1 00:00:17,560 --> 00:00:21,479 Speaker 1: Pushkin too quick. No, it's perfect push kid stuff. You 2 00:00:21,600 --> 00:00:44,400 Speaker 1: got it. 3 00:00:33,480 --> 00:00:39,239 Speaker 2: Fish, General Electric, the General GE. 4 00:00:39,960 --> 00:00:43,080 Speaker 3: There has never been a company before in human history 5 00:00:43,120 --> 00:00:45,200 Speaker 3: like GE, and after you hear the story, you will 6 00:00:45,240 --> 00:00:48,479 Speaker 3: know why there will never be such a company ever again. 7 00:00:49,280 --> 00:00:53,880 Speaker 3: GE was the perfect conglomerate, A conglomerate meaning a vast, 8 00:00:54,320 --> 00:00:58,640 Speaker 3: sprawling company with other companies inside it doing wildly different things. 9 00:00:59,240 --> 00:01:01,840 Speaker 3: GE started with Thomas Edison and the light bulb. 10 00:01:02,040 --> 00:01:02,320 Speaker 2: Edison. 11 00:01:02,440 --> 00:01:05,119 Speaker 3: General Electric was the original name of the company, and 12 00:01:05,120 --> 00:01:08,560 Speaker 3: then it proceeded to make just about everything else in 13 00:01:08,680 --> 00:01:15,200 Speaker 3: modern life. Give it to me, microwave ovens, refrigerators, stoves, 14 00:01:15,280 --> 00:01:18,120 Speaker 3: washing machines, clock radios, smoke alarms. I could go on 15 00:01:18,160 --> 00:01:21,000 Speaker 3: for forty five minutes. But it also made the turbines 16 00:01:21,360 --> 00:01:24,399 Speaker 3: that made the electricity. You could commute to work on 17 00:01:24,520 --> 00:01:28,800 Speaker 3: GE trains, You could fly on GE owned planes with 18 00:01:28,880 --> 00:01:34,240 Speaker 3: GE engines. In hospitals, GE went inside your body MRIs 19 00:01:34,360 --> 00:01:37,039 Speaker 3: Cat scanners. GE invented silly Putty. 20 00:01:37,200 --> 00:01:39,920 Speaker 2: No, it did, funny that's the first surprise at this 21 00:01:40,040 --> 00:01:40,520 Speaker 2: list of me. 22 00:01:41,360 --> 00:01:45,520 Speaker 3: Silly Puddy invented at GE. At one point, G owned 23 00:01:45,520 --> 00:01:48,920 Speaker 3: the most popular TV network in America, NBC. Of course, 24 00:01:49,400 --> 00:01:52,480 Speaker 3: and the two biggest shows in America Seinfeld and Friends. 25 00:01:53,000 --> 00:01:57,720 Speaker 3: It ran Universal Studios, owned Gibson Guitars, it was financing 26 00:01:57,800 --> 00:02:01,240 Speaker 3: McDonald's franchises, and it owned Del Taco. 27 00:02:01,640 --> 00:02:03,920 Speaker 2: They should have gone long. Taco Bell would have solved 28 00:02:03,920 --> 00:02:04,640 Speaker 2: all their problems. 29 00:02:04,760 --> 00:02:07,560 Speaker 3: They actually did help finance Taco Bell. They did everything. 30 00:02:07,600 --> 00:02:10,000 Speaker 3: At the turn of the millennium, GE was the most 31 00:02:10,079 --> 00:02:14,360 Speaker 3: valuable company in the world. And now GE the conglomerate 32 00:02:14,959 --> 00:02:16,079 Speaker 3: does not exist. 33 00:02:16,680 --> 00:02:17,839 Speaker 2: The products are still there. 34 00:02:17,840 --> 00:02:20,359 Speaker 3: In fact, we have one in the kitchen of our 35 00:02:20,360 --> 00:02:23,560 Speaker 3: offices right now, a GE microwave oven. You can still 36 00:02:23,560 --> 00:02:26,960 Speaker 3: see the round GE logo. But the conglomerate itself has 37 00:02:27,040 --> 00:02:30,959 Speaker 3: been broken up. And there was one man responsible both 38 00:02:31,000 --> 00:02:34,840 Speaker 3: the rise of the company and the fall. I'm Robert Smith, 39 00:02:35,120 --> 00:02:38,400 Speaker 3: I'm Jacob Goldstein, and this is Business History, a show 40 00:02:38,440 --> 00:02:43,160 Speaker 3: about the history of business. The man who propelled GE 41 00:02:43,320 --> 00:02:47,920 Speaker 3: into the stratosphere was Jack Welch. He was named CEO 42 00:02:48,000 --> 00:02:50,799 Speaker 3: of the Century by Fortune magazine, because, of course he 43 00:02:51,000 --> 00:02:54,680 Speaker 3: was century this century in nineteen ninety nine, of course 44 00:02:55,280 --> 00:02:56,200 Speaker 3: calling the top. 45 00:02:56,360 --> 00:02:57,400 Speaker 2: As ever, he was. 46 00:02:57,360 --> 00:03:00,680 Speaker 3: A business legend. He was filled with swagger and charm. 47 00:03:00,800 --> 00:03:05,520 Speaker 3: He really epitomized business in the nineteen eighties and nineteen nineties, 48 00:03:06,080 --> 00:03:09,480 Speaker 3: Jack turned G from a company that made things, real 49 00:03:09,560 --> 00:03:14,000 Speaker 3: things into a company that made money out of money, 50 00:03:14,320 --> 00:03:17,280 Speaker 3: a money making machine, just kind of like the rest 51 00:03:17,320 --> 00:03:20,480 Speaker 3: of the American economy at the time, GE became financialized, 52 00:03:21,240 --> 00:03:23,560 Speaker 3: and like all deals with the devil, and it was 53 00:03:23,600 --> 00:03:25,639 Speaker 3: a deal with the devil, it works out really well 54 00:03:25,800 --> 00:03:29,680 Speaker 3: for a while, and then it'll take your soul. 55 00:03:30,720 --> 00:03:32,760 Speaker 2: Tell me about Jack always my. 56 00:03:32,720 --> 00:03:34,480 Speaker 3: Favorite part of the show. And we have like four 57 00:03:34,560 --> 00:03:38,760 Speaker 3: sentences about our lead character. Jack Welsh. One tough talking 58 00:03:38,880 --> 00:03:43,200 Speaker 3: Irish guy from Massachusetts, son of a railroad conductor. He 59 00:03:43,240 --> 00:03:47,280 Speaker 3: had personality, he had passion, he had infinite self confidence, 60 00:03:47,720 --> 00:03:50,880 Speaker 3: and in nineteen eighty one he became the ninth CEO 61 00:03:51,280 --> 00:03:54,720 Speaker 3: of General Electric. I picture that hallway and wherever their 62 00:03:54,720 --> 00:03:58,760 Speaker 3: headquarters is, with nine pictures them hanging the Jack Welsh one. 63 00:03:58,880 --> 00:04:02,800 Speaker 3: Schenectady wasn't Schenectady then, it was in Fairfield, Connecticut. 64 00:04:02,840 --> 00:04:03,600 Speaker 2: It was in Boston. 65 00:04:04,720 --> 00:04:08,760 Speaker 3: But being CEO of GE has to be the most 66 00:04:08,760 --> 00:04:11,880 Speaker 3: impossible job in the history of business, because when Jack 67 00:04:12,080 --> 00:04:16,159 Speaker 3: comes ceo, G now has hundreds of thousands of products, 68 00:04:16,159 --> 00:04:20,040 Speaker 3: the ones we mentioned, but also little switches, parts of engines, 69 00:04:20,600 --> 00:04:24,960 Speaker 3: forty two different business units, twenty nine levels of management. 70 00:04:25,320 --> 00:04:27,000 Speaker 2: It's twenty nine, twenty nine. 71 00:04:27,120 --> 00:04:30,120 Speaker 3: Good to work your way up from the factory floor 72 00:04:30,400 --> 00:04:33,040 Speaker 3: to CEO. It took twenty eight Jen just doesn't seem 73 00:04:33,120 --> 00:04:35,120 Speaker 3: like an insane amount to me. No one in the 74 00:04:35,160 --> 00:04:39,040 Speaker 3: company understands how everything works, and no one ever did, 75 00:04:39,120 --> 00:04:41,400 Speaker 3: except for maybe the founder of the company. 76 00:04:41,120 --> 00:04:43,520 Speaker 2: Thomas Edison. Thomas he I mean, it was sort of 77 00:04:43,680 --> 00:04:46,640 Speaker 2: wasn't quite General Electric yet, right, Like, as we talked 78 00:04:46,640 --> 00:04:51,000 Speaker 2: about in the Edison Show, Thomas Edison founded Edison General Electric, 79 00:04:51,839 --> 00:04:56,599 Speaker 2: but then it was JP Morgan who swooped in and basically, 80 00:04:56,680 --> 00:05:01,840 Speaker 2: against Edison's wishes, merged Edison General Electric with its rivals 81 00:05:01,880 --> 00:05:05,200 Speaker 2: to create GE and Edison just sort of walked away 82 00:05:05,240 --> 00:05:06,960 Speaker 2: in a huff and like said, oh, I'm just going 83 00:05:07,000 --> 00:05:09,640 Speaker 2: to reinvent iron mining now. I didn't care about Edison 84 00:05:09,680 --> 00:05:11,000 Speaker 2: General Electric anyway. 85 00:05:11,320 --> 00:05:14,400 Speaker 3: Yeah, And g VEE of course loves to talk about 86 00:05:14,440 --> 00:05:17,320 Speaker 3: its founder as Thomas Edison, but there's very little Edison 87 00:05:17,440 --> 00:05:20,440 Speaker 3: DNA in the company because the company is this. 88 00:05:20,480 --> 00:05:21,960 Speaker 2: Creature of JP Morgan. 89 00:05:22,320 --> 00:05:26,760 Speaker 3: Morgan really saw that electricity was going to be huge, obviously, 90 00:05:27,800 --> 00:05:31,960 Speaker 3: but it also required so much money to build grids 91 00:05:32,000 --> 00:05:35,440 Speaker 3: and turbines and electricity that if you could become the 92 00:05:35,480 --> 00:05:37,800 Speaker 3: biggest company, there was this huge barrier to entry. No 93 00:05:37,839 --> 00:05:39,960 Speaker 3: one could challenge you and say like, oh, I'm going 94 00:05:40,040 --> 00:05:41,120 Speaker 3: to build my own grid. 95 00:05:41,120 --> 00:05:43,920 Speaker 2: At this mean there is something of a natural monopoly, right. 96 00:05:44,160 --> 00:05:47,279 Speaker 2: Power delivery is regulated as a natural monopoly because it 97 00:05:47,320 --> 00:05:50,799 Speaker 2: doesn't make sense for two companies to build parallel sets 98 00:05:50,800 --> 00:05:53,520 Speaker 2: of wires to people's houses. So you might as well 99 00:05:53,839 --> 00:05:55,159 Speaker 2: win if you can. 100 00:05:55,160 --> 00:05:57,840 Speaker 3: You should be first. And Morgan pushed the new company 101 00:05:57,880 --> 00:06:01,920 Speaker 3: to buy every small electrical startup they could. The idea 102 00:06:01,960 --> 00:06:04,520 Speaker 3: from the beginning of GE was to own the whole 103 00:06:04,560 --> 00:06:08,159 Speaker 3: path of the electron. They called it the benign cycle 104 00:06:08,279 --> 00:06:08,839 Speaker 3: of power. 105 00:06:09,400 --> 00:06:13,520 Speaker 2: Nothing sounds less benign than the cycle of power g 106 00:06:13,640 --> 00:06:14,160 Speaker 2: You would. 107 00:06:13,920 --> 00:06:16,640 Speaker 3: Generate the electricity, get it to people's homes, and then 108 00:06:16,960 --> 00:06:20,119 Speaker 3: sell them the appliances that would make them want more 109 00:06:20,240 --> 00:06:21,880 Speaker 3: electricity a fridge. 110 00:06:22,120 --> 00:06:24,080 Speaker 2: A fridge takes a lot of electricity. Bandy has already 111 00:06:24,080 --> 00:06:26,560 Speaker 2: got light bulbs. We want to sell more electricity you 112 00:06:26,560 --> 00:06:27,239 Speaker 2: sell of a fridge. 113 00:06:27,279 --> 00:06:30,200 Speaker 3: If you could sell a million fridges, then the power 114 00:06:30,240 --> 00:06:34,599 Speaker 3: companies have to buy hundreds more turbines. Which cost millions 115 00:06:34,600 --> 00:06:35,359 Speaker 3: and millions of dollars. 116 00:06:35,440 --> 00:06:37,400 Speaker 2: It was genius. And also, you are the power company, 117 00:06:37,400 --> 00:06:38,960 Speaker 2: and so you're selling more power, right. 118 00:06:39,080 --> 00:06:43,240 Speaker 3: And what G understood very early is one of these 119 00:06:43,279 --> 00:06:47,000 Speaker 3: foundational ideas in modern business that you know, great fortunes 120 00:06:47,000 --> 00:06:49,520 Speaker 3: aren't made by selling one thing. You own the system 121 00:06:49,560 --> 00:06:51,919 Speaker 3: around the thing. You don't go into the market, you 122 00:06:52,040 --> 00:06:54,719 Speaker 3: are the market. In the year nineteen hundred, a lawyer 123 00:06:54,720 --> 00:06:56,359 Speaker 3: for the company said, why do you give it to me? 124 00:06:56,880 --> 00:07:00,680 Speaker 2: The purpose of the General Electric Company is to absorb 125 00:07:00,720 --> 00:07:04,240 Speaker 2: as many companies as possible under the law, and in 126 00:07:04,320 --> 00:07:06,200 Speaker 2: nineteen hundred the law let you get away with a 127 00:07:06,240 --> 00:07:08,719 Speaker 2: lot of absorbent loose. It was pretty loose. 