1 00:00:04,400 --> 00:00:07,800 Speaker 1: Welcome to Tech Stuff, a production from I Heart Radio. 2 00:00:12,520 --> 00:00:14,880 Speaker 1: Hey there, and welcome to tech Stuff. I'm your host, 3 00:00:15,000 --> 00:00:18,319 Speaker 1: Jonathan Strickland. I'm an executive producer with iHeart Radio, and 4 00:00:18,840 --> 00:00:21,560 Speaker 1: I love all things tech and it is time for 5 00:00:21,680 --> 00:00:25,800 Speaker 1: us to conclude the g E Saga. Now. These were 6 00:00:25,840 --> 00:00:28,640 Speaker 1: a series of episodes that originally published back in two 7 00:00:28,680 --> 00:00:31,520 Speaker 1: thousand nineteen. I did reruns this week because in case 8 00:00:31,720 --> 00:00:34,360 Speaker 1: you hadn't listened to any of the other ones, I'm 9 00:00:34,400 --> 00:00:38,400 Speaker 1: on vacation this week. I am. I am vacating. Actually, 10 00:00:38,880 --> 00:00:41,680 Speaker 1: as you listen to this, I'm probably getting ready to 11 00:00:41,760 --> 00:00:45,400 Speaker 1: head back to Atlanta. But yes, I was on vacation 12 00:00:45,520 --> 00:00:48,680 Speaker 1: and I didn't want to leave you without any episodes. So, 13 00:00:48,880 --> 00:00:52,360 Speaker 1: because GE recently announced it was going to split up 14 00:00:52,400 --> 00:00:56,440 Speaker 1: into three separate companies in the near future, I thought 15 00:00:56,480 --> 00:00:59,160 Speaker 1: it would be good to go back and review the 16 00:00:59,240 --> 00:01:02,880 Speaker 1: history of Ural Electric. It's a long and storied and 17 00:01:03,440 --> 00:01:07,039 Speaker 1: at times very bumpy history, and so we are going 18 00:01:07,080 --> 00:01:10,480 Speaker 1: to listen to the g E of today. Although keep 19 00:01:10,480 --> 00:01:13,800 Speaker 1: in mind the today in that title refers to two 20 00:01:13,880 --> 00:01:18,440 Speaker 1: thousand nineteen, because this episode originally published on September eleven, nineteen. 21 00:01:18,959 --> 00:01:21,520 Speaker 1: I hope you enjoy and I'll talk to you again, 22 00:01:22,319 --> 00:01:26,000 Speaker 1: really really soon, like next week when I'm back in 23 00:01:26,040 --> 00:01:30,240 Speaker 1: the office. We have come to the end of our 24 00:01:30,319 --> 00:01:34,760 Speaker 1: journey covering the history of General Electric up to today, 25 00:01:34,840 --> 00:01:37,480 Speaker 1: and just a heads up, this episode is going to 26 00:01:37,480 --> 00:01:41,520 Speaker 1: focus a lot on the business side of General Electric 27 00:01:41,680 --> 00:01:45,479 Speaker 1: rather than the tech side of General Electric. I could 28 00:01:45,520 --> 00:01:48,280 Speaker 1: have ended this series with the last episode as far 29 00:01:48,320 --> 00:01:51,120 Speaker 1: as the technological innovations go. And that's not to say 30 00:01:51,160 --> 00:01:56,000 Speaker 1: GE hasn't continued to innovate in the post Jack Welch era, 31 00:01:56,480 --> 00:01:59,160 Speaker 1: but rather that the innovations the company is most known 32 00:01:59,280 --> 00:02:05,320 Speaker 1: for span the previous one years of its existence. The 33 00:02:05,440 --> 00:02:09,240 Speaker 1: last twenty years, the most recent twenty years have been 34 00:02:09,280 --> 00:02:13,960 Speaker 1: more marked with controversy and business practices and market issues. 35 00:02:14,639 --> 00:02:17,320 Speaker 1: And I think it's important to understand what's happened since 36 00:02:17,320 --> 00:02:20,720 Speaker 1: two thousand one because GE has been such an incredibly 37 00:02:20,840 --> 00:02:25,440 Speaker 1: important part of the modern technological landscape. I mean, that's 38 00:02:25,960 --> 00:02:29,800 Speaker 1: one of the main companies that helped spread the electrical 39 00:02:29,880 --> 00:02:33,519 Speaker 1: infrastructure in the United States. You know, without GE, it 40 00:02:33,560 --> 00:02:36,560 Speaker 1: would have taken much longer for that to have happened, 41 00:02:36,760 --> 00:02:40,000 Speaker 1: and the world would be very different today if GE 42 00:02:40,040 --> 00:02:43,399 Speaker 1: had not existed. But in the last episode, I told 43 00:02:43,440 --> 00:02:46,720 Speaker 1: you guys about Jack Welch, the g E CEO who 44 00:02:46,760 --> 00:02:51,240 Speaker 1: pushed the company to incredible profitability, mainly by selling off 45 00:02:51,320 --> 00:02:55,200 Speaker 1: businesses where General Electric wasn't in first or second place 46 00:02:55,240 --> 00:02:58,560 Speaker 1: in the industry. He sold off more than seventy of 47 00:02:58,680 --> 00:03:01,760 Speaker 1: g S businesses just in his first two years of 48 00:03:01,800 --> 00:03:05,080 Speaker 1: being CEO. He also laid off more than one hundred 49 00:03:05,160 --> 00:03:09,800 Speaker 1: thousand employees, which earned him the nickname Neutron Jack, because 50 00:03:09,800 --> 00:03:13,840 Speaker 1: like a neutron bomb, he eliminated people without damaging the assets. 51 00:03:14,200 --> 00:03:18,160 Speaker 1: And he also led efforts to acquire financial institutions like 52 00:03:18,320 --> 00:03:22,720 Speaker 1: banks and insurance companies in order to launch this financial 53 00:03:22,760 --> 00:03:25,320 Speaker 1: and insurance business, and that would end up giving g 54 00:03:25,480 --> 00:03:31,120 Speaker 1: E an enormous revenue boost. It would become incredibly important 55 00:03:31,160 --> 00:03:34,720 Speaker 1: for the company in the nineteen eighties and beyond for 56 00:03:34,840 --> 00:03:41,960 Speaker 1: different reasons. Now. One exception to Welch's amazing victories was 57 00:03:42,000 --> 00:03:46,320 Speaker 1: an acquisition of a securities firm called Kidder, Peabody and Company, 58 00:03:46,400 --> 00:03:50,720 Speaker 1: which was actually an even older company than General Electric. 59 00:03:51,320 --> 00:03:55,000 Speaker 1: If you looked at the origin for Kidder, Peabody and Company, 60 00:03:55,080 --> 00:03:57,840 Speaker 1: that firm traced its history all the way back to 61 00:03:57,920 --> 00:04:02,080 Speaker 1: eighteen sixty five, more than a decade before even the 62 00:04:02,160 --> 00:04:06,680 Speaker 1: earliest of companies that formed General Electric. Welch led the 63 00:04:06,720 --> 00:04:10,480 Speaker 1: acquisition effort in nineteen six, But then there were a 64 00:04:10,520 --> 00:04:14,760 Speaker 1: series of scandals centered around insider trading that brought a 65 00:04:14,760 --> 00:04:18,400 Speaker 1: lot of suspicion and scrutiny on Kidder Peabodies business and 66 00:04:18,440 --> 00:04:23,440 Speaker 1: therefore GE Capital, the financial division of General Electric. And 67 00:04:23,520 --> 00:04:27,760 Speaker 1: a year after the acquisition, the global stock markets crashed 68 00:04:27,760 --> 00:04:32,240 Speaker 1: on October nineteenth, n seven and what was called Black Monday. 69 00:04:32,320 --> 00:04:35,400 Speaker 1: The combination of events convinced Welch that he had made 70 00:04:35,400 --> 00:04:39,400 Speaker 1: an error in judgment acquiring Kidder Peabody, and it took 71 00:04:39,440 --> 00:04:44,640 Speaker 1: several more years and more scandals centering on Kidder Peabodies 72 00:04:44,839 --> 00:04:48,520 Speaker 1: record keeping and allegations of reporting false profits, but GE 73 00:04:48,560 --> 00:04:52,840 Speaker 1: would eventually sell Kidder Peabody off at a huge loss. 74 00:04:53,279 --> 00:04:56,760 Speaker 1: Now that embarrassment aside, GE for the most part did 75 00:04:56,960 --> 00:05:00,320 Speaker 1: very well in the eighties and nineties. The stock price 76 00:05:00,360 --> 00:05:04,480 Speaker 1: for g E rose four thousand percent. Some sources state 77 00:05:04,560 --> 00:05:06,880 Speaker 1: that when you take all the factors into consideration, it 78 00:05:06,960 --> 00:05:11,560 Speaker 1: was more like five thousand two. Under Welch's command, he 79 00:05:11,600 --> 00:05:14,599 Speaker 1: put off his retirement in order to secure an acquisition 80 00:05:14,680 --> 00:05:17,560 Speaker 1: of Honeywell International. If you listen to my last episode, 81 00:05:17,960 --> 00:05:21,760 Speaker 1: you know that didn't go well. The European Commission denied 82 00:05:21,960 --> 00:05:26,120 Speaker 1: the merger for anti competitive reasons, and the man who 83 00:05:26,240 --> 00:05:28,960 Speaker 1: hated to lose, Jack Welch, had to go out on 84 00:05:29,000 --> 00:05:32,440 Speaker 1: a down note. But compared to GE, you could say 85 00:05:32,520 --> 00:05:35,800 Speaker 1: Jack Welch got off easy. Now, this episode will cover 86 00:05:35,920 --> 00:05:39,719 Speaker 1: what happened to General Electric since two thousand one, including 87 00:05:39,760 --> 00:05:43,560 Speaker 1: the events that would create massive problems for the huge company. 88 00:05:43,880 --> 00:05:46,760 Speaker 1: And there is ongoing disagreement as to whether most of 89 00:05:46,760 --> 00:05:50,440 Speaker 1: the blame should fall on Welch's successor, or if Welch 90 00:05:50,560 --> 00:05:54,640 Speaker 1: himself should shoulder some of that responsibility or some other party. 