
Jack Welch Inflicted Great Damage on Corporate America - PaulHoule
http://archive.is/gZSME
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dang
Please post the original source. This is in the guidelines:
[https://news.ycombinator.com/newsguidelines.html](https://news.ycombinator.com/newsguidelines.html).

It's fine to add links to workaround URLs in the thread.

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multiplegeorges
The singular focus on shareholder value, to the exclusion of all else, has
greatly damaged society.

There needs be a conscientious realignment to maximizing stakeholder value.

The corporation is best way to organize labour and capital in productive ways
that we've ever come up with and it can be a tool for immense good, but not if
it disregards the society, the environment, or the community it operates in.

~~~
eternalny1
Totally agreed.

If I was CEO this wouldn't be rocket science, you fire a bunch of people prior
to reporting numbers. Expenses go way down, stock goes up, repeat this. Throw
in some M&A's and you are good to go.

Not that I would do this, but that's how you maximize "shareholder value". Of
course, it's not good for the actual business in the long term.

~~~
adharmad
Partly, the emphasis on extreme short term gains, in turn accentuated by short
term trading (options) and HFTs disincentivizes any management actions that
try to optimize for the long term.

The CEO will be under tremendous pressure if he/she tries to optimize for a 1
year timeframe (for example) as opposed to quarter-by-quarter. I wish boards
can come up with a compensation structure for execs which optimizes for long
term.

~~~
wpietri
Absolutely. In recent decades CEO tenure has fallen by ~half, while CEO
compensation is circa 10x bigger. I think that's behind a lot of current
business and economic problems. Giving someone only a short time to extract a
lot of money is an absolutely terrible setup for creating sustained value
delivery.

~~~
TuringNYC
Spot on. Any doubters can go check out GE stock. After several rounds of
mining, there is nothing left in the poor rock.

PS You know things are really bad when the stock chart starts to go to log
price scale because it has gone down so much!

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aazaa
> Under Welch, GE’s mission changed. Its new goal was to become “the world’s
> most valuable company.” Which is to say, he turned the focus of the company
> to its stock price. Everything became secondary to that. ...

The irony is that GE's stock price is now at the same place it was in 1997. In
between, sound and fury signifying nothing. Over twenty years of zilch.

[https://bigcharts.marketwatch.com/quickchart/quickchart.asp?...](https://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=ge&insttype=&freq=2&show=&time=20)

~~~
masklinn
FWIW GE has split its stock twice in that interval: there was a 2:1 split in
December 1997 and a 3:1 split in mid 2000. Meaning despite stock price being
back to its 1997 level, total valuation has increased 6x (and an investor who
had one GE share in early 1997 now has 6 of them).

~~~
three_seagrass
When a stock splits, the market cap still stays relatively the same.

Market cap for GE is still lower today (93 B) than it was in 1997 (208 B).
Unless there were major spin offs, that means the company is worth less.

~~~
nimaco
GE has been selling off assets as part of a turnaround strategy in the past
~2yrs or so

[https://www.wsj.com/articles/ge-chief-says-assets-sales-
will...](https://www.wsj.com/articles/ge-chief-says-assets-sales-will-
reap-38-billion-11568315157)

~~~
three_seagrass
That shouldn't affect market cap since they're capturing the cash equivalent
in value through the sale. It's trading physical assets (probably with poor
returns) for cash assets.

Spinning off less-profitable divisions would affect market cap.

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btilly
It is worth noting that when Jack Welch arrived at GE he was dealing with a
bloated company heading towards bankruptcy because it had way too much
overhead. Firing the bottom 10% each year was harsh medicine, but it was what
GE needed at the time.

The fault is not in the medicine supplied. It is that his imitators supplied
the same medicine to other companies in other circumstances.