128 00:07:09,080 --> 00:07:11,760 Speaker 3: By nineteen sixty they had a quarter of a million 129 00:07:11,840 --> 00:07:15,720 Speaker 3: in employees at GE, and then they added one more, 130 00:07:16,200 --> 00:07:18,680 Speaker 3: the most important person they would ever hire, Jack Welch, 131 00:07:18,880 --> 00:07:21,160 Speaker 3: our hero and villain of the story. 132 00:07:20,880 --> 00:07:25,000 Speaker 2: Two hundred and fifty thousand and first employee of General Electric. 133 00:07:25,080 --> 00:07:26,160 Speaker 3: And I should say here are a lot of the 134 00:07:26,160 --> 00:07:28,520 Speaker 3: stories in the podcast today come from a great book 135 00:07:28,520 --> 00:07:30,920 Speaker 3: about GE called Power Failure. 136 00:07:31,320 --> 00:07:33,559 Speaker 2: Get It Power Failure by William D. Cohen. 137 00:07:34,200 --> 00:07:37,840 Speaker 3: Guess which division Welch was hired into one word. 138 00:07:38,000 --> 00:07:43,320 Speaker 2: A light bulbs. That's two words. I don't know what plastics, Oh, plastics. 139 00:07:43,320 --> 00:07:45,600 Speaker 3: It's like the graduate, just like the graduate which would 140 00:07:45,640 --> 00:07:48,240 Speaker 3: come a decade later. Yeah, he was hired into the 141 00:07:48,240 --> 00:07:52,720 Speaker 3: plastics division in Pittsfield, Massachusetts, backwater of the company. Why 142 00:07:52,720 --> 00:07:55,880 Speaker 3: do you think GE owned plastics? How did this fit 143 00:07:55,960 --> 00:07:57,520 Speaker 3: in the benign cycle of power? 144 00:07:57,640 --> 00:07:58,440 Speaker 2: I don't know what is it? 145 00:07:59,720 --> 00:08:02,400 Speaker 3: At the beginning, they needed the plastic to cover wires. 146 00:08:02,600 --> 00:08:04,560 Speaker 2: It was like an insulator. Yeah, I got we got 147 00:08:04,560 --> 00:08:06,120 Speaker 2: the conductor. We need the insulator. 148 00:08:06,160 --> 00:08:08,240 Speaker 3: Why buy it from someone else? We should have a 149 00:08:08,240 --> 00:08:12,119 Speaker 3: plastics We should have a plastics division. Jack Welch was 150 00:08:12,440 --> 00:08:14,480 Speaker 3: smart from the very beginning. He had a PhD in 151 00:08:14,560 --> 00:08:19,440 Speaker 3: chemical engineering from state schools. But I'm going to argue 152 00:08:19,480 --> 00:08:23,000 Speaker 3: here that the real skill of Jack Welch was that 153 00:08:23,120 --> 00:08:27,920 Speaker 3: he was a golfer, an extraordinary golfer. 154 00:08:28,240 --> 00:08:31,280 Speaker 2: This is corporate America in nineteen sixty corporate America. Not 155 00:08:31,360 --> 00:08:32,240 Speaker 2: a trivial skill. 156 00:08:32,600 --> 00:08:37,640 Speaker 3: And weirdly, he was trained to do this to be 157 00:08:37,720 --> 00:08:40,760 Speaker 3: a CEO. His father, who was the railway conductor. At ten, 158 00:08:41,520 --> 00:08:44,720 Speaker 3: he teaches Jack Welch how to play golf. Jack Welch 159 00:08:44,760 --> 00:08:47,760 Speaker 3: becomes a caddie and his father says, this is the 160 00:08:47,800 --> 00:08:50,440 Speaker 3: way you're going to escape your working class roots and 161 00:08:50,520 --> 00:08:53,360 Speaker 3: meets successful businessmen on the golf course. 162 00:08:53,640 --> 00:08:55,760 Speaker 2: And he was not wrong. This is a story about 163 00:08:55,800 --> 00:08:56,880 Speaker 2: class in America. 164 00:08:57,000 --> 00:08:59,640 Speaker 3: If you read the story of GE, all these big 165 00:08:59,679 --> 00:09:02,800 Speaker 3: decisions happen on the golf course. And here's just one example. 166 00:09:02,920 --> 00:09:05,280 Speaker 3: When Jack Welch was gunning to be CEO. You know, 167 00:09:05,600 --> 00:09:08,800 Speaker 3: in the early nineteen eighties, he went golfing with one 168 00:09:08,800 --> 00:09:12,360 Speaker 3: of the biggest shareholders of GE, someone who was on 169 00:09:12,400 --> 00:09:15,600 Speaker 3: the board of GE, who's his golf partner. And then 170 00:09:15,679 --> 00:09:19,880 Speaker 3: Jack Welch hits a hole in one. No, not Ciper's point. 171 00:09:20,000 --> 00:09:25,000 Speaker 3: At Ciper's point, absolutely not, that sounds celepographal. It is 172 00:09:25,080 --> 00:09:29,240 Speaker 3: a legend, the chosen one. Absolutely, he was the one 173 00:09:29,600 --> 00:09:31,280 Speaker 3: that should be right. You get a hole in one, 174 00:09:31,320 --> 00:09:34,079 Speaker 3: you automatically become CEO for good reason. 175 00:09:34,120 --> 00:09:35,680 Speaker 2: It's like pulling the sword out of the stone. 176 00:09:36,440 --> 00:09:39,520 Speaker 3: So Jack gets hired in plastics in nineteen sixty, does 177 00:09:39,520 --> 00:09:41,640 Speaker 3: not spend a lot of time in the lab. He 178 00:09:41,679 --> 00:09:44,880 Speaker 3: starts the twenty nine step climb up the management ladder, 179 00:09:45,400 --> 00:09:47,840 Speaker 3: and you know, maybe it was his charm, or maybe 180 00:09:47,840 --> 00:09:51,200 Speaker 3: it's the golf, but it seemed like nothing bad ever 181 00:09:51,280 --> 00:09:54,520 Speaker 3: stuck to Jack Welch in the plastics division. He was 182 00:09:54,520 --> 00:09:57,560 Speaker 3: setting up a new factory at one time. He's in 183 00:09:57,640 --> 00:09:59,840 Speaker 3: the office across the street from it. They're actually building 184 00:09:59,880 --> 00:10:06,160 Speaker 3: it making polyphenal lean oxide. Somehow a spark ignites it. 185 00:10:06,600 --> 00:10:09,200 Speaker 3: The factory blows up, blows the roof off the factory. 186 00:10:09,240 --> 00:10:12,400 Speaker 3: No one was injured or killed, but Jack, she gets 187 00:10:12,440 --> 00:10:16,160 Speaker 3: called to corporate headquarters, has to answer for the factory. 188 00:10:16,240 --> 00:10:16,920 Speaker 2: He's just blown up. 189 00:10:16,920 --> 00:10:18,199 Speaker 3: This is probably the first time they're like, we have 190 00:10:18,240 --> 00:10:21,240 Speaker 3: a plastics division and this kid blew it up. 191 00:10:22,400 --> 00:10:22,760 Speaker 1: He m. 192 00:10:23,320 --> 00:10:26,360 Speaker 3: He charms them, He explains the chemical process, he's behind it, 193 00:10:26,480 --> 00:10:29,080 Speaker 3: why it's difficult, and all of that, and they let 194 00:10:29,160 --> 00:10:29,360 Speaker 3: him go. 195 00:10:29,840 --> 00:10:31,440 Speaker 2: Let's go shoot a quick nine boys. 196 00:10:32,000 --> 00:10:35,120 Speaker 3: They end up promoting him, and it was around this 197 00:10:35,160 --> 00:10:38,440 Speaker 3: time where he got the nickname Teflon Jack because nothing 198 00:10:38,520 --> 00:10:39,079 Speaker 3: sticks to him. 199 00:10:39,080 --> 00:10:41,560 Speaker 2: Teflon's a dupunch product, right, you'd think they'd call it 200 00:10:41,679 --> 00:10:45,000 Speaker 2: polyethylene oxide Jack. Nope, teflon. 201 00:10:45,000 --> 00:10:47,160 Speaker 3: Maybe they wanted to take it over, so he moved 202 00:10:47,160 --> 00:10:52,320 Speaker 3: from plastics to all chemicals, synthetic diamonds, metallurgy. It becomes 203 00:10:52,320 --> 00:10:57,640 Speaker 3: a Group executive over medical systems, appliance components. And then 204 00:10:57,679 --> 00:11:01,200 Speaker 3: he makes the big lead to consumer products. Okay, that's 205 00:11:01,240 --> 00:11:04,000 Speaker 3: the Glory microwaves and East Coast programming. 206 00:11:04,200 --> 00:11:04,960 Speaker 2: Absolutely. 207 00:11:05,720 --> 00:11:08,199 Speaker 3: Twenty years after he joins the companies in the running 208 00:11:08,200 --> 00:11:12,600 Speaker 3: for the CEO, and it's nineteen eighty. It's this changing 209 00:11:12,720 --> 00:11:17,120 Speaker 3: the guard in corporate America. The eighth CEO in that 210 00:11:17,280 --> 00:11:22,079 Speaker 3: hallway of pictures was Reginald Jones. He was a quiet, 211 00:11:22,400 --> 00:11:25,480 Speaker 3: modest man, lived in a small house, almost regal, you know, 212 00:11:25,520 --> 00:11:28,640 Speaker 3: I'm sure worth three piece suit. And then here comes 213 00:11:28,720 --> 00:11:33,240 Speaker 3: Jack like he's alpha male bravado. And Forbes called the 214 00:11:33,240 --> 00:11:36,120 Speaker 3: two chalk and Cheese. 215 00:11:37,000 --> 00:11:39,600 Speaker 2: Is that a British ism? I don't know. I don't know, 216 00:11:39,720 --> 00:11:44,559 Speaker 2: chalk and cheese Jones. Yeah, and Jack is definitely the cheese. 217 00:11:44,280 --> 00:11:47,680 Speaker 3: Yeah, because he's like big and cheesy and ooz's charm. 218 00:11:47,760 --> 00:11:51,000 Speaker 2: And then Reginald is brittle and white something like that. 219 00:11:51,720 --> 00:11:52,439 Speaker 2: They're both white. 220 00:11:52,559 --> 00:11:56,600 Speaker 3: Yeah, So it is amazing how Jack got the job. 221 00:11:56,920 --> 00:12:00,320 Speaker 3: Reginald Jones did this whole formal process, took years, you know, 222 00:12:01,320 --> 00:12:03,920 Speaker 3: to promote certain people, put them in the running, and 223 00:12:03,960 --> 00:12:08,000 Speaker 3: then did these long interviews and everything, and he goes 224 00:12:08,000 --> 00:12:09,720 Speaker 3: to the division heads and he's like, well, you know, 225 00:12:09,720 --> 00:12:12,360 Speaker 3: if I should get killed in an airplane crash, who 226 00:12:12,360 --> 00:12:14,280 Speaker 3: should take over the company right this moment? And every 227 00:12:14,360 --> 00:12:17,080 Speaker 3: division head said it should be me? Should be me, Reginald, 228 00:12:17,280 --> 00:12:21,520 Speaker 3: I'm the man. He's like, okay, who should be your 229 00:12:21,600 --> 00:12:23,839 Speaker 3: number two? If we both die? Who should take over 230 00:12:23,880 --> 00:12:27,040 Speaker 3: the company? And most all of them say, well, Jack. 231 00:12:26,840 --> 00:12:30,360 Speaker 2: Welch, oh that's very good, right right. 232 00:12:30,559 --> 00:12:33,800 Speaker 3: People loved him, and so it became obvious. You know, 233 00:12:34,080 --> 00:12:36,319 Speaker 3: he had the magic, he had the hole in one, 234 00:12:36,440 --> 00:12:39,439 Speaker 3: He was pals with everybody, and he becomes CEO in 235 00:12:39,520 --> 00:12:42,439 Speaker 3: nineteen eighty one. He's in his forties. He's full of energy, 236 00:12:42,600 --> 00:12:45,560 Speaker 3: and he says things are going to change around here 237 00:12:45,600 --> 00:12:51,480 Speaker 3: at GE. I don't want to run some lumbering, industrial, giant, boring, 238 00:12:52,040 --> 00:12:57,599 Speaker 3: consistent stock bureaucratic nightmare. He thinks GE should be confident, 239 00:12:58,120 --> 00:13:00,800 Speaker 3: g you should throw elbows, push its way through the competition, 240 00:13:00,880 --> 00:13:01,760 Speaker 3: be in the marketplace. 241 00:13:01,840 --> 00:13:07,520 Speaker 2: Ge Jack dreams should be more like me, Robert Smith, No, 242 00:13:07,679 --> 00:13:10,880 Speaker 2: Jack Welsh. Jack Welch's definitely a man who referred to 243 00:13:10,960 --> 00:13:12,800 Speaker 2: himself the third person. 244 00:13:13,240 --> 00:13:16,280 Speaker 4: How he changed the company and brought the cheese in 245 00:13:16,320 --> 00:13:50,920 Speaker 4: a minute. 