Jeff Immelt Knows He Let You Down (Ep. 452)
Not so long ago, G.E. was the most valuable company in the world, a conglomerate that included everything from light bulbs and jet engines to financial services and The Apprentice. Now it’s selling off body parts to survive. What does the C.E.O. who presided over the decline have to say for himself?
Listen and subscribe to our podcast at Apple Podcasts, Stitcher, or elsewhere. Below is a transcript of the episode, edited for readability. For more information on the people and ideas in the episode, see the links at the bottom of this post.
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Stephen DUBNER: So there is a silly question that a lot of authors get asked, which is: Why did you write this book? Silly, because it’s usually obvious. But in your case, I don’t think it’s such a silly question because: a) you don’t need the money; let’s be honest. And b) you don’t have a tale of triumph to tell. So why did you write the book?
Jeff IMMELT: I’d say really two reasons. I felt like the story had been out there, but lacking context and quite honestly, not always being truthfully told. And the second thing is, today all leadership is crisis leadership, and I have a lot to offer to that debate.
That is Jeff Immelt.
IMMELT: I worked at G.E. for more than 35 years. I was the C.E.O. for 16.
And yes, G.E. — that’s General Electric — gave Immelt a lot of experience with crisis leadership.
IMMELT: I lived and led at a time of immense volatility and change. Always did my best. Some things worked and some things didn’t.
Okay, let’s start with what didn’t work out. When Immelt inherited the C.E.O. position in 2001 from the legendary Jack Welch, the stock price was around $38, representing a market capitalization of just over $400 billion. When Immelt left, in 2017, the stock price had fallen to around $25, with a market cap of around $220 billion, a drop of roughly 45 percent. And now, just four years and two C.E.O.’s later — John Flannery lasted just 14 months, and Larry Culp now has the job — G.E. stock has fallen even further, and the company’s only worth around $100 billion, or one-quarter what it was when Jeff Immelt took over in 2001. As recently as 2005, G.E. was still the most valuable company in the world; today it’s not even in the top 100 of companies when ranked by market cap.
The financial collapse is only part of the story. For decades, General Electric was the quintessential American corporation, a combination of scientific ingenuity and muscular execution. It was founded in the 1890’s to capitalize on the inventions of Thomas Edison, including his light bulb. For years, its headquarters were in Schenectady, N.Y., built up around Edison’s own machine works. I happen to have been born in Schenectady. G.E. was the biggest fixture on the horizon — literally, its famous cursive logo visible for miles in the night sky; and economically, too; it was by far the biggest private employer in the region, and many would say the best employer too. G.E. had grown into an industrial conglomerate, making airplane engines and locomotives; gas turbines and medical equipment.
During the Jack Welch era, it became a much broader conglomerate, expanding into financial services, insurance, commercial real estate, even the N.B.C. television network! Some of its growth was spectacular. Just as the economy in California is larger than that of most countries, G.E.’s finance arm — G.E. Capital — was bigger than most banks. But in the past decade-plus, G.E. has been selling off body parts to stay alive — including, last year, its iconic Lighting division. In 2018, G.E. was removed from the Dow Jones Industrial Average — it had been the last of the original 12 members. And then there are the allegations of accounting and other financial fraud, brought by the Securities and Exchange Commission and the Department of Justice. In 2019, G.E. agreed to pay a $1.5 billion penalty for its misrepresentation of the subprime residential mortgages it sold. There was a $200 million penalty last year for violating a number of accounting and anti-fraud provisions, and a similar, $50 million penalty in 2009.
Most of these alleged violations happened on Jeff Immelt’s watch. — although in a recent book called Lights Out, about G.E.’s decline, the Wall Street Journal reporters Thomas Gryta and Ted Mann write that fudging the numbers was a standard G.E. practice that went back at least to the Jack Welch era. The exposure of this practice can help explain the decline of General Electric. But there were other reasons too. According to his critics, Jeff Immelt’s strategy to modernize the old industrial company was erratic and wayward: buying high and selling low as he shuffled G.E.’s portfolio, and placing bad bets — bulking up in the oil-and-gas sector, for instance, just in time for oil prices to tank. So yeah, those are the things that didn’t work out for Jeff Immelt when he was C.E.O. of General Electric. The things that did? That list is shorter. Today on Freakonomics Radio: how Immelt won the C.E.O. job in the first place.
