this general shift in how 0:08:40.000 --> 0:08:43.720 businesses operated in the United States. Now. I don't say 0:08:43.720 --> 0:08:48.160 this to diminish Welch's contributions or GEES performance, because the 0:08:48.200 --> 0:08:53.360 company's own stock outperformed the general market significantly. But I 0:08:53.400 --> 0:08:57.000 do also want to take the overall market performance into consideration, 0:08:57.160 --> 0:09:00.000 because while I don't want to take any credit away, 0:09:00.200 --> 0:09:02.720 I also don't want to give too much credit to 0:09:03.280 --> 0:09:07.960 Welch and his impact beyond what it actually was. Anyway, 0:09:08.120 --> 0:09:11.360 as the market improved, and as g S performance in 0:09:11.400 --> 0:09:15.920 particular made its stock price rocket upwards, ge stocks were 0:09:15.960 --> 0:09:19.680 seen as more than just a dividend payout. The company 0:09:19.720 --> 0:09:22.559 continued to pay dividends, though, which again is going to 0:09:22.600 --> 0:09:25.840 be important later. Those dividends were largely funded by the 0:09:25.920 --> 0:09:30.439 incredible performance of g E Capital, that's the financial services 0:09:30.520 --> 0:09:34.559 division of General Electric. In the last year of Welch's 0:09:34.640 --> 0:09:39.880 tenure as CEO, GEES stock price did take several hits, 0:09:40.040 --> 0:09:43.360 but then so did just about everybody else. In March 0:09:43.440 --> 0:09:46.840 two thousand, the stock markets performance shifted. It was no 0:09:46.920 --> 0:09:50.040 longer bullish. It was going into a bear market, so 0:09:50.080 --> 0:09:54.320 instead of growing, it was receding. The Dot com bubble 0:09:54.440 --> 0:09:56.960 had crashed, and that caused a bit of a stock 0:09:57.000 --> 0:10:00.360 market crisis. Companies that were in the dot com in dustry, 0:10:00.480 --> 0:10:03.480 obviously they suffered the most. Many of them just were 0:10:03.520 --> 0:10:06.959 blinking out of existence after it became clear that those 0:10:07.000 --> 0:10:09.640 companies had no way to deliver upon the promises that 0:10:09.679 --> 0:10:12.880 they were making or to be able to justify the 0:10:13.040 --> 0:10:17.560 crazy speculation that drove their stock prices into the stratosphere 0:10:17.559 --> 0:10:19.960 before the companies had even figured out how to generate 0:10:20.000 --> 0:10:24.280 ascent in revenue. But even companies like General Electric, which 0:10:24.320 --> 0:10:30.600 were traditional, established, giant conglomerate companies, were affected by this 0:10:30.760 --> 0:10:33.679 change in the market. Between March two thousand and when 0:10:33.720 --> 0:10:37.120 Welch would hand over the CEO role to his successor, 0:10:37.480 --> 0:10:41.000 Jeff Emilt, in early September two thousand one, the stock 0:10:41.040 --> 0:10:44.400 price for GE had fallen by twenty four percent. Now 0:10:44.440 --> 0:10:48.120 I point that out because often the simplified story about 0:10:48.160 --> 0:10:52.240 what happened to GE was that Jack Welch stepped down 0:10:52.440 --> 0:10:55.680 and Imilt fumbled the ball, that Emilt was a terrible 0:10:55.679 --> 0:10:59.559 CEO and he could not follow Welch's lead. But in reality, 0:10:59.800 --> 0:11:03.040 I think the story is far more nuanced, and we 0:11:03.120 --> 0:11:06.199 have to remember that the market itself was changing during 0:11:06.240 --> 0:11:09.679 this transition. It wasn't the case of Emilt being handed 0:11:09.800 --> 0:11:12.920 a profitable company on a silver platter and nothing was 0:11:12.960 --> 0:11:16.920 going wrong and he just messed it up from there. Uh. 0:11:16.960 --> 0:11:19.160 He did make a ton of decisions that