246 00:13:36,440 --> 00:13:39,880 Speaker 2: Ads over, or if you joined pushkin plus and didn't 247 00:13:39,880 --> 00:13:42,680 Speaker 2: have to listen to an ad. There is no ad 248 00:13:42,679 --> 00:13:44,440 Speaker 2: that is over. And we're going back to the show. 249 00:13:44,840 --> 00:13:49,000 Speaker 2: Jack Welch has taken over General Electric and is about 250 00:13:49,080 --> 00:13:50,800 Speaker 2: to what's going to happen. 251 00:13:51,200 --> 00:13:52,800 Speaker 3: Well, the first thing you have to do to transform 252 00:13:52,800 --> 00:13:54,559 Speaker 3: a company is you need a napkin. 253 00:13:55,840 --> 00:13:57,880 Speaker 2: There's one thing we've learned in business history. If you 254 00:13:57,920 --> 00:14:00,280 Speaker 2: have a big idea in the history of business, you 255 00:14:00,320 --> 00:14:03,600 Speaker 2: have to write it on a cocktail napkin. And okay, 256 00:14:03,720 --> 00:14:06,280 Speaker 2: in Jack's telling, this is how it happened. 257 00:14:06,320 --> 00:14:09,319 Speaker 3: He's out with his wife at a restaurant in New Canaan, Connecticut, 258 00:14:09,800 --> 00:14:13,319 Speaker 3: has his cocktail napkin, and he draws three circles, barely 259 00:14:13,400 --> 00:14:17,839 Speaker 3: overlapping circles, and he says, g should just focus on 260 00:14:18,040 --> 00:14:21,280 Speaker 3: three things. Three big things, my three circles, and they 261 00:14:21,320 --> 00:14:28,400 Speaker 3: are the core Edison businesses. Large appliances, lighting, turbines, high technology, 262 00:14:28,560 --> 00:14:35,600 Speaker 3: that's the medical equipment, the aerospace and services, engineering, maintenance, financing. 263 00:14:36,080 --> 00:14:39,720 Speaker 3: And that may sound a little bit boring, but the 264 00:14:40,240 --> 00:14:43,440 Speaker 3: repair services for g was a huge money maker for them. 265 00:14:43,480 --> 00:14:47,520 Speaker 3: They would sometimes even sell turbines at a loss, knowing 266 00:14:47,520 --> 00:14:49,800 Speaker 3: that for the next thirty years. They could repair those 267 00:14:49,840 --> 00:14:52,800 Speaker 3: turbines and sell them parts and make a ton of money. 268 00:14:52,920 --> 00:14:55,840 Speaker 2: The turbine is like a giant razor and the services 269 00:14:55,880 --> 00:14:57,560 Speaker 2: are thirty years of blades. 270 00:14:57,640 --> 00:15:01,000 Speaker 3: Exactly right, only for hundreds of millions of dollars. Yes, yes, 271 00:15:01,080 --> 00:15:04,440 Speaker 3: yes yes. Jack also said this was not on the napkin, 272 00:15:04,840 --> 00:15:07,520 Speaker 3: that G should be the number one or number two 273 00:15:07,560 --> 00:15:10,880 Speaker 3: player in every business they were in. It shouldn't just 274 00:15:10,960 --> 00:15:13,560 Speaker 3: be you're in everything. You need to be a winner 275 00:15:14,120 --> 00:15:17,880 Speaker 3: or a second place person in each industry. And if 276 00:15:18,120 --> 00:15:20,760 Speaker 3: a division was not number one or number two, G 277 00:15:21,000 --> 00:15:22,840 Speaker 3: should sell the companies and get out of the way 278 00:15:23,360 --> 00:15:27,000 Speaker 3: and teflon Jack at this point gets a new nickname. 279 00:15:27,600 --> 00:15:32,920 Speaker 2: Neutron Jack. Neutron Jack. Do you remember the neutron bomb. 280 00:15:33,080 --> 00:15:35,880 Speaker 2: This is a huge eighties thing. Yeah. It's the bomb 281 00:15:35,880 --> 00:15:39,240 Speaker 2: that kills people but leaves buildings a standing. 282 00:15:39,480 --> 00:15:43,560 Speaker 3: Yeah, it sends massive waves of radiation. Everyone dies, but 283 00:15:43,680 --> 00:15:46,760 Speaker 3: then you can just rebuild society easier because you have 284 00:15:46,800 --> 00:15:50,200 Speaker 3: the buildings. So the play was Jack was going to 285 00:15:50,280 --> 00:15:52,640 Speaker 3: go out and fire all the people but keep the 286 00:15:52,680 --> 00:15:58,760 Speaker 3: company in teh And the timing was good for this 287 00:15:58,840 --> 00:16:02,600 Speaker 3: sort of move because this is like Ronald Reagan's America. 288 00:16:03,240 --> 00:16:07,400 Speaker 3: And this is when we start to see shareholder. 289 00:16:06,840 --> 00:16:09,240 Speaker 2: Activism right now. 290 00:16:09,760 --> 00:16:12,560 Speaker 3: In the thirties, forties and fifties, there was a little 291 00:16:12,560 --> 00:16:14,680 Speaker 3: bit more of a sense that a company is run 292 00:16:14,720 --> 00:16:17,040 Speaker 3: for the community and the stakeholders. 293 00:16:17,120 --> 00:16:17,840 Speaker 2: Right, you had your. 294 00:16:17,880 --> 00:16:21,400 Speaker 3: Unions and the town you were in, and yeah, the 295 00:16:21,440 --> 00:16:27,360 Speaker 3: people running the company, right, everyone benefited, but the actual investors, 296 00:16:27,360 --> 00:16:30,240 Speaker 3: the shareholders, were like, wait, why am I number four 297 00:16:30,440 --> 00:16:33,160 Speaker 3: in this list of things you care about? You should 298 00:16:33,240 --> 00:16:35,880 Speaker 3: run this company for the maximum profits possible. 299 00:16:36,480 --> 00:16:37,800 Speaker 2: And so as. 300 00:16:37,720 --> 00:16:40,320 Speaker 3: Jack is doing this, a lot of companies are thinking 301 00:16:40,400 --> 00:16:45,080 Speaker 3: of doing this. They're shedding divisions, they're renegotiating labor contracts, 302 00:16:45,120 --> 00:16:46,240 Speaker 3: they're moving overseas. 303 00:16:46,360 --> 00:16:48,360 Speaker 2: And this is also the era when you have the 304 00:16:48,400 --> 00:16:51,400 Speaker 2: birth of what is now called private equity. Right at 305 00:16:51,440 --> 00:16:54,200 Speaker 2: the time, they called them corporate raiders. At the time, 306 00:16:54,240 --> 00:16:56,600 Speaker 2: they said they did leverage buyouts where they would do 307 00:16:56,720 --> 00:16:58,800 Speaker 2: a version in a way of what he's doing, of 308 00:16:58,800 --> 00:17:01,120 Speaker 2: what Jack Welch is doing, but with debt. Right, they'd 309 00:17:01,120 --> 00:17:03,720 Speaker 2: borrow a bunch of money, they'd buy some big oldline 310 00:17:03,760 --> 00:17:06,359 Speaker 2: industrial company, and then they'd fire a lot of people 311 00:17:06,440 --> 00:17:09,080 Speaker 2: and increase the profits. So in a way. Jack is 312 00:17:09,119 --> 00:17:12,320 Speaker 2: doing that but without having to buy the company. 313 00:17:12,520 --> 00:17:16,480 Speaker 3: Yeah, because he owns every company in America. Company right, right, 314 00:17:16,520 --> 00:17:18,960 Speaker 3: So he gets rid of small appliances. You know who 315 00:17:18,960 --> 00:17:20,719 Speaker 3: could make them cheaper. The Japanese. 316 00:17:20,840 --> 00:17:22,240 Speaker 2: Ah, the Japanese. It's the eighties. 317 00:17:22,480 --> 00:17:25,040 Speaker 3: You're worried about the Japanese. So no more ge clock 318 00:17:25,160 --> 00:17:28,120 Speaker 3: radios or toasters, although they would sell the brand too, 319 00:17:28,160 --> 00:17:30,040 Speaker 3: so people could put the little round G. 320 00:17:30,240 --> 00:17:30,919 Speaker 2: Logo on it. 321 00:17:31,160 --> 00:17:36,120 Speaker 3: Air conditioning gone mining would have broke Edison's heart. Mining abandoned. 322 00:17:36,840 --> 00:17:41,880 Speaker 3: At a meeting in Boca Raton, jackfires four division CEOs 323 00:17:42,240 --> 00:17:46,000 Speaker 3: all at once, all in the same meeting, like Game. 324 00:17:45,840 --> 00:17:49,080 Speaker 2: Of Thrones meet succession. They called it the Boca Massacre. 325 00:17:49,600 --> 00:17:52,640 Speaker 3: He closed factories, including factories that he had worked at. 326 00:17:52,680 --> 00:17:56,920 Speaker 3: He apparently devastated Pittsfield, Massachusetts, which is where he got 327 00:17:56,960 --> 00:17:57,399 Speaker 3: his start. 328 00:17:57,760 --> 00:17:58,639 Speaker 2: He was pretty brutal. 329 00:17:59,040 --> 00:18:02,639 Speaker 3: Jack also apparently, and he said this, he did not 330 00:18:02,960 --> 00:18:07,360 Speaker 3: like fat people, people who were overweight. There's a story 331 00:18:07,480 --> 00:18:11,520 Speaker 3: he was visiting one of the small appliance factories somewhere 332 00:18:12,160 --> 00:18:15,960 Speaker 3: hassling the plant manager about being fat. At one point, 333 00:18:16,000 --> 00:18:18,200 Speaker 3: I guess when Jack was coming to tour, people were 334 00:18:18,240 --> 00:18:22,000 Speaker 3: like hight everyone who's overweight, but do not let him 335 00:18:22,080 --> 00:18:24,960 Speaker 3: see them. Only skinny people on the line. But the 336 00:18:25,320 --> 00:18:28,359 Speaker 3: plant manager had a big belly, and Jack has given 337 00:18:28,400 --> 00:18:30,840 Speaker 3: him a hard time, and so he calls for a 338 00:18:30,920 --> 00:18:33,440 Speaker 3: GE digital scale to be brought out. They made Ge 339 00:18:33,520 --> 00:18:37,600 Speaker 3: digital scales there and Jack himself stands on the scale, 340 00:18:37,680 --> 00:18:41,160 Speaker 3: gets on, gets off, gets on, it's a different number, 341 00:18:41,200 --> 00:18:43,679 Speaker 3: gets off, He gets on, it's a different number again, 342 00:18:44,400 --> 00:18:48,680 Speaker 3: and he just goes ballistic, both at the overweight plant 343 00:18:48,720 --> 00:18:53,280 Speaker 3: manager and also the digital scales don't work, and so 344 00:18:53,440 --> 00:18:58,040 Speaker 3: Jack yell's what will become apparently one of his favorite catchphrases, 345 00:18:58,560 --> 00:19:00,000 Speaker 3: Why don't you give this to me? 346 00:19:00,160 --> 00:19:03,199 Speaker 2: Jacob? Jack says, what the fuck do I pay you for? 347 00:19:04,480 --> 00:19:08,320 Speaker 2: Love it? What the fuck do I pay you for? Charming? 348 00:19:08,720 --> 00:19:11,280 Speaker 3: In the nineteen eighties, Jack welch eliminated one hundred thousand 349 00:19:11,400 --> 00:19:12,879 Speaker 3: jobs worth of the company. 350 00:19:13,119 --> 00:19:16,119 Speaker 2: It was brutal, but for all silly putty. Well you 351 00:19:16,119 --> 00:19:18,960 Speaker 2: haven't mentioned silly put I've been waiting for silly buddy. 352 00:19:19,240 --> 00:19:21,359 Speaker 3: I don't know what I mean. At some point, I 353 00:19:21,440 --> 00:19:23,600 Speaker 3: think they invented it. I'm not even sure if they marketed, 354 00:19:23,640 --> 00:19:26,520 Speaker 3: if they sell it to someone else, You're like, I've. 355 00:19:26,359 --> 00:19:28,359 Speaker 2: Been waiting for one thing your last five minutes. What 356 00:19:28,400 --> 00:19:29,280 Speaker 2: happened to silly buddy? 357 00:19:29,320 --> 00:19:32,320 Speaker 3: The thirty thousand employees of Silly Putty Eggs were like, 358 00:19:32,400 --> 00:19:33,199 Speaker 3: you're gone. 359 00:19:34,160 --> 00:19:36,520 Speaker 2: Who's going to put the little eggs into the liddle 360 00:19:36,520 --> 00:19:38,159 Speaker 2: of the sheet outside the grocery store. 361 00:19:39,960 --> 00:19:43,880 Speaker 3: Of course, the stock price went up after all of this. Yeah, 362 00:19:43,920 --> 00:19:46,920 Speaker 3: and for all the turmoil, the one place you would 363 00:19:47,000 --> 00:19:50,880 Speaker 3: not have noticed it is in the financial documents of GE, 364 00:19:50,920 --> 00:19:57,359 Speaker 3: the annual report. Because the company's earnings looked steady slow 365 00:19:57,520 --> 00:20:02,800 Speaker 3: every year every quarter GE quietly and was predictably profitable. 