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Power Failure: The Rise and Fall of an American Icon
NEW YORK TIMES BESTSELLER
The New Yorker Best Books of 2022 • Financial Times Best Books of 2022 • The Economist Best Books of 2022
The dramatic rise—and unimaginable fall—of America's most iconic corporation by New York Times bestselling author and pre-eminent financial journalist William D. Cohan
No company embodied American ingenuity, innovation, and industrial power more spectacularly and more consistently than the General Electric Company. GE once developed and manufactured many of the inventions we take for granted today, nearly everything from the lightbulb to the jet engine. GE also built a cult of financial and leadership success envied across the globe and became the world’s most valuable and most admired company. But even at the height of its prestige and influence, cracks were forming in its formidable foundation.
In a masterful re-appraisal of a company that once claimed to “bring good things to life,” pre-eminent financial journalist William D. Cohan argues that the incredible story of GE’s rise and fall is not only a paragon, but also a prism through which we can better understand American capitalism. Beginning with its founding, innovations, and exponential growth through acquisitions and mergers, Cohan plumbs the depths of GE's storied management culture, its pioneering doctrine of shareholder value, and its seemingly hidden blind spots, to reveal that GE wasn't immune from the hubris and avoidable mistakes suffered by many other corporations.
In Power Failure , Cohan punctures the myth of GE, exploring in a rich narrative how a once-great company wound up broken and in tatters—a cautionary tale for the ages.
The New Yorker Best Books of 2022 • Financial Times Best Books of 2022 • The Economist Best Books of 2022
The dramatic rise—and unimaginable fall—of America's most iconic corporation by New York Times bestselling author and pre-eminent financial journalist William D. Cohan
No company embodied American ingenuity, innovation, and industrial power more spectacularly and more consistently than the General Electric Company. GE once developed and manufactured many of the inventions we take for granted today, nearly everything from the lightbulb to the jet engine. GE also built a cult of financial and leadership success envied across the globe and became the world’s most valuable and most admired company. But even at the height of its prestige and influence, cracks were forming in its formidable foundation.
In a masterful re-appraisal of a company that once claimed to “bring good things to life,” pre-eminent financial journalist William D. Cohan argues that the incredible story of GE’s rise and fall is not only a paragon, but also a prism through which we can better understand American capitalism. Beginning with its founding, innovations, and exponential growth through acquisitions and mergers, Cohan plumbs the depths of GE's storied management culture, its pioneering doctrine of shareholder value, and its seemingly hidden blind spots, to reveal that GE wasn't immune from the hubris and avoidable mistakes suffered by many other corporations.
In Power Failure , Cohan punctures the myth of GE, exploring in a rich narrative how a once-great company wound up broken and in tatters—a cautionary tale for the ages.
816 pages, Hardcover
Published November 15, 2022
About the author
William D. Cohan
9 books170 followersWilliam David Cohan (born February 20, 1960) is an American business writer. He has written three books about business and economics and is a contributing editor at Vanity Fair.
Prior to becoming a journalist, he worked on Wall Street for seventeen years. He spent six years at Lazard Frères in New York, then Merrill Lynch & Co., and later became a managing director at JP Morgan Chase. He also worked for two years at GE Capital. Cohan is a graduate of Duke University, Columbia University School of Journalism, and Columbia University Graduate School of Business.
Cohan was born in Worcester, Massachusetts on February 20, 1960. His father was an accountant and his mother worked in administration.
In 1991 he married editor Deborah Gail Futter in a Jewish ceremony.
In 2007, he published The Last Tycoons The Secret History of Lazard Frères Co., about Lazard Frères. It won the 2007 Financial Times and Goldman Sachs Business Book of the Year Award.
His book House of Cards A Tale of Hubris and Wretched Excess on Wall Street, describing the last days of Bear Stearns & Co., was published in March 2009. The book has received excellent reviews and was described as a "masterfully reported account" by Tim Rutten in The Los Angeles Times. It remained on the New York Times Bestseller list for several months.
In an op-ed article in the New York Times, Cohan said in March 2009 that Bear Stearns CEO Alan Schwartz and Lehman CEO Dick Fuld had engaged in a "tsunami of excuses" when they were responsible for their firms' collapse. In another op-ed written with Sandy B. Lewis in June 2009 he said that the current economic crisis is not over yet, and that "many of the fixes that the Obama administration has proposed will do little to address them and may make them worse."
His 2011 book, Money and Power How Goldman Sachs Came to Rule the World, examines the historical role and influence of Goldman Sachs.
His new book, The Price of Silence The Duke Lacrosse Scandal the Power of the Elite and the Corruption of Our Great Universities, about the story of the Duke lacrosse case, was published in 2014 by Scribner.
Prior to becoming a journalist, he worked on Wall Street for seventeen years. He spent six years at Lazard Frères in New York, then Merrill Lynch & Co., and later became a managing director at JP Morgan Chase. He also worked for two years at GE Capital. Cohan is a graduate of Duke University, Columbia University School of Journalism, and Columbia University Graduate School of Business.
Cohan was born in Worcester, Massachusetts on February 20, 1960. His father was an accountant and his mother worked in administration.
In 1991 he married editor Deborah Gail Futter in a Jewish ceremony.
In 2007, he published The Last Tycoons The Secret History of Lazard Frères Co., about Lazard Frères. It won the 2007 Financial Times and Goldman Sachs Business Book of the Year Award.
His book House of Cards A Tale of Hubris and Wretched Excess on Wall Street, describing the last days of Bear Stearns & Co., was published in March 2009. The book has received excellent reviews and was described as a "masterfully reported account" by Tim Rutten in The Los Angeles Times. It remained on the New York Times Bestseller list for several months.
In an op-ed article in the New York Times, Cohan said in March 2009 that Bear Stearns CEO Alan Schwartz and Lehman CEO Dick Fuld had engaged in a "tsunami of excuses" when they were responsible for their firms' collapse. In another op-ed written with Sandy B. Lewis in June 2009 he said that the current economic crisis is not over yet, and that "many of the fixes that the Obama administration has proposed will do little to address them and may make them worse."
His 2011 book, Money and Power How Goldman Sachs Came to Rule the World, examines the historical role and influence of Goldman Sachs.
His new book, The Price of Silence The Duke Lacrosse Scandal the Power of the Elite and the Corruption of Our Great Universities, about the story of the Duke lacrosse case, was published in 2014 by Scribner.
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Displaying 1 - 30 of 126 reviews
December 1, 2022
This is an outstanding book — albeit a long one. It is a corporate history of the General Electric Corporation organized around the top management of the firm - in particular the “superstar” CEOs of the firm during its later years such as Reg Jones, Jack Welch, and Jeff Immelt. What is especially good about this book is that it seems to be part of a general rethinking of the management of of US corporations since WW2 and in particular since the 1980s and 1990s. In its prime, GE was very much the archetype of the American corporation and the diversified global conglomerate. For the longest time, GE would set the standards for how large firms would behave and it became known as a “factory” for developing top managers who went on to become CEOs of other corporations. Jack Welch in particular was the standard for the power manager who was named as the “manager of the century” and GE under his watch was the most valuable firm in America and seldom if ever missed declaring a dividend for shareholders. His memoirs and other books and articles were required readings for business students and his comings and going seemed akin to those of rock stars.
Since Welch retired from GE, much has changed. GE lost its performance luster and its stock price tanked. It has more recently been broken up into parts and has not been positively compared to the new darling firms of technology - the FAANG firms - in a long time.
Indeed, it now seems that the management style and culture of GE no longer represents the best management but rather the worst in some respects and certainly is no longer a model that is worthy of emulation. What the heck happened? Did the times change? Did the nature of business change? How technology changed what managers can or should do? Has government regulation killed the possibilities for global conglomerates? What about COVID and the financial crises of 2007-2008?
Probably a bit of all of these issues are at play but the story is a complex one and it is hard to pinpoint the time when the world appears to have passed GE by.
William Cohan has written a fine book and he appears knowledgeable and up to the analytic task he sets for himself in telling this story. The book is well written and covers a huge amount of ground and Cohan does a fine job in discussing the various events and phases that GE goes through.
There is a lot to talk about that cannot be really considered in even a summary. One example is the shift of GE from an industrial to a financial firm through the growth and influence of the GE Capital group on the rest of the firm. Financial strategies are complex even to those in the business and how GE became akin to a major bank could merit a book of its own. Cohan seems to cover it well.
A more general story line has to do with the rise in importance of “making ones numbers” at any costs as the rule for management success. This is also a complex story but in a nutshell the issue is what happens when one judges performance financial results without a careful idea of how those results are generated by the component businesses of a conglomerate. The history of GE is much more about managing a portfolio of very diverse businesses to obtain an overall aggregated result. How the businesses in a portfolio actually fit together is a key issue for whether conglomerates actually create value or not. If the interactions among business units (synergies) do not produce real results, then it becomes hard to justify the costs of keeping the businesses of a conglomerate together. This is the general argument against conglomerates and it is the line of critique that Mr. Cohan seems to favor in understanding the ups and downs of “earnings management” at GE. There is much more going on about the strong individuals in GE management, the different business areas, and the events affecting GE since the 2000s arrived. This appears to be one of the better books in the current rethink going about concerning GE.
Since Welch retired from GE, much has changed. GE lost its performance luster and its stock price tanked. It has more recently been broken up into parts and has not been positively compared to the new darling firms of technology - the FAANG firms - in a long time.
Indeed, it now seems that the management style and culture of GE no longer represents the best management but rather the worst in some respects and certainly is no longer a model that is worthy of emulation. What the heck happened? Did the times change? Did the nature of business change? How technology changed what managers can or should do? Has government regulation killed the possibilities for global conglomerates? What about COVID and the financial crises of 2007-2008?
Probably a bit of all of these issues are at play but the story is a complex one and it is hard to pinpoint the time when the world appears to have passed GE by.
William Cohan has written a fine book and he appears knowledgeable and up to the analytic task he sets for himself in telling this story. The book is well written and covers a huge amount of ground and Cohan does a fine job in discussing the various events and phases that GE goes through.
There is a lot to talk about that cannot be really considered in even a summary. One example is the shift of GE from an industrial to a financial firm through the growth and influence of the GE Capital group on the rest of the firm. Financial strategies are complex even to those in the business and how GE became akin to a major bank could merit a book of its own. Cohan seems to cover it well.
A more general story line has to do with the rise in importance of “making ones numbers” at any costs as the rule for management success. This is also a complex story but in a nutshell the issue is what happens when one judges performance financial results without a careful idea of how those results are generated by the component businesses of a conglomerate. The history of GE is much more about managing a portfolio of very diverse businesses to obtain an overall aggregated result. How the businesses in a portfolio actually fit together is a key issue for whether conglomerates actually create value or not. If the interactions among business units (synergies) do not produce real results, then it becomes hard to justify the costs of keeping the businesses of a conglomerate together. This is the general argument against conglomerates and it is the line of critique that Mr. Cohan seems to favor in understanding the ups and downs of “earnings management” at GE. There is much more going on about the strong individuals in GE management, the different business areas, and the events affecting GE since the 2000s arrived. This appears to be one of the better books in the current rethink going about concerning GE.
