Was Jack Welch the greatest CEO of his day, or the worst? | Hacker News Reader

Was Jack Welch the greatest CEO of his day, or the worst?

newyorker.com

79 pointsAmorymeltzer98 comments

Jack Welch was one of many voices in the 1980s and 1990s that oversaw the deindustrialization of the USA. The USA lost almost 2 million manufacturing jobs in the 1980s. We shouldn't blame Jack Welch for much of that deindustrialization, as there were other, larger forces at work. At least in the early part of the 1980s, President Reagan sought a "strong dollar" which made the dollar so strong that USA manufacturers had no hope of competing on international markets, and so in that sense, Jack Welch was only responding to the circumstances he was dealt. But his focus on "shareholder value" also meant that he signaled, and was in favor of, the end of the era when big USA corporations were making long-term bets in speculative technologies. And allowing the rise of GE Capital meant he was very much part of the movement that saw the USA retreat from manufacturing and focus instead on finance. So to the extent that he was simply reacting to circumstance, we can admire his flexibility, but his focus on short-term results, and his retreat from long-term results, we can blame him for his part in the deindustrialization of the USA.

More about that deindustrialization here:

https://demodexio.substack.com/p/why-did-the-west-deindustri...

FYI: Not sure if you know, but that article works to block you from reading it and asks you to sign up for something. I don't know, I just back out of any user hostile BS like that point. Maybe you have a better article from a source that isn't clearly hostile to visitors?

There’s a “let me read it first” option that grants you unmolested access to the article

Why bother? If they don't want me to read it i won't read it.

There should be a way to mark this crap on the front page so I don't waste my time clicking on it...

Oh, I didn't see it. It's hidden.

"Unmolested' would be me not needing to interact with that.

This is literally what they sell though. It’s like going to a restaurant and complaining that they ask you to pay for your meal.

I know when I got to a restaurant what I'm getting myself into.

I guess I just need to equate substack URLs with deceit, hostile reading patterns, and substandard content. Though, someone sharing out substack links that apparently they wrote should be seen as advertising and treated as such.

Or, alternatively, we need to stop constantly expecting content for free. (I'm saying as a society, not you personally)

Substack does have all these sketchy patterns but there is a 'Let me read it first' text link on the popup that lets you continue, seemingly without tracking how many times you've done that.

BUT I made the mistake of actually signing up for one blog I liked and got smacked by a barrage of more 'sign up for this!!!' immediately after. So I agree that it's user-hostile but... it seems like most of the web is moving that way, outside of our digital gardens.

What’s really weird about Substack is that you seemingly can’t subscribe to a newsletter and read it in the app without getting every post emailed too. I just want to read in the app.

fwiw, part of their schtick was newsletters and that you, effectively, never had to open their app. Seems like they designed for one and not the other. That said, during launch day they took a lot of feedback from here so they might hear you if you reach out.

> ...'Let me read it first' text link

Yep, I didn't notice that until someone commented that. Seems purposely hidden.

> it seems like most of the web is moving that way,

Yeah, I really don't care at this point. I'm not going to jump through hoops anymore. If someone wants to block me from reading something using trickery, than clearly it's worthless and neither the site nor the author respect me. Why should I respect them?

So, the country is better off with 1) a weak president, 2) a weak dollar and 3) poor shareholder value?

I know you’re being snarky, but a dictatorship with limited export opportunities and extreme inequality isn’t exactly the paradise you think it is.

The country is better off when we improve it directly, rather than optimizing for weak proxies like shareholder value.

It’s also best to discharge any gut feelings you might have about a “weak” versus “strong” dollar. They’re economic qualities, not moral ones.

I think you could make strong arguments for all of those:

- fairly sure the Federalist society wrote a lot of words on why strong king-like presidents were bad; a strong individual post is a license for arbitrary whims of power

- weak currency improves exports; the Chinese strategy for decades was a weak RMB to the extent that the US complained about it endlessly

- "shareholder value" tends to be a horribly short termist metric that encourages hollowing out the business, reducing investment, and pinching the employees until they start leaving

Deindustrialization was mostly done in the 1970s, with factory employment as a share of the labor force peaking in the 1950s. Moreover a strong dollar lowers the cost of imported inputs, say iron ore, so it isn’t all bad news for manufacturing. Exports also aren’t the only markets for finished goods.

I’d also point out that the US manufacturers more cars than ever, and makes basically as much steel as it ever has. Sure, no one sees t-shirts anymore.