366 00:20:03,359 --> 00:20:05,720 Speaker 3: And this was by design. This was sort of the 367 00:20:05,720 --> 00:20:09,320 Speaker 3: whole point we talked about the original reason for a conglomerate, 368 00:20:09,320 --> 00:20:12,080 Speaker 3: which is, you know, barrier to entry. But over the 369 00:20:12,160 --> 00:20:16,439 Speaker 3: last half century of GE, they figured out that the 370 00:20:16,480 --> 00:20:21,160 Speaker 3: real power of a conglomerate was diversification. If one part 371 00:20:21,160 --> 00:20:23,760 Speaker 3: of the company was not doing well, maybe people aren't 372 00:20:23,760 --> 00:20:27,840 Speaker 3: buying as many railroad engines, you could perhaps sell more 373 00:20:27,880 --> 00:20:31,200 Speaker 3: aircraft engines and make up for it. 374 00:20:31,119 --> 00:20:33,000 Speaker 2: It's like it's like a mutual fund. It's like an 375 00:20:33,000 --> 00:20:35,359 Speaker 2: index fund in one company. And it was. 376 00:20:35,359 --> 00:20:38,280 Speaker 3: Classically sort of before it was easy to invest in. 377 00:20:38,920 --> 00:20:41,320 Speaker 3: You know, an index fund of industrial companies. You could 378 00:20:41,359 --> 00:20:42,120 Speaker 3: just invest in GE. 379 00:20:42,440 --> 00:20:44,359 Speaker 2: They did every It's an index fund in one stock. 380 00:20:45,080 --> 00:20:49,439 Speaker 3: And Jack knew this, and so at the end of 381 00:20:49,480 --> 00:20:53,400 Speaker 3: the year he would start to pressure people. He'd be like, yeah, 382 00:20:53,480 --> 00:20:55,760 Speaker 3: we had a bad year in power. I need you 383 00:20:55,800 --> 00:20:59,200 Speaker 3: in medical systems to show me more money. Apparently, from 384 00:20:59,280 --> 00:21:04,640 Speaker 3: Thanksgiving on, like people, managers of the company worked furiously 385 00:21:05,040 --> 00:21:08,760 Speaker 3: to try and either generate profits or bring forward profits 386 00:21:08,840 --> 00:21:10,200 Speaker 3: or move losses like that. 387 00:21:10,200 --> 00:21:12,639 Speaker 2: That contract that's probably going to be signed in January, 388 00:21:12,680 --> 00:21:14,960 Speaker 2: you do whatever you can to get it signed in December. 389 00:21:15,080 --> 00:21:17,000 Speaker 3: There are stories of people working on New Year's Eve 390 00:21:17,280 --> 00:21:20,000 Speaker 3: to try and get the money. And this was the 391 00:21:20,040 --> 00:21:24,680 Speaker 3: strength of GE. And this is what frankly, investors wanted 392 00:21:24,720 --> 00:21:27,080 Speaker 3: to see because a lot of the investors are you know, 393 00:21:27,160 --> 00:21:31,440 Speaker 3: retirees who want the dividend or you know, big corporate 394 00:21:31,440 --> 00:21:34,879 Speaker 3: pension funds. They just want GE to reliably make money. 395 00:21:35,400 --> 00:21:37,639 Speaker 3: And by the way, this is the whole point for 396 00:21:37,800 --> 00:21:40,119 Speaker 3: investors of GE. You were not investing in G for 397 00:21:40,240 --> 00:21:43,000 Speaker 3: a moonshot or you're gonna ten x your investment. 398 00:21:43,240 --> 00:21:44,160 Speaker 2: You're invested in GE. 399 00:21:44,320 --> 00:21:47,399 Speaker 3: So you get your five to ten percent every single year. 400 00:21:47,880 --> 00:21:50,800 Speaker 3: So Jack is doing this between the divisions, but as 401 00:21:50,840 --> 00:21:54,800 Speaker 3: he is liquidating certain divisions moving things around, it becomes 402 00:21:54,800 --> 00:21:59,479 Speaker 3: a little bit more difficult. But he has a secret weapon. 403 00:22:00,440 --> 00:22:05,160 Speaker 3: It is a financial services part of GE. Initially, Jack 404 00:22:05,200 --> 00:22:06,680 Speaker 3: called it the popcorn stand. 405 00:22:06,760 --> 00:22:08,560 Speaker 2: There's always money in the popcorn stand. 406 00:22:08,720 --> 00:22:11,240 Speaker 3: There was money in the popcorn stand. It became known 407 00:22:11,280 --> 00:22:14,879 Speaker 3: to the world as GE Capital. So G capital started 408 00:22:14,880 --> 00:22:18,240 Speaker 3: in the nineteen thirties as a financing arm that gave 409 00:22:18,280 --> 00:22:20,240 Speaker 3: people loans to buy GE products. 410 00:22:20,160 --> 00:22:21,600 Speaker 2: Like we talked about it in the GM show with 411 00:22:21,800 --> 00:22:25,720 Speaker 2: General Motors Acceptance Corporation GMAC. Basically, you give them the 412 00:22:25,800 --> 00:22:27,680 Speaker 2: loans so they can buy your product without having to 413 00:22:27,720 --> 00:22:28,359 Speaker 2: go to the bank. 414 00:22:28,760 --> 00:22:32,280 Speaker 3: Yeah, it's great and it helps move product, but that's 415 00:22:32,320 --> 00:22:34,960 Speaker 3: only the beginning of what you can do with finance. 416 00:22:35,000 --> 00:22:40,000 Speaker 3: And Jack realized early on that GE could borrow massive 417 00:22:40,000 --> 00:22:42,879 Speaker 3: amounts of money from Wall Street because it was GE 418 00:22:43,480 --> 00:22:46,399 Speaker 3: triple A rating as trusted as the US government. Anyone 419 00:22:46,520 --> 00:22:49,520 Speaker 3: is going to lend money to GE, and then it 420 00:22:49,560 --> 00:22:54,240 Speaker 3: could lend out that money again at higher interest rates, 421 00:22:54,720 --> 00:22:57,959 Speaker 3: not just to its customers, but to anyone who needed 422 00:22:58,119 --> 00:22:58,600 Speaker 3: the money. 423 00:22:59,119 --> 00:23:03,119 Speaker 2: Sounds like a bank sounds like a borrowing low and 424 00:23:03,200 --> 00:23:05,919 Speaker 2: lending high, having that net interest margin. That is the 425 00:23:05,960 --> 00:23:10,359 Speaker 2: fundamental business model of a bank. And people would flock 426 00:23:10,400 --> 00:23:13,919 Speaker 2: to GE for these loans, leverage, buyout. People who wanted 427 00:23:13,960 --> 00:23:19,280 Speaker 2: to like takeover companies, could get loans from GE franchises. 428 00:23:19,560 --> 00:23:23,080 Speaker 3: Real estate. It was just an easy way to get money. 429 00:23:23,119 --> 00:23:25,160 Speaker 3: And you're dealing with GE, so there weren't as many 430 00:23:25,440 --> 00:23:27,680 Speaker 3: regulations that if you had to go to a bank. 431 00:23:27,720 --> 00:23:30,280 Speaker 2: It's the kind of regulatory arbitrage. They're doing what a 432 00:23:30,280 --> 00:23:32,960 Speaker 2: bank does, but they're not regulated as strictly as a bank. 433 00:23:33,080 --> 00:23:36,440 Speaker 3: In his book Power Failure, Bill Cohen quotes Jack as 434 00:23:36,480 --> 00:23:39,360 Speaker 3: saying about GE capital, want you give me your best, 435 00:23:39,440 --> 00:23:40,320 Speaker 3: Jack Welch. 436 00:23:40,320 --> 00:23:43,600 Speaker 2: I thought it was easier than bending metal, fooling with money. 437 00:23:43,760 --> 00:23:46,399 Speaker 2: You get bright people find an EDGE was easier to 438 00:23:46,440 --> 00:23:47,200 Speaker 2: make money. 439 00:23:47,280 --> 00:23:49,400 Speaker 3: It was a home run, and it became the fastest 440 00:23:49,400 --> 00:23:52,720 Speaker 3: growing part of GE as it does because it's so easy. 441 00:23:52,840 --> 00:23:54,359 Speaker 3: You didn't have to have a factory, you didn't have 442 00:23:54,440 --> 00:23:55,320 Speaker 3: to blow up anything. 443 00:23:55,920 --> 00:23:58,560 Speaker 2: So this is striking to me, right, So what are 444 00:23:58,600 --> 00:24:01,199 Speaker 2: we like eighties getting into the nineties here, this is 445 00:24:01,200 --> 00:24:04,800 Speaker 2: when this is happening. Yeah, it is really remarkable to 446 00:24:04,960 --> 00:24:10,840 Speaker 2: think about GE as emblematic of American business, of the 447 00:24:10,880 --> 00:24:15,520 Speaker 2: American economy, this company that rose with the industrialization and 448 00:24:15,560 --> 00:24:19,040 Speaker 2: innovation in the eighteen hundreds and became this kind of 449 00:24:19,480 --> 00:24:23,520 Speaker 2: boring corporate behemoth in the mid twentieth century. And now 450 00:24:23,600 --> 00:24:27,200 Speaker 2: what's happening in the American economy, Go go, go go, 451 00:24:27,440 --> 00:24:30,760 Speaker 2: and a shift from being an industrial economy being an 452 00:24:30,800 --> 00:24:35,159 Speaker 2: economy that sells things like jet engines to finance. Right, 453 00:24:35,200 --> 00:24:38,600 Speaker 2: the great financialization of the late twentieth century, it's happening 454 00:24:38,720 --> 00:24:39,280 Speaker 2: at GE. 455 00:24:39,440 --> 00:24:42,159 Speaker 3: It's perfect, and this money making machine allows them to 456 00:24:42,240 --> 00:24:45,480 Speaker 3: do things they couldn't do before. So of course they 457 00:24:45,480 --> 00:24:48,320 Speaker 3: built aircraft engines. But they think, well, we have all 458 00:24:48,320 --> 00:24:51,800 Speaker 3: this money we can borrow at such low rates, why 459 00:24:51,880 --> 00:24:55,120 Speaker 3: don't we buy the whole plane, put GE engines on them, 460 00:24:55,160 --> 00:24:57,720 Speaker 3: and then lease those planes to the airlines. 461 00:24:57,800 --> 00:25:02,679 Speaker 2: Huh, because presumably GE can borrow money more cheaply to 462 00:25:03,000 --> 00:25:05,800 Speaker 2: buy a plane than an airline. Do not lend money 463 00:25:05,840 --> 00:25:07,520 Speaker 2: to an airline. They are going to go bankrupt. This 464 00:25:07,560 --> 00:25:09,800 Speaker 2: is the nineties. We talked about this in the Southwest show. Right, 465 00:25:09,840 --> 00:25:12,000 Speaker 2: They're all going to go bankrupt. Don't lend the money. 466 00:25:12,000 --> 00:25:14,399 Speaker 2: But gee, they're not going anywhere, so this is another 467 00:25:14,480 --> 00:25:15,520 Speaker 2: arbitrage basically. 468 00:25:15,760 --> 00:25:18,760 Speaker 3: Yeah, And of course GE could then use depreciation on 469 00:25:18,800 --> 00:25:20,880 Speaker 3: the planes to offset their tax bill. 470 00:25:21,280 --> 00:25:23,400 Speaker 2: Everybody loves depreciation come tax time. 471 00:25:23,840 --> 00:25:28,959 Speaker 3: Yeah, So G Capital also had this added benefit for 472 00:25:29,080 --> 00:25:34,400 Speaker 3: Jack Welch himself. So he always prided himself on being 473 00:25:34,400 --> 00:25:37,600 Speaker 3: able to go to analysts and say, oh, here's what 474 00:25:37,680 --> 00:25:40,920 Speaker 3: the company is going to make the expectations, and then 475 00:25:40,960 --> 00:25:43,720 Speaker 3: beat those expectations. He just loved to do it. You 476 00:25:43,800 --> 00:25:46,400 Speaker 3: loved to be like, uh, you know, I'm gonna meet 477 00:25:46,440 --> 00:25:49,679 Speaker 3: five percent earnings growth and then hit ten percent. 478 00:25:49,760 --> 00:25:53,480 Speaker 2: And this is still in financial news in just bread 479 00:25:53,480 --> 00:25:57,880 Speaker 2: and butter commodity day to day financial news. Earnings reports 480 00:25:57,880 --> 00:26:01,400 Speaker 2: of public companies are maybe the classic financial news story, 481 00:26:01,440 --> 00:26:03,960 Speaker 2: and there is always the question did they beat did 482 00:26:03,960 --> 00:26:08,359 Speaker 2: they beat expectations? And there's this whole backstory of the 483 00:26:08,400 --> 00:26:13,280 Speaker 2: CEOs of the companies kind of massaging the expectations, massage Ernie's. 484 00:26:13,000 --> 00:26:15,399 Speaker 3: And g was so big and so good at it, 485 00:26:15,880 --> 00:26:17,119 Speaker 3: there weren't even questions. 