December 3, 2022
Bill Cohen has it in for Jeffrey Immelt in this book. He faults him for the demise of GE and minimizes the large part also played by his predecessor, the vaunted Jack Welch. Immelt made many mistakes, to be sure, but Cohen is too biased; he frequently interrupts his narrative with snarky, first-person asides and uses too many partial or poorly attributed quotes to nail Immelt. I don’t completely trust his account, which could also have benefited from tighter editing and less repetition. Parts of this book feel slap dash and hastily put together. And Cohen doesn’t address a major issue raised by others, including Immelt in his own defense: the lack of funding for R&D at GE under Welch that left Immelt with mature businesses when he took over and a company inadequately positioned for a new generation of growth. What happened to GE is a fascinating story, and this one is ambitious, but unfortunately it is not definitive.
September 9, 2022
Review to come closer to publication date.
December 13, 2022
Corporate downfalls make for exciting storytelling (looking forward to the inevitable one on Twitter). The fall of GE is an interesting story - I've seen its logo in enough places to know it's a big deal, but didn't know how big it was. Cohan sketches out what promises to be a fascinating tale, but his outright bias and snarky attitude towards some of the story's subjects, especially Jeff Immelt, is grating and distracts from the real story.
Unlike Enron or Theranos, GE's downfall was quiet- it didn't implode so much as fade into insignificance. It is still an interesting tale, but Cohan forfeits depth for breadth. This might sound crazy given this book's length, but most of it is spent introducing and dispensing with a parade of characters. He has a wealth of sources at his disposal, and uses them liberally - the book is replete with direct quotes from his subjects and news coverage of the time. However, Cohan often takes these sources at face value and doesn't really examine or question them, leaving the reader to do all the heavy lifting. The book had potential but ultimately failed to live up to it. 2/5.
Unlike Enron or Theranos, GE's downfall was quiet- it didn't implode so much as fade into insignificance. It is still an interesting tale, but Cohan forfeits depth for breadth. This might sound crazy given this book's length, but most of it is spent introducing and dispensing with a parade of characters. He has a wealth of sources at his disposal, and uses them liberally - the book is replete with direct quotes from his subjects and news coverage of the time. However, Cohan often takes these sources at face value and doesn't really examine or question them, leaving the reader to do all the heavy lifting. The book had potential but ultimately failed to live up to it. 2/5.
March 25, 2023
This book is catered to a very specific type of reader, and it only took me the whole 733 pages to realize I am not that reader. One of my coworkers gave a presentation on the actuarial liabilities mentioned on p. 658 and then said it was the best business book he ever read and couldn’t put it down. I was really impressed by the thorough journalism, but this is basically a lengthy succession story that begins with Thomas Edison; some of the executive profiles lasted a bit too long for my taste. I noticed some typos in the last 100 or so pages of the book, which suggests even the editors were snoozing towards the end.
December 4, 2022
In 2010, Supreme Court Justice, John Roberts in Citizens United v. FEC, announced that corporations are people too. This has rightly been derided, however in some ways companies can be seen as a metaphor to an individual. One way is that companies like people have their own character and DNA that make them unique entities and guide their personalities.
In Power Failure, the rise and fall of General Electric(GE), William D. Cohan tries to document how GE became the world's most valued company to its fall from grace up to its imminent splitting up to become 3 companies.
At this point I must declare my interest. I have been and am a long-term GE employee. Not by choice, I may hasten, since the company around me was bought. However, as a relative outsider, I feel I am in a good position to reflect how some of the events in this book are described.
One thing that may surprise many American readers is unlike in the US, where GE is almost a national champion and represents the US capitalist might, in Europe it does not have the same respect or authority. If you ask someone in the street about GE in Europe, most would not of heard about it or even care. However, in the USA, Cohan charts the rise of a company that pretty well had fingers in every possible industry, from lighting to appliances, from credit cards to banks, from plastics to media and from jet engines to power generation.
There is also a mythology about GE, that the company itself was keen to promote.
Niskayuna in New York State is the home to GE research, an organization whose function was to create the innovation for tomorrow’s products. As you go through the main entrance you are confronted by Thomas Edison desk frozen as if he is just left for a bio break. This is the GE that the company wants to promote; a company that Edison created and is the descendent of his innovative spirit. The only problem is, as William Cohan explains, is that this is a stretch.
GE came about due to the failure of Edison's generating interests, a forced merger of competing electrical generating companies forced by banks and financial interests to attempt to monopolize electricity in the US. Edison, although a board member, of the new company, hated the forced marriage and had virtually no involvement.
So rather than a company of entrepreneurial spirit that GE presents, we have a company run primarily for the interests of the leading capitalists of the day. It was a company that realized that the one way to increase your bottom line was not only to sell the equipment, at the same time lend them the money to buy it. In this way, the company would not only profit from their industrial sales, but also in the finance of those deals. As such, GE has always been a company of two identities. An industrial power house and a financial institution. The book charts the story of how eventually the conflicting characters of those businesses brought it to the point it is now
The first few chapters chart the rise of the company, weathering various financial storms and world wars. However, the book starts getting into more detail charting the rise of the legendary CEO, Jack Welch, the architect of the modern GE powerhouse. The author had a number of interviews with Jack Welch before he died, and it was clear from the book the Welch was keen to cement his part in history.
He charts Jack's rise from humble beginnings to the head of GE. From this we get that Jack was incredibly driven to succeed, could be ruthless in business and life, but had the ability to inspire both fear and great loyalty. The author also hints, but does not go into much detail, of some of his less impressive moral traits, such as his womanizing, and a strange prejudice against fat people. The author sort of justifies these a bit too easily in the basis that boy swill be boys, and it was the cultural norm at the time. However, maybe a greater distinction could be drawn between the CEO culture and an atmosphere of winning at any cost, however it was achieved.
The author charts how Jack grew the company, leveraging the financial might of the company and its AAA credit rating, finally becoming GE capital, which created a money making machine. One thing I had not realized was that GE used to own an investment bank, which turned out to be a disaster, with the GE unable to manage the high risk, opaque investment strategy of such an institution.
The rise of GE capital meant that the company drive for continual growth was more driven by financial instruments than by industrial excellence, at the same time imposing debt on the company credit card fuelled by GE’s access to cheap money through its AAA credit rating. It also allowed the company to give the impression of flawless prediction and management by allowing GE to move money around at will to hide financial weaknesses.
This success story, combined with Jack Welch ruthlessly killing any queries into the methods and the cosy relationship with Wall Street analysts meant that the GE’s success was rarely questioned, and the company got comfortable with the relatively easy profit machine, not questioning the long term consequences or whether the conditions would ever change.
One area the Jack did admit he got wrong was the purchase of Honeywell. While US regulators waved it through, the EU was less forgiving, and the conditions made it less attractive as a purchase. However, GE directors later felt it was a mistake. The book also accounts to the purchase of NBC, one of the big 4 US TV companies. Why an industrial conglomerate ever felt the need for a media company was never really made clear, but it was obvious that Jack liked the stardust sparkle of owning such an organization.
One weakness of the book is that it goes into much detail about the 6-sigma process that Jack Welch was an early evangelist of and often promoted as an important factor in GE’s industrial reputation. However, the author does not mention one other important business practice bought in by Jack which has not stood the test of time, and that is Stack Ranking. Stack ranking involved regularly ranking your employees and getting rid of the worst 10%. While sometimes a useful tool to turning around underperforming companies, it is now generally recognized as killing teamwork and innovation as individuals, try to avoid high performing teams. Microsoft blamed it for its lack of innovation in the 200’s and GE no longer uses it. However, nowhere in the book is it mentioned.
There is a long section on the process to choose the next CEO. To be honest, the whole section sounds more like a dull Games of Thrones episode than a company choosing its next CEO and is spelt out in too much detail, including detailed bio's of all the candidates. There is a hubris to the whole description, especially when considering at the same time the 2000 presidential election was going on with the Florida recounts.
We author then details the Jeff Immelt years. Again, the authors does have some access to the man, but you get the feeling that Jeff is dealt with less kindly than Jack Welch. While the author admits that Immelt was dealt some poor hands dealing with both 9/11 and the financial breakdown, the author paints a picture of a man out of his depth, unwilling to accept criticism and surrounded by yes men. He even quotes Jack in saying that appointing him was his worst ever decision, ignoring that all the candidates had been tested and grilled in so many ways, so he and the board knew exactly what they were getting.
It also ignores the fact that Jeff had to deal with a new world where Jack's past sins and shady accountancy would no longer be tolerated and the past sins of the company would catch up.
Firstly after 9/11 the easy access to cheap money dried up, laying bare GE's financial huge over-draught, then the financial crisis forced more governance on both the GEO and big finance. The point was made that the truth was half the company was a huge unregulated bank and with the fail of the banking sector that could not be allowed to continue. While Jeff Immelt made big strides to reduce GE’s exposure by selling a lot of GE capital off, it was done too slowly and too late, but hindsight is not always a telling indicator of competence and luck can be a bigger fact. J
The books goes to highlight what the author feel were two big mistakes in the Immelt reign. Firstly was the selling off of NBC. In truth, not a strong case is made here. Whether GE was ever the right place for a media company with a very different ethos and the requirements that an industrial company is never really questioned. The 2nd is about the purchase of Alstom. A stronger case could be made here that while the initial idea was valid, as more of the deal was re-negotiated, GE should have walked away, but Jeff failed to see the issues and was blinkered in doing a deal at any place in order to cement his legacy
The last chapters was about the CEO John Flannery, and his short tenure before being replaced by the present CEO Larry Culp. What I hadn’t realised was that John Flannery was pushed out by activist shareholders, bought in by Jeff Immelt to provide expertise to the board. Also, the plan to break GE apart was originally put forward by Flannery, but did not gain the support of the board to push it through. The present CEO, Larry Culp was basically placed as CEO by a shareholders and board putsch as the person most likely to realise shareholder value, something he has so far totally failed to do.
The last chapter raises some questions on whether the trend of the Harvard Business School MBA CEO’s is a good thing. There is some truth here. Ben Rich, the legendary CEO of Lockheed Skunk works after going to Harvard Business School, wrote on the board that ⅔ rd of H.B.S = B.S. However that leaves ⅓ that isn’t and the challenge is to work out which bit that is. The failure of GE is as much about assuming that the multi company conglomerate is sustainable, since the CEO must be able to understand the different dynamics of a business that really should not be together. This is where Jack and Jeff ultimately failed.
I do have some issues with this book. Firstly, it is far too long, being 700 pages in the dead tree version. Too much detail is spent considering minor characters and less analysing the actual lessons and failures. For example, an examination of the rise of the activist shareholder and what actual long term benefits they bring would have been one tack, and whether for a company required to make long term investment decisions this concentration on shareholder value is healthy.
There are two specific issues that stood out in this book. Firstly, the author mentions that GE developed the 1st Jet Engine. This stood out because one of the information screens at my company used to proclaim this, despite me standing only 200 yards from the factory where the Whittle engine was developed that was given to the US to create the GE first engine n as a copy of it. This is another part of the GE DNA. It was not always first in innovation, but it was great in taking ideas and creating them into mass-produced industrial products
The 2nd issue is more worrying, and I have tried hard to work out why it was included. The author mentions an incident of financial fraud in the investment bank that GE owned when a employee used insider trading to commit fraud. I have no problem with that, and it is a good example of GE lack of governance at the bank. However, the author felt it was important to mention that the employee was one of the few black employees at the bank, and I cannot think of a good reason for that to be highlighted.
The book itself is of interest, but I never get the feeling that the author is being truly impartial. It is clear he likes Jack Welch (most successful people have the ability to impose their character on you) and skips over many of his flaws. He also strangely calls other ex-GE board members cowards for refusing to speak with him, forgetting this is a book about a company not some sort of investigative political exposé, As such I never really get the feeling that the author is not being used to sell the GE story according to Jack.