What is the fallout? Jack Welch was a big part of the breaking of the social
contract that used to be part of American business. It took decades, but now
American workers have accepted that a job is not "until death do us part" and
have also given up on their side of the same contract. And the result is a
very different relationship between corporate America and their workers.

~~~
watwut
The imitators did what Jack Welch advocated for. He did not advocated for
firing 10% of people once when company is clearly bloated. He advocated to do
it again and again and again.

When I give you advice and you follow my advice, it is rightful to blame me
for that advice.

But also, these articles primary blame him for massive short-termism,
corporate raiding and likely creative accounting to get numbers he wanted at
the expense of company health.

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zyang
Unfortunately that mindset is bleeding into our governing system. Make the
short-term numbers look good at the expense of long term prosperity.

~~~
JackFr
> Unfortunately that mindset is bleeding into our governing system. Make the
> short-term numbers look good at the expense of long term prosperity.

What does that even mean?

~~~
zyang
Maybe I'm just looking at the past with rose-colored glasses, but postwar US
built the most advanced highway infrastructure, hoover dam, landed on the
moon. Now we rely on rate cuts and tax cuts to inflate our paper wealth.
California couldn't build a high speed rail with all its wealth. Our
astronauts had to hitch a ride with the Russians to get to ISS.

~~~
JackFr
> but postwar US built the most advanced highway infrastructure, hoover dam,
> landed on the moon.

The interstate system could be seen as a boondoggle to make automakers rich at
the expense of the US having a modern rail network.

Without question the moon landing and the Hoover Dam were historic engineering
feats but they were both products of their eras. The Hoover Dam was a _prewar_
Great Depression jobs effort and the moon landing would never have been
possible but for the Cold War.

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dtrailin
The most harmful idea he introduced is stack ranking, the consequences of
which we're still dealing with in the tech industry. In particular ranking
people on a team level on the team and firing those on the bottom has taken a
severe toll on many teams and companies/

~~~
protomyth
The utter destruction of any sense of team work when people realize that
someone has to be the bottom is awful.

He had to be a smart guy. How did he not realize anything that actually needs
a team is going to suffer? Is this some lone eagle crap like EDS had?[1] Can
you imagine the original Macintosh team running under stack ranking? I guess
you shouldn't appoint people CEO who don't understand teams are required to
build great products.

1) had a buddy who worked for EDS tell me that they wouldn't hire anyone who
came as a group at a job fair because "eagles fly alone". That would actually
explain some interactions.

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satya71
His achievement was leverage and acquisition to make the top line number look
really big.

The legacy is stack ranking has destroyed culture at innumerable companies (I
continue to witness it in most companies that I know).

Also the CEOs from the GE CEO factory went to on to destroy not only GE value,
but also Boeing [1] and many others.

[1] [https://www.economist.com/business/2020/01/11/the-last-ge-
ma...](https://www.economist.com/business/2020/01/11/the-last-ge-man)

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JackFr
I'm not unsympathetic to his point but pointing out that GE doubled the return
on the S&P and then trying to make the case that he was merely in the right
place at the right time for a global bull market seems odd.

~~~
peteradio
I think the argument is that he cut out the interior walls and burned em for
extra heat.

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cayblood
Pretty ironic that he later came to call maximizing shareholder value "the
dumbest idea in the world."

[https://www.forbes.com/sites/stevedenning/2011/11/28/maximiz...](https://www.forbes.com/sites/stevedenning/2011/11/28/maximizing-
shareholder-value-the-dumbest-idea-in-the-world)

------
fredsanford
For his sake I hope the afterlife doesn't do stack ranking though the irony
appeals to me.

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ChrisMarshallNY
I worked at GE during his tenure.

We used to call him "Neutron Jack," because after he was done, the buildings
were still there, but all the people were gone.

He used to visit corporate sites in a $20-million-dollar helicopter. Quite a
sight...

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jdkee
What a truly horrible human being to do that to his fellow men.

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jsanford9292
I am skeptical of this article.

Paragraph 5: GE beat the market by 2x over Welch's career.