486 00:26:17,440 --> 00:26:21,600 Speaker 2: This just happened every quarter. But if they're always beating expectations, 487 00:26:21,640 --> 00:26:23,960 Speaker 2: something weird is going on. The problem that is with 488 00:26:24,040 --> 00:26:28,160 Speaker 2: the expectations. Right in a well strettured world, it would 489 00:26:28,160 --> 00:26:30,960 Speaker 2: be random whether they beat or miss expectation. Look, it 490 00:26:31,080 --> 00:26:31,840 Speaker 2: is a game. 491 00:26:32,080 --> 00:26:35,040 Speaker 3: Nobody is looking closely at this point because the economy 492 00:26:35,119 --> 00:26:37,520 Speaker 3: is growing, GE is growing. 493 00:26:37,359 --> 00:26:38,960 Speaker 2: And they we're in the nineties. This is the go 494 00:26:38,960 --> 00:26:40,000 Speaker 2: go nineties. Yeah. 495 00:26:40,040 --> 00:26:43,600 Speaker 3: Absolutely, And whenever Jack needed a little extra money, he 496 00:26:43,760 --> 00:26:48,119 Speaker 3: had ge Capital because GE Capital, which is growing and 497 00:26:48,119 --> 00:26:51,040 Speaker 3: growing in the company, owns all these very liquid assets, 498 00:26:51,160 --> 00:26:54,720 Speaker 3: loans and investments, and so Jack could say to them, Eh, 499 00:26:54,800 --> 00:26:59,320 Speaker 3: I need an extra billion dollars in profit, and they 500 00:26:59,320 --> 00:27:00,320 Speaker 3: could do it overnight. 501 00:27:00,440 --> 00:27:03,040 Speaker 2: There's always money in the popcorn stand. 502 00:27:03,760 --> 00:27:06,800 Speaker 3: So now you had to split in the company old 503 00:27:07,320 --> 00:27:14,800 Speaker 3: metal bending, expensive rusting industrial products, shiny new financial manipulation, 504 00:27:16,080 --> 00:27:18,000 Speaker 3: and the part of the company. 505 00:27:17,640 --> 00:27:20,760 Speaker 2: That nobody really understood. 506 00:27:20,920 --> 00:27:25,680 Speaker 3: That ends up taking over the company financialization. Maybe it's 507 00:27:25,720 --> 00:27:28,240 Speaker 3: worth mentioning at this point. A couple of other things 508 00:27:28,280 --> 00:27:33,080 Speaker 3: that cemented Jack's reputation as the greatest CEO of the 509 00:27:33,080 --> 00:27:39,600 Speaker 3: century trademark one was he bought the TV network ris NBC, 510 00:27:40,760 --> 00:27:44,040 Speaker 3: and buying a TV network never made sense to me. 511 00:27:44,200 --> 00:27:47,160 Speaker 2: It doesn't seem like it goes on his three napkin circles. 512 00:27:47,160 --> 00:27:47,800 Speaker 2: Of success. 513 00:27:47,960 --> 00:27:49,720 Speaker 3: I think he had an arrow to a second napkin 514 00:27:49,760 --> 00:27:52,600 Speaker 3: that said NBC. But I ran about his reasoning and 515 00:27:52,920 --> 00:27:56,200 Speaker 3: it does actually make sense. He was worried about competition 516 00:27:56,320 --> 00:27:58,320 Speaker 3: from the Japanese nineteen eighties. 517 00:27:58,359 --> 00:27:59,879 Speaker 2: This is nineteen eighties moving on, Yeah. 518 00:27:59,720 --> 00:28:02,640 Speaker 3: Because they were competing in small appliances and TV sets 519 00:28:02,680 --> 00:28:07,320 Speaker 3: and all of this. And he thinks there is something 520 00:28:07,480 --> 00:28:11,000 Speaker 3: that foreign companies are not allowed to own by law, 521 00:28:11,440 --> 00:28:15,200 Speaker 3: and that is TV networks. So he thinks, well, if 522 00:28:15,240 --> 00:28:17,720 Speaker 3: I have a TV network, that's kind of my mote. 523 00:28:17,880 --> 00:28:20,680 Speaker 3: That's the one thing that Japanese cannot take over. 524 00:28:20,840 --> 00:28:23,760 Speaker 2: Clever I mean, I guess it is interesting to think 525 00:28:23,800 --> 00:28:28,840 Speaker 2: about the big Japanese conglomerates, right, like Mitsubishi and Mitsui, 526 00:28:29,320 --> 00:28:32,440 Speaker 2: as a kind of counterpart to ge Right, Presumably he's 527 00:28:32,440 --> 00:28:37,080 Speaker 2: thinking of them as his rivals. They're big and innovative 528 00:28:37,119 --> 00:28:39,400 Speaker 2: at this time, and they're trying to get you. What 529 00:28:39,440 --> 00:28:40,760 Speaker 2: can I do that they can't do? 530 00:28:40,960 --> 00:28:45,400 Speaker 3: Yeah, So he has NBC. It allows him to develop 531 00:28:45,680 --> 00:28:51,960 Speaker 3: what will become his dear pet, CNBC, the business channel. 532 00:28:52,120 --> 00:28:55,480 Speaker 3: He loved to show up on CNBC and just be Jack. 533 00:28:55,680 --> 00:28:55,880 Speaker 2: Yeah. 534 00:28:56,160 --> 00:28:58,760 Speaker 3: In fact, he just even after he left the CEO. 535 00:28:58,920 --> 00:29:02,560 Speaker 3: He was on dozens of Times Ladies and Gentlemen Jack, 536 00:29:02,960 --> 00:29:05,440 Speaker 3: so he had his own business channel, and we were 537 00:29:05,480 --> 00:29:08,960 Speaker 3: talking about this. There is a strange thing. After Jack 538 00:29:09,000 --> 00:29:14,200 Speaker 3: Welch left, a show came on NBC called thirty Rock. 539 00:29:14,760 --> 00:29:17,440 Speaker 2: A show called thirty Rock. Yes, I know of the 540 00:29:17,440 --> 00:29:18,720 Speaker 2: show called thirty Rock. 541 00:29:19,080 --> 00:29:24,680 Speaker 3: And it was a parody of GE itself and one 542 00:29:24,720 --> 00:29:27,280 Speaker 3: of the lead characters, played by Alec Baldwin, was named 543 00:29:27,480 --> 00:29:31,040 Speaker 3: Jack Donnahey, who was the head of East Coast Television 544 00:29:31,320 --> 00:29:35,400 Speaker 3: and Microwave programming beautiful writing. So the idea is you 545 00:29:35,440 --> 00:29:39,080 Speaker 3: have this GE executive microwave person who comes in to 546 00:29:39,160 --> 00:29:40,120 Speaker 3: run a TV network. 547 00:29:40,400 --> 00:29:40,840 Speaker 2: Hilarious. 548 00:29:41,760 --> 00:29:45,880 Speaker 3: Yeah, And then there were a few facts about the 549 00:29:45,920 --> 00:29:49,760 Speaker 3: Alec Baldwin character. He grew up outside of Boston in 550 00:29:49,800 --> 00:29:53,360 Speaker 3: a suburb called sad Chester Genius, so he had the 551 00:29:53,400 --> 00:29:58,360 Speaker 3: working class roots and he started in the GE poisons division. 552 00:29:59,440 --> 00:30:01,120 Speaker 2: Very funny. 553 00:30:02,040 --> 00:30:04,640 Speaker 3: In the very first show, Jack Donnaey talks about how 554 00:30:04,680 --> 00:30:09,520 Speaker 3: he invented the trivection oven, the third heat, the thirty 555 00:30:09,960 --> 00:30:15,000 Speaker 3: which was heat could vection and microwaves and the punchline. 556 00:30:15,440 --> 00:30:18,400 Speaker 3: This was an actual product that GE made. The Trivection 557 00:30:18,520 --> 00:30:22,000 Speaker 3: oven was a ge product. They just took it right 558 00:30:22,040 --> 00:30:23,320 Speaker 3: from the catalog and. 559 00:30:24,320 --> 00:30:25,240 Speaker 2: From the headlines. 560 00:30:25,800 --> 00:30:30,440 Speaker 3: Okay, enough, thirty rock. The other thing that Jack Welch 561 00:30:30,920 --> 00:30:35,520 Speaker 3: the real Man started was something called six sigma, which 562 00:30:35,560 --> 00:30:39,760 Speaker 3: sounds like it's a comedy chats but is an actual thing. 563 00:30:40,280 --> 00:30:44,440 Speaker 2: People were obsessed with six sigma in the aughts, right 564 00:30:44,480 --> 00:30:46,280 Speaker 2: and the aughts was that when everybody was talking about 565 00:30:46,320 --> 00:30:49,560 Speaker 2: six Can I show you my six sigma tattoo? You 566 00:30:49,600 --> 00:30:51,400 Speaker 2: have like a bell curve. 567 00:30:51,760 --> 00:30:55,240 Speaker 3: So, six sigma is a statistical measure of how many 568 00:30:55,440 --> 00:30:58,000 Speaker 3: defects are in a product. You take a normal distribution. 569 00:30:58,400 --> 00:31:00,880 Speaker 3: One sigma is one standard deviation all the way out 570 00:31:00,920 --> 00:31:04,040 Speaker 3: to six standard deviation six sigma. It boils down to, 571 00:31:04,320 --> 00:31:07,080 Speaker 3: if you make a million products, you can have defects 572 00:31:07,120 --> 00:31:11,000 Speaker 3: in three point four of them. Okay, tiny, tiny fraction. 573 00:31:12,440 --> 00:31:17,560 Speaker 3: It's just you know, manufacturing excellence. If this show we're 574 00:31:17,600 --> 00:31:21,360 Speaker 3: going by six sigma principles, god forbid, the length of 575 00:31:21,440 --> 00:31:25,400 Speaker 3: every show would vary by one one hundredth of a second, 576 00:31:25,640 --> 00:31:31,240 Speaker 3: look slightly faster, and then massage the earnings. So six 577 00:31:31,280 --> 00:31:35,880 Speaker 3: sigma dad expectations. Six sigma did help the company. They 578 00:31:35,880 --> 00:31:40,360 Speaker 3: did improve their operating margins, but it was more of 579 00:31:40,400 --> 00:31:43,280 Speaker 3: a brand for Jack. Everyone had to go through six 580 00:31:43,280 --> 00:31:46,280 Speaker 3: sigma training. He took the best people from every division 581 00:31:46,280 --> 00:31:49,880 Speaker 3: to go to six sigma school, you know, up in Crotonville, 582 00:31:50,400 --> 00:31:52,080 Speaker 3: And you know a lot of people at the time 583 00:31:52,120 --> 00:31:54,280 Speaker 3: referred to it as management mumbo jumbo. 584 00:31:54,760 --> 00:31:57,160 Speaker 2: People really say mumbo jumbo. I feel like no one 585 00:31:57,200 --> 00:32:00,200 Speaker 2: actually says that. No one ever talked about seven sigma impossible. 586 00:32:01,240 --> 00:32:02,560 Speaker 2: But you look, it worked. 587 00:32:02,720 --> 00:32:07,360 Speaker 3: It saved some money for the company, they increased operating margins, whatever, whatever, whatever. 588 00:32:08,160 --> 00:32:10,080 Speaker 3: But it seemed to me it was more like a 589 00:32:10,120 --> 00:32:12,440 Speaker 3: pr move for Jack. So when people say to him, 590 00:32:13,000 --> 00:32:15,680 Speaker 3: how do you keep beating expectations with your earnings, he 591 00:32:15,720 --> 00:32:18,280 Speaker 3: could be like, sir, six. 592 00:32:18,200 --> 00:32:21,600 Speaker 2: Have you counted my sigma's, young man, so many sigmas? 593 00:32:21,800 --> 00:32:25,720 Speaker 2: Try three vections, three eights, and six sigma. It's eighteen. 594 00:32:25,800 --> 00:32:29,280 Speaker 2: The product of my heats and my sigmas is eighteen, sir. 595 00:32:30,520 --> 00:32:33,600 Speaker 3: It is easy to mock and to nitpick at this point, 596 00:32:33,880 --> 00:32:36,400 Speaker 3: But in the mid nineteen nineties, g becomes the most 597 00:32:36,480 --> 00:32:39,600 Speaker 3: valuable company in the world. In the year two thousand, 598 00:32:40,000 --> 00:32:42,840 Speaker 3: it reached its peak just as Jack was about to 599 00:32:42,880 --> 00:32:48,080 Speaker 3: turn sixty five and retire. It was a perfect CEO run. 600 00:32:48,440 --> 00:32:52,000 Speaker 3: He increased g's earnings eightfold over the twenty years. Wow 601 00:32:52,120 --> 00:32:55,520 Speaker 3: stock increased by a factor of forty forty x for 602 00:32:55,560 --> 00:32:58,640 Speaker 3: an industrial company, Right right, right, And then Welch picks 603 00:32:58,640 --> 00:33:03,080 Speaker 3: his own successor, Jeffrey Immolt, the best salesman in the company, 604 00:33:03,320 --> 00:33:05,719 Speaker 3: and he hands the best salesman in the company the 605 00:33:05,720 --> 00:33:07,840 Speaker 3: best company in the world. 606 00:33:08,720 --> 00:33:09,800 Speaker 2: What God going wrong? 607 00:33:10,440 --> 00:33:13,480 Speaker 3: Whatever evil was hiding in GE, and there was a 608 00:33:13,480 --> 00:33:16,400 Speaker 3: lot of it was about to be the problem for 609 00:33:16,520 --> 00:33:18,680 Speaker 3: the next guy in a minute. 610 00:33:19,160 --> 00:33:21,600 Speaker 2: Going to have an ad break unless you've signed up 611 00:33:21,640 --> 00:33:23,160 Speaker 2: for pushkin Plus, And if you don't want to hear 612 00:33:23,200 --> 00:33:26,760 Speaker 2: the ads, go right now to pushkin dot FM, slash plus. 613 00:33:46,560 --> 00:33:47,480 Speaker 2: We're back from the break. 