Lights Out: Pride, Delusion, and the Fall of General Electric

I thought the book was a fascinating read and for a business book an easy read. Perfect for a Christmas present for somebody who enjoys business books. Its tells an interesting story and leaves you with a lot to think about. Even after reading it. Its still hard to tell where it all went wrong for GE. Thats not to say after the read you aren't left with your own opinion of where it went wrong. You are. So if you do like talking about books you read, this one leaves you with lots of topics to explore.

First let me put in context my interest in this book. I am a GE employee, not by choice, but through chance as the company I worked for was taken over 9 years ago (I was a bit disappointed that the takeover was not mentioned in the book, although I guess $3 billion dollars is small fare in this story). As such I lived within some of the story laid out here and for me it is fascinating to see what was going on behind the scenes at board level, since most of that was hidden as mere employees. Fascinating and slightly horrifying that a company with such a reputation as Ge could be so dysfunctional.The book also echoes a lot of what I have learned about GE. The 1st thing you need to know is that there are two world views of GE. In America, GE status is almost mythological. This stems from the 60s and 70s when GE seemed to run American life from jets, power turbines to fridges and toasters. There was not a part of US life that GE did not touch. Not only that but it seemed very good at making money. Under their CEO Jack Welch, growth seemed limitless and the shares were the darling of pension plans offering a safe haven and guaranteed dividends. In the rest of the world however, GE does not have the same status. Yes it has a big presence in the other parts, but it was little known outside the niches.The book starts off with GE history. If you work in GE you are told we are the child of Thomas Edison, the master inventor (in fact if you visit GE research in Niskyuna, you will find Edison's desk preserved in the entrance). However like a lot of the Edison story, this is not really true. As the book sets out, GE was a creation of failed Edison businesses joined together by the banker J.P.Morgan, and Edison had little to actually do with the company. So rather than a industrial company based on the ideals of industrial innovation, it was a company set up by a finance house for industrial domination. That characteristic forms a large part the rest of the story.The story starts with the legendary chairman Jack Welch who set out transforming the company and become a byword for managerial excellence. However hidden under the success story is another one of shady accounting practices, labyrinths of financial deals and opaque structures which were used to maintain the myth of almost infinite growth.As such the industrial side was supported by the rise of behemoth GE capital which tapped the financial instrument market to ensure a steady supply of cash. In doing so its tentacles spread wide to tap new lines of credit with little apparent appreciation of risk. It feels in hindsight that Jack Welch main talent was in timing and being able to ride the wave of fast growing economy while not having to be held into account for the consequences years into the future. I was also a little disappointed that there was little analysis of one of Jack Welch's worst legacy's, a system called stack ranking which rated everyone and the lowest 10% were forced to leave. This system which at the time was lauded, has been shown to be in the long term destructive as it creates a atmosphere of back stabbing and distrust in a business and was widely sited as one of the reasons that Microsoft lost there way in he the 90's. While no longer implemented, its shadow still sets the culture in GE today and may well have been partly to blame for the Ge capital risk taking culture.In 2001, Jeff Immelt took over as CEO. Mr Immelt is a very charismatic character, however his background was sales rather than engineering and he struggled with running a company which was both large and schizophrenic in character. The capital side providing huge dividends, but with large risks while the industrial side being less profitable, but more stable. This came to ahead almost instantly he took over with the aftermath of the 9/11 attacks and the financial fallout meaning that the capital market shrank overnight. In some way Immelt could be considered unlucky, however the aftermath of a charismatic CEO meant that the board was no longer functioning and failed to rein in a CEO with limited experience. This was shown in two episodes.Firstly was one of Immelt's main initiative, the industrial internet.The idea of the industrial internet was the idea of connecting data from industrial sources to generate new industries around that data. In many ways the idea is a valid one, unfortunately the implementation under-estimated the cost and difficulties. As someone who was involved, I can attest to this. Rather than take a evolutionary approach, GE pumped money into it setting up GE software in California to drive it forward. There were two problems with this. Firstly the GE software department tried to do everything from writing the whole industrial stack to creating the entire data infrastructure to store the data. Despite GE's size it was not a software company and just did not have the resources to manage this. Instead it should of created partnerships to piggy back off someone like IBM. Amazon etc. Secondly there was a big ethos clash between the east coast traditional industries and the west coast new technology gurus. One was traditionally conservative (after all you can't have a jet engine fail in the air), while the other was more just try it and see. The lack of direction and misunderstanding of the two philosophies meant that money was being pored in with