would not 0:11:19.240 --> 0:11:21.240 turn out to be great for GE. So I don't 0:11:21.240 --> 0:11:24.880 want to diminish his responsibility either. I just think it's 0:11:25.080 --> 0:11:28.920 important for us to take all these factors into consideration. Okay. 0:11:28.960 --> 0:11:32.320 So Welch stepped down on September six, two thousand one. 0:11:32.360 --> 0:11:35.640 Emil took over on September seven, and four days later, 0:11:35.960 --> 0:11:38.720 the United States was rocked by a series of terrorist 0:11:38.800 --> 0:11:43.040 attacks that shook the country to its core. Those effects 0:11:43.040 --> 0:11:48.559 were widespread. The tragedy touched thousands of people directly, tens 0:11:48.600 --> 0:11:52.760 of thousands millions of people indirectly. It transformed the New 0:11:52.840 --> 0:11:56.600 York City Escape permanently, and it caused disruption in the 0:11:56.640 --> 0:12:00.120 markets as well. Wall Street made the decision to not 0:12:00.320 --> 0:12:03.800 open the New York Stock Exchange the morning of September eleven, 0:12:03.960 --> 0:12:07.480 two thousand one, fearing that the terrorist attacks would prompt 0:12:07.600 --> 0:12:12.959 panic selling amongst shareholders, making a truly horrible situation even 0:12:13.040 --> 0:12:16.760 more dire both the New York Stock Exchange and the 0:12:16.880 --> 0:12:22.600 NASDAC would remain closed until September two thousand one. When 0:12:22.679 --> 0:12:26.400 trading resumed, the market fell by nearly seven hundred points. 0:12:26.720 --> 0:12:30.080 That was a decline of almost mobile actually more than 0:12:30.440 --> 0:12:33.920 seven per cent, and that was just the first day 0:12:33.960 --> 0:12:38.240 of trading. Losses actually continued throughout that week. I hate 0:12:38.320 --> 0:12:42.240 even talking about this, but it is important in order 0:12:42.280 --> 0:12:45.920 for us to understand ges story. At this stage in 0:12:45.960 --> 0:12:51.120 the company's history, business philosophies had changed significantly in the 0:12:51.200 --> 0:12:54.400 United States in the nineteen eighties and nineteen nineties. We 0:12:54.440 --> 0:12:58.360 had created a new environment where share value was the 0:12:58.400 --> 0:13:02.000 most important metric for a business, the company's stock price. 0:13:02.440 --> 0:13:05.400 If the stock price was going up, that was good. 0:13:05.960 --> 0:13:09.080 That was pretty much the end all be all. A 0:13:09.120 --> 0:13:12.320 company wasn't thought of doing well unless it's stock price 0:13:12.440 --> 0:13:15.959 was growing year over year, or at least the overall 0:13:16.040 --> 0:13:18.720 value of the company when you take in at stock. 0:13:18.800 --> 0:13:22.079 Because of course, companies can do things like stock splits 0:13:22.160 --> 0:13:25.079 so that the price of an individual shriff stock goes down. 0:13:25.520 --> 0:13:28.280 But because you've doubled the number of stocks or a 0:13:28.360 --> 0:13:30.840 number of shares, I should say, out on the market, 0:13:30.960 --> 0:13:33.880 the value of the company itself remains stable and can 0:13:33.960 --> 0:13:37.559 continue to grow. This drove a lot of business decisions 0:13:37.600 --> 0:13:42.040 that put shareholders above just about everything else in the company, 0:13:42.120 --> 0:13:45.400 including customers. Now, in my opinion, it's one of the 0:13:45.440 --> 0:13:50.439 biggest economic mistakes made in recent decades, as it has 0:13:50.480 --> 0:13:54.520 created a world in which many company executives focus very 0:13:54.600 --> 0:13:58.480 much on the short term to mid term gains as 0:13:58.559 --> 0:14:02.640 opposed to long term strategies. So often