Paragraph 6: The market is the reason Welch's track record looks so good.

~~~
waldohatesyou
I think to be able to understand the article's point one has to take for
granted that the opinion of the stock market is not gospel.

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kurthr
Cloudflare DNS resolution error...

~~~
geofft
The actual link is [https://www.bloomberg.com/opinion/articles/2020-03-02/ge-
s-j...](https://www.bloomberg.com/opinion/articles/2020-03-02/ge-s-jack-welch-
inflicted-great-damage-on-corporate-america) .

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cannabis_sam
He’s like a human paperclip maximizer..

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cptskippy
Blocked by Cisco Umbrella.

~~~
virgil_disgr4ce
Same here, what's the deal with that

~~~
kick
archive.{is,today,fo,li,vn,md,ph} allows arbitrary content, which means that
most corporate firewalls will block it as a matter of principle, assuming
you're using the MITM part of Umbrella.

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neom
I'm a pretty big fan of "don't hate the player hate the game" \- it's too easy
to look from outside and say X person failed society. With business, we love
to hate on those who have extracted so much wealth for a few, yet modern
capitalism is built on these tenants. If we went to prevent inexperienced,
philosophically devoid people from running amuck, we need to focus on re-
building the system, not vilifying those that utilize it. Many of these issues
started with Dodge vs Ford [1] - yet I rarely hear folks talk about it.

[1]
[https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co](https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co).

~~~
mattmanser
The article is about how he changed the game.

~~~
blaser-waffle
There was plenty of ruthless capitalism before he showed up. He just pushed it
to be more ruthless.

------
boshomi
De mortuis nil nisi bene.

~~~
arbitrage
Yeah, no. That's way too easy of an out.

He did bad things. His reputation continues to influence commerce to this day.
He doesn't get a free pass on the harm he caused simply because he's checked
out.

~~~
Ygg2
Yeah, but was he an evil person or a product of a flawed system?

It seems to me there would always be a Jack Welch, albeit one of a different
name.

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stuff4ben
I'm not an economist or anything, but isn't this article really just a
complaint against pure capitalism? Jack played the game and played it well. I
wouldn't vilify someone because of that. Blame the system and then propose
something better.

~~~
sgt101
There was something better, mid century regulated corporate business
stewardship. But Walsh and his acolytes pillaged it like a barbarian horde
falling on a dignified gallery.

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erikig
For all his faults, and he had many - from infidelity, focus on
manager/corporate rankings instead of absolute performance, allowing
accounting shenanigans that still haunt GE etc, wasn't Jack Welch was a
product of the period in which he ran GE?

His ability to manage a behemoth of GE's size during the globalization push
that resulted in the death of so many industrial companies during that same
period is undeniable.

~~~
whatshisface
A product of the period? It was the leaders of the time that produced the
period.

------
markus_zhang
I don't think he is to be blamed on that. What happened for GE/IBM/Boeing is
just the symptom.

After all the deindustrialization process had been going on for decades, and
naturally the only way to keep the company afloat is to cut cost or
"financializate" everything.

The real questions are:

1 - Why there weren't enough people who were interested in STEM?

2 - Why didn't the government (and the voters) do anything useful about this
situation?

~~~
defterGoose
1\. When the culture celebrates rapacious capitalism, rugged individualism,
and financialization of the economy as right and just, people are drawn along
by the current. No one lives in a vacuum despite what the prevailing voices
would have you believe. It is no wonder that many talented scientists went
(and still go) to investment banks, when this behavior is congratulated and
voices of admonishment are minimized.

2\. Vietnam, Nixon, Reagan, Bush...the list continues. When Jimmy Carter
warned the country people lost faith in him because his statements didn't make
them "feel good". This was also the era in which corporate money began to flow
almost unrestrictedly into government in the form of lobbying and campaign
contributions. As Upton Sinclair rightly put it: "It is hard to get a man to
understand something when his paycheck depends on him not understanding it."

~~~
markus_zhang
Yeah that's exactly what I have in my mind.