614 00:33:47,960 --> 00:33:50,959 Speaker 3: You know who's not back, Jack Welt, he's off enjoying 615 00:33:51,000 --> 00:33:55,600 Speaker 3: his retirement. And finally Jeffrey Emilt becomes CEO. Jack leaves 616 00:33:55,600 --> 00:33:59,040 Speaker 3: on a Friday, Jeff starts on the Monday. There's a 617 00:33:59,080 --> 00:34:04,520 Speaker 3: PEP rally, an actual engineered PEP rally for Jeff Emilt. Yay, 618 00:34:04,800 --> 00:34:08,919 Speaker 3: you're our next Jack, and it's broadcast all the different offices. 619 00:34:09,200 --> 00:34:12,279 Speaker 3: Has a great time. Jeff Emmelt had been at GE 620 00:34:12,480 --> 00:34:15,600 Speaker 3: four decades, Like jack He worked his way up through 621 00:34:16,040 --> 00:34:19,640 Speaker 3: the various divisions. But unlike Jackie, is not an engineer, 622 00:34:19,680 --> 00:34:20,680 Speaker 3: a nuts and bolts guy. 623 00:34:21,239 --> 00:34:22,560 Speaker 2: Jeff is an Ivy leaguer. 624 00:34:23,160 --> 00:34:26,279 Speaker 3: He can golf, but mostly he was the captain of 625 00:34:26,320 --> 00:34:31,640 Speaker 3: the Dartmouth football team Harvard MBA. He's a glad hander, backslapper. 626 00:34:31,840 --> 00:34:36,160 Speaker 3: Everyone likes Jeff Immolt, best salesman in the company. Later 627 00:34:36,280 --> 00:34:39,839 Speaker 3: Jeff would say that he had only one good day 628 00:34:40,200 --> 00:34:45,480 Speaker 3: in his job. That first day, Monday, September tenth, two 629 00:34:45,560 --> 00:34:46,200 Speaker 3: thousand and one. 630 00:34:46,880 --> 00:34:47,160 Speaker 2: I know. 631 00:34:47,560 --> 00:34:50,560 Speaker 3: The next morning two planes hit the World Trade Center, 632 00:34:50,960 --> 00:34:53,760 Speaker 3: and the financial repercussions you may remember, were massive. 633 00:34:53,800 --> 00:34:57,000 Speaker 2: They were immediate. So Ge, as we've. 634 00:34:56,800 --> 00:35:00,240 Speaker 3: Talked about, was in the aircraft business. G was also 635 00:35:00,360 --> 00:35:04,440 Speaker 3: in the insurance business, had insurance policies that were involved 636 00:35:04,440 --> 00:35:07,920 Speaker 3: in that day. And as Jeff later put it, why 637 00:35:07,960 --> 00:35:08,800 Speaker 3: do you read this quote. 638 00:35:09,520 --> 00:35:13,560 Speaker 2: On my second day, A and I lease running on 639 00:35:13,719 --> 00:35:17,960 Speaker 2: engines I built, crashed into a building I ensure, and 640 00:35:18,000 --> 00:35:20,120 Speaker 2: it was covered by a network I own. 641 00:35:20,480 --> 00:35:25,440 Speaker 3: Diversification had gotten GE through basically everything that happened in 642 00:35:25,520 --> 00:35:29,160 Speaker 3: the twentieth century, but in this case, September eleventh was 643 00:35:29,200 --> 00:35:32,040 Speaker 3: so big it hit at all parts of the company 644 00:35:32,040 --> 00:35:36,879 Speaker 3: at once. And the biggest problem for G wasn't necessarily 645 00:35:37,040 --> 00:35:39,160 Speaker 3: that they took a hit, a lot of companies did, 646 00:35:40,040 --> 00:35:44,880 Speaker 3: but it was that G investors were surprised by the 647 00:35:44,920 --> 00:35:48,239 Speaker 3: ways in which September eleventh hit the company. Jeff Imill 648 00:35:48,400 --> 00:35:51,280 Speaker 3: remembers getting a phone call from one of his largest 649 00:35:51,320 --> 00:35:56,239 Speaker 3: investors who said, we're in the reinsurance business. I had 650 00:35:56,280 --> 00:35:59,280 Speaker 3: no idea we were in the reinsurance business. 651 00:35:59,360 --> 00:36:01,520 Speaker 2: I feel like that's on the investor like I thought 652 00:36:01,560 --> 00:36:02,799 Speaker 2: like GE was hiding that. 653 00:36:03,640 --> 00:36:05,319 Speaker 3: No, I'm sure it was in the annual report on 654 00:36:05,320 --> 00:36:08,440 Speaker 3: page eighty seven or something like that. All of a sudden, though, 655 00:36:09,320 --> 00:36:12,520 Speaker 3: people started to ask questions, what else is in this company? 656 00:36:13,080 --> 00:36:17,160 Speaker 3: And diversity becomes a weakness at this point, and investors 657 00:36:17,160 --> 00:36:21,120 Speaker 3: stops saying, Wow, G does everything, and they start saying, wait, 658 00:36:21,200 --> 00:36:24,640 Speaker 3: what exactly does GE do? And how are we going 659 00:36:24,680 --> 00:36:27,359 Speaker 3: to get out of this when the market's open. 660 00:36:28,480 --> 00:36:29,600 Speaker 2: It was a few days later. 661 00:36:30,080 --> 00:36:34,320 Speaker 3: Yeah, G's stock was hit especially hard, twenty five percent down, 662 00:36:34,760 --> 00:36:37,239 Speaker 3: both for the business impact and also because people just 663 00:36:37,280 --> 00:36:40,960 Speaker 3: needed liquidity. They were selling the most basic stuff they had, 664 00:36:41,040 --> 00:36:46,880 Speaker 3: which was GE, and this might have been the chance 665 00:36:47,120 --> 00:36:48,080 Speaker 3: for Jeff Emmolt. 666 00:36:48,800 --> 00:36:50,080 Speaker 2: It's his first week. 667 00:36:51,320 --> 00:36:54,120 Speaker 3: To really reset the company, and everyone was expecting this. 668 00:36:54,200 --> 00:36:55,800 Speaker 3: They were expecting him to say, well, we're gonna have 669 00:36:55,800 --> 00:36:59,040 Speaker 3: to make some tough decisions, maybe not give dividends, maybe 670 00:36:59,120 --> 00:37:03,799 Speaker 3: we won't meet earnings, maybe we'll reform the way the 671 00:37:03,840 --> 00:37:10,160 Speaker 3: company does business. Instead, Jeff Emmolt decides he wants to 672 00:37:10,200 --> 00:37:12,880 Speaker 3: be like his predecessor, like Jack Wow, he wants to 673 00:37:12,920 --> 00:37:16,719 Speaker 3: show profits, and even though Jet Engines and NBC had 674 00:37:16,760 --> 00:37:19,240 Speaker 3: lost money that year in two thousand and one, Imilt 675 00:37:19,280 --> 00:37:24,600 Speaker 3: promised a ten percent boost in earnings. Jack Level and 676 00:37:24,719 --> 00:37:27,640 Speaker 3: he met a school like It's a miracle, and GE 677 00:37:29,000 --> 00:37:34,440 Speaker 3: met their expectations by leaning even heavier on GE Capital 678 00:37:34,960 --> 00:37:38,880 Speaker 3: and its financial deals. But something had changed about people's 679 00:37:38,880 --> 00:37:42,200 Speaker 3: perception of GE at this point. And maybe it's that 680 00:37:42,360 --> 00:37:45,880 Speaker 3: Jack Welch has left, maybe it's that we're no longer 681 00:37:45,920 --> 00:37:47,560 Speaker 3: in the Gogo nineties. 682 00:37:47,560 --> 00:37:49,080 Speaker 2: Or maybe it's the mood of the country. 683 00:37:49,400 --> 00:37:51,120 Speaker 3: This is the age where we're starting to get into 684 00:37:51,280 --> 00:37:54,960 Speaker 3: Enron and Tycho accounting scandals, and people start to ask 685 00:37:55,000 --> 00:38:00,120 Speaker 3: some hard questions like how exactly are you exceeding expectations 686 00:38:00,160 --> 00:38:04,520 Speaker 3: every quarter every year? At this point, GE is getting 687 00:38:04,560 --> 00:38:07,840 Speaker 3: more than forty percent of its profits from GE capital, 688 00:38:08,120 --> 00:38:12,480 Speaker 3: from its financial art forty percent of its profits. It 689 00:38:12,640 --> 00:38:15,440 Speaker 3: was a bank we've talked about, but more than that, 690 00:38:15,560 --> 00:38:19,120 Speaker 3: it was around the seventh largest bank in the US 691 00:38:19,200 --> 00:38:21,880 Speaker 3: if you look at their assets, but not regulated like 692 00:38:21,920 --> 00:38:25,240 Speaker 3: a bank. It's a bank dressed up in a factory costume, 693 00:38:25,960 --> 00:38:29,080 Speaker 3: and it's borrowing money at rates usually given to large 694 00:38:29,120 --> 00:38:33,400 Speaker 3: study industrial companies, and then funnels that money to the 695 00:38:33,400 --> 00:38:38,080 Speaker 3: Wall Street guys. And then someone says something. They hold 696 00:38:38,200 --> 00:38:43,480 Speaker 3: investor meeting and they notice that a really big company 697 00:38:43,560 --> 00:38:47,600 Speaker 3: is not there. PIMCO, which was the largest bond company 698 00:38:47,600 --> 00:38:48,120 Speaker 3: at the time. 699 00:38:48,880 --> 00:38:52,960 Speaker 2: Yeah, they're like bond investors. It's basically a bond investment company. 700 00:38:53,000 --> 00:38:54,040 Speaker 2: They buy bond Yeah. 701 00:38:54,080 --> 00:38:56,600 Speaker 3: And the guy who runs it is Bill Gross, known 702 00:38:56,600 --> 00:39:00,560 Speaker 3: as the bond King. And he announces that not only 703 00:39:00,640 --> 00:39:02,440 Speaker 3: is he not going to show up to this meeting, 704 00:39:02,880 --> 00:39:05,560 Speaker 3: but he is going to unload a billion dollars worth 705 00:39:05,760 --> 00:39:09,480 Speaker 3: of GE bonds money that he had lent to GE. 706 00:39:09,800 --> 00:39:10,880 Speaker 3: He's like, I don't want to be in the G 707 00:39:11,040 --> 00:39:13,759 Speaker 3: business anymore. And if you know Bill Gross, you'll know 708 00:39:13,840 --> 00:39:16,400 Speaker 3: that he did not do this quietly. In a memo, 709 00:39:16,640 --> 00:39:17,520 Speaker 3: in a polite way. 710 00:39:18,840 --> 00:39:20,719 Speaker 2: Bill Gross goes to war. 711 00:39:20,520 --> 00:39:24,600 Speaker 3: With the company, publishes this scathing article. He points out 712 00:39:24,640 --> 00:39:29,560 Speaker 3: that not only is GE a bank company borrowing a 713 00:39:29,560 --> 00:39:32,920 Speaker 3: ton of money, but it's running on commercial paper. 714 00:39:33,160 --> 00:39:33,759 Speaker 2: Huh. 715 00:39:33,840 --> 00:39:37,319 Speaker 3: So, commercial paper is a certain kind of loan. It's 716 00:39:37,360 --> 00:39:40,720 Speaker 3: basically a short term loan in the market, sometimes. 717 00:39:40,320 --> 00:39:43,400 Speaker 2: For just months, never longer than months. Right, the longest 718 00:39:43,440 --> 00:39:46,239 Speaker 2: commercial paper loan is something like nine months or something. Yeah. 719 00:39:46,320 --> 00:39:50,600 Speaker 3: Yeah, So usually companies use this for short term needs 720 00:39:50,640 --> 00:39:53,319 Speaker 3: to meet payroll or they're trying to build something new. Right, 721 00:39:53,760 --> 00:39:56,200 Speaker 3: But Bill Gross pointed out the g had borrowed one 722 00:39:56,280 --> 00:40:01,480 Speaker 3: hundred and twenty seven billion dollars worth of short term loans. Huh, 723 00:40:01,480 --> 00:40:04,600 Speaker 3: I'm gonna say it again, and twenty seven billion dollars 724 00:40:04,800 --> 00:40:11,279 Speaker 3: worth of short term loans that, of course, like their 725 00:40:11,320 --> 00:40:14,759 Speaker 3: plan was they would roll those loans over, they would 726 00:40:14,800 --> 00:40:16,560 Speaker 3: get money, they would pay them off, get new loans 727 00:40:16,560 --> 00:40:17,400 Speaker 3: to pay those loans. 