IMMELT: You know, Stephen, near-death experiences are really good for you.
One big reason things went sideways at G.E., which Immelt says no one could have prevented.
IMMELT: We were kind of collateral damage, if you will.
We hear about his bitter end:
IMMELT: What were the last months like? They were excruciatingly sad.
And: why Jeff Immelt will forever be marked, quite literally, by the company that got rid of him.
IMMELT: I Googled “tattoo Danbury” because I wanted to be far enough away that maybe nobody would recognize me.
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DUBNER: I have to say, you are my favorite kind of C.E.O. to interview: a former C.E.O. Because when you’re in the job, it seems like there’s very little incentive — and time, honestly — to really say anything interesting. Now you can speak your mind. Do you find that liberating?
IMMELT: You’ve got a little bit more time to think about things. When you’re in the job, it’s such an intense 7-by-24 job. I still have a desire not to trash people, things like that. But I am able to be a little bit more frank, for sure.
Jeff Immelt’s new book is called Hot Seat: What I Learned Leading a Great American Company. He doesn’t trash a lot of people in the book; it’s primarily a defense of his performance — which, not surprisingly, he rates substantially higher than his critics do. This interview with Immelt is part of an occasional series we call “The Secret Life of a C.E.O.” We’ve had John Mackey from Whole Foods; Indra Nooyi, who was then C.E.O. of PepsiCo.; and, in 2018, we had Jack Welch, Immelt’s predecessor at G.E. Here is a relevant exchange from that Welch interview:
DUBNER: In 1999, not long before you retired from G.E., you said that your ultimate success would be determined by how well your successor grows the company over the next 20 years. When you said that, G.E.’s market cap was up north of $450 billion. Now it’s almost 20 years later, it’s just north of $200 billion. So talk to me about that. I know that you—.
Jack WELCH: I don’t talk about that.
DUBNER: You don’t. Why not? I mean it’s public record—.
WELCH: You can comment on it in any way you want. But I haven’t commented on my successor once in the 20 years. And I don’t intend to comment now. You can judge me any way you want, on whether I picked the right guy or not, you gave numbers. And one, from those numbers, would question how well I did. But I’m not commenting. And I — if you want to give me a black mark, give me a black mark. I did the best I could. I picked the guy.
So why did Jack Welch pick Jeff Immelt? How did Immelt put himself in that position? And then, what went wrong? Immelt grew up in Cincinnati, where his father worked 38 years for — you guessed it — General Electric. In the aircraft division.
IMMELT: Most of his career was in sourcing and purchasing, fan blades and castings and things like that. You know, we used to go to Lunken Airport and watch planes land. We never missed an open house where we would go see Building 800, and see how engines were made. Just loved the business, loved the company.
Jeff Immelt studied math at Dartmouth and got an M.B.A. at Harvard. In between, he worked briefly at Procter & Gamble, where he was buddies with future Microsoft C.E.O. Steve Ballmer. After business school, Immelt took a sales job in the plastics division at G.E. He would go on to run or help run Plastics, Appliances, and Healthcare.
DUBNER: I’m going to tell you, Jeff, my favorite G.E. invention, and then I want to hear yours, okay? So my favorite story is about a physicist named Bernard Vonnegut, who worked at G.E. Research in Schenectady, who discovered that if you fly up in an airplane and add droplets of silver iodide to the clouds, you can make it rain. Okay? But even better, his little brother Kurt worked as a P.R. guy for G.E.
IMMELT: Oh! There you go. Yeah, for sure.
DUBNER: And then Kurt, of course, went on to write these amazing novels with all sorts of fantastical elements. And I’d like to think that his big brother’s G.E. weather experiments played a role in Kurt Vonnegut’s novel-writing. So that’s my favorite invention. What’s yours?
IMMELT: I always go to healthcare just because it’s so identifiable. So I would say it’s somewhere between the ultrafast C.T., which can freeze the beating heart so you can really diagnose vascular problems and circulation problems. And then I would go from there to the ultrasound, a handheld ultrasound, which is sold in India and Africa. I’ve always found that there’s just a great intersection between technology and solving problems.
DUBNER: Okay, yours beats mine. I mean, at least in terms of good for the world. So let me ask you this. When you look back at the technology that was either invented or perfected or acquired during G.E.’s history, it’s breathtaking to me that one company did all that. But in the last, let’s say 30 years, the innovations were much slower coming. And it became more about selling off some things and acquiring others that were often established. So how did a firm that was so innovative stop being so innovative?