91 00:05:54,760 --> 00:05:59,080 Speaker 1: So what the heck actually happened? Well, first, let me 92 00:05:59,120 --> 00:06:02,160 Speaker 1: talk a little bit about g S stock, because that's 93 00:06:02,200 --> 00:06:04,680 Speaker 1: going to come back around later in this episode a 94 00:06:04,720 --> 00:06:08,160 Speaker 1: few times. So, for years, g E paid out a 95 00:06:08,240 --> 00:06:11,919 Speaker 1: dividend on its stock. Not all companies do this, and 96 00:06:11,960 --> 00:06:14,719 Speaker 1: a dividend is a payment that a company makes to 97 00:06:14,839 --> 00:06:18,400 Speaker 1: distribute some of its revenue to its shareholders. So a 98 00:06:18,440 --> 00:06:21,520 Speaker 1: company makes money and then distributes some of that money 99 00:06:21,560 --> 00:06:24,440 Speaker 1: amongst the people who hold shares in the company. It's 100 00:06:24,520 --> 00:06:28,200 Speaker 1: usually not very much per share. In fact, it's typically 101 00:06:28,320 --> 00:06:32,159 Speaker 1: less than a dollar. Ges case, it was around thirty 102 00:06:32,200 --> 00:06:35,080 Speaker 1: one cents for a long time. In the US, there 103 00:06:35,080 --> 00:06:38,159 Speaker 1: are no rules about how frequently a company actually pays 104 00:06:38,200 --> 00:06:41,920 Speaker 1: out dividends. Most companies will do it quarterly, so you 105 00:06:41,960 --> 00:06:45,760 Speaker 1: would get one quarter of your dividend four times a year. 106 00:06:45,920 --> 00:06:48,479 Speaker 1: So if it was a dividend of forty cents, that 107 00:06:48,560 --> 00:06:50,880 Speaker 1: means every three months you would get a check for 108 00:06:50,960 --> 00:06:53,600 Speaker 1: ten cents for every share you own. So it's not 109 00:06:53,720 --> 00:06:55,640 Speaker 1: very much, but if you own a lot of shares, 110 00:06:55,680 --> 00:06:59,320 Speaker 1: it starts to add up. And besides distributing revenue, it's 111 00:06:59,360 --> 00:07:03,840 Speaker 1: also meant to incentivize shareholders to reinvest and buy more 112 00:07:03,960 --> 00:07:07,599 Speaker 1: shares of stock in that company. So the idea is, oh, 113 00:07:07,760 --> 00:07:09,920 Speaker 1: you got a dividend payout, it's enough for you to 114 00:07:09,920 --> 00:07:12,160 Speaker 1: buy another share in the company, So you spend that 115 00:07:12,200 --> 00:07:16,600 Speaker 1: dividend buying another share. That's the logic there. Well, when 116 00:07:16,600 --> 00:07:21,600 Speaker 1: Welch first took over g E stock wasn't doing so great, 117 00:07:22,000 --> 00:07:25,160 Speaker 1: it wasn't super high. A lot of investors thought of 118 00:07:25,200 --> 00:07:29,160 Speaker 1: the stocks as essentially a dividend payout and not much else, 119 00:07:29,240 --> 00:07:32,119 Speaker 1: so you wouldn't buy g E stocks with the idea 120 00:07:32,200 --> 00:07:35,120 Speaker 1: of selling them at a higher price leader on the road. 121 00:07:35,240 --> 00:07:37,800 Speaker 1: You know, you weren't thinking, I'm gonna buy now, because 122 00:07:37,920 --> 00:07:40,760 Speaker 1: in five or ten years this stock is going to 123 00:07:40,840 --> 00:07:43,520 Speaker 1: be worth two or three times as much. You bought 124 00:07:43,600 --> 00:07:46,800 Speaker 1: g E stock because it paid out a dividend, So 125 00:07:47,240 --> 00:07:49,560 Speaker 1: it would take a long time, but you would eventually 126 00:07:49,560 --> 00:07:52,640 Speaker 1: make more money than you invested if that dividend were 127 00:07:52,680 --> 00:07:56,720 Speaker 1: to hold steady. Now, when Welch took over, the stock 128 00:07:56,760 --> 00:07:59,680 Speaker 1: price actually dipped a little bit after he had been 129 00:07:59,760 --> 00:08:02,760 Speaker 1: run ge for a year or two, but another year 130 00:08:02,840 --> 00:08:06,280 Speaker 1: later the entire stock market took a turn and it 131 00:08:06,280 --> 00:08:08,800 Speaker 1: started to climb in value. This would be the beginning 132 00:08:08,880 --> 00:08:13,080 Speaker 1: of eighteen years of a climbing market, a bull market 133 00:08:13,120 --> 00:08:16,200 Speaker 1: in other words, even with events like Black Monday in 134 00:08:16,280 --> 00:08:19,600 Speaker 1: Night seven taken into account, so you had moments where 135 00:08:19,640 --> 00:08:22,440 Speaker 1: the market was not bullish, where it was crashing, but 136 00:08:22,840 --> 00:08:25,680 Speaker 1: it would recover and then go back on its bullish 137 00:08:26,240 --> 00:08:30,600 Speaker 1: route trajectory. If you will now collectively the SMP five 138 00:08:30,680 --> 00:08:35,920 Speaker 1: hundred index, it would climb by two thousand and this 139 00:08:36,000 --> 00:08:38,360 Speaker 1: was the same time that we started seeing packages like 140 00:08:38,720 --> 00:08:43,040 Speaker 1: four oh one K plans replaced traditional retirement plans. Now 141 00:08:43,080 --> 00:08:47,120 Speaker 1: that meant that stock market performance would become far more 142 00:08:47,160 --> 00:08:50,559 Speaker 1: important to weigh more people. Like in the old days, 143 00:08:51,000 --> 00:08:53,920 Speaker 1: it was just people who traded in stocks, and largely 144 00:08:54,000 --> 00:08:56,319 Speaker 1: it was a lot of businesses that did that trading. 145 00:08:56,600 --> 00:08:59,440 Speaker 1: Your average person didn't play the stock market that much. 146 00:09:00,040 --> 00:09:03,679 Speaker 1: But now stuff like our retirement was tied directly into 147 00:09:03,679 --> 00:09:08,800 Speaker 1: stock market performance. So suddenly everybody was really really focusing 148 00:09:08,840 --> 00:09:12,520 Speaker 1: on the stock market, and it meant that it became 149 00:09:12,640 --> 00:09:15,559 Speaker 1: far more important for stocks to do well. See before 150 00:09:15,600 --> 00:09:19,160 Speaker 1: the nineteen eighties, stock market performance was you know, it 151 00:09:19,200 --> 00:09:22,120 Speaker 1: was an indicator of a company's overall health, but most 152 00:09:22,120 --> 00:09:26,080 Speaker 1: people didn't consider it the metric against which all companies 153 00:09:26,120 --> 00:09:29,599 Speaker 1: should stand. You would worry more about the company's profitability, 154 00:09:29,600 --> 00:09:31,840 Speaker 1: how much revenue is it bringing in, how much does 155 00:09:31,880 --> 00:09:34,200 Speaker 1: it cost to do business, and how much profit is 156 00:09:34,200 --> 00:09:37,680 Speaker 1: the company making. The share price wasn't as big a deal. 157 00:09:38,160 --> 00:09:41,320 Speaker 1: That changed around the same time that Welch took over 158 00:09:41,360 --> 00:09:45,720 Speaker 1: at GE, and Welch's philosophy happened to match this general 159 00:09:45,800 --> 00:09:49,719 Speaker 1: shift in how businesses operated in the United States. Now, 160 00:09:49,760 --> 00:09:53,480 Speaker 1: I don't say this to diminish Welch's contributions or GEES 161 00:09:53,520 --> 00:09:59,320 Speaker 1: performance because the company's own stock outperformed the general market significantly. 162 00:09:59,679 --> 00:10:02,160 Speaker 1: But I do also want to take the overall market 163 00:10:02,200 --> 00:10:05,240 Speaker 1: performance into consideration, because while I don't want to take 164 00:10:05,240 --> 00:10:08,400 Speaker 1: any credit away, I also don't want to give too 165 00:10:08,480 --> 00:10:12,200 Speaker 1: much credit to Welch and his impact beyond what it 166 00:10:12,280 --> 00:10:17,280 Speaker 1: actually was. Anyway, as the market improved, and as GEES 167 00:10:17,320 --> 00:10:21,880 Speaker 1: performance in particular made its stock price rocket upwards, ge 168 00:10:22,040 --> 00:10:25,560 Speaker 1: stocks were seen as more than just a dividend payout. 169 00:10:25,880 --> 00:10:29,000 Speaker 1: The company continued to pay dividends, though, which again is 170 00:10:29,000 --> 00:10:32,160 Speaker 1: going to be important later. Those dividends were largely funded 171 00:10:32,200 --> 00:10:35,640 Speaker 1: by the incredible performance of g E Capital, that's the 172 00:10:35,760 --> 00:10:40,440 Speaker 1: financial services division of General Electric. In the last year 173 00:10:40,559 --> 00:10:45,520 Speaker 1: of Welch's tenure as CEO, gees stock price did take 174 00:10:45,679 --> 00:10:49,160 Speaker 1: several hits, but then so did just about everybody else. 175 00:10:49,559 --> 00:10:53,160 Speaker 1: In March two thousand, the stock markets performance shifted. It 176 00:10:53,240 --> 00:10:56,440 Speaker 1: was no longer bullish. It was going into a bear market, 177 00:10:56,600 --> 00:11:00,560 Speaker 1: so instead of growing, it was receding. The dot com 178 00:11:00,600 --> 00:11:03,280 Speaker 1: bubble had crashed and that caused a bit of a 179 00:11:03,280 --> 00:11:06,440 Speaker 1: stock market crisis. Companies that were in the dot com 180 00:11:06,520 --> 00:11:09,560 Speaker 1: industry obviously they suffered the most. Many of them just 181 00:11:09,960 --> 00:11:12,760 Speaker 1: were blinking out of existence after it became clear that 182 00:11:13,360 --> 00:11:16,160 Speaker 1: those companies had no way to deliver upon the promises 183 00:11:16,200 --> 00:11:19,400 Speaker 1: that they were making or to be able to justify 184 00:11:19,440 --> 00:11:23,440 Speaker 1: the crazy speculation that drove their stock prices into the 185 00:11:23,480 --> 00:11:26,120 Speaker 1: stratosphere before the companies had even figured out how to 186 00:11:26,200 --> 00:11:30,560 Speaker 1: generate ascent in revenue. But even companies like General Electric, 187 00:11:30,720 --> 00:11:37,000 Speaker 1: which were traditional, established, giant conglomerate companies, were affected by 188 00:11:37,040 --> 00:11:40,160 Speaker 1: this change in the market. Between March two thousand and 189 00:11:40,160 --> 00:11:43,760 Speaker 1: when Welch would hand over the CEO role to his successor, 190 00:11:44,120 --> 00:11:47,959 Speaker 1: Jeff Emilt, in early September two thoe, the stock price 191 00:11:48,040 --> 00:11:51,079 Speaker 1: for g E had fallen by twenty four percent. Now 192 00:11:51,080 --> 00:11:54,720 Speaker 1: I point that out because often the simplified story about 193 00:11:54,800 --> 00:11:58,760 Speaker 1: what happened to GE was that Jack Welch stepped down 194 00:11:59,080 --> 00:12:02,320 Speaker 1: and Immolt fumbled the ball, that Emilt was a terrible 195 00:12:02,360 --> 00:12:06,240 Speaker 1: CEO and he could not follow Welch's lead. But in reality, 196 00:12:06,480 --> 00:12:09,720 Speaker 1: I think the story is far more nuanced, and we 197 00:12:09,760 --> 00:12:12,840 Speaker 