I think companies 0:14:02.679 --> 0:14:06.840 are making choices that hurt the company's chances to survive 0:14:06.920 --> 0:14:09.960 in the long term, all in an effort to drive 0:14:10.000 --> 0:14:15.079 that stock market price further up. Anyway, this disaster impacted 0:14:15.120 --> 0:14:19.280 gees stock price along with countless other companies, and you 0:14:19.400 --> 0:14:23.440 can't lay that blame on Emilt. It's not his fault 0:14:23.800 --> 0:14:28.160 that this series of awful attacks happened four days after 0:14:28.240 --> 0:14:31.160 he took control of the company. In the wake of 0:14:31.240 --> 0:14:35.560 nine eleven, all airline operations in the United States stopped 0:14:35.680 --> 0:14:39.160 for several days. That had a direct impact on gees business, 0:14:39.160 --> 0:14:42.080 which included building stuff like jet engines for the airlines 0:14:42.520 --> 0:14:46.800 and also leasing out parts for various companies. All of 0:14:46.800 --> 0:14:49.320 that was put on hold. On top of that, gees 0:14:49.440 --> 0:14:53.560 insurance business was suddenly inundated with claims which the company 0:14:53.640 --> 0:14:56.160 had to make good on. For one thing, GE was 0:14:56.200 --> 0:14:59.920 responsible for the insurance policy for the World Trade Center, which, 0:15:00.080 --> 0:15:03.080 as I'm sure you all know, lost the two towers 0:15:03.360 --> 0:15:06.400 that made the center iconic back in two thousand one 0:15:06.400 --> 0:15:09.600 as a result of those attacks. Prior to September eleven, 0:15:10.080 --> 0:15:12.880 it wasn't unusual for GE to lean a bit heavily 0:15:13.040 --> 0:15:17.400 on GE capital to kind of smooth things over. The 0:15:17.440 --> 0:15:20.600 branch was so profitable, that division of GE was so 0:15:20.720 --> 0:15:24.680 profitable that could help conceal if another division weren't quite 0:15:24.880 --> 0:15:29.440 doing so well. A lot of gees accounting practices have 0:15:29.680 --> 0:15:33.160 over the years been called opaque, meaning that you might 0:15:33.280 --> 0:15:36.240 get the end result of how well the overall company 0:15:36.320 --> 0:15:39.480 is doing, but you might not know how it got there, 0:15:39.840 --> 0:15:42.720 which divisions are doing well versus which ones are not. 0:15:43.280 --> 0:15:46.280 The overall performance of the company was what mattered, right, 0:15:46.360 --> 0:15:49.960 So who cares what's happening in the individual divisions. Well, 0:15:50.040 --> 0:15:52.800 Emil would get to work selling off parts of GES 0:15:52.840 --> 0:15:55.960 insurance business, though the company would still maintain some of 0:15:55.960 --> 0:15:58.960 that business up to present day. I'll explain more about 0:15:59.000 --> 0:16:01.840 that in a little bit. It and he also began 0:16:01.880 --> 0:16:06.080 to look at possible acquisitions. So what things turn out, Well, 0:16:06.800 --> 0:16:12.240 we'll find out. But spoiler alert, no they don't. But 0:16:12.320 --> 0:16:14.960 before I get into that, let's take a quick break. 0:16:22.600 --> 0:16:24.920 One thing I want to mention before I forget it 0:16:25.000 --> 0:16:29.000 is that during Emilt's run as CEO of GE, there 0:16:29.080 --> 0:16:32.640 was a particularly wasteful practice going on that would later 0:16:32.680 --> 0:16:35.520 get a lot of media attention when it was made public. 