In the start of the book, the author describes his meeting with Jack Welch at one of those billionaire only hangouts. On the way back, Jack Welch offers to drive him back in his open-top jeep and proceeds to drive down the middle of the road, oblivious of other the law and other road users. To me, this is the metaphor of GE.
A company driven fast down the middle of the road on the belief that it was above the law and market dynamics until it was hit by the truck of reality coming the other way as a reminder that the rules exist for a reason.
In Power Failure, the rise and fall of General Electric(GE), William D. Cohan tries to document how GE became the world's most valued company to its fall from grace up to its imminent splitting up to become 3 companies.
At this point I must declare my interest. I have been and am a long-term GE employee. Not by choice, I may hasten, since the company around me was bought. However, as a relative outsider, I feel I am in a good position to reflect how some of the events in this book are described.
One thing that may surprise many American readers is unlike in the US, where GE is almost a national champion and represents the US capitalist might, in Europe it does not have the same respect or authority. If you ask someone in the street about GE in Europe, most would not of heard about it or even care. However, in the USA, Cohan charts the rise of a company that pretty well had fingers in every possible industry, from lighting to appliances, from credit cards to banks, from plastics to media and from jet engines to power generation.
There is also a mythology about GE, that the company itself was keen to promote.
Niskayuna in New York State is the home to GE research, an organization whose function was to create the innovation for tomorrow’s products. As you go through the main entrance you are confronted by Thomas Edison desk frozen as if he is just left for a bio break. This is the GE that the company wants to promote; a company that Edison created and is the descendent of his innovative spirit. The only problem is, as William Cohan explains, is that this is a stretch.
GE came about due to the failure of Edison's generating interests, a forced merger of competing electrical generating companies forced by banks and financial interests to attempt to monopolize electricity in the US. Edison, although a board member, of the new company, hated the forced marriage and had virtually no involvement.
So rather than a company of entrepreneurial spirit that GE presents, we have a company run primarily for the interests of the leading capitalists of the day. It was a company that realized that the one way to increase your bottom line was not only to sell the equipment, at the same time lend them the money to buy it. In this way, the company would not only profit from their industrial sales, but also in the finance of those deals. As such, GE has always been a company of two identities. An industrial power house and a financial institution. The book charts the story of how eventually the conflicting characters of those businesses brought it to the point it is now
The first few chapters chart the rise of the company, weathering various financial storms and world wars. However, the book starts getting into more detail charting the rise of the legendary CEO, Jack Welch, the architect of the modern GE powerhouse. The author had a number of interviews with Jack Welch before he died, and it was clear from the book the Welch was keen to cement his part in history.
He charts Jack's rise from humble beginnings to the head of GE. From this we get that Jack was incredibly driven to succeed, could be ruthless in business and life, but had the ability to inspire both fear and great loyalty. The author also hints, but does not go into much detail, of some of his less impressive moral traits, such as his womanizing, and a strange prejudice against fat people. The author sort of justifies these a bit too easily in the basis that boy swill be boys, and it was the cultural norm at the time. However, maybe a greater distinction could be drawn between the CEO culture and an atmosphere of winning at any cost, however it was achieved.
The author charts how Jack grew the company, leveraging the financial might of the company and its AAA credit rating, finally becoming GE capital, which created a money making machine. One thing I had not realized was that GE used to own an investment bank, which turned out to be a disaster, with the GE unable to manage the high risk, opaque investment strategy of such an institution.
The rise of GE capital meant that the company drive for continual growth was more driven by financial instruments than by industrial excellence, at the same time imposing debt on the company credit card fuelled by GE’s access to cheap money through its AAA credit rating. It also allowed the company to give the impression of flawless prediction and management by allowing GE to move money around at will to hide financial weaknesses.
This success story, combined with Jack Welch ruthlessly killing any queries into the methods and the cosy relationship with Wall Street analysts meant that the GE’s success was rarely questioned, and the company got comfortable with the relatively easy profit machine, not questioning the long term consequences or whether the conditions would ever change.
One area the Jack did admit he got wrong was the purchase of Honeywell. While US regulators waved it through, the EU was less forgiving, and the conditions made it less attractive as a purchase. However, GE directors later felt it was a mistake. The book also accounts to the purchase of NBC, one of the big 4 US TV companies. Why an industrial conglomerate ever felt the need for a media company was never really made clear, but it was obvious that Jack liked the stardust sparkle of owning such an organization.
One weakness of the book is that it goes into much detail about the 6-sigma process that Jack Welch was an early evangelist of and often promoted as an important factor in GE’s industrial reputation. However, the author does not mention one other important business practice bought in by Jack which has not stood the test of time, and that is Stack Ranking. Stack ranking involved regularly ranking your employees and getting rid of the worst 10%. While sometimes a useful tool to turning around underperforming companies, it is now generally recognized as killing teamwork and innovation as individuals, try to avoid high performing teams. Microsoft blamed it for its lack of innovation in the 200’s and GE no longer uses it. However, nowhere in the book is it mentioned.
There is a long section on the process to choose the next CEO. To be honest, the whole section sounds more like a dull Games of Thrones episode than a company choosing its next CEO and is spelt out in too much detail, including detailed bio's of all the candidates. There is a hubris to the whole description, especially when considering at the same time the 2000 presidential election was going on with the Florida recounts.
We author then details the Jeff Immelt years. Again, the authors does have some access to the man, but you get the feeling that Jeff is dealt with less kindly than Jack Welch. While the author admits that Immelt was dealt some poor hands dealing with both 9/11 and the financial breakdown, the author paints a picture of a man out of his depth, unwilling to accept criticism and surrounded by yes men. He even quotes Jack in saying that appointing him was his worst ever decision, ignoring that all the candidates had been tested and grilled in so many ways, so he and the board knew exactly what they were getting.
It also ignores the fact that Jeff had to deal with a new world where Jack's past sins and shady accountancy would no longer be tolerated and the past sins of the company would catch up.
Firstly after 9/11 the easy access to cheap money dried up, laying bare GE's financial huge over-draught, then the financial crisis forced more governance on both the GEO and big finance. The point was made that the truth was half the company was a huge unregulated bank and with the fail of the banking sector that could not be allowed to continue. While Jeff Immelt made big strides to reduce GE’s exposure by selling a lot of GE capital off, it was done too slowly and too late, but hindsight is not always a telling indicator of competence and luck can be a bigger fact. J
The books goes to highlight what the author feel were two big mistakes in the Immelt reign. Firstly was the selling off of NBC. In truth, not a strong case is made here. Whether GE was ever the right place for a media company with a very different ethos and the requirements that an industrial company is never really questioned. The 2nd is about the purchase of Alstom. A stronger case could be made here that while the initial idea was valid, as more of the deal was re-negotiated, GE should have walked away, but Jeff failed to see the issues and was blinkered in doing a deal at any place in order to cement his legacy
The last chapters was about the CEO John Flannery, and his short tenure before being replaced by the present CEO Larry Culp. What I hadn’t realised was that John Flannery was pushed out by activist shareholders, bought in by Jeff Immelt to provide expertise to the board. Also, the plan to break GE apart was originally put forward by Flannery, but did not gain the support of the board to push it through. The present CEO, Larry Culp was basically placed as CEO by a shareholders and board putsch as the person most likely to realise shareholder value, something he has so far totally failed to do.
The last chapter raises some questions on whether the trend of the Harvard Business School MBA CEO’s is a good thing. There is some truth here. Ben Rich, the legendary CEO of Lockheed Skunk works after going to Harvard Business School, wrote on the board that ⅔ rd of H.B.S = B.S. However that leaves ⅓ that isn’t and the challenge is to work out which bit that is. The failure of GE is as much about assuming that the multi company conglomerate is sustainable, since the CEO must be able to understand the different dynamics of a business that really should not be together. This is where Jack and Jeff ultimately failed.
I do have some issues with this book. Firstly, it is far too long, being 700 pages in the dead tree version. Too much detail is spent considering minor characters and less analysing the actual lessons and failures. For example, an examination of the rise of the activist shareholder and what actual long term benefits they bring would have been one tack, and whether for a company required to make long term investment decisions this concentration on shareholder value is healthy.
There are two specific issues that stood out in this book. Firstly, the author mentions that GE developed the 1st Jet Engine. This stood out because one of the information screens at my company used to proclaim this, despite me standing only 200 yards from the factory where the Whittle engine was developed that was given to the US to create the GE first engine n as a copy of it. This is another part of the GE DNA. It was not always first in innovation, but it was great in taking ideas and creating them into mass-produced industrial products
The 2nd issue is more worrying, and I have tried hard to work out why it was included. The author mentions an incident of financial fraud in the investment bank that GE owned when a employee used insider trading to commit fraud. I have no problem with that, and it is a good example of GE lack of governance at the bank. However, the author felt it was important to mention that the employee was one of the few black employees at the bank, and I cannot think of a good reason for that to be highlighted.
The book itself is of interest, but I never get the feeling that the author is being truly impartial. It is clear he likes Jack Welch (most successful people have the ability to impose their character on you) and skips over many of his flaws. He also strangely calls other ex-GE board members cowards for refusing to speak with him, forgetting this is a book about a company not some sort of investigative political exposé, As such I never really get the feeling that the author is not being used to sell the GE story according to Jack.
In the start of the book, the author describes his meeting with Jack Welch at one of those billionaire only hangouts. On the way back, Jack Welch offers to drive him back in his open-top jeep and proceeds to drive down the middle of the road, oblivious of other the law and other road users. To me, this is the metaphor of GE.
A company driven fast down the middle of the road on the belief that it was above the law and market dynamics until it was hit by the truck of reality coming the other way as a reminder that the rules exist for a reason.
September 12, 2023
A primer on the hubris of capitalism. Very well researched and written, especially around the Welsh/Immelt period, with great anecdotes run throughout the factual history. That said it was a bit long and I think he could have been sharper especially on the succession periods. It’s a good insight into how such a big corporation works and a glimpse into the machinations of the Board room. My overwhelming feeling was how much ego the core business leaders had and how little they think about the consequences of their actions when it comes to the hundreds of thousands they employ.
December 23, 2022
I would perhaps have had a better understanding of some of the complicated deals described in this book had I had a background in business and accounting. However, what made "Power Failure" fascinating for me, were the detailed descriptions of the PEOPLE who ran, or who finagled for the chance to run, GE. It was their hubris, underhanded deals, lust for power and monumental errors in judgment that eventually led to the breakup of the company. (Perhaps I should also add another characteristic - a lack of civility - since most of the quotes from GE personnel are generously sprinkled with f-bombs and other obscenities.)
January 15, 2023
Outstanding book about a business and leaders
Most people in the business world know the story of GE from its beginnings to its soaring success, and it’s all too dramatic downfall. This book chronicles all of it, with the added story of the leaders who nurtured it… and those who destroyed it. A compelling and honest “autopsy” with some well-warranted opinions by the author.
Most people in the business world know the story of GE from its beginnings to its soaring success, and it’s all too dramatic downfall. This book chronicles all of it, with the added story of the leaders who nurtured it… and those who destroyed it. A compelling and honest “autopsy” with some well-warranted opinions by the author.
March 27, 2023
reads like the author went off his ritalin
January 22, 2023
I must admit that when I was given a copy of this book by my brother-in-law, who happens to have as another brother-in-law author Bill Cohan, I had little interest in reading it. The book is long (about 750 pages), and I was afraid that it would be a dense and highly-detailed examination of Jack Welch’s career at GE. However, upon finding myself between books a couple of weeks ago, and having been rebuffed when I offered the book to another brother-in-law on the other side of my family, I picked up all 2 lbs., 9 oz. of the book and dove in.