1: have to remember that the market itself was changing during 198 00:12:12,880 --> 00:12:16,360 Speaker 1: this transition. It wasn't the case of Emilt being handed 199 00:12:16,440 --> 00:12:19,600 Speaker 1: a profitable company on a silver platter and nothing was 200 00:12:19,640 --> 00:12:23,560 Speaker 1: going wrong, and he just messed it up from there. Uh, 201 00:12:23,600 --> 00:12:25,800 Speaker 1: he did make a ton of decisions that would not 202 00:12:25,920 --> 00:12:27,880 Speaker 1: turn out to be great for Ge. So I don't 203 00:12:27,920 --> 00:12:31,720 Speaker 1: want to diminish his responsibility either. I just think it's 204 00:12:31,760 --> 00:12:35,559 Speaker 1: important for us to take all these factors into consideration. Okay. 205 00:12:35,600 --> 00:12:38,959 Speaker 1: So Welch stepped down on September six, two thousand one. 206 00:12:39,040 --> 00:12:42,280 Speaker 1: Emilt took over on September seven, and four days later, 207 00:12:42,600 --> 00:12:45,360 Speaker 1: the United States was rocked by a series of terrorist 208 00:12:45,440 --> 00:12:49,640 Speaker 1: attacks that shook the country to its core. Those effects 209 00:12:49,679 --> 00:12:55,199 Speaker 1: were widespread. The tragedy touched thousands of people directly, tens 210 00:12:55,280 --> 00:12:59,400 Speaker 1: of thousands millions of people indirectly. It transformed the New 211 00:12:59,480 --> 00:13:03,280 Speaker 1: York City Escape permanently, and it caused disruption in the 212 00:13:03,320 --> 00:13:06,800 Speaker 1: markets as well. Wall Street made the decision to not 213 00:13:06,960 --> 00:13:10,440 Speaker 1: open the New York Stock Exchange the morning of September eleven, 214 00:13:10,640 --> 00:13:14,120 Speaker 1: two thousand one, fearing that the terrorist attacks would prompt 215 00:13:14,280 --> 00:13:19,640 Speaker 1: panic selling amongst shareholders, making a truly horrible situation even 216 00:13:19,679 --> 00:13:23,440 Speaker 1: more dire. Both the New York Stock Exchange and the 217 00:13:23,520 --> 00:13:29,320 Speaker 1: NASDAC would remain closed until September two thousand one, when 218 00:13:29,360 --> 00:13:33,040 Speaker 1: trading resumed, The market fell by nearly seven hundred points. 219 00:13:33,360 --> 00:13:36,760 Speaker 1: That was a decline of almost mobile actually more than 220 00:13:37,080 --> 00:13:41,200 Speaker 1: seven percent, and that was just the first day of trading. 221 00:13:41,280 --> 00:13:46,040 Speaker 1: Losses actually continued throughout that week. I hate even talking 222 00:13:46,080 --> 00:13:49,160 Speaker 1: about this, but it is important in order for us 223 00:13:49,200 --> 00:13:54,160 Speaker 1: to understand ges story. At this stage in the company's history, 224 00:13:54,400 --> 00:13:58,880 Speaker 1: business philosophies had changed significantly in the United States in 225 00:13:58,920 --> 00:14:02,000 Speaker 1: the nineteen eighties and nine nineties. We had created a 226 00:14:02,040 --> 00:14:06,160 Speaker 1: new environment where share value was the most important metric 227 00:14:06,360 --> 00:14:09,640 Speaker 1: for a business, the company's stock price. If the stock 228 00:14:09,679 --> 00:14:13,199 Speaker 1: price was going up, that was good. That was pretty 229 00:14:13,280 --> 00:14:16,720 Speaker 1: much the end all be all. A company wasn't thought 230 00:14:16,720 --> 00:14:20,120 Speaker 1: of doing well unless its stock price was growing year 231 00:14:20,200 --> 00:14:23,240 Speaker 1: over year, or at least the overall value of the 232 00:14:23,280 --> 00:14:26,080 Speaker 1: company when you take in at stock. Because of course, 233 00:14:26,240 --> 00:14:29,280 Speaker 1: companies can do things like stock splits so that the 234 00:14:29,360 --> 00:14:32,720 Speaker 1: price of an individual shaff stock goes down, but because 235 00:14:32,760 --> 00:14:35,360 Speaker 1: you've doubled the number of stocks or a number of 236 00:14:35,400 --> 00:14:38,040 Speaker 1: shares i should say, out on the market, the value 237 00:14:38,040 --> 00:14:41,560 Speaker 1: of the company itself remains stable and can continue to grow. 238 00:14:42,200 --> 00:14:45,560 Speaker 1: This drove a lot of business decisions that put shareholders 239 00:14:45,640 --> 00:14:50,480 Speaker 1: above just about everything else in the company, including customers. Now, 240 00:14:50,520 --> 00:14:53,680 Speaker 1: in my opinion, It's one of the biggest economic mistakes 241 00:14:54,320 --> 00:14:57,760 Speaker 1: made in recent decades, as it has created a world 242 00:14:57,840 --> 00:15:01,880 Speaker 1: in which many company executives Phoe becus very much on 243 00:15:02,040 --> 00:15:05,680 Speaker 1: the short term to mid term gains as opposed to 244 00:15:05,840 --> 00:15:09,760 Speaker 1: long term strategies. So often I think companies are making 245 00:15:09,840 --> 00:15:13,760 Speaker 1: choices that hurt the company's chances to survive in the 246 00:15:13,840 --> 00:15:17,160 Speaker 1: long term, all in an effort to drive that stock 247 00:15:17,200 --> 00:15:22,640 Speaker 1: market price further up. Anyway, this disaster impacted gees stock 248 00:15:22,720 --> 00:15:26,720 Speaker 1: price along with countless other companies, and you can't lay 249 00:15:26,760 --> 00:15:31,000 Speaker 1: that blame on Emilt. It's not his fault that this 250 00:15:31,240 --> 00:15:35,320 Speaker 1: series of awful attacks happened four days after he took 251 00:15:35,480 --> 00:15:38,560 Speaker 1: control of the company. In the wake of nine eleven, 252 00:15:38,960 --> 00:15:43,200 Speaker 1: all airline operations in the United States stopped for several days. 253 00:15:43,520 --> 00:15:46,480 Speaker 1: That had a direct impact on gees business, which included 254 00:15:46,520 --> 00:15:49,720 Speaker 1: building stuff like jet engines for the airlines and also 255 00:15:50,000 --> 00:15:53,680 Speaker 1: leasing out parts for various companies. All of that was 256 00:15:53,720 --> 00:15:57,200 Speaker 1: put on hold. On top of that, gees insurance business 257 00:15:57,520 --> 00:16:00,200 Speaker 1: was suddenly inundated with claims which to come and he 258 00:16:00,320 --> 00:16:02,840 Speaker 1: had to make good on For one thing, ge was 259 00:16:02,880 --> 00:16:06,320 Speaker 1: responsible for the insurance policy for the World Trade Center, 260 00:16:06,360 --> 00:16:09,200 Speaker 1: which as I'm sure you all know lost the two 261 00:16:09,240 --> 00:16:12,880 Speaker 1: towers that made the center iconic back in two thousand 262 00:16:12,920 --> 00:16:16,280 Speaker 1: one as a result of those attacks. Prior to September eleven, 263 00:16:16,720 --> 00:16:19,560 Speaker 1: it wasn't unusual for ge to lean a bit heavily 264 00:16:19,680 --> 00:16:24,040 Speaker 1: on ge capital to kind of smooth things over. The 265 00:16:24,080 --> 00:16:27,280 Speaker 1: branch was so profitable, that division of ge was so 266 00:16:27,360 --> 00:16:31,320 Speaker 1: profitable that could help conceal if another division weren't quite 267 00:16:31,520 --> 00:16:36,080 Speaker 1: doing so well. A lot of gees accounting practices have 268 00:16:36,360 --> 00:16:39,840 Speaker 1: over the years been called opaque, meaning that you might 269 00:16:39,920 --> 00:16:42,920 Speaker 1: get the end result of how well the overall company 270 00:16:42,960 --> 00:16:46,160 Speaker 1: is doing, but you might not know how it got there, 271 00:16:46,480 --> 00:16:49,400 Speaker 1: which divisions are doing well versus which ones are not. 272 00:16:49,920 --> 00:16:52,920 Speaker 1: The overall performance of the company was what mattered, right, 273 00:16:53,000 --> 00:16:56,640 Speaker 1: so who cares what's happening in the individual divisions. Well, 274 00:16:56,680 --> 00:16:59,440 Speaker 1: Emil would get to work selling off parts of gees 275 00:16:59,520 --> 00:17:02,600 Speaker 1: insurance business, though the company would still maintain some of 276 00:17:02,640 --> 00:17:05,600 Speaker 1: that business up to present day. I'll explain more about 277 00:17:05,640 --> 00:17:08,600 Speaker 1: that in a little bit. And he also began to 278 00:17:08,640 --> 00:17:12,719 Speaker 1: look at possible acquisitions. So what things turn out well, 279 00:17:13,440 --> 00:17:18,919 Speaker 1: we'll find out. But spoiler alert, no they don't. But 280 00:17:19,000 --> 00:17:21,639 Speaker 1: before I get into that, let's take a quick break. 281 00:17:29,240 --> 00:17:31,600 Speaker 1: One thing I want to mention before I forget it 282 00:17:31,640 --> 00:17:35,680 Speaker 1: is that during Emilt's run as CEO of GE, there 283 00:17:35,720 --> 00:17:39,280 Speaker 1: was a particularly wasteful practice going on that would later 284 00:17:39,320 --> 00:17:42,160 Speaker 1: get a lot of media attention when it was made public. 285 00:17:42,760 --> 00:17:46,399 Speaker 1: Emilt traveled a lot. He would meet with various GE 286 00:17:46,560 --> 00:17:49,640 Speaker 1: executives and facilities all around the world, as well as 287 00:17:49,680 --> 00:17:54,359 Speaker 1: with other company and industry leaders and politicians. Particularly, he 288 00:17:54,400 --> 00:17:55,960 Speaker 1: would do this when he was on the lookout for 289 00:17:56,040 --> 00:17:59,560 Speaker 1: possible acquisitions, and he made a lot of those as 290 00:17:59,600 --> 00:18:02,119 Speaker 1: he was the EO of g E. Now, to hop 291 00:18:02,200 --> 00:18:04,120 Speaker 1: over to the other side of the world, he would 292 00:18:04,160 --> 00:18:08,240 Speaker 1: take one of the g E owned business jets. They 293 00:18:08,280 --> 00:18:11,680 Speaker 1: had six of them. But here's the curious thing. Every 294 00:18:11,680 --> 00:18:14,840 Speaker 1: time you would travel, there would be a second empty 295 00:18:14,960 --> 00:18:18,960 Speaker 1: jet that would follow along behind and stay at the 296 00:18:19,000 --> 00:18:22,400 Speaker 1: same airport and wait there. And then when Emilt would 297 00:18:22,440 --> 00:18:26,320 Speaker 1: fly back, so did the empty jet. Now the justification 298 00:18:26,400 --> 00:18:30,920 Speaker 1: for that practice, which again eventually became public, in which 299 00:18:30,920 --> 00:18:35,200 Speaker 1: a jet carrying only a crew no passengers, would burn 300 00:18:35,280 --> 00:18:38,639 Speaker 1: through fuel it would generate pollution. The justification was that 301 00:18:38,760 --> 00:18:43,880 Speaker 1: Emilt was a very important person on very important business 302 00:18:44,359 --> 00:18:47,919 Speaker 1: and yes, I capitalized very important in my notes in 303 00:18:47,960 --> 00:18:53,080 Speaker 1: this section. As such, he couldn't be delayed by mechanical failures. 