Sunday, May 22, 2022

The Man Who Supposedly Broke Capitalism: Neutron Jack



How Jack Welch’s Reign at G.E. Gave Us Elon Musk’s Twitter Feed The onetime ‘manager of the century’ paved the way for C.E.O.s to moonlight as internet trolls. ......... whom many revered as the greatest chief executive of all time. ........ David Zaslav, the C.E.O. of Warner Bros. Discovery and a Welch disciple, remembered him as an almost godlike figure. “Jack set the path. He saw the whole world. He was above the whole world,” Mr. Zaslav said. “What he created at G.E. became the way companies now operate.” ......... During Mr. Welch’s two decades in power — from 1981 to 2001 — he turned G.E. into the most valuable company in the world, groomed a flock of protégés who went on to run major companies of their own, and set the standard by which other C.E.O.s were measured. ......... “Manager of the Century,” as Fortune magazine crowned him upon his retirement. ......... he exerted a powerful and lasting influence on American business, informing how workers are treated, how shareholders are rewarded and how C.E.O.s comport themselves in an increasingly divisive age. When Donald J. Trump is elected president, when Jeff Bezos argues about inflation with the White House, when Elon Musk negotiates his $44 billion deal to buy Twitter by using the poop emoji — this is the world that Jack Welch helped create. ............ Mr. Welch still looms over the corporate world, living rent-free in the minds of C.E.O.s around the globe. ...... And in more than 100 conversations for “The Man Who Broke Capitalism,” my new book, from which this article is adapted, a broad range of people said some version of the same thing: While it has been more than two decades since Mr. Welch was C.E.O. of G.E., his legacy still affects millions of American households. Almost immediately after Mr. Welch retired in September 2001 with a $417 million severance package, G.E. went into a tailspin from which it would never recover. ........ His pupils, though, went on to run dozens of other major companies, including Home Depot, Albertson’s, Chrysler and Boeing. Most of them failed. ......... And in the decades since Mr. Welch assumed power, the economy at large has come to resemble his skewed priorities. Wages stagnated and jobs moved overseas. C.E.O. pay went stratospheric and buybacks and dividends boomed. Factories closed and companies found ways to pay fewer taxes. ........... Welch also redefined what it meant to be a boss, personifying an aggressive, materialistic style of management that endures to this day. .......... “Jack was the rock star C.E.O. of my era,” said Lynn Forester de Rothschild, one of the rare female media moguls of the 1980s. “We all thought Jack was doing everything right and that success was defined by meeting quarterly earnings to the penny.” ........ In retirement, Mr. Welch continued to hold sway over the business world as an elder statesman, penning books and columns, and appearing on cable news to praise the executives he had groomed and continue his assault on taxation and regulation. ........... Mr. Welch also pursued an unexpected retirement pastime: He became an internet troll. His old friend Donald J. Trump seemed to lead the way on many conspiracy theories that Mr. Welch embraced. But by 2012, Mr. Welch was picking fights of his own with his online adversaries, trying to own the libs on Twitter and promulgating conspiracy theories about the Obama administration. ............ a career defined by a ruthless devotion to maximizing short-term profits at any cost, and punctuated by a foray into misinformation. And it opened the door to an era where billionaire C.E.O.s are endowed with vast power and near total impunity. ......... G.E., too, is still reckoning with Mr. Welch’s legacy. For two decades after he retired, a succession of C.E.O.s tried and failed to return the company to its former glory. Then last year, G.E. management admitted defeat and made an announcement — the company would be broken up for good. ......... G.E. was worth $14 billion when Mr. Welch became C.E.O., just months after Ronald Reagan took office. Not long before Mr. Welch retired, just days before Sept. 11, 2001, the company was worth $600 billion, the most valuable company on Earth. ...........

the ways in which Mr. Welch created so much shareholder value often did more harm than good.