IMMELT: I would push back just a little bit. You know, Stephen — we spent a lot of time on investing in technology and in the industries that we were in — like aviation and healthcare, energy — we would be viewed, both by patents filed and by our customers and the markets, as kind of the industry innovator. So that was certainly part of my strategy. I would say the difference is so much of the innovation today is driven by information technology, data, and analytics. And this was something we were trying to change. But I think if you could rewind lots of stuff over time, the company would have made even bigger and more profound bets in those areas earlier.
DUBNER: I know that you believed and invested in a software vision for G.E. to harness the customer and other data that’s generated by your various machines. And that really didn’t work. It did make me wonder, is the era of that kind of conglomerate just over?
IMMELT: Oh, gosh, I think the era of somebody that does jet engines, T.V. shows, and insurance, that’s over. Okay? It’s just, you know — investors don’t want it. It’s too hard to manage. I think being able to do a more tightly connected with aviation and power and maybe healthcare, I think that’s possible. And there’s reasons to think that’s going to endure.
If you think about the conglomerates of today — I’m talking about Amazon and Alphabet — they have a technical foundation. I would say G.E. had, at least in the beginning of my career, our foundation was management practices. It’s not that that’s unimportant. But that wasn’t enduring, really. And I think when you look at Amazon, they are a dominant software company. And in some way, shape, or form, everything they do feeds off that. Google was a dominant A.I. company. Everything they do feeds off that, right? So I think if you want to be a conglomerate today, a technical foundation is a must.
DUBNER: Yeah, but their core is built around technology that is also very scalable and very flexible. Whereas what you were doing still involved a lot of physical things with sunk costs spread all over the world. And that just seems like a hard thing to do.
IMMELT: If you step back, I think what we saw as our core competency was the global framework, you know, infrastructure equipment, rotating equipment. And then the digital context for how to optimize, get productivity, drive safety. And so we were a relevant player in 150 countries around the world because of the mix of businesses that we had. Now, it doesn’t mean they don’t cycle, you know. Aviation on 9/11 was the world’s worst industry, right? And then for 15 years, it was awesome. And then with Covid, it’s the world’s worst industry again, right? So I think you need to separate natural volatility from a company that was basically winning in the businesses we were in from a market-share standpoint. But it wasn’t because they were cycle-free.
DUBNER: So you write about this incident back when you were running plastics, most of plastics, and you missed your annual earnings estimate by a lot, $50 million, which was really something at the time. And as you write, Jack Welch, C.E.O. — grabbed you at a manager’s conference and said, “Jeff, you had the worst year in the entire company. You were the worst person in the entire company,” but he didn’t fire you. And interestingly, Welch, when he was starting out at G.E., blew the roof off a factory. He was expecting to be fired and he hadn’t been. So I’m curious what that event did for you, how that set you up to keep succeeding there?
IMMELT: You know, Stephen, near-death experiences are really good for you and growing a career. You don’t want too many of them, but being able to survive your own failure is part of life and part of a business career. And nobody has a perfect career. And I didn’t. It also taught me that, like, I could live. That basically he wasn’t going to define how I felt about myself. So, I told him, “Look, Jack, I’m going to fix this. And if I don’t, you won’t have to fire me. I’m going to quit.”
DUBNER: So you became famous for hitting your numbers from there on out. And really the story of G.E. during that period was a company that hit its numbers and Wall Street loved it and the stock boomed because of it. But the more postmortems that are done on G.E., especially in this book Lights Out by two Wall Street Journal reporters, the more we find that a lot of those earnings were just pumped, you know, inflated, that there were a lot of different ways to reach your earnings targets, including some really creative and aggressive accounting that was going on across a lot of divisions at G.E. for many years. So I’m not expecting you to cop to any specifics or point any fingers. But looking back, wasn’t that a counterproductive institutional practice?
IMMELT: Well, what I learned growing up in G.E. was how to be a good operator, how to invest in growth, how to drive productivity, how to manage costs, those kinds of things. Interwoven in this story is always going to be the growth of financial services. And financial services has, let’s say, historically just been more fluid because of the way reserves are done and things like that.