304 00:18:53,280 --> 00:18:56,520 Speaker 1: His business was far too important. So the empty jet 305 00:18:57,040 --> 00:19:01,160 Speaker 1: was essentially a backup transport in cases Mary should experience 306 00:19:01,160 --> 00:19:04,680 Speaker 1: a mechanical delay. It was his just in case measure, 307 00:19:05,240 --> 00:19:10,200 Speaker 1: a very expensive, wasteful measure. The company would actually stop 308 00:19:10,320 --> 00:19:13,200 Speaker 1: that practice in two thousand fourteen, which was a few 309 00:19:13,240 --> 00:19:16,879 Speaker 1: years before Emilt would be replaced as CEO. Spoiler alert, 310 00:19:16,920 --> 00:19:19,639 Speaker 1: will get there, all right, So back to the post 311 00:19:19,760 --> 00:19:23,399 Speaker 1: two thousand one g E. In two thousand two, ge 312 00:19:23,400 --> 00:19:27,040 Speaker 1: would acquire a business from a formerly huge company. That 313 00:19:27,080 --> 00:19:30,000 Speaker 1: company was in Ron, which went bankrupt in two thousand 314 00:19:30,040 --> 00:19:33,280 Speaker 1: one after its own massive scandal, which I'm not going 315 00:19:33,320 --> 00:19:36,360 Speaker 1: to get into here it's outside the purview of this episode. 316 00:19:36,600 --> 00:19:38,680 Speaker 1: But one of the many parts of in Ron to 317 00:19:38,760 --> 00:19:42,760 Speaker 1: go up on the auction block after the bankruptcy was 318 00:19:42,920 --> 00:19:47,120 Speaker 1: a wind power business. Emilt was, in his own words, 319 00:19:47,359 --> 00:19:51,640 Speaker 1: not enthusiastic about wind power. He felt wind power wasn't 320 00:19:51,720 --> 00:19:55,000 Speaker 1: profitable and it was too dependent upon subsidies, and those 321 00:19:55,000 --> 00:19:58,280 Speaker 1: subsidies could disappear at any time, according to which way 322 00:19:58,400 --> 00:20:01,359 Speaker 1: any government budget might be headed. So there was no 323 00:20:01,400 --> 00:20:04,600 Speaker 1: way to control that. If the subsidies went away, you'd 324 00:20:04,600 --> 00:20:09,320 Speaker 1: be saddled with a really expensive and nonprofitable business. But 325 00:20:09,640 --> 00:20:13,119 Speaker 1: EMIL gave the authority to executives who really believed in 326 00:20:13,119 --> 00:20:15,880 Speaker 1: that acquisition to go forward with it, and they went 327 00:20:15,920 --> 00:20:19,080 Speaker 1: and purchased the division. It would end up becoming profitable 328 00:20:19,240 --> 00:20:22,840 Speaker 1: and perhaps should have served as a lesson for future 329 00:20:22,920 --> 00:20:25,639 Speaker 1: emilt And I'll get back into what I mean about 330 00:20:25,680 --> 00:20:28,240 Speaker 1: that in just a little bit. In two thousand three, 331 00:20:28,560 --> 00:20:32,119 Speaker 1: ge announced its intention to purchase a majority stake in 332 00:20:32,240 --> 00:20:35,960 Speaker 1: Universal Pictures. That was a company that was under the 333 00:20:36,000 --> 00:20:39,520 Speaker 1: control of another company called Vivendi, a French company. In 334 00:20:39,640 --> 00:20:43,639 Speaker 1: this deal, g E would acquire eighty percent of Universal. 335 00:20:44,200 --> 00:20:47,200 Speaker 1: Vivindi was going through kind of a financial crisis at 336 00:20:47,200 --> 00:20:51,640 Speaker 1: the time, so g E merged Universal with NBC, creating 337 00:20:51,920 --> 00:20:56,280 Speaker 1: NBC Universal and the deal included several cable television channels 338 00:20:56,320 --> 00:20:59,800 Speaker 1: like Sci Fi Network, USA Network, as well as the 339 00:20:59,840 --> 00:21:03,640 Speaker 1: un Reversal film studio the Universal Theme Parks. It did 340 00:21:03,680 --> 00:21:07,600 Speaker 1: not include Universal Music that would remain completely under Vivendi's control, 341 00:21:07,680 --> 00:21:10,520 Speaker 1: but lots of the other Universal properties were part of 342 00:21:10,560 --> 00:21:14,920 Speaker 1: this deal. Vivendi would have twenty control of this, and 343 00:21:14,960 --> 00:21:20,440 Speaker 1: then UH you would have GE with control and you 344 00:21:20,560 --> 00:21:24,480 Speaker 1: got INBC Universal. GE would not hold onto this property forever. 345 00:21:25,160 --> 00:21:27,960 Speaker 1: G was acquiring other companies as well at this time, 346 00:21:27,960 --> 00:21:31,600 Speaker 1: adding them to the various divisions of General Electric. GE 347 00:21:31,640 --> 00:21:38,080 Speaker 1: Healthcare was growing with companies like UH Instrumentarium and Amersham Plc. 348 00:21:38,440 --> 00:21:41,520 Speaker 1: Those were being added as part of g E Healthcare. 349 00:21:41,920 --> 00:21:45,399 Speaker 1: G Capital was also growing with similar acquisitions, including some 350 00:21:45,440 --> 00:21:48,159 Speaker 1: subprime mortgage loan companies, and we'll get into that in 351 00:21:48,200 --> 00:21:51,359 Speaker 1: a bit. And GE would also build out its industrial, 352 00:21:51,520 --> 00:21:55,840 Speaker 1: consumer and energy businesses and made several acquisitions of companies 353 00:21:55,880 --> 00:21:59,760 Speaker 1: in the oil industry, also in banking and that old 354 00:22:00,040 --> 00:22:03,920 Speaker 1: horse of fossil fuels in general, because he really believed 355 00:22:03,960 --> 00:22:08,439 Speaker 1: that that was going to be the mainstay for energy 356 00:22:08,480 --> 00:22:11,840 Speaker 1: production or electricity production. I guess I should say for 357 00:22:11,880 --> 00:22:15,600 Speaker 1: the foreseeable future. Throughout this time, GE Capital would remain 358 00:22:15,680 --> 00:22:18,760 Speaker 1: the most profitable division of General Electric, and so the 359 00:22:18,760 --> 00:22:22,760 Speaker 1: company would lean more heavily upon GE Capital in order 360 00:22:22,800 --> 00:22:26,160 Speaker 1: to do things like pay out that dividend to shareholders 361 00:22:26,760 --> 00:22:29,919 Speaker 1: that set up GE for disaster. Just a couple of 362 00:22:29,960 --> 00:22:34,480 Speaker 1: years after GE purchased subprime mortgage businesses, the world plunged 363 00:22:34,600 --> 00:22:38,359 Speaker 1: into a global economic crisis, which we often refer to 364 00:22:38,480 --> 00:22:41,919 Speaker 1: as the two thousand eight financial crisis, but really the 365 00:22:41,960 --> 00:22:46,480 Speaker 1: crisis first started becoming apparent in two thousand seven with 366 00:22:46,600 --> 00:22:49,639 Speaker 1: the subprime mortgage market. So what the heck is a 367 00:22:49,640 --> 00:22:55,120 Speaker 1: subprime mortgage Well, the short answer is it's an incredibly risky, predatory, 368 00:22:55,160 --> 00:23:00,240 Speaker 1: and irresponsible market practice that depends upon people who are 369 00:23:00,600 --> 00:23:03,640 Speaker 1: some of the most vulnerable folks out there. Maybe that's 370 00:23:03,680 --> 00:23:06,080 Speaker 1: just me putting my own bias on things, but it's 371 00:23:06,080 --> 00:23:08,080 Speaker 1: hard for me to see the whole concept as anything 372 00:23:08,080 --> 00:23:11,400 Speaker 1: other than dumb and harmful. But here's how it breaks down, 373 00:23:11,720 --> 00:23:14,160 Speaker 1: all right. So you know about credit scores, right, They're 374 00:23:14,200 --> 00:23:16,760 Speaker 1: supposed to represent how much of a risk or a 375 00:23:16,880 --> 00:23:19,359 Speaker 1: lack of risk a person is when it comes to 376 00:23:19,359 --> 00:23:21,960 Speaker 1: paying off debt like loans. So if you have a 377 00:23:22,040 --> 00:23:25,000 Speaker 1: high credit score, it means your history shows that you're 378 00:23:25,040 --> 00:23:28,199 Speaker 1: diligent about paying off debt and that you represent a 379 00:23:28,240 --> 00:23:30,760 Speaker 1: low risk for future loans. It does not mean that 380 00:23:30,800 --> 00:23:33,240 Speaker 1: you've never had debt. You want to have some debt 381 00:23:33,359 --> 00:23:34,560 Speaker 1: and then you want to be able to pay it 382 00:23:34,600 --> 00:23:37,480 Speaker 1: off because that's what gets you that high credit score. 383 00:23:37,640 --> 00:23:40,000 Speaker 1: But if you have a low credit score. It means 384 00:23:40,040 --> 00:23:42,600 Speaker 1: that in the eyes of a lender, you represent a risk. 385 00:23:42,880 --> 00:23:45,720 Speaker 1: Maybe you have a spotty employment history, maybe you have 386 00:23:45,760 --> 00:23:48,640 Speaker 1: a lot of outstanding debt, maybe you've missed some payments 387 00:23:48,680 --> 00:23:51,639 Speaker 1: on some loans. The purpose of these credit scores is 388 00:23:51,640 --> 00:23:55,800 Speaker 1: to give lenders enough information to make responsible loan agreements. 