Contrary to my expectations, I really enjoyed reading Power Failure. Despite its length, it is not a difficult read and the story that it weaves is, at least as far as sagas about the corporate world can be, fascinating.
Particularly compelling to me were those portions of the book which concerned GE’s global dealings, and those portions which concerned the 2007-2008 financial crisis, which was really the catalyst to (eventually) showing that GE was an emperor with, shall we say, very ill-fitting clothes. As an example, the description of Jeff Immelt’s trip to Washington to plead GE’s case to Secretary of the Treasury Hank Paulson and FDIC head Sheila Bair brought events having global significance down to a human level. (On the visit to Bair: “An assistant came out and told the two men that the head of the FDIC had no time for them. No time to see the CEO of GE? Jeff insisted on waiting to see Bair. The threat to GE was existential. They bided their time in the FDIC lobby while the cleaning staff polished the marble floor. ‘At 240 pounds, I’d be difficult to force out the door,’ Jeff allowed.”)
After spending about 60 pages on the early history of GE, the book moves into its major focus: Jack Welch, his immediate successors as CEO, Jeff Immelt, John Flannery and Larry Culp, the ways in which these leaders guided (or in frequent cases, mis-guided) a vast, iconic conglomerate through an often chaotic era in American history, and the high-pressure, high-stakes machinations within GE’s C-suite.
Although there was a decent amount of Wall Street-speak in the book, an intimate knowledge of finance or the corporate world is not necessary to enjoy Power Failure. (That being said, however, I’m not sure that I would recommend the book to anyone who doesn’t already know that covering long-term obligations with short-term sources of cash for repayment is a very dangerous game.)
Also, the book didn’t turn out to be nearly as monolithic as I had feared. It moved along at a good clip and seemed almost like a succession of short stories, some of which dealt with the backgrounds and personalities of the book’s principal subjects (not just the CEOs, but other top GE executives), and others of which dealt with subjects including the decisions made by those principal subjects, internal and external crises confronted by them and so forth. Despite the length of the book, I never felt as I was reading it that it had bogged down.
Another surprise was the mostly sympathetic treatment of Jack Welch. There’s very little discussion of Welch’s ruthlessness (such as firing the bottom 10% performers each year), and it seems that Cohan judged Welch’s successors, particularly Jeff Immelt, with more of a critical eye than Welch himself. The overall impression I was left with of Jack Welch is that he was tough, but fair, decisive and direct. Although the general view of Welch is that he was high-handed and dictatorial, the book depicts him as actively encouraging others to provide their views on whatever question was at hand, particularly when those views diverged from his own. This is in contrast to the book’s treatment of Jeff Immelt, who is depicted as insulating himself from contrary viewpoints. From the book: “Jack’s tolerance for ‘wallowing’ – mixing it up intellectually with all comers before reaching a decision – seems to be infinitely higher than Jeff’s.”
Perhaps the most noteworthy feature of Power Failure is the access that Cohan had to many of the subjects in the book, particularly his extensive interviews with Jack Welch. The prologue, which describes one of these interviews, held at Welch’s country club on Nantucket (I should say ONE OF Welch’s country clubs on Nantucket), telegraphs that the book will present a fairly intimate examination of the subject at hand. Cohan’s access to so many of the principal players in the GE drama makes the book particularly worthwhile, and he is harshly critical of those subjects of the book, particularly members of GE’s board of directors, who declined to make themselves available to him.
Anyway, I thought that Power Failure was excellent. And to my brother-in-law who gave me the book, I say “Thank you, Jeff!”, and to my brother-in-law who turned down my offer to give him the book, but who might read this review and decide that he now wants to get the book from me, I say “Sorry, Joe, you had your chance. Get it from the library!”
P.S.: As an aside, one thing that I couldn’t figure out while reading the book was the naming convention used by Cohan when dealing with the book’s principal subjects. He generally uses the first names of most of the CEOs, Reg (Jones; Jack Welch’s immediate predecessor as CEO), Jack (Welch), Jeff (Immelt) and John (Flannery). The current CEO Larry Culp, however, is pretty much always referred to not as Larry, but as Culp. And most of the top executives other than CEOs are generally referred to by their last names. I’m not sure that much should be read into this, but I thought it was noteworthy.
Contrary to my expectations, I really enjoyed reading Power Failure. Despite its length, it is not a difficult read and the story that it weaves is, at least as far as sagas about the corporate world can be, fascinating.
Particularly compelling to me were those portions of the book which concerned GE’s global dealings, and those portions which concerned the 2007-2008 financial crisis, which was really the catalyst to (eventually) showing that GE was an emperor with, shall we say, very ill-fitting clothes. As an example, the description of Jeff Immelt’s trip to Washington to plead GE’s case to Secretary of the Treasury Hank Paulson and FDIC head Sheila Bair brought events having global significance down to a human level. (On the visit to Bair: “An assistant came out and told the two men that the head of the FDIC had no time for them. No time to see the CEO of GE? Jeff insisted on waiting to see Bair. The threat to GE was existential. They bided their time in the FDIC lobby while the cleaning staff polished the marble floor. ‘At 240 pounds, I’d be difficult to force out the door,’ Jeff allowed.”)
After spending about 60 pages on the early history of GE, the book moves into its major focus: Jack Welch, his immediate successors as CEO, Jeff Immelt, John Flannery and Larry Culp, the ways in which these leaders guided (or in frequent cases, mis-guided) a vast, iconic conglomerate through an often chaotic era in American history, and the high-pressure, high-stakes machinations within GE’s C-suite.
Although there was a decent amount of Wall Street-speak in the book, an intimate knowledge of finance or the corporate world is not necessary to enjoy Power Failure. (That being said, however, I’m not sure that I would recommend the book to anyone who doesn’t already know that covering long-term obligations with short-term sources of cash for repayment is a very dangerous game.)
Also, the book didn’t turn out to be nearly as monolithic as I had feared. It moved along at a good clip and seemed almost like a succession of short stories, some of which dealt with the backgrounds and personalities of the book’s principal subjects (not just the CEOs, but other top GE executives), and others of which dealt with subjects including the decisions made by those principal subjects, internal and external crises confronted by them and so forth. Despite the length of the book, I never felt as I was reading it that it had bogged down.
Another surprise was the mostly sympathetic treatment of Jack Welch. There’s very little discussion of Welch’s ruthlessness (such as firing the bottom 10% performers each year), and it seems that Cohan judged Welch’s successors, particularly Jeff Immelt, with more of a critical eye than Welch himself. The overall impression I was left with of Jack Welch is that he was tough, but fair, decisive and direct. Although the general view of Welch is that he was high-handed and dictatorial, the book depicts him as actively encouraging others to provide their views on whatever question was at hand, particularly when those views diverged from his own. This is in contrast to the book’s treatment of Jeff Immelt, who is depicted as insulating himself from contrary viewpoints. From the book: “Jack’s tolerance for ‘wallowing’ – mixing it up intellectually with all comers before reaching a decision – seems to be infinitely higher than Jeff’s.”
Perhaps the most noteworthy feature of Power Failure is the access that Cohan had to many of the subjects in the book, particularly his extensive interviews with Jack Welch. The prologue, which describes one of these interviews, held at Welch’s country club on Nantucket (I should say ONE OF Welch’s country clubs on Nantucket), telegraphs that the book will present a fairly intimate examination of the subject at hand. Cohan’s access to so many of the principal players in the GE drama makes the book particularly worthwhile, and he is harshly critical of those subjects of the book, particularly members of GE’s board of directors, who declined to make themselves available to him.
Anyway, I thought that Power Failure was excellent. And to my brother-in-law who gave me the book, I say “Thank you, Jeff!”, and to my brother-in-law who turned down my offer to give him the book, but who might read this review and decide that he now wants to get the book from me, I say “Sorry, Joe, you had your chance. Get it from the library!”
P.S.: As an aside, one thing that I couldn’t figure out while reading the book was the naming convention used by Cohan when dealing with the book’s principal subjects. He generally uses the first names of most of the CEOs, Reg (Jones; Jack Welch’s immediate predecessor as CEO), Jack (Welch), Jeff (Immelt) and John (Flannery). The current CEO Larry Culp, however, is pretty much always referred to not as Larry, but as Culp. And most of the top executives other than CEOs are generally referred to by their last names. I’m not sure that much should be read into this, but I thought it was noteworthy.
August 15, 2023
The most readable corporate profile I have read in years, maybe ever, but Cohan has really written detailed biographies of Jack Welch and Jeff Immelt.
It succeeds at that level. Cohan sums up the first eight decades of GE’s existence in about 150 pages, which felt way too rushed. But when Welch shows up, Cohan’s focus tightens in, and the book shines.
Cohan doesn’t fall into idol-worship of Welch. He admires his leadership, but gives lots of room for Welch’s detractors. Cohan is meticulous in documenting Welch’s failures both professionally and personally.
Immelt, however, gets nothing but the stinkeye. The guy had bad luck, bad timing and bad instincts, amplified by being the guy after Welch. Welch left him a house of cards, and Immelt was not up to the task of managing it. Cohan quotes liberally from Immelt’s book and from firsthand interviews, and often Immelt’s reasoning or analysis comes off as petty, small minded, or dishonest.
Cohan falls a bit into the weeds in the second half of the book, writing detailed histories of bit players - several figures are introduced with long and detailed histories that seem disproportionate to their role in the book.
The last few chapters are the aftermath of Immelt’s actions, and the unwinding of the company after his firing. Cohan does an excellent job of articulating how complex a task it was, and how much of a mess John Flannery inherited. Cohan has no time for current CEO Larry Culp.
Cohan’s real scorn is reserved for the Board of Directors though. Several times he piles blame for the decline of the company on them, and it’s hard to disagree. Almost all of the board members declined to be interviewed for the book, and I imagine a few of them regret that decision. He ends with a direct shot at the board for enriching Culp at the expense of the shareholders.
Anyway, this is great. Cohan writes with personality and it makes this 750 page corporate history an actual page turner.
It succeeds at that level. Cohan sums up the first eight decades of GE’s existence in about 150 pages, which felt way too rushed. But when Welch shows up, Cohan’s focus tightens in, and the book shines.
Cohan doesn’t fall into idol-worship of Welch. He admires his leadership, but gives lots of room for Welch’s detractors. Cohan is meticulous in documenting Welch’s failures both professionally and personally.
Immelt, however, gets nothing but the stinkeye. The guy had bad luck, bad timing and bad instincts, amplified by being the guy after Welch. Welch left him a house of cards, and Immelt was not up to the task of managing it. Cohan quotes liberally from Immelt’s book and from firsthand interviews, and often Immelt’s reasoning or analysis comes off as petty, small minded, or dishonest.
Cohan falls a bit into the weeds in the second half of the book, writing detailed histories of bit players - several figures are introduced with long and detailed histories that seem disproportionate to their role in the book.
The last few chapters are the aftermath of Immelt’s actions, and the unwinding of the company after his firing. Cohan does an excellent job of articulating how complex a task it was, and how much of a mess John Flannery inherited. Cohan has no time for current CEO Larry Culp.
Cohan’s real scorn is reserved for the Board of Directors though. Several times he piles blame for the decline of the company on them, and it’s hard to disagree. Almost all of the board members declined to be interviewed for the book, and I imagine a few of them regret that decision. He ends with a direct shot at the board for enriching Culp at the expense of the shareholders.
