Power Failure

Power Failure: The Rise and Fall of an American Icon by William D. Cohan is a history of General Electric (GE) published in November 2022. Before listening to this audiobook, I mistakenly thought that the American icon mentioned in the subtitle was Jack Welch, but it was GE itself.

I was prompted to listen to this book by reading a blog post, My review of Power Failure: the downfall of America’s greatest company, by Gordon Wintrob. I learned about the post from reading a Hacker News post.

I remember trying to decide in the 1990s whether to buy GE stock in its high flying days. I never did, and that was a smart decision. (I remember also considering buying stock in Lucent Technologies. I never did, and that also was a smart decision.)

The book opens with an introduction to the early history of GE, but it moves quickly to the Jack Welch era from 1981-2001. By halfway through the book, Jack Welch has retired as CEO and Jeffrey Immelt has taken over.

These executives made huge amounts of money, but the cost was that they sacrificed their personal lives and negatively impacted the lives of their wives, children, and employees by being so devoted to work. Some of the executives seemed to move every year as they were reassigned to different divisions of GE. The rewards were great, but there was a heavy price to pay.

I was more impressed with Jack Welch than I thought I would be. He started out well with a Ph.D. in chemical engineering. He was a very smart guy. Then he turned to management and reached the top of power at GE. At the time, people thought he was the greatest CEO ever as GE became the world’s most valuable company.

But as soon as Jack Welch retired, the weakness of GE rapidly became apparent as GE Capital grew too large and risky. Jeffrey Immelt spent sixteen years trying to rebalance the company as its value declined.

Listening to this book brought back memories of my career at $corporation1 and $corporation2 and how some management practices were influenced by what was happening at GE.

Cohan judges GE’s leadership team harshly, and this is justified. Jack Welch could be a real jerk to the people who worked for him. The board of directors did not assert itself. Welch’s retirement package was grossly excessive. There was so much playing of golf and so many deals arranged on the golf course. There were so few women in leadership roles.

GE was a huge destroyer of wealth after Jack Welch left, and if you think of GE’s employees and small investors, they all lost money. In the meantime, the leadership team was awarded with huge salaries and luxurious benefits. The company was not managed well.

After Jeff Immelt spent sixteen years unwinding Jack Welch’s mistakes, he was fired by the board, and John Flannery took over. Flannery was another GE insider, having worked at the company for nearly thirty years. But Flannery lasted only fifteen months when the board of directors asserted itself. Cohan relates that all Flannery had after being replaced was his $1.5 million per year pension and whatever severance pay he could negotiate. It’s difficult for a small investor to feel sympathetic when the ordinary GE employee might need fifteen to thirty years to earn $1.5 million.

A big unavoidable flaw of the book is that Cohan was unable to get many former GE leaders to speak to him. Cohan does a good job of providing numerous examples of conflicting stories, where one person asserts one set of facts and another person denies those facts. And the reader/listener must keep in mind that people embellish their stories to make themselves look better.

I listened to the audiobook, which was narrated well by Eric Jason Martin.

My rating: Three stars, good.