concrete objective, other than a vague sales slogan.The second was the purchase of Alstom, a large French owned supplier of power generating equipment. Jeff Immelt set his reputation on purchasing this, however to virtually everyone else it seemed a strange purchase. Before becoming part of GE, we had been part of Alstom and we could attest that it was a company with big problems largely propped up by the French government. The more the negotiations went on and the bigger concessions GE had to make, the less sense it made. In fact the French government really out manoeuvred GE by getting GE to take a troubled nationalised industry off their hands and at the same timer guaranteeing no job losses for a long period, something that even now rankles in GE outside France. The fact that the board failed to rein Jeff Immelt in and Immelt himself could not see the issues pointed to a company no longer in full control or good governance.Jeff Imelt's reign came to an end in 2017, and the CEO position was breifly held by John Flannery. However the excesses of the two previous CEO's and the lack of adaption to the changing market had pretty well made it an impossible job. Also some of the risks taken by Capital came back to haunt GE with a huge debt to finance health insurance policies taken out earlier. Also there had been huge investment in both gas turbines and oil production companies. However the rise in renewables had stopped any growth in the former, and the crash in the oil price had severely dented the latter. What Flannery did do however was a well overdue shake up of the board and remove some the excesses like the 2 planes Immelt had used to travel in.My own story in GE, echoes much of this. In many ways I was there at the beginning. I had visited our CEO as part of a program to allow engineers to meet our then CEO. They had to regularly exit the room to take phone calls, and he asked our group whether our company should remain independent. Obviously he could got give details, but in hindsight they were being wooed by GE. And our company had been a success. We had grown to a billion dollar company in 5 years, by being agile, responsive and innovative. However what was stopping us growing was the lack of capital to take on larger projects. Being part of GE seemed to promise us that access.A number of important things changed when we were taken over however. Firstly our CEO had always travelled on his own. The first meeting of our new boss, was when we were bussed to football stadium and he arrived flanked by about 20 flunkeys. The senior management team were sent to a hotel in Dubai, where a video was made of a speech that looked more like a evangelical rally than a conference. Our CEO had setup a system where you could directly ask him a question. While sometimes abused it provided a communication channel to raise issues and queries. This quickly stopped and it became clear that information would flow only from top to bottom. Our head office had been a single floor of a shared office in a industrial suburb of Paris. That apparently did not meet the image of GE, and was moved to a an expensive old building in central Paris. Or so I'm told because no one outside the top team were allowed to visit.More importantly the management structure changed from a pyramid to a matrix. This meant there was no longer any direct decision making responsibility anymore. The management decided that they no longer wanted us to do the systems, but make products. Systems are more difficult to manage, but products require a whole different mindset. We were told that we were to transform GE, but we quickly found that other parts of GE either kept us at arms length because we threatened their jobs, or saw us as an easy sales win as part of the GE to GE program.We had been bought because we were what GE was not, agile Innovative and not risk averse. After spending 3 billion to take us over, they then set about trying to make us more like GE. At the same time, costs were piled on us. GE companies are run more like franchises with each one paying for headquarter's services. So each excess of the board and each corporate jet was paid for by the businesses in a reduced bottom line. Another thing is that our CEO was an ex-engineer. They knew the product as well as the business. In GE, it seems to rise to the top you need to be from either sales of finance. Engineers have a managerial glass ceiling.So back to the book. Generally it gives a fascinating insight into one of the worlds biggest companies and some idea on how it lost its way. Certainly it gave me insights in many of the things that affected me directly as an employee.However I do feel that the authors missed a trick.The GE story is actually an American story. How companies that made things got seduced away into the world of financial instruments. Where making money is mistaken for making wealth. The truth is the GE myth was a much based on sleight of hand that industrial excellent. It was only federal laws such as the Frank Dodds act that stripped away much of the obfuscation and allowed investors to get a true view of what was going on. Those laws however are under attack by the right wing de-regulation lobby who feel that governments should not have companies oversight. It would of been a useful last chapter for the authors to look at the present state of American capitalism and tie to the how it should change to meet the challenges of a rapidly changing world.The GE story is the American story. How a company famous for making everything from toasters to aircraft engines forgot its roots and became an emperor with new clothes. It is a lesson on the dangers of the deification of CEO's, cosy wall street relationships and lack of business transparency. It is a lesson on how companies lose touch with their employees and how to big to fail is not actually a thing. In the end it is a lesson how America industry lost its way