DUBNER: But even in like Power, where the way orders were booked and accounted for ahead of time and the way that they’re predicted against an unreasonable and not realistic timeline, it just sounds as though there was a culture that was pronounced under Welch and continued under you that led to a situation where you got backed into a lot of corners. Is that not the case?
IMMELT: So all accounting at G.E. was bottoms-up. All of it. We paid external auditors hundreds of millions of dollars a year to review our books. We had a 20-person disclosure committee that was made up of mid-level managers that approved everything we said, everything we ever did. We were regulated by the Fed for six years. I had two audit committee chairs. One was a retired C.E.O. of J.P. Morgan, the other then was the retired commissioner of the S.E.C. I know what’s been written, Stephen, but all I can tell you is what we tried to do.
DUBNER: So okay, Jeff, you were a G.E. lifer. At one point you are in a bake-off to replace Jack Welch. You’re the youngest guy by quite a bit. Why did you win?
IMMELT: You know, I never really know because these are things you don’t know. I would say to a certain extent in a big company, your peers promote you. And not that the other guys didn’t but I had really good peer relationships at that time and I think that certainly helped.
DUBNER: So your reward is getting to replace Jack Welch, who Fortune magazine had named “Manager of the Century” So tough warm-up act. And there’s a story you tell in the book, this encounter just before you’d been appointed to take over. This was at a dinner in London where a legendary British executive, as you call him, says to Welch, “Jack, how do you do it? How do you get a 50 P.E.” — that’s price-to-earnings ratio for the G.E. stock price — “how do you get a 50 P.E. with that bag of s*** you’ve got?” Meaning G.E. And you write how you were shocked that someone would say to his face, what surely other people were thinking. This was right before you get the big job. Obviously the big job is extremely desirable. Did that comment, however, make you want to run just a tiny bit in the other direction?
IMMELT: You know, everybody roared with laughter when the guy said it. And I realized at that moment that the joke was on me. Really.
DUBNER: It strikes me, as I read about the complicated history of G.E. during Jack Welch’s tenure and yours, that you needed to make a lot of decisions, often under time pressure, and like any human that makes any decision, you often have incomplete information — and the stakes are routinely very high. So I hate to say it: the primary lesson I took away from reading your book was: “Don’t be a C.E.O. It is friggin’ impossible.”
IMMELT: Well, I’d say — I would say the last 20 years have just been filled — so I basically went to work, let’s say, about 1980. From 1980 to 2000, I had never seen a tail-risk event. I didn’t even know what they were really. And then 9/11 happens and Fukushima happens and the financial crisis and Covid. And so leaders today almost haven’t seen anything but tail-risk events.
DUBNER: So among other things, you had some pretty bad timing. I mean, look, you become C.E.O. just in time for 9/11.
IMMELT: Yeah, I would say not only 9/11, but Enron. You were maybe the biggest “trust me” company and then you trip over into a world where there is no trust. That’s a big change.
DUBNER: Give me your thumbnail of getting settled that first year or two, trying to figure out what the company actually was and where it needed to go.
IMMELT: Yeah, so the original thing was just get through 9/11, right? We not only were big in the aviation business, but we were big in the aviation-leasing business. We had an insurance product and it was just a panic. You know, we used to have these nightly calls and we had to lend airlines money to keep them going. Let’s say it’s nine o’clock at night and it’s a week or two after 9/11. And the G.E. Capital guys say, “We need to buy $2 billion of American Airlines Double E.T.C.’s by tomorrow morning.” And, you know, my question is: what the eff is a double E.T.C.? I don’t even know what the language, what we’re talking about. So making decisions like that was hard.
DUBNER: I mean, at least it’s good for the G.E. Capital numbers, right?
IMMELT: Yeah, we made some good loans, but then we started whittling away on how do we start reinvesting again in technology that could help the industrial business? And we started plotting a path of saying, “Look, all of our industrial businesses need to be retooled, even N.B.C., right?” Even though the long-term goal was to make G.E. Capital smaller.
DUBNER: But keep it.
IMMELT: But keep it. We had to let G.E. Capital go for a while because we needed the cash. The decision we made was to try to do that in the context of continuing to grow earnings-per-share because it was the only language investors understood.
DUBNER: And was that a kind of path dependence that Welch had set you on, that you had to hit that dividend number?
IMMELT: Look, I mean, I just think it was—.
DUBNER: It’s the kind of company you were.