Anyway, this is great. Cohan writes with personality and it makes this 750 page corporate history an actual page turner.
January 7, 2023
Great history on the rise and fall of General Electric - an American icon of an industrial company. The book tracks the history from its formation thru to present day. A lot of focus is spent on the Jack Welch years when it became one of America's most revered companies (and CEO). A similar amount of focus is given to the Jeff Immelt years - when its decline started. Under Welch, GE gained a lot of reliance on GE credit - which literally became over half of the company. GE was able to deliver ever increasing earnings and dividends, somewhat based on financial engineering or shenanigans. Immelt first day was September 10th, 2001 - the day before 9/11 - and of course the world changed that day. It caused immediate impact on the aviation business. It slowly lead to the 2008 financial crisis which brought GE to the brink of bankruptcy based on its financial branch. Ironically, GE was one of the top 5 financial organizations in the country but was not a bank so did not directly get a government bailout. While they were able to be named a "Too Big to Fail" organization, this brought a much greater amount of regulation, which in turn minimized GE ability to perform financial shenanigans. This quickly impacted their ability to deliver on earnings commitments and their stock dearly paid the price. GE went from being the most revered company to being booted from the Dow 30 after a 100 year run. The book finishes up with a section the takeover by an activist investor (Larry Culp) who became CEO and is leading the breakup of GE. A fascinating read.
January 16, 2024
An excellent and fairly comprehensive history of General Electric. The author rarely pulls any punches and provides a variety of sources and viewpoints on key points in GE's history. The book spends the majority of its pages on three periods of history. First, the precursor companies under Thomas Edison and the first several decades of General Electric as a corporation. Then the period from the end of WWII to about 1980 is covered fairly quickly (at 800 pages I guess there had to be cuts somewhere). Second the Jack Welch years in the 1980s and 1990s when GE grew tremendously. Third, the Jeff Immelt years in the 2000s and 2010s when GE fell from its high perch. While there is plenty of blame to go around for the fall, the author tends to focus on (1) the earnings expectations set up by Welch due to creative accounting/sale of assets to smooth earnings from year to year, (2) the underlying weaknesses of GE Capital that accounted for a majority of GE's earnings during Welch's tenure, but fell apart during the Immelt years, and (3) the failures and bad decisions of Immelt as CEO. GE Capital (and the move away from an industrial/engineering company first) is easily the biggest "villain" in the book. Highly recommend to anyone interested in this most American of corporations and a symbol of U.S. capitalism at its finest and worst.
December 11, 2022
This is the story of General Electric, from the time of Edison, the great American inventor, to the time of Jack Welsh, the great American Corporate Executive Officer. GE, the company that claimed to “bring good things to life” did provide good paying jobs (many were union represented) and for the most part, quality appliances and products, which included jet engines. The company made huge profits, partly due to selling jet engines to the U.S. military and partly through a process called “financial managing.” Offering loans to customers who wanted to buy products was a sideline business that provided a greater source of interest income that could be used to give GE the image of stability. This stability turned out to be what some might call a scam. Never mind that GE dumped PCBs in the Hudson River, and created plastics that might easily fall under the category of PFAS—forever plastic poisons. The corporate leadership kept their heads high through the great American Enron collapse. By page 350 or a little thereafter, the bottom drops out and we soon learn how interconnected corporations are and how vulnerable. This vulnerability threatens to ruin us all. It’s good to read this book and get an idea of how little democracy is involved in the economic well-being of our global economy.
February 17, 2023
I truly didn’t think I could be this enthralled by an 800 page book about GE, but Cohen is an excellent writer (with an incredible vocabulary) and kept my attention at every twist and turn. The book seems well-researched and mostly objective, although Cohen’s resentment towards certain GE leaders seeps through in the final chapters. Given the circumstances, however, it’s hard to blame him.
Also, my own “inside source” at GE said the book was “very accurate, at least about the time I was there.”
Also, my own “inside source” at GE said the book was “very accurate, at least about the time I was there.”
Want to read
January 8, 2023The Economist's 2022 Books of the Year.
April 8, 2023
Not a quick read, but a fascinating history of the company and it’s top people. And ultimately the leadership, decision making, business practices, and hubris that destroyed the company.
July 20, 2023
800+ pages, but I could summarize it in 1.
March 14, 2024
An incredible tale of the rise and fall of GE that largely mirrors the rise and fall of America’s industrial capitalism. A must-read for anyone interested in corporate history.
March 12, 2023
Learn from success – and failure
If anyone had come to GE CEO Ralph Cordiner in the 1950s and raised concerns about whether the company could survive, he probably would have just laughed. To even question the future success of what was one of the most successful companies in American history would have seemed ludicrous.
General Electric once had the swagger now held by big tech giants like Amazon or Microsoft. It was on the cutting edge of technology, spearheading the electrical revolution, the creation of radio, and landmarks in aviation. We even owe CAT scans to GE scientists. You get the feeling that if you looked closely enough, that “idea” lightbulb in cartoons would probably have a GE logo on it.
And then it came crashing down, with blows like the 2007-08 financial crisis exposing deep flaws in what had become an unwieldy giant corporation.
It’s a riveting story of talent, luck, ambition, and hubris, and with lessons for anyone launching a venture of their own or taking on a leadership role. Its sprawling story offers both inspiration and warning.
Power Failure is more than 700 pages long, so in this book we won’t cover all the inside details of that history. But we can look at some of the important highlights and the valuable lessons they reveal for those who want to be leaders, or anyone looking to learn wisdom for living from the successes and mistakes of others.
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Stay flexible
Although General Electric eventually came to resemble a complicated, symbiotic organism that took on a life of its own, a staggering sci-fi monster of finance, it was not always that way. The company evolved many times over the years as circumstances changed.
It grew quickly from its origins in a battle for supremacy in the early electrical industry. Light bulb inventor Thomas Edison’s company merged with a rival and the company began shifting and expanding to deal with ever changing markets.
During World War I, GE expanded to meet military needs like submarine detection, with inventions that were repurposed after the war and formed the roots of its later industrial core. Then, one of the company’s scientists developed a better radio transmitter, launching GE into that sector, where it built RCA and successfully marketed the new product it wanted to sell.
The lax oversight that would allow GE to become a sprawling conglomerate was not in evidence in the 1930s, as GE had to spin off RCA because of monopoly concerns. (The company later bought it again when the government calmed down about monopolies).
By the 1940s, GE had transformed into a corporate juggernaut. The core of the company had already begun to change – Fortune magazine called it an investment trust that also built things.
If there was a place to make money, GE found it. Yet even as a huge company, it put an emphasis on strategic thinking for the future, though executives sometimes took sharply differing tacks on how to do that.
Over time, though, the conglomerate went from a nimble market leader to a bit of a lumbering dinosaur, overly dependent on its capital business.
Huge pressure came fast in the early 2000s, starting with the terrorist attacks of 9/11, which hammered GE. It held reinsurance on not only the towers, but also the planes. It continued in the shaky market afterward.
A changing corporate environment meant GE and other companies were no longer permitted to run amok with little oversight. Public sentiment shifted against the company for its lack of transparency, and accounting practices that had long propped up the company’s image began to raise eyebrows.
Although many factors contributed to GE’s fall, entrepreneurs and others would do well to heed the rather vivid object lesson: If making a huge profit requires you to give up too much flexibility, and depend on risky ventures, you might want to consider other ways of making a profit.
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Stick to your values
In its early and peak stages, General Electric valued careful financial management that enabled it to survive and grow early on.
Greed and ambition, though, eventually swept that away.
An early leader in GE, Charles Albert Coffin, was a savvy financial manager. He was able to adroitly plug holes and keep the company afloat during the financial panic of 1893, when demand for GE’s products and services plummeted.
The experience made a deep impact on the company’s culture, though. Afterward, Coffin demanded careful financial management, refusing to be overly optimistic or inflate the value of the company’s assets.
By following that plan, when the next financial panic broke out in 1907, GE was so strong it weathered the storm easily and even offered some loans to help others.
Things changed later though. The legendary CEO Jack Welch, who took over in the early 80s, made many savvy moves. But he also made the stock price a major point of pride, and oversaw an accounting department that delivered profits every quarter by clever use of the company’s sprawling assets – a major sale at just the right time to balance out a loss, for example.
Welch also relied heavily on GE Capital, a division of the company that dealt with loans. It delivered vast and seemingly easy wealth, but did so by taking on cheap short term debt and using the money to finance profitable long term loans. It was a classic banking mistake repeated many times over the centuries, and every time, there’s hell to pay. It works until something happens that makes short term loans harder to get, like the 9/11 attacks. Coffin would not have approved.
Welch and others were aware of the weak spots, but forged ahead with dealing in risky assets. Had they stuck with the company’s earlier credo of sound finances and conservative money management, the company’s history may have been far different.
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Don’t underestimate the importance of a good leader
Like managers of sports teams, CEOs can unfairly get the credit when things are going great, and also earn unfair blame when things go wrong. So it doesn’t make sense to attribute all the ups and downs of a company, or even its long term success, to the actions of one person.
But despite that caveat, given the power of the modern CEO their decisions and people skills can play huge roles in the fates of large corporations.
Jack Welch, the last CEO of GE in its glory days, has become part of its lore, partly because his team was adept at playing the business to make GE’s numbers look good, and partly because of his decision-making skills and leadership abilities.
One of his strengths was self-confidence. When he became CEO in 1980, he didn’t play it safe and stick with tradition, afraid to upset people or disrupt the status quo. Even though the company was doing well, he immediately began making changes from his predecessors.
Welch also knew the business thoroughly and did his homework. When his deputies had to give a presentation, they knew Welch would expect them to be on top of their game and ask probing questions. Sloppiness could get you in trouble.
Although Welch occasionally missed on deals, he was known for driving a shrewd bargain and picking winners.
Jeff Immelt, his handpicked successor as CEO, may have been one of his misses. Welch certainly came to believe that. As one of the nation���s most respected companies crumbled, Welch and others blamed Immelt for a series of disastrous decisions and missteps.
One executive put it that Immelt lacked the ability to see the big picture of how the different pieces of the businesses affected each other. He did not do his homework as thoroughly as Welch, and seemed to have trouble building team loyalty.
One key mistake was his decision for GE to invest in a subprime mortgage business, the foolishness of which became apparent when the 2007-2008 financial crisis hit, spurred in large part by bad debt and irresponsible loans. Another was that as the crisis began to unfold, people tried to convince Immelt to start getting rid of GE’s real estate interests, but he wouldn’t listen. He wanted to keep taking the risks (and reaping the rewards).
Immelt survived that crisis, but GE’s fortunes did not turn around in the coming years. Immelt was eventually fired.
To be fair to Immelt, the September 11 attacks and the financial meltdowns were huge disruptions that could, and did, spell doom for more than one company. Immelt felt Welch had left him with big problems to fix, and the evidence bears that out. But it also seems clear that he lacked Welch’s knack for good decisions and leadership, and that this hurt the company’s chances to weather the storm.
Picking the right leader – or developing the skills to be the right leader – can be a crucial part of success.
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Listen, even when people disagree
Jeff Immelt did not like pushback.
Jack Welch, by contrast, was known for his sharp criticism, but also for allowing fierce arguments over policies and decisions, and he had the self confidence to allow himself to be persuaded to change his mind.
Immelt’s management team, though, tended more toward flattery than productive conflict. He was less likely than Welch to use gritty discussion to analyze the pros and cons of a decision, or grill subordinates on the merits of proposals. And he did not appreciate hearing bad news about his ideas.