The book tells me managerial excellence is over-rated. It confirms Warren Buffett’s view: “When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.”

The authors have achived their primary goal, to summarize the history of this great Amrican company, its rise to proeminence under the leadership of Jack Welsch, and its decline in the last 20 years, to its current status, a pale shadow : too much financial risk, too much leverage, too much diversification, too opportunitic in its management, etc. among other sins of conglomerization.BUT the book is also somewhat disappointing : not much beyond a good summary of old pages of the Wall Street Journal, but no new, original insight into the difficulties of good management.

I was very interested to see this book as I have watched from afar to see the collapse of GE. Two writers putting together an account sounded ideal. Looking from my vantage point, the GE Capital story always looked a bit too good to be true but what did I know? The book sets up the Immelt years with a more balanced view of the Welch years highlighting his obvious skills but also highlighting how he did sow the seeds for the eventual collapse. One feels more sympathy for Immelt who comes across as more a tragic character than anything else. The 9/11 attacks coming on his second day as CEO a case in point. Not being able to see the wood for the trees is an obvious flaw but so easy to see how that develops amidst a company so focused on delivering quarterly earnings. Notably strong language in the epilogue on the failure of the board who oversaw it all without really challenging what was going on. Final point, at 340 pages, the book is thorough but I reckon it could have been 240 pages as there is a fair degree of repetition. I concede it's a complicated company with plenty of moving parts and businesses so I can understand that to a point. My only gripe in an otherwise interesting read.

The lesson here is, be careful how you lead. Sad story about GE's decline exposing leadership that can be deceptive.

A

Interesting for past or present GE employees to get an insight into the recent history and decision making at the top of the company.Not many lessons clearly articulated so you have to come to your own conclusions.

Loved discovering what happened to this company. When I was younger I was wondering why it's stock price hovered around $25. Now I know.

Love these types of books

Good analysis of the mistakes made by GE under the direction of Jeff Immelt. The book teaches some important lessons about leadership in the corporate sector.

This book is a pretty undisguised, straightforward condemnation of Jack Welch and Jeff Immelt, and their enormous egos, that in the end cratered a once great company. Apparently all that mattered to Welch and Immelt were quarterly results, keeping the stock price up, preserving the stock dividend and, at bottom, preserving their place in the pantheon of American business giants. As a result, they often chased bad deals in industries they knew nothing about, eg Immelt’s venture into oil and gas, and overpaid for them - Immelt especially, according to the authors, frequently came in too high with a first offer; manipulated GE’s accounting (and GE’s accountants) to make sure the numbers came out right; allowed GE Capital to become the 7th largest bank in the US and then often misused its assets to keep the rest of the company’s numbers up; stretched the truth (at a minimum) on many analyst calls; and ran roughshod over a compliant board whose members (with one identified exception, then Verizon CEO Lowell McAdam) were happy to go along presumably given, as the book notes, a compensation package worth up to $300K annually plus a $1mm kicker when going off the board to be directed to a charity of a departing board member’s choice. To their credit, Welch and Immelt were devoted to GE and its history; to their discredit, they apparently believed that they could maintain GE’s historic position by running the company seemingly mainly by going with their respective “gut(s)” and brooking no dissent by relying on, among other things, their outsized personalities to intimidate their subordinates either directly or indirectly. It’s a sad story, and one that ultimately did real damage to millions of people - employees who held GE stock; GE pensioners, individual stockholders, institutional investors etc. Early in the book, the authors make a point of saying GE under Welch and Immelt wasn’t Enron. But as one reads on, it becomes increasingly difficult to see the difference. (And, for that matter and very loosely, the difference between GE and Bernie Madoff. Madoff promised his investors a regular return within a narrow range every year. He delivered on his promise until he could no longer maintain his house of cards. GE basically promised its stockholders a regular return. Every quarter the numbers came out pretty much just right based on such things as the misuse of SPVs, accounting manipulations, hiding key parts of certain transactions eg re the insurance business it sold, disingenuous comments during analyst calls etc etc until GE could no longer pull it off.)Apparently, GE’s in-house lawyers were nowhere to be found during GE’s fall from grace. The company’s in-house legal function was practically canonized by the legal press yet no GE in-house lawyer is mentioned other than GC Brackett Denniston III. And he is mentioned only a handful of times and never as a key player but as a bystander. It is possible that Welch and Immelt simply chose to ignore GE’s in-house legal team as the company’s problems multiplied. If that was the case, that does not reflect well on what many were led to believe was the best in-house legal team in the country.The notion that CEOs have outsized egos is hardly novel - Immelt had an empty company plane follow the plane he was actually traveling in to ensure that he would never be late for a meeting. If his plane had a problem, there was another right behind him. Nor is it news that CEOs often take advantage of their positions to their financial benefit over and above their generous (to put it mildly) compensation arrangements - Welch’s divorce proceedings revealed so many embarrassing details about his GE exit package that he abandoned many of the perks he was granted. But GE, the company of Edison, was supposed to be different. It was part of the fabric of the country. It had a management team, and a management philosophy, that was better than that of any other company. Well, maybe for a long time, but not for that last 30 years or so. it turns out that during this period GE wasn’t really different. It was just another company whose leaders made an awful lot of bad decisions, decisions that have left it today a shadow of what it once was.My main issue with the book, like Bob Woodward’s books for example, is that there are only relatively few people quoted by name. I understand why that’s the case, but I do think it’s a flaw worth noting. That said, it’s a terrific read, especially for anyone with some degree of familiarity with how corporations function.

The best book i read after the cultural code. A lot to learn about management. However, the look of the book is simple and it looks like a 500 rs book. It costs me 1200 almost but look is so simple. Can anyone tell me if this book is original or a fake one? I have uploaded pics.