......... He was

a compulsive dealmaker, fueling G.E.’s growth with a relentless series of mergers and acquisitions

that took G.E. far from its industrial roots and set in motion a wave of corporate consolidation that would reduce competition in industries as diverse as airlines and media. .......... He closed factories and fired employees by the tens of thousands, unleashing a series of mass layoffs that destabilized the American working class. He devised systems like “stack ranking,” which mandated that the bottom 10 percent of workers be fired each year, and took root at other companies. And he embraced offshoring and outsourcing, sending labor overseas and turning to other companies to provide back-office functions like accounting and printing. .............. the nickname he hated but could never shake: “Neutron Jack,” a reference to the neutron bomb, which purportedly kills people while leaving buildings intact. .......... Welch’s obsession with finance that allowed him to steadily inflate G.E.’s valuation in the public markets. .......... By the time he retired, the company derived much of its profit from GE Capital, which was essentially

a giant unregulated bank. Mr. Welch called it “the blob”

— it was an amorphous, ever-changing collection of financial assets, capable of delivering whatever adjustments were most advantageous to the parent company in a moment’s notice. ............... The finance division became G.E.’s center of gravity, ultimately accounting for 40 percent of its revenue and 60 percent of its profit. With so much money coursing through the finance division, Mr. Welch used it to his advantage, shifting zeros throughout a sprawling international web of subsidiaries, and extracting whatever he needed to meet or beat analysts’ estimates for nearly 80 quarters in a row, an unprecedented run. It was what one influential analyst called “earnings on demand.” ................ the finance division was used to keep the stock price ticking up. ......... “There was very little transparency,” said Beth Comstock, a longtime G.E. marketing executive. “G.E. had a financial army that was able to close the quarter the way we’d said we would.” .......... in 2009, G.E. announced that it had settled sweeping accounting fraud charges with the Securities and Exchange Commission that pointed to decades of impropriety. ................. “G.E. bent the accounting rules beyond the breaking point” ........ This wasn’t a one-off anomaly ....... Distorting earnings was a well established practice inside the company. In its complaint, the S.E.C. took pains to note that G.E. met or beat analyst expectations every quarter from 1995 through 2004. .......... For the better part of a century, G.E. was the most influential company in the country when it came to organizational design and executive development. ........... Charles Coffin, who took over G.E. in 1892, was known as the “father of professional management.” An influential Harvard Business School case study chronicled how G.E. became “a bellwether” for American business operations. In refining its own internal processes and training methods over the decades, the study argued, “G.E. found itself at the leading edge of management practice.” .............. “When a company needs a loan, it goes to a bank,” Fortune magazine once wrote. “When a company needs a C.E.O., it goes to General Electric, which mints business leaders the way West Point mints generals.” ........ G.E. even had its own elite training ground for up-and-coming stars, a retreat where white collar gladiators could hone their skills. Known as Crotonville, the campus was spread across 52 acres in the bucolic village of Croton-on-Hudson, just north of New York City and not far from West Point. .......... The center was the first of its kind, and it would inspire other corporations, including IBM, Hitachi, and Boeing, to create similar centers. It served as an in-house business school for the dozens of G.E. executives who studied Mr. Welch’s playbook and went on to manage other companies ........... For a time in the early 2000s, five of the top 30 companies in the Dow Jones industrial average were run by men who had worked for Mr. Welch. “That’s why they got hired,” said William Conaty, G.E.’s longtime chief of human resources. “Because they had the playbook. They had the G.E. tool kit. And boards back then thought that was the answer.” .......... the same story seemed to repeat itself ad infinitum. ........ A G.E. executive was named C.E.O. of another company. News of the appointment sent the stock of that company soaring. The incoming leaders were lavished with riches when they took their new jobs, signing multimillion-dollar contracts that ensured them a gilded retirement, no matter how well they performed. A period of job cuts usually ensued, and profits sometimes rose for a few quarters, or even a few years. But inevitably, morale cratered, the business wobbled, the stock price sank and the Welch disciple was sent packing. ........... “But they were just cost cutters. And you can’t cost cut your way to prosperity.” .......... Over the past 25 years, a succession of men who worked for Mr. Welch refashioned the airplane maker’s culture to resemble G.E.’s, transforming a company that once made a priority of aeronautical engineering into one that thrived on financial engineering. ........... The “Manager of the Century” was unbowed in retirement, barreling through the twilight of his life with the same bombast that defined his tenure as C.E.O. .......... He refashioned himself as a management guru and created a $50,000 online M.B.A. in an effort to instill his tough-nosed tactics in a new generation of business leaders. (The school boasts that “more than two out of three students receive a raise or promotion while enrolled.”) He cheered on the political rise of Mr. Trump, then advised him when he won the White House. .......... In his waning days, Mr. Welch emerged as a trafficker of conspiracy theories. He called climate change “mass neurosis” and “the attack on capitalism that socialism couldn’t bring.” He called for President Trump to appoint Rudy Giuliani attorney general and investigate his political enemies. ................. in 2012. That’s when he took to Twitter and accused the Obama administration of fabricating the monthly jobs report numbers for political gain. The accusation was rich with irony. .......... While Mr. Welch’s claim was baseless, conservative pundits picked up on the conspiracy theory and amplified it on cable news and Twitter. Even Mr. Trump, then merely a reality television star, joined the chorus, calling Mr. Welch’s bogus accusation “100 percent correct” and accusing the Obama administration of “monkeying around” with the numbers. It was one of the first lies to go viral on social media, and it had come from one of the most revered figures in the history of business. ............... the entirety of his legacy. They didn’t dwell on the downsizing, the manipulated earnings, the Twitter antics. ......... creating a world where manufacturing jobs have evaporated as C.E.O. pay soars, where buybacks and dividends are plentiful as corporate tax rates plunge. ........ one of the most enduring bits of disinformation of all: the notion that Jack Welch was the greatest C.E.O. of all time.