Immelt was also accused of not being a good listener, even in basic conversations.
It’s true that CEOs need to have buy-in and loyalty from their team. Sitting in the executive chair watching riots break out around the table isn’t exactly good leadership. But Welch was reportedly much better at walking that tightrope of leadership and tolerating dissent than Immelt, and that could be seen in his results and decision-making.
Dave Calhoun, one of the top executives under Immelt who left for a leadership position at another company, held that problems that led to GE’s collapse could have been addressed, but were not. He pointed to the way Immelt, unlike Welch, did not use dissent and pushback to his benefit. Thus, people who could have pointed out problems weren’t able to.
Confident leaders can listen to disagreement without being threatened. And that makes them more effective leaders and easier to follow.
---
Don’t forget incentives and human nature
Chances are those old enough to remember General Electric as a success story will think of refrigerators and stoves when they think of the company.
GE emerged as an appliance giant in the middle of the 20th century, as CEO Ralph Cordiner reorganized the company into a much more decentralized structure. He got results, as the company made big profits.
Cordiner also put huge pressure on the various divisions to meet numbers goals.
It turned out to be a recipe for corruption. The company preached ethics at the top. But the pressure on top managers gave them incentive to cheat, and cheat they did, illegally colluding with competitors to drive up prices and arrange who would win bids for projects. This was especially notable in the utility sector, where consistently meeting numbers was not easy in the shifting market.
Cordiner’s system worked when it came to meeting goals. Unfortunately, it also incentivized meeting goals however you could do it, no matter the ethics preached at the top. In the resulting pressure cooker environment, corruption took hold and managers with a strong sense of ethics sometimes had to find somewhere else to work.
Because of Cordiner’s decentralization, practices varied across the company and ethical managers at the top (if there were many) were not able to impose their will downward effectively.
Unfortunately for GE and fortunately for its customers, the rigged system began to fall apart around 1960 when a federal investigation began.
GE fired a number of its executives after they were indicted on price fixing charges. Cordiner proclaimed his opposition to the corruption, although in Senate testimony he and other top leaders were implicated as knowing about it years before.
Whatever the case, Cordiner didn’t have to promote corruption to get it. He just had to create a system where it thrived.
Incentives matter, and if you don’t consider human nature when setting them up, the results can be counterproductive.
---
In their elegant offices, top GE executives lived in a culture of invulnerability. They were the mighty GE. What could touch them?
One prominent critic of the company pointed to this hubris as part of the company’s failure: It didn’t follow appropriate safeguards because of its name, history, size and past success.
It’s an obvious pitfall to avoid. No matter how big and tough you are, you aren’t invincible.
And yet, despite perhaps one of the biggest downturns in corporate history, GE’s story is not over yet. The company continues to innovate in the aviation industry, turning out impressive new jet engines and working on ways to power aircraft without fossil fuels. It’s also focusing energy on the promises of 3D printing for industrial applications.
That seems like a good optimistic note to end on. Despite its many mistakes, and its story of arrogance leading to downfall, GE may yet make important contributions to business and to the world. It’s working to pick up the pieces and build again, something we can all do when facing the consequences of our mistakes.
If anyone had come to GE CEO Ralph Cordiner in the 1950s and raised concerns about whether the company could survive, he probably would have just laughed. To even question the future success of what was one of the most successful companies in American history would have seemed ludicrous.
General Electric once had the swagger now held by big tech giants like Amazon or Microsoft. It was on the cutting edge of technology, spearheading the electrical revolution, the creation of radio, and landmarks in aviation. We even owe CAT scans to GE scientists. You get the feeling that if you looked closely enough, that “idea” lightbulb in cartoons would probably have a GE logo on it.
And then it came crashing down, with blows like the 2007-08 financial crisis exposing deep flaws in what had become an unwieldy giant corporation.
It’s a riveting story of talent, luck, ambition, and hubris, and with lessons for anyone launching a venture of their own or taking on a leadership role. Its sprawling story offers both inspiration and warning.
Power Failure is more than 700 pages long, so in this book we won’t cover all the inside details of that history. But we can look at some of the important highlights and the valuable lessons they reveal for those who want to be leaders, or anyone looking to learn wisdom for living from the successes and mistakes of others.
---
Stay flexible
Although General Electric eventually came to resemble a complicated, symbiotic organism that took on a life of its own, a staggering sci-fi monster of finance, it was not always that way. The company evolved many times over the years as circumstances changed.
It grew quickly from its origins in a battle for supremacy in the early electrical industry. Light bulb inventor Thomas Edison’s company merged with a rival and the company began shifting and expanding to deal with ever changing markets.
During World War I, GE expanded to meet military needs like submarine detection, with inventions that were repurposed after the war and formed the roots of its later industrial core. Then, one of the company’s scientists developed a better radio transmitter, launching GE into that sector, where it built RCA and successfully marketed the new product it wanted to sell.
The lax oversight that would allow GE to become a sprawling conglomerate was not in evidence in the 1930s, as GE had to spin off RCA because of monopoly concerns. (The company later bought it again when the government calmed down about monopolies).
By the 1940s, GE had transformed into a corporate juggernaut. The core of the company had already begun to change – Fortune magazine called it an investment trust that also built things.
If there was a place to make money, GE found it. Yet even as a huge company, it put an emphasis on strategic thinking for the future, though executives sometimes took sharply differing tacks on how to do that.
Over time, though, the conglomerate went from a nimble market leader to a bit of a lumbering dinosaur, overly dependent on its capital business.
Huge pressure came fast in the early 2000s, starting with the terrorist attacks of 9/11, which hammered GE. It held reinsurance on not only the towers, but also the planes. It continued in the shaky market afterward.
A changing corporate environment meant GE and other companies were no longer permitted to run amok with little oversight. Public sentiment shifted against the company for its lack of transparency, and accounting practices that had long propped up the company’s image began to raise eyebrows.
Although many factors contributed to GE’s fall, entrepreneurs and others would do well to heed the rather vivid object lesson: If making a huge profit requires you to give up too much flexibility, and depend on risky ventures, you might want to consider other ways of making a profit.
---
Stick to your values
In its early and peak stages, General Electric valued careful financial management that enabled it to survive and grow early on.
Greed and ambition, though, eventually swept that away.
An early leader in GE, Charles Albert Coffin, was a savvy financial manager. He was able to adroitly plug holes and keep the company afloat during the financial panic of 1893, when demand for GE’s products and services plummeted.
The experience made a deep impact on the company’s culture, though. Afterward, Coffin demanded careful financial management, refusing to be overly optimistic or inflate the value of the company’s assets.
By following that plan, when the next financial panic broke out in 1907, GE was so strong it weathered the storm easily and even offered some loans to help others.
Things changed later though. The legendary CEO Jack Welch, who took over in the early 80s, made many savvy moves. But he also made the stock price a major point of pride, and oversaw an accounting department that delivered profits every quarter by clever use of the company’s sprawling assets – a major sale at just the right time to balance out a loss, for example.
Welch also relied heavily on GE Capital, a division of the company that dealt with loans. It delivered vast and seemingly easy wealth, but did so by taking on cheap short term debt and using the money to finance profitable long term loans. It was a classic banking mistake repeated many times over the centuries, and every time, there’s hell to pay. It works until something happens that makes short term loans harder to get, like the 9/11 attacks. Coffin would not have approved.
Welch and others were aware of the weak spots, but forged ahead with dealing in risky assets. Had they stuck with the company’s earlier credo of sound finances and conservative money management, the company’s history may have been far different.
---
Don’t underestimate the importance of a good leader
Like managers of sports teams, CEOs can unfairly get the credit when things are going great, and also earn unfair blame when things go wrong. So it doesn’t make sense to attribute all the ups and downs of a company, or even its long term success, to the actions of one person.
But despite that caveat, given the power of the modern CEO their decisions and people skills can play huge roles in the fates of large corporations.
Jack Welch, the last CEO of GE in its glory days, has become part of its lore, partly because his team was adept at playing the business to make GE’s numbers look good, and partly because of his decision-making skills and leadership abilities.
One of his strengths was self-confidence. When he became CEO in 1980, he didn’t play it safe and stick with tradition, afraid to upset people or disrupt the status quo. Even though the company was doing well, he immediately began making changes from his predecessors.
Welch also knew the business thoroughly and did his homework. When his deputies had to give a presentation, they knew Welch would expect them to be on top of their game and ask probing questions. Sloppiness could get you in trouble.
Although Welch occasionally missed on deals, he was known for driving a shrewd bargain and picking winners.
Jeff Immelt, his handpicked successor as CEO, may have been one of his misses. Welch certainly came to believe that. As one of the nation���s most respected companies crumbled, Welch and others blamed Immelt for a series of disastrous decisions and missteps.
One executive put it that Immelt lacked the ability to see the big picture of how the different pieces of the businesses affected each other. He did not do his homework as thoroughly as Welch, and seemed to have trouble building team loyalty.
One key mistake was his decision for GE to invest in a subprime mortgage business, the foolishness of which became apparent when the 2007-2008 financial crisis hit, spurred in large part by bad debt and irresponsible loans. Another was that as the crisis began to unfold, people tried to convince Immelt to start getting rid of GE’s real estate interests, but he wouldn’t listen. He wanted to keep taking the risks (and reaping the rewards).
Immelt survived that crisis, but GE’s fortunes did not turn around in the coming years. Immelt was eventually fired.
To be fair to Immelt, the September 11 attacks and the financial meltdowns were huge disruptions that could, and did, spell doom for more than one company. Immelt felt Welch had left him with big problems to fix, and the evidence bears that out. But it also seems clear that he lacked Welch’s knack for good decisions and leadership, and that this hurt the company’s chances to weather the storm.
Picking the right leader – or developing the skills to be the right leader – can be a crucial part of success.
---
Listen, even when people disagree
Jeff Immelt did not like pushback.
Jack Welch, by contrast, was known for his sharp criticism, but also for allowing fierce arguments over policies and decisions, and he had the self confidence to allow himself to be persuaded to change his mind.
Immelt’s management team, though, tended more toward flattery than productive conflict. He was less likely than Welch to use gritty discussion to analyze the pros and cons of a decision, or grill subordinates on the merits of proposals. And he did not appreciate hearing bad news about his ideas.
Immelt was also accused of not being a good listener, even in basic conversations.
It’s true that CEOs need to have buy-in and loyalty from their team. Sitting in the executive chair watching riots break out around the table isn’t exactly good leadership. But Welch was reportedly much better at walking that tightrope of leadership and tolerating dissent than Immelt, and that could be seen in his results and decision-making.
Dave Calhoun, one of the top executives under Immelt who left for a leadership position at another company, held that problems that led to GE’s collapse could have been addressed, but were not. He pointed to the way Immelt, unlike Welch, did not use dissent and pushback to his benefit. Thus, people who could have pointed out problems weren’t able to.
Confident leaders can listen to disagreement without being threatened. And that makes them more effective leaders and easier to follow.
---
Don’t forget incentives and human nature
Chances are those old enough to remember General Electric as a success story will think of refrigerators and stoves when they think of the company.
GE emerged as an appliance giant in the middle of the 20th century, as CEO Ralph Cordiner reorganized the company into a much more decentralized structure. He got results, as the company made big profits.
Cordiner also put huge pressure on the various divisions to meet numbers goals.
It turned out to be a recipe for corruption. The company preached ethics at the top. But the pressure on top managers gave them incentive to cheat, and cheat they did, illegally colluding with competitors to drive up prices and arrange who would win bids for projects. This was especially notable in the utility sector, where consistently meeting numbers was not easy in the shifting market.
