When Jack Welch’s reign as CEO of General Electric came to a close in September 2001, he could look back, to paraphrase one journalist, safe in the knowledge that he’d put together one of those unbroken streaks of triumph that Americans so cherish.
In his 20 years at the helm, Welch turned respectable old GE, manufacturer of lightbulbs and jet engines, into the greatest conglomerate the world had ever seen, a remarkable transformation that resulted in the business community rushing to anoint Welch the “manager of the century.” Sure, he could be demanding, quick to criticize, ruthless even. But he got results. If you had invested a modest $17,000 in GE the day Welch took over, you’d have been a millionaire by the time he retired.
But in the 20 years since Welch relinquished his throne, GE has drifted steadily toward irrelevance. This week on The Next Big Idea podcast, we try to understand how that happened—and what lessons GE’s downfall can teach us about the changing nature of capitalism in the 21st century—with the help of two writers who have followed the saga closely and written about it brilliantly.
The first, William D. Cohan, is the author of a new bestseller called Power Failure: The Rise and Fall of an American Icon, named one of the best books of the year by the New Yorker, Financial Times, and the Economist.
The second is our curator Malcolm Gladwell, whose story “Was Jack Welch the Greatest CEO of His Day—or the Worst?” ran in the November 7th issue of the New Yorker.
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The forgotten ubiquity of Jack Welch.
Malcolm Gladwell: There’s a whole generation of people who don’t understand what an insanely enormous cultural figure Jack Welch was in his day. There was a good 20 years where the man was a rockstar.
Bill Cohan: I think the equivalent probably would be somebody like Steve Jobs or Elon Musk, except that Elon seems like he’s off the reservation half the time. If you can imagine an establishment Elon Musk who wasn’t the world’s wealthiest guy but who had this undue influence on business and on cultural life and the news cycle—that was Jack Welch. When GE owned NBC, he created CNBC and MSNBC, and he would go on CNBC all the time. He was ubiquitous.
There’s like a dead body on the floor. How did it get there?
Malcolm: Tell me a little bit about how you came to write this book. What led to the decision that he deserved this kind of exhaustive biography?
Bill: Exhaustive is a good word. It almost exhausted me! I am drawn to stories like whodunits, whether it was the collapse of Bear Stearns, or how Goldman avoided collapse, or the Duke lacrosse scandal. There’s like a dead body on the floor. How did it get there? And I’ve learned as I’ve been writing—this is the seventh book—that there’s some sort of subliminal tie between my own life and the books that I choose to write about. I worked at Lazard; I competed against Bear and Goldman. I went to Duke. I went to Andover and wrote a book about my four friends at Andover. So having worked at GE Capital for two years after I graduated from Columbia Business School, I had this experience of GE in my DNA.
So, dead body on the floor. And I worked there. And it’s a ubiquitous and important American company that was global and dominant. What happened? I wanted to know what happened.
Malcolm: To be specific, what we’re talking about when we talk about the “dead body on the floor” is that Welch leaves and the company goes from being this colossus that’s far and away the most admired American company to being a basket case.
“All the apparatus of the conglomerate era are fading away.”
Bill: Yeah, it’s in the process of breaking itself up. It’s the end of an era, right? The end of the conglomerate era. All the apparatus of the conglomerate era are fading away. They’re going to be moving out of their corporate headquarters in Boston. Tragically, they’re, selling Crotonville, which is their great management think tank on the Hudson River. It just really is the end of an era. And it’s interesting: It was a slow, 17-year death because it was so big and so powerful.
How things went south for GE.
Malcolm: Describe for us how Jack Welch made sense of the way everything had come undone after he left. To what extent do you think he reevaluated his own time as CEO in the wake of the company’s slow burn? How self-critical was he in his dotage?
Bill: Do the words “not at all” mean anything to you? He came prepared for our visits with sheaves of paper in manila folders to make his case to me about what he thought happened. And he was very, very clear. He blamed his successor, Jeff Immelt, for everything that went wrong. He was absolutely convinced that it was Jeff’s fault.