at No comments:
Labels: ,

Saturday, May 21, 2022

News: May 21

US economy could outpace China's China’s strict COVID lockdowns could cause its economic growth to drop below that of the U.S. this year, the first time America will have outpaced the People’s Republic since the Cultural Revolution ended in 1976. ........ China’s gross domestic product will increase 2% in 2022, while U.S. GDP will climb by 2.8%.



Musk calls ESG a ‘scam.’ Is he right? Tesla CEO Elon Musk has blasted ESG investing as a “a scam” after his electric vehicle company was booted from a top index of socially responsible companies over labor practice concerns. Musk tweeted that S&P had lost its “credibility” by pulling Tesla from its index of companies that meet environmental, social and governance (ESG) criteria, while leaving oil giant Exxon Mobil on the list.

at No comments:
Labels:

May 21: News



Elon Musk says he's wading into politics to stop the 'woke mind virus' from destroying civilization On Wednesday, he called Yale the "epicenter of the woke mind virus attempting to destroy civilization." ......

at No comments:
Labels: ,

Friday, May 20, 2022

Tesla Justice

at No comments:
Labels: ,

Thursday, May 19, 2022

News: May 19

We’re in the Midst of an Unprecedented Democratic Effort. Let’s Stop Messing It Up
A 590-Foot-Tall Dam in China Will Be Built Entirely by Robots
Who really wants a 4-day workweek? Over half (54%) of U.S. workers chose a four-day workweek as one of the top three benefits they’d like offered by their employer ....... The only option that ranked higher was greater flexibility (63%). And it’s middle management that’s driving the trend, with 59% of managers and 58% of directors listing the benefit as a priority. 55% of entry-level employees and only 43% of professionals with a title of VP or above feel the same.

Chronicling the Rise, Fall, and Rebirth of WeWork
Where Does Implicit Gender Bias In The Startup World Come From
Reflections on early-stage investing as a new(ish) venture capitalist
9 Ways Angel Investors Can Help Your Startup
New, Dedicated Fund for Founders
Strategic Planning Framework for Startups
Why we invested in MVMNT
Don’t Outsource Learning



Does Matt Damon have crypto regret?



Web3 Is Our Chance to Make a Better Internet Web3 proponents envision an internet in which users can wrest back power from a small number of extractive, centralized institutions, and in which everyone with an internet connection can participate on a level playing field. ....... But Web2, the current era of the internet defined by companies built on proprietary data (such as Facebook and Google), started with a similar promise of empowering individual creators and removing intermediaries — a promise left unfulfilled. Now, standing at the precipice of a new era, we should ask ourselves: Is Web3 actually democratizing opportunity? And if not, how can we better design platforms and governance systems to promote fairness? ......... A just society is one “that if you knew everything about it, you’d be willing to enter it in a random place.” .......... Web3 presents the opportunity to build an entirely new internet — indeed, entire new economies — from scratch. .......... questions about impacts and externalities were left too late in the design of Web2, with consequences ranging from election manipulation to widespread vaccine misinformation. Some indicators show that early design choices in Web3 are replicating or compounding the inequalities of Web2 and the real world. ......... If we want Web3 to make good on the promise that it can materially improve the situations of everyone within the ecosystem, and not just a handful of people at the top, we need to design it according to principles that will make that happen. ........ it’s acceptable that doctors earn more than janitors, because that compensation differential incentivizes doctors to pursue their careers and ensures that janitors (and everyone else) will receive quality care if they fall ill.

at No comments:
Labels:
Subscribe to: Posts (Atom)