IMMELT: It was the kind of company we were. Look, I probably had a window to reset the company after 9/11. And not doing it probably was a mistake. So I kept us on that path. It was starting to work and then the financial crisis hit. There’s people that say, “You should have seen the financial crisis coming,” and I recognize that maybe there were things we could have done differently, but none of us really saw that as a tail risk, right? So when Covid happened, my first reaction was, “Ah, you know we lived through SARS. It wasn’t that bad, right?” It turns out it was like a thousand times worse. You can make yourself prepared, but you better be good at volatility.
In his new book, Immelt writes about the immediate aftermath of 9/11, and the double-whammy that G.E. faced: a huge hit to many of its core businesses as well as a huge drop in its stock price. “I tried to stay calm,” he writes, “but G.E. was getting crushed. I heard from several shareholders, including our biggest one: ‘We didn’t realize G.E. was so big in insurance!’ I wanted to say, ‘We’ve never hidden it. Didn’t you examine our holdings when you bought our stock?’ Instead I kept quiet.”
It is hard not to picture how Jack Welch might have played things differently. When Welch was C.E.O., the markets loved G.E. stock in part because he made them love it, by force of will. Stock markets are full of numbers but those numbers are driven by stories, and Welch sold the G.E. story enthusiastically and aggressively. Jeff Immelt didn’t. Here, again, is what he wrote about that shareholder call after 9/11: “Instead, I kept quiet.” The markets seemed to punish him for that — that and the simple fact that Jeff Immelt wasn’t Jack Welch.
DUBNER: So by the time of the global financial crisis, G.E. looked a lot like a financial-services company. In Hot Seat, you write, “After Lehman Brothers went bankrupt, I knew it preceded not just the beginning of a down cycle for G.E., but the destruction of our business model.” I’m guessing a lot of people did not see that that was the destruction of your business model, not appreciating how reliant Big G.E., as you called it, was on G.E. Capital. Can you explain how reliant you were, how intertwined, and why you saw how bad this was going to be for you?
IMMELT: We were what was called a wholesale-funded finance company. So basically we would borrow unsecured debt because we had, you know, industrial cash flow and we were triple-A. And then we could lend that money out at a higher rate. And the difference between what we could borrow money for and what we can lend money for, created a very profitable financial-services company. You know, banks have deposits. We had some deposits, but we were basically prohibited, pre-financial crisis, from having deposits because we weren’t a bank holding company. So when Lehman Brothers went down, it was really a missile into the unsecured-debt market more than anything else. We were kind of collateral damage, if you will. And we were big; we were huge. So the combination of our size plus the fact that we weren’t funded by deposits was a real one-two punch. This is a crisis that came at you in waves. And then where regulators went, ultimately, which is probably exactly what they should have done, just really disadvantaged us.
DUBNER: It was really bad for G.E. specifically, it sounds like.
IMMELT: Extremely, it was extremely bad. It was hard to grow. It was costly. It was a huge challenge and you know, it wasn’t going to be like a month or two. There was no vaccine, let’s say. It was going to be permanent.
DUBNER: So you write that after reading, I think it was the first draft of the Dodd-Frank legislation, which set forward some regulations for the finance and banking industries, you said you felt that the federal government had pointed a cannon at G.E. specifically, that they didn’t want big financial institutions to also have an industrial arm.
IMMELT: There may have been a handful of others, but it really was at us, and basically the first draft said we were going to have to split off G.E. Capital from G.E., which at that moment in 2009, we just had no way to even think about doing it. It was just hard to consider what we would have to do. So like I said, the crisis came at us in waves, and this was another wave.
DUBNER: So I’m sure Tim Geithner had good reason to suggest this. I’m sure it wasn’t folly. Why do you think that you had been singled out?
IMMELT: I don’t know exactly, because Tim and I never had the conversation, but my sense was they probably always had in mind of making us a Fed-regulated entity. I think they basically felt like for a financial institution to be as big as G.E. Capital, it needed to be under Fed regulation. So I think to a certain extent, they may have looked at it in two steps and not one step, but I don’t know. In September of 2007 this was a $42 stock and had the broad support of investors and analysts. And we were executing a strategy that seemed to be working and was appreciated by our customers and our team and our investors. So, I never play victim. But I think that’s just a fact.
But others saw the facts differently.