728 00:40:17,560 --> 00:40:19,080 Speaker 2: Like that's the plan. Yeah. 729 00:40:19,120 --> 00:40:22,800 Speaker 3: But what if, Bill Gross says, the market says no, no, 730 00:40:22,920 --> 00:40:23,279 Speaker 3: thank you. 731 00:40:23,400 --> 00:40:26,399 Speaker 2: Well, I mean, let's talk about that for a minute more, right, 732 00:40:26,440 --> 00:40:30,759 Speaker 2: because it seems central to risk, I think in a 733 00:40:30,760 --> 00:40:34,680 Speaker 2: way that's underappreciated. So they're doing this other bank like 734 00:40:34,680 --> 00:40:37,000 Speaker 2: thing here. They're not just borrowing at a low interest 735 00:40:37,080 --> 00:40:39,319 Speaker 2: rate and lending at a higher interest rate. If you 736 00:40:39,360 --> 00:40:41,719 Speaker 2: borrow money for five years and lend it out for 737 00:40:41,800 --> 00:40:44,840 Speaker 2: five years and you have this interest margin, great, that 738 00:40:44,960 --> 00:40:48,920 Speaker 2: is relatively safe. Yes, if the people you're lending to 739 00:40:49,040 --> 00:40:51,920 Speaker 2: don't go pay you back, that's maybe trouble. But this 740 00:40:52,440 --> 00:40:56,120 Speaker 2: borrowing short term and lending long term, that is the 741 00:40:56,239 --> 00:40:59,319 Speaker 2: fundamental reason why banks are so risky. You know, we 742 00:40:59,320 --> 00:41:01,360 Speaker 2: put our money in the checking account in a basic 743 00:41:01,400 --> 00:41:03,880 Speaker 2: model of a bank, we can take it out tomorrow. 744 00:41:04,280 --> 00:41:06,279 Speaker 2: The bank turns around and lends it to people for 745 00:41:06,320 --> 00:41:09,080 Speaker 2: thirty years to buy a house. And if everybody all 746 00:41:09,080 --> 00:41:11,160 Speaker 2: of a sudden decides to take their money out of 747 00:41:11,200 --> 00:41:13,680 Speaker 2: the bank, the bank is not going to have their money, 748 00:41:13,880 --> 00:41:16,200 Speaker 2: even if the bank is healthy. And this is why 749 00:41:16,360 --> 00:41:20,920 Speaker 2: banks are so highly regulated, because they're a fundamentally dangerous business, 750 00:41:20,960 --> 00:41:23,879 Speaker 2: not because they're borrowing and lending, but because of this. 751 00:41:24,080 --> 00:41:27,840 Speaker 2: They call it maturity transformation, this maturity mistage of borrowing 752 00:41:27,840 --> 00:41:30,520 Speaker 2: short and lending along. And I suppose this is what 753 00:41:30,600 --> 00:41:33,800 Speaker 2: we're walking up to. This ends up being the core 754 00:41:33,920 --> 00:41:36,359 Speaker 2: problem in the two thousand and eight financial crisis. I mean, 755 00:41:36,360 --> 00:41:39,480 Speaker 2: we hear about housing and the housing bubble. That's like 756 00:41:39,520 --> 00:41:42,160 Speaker 2: the surface of it, But the underneath part of it 757 00:41:42,200 --> 00:41:46,400 Speaker 2: is these companies that are not banks doing this maturity 758 00:41:46,440 --> 00:41:49,319 Speaker 2: transformation that is wildly dangerous and that is going to 759 00:41:49,320 --> 00:41:50,280 Speaker 2: blow up the economy. 760 00:41:50,320 --> 00:41:53,200 Speaker 3: It becomes I don't want to say a full bank 761 00:41:53,280 --> 00:41:55,800 Speaker 3: run or even a slow motion bank run, but definitely. 762 00:41:55,880 --> 00:41:58,840 Speaker 3: Bill Grows is first in line to take his money 763 00:41:59,360 --> 00:42:01,680 Speaker 3: out of the company, and he starts to question the 764 00:42:01,760 --> 00:42:05,879 Speaker 3: very honesty of GE, asking well, how do they get 765 00:42:05,880 --> 00:42:09,400 Speaker 3: these consistent earnings? He called it a conglomerate financed by 766 00:42:09,440 --> 00:42:13,920 Speaker 3: a money machine, which was accurate. And inside GE executives 767 00:42:13,960 --> 00:42:16,920 Speaker 3: start turning on each other. There's yelling and meetings. People 768 00:42:16,960 --> 00:42:19,839 Speaker 3: start to leak bad news about the new CEO. Jeff 769 00:42:19,880 --> 00:42:23,480 Speaker 3: immelt that he doesn't listen, takes nobody's advice. He's acting 770 00:42:23,520 --> 00:42:25,240 Speaker 3: like the captain of the football team. 771 00:42:25,400 --> 00:42:26,640 Speaker 2: Not a friendly golf buddy. 772 00:42:27,000 --> 00:42:29,799 Speaker 3: They say he's afraid of Wall Street, that he basically 773 00:42:30,040 --> 00:42:33,840 Speaker 3: will write the press release first and then backwards engineer 774 00:42:33,960 --> 00:42:38,279 Speaker 3: how he gets things into the press release. Jeff responds 775 00:42:39,400 --> 00:42:43,520 Speaker 3: by changing the company's marketing. I know, I know, I know, 776 00:42:44,160 --> 00:42:47,360 Speaker 3: he decides it is a good time to change the slogan. 777 00:42:47,680 --> 00:42:50,320 Speaker 3: You remember the slogan of ge we bring. 778 00:42:50,239 --> 00:42:54,239 Speaker 2: Good things to life. We bring good things to life. 779 00:42:54,280 --> 00:42:55,359 Speaker 2: It is burned in. 780 00:42:55,360 --> 00:42:58,600 Speaker 3: My brain because it was their slogan for decades and decades. 781 00:42:58,640 --> 00:43:00,879 Speaker 3: And they go to their advertising firm say we want 782 00:43:00,920 --> 00:43:03,600 Speaker 3: to change the slogan. And you know, advertising firms love 783 00:43:03,640 --> 00:43:06,399 Speaker 3: this moment to make money. But even the advertising firm 784 00:43:06,480 --> 00:43:09,560 Speaker 3: is like, dude, this is one of the most famous 785 00:43:09,600 --> 00:43:12,200 Speaker 3: slogans in the world. It's up there with Cooke the 786 00:43:12,239 --> 00:43:15,440 Speaker 3: real thing. Gee, we bring good things to life. You 787 00:43:15,480 --> 00:43:17,640 Speaker 3: don't want to do this. And Jeff's like, we wanted it. 788 00:43:18,320 --> 00:43:22,800 Speaker 3: And they come up with their new slogan imagination at work, 789 00:43:23,920 --> 00:43:27,680 Speaker 3: which is fine whatever, but people hate it, especially in 790 00:43:27,680 --> 00:43:29,800 Speaker 3: an ero when people are starting to question your accounting. 791 00:43:30,120 --> 00:43:32,439 Speaker 2: You don't want to like lean on the imagination part. 792 00:43:32,480 --> 00:43:36,720 Speaker 2: Why are you imagining those earnings in the out? Okay, 793 00:43:36,760 --> 00:43:38,120 Speaker 2: we might as well get to the lowest point. 794 00:43:38,160 --> 00:43:40,799 Speaker 3: We could go on all day. Housing bubble starts to 795 00:43:40,800 --> 00:43:44,160 Speaker 3: burst in two thousand and six. G Capital is of 796 00:43:44,160 --> 00:43:46,920 Speaker 3: course up to its ears in real estate of various sorts. 797 00:43:47,920 --> 00:43:51,840 Speaker 3: In two thousand and eight, Jeff Emmolt tells an investor call, 798 00:43:52,080 --> 00:43:56,480 Speaker 3: it's gonna be okay. Ten percent growth is in the bag, 799 00:43:56,719 --> 00:44:00,000 Speaker 3: in the bag, in the bag, just like always ten percent, 800 00:44:00,520 --> 00:44:04,720 Speaker 3: just like Jack used to do. But remember, G Capital 801 00:44:04,760 --> 00:44:07,880 Speaker 3: can't come to the rescue this time. They're having trouble 802 00:44:07,960 --> 00:44:11,120 Speaker 3: unloading the investments that they have. They are in trouble. 803 00:44:11,120 --> 00:44:15,520 Speaker 3: They're bleeding money. And less than a month after he 804 00:44:15,560 --> 00:44:18,319 Speaker 3: says it was in the bag, Ge announces that they 805 00:44:18,320 --> 00:44:23,399 Speaker 3: will miss their numbers. No, inconceivable, G does not miss 806 00:44:23,440 --> 00:44:28,960 Speaker 3: its numbers. The stock plunge is thirteen percent. And this 807 00:44:29,040 --> 00:44:31,800 Speaker 3: is the saddest part of this very sad story, Jacob. 808 00:44:32,360 --> 00:44:35,960 Speaker 2: It's nice, not sadder than ten thousand people getting fired. 809 00:44:37,320 --> 00:44:38,880 Speaker 2: This one made me sad. Fair enough. 810 00:44:39,040 --> 00:44:42,760 Speaker 3: The great Jack Welch goes on CNBC that day, remember 811 00:44:42,800 --> 00:44:46,839 Speaker 3: the network that's owned by Ge. Jack Welch comes out 812 00:44:46,840 --> 00:44:50,720 Speaker 3: of retirement, sits down in the chair, turns to the anchor, 813 00:44:51,160 --> 00:44:55,560 Speaker 3: and he rips into his successor, into Jeff Emmolt. He 814 00:44:55,640 --> 00:44:59,759 Speaker 3: basically is addressing Jeff through the camera and he says, here's. 815 00:44:59,480 --> 00:45:02,880 Speaker 2: The screw up, mean her, here's the screw up. You 816 00:45:02,960 --> 00:45:05,360 Speaker 2: made a promise that you deliver this and you missed 817 00:45:05,400 --> 00:45:09,520 Speaker 2: three weeks later, Jeff has a credibility issue. He's getting 818 00:45:09,560 --> 00:45:11,800 Speaker 2: his ass kicked. I'd get a gun out and shoot 819 00:45:11,840 --> 00:45:14,400 Speaker 2: him if he doesn't make what he promised. Now, just 820 00:45:14,600 --> 00:45:20,200 Speaker 2: deliver the earnings. What a jerk, What a jerk. Also, 821 00:45:21,360 --> 00:45:24,320 Speaker 2: he picked Iml like a key central job of a 822 00:45:24,400 --> 00:45:27,680 Speaker 2: CEO is helping to choose the successor. 823 00:45:28,120 --> 00:45:31,799 Speaker 3: And Jack starts saying, it was my worst mistake I made. 824 00:45:31,920 --> 00:45:32,960 Speaker 2: I picked a loser. 825 00:45:33,840 --> 00:45:37,160 Speaker 3: Jeff calls his former boss, calls Jack and says, you 826 00:45:37,200 --> 00:45:39,719 Speaker 3: are dead to me, sure, and. 827 00:45:39,640 --> 00:45:42,200 Speaker 2: Then can you take another blow? It's like a horror 828 00:45:42,200 --> 00:45:43,920 Speaker 2: movie in there. To me, I don't feel sorry for 829 00:45:44,000 --> 00:45:45,879 Speaker 2: Jeff Iml. I'll be honest with you, all right. 830 00:45:45,960 --> 00:45:48,960 Speaker 3: The commercial paper market starts to freeze up all those 831 00:45:49,000 --> 00:45:52,239 Speaker 3: billions in loans that G took out. They start to 832 00:45:52,239 --> 00:45:56,040 Speaker 3: hear that like they can't really roll them over. You know, 833 00:45:56,080 --> 00:45:59,200 Speaker 3: people will give them money for one night, one day, 834 00:45:59,680 --> 00:46:01,440 Speaker 3: but no one knows if G is going to be 835 00:46:01,440 --> 00:46:02,760 Speaker 3: around in ninety days. 836 00:46:02,840 --> 00:46:05,160 Speaker 2: And this is the financial crisis. Is the same thing 837 00:46:05,200 --> 00:46:07,960 Speaker 2: that's happening to bear Stearns, It's happening to Lehman Brothers. 838 00:46:08,800 --> 00:46:09,439 Speaker 2: It got bad. 839 00:46:10,040 --> 00:46:13,280 Speaker 3: At one point, Emil tells the Treasury Secretary in secret 840 00:46:14,000 --> 00:46:16,839 Speaker 3: that they might need a bankruptcy plan. 841 00:46:17,120 --> 00:46:19,680 Speaker 2: Again, if you are a big industrial company and you 842 00:46:19,719 --> 00:46:22,520 Speaker 2: go bankrupt, that is extremely bad. If you are a 843 00:46:22,560 --> 00:46:25,880 Speaker 2: bank and you go bankrupt, it is much worse because 844 00:46:25,920 --> 00:46:29,840 Speaker 2: you were tied through these credit and debt relationships to 845 00:46:30,120 --> 00:46:31,360 Speaker 2: everybody in the economy. 846 00:46:31,440 --> 00:46:34,200 Speaker 3: Somebody bought that one hundred and twenty seven billion dollars 847 00:46:34,239 --> 00:46:37,399 Speaker 3: in commercial paper, Yes, and the market doesn't know who 848 00:46:38,080 --> 00:46:41,759 Speaker 3: owns GE paper. If G were to declare bankruptcy, it 849 00:46:41,800 --> 00:46:43,400 Speaker 3: would be absolute panic. 850 00:46:43,440 --> 00:46:44,320 Speaker 2: It would be the worst. 