0:16:36.080 --> 0:16:39.720 Emilt traveled a lot. He would meet with various GE 0:16:39.880 --> 0:16:42.960 executives and facilities all around the world, as well as 0:16:43.000 --> 0:16:47.720 with other company and industry leaders and politicians. Particularly. He 0:16:47.720 --> 0:16:49.320 would do this when he was on the lookout for 0:16:49.400 --> 0:16:52.880 possible acquisitions, and he made a lot of those as 0:16:52.960 --> 0:16:55.720 he was CEO of g E. Now, to hop over 0:16:55.800 --> 0:16:57.760 to the other side of the world, he would take 0:16:57.840 --> 0:17:01.840 one of the g E owned business jets. They had 0:17:02.000 --> 0:17:05.200 six of them. But here's the curious thing. Every time 0:17:05.240 --> 0:17:08.600 you would travel, there would be a second empty jet 0:17:08.960 --> 0:17:12.600 that would follow along behind and stay at the same 0:17:12.640 --> 0:17:16.320 airport and wait there. And then when Emilt would fly back, 0:17:16.880 --> 0:17:20.560 so did the empty jet. Now the justification for that practice, 0:17:21.280 --> 0:17:25.119 which again eventually became public, in which a jet carrying 0:17:25.240 --> 0:17:29.440 only a crew no passengers would burn through fuel, it 0:17:29.440 --> 0:17:33.320 would generate pollution. The justification was that Emilt was a 0:17:33.440 --> 0:17:38.199 very important person on very important business and yes I 0:17:38.280 --> 0:17:43.359 capitalized very important in my notes in this section. As such, 0:17:43.680 --> 0:17:47.320 he couldn't be delayed by mechanical failures. His business was 0:17:47.359 --> 0:17:51.080 far too important. So the empty jet was essentially a 0:17:51.119 --> 0:17:55.439 backup transport in case his primary should experience a mechanical delay. 0:17:55.680 --> 0:17:59.920 It was his just in case measure, a very expend 0:18:00.160 --> 0:18:04.240 of wasteful measure. The company would actually stop that practice 0:18:04.280 --> 0:18:07.080 in two thousand fourteen, which was a few years before 0:18:07.119 --> 0:18:10.880 Emilt would be replaced as CEO. Spoiler alert, will get there, 0:18:11.160 --> 0:18:13.960 all right, So back to the post two thousand one 0:18:14.080 --> 0:18:17.439 g E. In two thousand two, GE would acquire a 0:18:17.480 --> 0:18:21.560 business from a formerly huge company. That company was in Ron, 0:18:21.760 --> 0:18:24.280 which went bankrupt in two thousand one after its own 0:18:24.520 --> 0:18:27.520 massive scandal, which I'm not going to get into here. 0:18:27.600 --> 0:18:30.399 It's outside the purview of this episode, but one of 0:18:30.440 --> 0:18:32.639 the many parts of in Ron to go up on 0:18:32.720 --> 0:18:38.040 the auction block after the bankruptcy was a wind power business. 0:18:38.520 --> 0:18:43.160 Emilt was, in his own words, not enthusiastic about wind power. 0:18:43.560 --> 0:18:46.400 He felt wind power wasn't profitable, and it was too 0:18:46.440 --> 0:18:49.960 dependent upon subsidies, and those subsidies could disappear at any 0:18:49.960 --> 0:18:53.959 time according to which way any government budget might be headed, 0:18:54.200 --> 0:18:56.359 So there was no way to control that. If the 0:18:56.400 --> 0:18:59.920 subsidies went away, you'd be saddled with a really expensive 0:19:00.040 --> 0:19:04.600 of a nonprofitable business. But Emil gave the authority to 0:19:04.920 --> 0:19:08.000 executives who really believed in that acquisition to go forward 0:19:08.040 --> 0:19:10.840 with it, and they went and purchased the division. It 0:19:10.880 --> 0:19:14.840 would end up becoming profitable and perhaps should have served 0:19:14.880 --> 0:19:17.760 as a lesson for future emmilt and I'll get back 0:19:17.920 --> 0:19:20.280 into what I mean about that in just a little bit. 0:19:20.640 --> 0:19:24.240 In two thousand three, GE announced its intention to purchase 0:19:24.280 --> 0:19:28.680 a majority stake in Universal Pictures. That was a company 0:19:28.720 --> 0:19:31.120 that was under the control of another company called Vivendi, 0:19:31.200 --> 0:19:34.760 a French company. In this deal, g E would acquire 0:19:34.880 --> 0:19:39.000 eighty percent of Universal. Vivindi was going through kind of 0:19:39.000 --> 0:19:43.399 a financial crisis at the time, so GE merged Universal 0:19:43.640 --> 0:19:48.199 with NBC, creating NBC Universal, and the deal included several 0:19:48.320 --> 0:19:52.760 cable television channels like Sci Fi Network, USA Network, as 0:19:52.760 --> 0:19:56.159 well as the Universal Film Studio, the Universal Theme parks. 