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Just how devoted was Jeff Immelt to General Electric, the company he led for 16 years, and worked at for more than 35? Consider the story of the meatball on his hip. “The meatball” is what G.E. employees call their famous circular logo.
IMMELT: Yeah. So I have a daughter. She’s 34 now. But when she was a teenager, I used to always say that I was going to get a tattoo. And she would just say, “Yeah, Dad, big talk, no action, blah, blah, blah.” So one day, I finally said, “I’m going to do it today.” So I was in my office in Fairfield on a Saturday.
That’s Fairfield, Connecticut, where G.E. had moved its headquarters in the 1970s.
IMMELT: I Googled “tattoo Danbury,” because I wanted to be far enough away that maybe nobody would recognize me.
Danbury’s a little over 20 miles from Fairfield.
IMMELT: And so I drove to Danbury, Connecticut. Went to a tattoo parlor. There’s a woman tattoo artist and I showed her the G.E. meatball. I put my wife’s initials on top and my daughter’s initials on the bottom. She says, “Why are you doing this?” I said, “I work at G.E. and I play in a bowling league and I lost a bet. So this is what I have to do.” My daughter comes home like three hours later and I show it to her and she hits the floor, she screams. So you know, sometimes when you’re a dad you have to go that extra mile.
Immelt plainly loved G.E. and, for a long time, it loved him back. The epilogue of the book I mentioned earlier, Lights Out, is titled “Jeff Is a Friend.” When the authors Thomas Gryta and Ted Mann interviewed Immelt’s former co-workers, those colleagues would routinely start by saying “Jeff is a friend, but …” — and then they’d lay into him for all the bad things that happened on his watch. He did invest about $175 billion in acquisitions to grow the company’s life sciences and alternative-energy portfolios, among others; but there was another $400 billion of divestments, as Immelt sold off the storied plastics division, major parts of G.E. Capital, and NBCUniversal. The thing is, for a long time Immelt felt his plan to streamline and reshape the company was working. But the markets weren’t buying. At one point, the activist investing firm Trian Partners took a big position in G.E., which earned them a sit-down with Immelt in Fairfield. They presented an 80-page white paper whose title beautifully summed up G.E.’s dilemma: “Transformation Underway, But Nobody Cares.”
IMMELT: We were pivoting from 50-50 financial-industrial to more industrial. That’s not something you do in a day or two or a week or two. That takes time.
DUBNER: I’d like you to talk for just a second about when you were C.E.O., your role as a de facto ambassador for American capitalism, really. At one point or another, you interacted with many, many heads of state around the world. What did they typically want from you and what did you want from them?
IMMELT: The first thing is I always try to maintain good relationships with all the administrations and the Secretary of State and things like that. So I never was just freelancing. I always tried to understand: here’s what the U.S. interests are, so I can meet with ambassadors and things like that, so that’s number one. I think if you want to be a good global company, you have to know how to make money in a country and you have to know how to make money for a country. So you have to be able to say things like, “Hey, I want to sell you a jet engine, Your Highness, but I’m also creating 200 jobs.”
DUBNER: So let’s talk a little bit about politics, or at least the interface of a company like yours and an administration — keeping in mind, the financial crisis happening, the end of the Bush II era, and then the beginning of Obama’s first term. In an interview you did with 60 Minutes around this time, you write that Lesley Stahl had said that most Americans see big corporations as greedy and selfish. And you pushed back. You said, “Everybody in Germany roots for Siemens, everybody in Japan roots for Toshiba. I want you to root for me.” So does America, in your view, or at least a significant portion of America, just not like capitalism?
IMMELT: Oh, gosh, so I’d say, first of all, we had built our company to win around the world. And we were either the first or second-largest exporter after Boeing, right? So exporting creates incredible jobs that, you know, for every G.E. job there would be eight in the supply chain. So it created lots of competitiveness for the country. And the point I was trying to make with Lesley was exporting is a way to make a strong country. And it’s hard. It’s harder than almost anything else. And you shouldn’t criticize us for that.
Look, I lived in a generation, let’s say, from roughly 1980 to 2020, where the wave of productivity hit hard, information technology and certainly in the early parts of that time, shutting down factories in the U.S. and moving them to Mexico or doing back rooms in India or things like that. I think everybody viewed that as a common business practice and that anything we can do to be competitive. And, guess what? That didn’t work, that wasn’t sustainable over the long term. And it’s hard to portray yourself as a great citizen while that’s happening.