> The USA lost almost 2 million manufacturing jobs in the 1980s.

That's misleading. Via FRED, manufacturing employment in the USA had a long peak lasting from roughly 1970 to about 1990. The largest peak-to-trough drop was in fact about 3 million, from mid-1979 to early 1983, but that had more to do with the Volker recession than any change in corporate culture. Manufacturing employment rebounded (partially) from the post-recession low, remaining steady until about 2000.

The sea change in employment came after 2000, plausibly due to opening trade relations with China. However, at the same time manufacturing production did not decrease much if any. For example, production of durable consumer goods (https://fred.stlouisfed.org/series/IPDCONGD) increased from 1982 to 2005 or so.

That being said, "steady manufacturing employment" does mean that manufacturing employment as a share of all employment fell, thanks to growth in the labour force. That by itself can explain some of the qualitative observations re: the rust belt and such.

It’s not misleading. If you’re not growing, you’re dying.

A lot of things happened in that era, including massive productivity improvements. But at the end of the day, fiscal policy and tax policy drove even state of the art manufacturing to first push to the South, then to Mexico and then to China.

So we exported wealth for cheap goods. As predicted in the 80s, the result is a country that is poorer and facing increasing social unrest.

> As predicted in the 80s, the result is a country that is poorer and facing increasing social unrest.

There might be greater wealth inequality. And some things might be getting measured better than they ever were, more accurately and truthfully. But today's America is not poorer.

Having cheap goods is not in any way the same as having wealth. Personal savings for Americans today are at the same level as during The Great Depression. Any significant financial crisis right now could be devastating.

> But today's America is not poorer.

Take a look at (say) 30th-percentile incomes vs. the costs of food/housing/medical care now. Vs. in the mid 80's. Computer goodies might be a whole lot cheaper now, but the basic costs of living for the less-well-off are sure as hell not.

You should factor in national and states debt. Vast majority of richness comes from turning debt (-ve) to positive via shifting it to national debt. For example? Let say, you owe 10K USD, government give you 10K USD and then cancel the debt a few mpnths or years later, you're now "wealthier" by 10K even if you do nothibg at all to get those 10K sent to you by IRA check. Americans now are poorer in real terms but get the facade of wealthy with borrowed money. Even if they dont ever need to pay off, their surrounding prices will i flates and catch up with their wealth and this is what is happening. When OPEC starts to shift half of petroldollar away, you will then understabd how we are now poorer.

> If you’re not growing, you’re dying.

Isn't this exactly the same Welchian attitude implicitly criticized by the grandparent commenter?

You are either getting better or getting worse. Nothing stays the same. --nature

Capitalism requires constant growth to function. There's no way around that.

It’s related. The US had 200M people in 1970. 330M in 2020. If the number of jobs is about the same, you’re shrinking.

You can explain some of that through productivity improvements, but imo the bill was just outsourced away. The fact that we cannot build iPhones anywhere but in a specific region of China tells the story.

It’s an incredible achievement - globally the industrialization of China dramatically improved the lot of a billion plus people. But that wasn’t free.

Reply to self: I realize I forgot to link the FRED series on manufacturing employment. It's located at https://fred.stlouisfed.org/series/MANEMP.

I apologize for the omission.

You skip the rise of leveraged buyouts, the end of lifetime employment, the end of defined-benefit pensions, layoffs from profitable corporations, rising competition from newly competitive Japan (and then Korea), and the whole 80s vibe. There really was a sea change in American employment culture from the 70s into the 80s. Just imagine that GM used to issue 35 year bonds!

Yeah but you're on HN. Everyone here has healthcare payed for by their corporate sponsor and nice stock options. Life has become worse for the poor but it is easy to ignore that.

Back then it was plain to see in real-time that upon GE's acquisition of Cooper Tools, Welch immediately set about destroying what made Cooper uniquely outstanding.

And that was just one company.

Other victim companies had been given the same treatment by then, the de-industrialization was well underway and picking up steam as upcoming American executives "across-the-board" tried to emulate the famous Welch by extracting long-term hard-earned intangibles and posting it as short-term profits in place of the real sustainable thing.

> the end of the era when big USA corporations were making long-term bets in speculative technologies

Please pick up the phone. Meta is calling.

And look what it is doing to their stock price.

I'd argue the breakup of AT&T was the coup de grace for mega-corp investment in pie in the sky tech, but even AT&T only invested in such things due to legal mandates.