389 00:23:56,480 --> 00:24:00,600 Speaker 1: Subprime lending involves giving loans to high risk in individuals, 390 00:24:00,880 --> 00:24:04,600 Speaker 1: and typically you pair this with really high interest rates 391 00:24:04,720 --> 00:24:08,000 Speaker 1: and other restrictions in order to mitigate the risk you 392 00:24:08,080 --> 00:24:10,679 Speaker 1: incur when you give a loan out to one of 393 00:24:10,720 --> 00:24:13,359 Speaker 1: these people who have a very low credit score. And 394 00:24:13,400 --> 00:24:16,000 Speaker 1: so people who are looking to buy homes or to 395 00:24:16,119 --> 00:24:20,280 Speaker 1: take out other loans were securing the money through financial 396 00:24:20,280 --> 00:24:24,960 Speaker 1: institutions with these subprime mortgages and subprime loans, but with 397 00:24:25,200 --> 00:24:29,879 Speaker 1: incredibly punishing restrictions on those loans, and surprise, surprise, a 398 00:24:29,920 --> 00:24:32,760 Speaker 1: lot of folks found it impossible to pay off that debt, 399 00:24:33,160 --> 00:24:36,000 Speaker 1: and ultimately many of the companies that were making those 400 00:24:36,040 --> 00:24:39,120 Speaker 1: loans found themselves in a hole that they had dug 401 00:24:39,200 --> 00:24:43,159 Speaker 1: themselves and it was too deep to climb out. Everyone 402 00:24:43,320 --> 00:24:45,560 Speaker 1: was put in an awful situation and it had a 403 00:24:45,560 --> 00:24:48,720 Speaker 1: really big ripple effect. Part of that ripple led to 404 00:24:48,760 --> 00:24:52,840 Speaker 1: an investment bank called Lemon Brothers collapsing in September of 405 00:24:52,880 --> 00:24:56,439 Speaker 1: two thousand eight. Other major financial institutions were in danger 406 00:24:56,480 --> 00:25:00,040 Speaker 1: of following suit. The whole thing was leading to a 407 00:25:00,080 --> 00:25:04,080 Speaker 1: global economic collapse, with the financial industry on the brink 408 00:25:04,160 --> 00:25:08,280 Speaker 1: of total disaster. That's when various parties swooped in to 409 00:25:08,359 --> 00:25:12,800 Speaker 1: rescue the situation, bailing out banks that had overextended themselves. 410 00:25:13,200 --> 00:25:15,520 Speaker 1: This in turn ticked off a lot of folks who 411 00:25:15,560 --> 00:25:18,760 Speaker 1: are directly affected by this problem. These were people who 412 00:25:18,760 --> 00:25:21,360 Speaker 1: had been evicted from their homes because they weren't able 413 00:25:21,400 --> 00:25:24,360 Speaker 1: to make their mortgage payments, or people who are otherwise 414 00:25:24,440 --> 00:25:28,040 Speaker 1: hurt by the subprime mortgage crisis, either directly or indirectly. 415 00:25:28,280 --> 00:25:30,120 Speaker 1: And it didn't help that many of these people saw 416 00:25:30,240 --> 00:25:35,119 Speaker 1: the bailouts as being rewards for the same financial institutions 417 00:25:35,160 --> 00:25:38,040 Speaker 1: that caused all the misery in the first place. Well. 418 00:25:38,320 --> 00:25:41,960 Speaker 1: Ge Capital was one of those institutions, and it was 419 00:25:42,040 --> 00:25:46,000 Speaker 1: hit hard by the two thousand eight crisis. Worse, because 420 00:25:46,040 --> 00:25:49,600 Speaker 1: General Electric was so dependent upon ge Capital for revenue, 421 00:25:49,920 --> 00:25:53,280 Speaker 1: it put all of General Electric at risk. To help 422 00:25:53,320 --> 00:25:55,879 Speaker 1: whether the storm, the company announced it would attempt to 423 00:25:55,960 --> 00:26:00,080 Speaker 1: raise twelve billion dollars through a common stock offering or 424 00:26:00,119 --> 00:26:04,400 Speaker 1: in Buffett Investor Extraordinaire also helped out by investing billions 425 00:26:04,440 --> 00:26:08,520 Speaker 1: of dollars in GE. In retrospect, many analysts have said 426 00:26:08,560 --> 00:26:12,200 Speaker 1: that GE was playing an increasingly dangerous game since Welch 427 00:26:12,280 --> 00:26:15,639 Speaker 1: had transformed GE Capital from a small division that helped 428 00:26:15,640 --> 00:26:20,439 Speaker 1: consumers get financing to purchase big appliances like refrigerators, into 429 00:26:20,520 --> 00:26:25,399 Speaker 1: a global financial institution. Gees more traditional divisions like it's 430 00:26:25,520 --> 00:26:30,399 Speaker 1: lighting business, industrial equipment business, medical equipment business, it's a 431 00:26:30,480 --> 00:26:34,719 Speaker 1: via Asian businesses. All of these secured for the company 432 00:26:34,800 --> 00:26:37,800 Speaker 1: the respect of Wall Street because they were dependable parts 433 00:26:38,040 --> 00:26:42,320 Speaker 1: of GE. They could make a dependable revenue, and they 434 00:26:42,320 --> 00:26:45,760 Speaker 1: were traditional, They had a long history with the company 435 00:26:45,880 --> 00:26:48,159 Speaker 1: that gave the company a lot of room to swing 436 00:26:48,280 --> 00:26:51,560 Speaker 1: for the fences with GE Capital and thus engage in 437 00:26:51,640 --> 00:26:54,840 Speaker 1: more risky behaviors in an effort to win big payoffs, 438 00:26:55,200 --> 00:26:57,800 Speaker 1: drive that stock market price up, and again pay out 439 00:26:57,840 --> 00:27:02,240 Speaker 1: those dividends. And that risk was somewhat necessary because of 440 00:27:02,240 --> 00:27:05,640 Speaker 1: that changing climate of business. So you had to grow 441 00:27:05,720 --> 00:27:09,520 Speaker 1: year over years. Traditional businesses usually had steady performance and 442 00:27:09,560 --> 00:27:13,000 Speaker 1: they did grow, but they grew slowly, so that wasn't 443 00:27:13,040 --> 00:27:17,320 Speaker 1: the kind of performance that would really when you the 444 00:27:17,320 --> 00:27:21,679 Speaker 1: the front cover of various business magazines, you wanted to 445 00:27:21,720 --> 00:27:26,119 Speaker 1: really go for it. So GE Capital was that method. 446 00:27:26,240 --> 00:27:29,720 Speaker 1: That was how GE was going to be the leader. 447 00:27:30,240 --> 00:27:33,240 Speaker 1: Then it became an anchor weighing the company down in 448 00:27:33,280 --> 00:27:36,960 Speaker 1: the wake of this financial crisis. Emil would start trying 449 00:27:37,000 --> 00:27:40,560 Speaker 1: to sell off parts of GE Capital, but it wasn't easy. 450 00:27:40,600 --> 00:27:45,160 Speaker 1: Before Buffett rushed into help, GE famously couldn't secure overnight 451 00:27:45,240 --> 00:27:48,639 Speaker 1: loans to keep the business afloat. Most investors felt it 452 00:27:48,680 --> 00:27:51,600 Speaker 1: was far too risky to pour money into General Electric, 453 00:27:51,880 --> 00:27:54,159 Speaker 1: so the house that Jack built was in danger of 454 00:27:54,280 --> 00:27:59,200 Speaker 1: crashing to its foundations. Even with the influx of investment cash, 455 00:27:59,359 --> 00:28:04,520 Speaker 1: not to mention an incredible one thirty nine billion dollars 456 00:28:04,560 --> 00:28:09,000 Speaker 1: of federal government bailout money, GE was still struggling, and 457 00:28:09,040 --> 00:28:12,960 Speaker 1: one thing barreling down at the company was that dividend payout. 458 00:28:13,200 --> 00:28:15,840 Speaker 1: The dividend made g E stock one of the most 459 00:28:15,960 --> 00:28:20,280 Speaker 1: popular stocks on the market. Tons of people owned g 460 00:28:20,480 --> 00:28:24,040 Speaker 1: E stock because it paid out dividends, but paying out 461 00:28:24,040 --> 00:28:25,960 Speaker 1: that dividend was going to put a huge burden on 462 00:28:26,000 --> 00:28:28,320 Speaker 1: the company, It just wasn't going to have the cash 463 00:28:28,359 --> 00:28:31,480 Speaker 1: to do it, so in two thousand nine, Emil decided 464 00:28:31,520 --> 00:28:34,320 Speaker 1: to cut the dividend from thirty one cents a share 465 00:28:34,720 --> 00:28:37,800 Speaker 1: down to ten cents a share. It would mark only 466 00:28:37,840 --> 00:28:41,200 Speaker 1: the second time the company had reduced its dividend payout. 467 00:28:41,440 --> 00:28:44,760 Speaker 1: The first time had been during the Great Depression, and 468 00:28:44,880 --> 00:28:48,120 Speaker 1: spoiler alert, it would not be the last time they 469 00:28:48,160 --> 00:28:51,080 Speaker 1: would have to cut the dividend. Also, in two thousand nine, 470 00:28:51,280 --> 00:28:55,280 Speaker 1: the company announced its intention to sell off NBC Universal 471 00:28:55,720 --> 00:28:59,440 Speaker 1: to cable provider Comcast. To do that, it would first 472 00:28:59,480 --> 00:29:02,880 Speaker 1: have to a wire the other twenty percent of NBC 473 00:29:02,960 --> 00:29:08,000 Speaker 1: Universal from Vivendi they still had that share. That process 474 00:29:08,040 --> 00:29:10,960 Speaker 1: took some time, so it wasn't until two thousand eleven 475 00:29:11,240 --> 00:29:14,520 Speaker 1: that GE would sell off a majority stake in NBC 476 00:29:14,600 --> 00:29:18,280 Speaker 1: Universal to Comcast. At that time, GE would still retain 477 00:29:18,360 --> 00:29:21,440 Speaker 1: a forty nine share in the company, although it did 478 00:29:21,440 --> 00:29:24,280 Speaker 1: have the intention to sell the rest of those shares 479 00:29:24,320 --> 00:29:27,440 Speaker 1: off a few years later. Uh This would become a 480 00:29:27,440 --> 00:29:30,400 Speaker 1: common plot element and a source of jokes in the 481 00:29:30,520 --> 00:29:34,600 Speaker 1: series Thirty Rock, just as ges ownership of NBC Universal 482 00:29:34,680 --> 00:29:37,840 Speaker 1: had been a source for humor previously in that series. 