Cordiner’s system worked when it came to meeting goals. Unfortunately, it also incentivized meeting goals however you could do it, no matter the ethics preached at the top. In the resulting pressure cooker environment, corruption took hold and managers with a strong sense of ethics sometimes had to find somewhere else to work.
Because of Cordiner’s decentralization, practices varied across the company and ethical managers at the top (if there were many) were not able to impose their will downward effectively.
Unfortunately for GE and fortunately for its customers, the rigged system began to fall apart around 1960 when a federal investigation began.
GE fired a number of its executives after they were indicted on price fixing charges. Cordiner proclaimed his opposition to the corruption, although in Senate testimony he and other top leaders were implicated as knowing about it years before.
Whatever the case, Cordiner didn’t have to promote corruption to get it. He just had to create a system where it thrived.
Incentives matter, and if you don’t consider human nature when setting them up, the results can be counterproductive.
---
In their elegant offices, top GE executives lived in a culture of invulnerability. They were the mighty GE. What could touch them?
One prominent critic of the company pointed to this hubris as part of the company’s failure: It didn’t follow appropriate safeguards because of its name, history, size and past success.
It’s an obvious pitfall to avoid. No matter how big and tough you are, you aren’t invincible.
And yet, despite perhaps one of the biggest downturns in corporate history, GE’s story is not over yet. The company continues to innovate in the aviation industry, turning out impressive new jet engines and working on ways to power aircraft without fossil fuels. It’s also focusing energy on the promises of 3D printing for industrial applications.
That seems like a good optimistic note to end on. Despite its many mistakes, and its story of arrogance leading to downfall, GE may yet make important contributions to business and to the world. It’s working to pick up the pieces and build again, something we can all do when facing the consequences of our mistakes.
June 28, 2023
A very thorough and insightful look at GE’s history through the lens of its different CEO’s. While the book was very long, it was generally very readable and focused on the human side of the company, which I appreciated. I give it five stars because I took away a lot of wisdom about management from the book.
March 16, 2024
I think this book is for a very particular type of business nerd, but I enjoyed it. Growing up during GE’s downfall vs. its golden era, I never really appreciated how impressive the company once was, but this book covered its whole history from Thomas Edison’s involvement in its founding to the spinoff of GE Healthcare that was all the talk of my days in banking. Jack Welch was quite the CEO. I don’t think his style is fit for the world today but it’s pretty sweet to see what he did at GE. Jeff Immelt, on the other hand, is a moron.
It was also probably twice as long as it needed to be and included a lot of unnecessary tangents and details, but the author clearly wanted to demonstrate his thoroughness.
It was also probably twice as long as it needed to be and included a lot of unnecessary tangents and details, but the author clearly wanted to demonstrate his thoroughness.
December 14, 2022
Probably one of my favorite books of the year, although not really one of the best. I just really enjoyed learning about the history of this company, and reading all these former executives gossip about each other. The story of GE is really the story of why you should never hold too much money in a single stock. At one point GE was the most admired and valuable company in America, maybe like Apple today, and thought to be so diversified that it could thrive in any cycle. Then next thing you know it turns out a lot of that was financial acrobatics, and the conglomerate is being spun off into three separate companies. Jack Welch is also a really compelling character. For some reason this is the second book about Welch I read this year, and while the other one comes out more guns blazing about how Welch ruined capitalism, this book probably gets Welch more correct, and more three dimensional. There’s clearly some things with listening that he did better than Jeff Immelt.
While I enjoyed a lot of these stories, we probably didn’t need so many pages about a random climbing vacation of Jeff Immelt. The editing is really lacking- there are typos, the same wording or detail is repeated as if it’s never been used previously, and there’s no discipline around dwelling too long on a subject. The tone is also all over the place when the author wants to toss in a random thought. The author has friends who are subjects in the book, and he allows who was willing to talk to him influence his portrayals. At one point he just interjects that someone is a coward for not doing an interview with him, as if that’s like his God-given right that everyone should talk to him.
Overall I enjoyed it, but would only recommend if you think you’ll have a lot of subject matter interest.
While I enjoyed a lot of these stories, we probably didn’t need so many pages about a random climbing vacation of Jeff Immelt. The editing is really lacking- there are typos, the same wording or detail is repeated as if it’s never been used previously, and there’s no discipline around dwelling too long on a subject. The tone is also all over the place when the author wants to toss in a random thought. The author has friends who are subjects in the book, and he allows who was willing to talk to him influence his portrayals. At one point he just interjects that someone is a coward for not doing an interview with him, as if that’s like his God-given right that everyone should talk to him.
Overall I enjoyed it, but would only recommend if you think you’ll have a lot of subject matter interest.
January 16, 2023
Way overlong and badly in need of some editing.
What is initially an interesting history of GE descends into a crass oral history of its recent failings, recounted by executives who desperately try to assign blame to their colleagues.
I think it was around page 570 or so, when Cohan devoted c. 5 pages to a story told by a former security officer for Immelt regarding an ascent of Kilimanjaro that I was tempted to throw the book at the wall. I'm sure the story was humorous in its initial retelling to Cohan but subjecting the reader to what seems like an almost verbatim recount of a pub-stool discussion felt like yet another egregious tangent for us to suffer through.
There's definitely an interesting, objective and dispassionate book to be told about the rise and fall of GE - this, unfortunately, is not that book.
What is initially an interesting history of GE descends into a crass oral history of its recent failings, recounted by executives who desperately try to assign blame to their colleagues.
I think it was around page 570 or so, when Cohan devoted c. 5 pages to a story told by a former security officer for Immelt regarding an ascent of Kilimanjaro that I was tempted to throw the book at the wall. I'm sure the story was humorous in its initial retelling to Cohan but subjecting the reader to what seems like an almost verbatim recount of a pub-stool discussion felt like yet another egregious tangent for us to suffer through.
There's definitely an interesting, objective and dispassionate book to be told about the rise and fall of GE - this, unfortunately, is not that book.
April 16, 2023
An interesting enough topic, the demise of General Electric, but covered in such an arbitrarily poor way with so little critical thinking applied to any aspect of the tale that I found it almost upsetting. The ending prologue almost perfectly encapsulates the vapid approach to interrogating an issue. A maudlin remembrance of Jack Welch, a person already hero worshipped enough, and then a weird hagiography of the General Electric company.
I really feel that this is an opportunity missed an almost criminal use of what must have been a huge amount of primary material but recreated into a very, very long New York Times article. Dont read it. Its not worth it. You could find out more by reading a few Newspaper articles.
I really feel that this is an opportunity missed an almost criminal use of what must have been a huge amount of primary material but recreated into a very, very long New York Times article. Dont read it. Its not worth it. You could find out more by reading a few Newspaper articles.
December 30, 2022
More of a hagiography of GE and a by-the-numbers wiki-like explanation of its downfall. It’s quite odd how the author seems to have so little criticism for Welch and what he did to a once-great American success story. Cohan even specifically calls out the much superior David Gelles book that preceded this one earlier this year and dismisses it entirely. It seems that Cohan should try to re-read ‘The Man Who Broke Capitalism’ to really get a sense of Welch’s true legacy.
Cohan also needed a much better editor - this was WAY overlong and much could have been excised without loss of the overall history.
Cohan also needed a much better editor - this was WAY overlong and much could have been excised without loss of the overall history.
May 7, 2023
Who is to blame? Jack or Jeff? Who is a better leader? Jack or Jeff? Who really understood GE best all along? The insiders or the outsiders?
So many subtle questions receive their thorough detailed answer . . .
I will some it up with one word, a word I learned in my strategy class in B-school back in 1996 . . . “Hubris”!
So many subtle questions receive their thorough detailed answer . . .
I will some it up with one word, a word I learned in my strategy class in B-school back in 1996 . . . “Hubris”!
August 14, 2023
Power Failure is among the first — and I think not the last — comprehensive histories of General Electric, the company traditionally understood as the offspring of the mind and successes of Thomas Edison, following the death of the company’s most famous leader in the modern era: Jack Welch.
Technically, the company is no more. It was broken up under its latest leadership following a series of financial catastrophes, including the 9/11 attacks and the 2008 financial meltdown after the collapse of Lehman Brothers.
Welch ended his 20 year regime in 2001 and lived long enough to blame his successor, Jeffrey Immelt, for tanking the conglomerate. Immelt swung back with a personal memoir called “Hot Seat: What I Learned Leading a Great American Company.”
From his perspective, Immelt blamed Welch for failing to reign in the lending practices of GE Financial, the world’s largest unregulated financial institution until 2008 forced the US government to finally take notice that the subsidiary posed an existential risk to the American economy.
Author Cohan straddles both camps: he sees the built-in problems Immelt inherited while blaming Immelt equally for very poor decision making.
To stay with this theme for a moment, let me say after reading this book that I think the author gives more credit to the individuals than they deserve, both positive and negative.
America and American business changed quite dramatically between the Welch and Immelt years at GE. The 1980’s grossly rewarded business executives for building conglomerates and pummelled those same executives for carrying bloated balance sheets in the 1990’s and beyond.
Jack Welch played his role in the earlier period but there were many other moving parts to the Wall Street culture that took over, including the laissez-faire attitudes of the neocons who captured The White House under Ronald Reagan.
The rise of the vulture capitalists and private equity later sunk big companies and rewarded great risky plays in the tech sector after 2001. Neither Immelt nor many other people could foresee the meteoric rise of Apple, Facebook, Google, or Amazon stock prices, a trend that made virtually all other enterprises look like weak sisters.
But the seeds of change were there long before Immelt and Welch.
For example, the pace of change at the beginning of the 20th century was much more dramatic than at the end.
The young GE had advantages that had an expiry date. It was given license to collude with British Marconi to control and protect hugely valuable patents in the US market. It was permitted to collude with competitors over supplies for building out the electric power infrastructure.
And it had the inside track on a lot of government contracts.
GE didn’t get “Great” by being great. In my opinion, it got great by being useful. To a lot of interests.
And it was given a AAA credit rating which allowed it to borrow money at obscenely low interest rates and loan it out to its customers. This gave it a unique and some would say devastating competitive advantage. Why couldn’t/wouldn’t the banks compete with GE? We don’t find out in this book, although I think we can guess why: at that stage the banks weren’t big enough to satisfy all comers and GE had an incentive to underbid the banks.
GE’s early rise was abetted by an insecure American government. The navy realized early on that Britain’s control over the manufacturing and management of undersea cables and early radio challenged American sovereignty in the lead up to WWI. (See “Nexus: Stratgeic Communications and American Security in World War I,” by Jonathan Reed Winkler.)
It was help from the navy that entrenched GE in the communications industry and the creation of its very profitable and monopolistic subsidiary Radio Corporation of America (RCA).
Cohan speeds through this part of the GE story. He also skates through the rise of activist shareholders during the go-go years of tech, a context which explains much of how Immelt reacted to the pressures of the stock market.
But to return to the Welch years, how much did the Jack Welch way of doing things affect the outcome of the company? This is an important theme of the book. Based on Cohan’s analysis, the reader must conclude that only a Jack Welch-like character could have rescued the company.
Jack Welch could be a bully, a frat boy, but most of all he was a captive of the bias toward bigness. Mining, manufacturing, communications, computers, financial services, construction and on and on and on. One of Welch’s big talents, as told in this story, was to let the data tell him who to keep and who to let go.
One of his most famous talents was to deliver a steady — some would say “managed” — stream of earnings. He gave the illusion that growth was a given even when he himself could see that business was cyclical.