AT&T only invested in tech because of a legal mandate? Can you provide more information about that claim?

And the invention of mass layoffs via stacked ranking.

For the last century we have glorified greed and individuality and now we get upset about it when it overrides nationalism and sense of community? Capitalism and globalisation has freed the elites and charged us headlong into a cyberpunk world.

The Chinese actually noticed this and they are trying to get the genie back into the bottle. They'll probably fail.

This assertion is the Chinese(is this referring to the government?) are trying to stop globalisation and fight greed.

With which techniques are those improvements being attempted?

Literally jailing billionaires that get out of line instead of giving them a platform. Social unrest is the only thing that keeps Xi awake at night.

Whether the reserve currency is strong or weak makes no difference -- having one's currency be the world's reserve currency necessarily leads to large trade deficits (e.g., otherwise there is no way to supply that currency to the rest of the world), and therefore deindustrialization.

Good blog article. I think if you combine Reagan's strong dollar policy and political deregulation of banking, you get both deindustrialization and consolidation of the banking/investment banking/insurance, and some of the extreme wealth concentration correlated with it.

That concentrated wealth is then used to influence (and potentially capture) the political process from cradle-to-grave - from campaign finance, to lobbying, to cushy board seats and the like upon leaving office. Making it politically difficult or impossible to fix or mitigate various problems like Too Big To Fail, deindustrialization, etc.

It seems the only way out is either via technological innovation like additive manufacturing, or via another big banking crisis that doesn't get bailed out, but rather resolved like the S&L crisis.

GE capital was a mistake IMO. I worry Apple might make the same mistake with Apple Card or whatever. Easy money in the short run, attracts the wrong kind of zero sum people in the long run (and takes away focus from engineering and building things of positive sum value)

Apple is continuing to invest and do well in their core business though. GE had a policy during Jack's tenure that if GE were not number 1 or 2 in a business segment, they'd get out it. This caused GE to shed many of their traditional capabilities.

Ah I vaguely remember this from reading his autobio a long time ago. Seems like a non-sensical rule.

In hind sight, yes.

While aiming to be at the top 1 - 2 of the stack is always a nice thing to do. Shutting down established revenue streams to achieve it is equally bad. In many ways it is also lazy. If you won't work on a business to make it the top 1 - 2, you just shut it down. That says better people need to be CEO, especially for a conglomerate like GE.

You are supposed to make money by expanding existing businesses, not by tuning the knobs and dials of the existing ones.

I read the book too and thought it was ironic that both businesses and employees were subjected to stack ranking within GE, yet Welch was praised while failing to maximize long-term shareholder value.

From that book I vaguely remember that he negotiated a deal with his wife that he was proud to break while she maintained her part. It was something like he visits art installations with her if she plays golf with him.

He didn't seem to realize that he most likely killed his marriage with that attitude. He was winning while losing.

I don’t like Jack Welch but you need to consider that policy in context.

GE was a weird company with a professional management class that were sort of like military officers. They were lifers and would travel around the country to run factories or whatever. You lived in your little GE town, and the location and size of your house was based in your corporate stature. You may be a plant manager building turbines in upstate ny, and then be promoted to some new role making washing machines in Kentucky.

The problem, like the military, it that it creates an insular and sort of incestuous culture that is hard to control centrally. It was similar to IBM in some ways. Alot of the “genius” of Jack Welch was reverse engineered as some visionary nonsense but was really about killing the old GE hierarchy.

If that was the goal then he completely failed. That company's manager class mindset is burned in and they will passively ignore the CEO or whatever manager is above them. This mindset trickles down through the hierarchy and makes the place immovable.

It's passive aggressive power play all the way down.

Shed businesses and narrowly define their business segment, eg #1 in servicing GE nuclear reactors vs #3 in servicing all nuclear reactors

I see the opposite. Apple has no choice but to tackle some aspects of finance because existing banking is so predatory.

So far each component they’ve taken on has set new expectations unseen in consumer banking.

Notably privacy of purchase history and shared credit history between couples who share a credit card.

It's dangerous though. If you hit a problem you leave Apple world and are routed to GS. I was loving the card then went through the worst customer support experience of my life (literally almost cost us our mortgage b/c they ended up filing a mark against our perfect credit, for a $4.99 WaPost charge I disputed, until finally an email to the big man Timmy himself landed and some deputy called us and got it settled—god bless her). So maybe they've fixed all of that, but it was a year long customer service nightmare

Were you in the process of closing? I can’t imagine a scenario where a $5 dispute would cause problems with an established loan.