0:19:56.720 --> 0:19:59.720 It did not include Universal Music that would remain completely 0:19:59.760 --> 0:20:03.240 under Vendy's control, but lots of the other Universal properties 0:20:03.400 --> 0:20:07.000 were part of this deal. Vivendi would have twenty control 0:20:07.040 --> 0:20:11.159 of this and then UH you would have GE with 0:20:11.920 --> 0:20:16.280 control and you got in BC Universal. G E would 0:20:16.280 --> 0:20:19.600 not hold on to this property forever. G was acquiring 0:20:19.640 --> 0:20:21.960 other companies as well at this time, adding them to 0:20:22.040 --> 0:20:26.720 the various divisions of General Electric. GE. Healthcare was growing 0:20:26.760 --> 0:20:32.160 with companies like UH Instrumentarium and Amersham Plc. Those were 0:20:32.160 --> 0:20:36.560 being added as part of healthcare. G Capital was also 0:20:36.600 --> 0:20:40.560 growing with similar acquisitions, including some subprime mortgage loan companies, 0:20:40.600 --> 0:20:42.560 and we'll get into that in a bit. And G 0:20:42.880 --> 0:20:46.680 would also build out its industrial, consumer and energy businesses 0:20:47.040 --> 0:20:50.520 and made several acquisitions of companies in the oil industry, 0:20:50.880 --> 0:20:54.840 also in banking and that old course of fossil fuels 0:20:54.880 --> 0:20:59.320 in general, because he really believed that that was going 0:20:59.359 --> 0:21:03.879 to be the mainstay for energy production or electricity production. 0:21:03.920 --> 0:21:06.840 I guess I should say for the foreseeable future. Throughout 0:21:06.880 --> 0:21:10.520 this time, GE Capital would remain the most profitable division 0:21:10.600 --> 0:21:13.280 of General Electric, and so the company would lean more 0:21:13.359 --> 0:21:16.840 heavily upon GE Capital in order to do things like 0:21:16.920 --> 0:21:21.360 pay out that dividend to shareholders that set up GE 0:21:21.359 --> 0:21:24.680 for disaster. Just a couple of years after GE purchased 0:21:24.960 --> 0:21:30.520 subprime mortgage businesses, the world plunged into a global economic crisis, 0:21:30.560 --> 0:21:33.160 which we often refer to as the two thousand eight 0:21:33.320 --> 0:21:38.280 financial crisis, but really the crisis first started becoming apparent 0:21:38.359 --> 0:21:42.080 in two thousand seven with the subprime mortgage market. So 0:21:42.119 --> 0:21:44.920 what the heck is a subprime mortgage Well, the short 0:21:44.960 --> 0:21:50.000 answer is it's an incredibly risky, predatory, and irresponsible market 0:21:50.040 --> 0:21:54.280 practice that depends upon people who are some of the 0:21:54.280 --> 0:21:57.639 most vulnerable folks out there. Maybe that's just me putting 0:21:57.640 --> 0:21:59.840 my own bias on things, but it's hard for me 0:21:59.880 --> 0:22:02.320 to see the whole concept as anything other than dumb 0:22:02.400 --> 0:22:05.359 and harmful. But here's how it breaks down, all right. 