There were good times and not so good times in all businesses, when Welch delivered the illusion that big could always get bigger, and the stock market rewarded him for it. Never, it seems, was the inherent risk in GE Financial’s lending practices ever baked into the price of GE stock…until it was too late.
Welch could have been indicted, on multiple occasions, but in one quite famous incident, District Attorney Rudolph Juliani chose not to. Possibly he saw a major future ally in his political future. This is another subtle way that corruption seeps into American politics.
He used new management techniques to improve productivity. He used loopholes to avoid major tax bills, gifted to GE (and other corporations) by the Reagan Administration.
But he also famously let Roger Ailes escape from CNBC when in 1996 Ailes joined forces with Rupert Murdoch to run Fox News, which became a hugely profitable business.
But stuck in the parallel universe of share prices, management tied their greatly inflated compensation to the performance of securities, not the earnings of the companies, not the risk inherent in their assets, or the buried value in balance sheets.
Early on it was the raiders like T. Boone Pickens who showed that the era of unmanageable conglomerates was coming to an end. The era of private equity splitting off assets, stock buybacks, and lean balance sheets was just revving up.
And now we are into the Amazon era, where a company laser-focussed on growth could mine public markets for really big capital.. where a company like Apple can finance enormous manufacturing with virtually no assets or debt.
Good investment decisions dictate diversification as a balance against the lows of the business cycle. Welchification insisted on being at the top of every business. It is theoretically impossible, but made good sense to the EPS crowd.
Welch was never satisfied with carrying “dogs”. They all had to be champions. And he used the phony profits from the financial industry to manipulate Wall Street. There are no business cycles in this paradigm, and maybe this is why GE missed the Internet Revolution.
One of the weaknesses in this very good book is Cohan’s focus on the horse race, important to Wall Street, but somehow America doesn’t appear much in the story.
Eventually the mantra became “unlocking shareholder value.” We don’t
hear about the new scrutiny of business by Sarbanes-Oxley following the crash and burn of Enron and Bernie Ebbers WorldCom. These were big events.
Sarbanes-Oxley imposed much higher costs to being a public company, replicating governance costs in small business units. Transparency made it difficult to do business the old way. It resulted in lower not higher margins for conglomerates, and helped create a more crowded competitive environment.
Immelt’s transformation of GE didn’t impress the markets because of who it came to be compared against: Microsoft, Apple, Facebook, Google, Netflix, and Amazon.
Technically, the company is no more. It was broken up under its latest leadership following a series of financial catastrophes, including the 9/11 attacks and the 2008 financial meltdown after the collapse of Lehman Brothers.
Welch ended his 20 year regime in 2001 and lived long enough to blame his successor, Jeffrey Immelt, for tanking the conglomerate. Immelt swung back with a personal memoir called “Hot Seat: What I Learned Leading a Great American Company.”
From his perspective, Immelt blamed Welch for failing to reign in the lending practices of GE Financial, the world’s largest unregulated financial institution until 2008 forced the US government to finally take notice that the subsidiary posed an existential risk to the American economy.
Author Cohan straddles both camps: he sees the built-in problems Immelt inherited while blaming Immelt equally for very poor decision making.
To stay with this theme for a moment, let me say after reading this book that I think the author gives more credit to the individuals than they deserve, both positive and negative.
America and American business changed quite dramatically between the Welch and Immelt years at GE. The 1980’s grossly rewarded business executives for building conglomerates and pummelled those same executives for carrying bloated balance sheets in the 1990’s and beyond.
Jack Welch played his role in the earlier period but there were many other moving parts to the Wall Street culture that took over, including the laissez-faire attitudes of the neocons who captured The White House under Ronald Reagan.
The rise of the vulture capitalists and private equity later sunk big companies and rewarded great risky plays in the tech sector after 2001. Neither Immelt nor many other people could foresee the meteoric rise of Apple, Facebook, Google, or Amazon stock prices, a trend that made virtually all other enterprises look like weak sisters.
But the seeds of change were there long before Immelt and Welch.
For example, the pace of change at the beginning of the 20th century was much more dramatic than at the end.
The young GE had advantages that had an expiry date. It was given license to collude with British Marconi to control and protect hugely valuable patents in the US market. It was permitted to collude with competitors over supplies for building out the electric power infrastructure.
And it had the inside track on a lot of government contracts.
GE didn’t get “Great” by being great. In my opinion, it got great by being useful. To a lot of interests.
And it was given a AAA credit rating which allowed it to borrow money at obscenely low interest rates and loan it out to its customers. This gave it a unique and some would say devastating competitive advantage. Why couldn’t/wouldn’t the banks compete with GE? We don’t find out in this book, although I think we can guess why: at that stage the banks weren’t big enough to satisfy all comers and GE had an incentive to underbid the banks.
GE’s early rise was abetted by an insecure American government. The navy realized early on that Britain’s control over the manufacturing and management of undersea cables and early radio challenged American sovereignty in the lead up to WWI. (See “Nexus: Stratgeic Communications and American Security in World War I,” by Jonathan Reed Winkler.)
It was help from the navy that entrenched GE in the communications industry and the creation of its very profitable and monopolistic subsidiary Radio Corporation of America (RCA).
Cohan speeds through this part of the GE story. He also skates through the rise of activist shareholders during the go-go years of tech, a context which explains much of how Immelt reacted to the pressures of the stock market.
But to return to the Welch years, how much did the Jack Welch way of doing things affect the outcome of the company? This is an important theme of the book. Based on Cohan’s analysis, the reader must conclude that only a Jack Welch-like character could have rescued the company.
Jack Welch could be a bully, a frat boy, but most of all he was a captive of the bias toward bigness. Mining, manufacturing, communications, computers, financial services, construction and on and on and on. One of Welch’s big talents, as told in this story, was to let the data tell him who to keep and who to let go.
One of his most famous talents was to deliver a steady — some would say “managed” — stream of earnings. He gave the illusion that growth was a given even when he himself could see that business was cyclical.
There were good times and not so good times in all businesses, when Welch delivered the illusion that big could always get bigger, and the stock market rewarded him for it. Never, it seems, was the inherent risk in GE Financial’s lending practices ever baked into the price of GE stock…until it was too late.
Welch could have been indicted, on multiple occasions, but in one quite famous incident, District Attorney Rudolph Juliani chose not to. Possibly he saw a major future ally in his political future. This is another subtle way that corruption seeps into American politics.
He used new management techniques to improve productivity. He used loopholes to avoid major tax bills, gifted to GE (and other corporations) by the Reagan Administration.
But he also famously let Roger Ailes escape from CNBC when in 1996 Ailes joined forces with Rupert Murdoch to run Fox News, which became a hugely profitable business.
But stuck in the parallel universe of share prices, management tied their greatly inflated compensation to the performance of securities, not the earnings of the companies, not the risk inherent in their assets, or the buried value in balance sheets.
Early on it was the raiders like T. Boone Pickens who showed that the era of unmanageable conglomerates was coming to an end. The era of private equity splitting off assets, stock buybacks, and lean balance sheets was just revving up.
And now we are into the Amazon era, where a company laser-focussed on growth could mine public markets for really big capital.. where a company like Apple can finance enormous manufacturing with virtually no assets or debt.
Good investment decisions dictate diversification as a balance against the lows of the business cycle. Welchification insisted on being at the top of every business. It is theoretically impossible, but made good sense to the EPS crowd.
Welch was never satisfied with carrying “dogs”. They all had to be champions. And he used the phony profits from the financial industry to manipulate Wall Street. There are no business cycles in this paradigm, and maybe this is why GE missed the Internet Revolution.
One of the weaknesses in this very good book is Cohan’s focus on the horse race, important to Wall Street, but somehow America doesn’t appear much in the story.
Eventually the mantra became “unlocking shareholder value.” We don’t
hear about the new scrutiny of business by Sarbanes-Oxley following the crash and burn of Enron and Bernie Ebbers WorldCom. These were big events.
Sarbanes-Oxley imposed much higher costs to being a public company, replicating governance costs in small business units. Transparency made it difficult to do business the old way. It resulted in lower not higher margins for conglomerates, and helped create a more crowded competitive environment.
Immelt’s transformation of GE didn’t impress the markets because of who it came to be compared against: Microsoft, Apple, Facebook, Google, Netflix, and Amazon.
January 14, 2023
Cohan has written about the titans of wall street and business and in his latest book he assuredly does not disappoint. Perhaps the most legendary business (conglomerate) and storied culture is General Electric or as it's been known for years, simply GE.
The book necessarily covers the creation and early history of the company, I mean it was Edison for for goodness sake, although he was never the "businessman" but of course the inventive genius. But the bulk of the book, for good reason is devoted to the rise and reign of Jack Welch and the GE empire he shepherded followed by the succession drama, the handoff to Jeff Imult followed by the near implosion of an American institution.
Cohan's reputation precedes him and the inside account of the rough and tumble culture that was Welch and GE is fascinating, whether your familiar with Welch, GE, interested in business or not. As for the succession drama, as the cliché goes it was Shakespearean if not Machiavellian.
Cohan has lots of access to Welch and Imult. His reporting is straight. The reader can judge but no surprise, Welch wasn't a corporate deity but was a true leader and a force of nature but not perfect of course.
A central theme is the metamorphosis of the boring financing arm of the company, created to lend money to consumers to buy GE appliances, into the colossus that became GE Capital. The GE division that for years contributed the majority of GE profits, was the "piggybank" for consistently hitting earnings projections, since unlike dull industrial businesses was one where accounting was far more opaque. The proverbial black box containing riches and ruin.
Was Imult snake bit from day one beginning his tenure as CEO within days of 9/11? Jet engines anyone? Did Welch hand Imult a ticking time bomb in GE Capital that went off in financial crisis of 2007. Was Imult a great sales person but not a great leader (on this one I'll just go ahead and say yes)? Could GE have become great once again? Read and decide for yourself.
It's rare to find a 737 page book that's truly a page turner, one intrigue after another, but this is it. Hats off to Cohan.
The book necessarily covers the creation and early history of the company, I mean it was Edison for for goodness sake, although he was never the "businessman" but of course the inventive genius. But the bulk of the book, for good reason is devoted to the rise and reign of Jack Welch and the GE empire he shepherded followed by the succession drama, the handoff to Jeff Imult followed by the near implosion of an American institution.
Cohan's reputation precedes him and the inside account of the rough and tumble culture that was Welch and GE is fascinating, whether your familiar with Welch, GE, interested in business or not. As for the succession drama, as the cliché goes it was Shakespearean if not Machiavellian.
Cohan has lots of access to Welch and Imult. His reporting is straight. The reader can judge but no surprise, Welch wasn't a corporate deity but was a true leader and a force of nature but not perfect of course.
A central theme is the metamorphosis of the boring financing arm of the company, created to lend money to consumers to buy GE appliances, into the colossus that became GE Capital. The GE division that for years contributed the majority of GE profits, was the "piggybank" for consistently hitting earnings projections, since unlike dull industrial businesses was one where accounting was far more opaque. The proverbial black box containing riches and ruin.
Was Imult snake bit from day one beginning his tenure as CEO within days of 9/11? Jet engines anyone? Did Welch hand Imult a ticking time bomb in GE Capital that went off in financial crisis of 2007. Was Imult a great sales person but not a great leader (on this one I'll just go ahead and say yes)? Could GE have become great once again? Read and decide for yourself.
It's rare to find a 737 page book that's truly a page turner, one intrigue after another, but this is it. Hats off to Cohan.
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