Yes. I mean it was the first time I had been in that situation, so maybe the mortgage was never in jeopardy. I just remember coming home to a message from our banker asking about a negative report from an Apple card and freaking out until Apple/Goldman withdrew it.

Thanks for sharing this.

I'd say its a lot of responsibility to get right, but not necessarily dangerous. And fwiw, I've seen old, established banks make reports that are objectively incorrect but then do everything possible to avoid fixing it.

On something like this, though, I'm glad you were able to get an email routed down from TC. I had multiple instances of this with matters addressed to Bezos but never with Apple.

> I had multiple instances of this with matters addressed to Bezos but never with Apple.

If I was a hedge fund manager I would do a fund where we go long all companies that have a [ceoName]@[company.com] and short all companies that don't. In my experience the former have crushed it (apple and amzn being 2 obvious ones) and vice versa.

With my new digital nomad life, flying across the US and staying in hotels, I’ve literally researched every credit card offered by all of the major banks except some of the ones aimed at people building there credit.

Just for context for those who aren’t in the US travel reward credit cards game, between churning (https://www.forbes.com/advisor/credit-cards/what-is-credit-c...) and earning based on spend is a great way to get free trips and hotels.

That being said, the Apple Card is meh in every way and far inferior to Amex as far as customer service, the application user experience, rewards, etc.

The Apple Card is just a cobranded Goldman Sachs card. It’s the opposite of when Apple is at its best - when it owns the entire experience.

Amex owns the credit card, the processing network, and doesn’t do but one or two deals with outside banks. The perks from being in the Amex ecosystem are vast. Once you have one card with Amex, they don’t even do a hard credit pull most of the time.

Apple is not the lender with Apple (credit) Card.

Cobranded cards are always managed by the bank. The bank takes the risks not the partner

The Apple Card is a partnership with GoldmanSachs, IIRC. That is, they outsourced the zero-sum thinking to Wall Street.

I am under the impression Jeff Immelt inherited a barn of cards and the cows finally came home under his watch -making him look less than stellar. It looked like Jack was your great Engineer-cum-MBA but instead there were accounting tricks that eventually caught up to the company after he retired. On the other hand, aiming to be among the top three of anything you were heavily in seems like a good idea to drive improvement and growth to stay there.

There's a good book (albeit, a bit repetitive as you read it) about the fall of of GE. If I remember correctly the book basically confirms what you said about Immelt inheriting a lot of problems that were hidden behind accounting complexity at GE.

https://www.amazon.com/Lights-Out-Delusion-General-Electric/...

Not that Immelt was a star either, but he he wasn't the person who created a lot of these problems.

I’m sure I remember an interview with him looking back at his time taking over from Welch where a bunch of people basically commiserated him on his appointment because they knew what a bunch of short term financial engineering he was walking into.

He was great for: -financial engineers -increasing profit margins -

he was bad for: -blue collar manufacturing (which got outsourced to countries with low regulations) -the environment (due to lack of regulations) -culture of business leadership -next generation of workers / young people

Also: "stack and rank" or "stack ranking". He made that popular in the business journals, so all sorts of companies introduced it.

It doesn't matter if every one of your staff are supergeniuses, at least one has to be ranked "subpar" and fired that year. Stack-ranking turned Microsoft from a great place to work for into a festering bunch of backstabby politicians. It isn't enough to be a good or great worker, you must be better than your coworkers - so sabotaging their work becomes job number one.

https://www.theverge.com/2013/11/12/5094864/microsoft-kills-...

https://slate.com/technology/2013/08/stack-ranking-steve-bal...

"festering bunch of backstabby politicians"

This is the most succinct description of GE I have ever seen.

What does Greatest CEO even mean? Great for who? The shareholders? The employees? The customers? The world? Maybe we shouldn't be looking for "greatness" from a CEO.

>> What does Greatest CEO even mean? Great for who? The shareholders? The employees? The customers? The world? Maybe we shouldn't be looking for "greatness" from a CEO.

Great question. Since the CEO works for the board, which works for the shareholders, I assumed "great for shareholders" -- however, I was asking myself a different question -- "great on what timeline". It is easy for CEOs to borrow from the future, have great earnings, improve stock prices...only to let the company fail in the long term.