483 00:29:38,240 --> 00:29:41,880 Speaker 1: Two years later in Comcast would arrange to purchase the 484 00:29:42,080 --> 00:29:45,000 Speaker 1: entirety of NBC Universal from g E, and g E 485 00:29:45,080 --> 00:29:47,720 Speaker 1: would get out of the entertainment and media business and 486 00:29:47,760 --> 00:29:49,640 Speaker 1: it would use some of that money to cover some 487 00:29:49,760 --> 00:29:52,520 Speaker 1: of the debt that GE had accrued following the two 488 00:29:52,520 --> 00:29:56,640 Speaker 1: thousand eight financial crisis. The NBC Universal deal was just 489 00:29:56,680 --> 00:29:59,680 Speaker 1: one of several that GE pursued in the first decade 490 00:29:59,680 --> 00:30:02,160 Speaker 1: of the two thousands. The company looked to sell off 491 00:30:02,200 --> 00:30:04,720 Speaker 1: some of its businesses and divisions in an effort to 492 00:30:04,880 --> 00:30:08,880 Speaker 1: refocus on core strategies. Emilt kept working on ways to 493 00:30:08,960 --> 00:30:12,800 Speaker 1: extract g E from g E capital business, and he 494 00:30:12,840 --> 00:30:14,680 Speaker 1: didn't have a whole lot of success with it, and 495 00:30:14,720 --> 00:30:17,400 Speaker 1: he had his eyes set on another company to try 496 00:30:17,440 --> 00:30:21,720 Speaker 1: and turn gees prospects around. The company in question was 497 00:30:21,800 --> 00:30:25,440 Speaker 1: a French company that was making coal powered turbines. In 498 00:30:25,480 --> 00:30:27,760 Speaker 1: other words, it was a company that built stuff for 499 00:30:27,880 --> 00:30:32,320 Speaker 1: the energy electric industry electric utilities, right specifically for fossil 500 00:30:32,360 --> 00:30:36,320 Speaker 1: fuel based power companies. The name of this company was 501 00:30:36,400 --> 00:30:39,800 Speaker 1: Alstom A L S T O M. And, as it 502 00:30:39,800 --> 00:30:42,720 Speaker 1: would turn out, the timing could not have been worse, 503 00:30:42,920 --> 00:30:46,880 Speaker 1: though it is arguable over whether or not that was predictable. 504 00:30:47,160 --> 00:30:50,440 Speaker 1: At that time, Emilt was hoping that Alston would become 505 00:30:50,440 --> 00:30:53,480 Speaker 1: a key component in g ees Power division. He thought 506 00:30:53,560 --> 00:30:56,200 Speaker 1: that GE could take this French company which had been 507 00:30:56,200 --> 00:31:00,400 Speaker 1: struggling financially and used GES processes and pra this is 508 00:31:00,640 --> 00:31:03,840 Speaker 1: to turn Alstom around. Then he would use Alstom to 509 00:31:03,880 --> 00:31:06,479 Speaker 1: meet the electricity demands of clients all over the world, 510 00:31:06,920 --> 00:31:12,160 Speaker 1: and all with fossil fuel based turbines. So what went wrong, Well, 511 00:31:12,160 --> 00:31:22,480 Speaker 1: I'll tell you after we take this quick break. Not 512 00:31:22,640 --> 00:31:26,840 Speaker 1: everyone at g was crazy about acquiring Alstom. Several executives 513 00:31:26,840 --> 00:31:29,640 Speaker 1: felt that the asking price was far too high, but 514 00:31:29,760 --> 00:31:33,040 Speaker 1: Emma was optimistic that g E could take Alstom and 515 00:31:33,120 --> 00:31:36,040 Speaker 1: turn it into a profitable business. As it turns out, 516 00:31:36,240 --> 00:31:38,240 Speaker 1: he wouldn't get the chance to stick around long enough 517 00:31:38,280 --> 00:31:41,800 Speaker 1: to see how far Allston would fall. But I'm not 518 00:31:41,880 --> 00:31:45,800 Speaker 1: quite there yet. GE needed to do something. The company's 519 00:31:45,840 --> 00:31:49,440 Speaker 1: oil and gas services, which revolved around actually extracting oil, 520 00:31:49,480 --> 00:31:51,640 Speaker 1: you know, making the equipment that would be used for 521 00:31:51,640 --> 00:31:54,160 Speaker 1: that sort of stuff. Those were on the decline as 522 00:31:54,280 --> 00:31:58,160 Speaker 1: energy prices were collapsing. But the power division, GE Power, 523 00:31:58,600 --> 00:32:01,480 Speaker 1: the part of GE that actually reduced equipment that was 524 00:32:01,600 --> 00:32:05,360 Speaker 1: used to generate electricity that was still a reliable revenue source. 525 00:32:05,400 --> 00:32:08,040 Speaker 1: In fact, at that point it was the largest source 526 00:32:08,120 --> 00:32:10,920 Speaker 1: of revenue for GE, and it had a high profit 527 00:32:10,960 --> 00:32:13,400 Speaker 1: margin to boot. G E made a lot of money 528 00:32:13,560 --> 00:32:16,120 Speaker 1: from that particular division. So if g E could do 529 00:32:16,160 --> 00:32:19,040 Speaker 1: the same thing for Alstom and turn things around, then 530 00:32:19,160 --> 00:32:21,680 Speaker 1: in Emilt's mind, the company would have a rock solid 531 00:32:21,720 --> 00:32:24,960 Speaker 1: foundation from which to work. But a few big factors 532 00:32:25,160 --> 00:32:28,680 Speaker 1: would hamper the success of Alstom. One was that there 533 00:32:28,720 --> 00:32:31,560 Speaker 1: just wasn't as big a demand for turbines as Emilt 534 00:32:31,640 --> 00:32:34,640 Speaker 1: had anticipated. They got fewer orders than what they were 535 00:32:34,640 --> 00:32:38,200 Speaker 1: hoping for. In places like the United States, power companies 536 00:32:38,240 --> 00:32:41,320 Speaker 1: were improving efficiencies and so they were able to do 537 00:32:41,400 --> 00:32:43,800 Speaker 1: more with less. There wasn't as big a demand to 538 00:32:43,960 --> 00:32:48,840 Speaker 1: add additional infrastructure to meet consumer needs. Then there was 539 00:32:48,880 --> 00:32:52,560 Speaker 1: the fact that Alstom's employees were very highly compensated, which 540 00:32:52,600 --> 00:32:56,360 Speaker 1: was good for them, but rough for GE. And regulations 541 00:32:56,360 --> 00:32:59,160 Speaker 1: in the EU meant that Emilt couldn't just pull a 542 00:32:59,320 --> 00:33:02,840 Speaker 1: jack well and start laying off employees in an effort 543 00:33:02,880 --> 00:33:06,360 Speaker 1: to cut costs. EU had protections in place to prevent 544 00:33:06,400 --> 00:33:08,760 Speaker 1: that sort of thing, so you couldn't just make the 545 00:33:09,480 --> 00:33:11,760 Speaker 1: books look better by laying off a bunch of people. 546 00:33:12,040 --> 00:33:14,880 Speaker 1: And the EU also blocked one part of the business 547 00:33:15,120 --> 00:33:18,920 Speaker 1: from GE acquiring it. That was Alstom's service business, their 548 00:33:18,960 --> 00:33:22,120 Speaker 1: maintenance business that would have supplied revenue as the company 549 00:33:22,120 --> 00:33:25,800 Speaker 1: would provide maintenance services for its clients. That was off limits. 550 00:33:26,280 --> 00:33:28,480 Speaker 1: And the other major factor was that the cost of 551 00:33:28,520 --> 00:33:33,440 Speaker 1: building out renewable energy systems fell drastically not long after 552 00:33:33,520 --> 00:33:37,520 Speaker 1: GE completed the ten billion dollar acquisition of Alstom in 553 00:33:37,560 --> 00:33:40,800 Speaker 1: two thousand fifteen, So it looked like the wrong bet 554 00:33:41,120 --> 00:33:46,560 Speaker 1: right buying a very expensive fossil fuel based company just 555 00:33:46,600 --> 00:33:50,440 Speaker 1: as renewable energy prices were falling to the point where 556 00:33:50,480 --> 00:33:55,200 Speaker 1: they were uh they could compete against fossil fuels. Now, 557 00:33:55,240 --> 00:33:58,720 Speaker 1: around the same time that the Alstom deal was starting 558 00:33:58,720 --> 00:34:02,400 Speaker 1: to take shape, GE would spin off its credit card business, 559 00:34:02,720 --> 00:34:05,040 Speaker 1: which was part of GE Capital, and it would become 560 00:34:05,240 --> 00:34:09,080 Speaker 1: Synchrony Financial. And I'm guessing it filled a lot of 561 00:34:09,120 --> 00:34:11,200 Speaker 1: folks at GE with a bit of dismay to see 562 00:34:11,239 --> 00:34:14,640 Speaker 1: that once it was free of General Electric, this former 563 00:34:14,719 --> 00:34:18,400 Speaker 1: division actually outperformed all expectations. It did much better on 564 00:34:18,440 --> 00:34:20,960 Speaker 1: its own than it did as part of General Electric. 565 00:34:21,239 --> 00:34:24,480 Speaker 1: On top of that, the oil price crash pushed GE 566 00:34:24,480 --> 00:34:27,279 Speaker 1: to merge its own oil and gas division with a 567 00:34:27,320 --> 00:34:31,280 Speaker 1: company called Baker Hughes, and then g E got a 568 00:34:31,320 --> 00:34:34,960 Speaker 1: majority ownership in the Baker Hughes company became Baker Hughes 569 00:34:35,080 --> 00:34:38,200 Speaker 1: a GE company, at least for the time. Oh and 570 00:34:38,320 --> 00:34:42,400 Speaker 1: two thousand fifteen, GE formed a unit called g E Digital. 571 00:34:42,719 --> 00:34:45,240 Speaker 1: G E had been in various digital products for a while, 572 00:34:45,280 --> 00:34:48,160 Speaker 1: but marked the move for the company to create an 573 00:34:48,200 --> 00:34:51,960 Speaker 1: independent business unit. Most of the unit's focus was on 574 00:34:52,000 --> 00:34:56,239 Speaker 1: a software product called Predicts, sort of a play on Prediction, 575 00:34:56,800 --> 00:34:59,880 Speaker 1: and it was a business to business product. It was 576 00:35:00,000 --> 00:35:04,560 Speaker 1: meant to help big companies like airlines identify strategies and 577 00:35:04,640 --> 00:35:08,080 Speaker 1: managed assets. But over time that unit would experience slow 578 00:35:08,160 --> 00:35:11,960 Speaker 1: revenues and technical issues, and in eighteen there was real 579 00:35:12,040 --> 00:35:15,960 Speaker 1: serious talk of GE potentially selling off the division entirely. 580 00:35:16,560 --> 00:35:19,920 Speaker 1: That is yet to happen. GE Digital still as part 581 00:35:19,960 --> 00:35:23,560 Speaker 1: of GE, but GE did do a few rounds of layoffs, 582 00:35:24,080 --> 00:35:27,200 Speaker 1: so things have not gone smoothly for that part of 583 00:35:27,239 --> 00:35:30,839 Speaker 1: the company. Back to GS leadership woes. In October two 584 00:35:30,840 --> 00:35:34,040 Speaker 1: thousand seventeen, GE announced that Jeff Emilt would be stepping 585 00:35:34,080 --> 00:35:36,799 Speaker 1: down as CEO, and he had served in that role 586 00:35:36,840 --> 00:35:40,840 Speaker 1: for about sixteen years. The company's stock price was around 587 00:35:40,840 --> 00:35:43,160 Speaker 1: a third of what it had been when he took control. 