DUBNER: Earlier in the Obama administration, as part of the recovery from the Great Recession, the president asked you to chair the Council on Jobs and Competitiveness. And you write that you were really impressed with Obama’s intellect. But as you write, Obama didn’t, “empathize with the business community.” I’m curious, what do you think were the biggest ramifications of that, maybe up to and including the election of President Trump a few years later?
IMMELT: I would say President Obama saw the job of the president of creating jobs. And whoever could help him create jobs in the U.S. was a friend and whoever didn’t was not a friend. And things like tax repatriation — he viewed that as whining from some companies.
DUBNER: In terms of tax repatriation — or the lack of repatriation, keeping money out of the hands of U.S. tax collectors — where did G.E. rank among the offenders
IMMELT: We were on that list, for sure. By the time I retired, 70 percent of our revenue was outside the United States. And so people that made money around the world were like on the target list for sure.
DUBNER: So suffice it to say that for a company that many people still think of as a big, powerful, rich American company, you weren’t contributing to tax coffers as much as that person might realize.
IMMELT: Exactly, because we were big outside the U.S. The one thing I would say is an exercise that everybody should do is to go to any town and interview 25 small- and medium-business people. Because we always say we love them. But I think both parties go out of their way to make their lives miserable.
DUBNER: In different directions, yes?
IMMELT: In different directions.
DUBNER: Tell me the ways in which each party does that.
IMMELT: Oh, I would say on the Democratic side: regulations, for sure. And certainly the more recent Republican Party, just volatility. Volatility around globalization and different things like that. So when people ask me, I said “Go create your own index of small- or medium-business people and figure out what their lives are like. And if their healthcare costs are going up 50 percent a year, it doesn’t matter what the president is saying about how good a policy’s working. They don’t like it.”
DUBNER: Now we should say that you single-handedly got Donald Trump elected the first time.
IMMELT: Please, please don’t go there.
DUBNER: Well, not single-handedly, but for those who don’t recall the connection, you know, G.E. owned N.B.C. Universal at the time, which aired the reality show The Apprentice, without which Donald Trump probably wouldn’t have become even close to president.
IMMELT: I mean, clearly, The Apprentice was a platform for him but nobody, when we were doing The Apprentice, ever said, you know, “There goes the President of the United States.” I don’t think, I don’t think anybody ever said that.
DUBNER: Now you, I understand, are on record as a Republican. Did you vote for him once or maybe twice?
IMMELT: No. I never voted for him. No. You know, I’m a Romney Republican. So there’s 12 of us left.
DUBNER: Can you assess, however, some of the things he did from a business-community perspective as president that were beneficial?
IMMELT: Oh, so Stephen, I want to be very clear that I don’t want to in any way make a comment about supporting what’s happened the last six months or a year, really. I don’t. I will say: I believe in less regulation. I believe that everybody should help small- and medium-sized business, and that’s tended to be the way I’ve thought about politics. But I just think nobody, myself included, can support what’s taken place over the last six months.
DUBNER: All right. So let me just get back to the large picture. There are two main stories that G.E. observers tell about the downfall of G.E. as we knew it. One is that Jack Welch propped up the share price by bluster and B.S. and by browbeating his direct reports into generating profits, even if those profits were only on paper — and that he therefore left a company behind that was in decline or disarray, which you, Jeff Immelt, as incoming C.E.O., tried to modernize and globalize. That’s one story. The other story is that you inherited a great, if, you know, slightly graying company, and tried to remake it in your image and wound up destroying it with a series of bad acquisitions and bad decisions. Now, whichever story people tell, the ending is always the same, which is bad. So what’s your version?
IMMELT: Look, I guess I would just say two things. You know, the results of the company over the time I was there — we generated almost $300 billion of earnings and cash. We were number one in the industries we were in. We set up a global foundation way ahead of others. Other people that have adopted the initiatives that we started have won big, right? So that’s one piece. The other piece: it clearly didn’t end the way I wanted it to. I think markets were tougher. The tail of G.E. Capital was longer and more volatile than we recognized. The people that I’d put in place at G.E. Power didn’t do as good a job as they should have. And at the end, we had too much going on for the board and I own that. So I’m going to let others kind of plot how they want to put that. But those are the two pieces I give you.