Malcolm: For those who don’t know the kind of story we’re describing, Welch leaves in 2000—
Bill: Four days before 9/11.
Malcolm: And he goes through this elaborate public process of choosing a successor. It was like an episode of some kind of reality TV show, only it was real life.
Bill: It was like a daily soap opera.
Malcolm: So he had, what, three candidates?
Bill: He had whittled it down to three.
Malcolm: And there was this public fascination with who was going to get to be the anointed successor to the king. He chooses Jeff Immelt. Describe Jeff Immelt.
Bill: CEO central casting. From the Midwest. Went to Dartmouth and played football, and then Harvard Business School.
“It was like a daily soap opera.”
Malcolm: In many ways, Welch could not have picked a successor more different from himself. Welch is a short, scrappy, colorful maverick—
Bill: From Boston, with the accent up the wazoo. Jack went to UMass and then University of Illinois to get his PhD, s no MBA or anything. His father worked on the train that went from Boston to the North Shore of Massachusetts. So completely modest upbringing. But he also was fascinated with Harvard, Ivy League types. That’s partly why he liked Jeff Immelt.
Could Jack Welch have saved GE?
Malcolm: Let me ask you this counterfactual. If a 45-year-old Jack Welch inherits GE in 2001, what’s the outcome 20 years later?
Bill: I really believe Jack would’ve played the hand very differently. We would not be sitting here today. I wouldn’t have written the book, and we wouldn’t have been talking about GE splitting up. It would still be an important company. Obviously, after 9/11, we were shocked into a new reality. But Jack would never have gotten out of GE Capital. He would’ve figured out how to make money in this different environment. I mean, the most successful industries after the 2008 financial crisis—one of them was tech, but the other one is financial services. He also wouldn’t have sold NBCUniversal, because he loved it.
One of the things they say about Jeff is that he “un-Jacked GE,” which is typical of what a new CEO does. They feel like they have to make changes. Obviously, Jack wouldn’t have un-Jacked himself. I think we wouldn’t be sitting here today. So, in a way, I’m glad he chose Jeff so that we can sit here and have this conversation.
The most important decision a CEO can make is finding the right successor. Why did Jack Welch blow that so badly?
Malcolm: Talk about your personal reactions to the two characters in this story, Welch and Immelt.
“He recognized and admitted that by screwing up the succession process, this most revered CEO had made a fundamental error that was going to tarnish his legacy.”
Bill: Well, you can’t help but like Immelt. But, I mean, I didn’t like him as much as I liked Jack. Jack was more gemütlich. I think part of it is that people’s mythology precedes them, even for journalists. Jack had taken the company from $12 billion to $650 billion. He was the CEO of the century. That Jack Welch mythology was massive. By the time I saw Jeff, it was quite the opposite. He had been fired. The company had lost a lot of value. And many people thought he was chiefly responsible.
Malcolm: One of the fascinating things about the book is that you have these two men, one of whom is consumed with dismay of what happened to his golden child, and the other bears a burden of screwing up, right? They’re both sitting out there in Connecticut or wherever with these burdens. I mean, to use the cliche, it’s Shakespearean.
Bill: I kept asking Jack, over and over again: “Jack, your most important decision was who was going to succeed you, right? And you made such a big show of it. You had these three pedigreed candidates that you had whittled it down to out of literally hundreds—candidates you had basically manufactured by moving around the company so they could see different aspects of the business, taking them to Crotonville and teaching them all these great management techniques, instilling in them your vision. And Jack, you blew it. You blew it by your own admission. You blew it. How do you live with that?”
It clearly weighed on him. He recognized and admitted that by screwing up the succession process, this most revered CEO had made a fundamental error that was going to tarnish his legacy. I just couldn’t get enough of that conversation.
Edited and condensed for clarity. For a closed-captioned version of this episode, click here.
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