588 00:35:43,560 --> 00:35:47,480 Speaker 1: Emerald had spun off numerous businesses over the years, including 589 00:35:47,520 --> 00:35:51,239 Speaker 1: gees plastics division, if you remember, that's the division that 590 00:35:51,360 --> 00:35:55,239 Speaker 1: Jack Welch had actually come to. He had also spun 591 00:35:55,280 --> 00:35:59,720 Speaker 1: off the appliances business. He's spun off the insurance business, 592 00:35:59,840 --> 00:36:02,279 Speaker 1: or a lot of it anyway, and more. And by 593 00:36:02,320 --> 00:36:04,840 Speaker 1: that time much of the upper leadership at g E 594 00:36:05,640 --> 00:36:08,000 Speaker 1: got caught in a shake up. There were members of 595 00:36:08,040 --> 00:36:11,000 Speaker 1: the board who left, there were other executive members who left, 596 00:36:11,320 --> 00:36:14,640 Speaker 1: and investors, employees, and retirees were all growing more and 597 00:36:14,680 --> 00:36:18,040 Speaker 1: more unhappy. The company had lost and estimated one hundred 598 00:36:18,160 --> 00:36:22,360 Speaker 1: billion dollars worth of shareholder wealth over the previous decade 599 00:36:22,360 --> 00:36:25,680 Speaker 1: and a half. Critics stated the Emilt had a habit 600 00:36:25,719 --> 00:36:29,280 Speaker 1: of chasing after fads, investing in businesses at the peak 601 00:36:29,440 --> 00:36:32,279 Speaker 1: of their visibility and then later selling them off for 602 00:36:32,440 --> 00:36:34,520 Speaker 1: less than what g had paid for them in the 603 00:36:34,520 --> 00:36:37,040 Speaker 1: first place. And people said the ge method was to 604 00:36:37,120 --> 00:36:40,440 Speaker 1: buy high sell low, which in general is the opposite 605 00:36:40,440 --> 00:36:43,320 Speaker 1: of what you want to do. I think O don't. No, 606 00:36:43,400 --> 00:36:46,279 Speaker 1: I'm not a business guy. Not every deal Emilt made 607 00:36:46,280 --> 00:36:48,640 Speaker 1: went sour, by the way, the in Ron deal in 608 00:36:48,640 --> 00:36:51,520 Speaker 1: which g took over that wind power business ended up 609 00:36:51,520 --> 00:36:55,800 Speaker 1: being very profitable, though again Emilt initially opposed that deal, 610 00:36:56,440 --> 00:36:59,520 Speaker 1: and when GE sold off its plastics division it was 611 00:36:59,600 --> 00:37:02,600 Speaker 1: for a higher price than what a lot of analysts expected, 612 00:37:02,840 --> 00:37:06,400 Speaker 1: but generally speaking, the deals didn't break in gees favor 613 00:37:06,560 --> 00:37:10,879 Speaker 1: under Emilt's watch. Emeralt's successor was John Flannery, who had 614 00:37:10,960 --> 00:37:14,640 Speaker 1: up to that point headed up gees healthcare business and 615 00:37:14,719 --> 00:37:18,319 Speaker 1: had worked for GE for thirty years. Flannery's goal was 616 00:37:18,360 --> 00:37:22,440 Speaker 1: to build a strong core for GE around its aviation business, 617 00:37:22,440 --> 00:37:26,160 Speaker 1: its power business, and its healthcare business, and there was 618 00:37:26,239 --> 00:37:29,280 Speaker 1: talk of the possibility that GE itself might break apart 619 00:37:29,360 --> 00:37:34,200 Speaker 1: into several different companies. The reaction to that idea kind 620 00:37:34,200 --> 00:37:36,919 Speaker 1: of fell across the spectrum. Some people saw it as 621 00:37:36,960 --> 00:37:40,640 Speaker 1: a necessity if the various parts of GE were to stabilize. 622 00:37:41,000 --> 00:37:44,239 Speaker 1: Others saw it as the end of a legacy, and 623 00:37:44,400 --> 00:37:45,880 Speaker 1: they had a bit of a point. One of the 624 00:37:45,920 --> 00:37:50,400 Speaker 1: discussions was about possibly selling off ges lightbulb business that 625 00:37:50,520 --> 00:37:54,160 Speaker 1: was the business that started it all, really all the 626 00:37:54,160 --> 00:37:57,080 Speaker 1: way back in eight seventy eight and the Edison Electric 627 00:37:57,200 --> 00:38:00,880 Speaker 1: Light Company. But innovation could sometimes be a double edged sword. 628 00:38:01,239 --> 00:38:04,200 Speaker 1: The move towards l e ED lights, which can last 629 00:38:04,280 --> 00:38:07,640 Speaker 1: for thousands of hours, meant that there just wasn't as 630 00:38:07,680 --> 00:38:10,000 Speaker 1: big a demand for light bulbs anymore. Because if you 631 00:38:10,000 --> 00:38:12,719 Speaker 1: don't have to worry about the lightbulb burning out on 632 00:38:12,760 --> 00:38:15,879 Speaker 1: a regular basis, there's not much call to buy new ones. 633 00:38:15,960 --> 00:38:18,359 Speaker 1: You just buy the l e ed s. You might 634 00:38:18,440 --> 00:38:21,480 Speaker 1: sell your house before you ever have to change that lightbulb. 635 00:38:21,800 --> 00:38:24,680 Speaker 1: So lightbulb sales were starting to drop. There just wasn't 636 00:38:24,920 --> 00:38:27,640 Speaker 1: enough call for them. I bet it made GE long 637 00:38:27,719 --> 00:38:30,319 Speaker 1: for the days when it had formed that secret lightbulb 638 00:38:30,440 --> 00:38:33,640 Speaker 1: Cartel in which companies agreed to limit the useful life 639 00:38:33,680 --> 00:38:36,520 Speaker 1: of a lightbulb through engineering. And things were rough for 640 00:38:36,560 --> 00:38:40,000 Speaker 1: shareholders too. Since GE had cut its dividend payouts a 641 00:38:40,000 --> 00:38:43,759 Speaker 1: few years earlier, the payouts had slowly increased again. They 642 00:38:43,760 --> 00:38:46,879 Speaker 1: had grown up to twenty four cents per share, so 643 00:38:47,000 --> 00:38:49,560 Speaker 1: that was an improvement. It was still below the thirty 644 00:38:49,600 --> 00:38:52,160 Speaker 1: one cents that it it had been at its peak, 645 00:38:52,480 --> 00:38:57,160 Speaker 1: but it was better. But in late, G had to 646 00:38:57,200 --> 00:39:00,560 Speaker 1: cut the dividend again, that time down to twelve sense, 647 00:39:01,000 --> 00:39:03,680 Speaker 1: and then not too long after that they were forced 648 00:39:03,680 --> 00:39:06,520 Speaker 1: to do another cut. They just realized that there just 649 00:39:06,640 --> 00:39:09,640 Speaker 1: wasn't enough money to cover the dividend payout, so the 650 00:39:09,719 --> 00:39:13,520 Speaker 1: dividend got cut down to just one cent per share. 651 00:39:14,000 --> 00:39:17,120 Speaker 1: It just didn't have the money to cover the payments otherwise. 652 00:39:17,760 --> 00:39:21,760 Speaker 1: In addition, G was having to deal with an unexpected cost. 653 00:39:22,160 --> 00:39:25,560 Speaker 1: The company had not issued any long term care insurance 654 00:39:25,600 --> 00:39:28,399 Speaker 1: policies since two thousand six, and in fact, it had 655 00:39:28,400 --> 00:39:32,160 Speaker 1: spun off almost its entire insurance business with a company 656 00:39:32,160 --> 00:39:35,920 Speaker 1: called gen Worth. However, in order to make that deal happen, 657 00:39:36,560 --> 00:39:40,080 Speaker 1: GE was forced to agree to cover any losses from 658 00:39:40,160 --> 00:39:43,040 Speaker 1: long term care insurance. It was just seen as too 659 00:39:43,080 --> 00:39:48,960 Speaker 1: great a financial risk otherwise, so GE signed that agreement. Now, 660 00:39:49,000 --> 00:39:52,000 Speaker 1: those long term care agreements are policies that are meant 661 00:39:52,040 --> 00:39:55,560 Speaker 1: to cover the elderly, and it turned out that insures, 662 00:39:55,600 --> 00:39:58,520 Speaker 1: not just a g E, but across the industry, had 663 00:39:58,600 --> 00:40:03,480 Speaker 1: underestimated how long policy holders would actually live, and the 664 00:40:03,520 --> 00:40:07,399 Speaker 1: medical costs, including things like nursing home fees, would tend 665 00:40:07,440 --> 00:40:10,440 Speaker 1: to get higher as customers got older. So as people 666 00:40:10,520 --> 00:40:14,280 Speaker 1: lived longer, they were creating a larger and larger drain 667 00:40:14,440 --> 00:40:17,719 Speaker 1: on resources for these insurance companies. Like if you looked 668 00:40:17,760 --> 00:40:21,000 Speaker 1: at it from a financial perspective, the person who was 669 00:40:21,040 --> 00:40:24,399 Speaker 1: paying for the policy was getting way more benefits out 670 00:40:24,400 --> 00:40:28,319 Speaker 1: of it than they were paying into it, and that 671 00:40:28,440 --> 00:40:32,440 Speaker 1: was an issue. So this was a huge cost for GE, 672 00:40:32,600 --> 00:40:34,719 Speaker 1: and it's no wonder that the company was continuing to 673 00:40:34,760 --> 00:40:37,480 Speaker 1: try and find ways to get completely out of the 674 00:40:37,520 --> 00:40:41,440 Speaker 1: insurance business. Now. To meet the obligation, Flannery had to 675 00:40:41,480 --> 00:40:46,440 Speaker 1: redirect fifteen billion dollars of GES wealth in two thousand 676 00:40:46,480 --> 00:40:50,600 Speaker 1: eighteen just to cover the obligations of that insurance policy stuff. 677 00:40:51,120 --> 00:40:52,759 Speaker 1: And the company was also hit with a seven and 678 00:40:52,760 --> 00:40:56,680 Speaker 1: a half billion dollar after tax charge, so things were 679 00:40:56,719 --> 00:40:59,839 Speaker 1: really rough. Also in two thousand eighteen, GE would leave 680 00:41:00,120 --> 00:41:03,440 Speaker 1: the dal Jones Industrial Average. If you listen to my 681 00:41:03,480 --> 00:41:06,840 Speaker 1: previous episodes, you remember that GE was one of the 682 00:41:06,880 --> 00:41:10,960 Speaker 1: original companies listed on that average when it was first created, 683 00:41:11,360 --> 00:41:14,520 Speaker 1: and it was the only company of that original list 684 00:41:14,760 --> 00:41:17,560 Speaker 1: that still existed in two thousand eighteen. It had been 685 00:41:17,600 --> 00:41:21,880 Speaker 1: part of the Dow Industrial Average for a hundred eleven years. 