0:22:05.359 --> 0:22:08.000 So you know about credit scores, right, They're supposed to 0:22:08.000 --> 0:22:10.959 represent how much of a risk or a lack of 0:22:11.080 --> 0:22:13.160 risk a person is when it comes to paying off 0:22:13.200 --> 0:22:16.359 debt like loans. So if you have a high credit score, 0:22:16.720 --> 0:22:19.480 it means your history shows that you're diligent about paying 0:22:19.480 --> 0:22:22.359 off debt and that you represent a low risk for 0:22:22.440 --> 0:22:25.160 future loans. It does not mean that you've never had debt. 0:22:25.480 --> 0:22:27.200 You want to have some debt, and then you want 0:22:27.200 --> 0:22:29.080 to be able to pay it off because that's what 0:22:29.440 --> 0:22:31.359 gets you that high credit score. But if you have 0:22:31.400 --> 0:22:34.040 a low credit score, it means that, in the eyes 0:22:34.080 --> 0:22:36.720 of a lender, you represent a risk. Maybe you have 0:22:36.760 --> 0:22:39.399 a spotty employment history, maybe you have a lot of 0:22:39.400 --> 0:22:42.880 outstanding debt, maybe you've missed some payments on some loans. 0:22:43.400 --> 0:22:45.760 The purpose of these credit scores is to give lenders 0:22:45.840 --> 0:22:51.480 enough information to make responsible loan agreements. Subprime lending involves 0:22:51.560 --> 0:22:55.800 giving loans to high risk individuals, and typically you pair 0:22:55.840 --> 0:22:59.199 this with really high interest rates and other restrictions in 0:22:59.280 --> 0:23:02.640 order to mitigate the risk you incur when you give 0:23:02.720 --> 0:23:04.879 a loan out to one of these people who have 0:23:04.960 --> 0:23:07.520 a very low credit score. And so people who are 0:23:07.520 --> 0:23:10.640 looking to buy homes or to take out other loans 0:23:11.000 --> 0:23:15.240 were securing the money through financial institutions with these subprime 0:23:15.400 --> 0:23:21.040 mortgages and subprime loans, but with incredibly punishing restrictions on 0:23:21.080 --> 0:23:24.080 those loans, and surprise, surprise, a lot of folks found 0:23:24.080 --> 0:23:27.560 it impossible to pay off that debt, and ultimately many 0:23:27.600 --> 0:23:30.520 of the companies that were making those loans found themselves 0:23:30.520 --> 0:23:33.719 in a hole that they had dug themselves and it 0:23:33.760 --> 0:23:37.199 was too deep to climb out. Everyone was put in 0:23:37.240 --> 0:23:40.240 an awful situation and it had a really big ripple effect. 0:23:40.680 --> 0:23:43.240 Part of that ripple led to an investment bank called 0:23:43.320 --> 0:23:47.560 Lemon Brothers collapsing in September of two thousand eight. Other 0:23:47.640 --> 0:23:51.399 major financial institutions were in danger of following suit. The 0:23:51.480 --> 0:23:55.600 whole thing was leading to a global economic collapse, with 0:23:55.680 --> 0:23:59.600 the financial industry on the brink of total disaster. That's 0:23:59.600 --> 0:24:03.640 when arious parties swooped in to rescue the situation, bailing 0:24:03.680 --> 0:24:07.280 out banks that had over extended themselves. This in turn 0:24:07.400 --> 0:24:10.320 ticked off a lot of folks who are directly affected 0:24:10.320 --> 0:24:12.840 by this problem. These were people who had been evicted 0:24:12.880 --> 0:24:15.239 from their homes because they weren't able to make their 0:24:15.280 --> 0:24:18.439 mortgage payments, or people who were otherwise hurt by the 0:24:18.480 --> 0:24:22.160 subprime mortgage crisis, either directly or indirectly. And it didn't 0:24:22.200 --> 0:24:24.800 help that many of these people saw the bailouts as 0:24:24.800 --> 0:24:29.280 being rewards for the same financial institutions that caused all 0:24:29.320 --> 0:24:32.760 the misery in the first place. Well. Ge Capital was 0:24:32.880 --> 0:24:36.600 one of those institutions, and it was hit hard by 0:24:36.640 --> 0:24:40.240