Timeline means "buy low sell high" for investors. Who cares if the whole thing collapses after your exit?

>> Timeline means "buy low sell high" for investors. Who cares if the whole thing collapses after your exit?

Some investors care. "Buy low sell high" might be good for low and medium latency traders, corporate raiders, and the like. Long-term investors (mutual funds, etfs, index funds, pensions, endowments) care very much. Many expect to hold for a decade or longer.

Why not all? We should definitely be looking for greatness from CEO and other top level execs.

What is great for shareholders is often not great for employees. What is great for customers is often not great for shareholders. These are often tradeoffs, so "all" is rarely an option.

Also when. He was great for shareholders if they didn't hold for too long.

Jack liked to film his "town hall" meetings. At one, an employee asked about "company loyalty". Jack replied "if it is Friday, and you got paid, then we're even".

I disliked many things about him, one of which was the insistence that every department had to be a profit center. Like the service department. Do you ever wonder why repair parts are so expensive? Or why they might not be available at all? You can thank Jack for that.

Or the prevalence of "stack and rank"? That's Jack again.

Jack replied "if it is Friday, and you got paid, then we're even".

That's probably one of the few Welch quotes I actually agree with. Granted, I take it from the "employee loyalty" POV, but it works the same going either direction.

Ironically, I get paid today, so we are even. Tomorrow, the company and I start over.

His legend could hardly have been bigger back in the day. A lot of it is the public's desire for a hero to worship. Whatever happened to celebrating the safe-pair-of-hands guy who just stirs his pot? That's still a difficult job, but we absolutely have to have action-men who do cold-hearted things like stack ranking.

Rank and yank is a poison and GE is now using OKRs. Let that set in.

> Whatever happened to celebrating the safe-pair-of-hands guy who just stirs his pot

He's running Apple, the world's most valuable company, and he's modestly celebrated for being a competent, fairly quiet, safe pair of hands. He's not a product-visionary person like Jobs, and he's not a loud salesperson like Ballmer; he's a relatively boring logistics person. He's very well paid and so far Wall Street has been quite happy with him and the results he has helped to deliver. While most of the tech side of the stock market cratered, Apple held up well and Apple keeps producing record profits year after year (while not hollowing itself out ala an IBM for short-term gains).

This isn’t a hard call. He destroyed one of the most established and valuable companies in history by fabricating financial results and siphoning off company money.

This is a Malcolm Gladwell article

A broken clock is right twice a day.

The right kind of broken clock gets a lot of lucrative book deals.

And tobacco industry money

He's not that bad of an author, he just covers topics from a snide populist angle. When you keep that in mind, even Blink is tolerable.

Worst.

He was great at hiding how much damage he was doing though!

Not necessarily, he got quite lucky with the macro context.

The roaring 1990s stock market temporarily helped to camouflage a lot of disasters, such as Worldcom, Enron, Adelphia, and the disease spreading inside of GE. When times are that good, big shareholders ask a lot fewer questions generally.

Financial engineering for short term profit at the expense of long term success is not unique but GE is a remarkable case study.

Welch's apprentices at GE went along to wreck havoc on several companies as well.

I generally think Jack got it right with performance evaluation, but Rank and yank has done so much damage to the American Worker, corporation value, and deindustrialization that he earns no love from me.

The book "Jack: Straight from the gut" is an interesting read. He has earned his accolades. But the part where he describes and justifies the "5-X-5" strategy of firing people is somewhat disturbing. We are seeing the repercussion of that even today through out various industries. The BBC's "Billion Dollar Deals" series had dedicated one episode to this very subject.

Greatest? Then where is General Electric today? It's gone.

GE failed to innovate in their core business and ended up using financial offerings to boost earnings.

It worked great until the financial crisis and they woke up and realized there wasn’t much left.

Archived: https://archive.ph/dlnS6

Well, depending on how you define "his day", perhaps Ken Lay would qualify, so in that case Welch would only be second worse.

https://archive.ph/dlnS6

Wasn't this already broached in depth with a book showcased on NPR?

https://www.npr.org/2022/05/31/1102165413/did-jack-welch-bre...

I like how Betteridge's law of headlines breaks down when there's "or" logic in the headline.

Well, not necessarily - he's almost certainly niether the greatest nor the worst CEO of the time, and so "No" is still the answer.

I laughed -- you're correct.

It's so hard to say what a perfect 10 (or 1) is, that one could say that part is... subjective.

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