686 00:41:22,440 --> 00:41:25,120 Speaker 1: But the performance of the company, along with the perception 687 00:41:25,160 --> 00:41:29,319 Speaker 1: that industrial companies in general weren't really key indicators for 688 00:41:29,360 --> 00:41:33,160 Speaker 1: overall market performance meant that those days were over, so 689 00:41:33,440 --> 00:41:35,799 Speaker 1: in its place, a different company would join the DOW. 690 00:41:36,000 --> 00:41:41,360 Speaker 1: That was Walgreen's Boots Alliance drug store chain company. Meanwhile, 691 00:41:41,760 --> 00:41:45,680 Speaker 1: a problem with most recent heavy duty gas turbines caused 692 00:41:45,719 --> 00:41:49,239 Speaker 1: other issues for General Electric. A utility in Texas had 693 00:41:49,239 --> 00:41:53,200 Speaker 1: to shut down two different power plants for repairs due 694 00:41:53,239 --> 00:41:56,239 Speaker 1: to failures with these new turbines. That news would end 695 00:41:56,320 --> 00:41:59,759 Speaker 1: up hurting GE power sales, which weren't doing super a 696 00:41:59,760 --> 00:42:03,480 Speaker 1: gray at that moment. Already, Flannery's efforts were seen as 697 00:42:03,560 --> 00:42:06,359 Speaker 1: insufficient by the board of directors, and on October one, 698 00:42:06,440 --> 00:42:09,560 Speaker 1: two thousand eighteen, the company announced that Flannery had been 699 00:42:09,560 --> 00:42:13,120 Speaker 1: removed from the position of chairman and CEO, and the 700 00:42:13,200 --> 00:42:17,200 Speaker 1: board appointed an outsider, Lawrence Culp, to serve as the 701 00:42:17,200 --> 00:42:21,040 Speaker 1: new chairman and CEO. Flannery had been CEO for about 702 00:42:21,080 --> 00:42:24,839 Speaker 1: fourteen months and then he was out. That would give 703 00:42:24,840 --> 00:42:29,280 Speaker 1: Flannery the unenviable distinction of having served the least amount 704 00:42:29,280 --> 00:42:32,960 Speaker 1: of time as CEO of all g e C e 705 00:42:33,160 --> 00:42:36,880 Speaker 1: O s, at least so far. Culp would be the 706 00:42:37,000 --> 00:42:40,640 Speaker 1: third CEO to lead the company since two thousand seventeen. 707 00:42:41,239 --> 00:42:44,640 Speaker 1: The company Culp took over, was in turmoil and there 708 00:42:44,640 --> 00:42:48,839 Speaker 1: were pending investigations into g S accounting practices, which had 709 00:42:48,880 --> 00:42:52,040 Speaker 1: for years, as I said earlier, been described as opaque. 710 00:42:52,200 --> 00:42:54,200 Speaker 1: It's polite way of saying the company wasn't making it 711 00:42:54,280 --> 00:42:56,600 Speaker 1: easy to see where money was coming from or where 712 00:42:56,600 --> 00:43:00,560 Speaker 1: it was going to. G E had already settled sec 713 00:43:01,880 --> 00:43:05,280 Speaker 1: charges in the past, but there were others that sought 714 00:43:05,320 --> 00:43:07,759 Speaker 1: to find out more about the finances of the company. 715 00:43:07,840 --> 00:43:12,080 Speaker 1: And then, of course there was no recent report from Marcopolis, 716 00:43:12,080 --> 00:43:14,759 Speaker 1: the guy who was one of the early whistleblowers on 717 00:43:14,800 --> 00:43:17,840 Speaker 1: Bernie made Off before everyone was aware of the Ponzi 718 00:43:17,880 --> 00:43:22,120 Speaker 1: scheme that made Off was running. The Marcopolis report alleges 719 00:43:22,160 --> 00:43:25,640 Speaker 1: that GE is essentially robbing Peter to pay Paul, shifting 720 00:43:25,840 --> 00:43:30,160 Speaker 1: cash around frantically to fend off insolvency. It's kind of 721 00:43:30,200 --> 00:43:33,840 Speaker 1: like a shell game to trying to move money around 722 00:43:34,040 --> 00:43:37,200 Speaker 1: fast enough so that the company doesn't collapse. G E, 723 00:43:37,400 --> 00:43:40,520 Speaker 1: I should add, disputes this report and says that the 724 00:43:40,560 --> 00:43:44,960 Speaker 1: allegations are baseless and it cannot be ignored that Marcopolis 725 00:43:45,040 --> 00:43:47,640 Speaker 1: himself actually stands to make a lot of money should 726 00:43:47,719 --> 00:43:51,799 Speaker 1: ges stocks decline and value. So you could argue there 727 00:43:51,920 --> 00:43:55,960 Speaker 1: is a motive for Marcopolis to try and drag ges 728 00:43:56,080 --> 00:43:59,279 Speaker 1: name in the mud. Uh So their valid arguments on 729 00:43:59,320 --> 00:44:02,600 Speaker 1: either side about whether or not this report is something 730 00:44:02,760 --> 00:44:05,680 Speaker 1: you should pay attention to or if it's something that 731 00:44:05,840 --> 00:44:11,560 Speaker 1: has ulterior motivations behind it. That being said, the fact 732 00:44:11,560 --> 00:44:14,319 Speaker 1: that the Marcopolist report came out doesn't change the fact 733 00:44:14,360 --> 00:44:19,600 Speaker 1: that there were already numerous investigations government investigations into g 734 00:44:20,000 --> 00:44:23,400 Speaker 1: S businesses that could end up hindering the company further. 735 00:44:23,840 --> 00:44:28,320 Speaker 1: So there seems to be smoke. There's just a question 736 00:44:28,360 --> 00:44:31,400 Speaker 1: of is the fire what Marcoupolists is saying or is 737 00:44:31,440 --> 00:44:34,480 Speaker 1: it something else? On top of all the problems the 738 00:44:34,480 --> 00:44:39,520 Speaker 1: company faces is another external force that could really spell doom. 739 00:44:39,560 --> 00:44:45,320 Speaker 1: Many financial analysts say that signs point to another global recession. Already, 740 00:44:45,440 --> 00:44:49,080 Speaker 1: industries like manufacturing and freight are in a bit of 741 00:44:49,080 --> 00:44:53,840 Speaker 1: a slide, so a recession would greatly exacerbate general electrics problems. 742 00:44:53,960 --> 00:44:57,239 Speaker 1: So are we seeing the end of days for a 743 00:44:57,280 --> 00:45:00,960 Speaker 1: company that helped launch the technological age? I don't know. 744 00:45:01,480 --> 00:45:03,920 Speaker 1: I don't feel great about it, but it is a 745 00:45:04,000 --> 00:45:07,640 Speaker 1: very large company. It's not like any of these things 746 00:45:07,880 --> 00:45:12,399 Speaker 1: is definitively the death knell for General Electric. And there's 747 00:45:12,400 --> 00:45:14,160 Speaker 1: a lot of stuff that could happen. We could see 748 00:45:14,200 --> 00:45:18,160 Speaker 1: GE get broken up into smaller companies that individually are 749 00:45:18,200 --> 00:45:21,520 Speaker 1: able to succeed much better than they can collectively. All 750 00:45:21,520 --> 00:45:25,279 Speaker 1: of that remains to be seen, but it was fascinating 751 00:45:25,400 --> 00:45:30,799 Speaker 1: to learn more about this company's incredible, rich history. And UH. 752 00:45:30,880 --> 00:45:33,400 Speaker 1: I know that this last section was much lighter on 753 00:45:33,400 --> 00:45:35,759 Speaker 1: the tech side, as I said at the beginning, but 754 00:45:35,960 --> 00:45:38,080 Speaker 1: at the same time, I thought it was important for 755 00:45:38,120 --> 00:45:41,200 Speaker 1: us to understand how a company that had been so 756 00:45:41,320 --> 00:45:46,760 Speaker 1: instrumental in setting the tone for the technological age could 757 00:45:46,760 --> 00:45:52,760 Speaker 1: be facing extinction UH in two thousand nineteen. So here's 758 00:45:52,760 --> 00:45:57,320 Speaker 1: hoping that things turn around for GE, that the company 759 00:45:57,360 --> 00:46:02,080 Speaker 1: is able to reconcile all these accounting practices, that it 760 00:46:02,239 --> 00:46:07,319 Speaker 1: is able to deliver value two employees to customers, to retirees, 761 00:46:07,880 --> 00:46:13,480 Speaker 1: and two shareholders, not just two shareholders. And that wraps 762 00:46:13,600 --> 00:46:16,760 Speaker 1: up this episode. If you have suggestions for future topics 763 00:46:16,760 --> 00:46:19,600 Speaker 1: of tech stuff, whether it's a company, a technology, a 764 00:46:19,719 --> 00:46:24,000 Speaker 1: concept in tech, anything like that, let me know send 765 00:46:24,000 --> 00:46:26,720 Speaker 1: me an email the addresses tech stuff at how stuff 766 00:46:26,719 --> 00:46:29,680 Speaker 1: works dot com, or draw me a line on Facebook 767 00:46:29,760 --> 00:46:31,600 Speaker 1: or Twitter. The handle of both of those is text 768 00:46:31,640 --> 00:46:34,600 Speaker 1: Stuff hs W. You can also pop on over to 769 00:46:34,600 --> 00:46:37,759 Speaker 1: our website that's tech stuff podcast dot com. You've got 770 00:46:37,760 --> 00:46:39,759 Speaker 1: to find a link to the archive of all of 771 00:46:39,760 --> 00:46:42,000 Speaker 1: our previous episodes there, so you can look up all 772 00:46:42,040 --> 00:46:45,440 Speaker 1: the different stuff we talked about, including the previous episodes 773 00:46:45,480 --> 00:46:47,960 Speaker 1: I did on g S History where Chris Pallette and 774 00:46:48,000 --> 00:46:50,040 Speaker 1: I sat down and talked about it. But the show 775 00:46:50,160 --> 00:46:52,000 Speaker 1: was very different back in those days. But if you 776 00:46:52,000 --> 00:46:54,439 Speaker 1: want to hear a different take on this same sort 777 00:46:54,480 --> 00:46:57,319 Speaker 1: of stuff, you can check that out. That one came out, 778 00:46:57,360 --> 00:47:00,960 Speaker 1: I believe in two thousand twelve. And don't forget. We 779 00:47:01,000 --> 00:47:04,040 Speaker 1: also have a link to our online store where every 780 00:47:04,080 --> 00:47:06,520 Speaker 1: purchase you make goes to help the show and we 781 00:47:06,719 --> 00:47:09,520 Speaker 1: greatly appreciate it, and I will talk to you again 782 00:47:10,480 --> 00:47:18,880 Speaker 1: really soon. Text Stuff is an I Heart Radio production. 783 00:47:19,120 --> 00:47:21,920 Speaker 1: For more podcasts from I Heart Radio, visit the i 784 00:47:22,040 --> 00:47:25,279 Speaker 1: Heart Radio app, Apple Podcasts, or wherever you listen to 785 00:47:25,320 --> 00:47:26,240 Speaker 1: your favorite shows.