851 00:46:45,360 --> 00:46:49,000 Speaker 3: The US government knows this about banks in general, and 852 00:46:49,080 --> 00:46:51,040 Speaker 3: so they're in the process of coming up with these 853 00:46:51,280 --> 00:46:55,440 Speaker 3: facilities to help bail out the banks. But remember, in 854 00:46:55,480 --> 00:46:58,640 Speaker 3: a cruel twist, G never wanted to be called a bank. 855 00:46:58,680 --> 00:47:00,040 Speaker 3: There's not bank in the name. 856 00:47:00,520 --> 00:47:04,120 Speaker 2: This was their trick. And well, lots of companies were 857 00:47:04,120 --> 00:47:06,600 Speaker 2: doing this. Around this time. There were lots of non 858 00:47:06,680 --> 00:47:10,160 Speaker 2: banks that had become Actually another Pinco guy called them 859 00:47:10,200 --> 00:47:14,080 Speaker 2: shadow banks. Described this phenomenon that had arisen, which was 860 00:47:14,120 --> 00:47:16,000 Speaker 2: all these companies that were not banks, that were not 861 00:47:16,040 --> 00:47:19,239 Speaker 2: regulated like banks, had become banks. And now there was 862 00:47:19,560 --> 00:47:21,880 Speaker 2: a shadow run on the shadow banks. 863 00:47:22,160 --> 00:47:26,480 Speaker 3: Yeah, and G and these other companies were like, well. 864 00:47:25,760 --> 00:47:27,719 Speaker 2: Remember when he said we weren't a bank. 865 00:47:28,080 --> 00:47:31,920 Speaker 3: And it occurred to them that every other bank in 866 00:47:31,960 --> 00:47:36,560 Speaker 3: the country now had a federal guarantee essentially on their loans, 867 00:47:36,600 --> 00:47:38,960 Speaker 3: could borrow all this money, and GE did not. No 868 00:47:38,960 --> 00:47:41,520 Speaker 3: one would ever lend money to GE when you could 869 00:47:41,560 --> 00:47:43,920 Speaker 3: lend it to a bank backed by the US government. 870 00:47:44,280 --> 00:47:49,520 Speaker 3: So they groveled. They groveled, They pulled politicians into this. Eventually, 871 00:47:49,800 --> 00:47:54,480 Speaker 3: eventually GE gets covered by a federal loan guarantee for 872 00:47:54,560 --> 00:47:56,200 Speaker 3: some of these things and g ends up being one 873 00:47:56,239 --> 00:47:59,040 Speaker 3: of the largest users of this facility, just sucking in 874 00:47:59,120 --> 00:48:03,880 Speaker 3: money trying to keep things going. Jeff Immil, to his credit, 875 00:48:04,840 --> 00:48:07,600 Speaker 3: tries a bunch of things to revive the company. He 876 00:48:07,640 --> 00:48:10,240 Speaker 3: promises that he's going to reduce the size of GE capital. 877 00:48:10,800 --> 00:48:13,600 Speaker 3: He tries to make some industrial acquisitions to try and 878 00:48:13,600 --> 00:48:17,080 Speaker 3: get that you know, metal bending mojo back to return 879 00:48:17,120 --> 00:48:19,720 Speaker 3: the company to former glory, but nothing seems to work. 880 00:48:20,400 --> 00:48:23,800 Speaker 3: At one point, Jeff Emmil clearly is tired of trying 881 00:48:23,800 --> 00:48:26,239 Speaker 3: to be Jack and he blows his top and he 882 00:48:26,239 --> 00:48:28,279 Speaker 3: tells a bunch of analysts you want to give this 883 00:48:28,360 --> 00:48:28,759 Speaker 3: a read. 884 00:48:29,080 --> 00:48:31,960 Speaker 2: In the nineteen nineties. Anyone could have run ge. His 885 00:48:32,120 --> 00:48:35,239 Speaker 2: dog could have run ge. A German shepherd could have 886 00:48:35,360 --> 00:48:39,279 Speaker 2: run ge. It wasn't Jack Weld. He's saying it was 887 00:48:39,320 --> 00:48:42,759 Speaker 2: the nineties doing the nineties. And I mean he had 888 00:48:42,800 --> 00:48:45,960 Speaker 2: a great point. The great debate in business circles is 889 00:48:46,000 --> 00:48:49,640 Speaker 2: whether Emmilt ever stood a chance. If you were better ceo, 890 00:48:50,239 --> 00:48:52,800 Speaker 2: better golfer, could he have rescued the company? 891 00:48:53,200 --> 00:48:53,400 Speaker 4: You know? 892 00:48:53,440 --> 00:48:55,120 Speaker 2: Could he have made some changes here and there. 893 00:48:55,360 --> 00:49:00,960 Speaker 3: I firmly believe that Jack Welch planted a financial time bomb. 894 00:49:01,480 --> 00:49:05,120 Speaker 3: He used it to enhance his glory CEO of the century, 895 00:49:05,200 --> 00:49:07,160 Speaker 3: and then he left it to the next guy to fix. 896 00:49:07,280 --> 00:49:08,240 Speaker 3: I blame Jack Welch. 897 00:49:08,600 --> 00:49:11,520 Speaker 2: You know, it's interesting. We were talking about this, this show, 898 00:49:11,560 --> 00:49:14,560 Speaker 2: this story yesterday and our editor Ryan Dilley made this 899 00:49:14,600 --> 00:49:17,919 Speaker 2: point that I thought was really interesting. He called back 900 00:49:17,920 --> 00:49:20,359 Speaker 2: to the show we did about General Motors, about GM, 901 00:49:20,400 --> 00:49:23,520 Speaker 2: and in that show I talked about Alfred Sloan coming 902 00:49:23,600 --> 00:49:27,879 Speaker 2: along in the twenties thirties and kind of creating the 903 00:49:28,080 --> 00:49:33,560 Speaker 2: model of the manager, the manager for the twentieth century. 904 00:49:33,800 --> 00:49:36,799 Speaker 2: Before that, it had been a lot of entrepreneurial cowboys 905 00:49:36,840 --> 00:49:39,799 Speaker 2: starting up companies in this era of industrialization, and then 906 00:49:39,880 --> 00:49:43,120 Speaker 2: things kind of settled down and Sloan was more boring 907 00:49:43,239 --> 00:49:47,480 Speaker 2: and into organization, and that became the model for the 908 00:49:47,520 --> 00:49:51,240 Speaker 2: rest of the twentieth century. And you can see Jack 909 00:49:51,320 --> 00:49:54,600 Speaker 2: Welch as the bookend to that. He is sort of 910 00:49:54,880 --> 00:49:58,799 Speaker 2: the last of the managers who come in to run 911 00:49:58,840 --> 00:50:01,200 Speaker 2: a company that was started long before, who we. 912 00:50:01,239 --> 00:50:04,120 Speaker 3: Deal with inspiration and vision and everyone pulling together. 913 00:50:04,520 --> 00:50:07,360 Speaker 2: Because after that, once you get into the twenty first century, 914 00:50:07,600 --> 00:50:12,160 Speaker 2: we are now back into the cowboy entrepreneur era. The 915 00:50:12,239 --> 00:50:15,880 Speaker 2: biggest companies now, unlike ge at the turn of the century, 916 00:50:16,120 --> 00:50:19,120 Speaker 2: are for the most part companies that were started twenty 917 00:50:19,200 --> 00:50:22,440 Speaker 2: years ago, forty years ago, fifty years ago, almost entirely 918 00:50:22,480 --> 00:50:24,680 Speaker 2: by people who are still alive, in many cases by 919 00:50:24,680 --> 00:50:26,600 Speaker 2: people who are still running them. So in that way, 920 00:50:26,719 --> 00:50:28,359 Speaker 2: Welch is the end of an era. 921 00:50:28,800 --> 00:50:30,800 Speaker 3: Yeah, and you don't see many of these new entrepreneurs 922 00:50:30,840 --> 00:50:32,920 Speaker 3: who are leading companies playing golf. 923 00:50:33,080 --> 00:50:36,200 Speaker 2: There's no time. They weren't around the clock, and then 924 00:50:36,239 --> 00:50:39,160 Speaker 2: they got to sleep, they got to do their workouts. 925 00:50:40,120 --> 00:50:43,440 Speaker 3: So the official end of the story, Jeff Emmolt pushed 926 00:50:43,440 --> 00:50:47,080 Speaker 3: out of GE by the board in twenty seventeen, and 927 00:50:47,120 --> 00:50:50,880 Speaker 3: there was one final indignity that Jeff Immolt had to 928 00:50:50,920 --> 00:50:53,880 Speaker 3: face after he left. The Wall Street Journal published a 929 00:50:53,920 --> 00:50:59,319 Speaker 3: story about Jeff and his private planes planes plural, so 930 00:50:59,440 --> 00:51:02,960 Speaker 3: of course, as CEO of GE, he flew all around 931 00:51:02,960 --> 00:51:06,800 Speaker 3: the world constantly on his private plane, his ge Jet, 932 00:51:07,120 --> 00:51:10,920 Speaker 3: specially painted as a GE plane. But what no one 933 00:51:11,040 --> 00:51:14,960 Speaker 3: knew and the journal is that there was a second plane, 934 00:51:15,040 --> 00:51:19,360 Speaker 3: an empty plane owned by GE that followed that first 935 00:51:19,360 --> 00:51:22,680 Speaker 3: plane anywhere Jeff Immol went, landed right next to it, 936 00:51:22,719 --> 00:51:24,400 Speaker 3: and was there just in case something went wrong with 937 00:51:24,400 --> 00:51:27,799 Speaker 3: the first plane. There was a backup plane flying around 938 00:51:27,840 --> 00:51:28,240 Speaker 3: the world. 939 00:51:28,360 --> 00:51:32,160 Speaker 2: Remember I remember when that story came out and it 940 00:51:32,280 --> 00:51:35,920 Speaker 2: really landed if you will. Yeah, I mean it was 941 00:51:36,040 --> 00:51:42,799 Speaker 2: emblematic of the like grotesque corporate excess. But it's so visual. Yeah, 942 00:51:42,840 --> 00:51:45,520 Speaker 2: I think it's such a good story because you can 943 00:51:45,600 --> 00:51:48,560 Speaker 2: see it and the notion of sure, you've gotten used 944 00:51:48,560 --> 00:51:50,839 Speaker 2: to the CEO flying on the private plane. Okay, we've 945 00:51:50,880 --> 00:51:54,440 Speaker 2: accepted that, but a second empty plane is a slap 946 00:51:54,520 --> 00:51:55,960 Speaker 2: in the face. Too much of it. 947 00:51:56,200 --> 00:52:00,000 Speaker 3: As as the nation's recovering from the Great Recession, it 948 00:52:00,080 --> 00:52:03,239 Speaker 3: was terrible. The new CEO of GE, John Flannery, he 949 00:52:03,280 --> 00:52:06,040 Speaker 3: announced it. From there on out, they would fly commercial, 950 00:52:06,560 --> 00:52:08,759 Speaker 3: I mean first class, sure, yeah, I mean come on, 951 00:52:08,920 --> 00:52:11,560 Speaker 3: maybe buy a second seat, sure, just a little room. 952 00:52:12,440 --> 00:52:15,439 Speaker 3: It was actually on a commercial flight to Salt Lake 953 00:52:15,480 --> 00:52:20,919 Speaker 3: City when John Flannery typed into his laptop Operation Eisenhower. 954 00:52:21,360 --> 00:52:23,080 Speaker 3: It was a code name because there was someone sitting 955 00:52:23,080 --> 00:52:24,880 Speaker 3: next to him. He didn't want them to see. And 956 00:52:25,000 --> 00:52:28,520 Speaker 3: Operation Eisenhower was the outlines of a plan to break 957 00:52:28,600 --> 00:52:32,040 Speaker 3: up GE, to get rid of G Capital, and then 958 00:52:32,840 --> 00:52:35,800 Speaker 3: form three separate companies that would take the parts of GE, 959 00:52:36,920 --> 00:52:40,800 Speaker 3: and his plan finally happened in twenty twenty four. GE 960 00:52:40,880 --> 00:52:46,560 Speaker 3: is now GE Aerospace Company number one, G Healthcare Company 961 00:52:46,600 --> 00:52:50,680 Speaker 3: number two, and company number three GE Vernova. 962 00:52:51,600 --> 00:52:53,600 Speaker 2: The other two were very clear. And then you're gonna 963 00:52:53,640 --> 00:52:58,680 Speaker 2: drop Vernova, I'd be what is Vernova? Nobody knows? 964 00:52:58,800 --> 00:53:02,200 Speaker 3: Yeah, it's surely you know, you know I made What 965 00:53:02,360 --> 00:53:05,080 Speaker 3: is it? It's the energy stuff? Oh see Edison. It 966 00:53:05,080 --> 00:53:07,640 Speaker 3: goes back to Edison and G. Vernova actually is doing 967 00:53:07,800 --> 00:53:11,719 Speaker 3: remarkably well. It's had this huge stock increase. Everyone's talking 968 00:53:11,719 --> 00:53:14,640 Speaker 3: about it's next G but smaller. 969 00:53:15,360 --> 00:53:19,880 Speaker 2: For now, Today's show was produced by Gabriel Hunter Chang 970 00:53:20,080 --> 00:53:24,839 Speaker 2: and engineered by Sarah Bruguier. Our video editor is Matt Nielsen. Yes, 971 00:53:24,960 --> 00:53:28,160 Speaker 2: we have videos on YouTube. Our showrunner and editor is 972 00:53:28,280 --> 00:53:28,960 Speaker 2: Ryan Dilley. 973 00:53:29,640 --> 00:53:31,680 Speaker 3: I'm Jacob Goldstein, I'm Robert Smith. 974 00:53:32,480 --> 00:53:33,280 Speaker 2: Thanks for listening.