DUBNER: So, Jeff, you wound up stepping down as C.E.O. a few months earlier than expected. Why did you do that, and what were those last months like?
IMMELT: Oh, gosh, the answer to your first question is that we all felt it was probably in the best interests of the company. I guess one thing I’d like people to know, and I know not everybody would give me the benefit of the doubt for, is I really loved the company. And I loved the people, and I always tried to do the best for them. What were the last months like? They were excruciatingly sad. This was my life. And it wasn’t going to turn out the way I wanted it to. And I felt like I had let people down, and that made me really sad.
DUBNER: So after you left, things got much worse for the company. The share price has dropped much, much more. There’s been a pretty unbelievable, really, dismantling of the conglomerate, and D.O.J. and S.E.C. investigations into improper accounting, including during your tenure. Are you concerned about civil or criminal charges against you personally?
IMMELT: Again, I’ll let that stand on its own, I would just go back to what I described to you earlier, which is to say we bent over backwards to do it right. We had detailed transparency with our board; we had the best auditors that money could buy. We had a multitude of relief valves and reviews and things like that. So, you know, we tried our best to get all those things right.
DUBNER: I am curious, what do you say to the longtime shareholder? You know, if it’s a retiree, if it’s a former G.E. employee themself who watched the stock price just get pummeled? If I were to corner you at the grocery store and say, “You know, you kind of screwed up my retirement,” what do you do with that even?
IMMELT: Look, I would say, “I don’t blame you for the way you feel. Here’s what we tried to do. Here are the actual results of cash flow generated and dividends paid and earnings generated and market position.” And I try to point out the context of what actually happened. And I end by saying I had every penny — not that this is a great consolation — but I never sold a share of G.E. stock. I had every penny of my 401(k) in G.E. stock. I was always in it with everybody else.
DUBNER: Okay, but you had a lot more pennies.
IMMELT: No, no, no. I’m saying — it’s not — it doesn’t give people — but I always start by saying, “Look, I understand the way you feel. I really do. But here’s what we tried to do.”
DUBNER: Do you still own some or all of that G.E. stock?
IMMELT: I still own a lot of G. E. stock and I just bought some recently.
DUBNER: I don’t mean to put you on a couch here, but I’m curious. You sound conscientious enough and self-aware enough that I’m guessing you feel a lot of guilt. You know, your career ended poorly, but it was a very good career for which you were obviously paid very, very well. And then the company is in bad shape now. Is that a feeling of guilt when you talk about looking back?
IMMELT: I just — I don’t want to put a word on it. I’ll let other people say — I don’t hide. And, you know, I’m going to try to continue to make contributions as best I can.
These days, Jeff Immelt splits time between coastal South Carolina and coastal northern California. He teaches a leadership class at Stanford and he’s a partner in a venture-capital firm called New Enterprise Associates, where he focuses on technology and healthcare.
DUBNER: So at the beginning of your new book, Hot Seat, you write about the inspiration for the book. You were doing a Q&A with the leadership class that you teach at Stanford. And this was right after Fortune magazine had published a piece called “What the Hell Happened at G.E.?” And it mostly argued, you know — I hate to say it to your face, but it mostly argued that Jeff Immelt is what happened to G.E. It was a very critical piece. And one of your students asked you about the article and you said, “I know some feel that I have let them down, and that will weigh on me for the rest of my life.” So I’m curious, what does that feel like? How much does it weigh on you now, a couple of years out?
IMMELT: Oh, gosh, there’s not a day that I don’t think about it. And that’s despite the fact that, you know, I love what I do now. I’m very happy. I have friends. I have a professional career that I enjoy. I have a family that I love. But there’s not one day that goes by that I don’t sit back and say, “I wish the stock price weren’t where it was. I wish people weren’t writing those things. I wish I had done certain things differently.” And I think that every day I live, I’ll have those moments. You know, every job looks easy ’til you’re the one doing it. Your podcast listeners should keep that in mind.
Jeff Immelt’s book, co-written by the journalist Amy Wallace, is called Hot Seat.
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Freakonomics Radio is produced by Stitcher and Renbud Radio. This episode was produced by Mary Diduch. Our staff also includes Alison Craiglow, Greg Rippin, Mark McClusky, Matt Hickey, Zack Lapinski, and Emma Tyrrell; we had help this week from Jasmin Klinger. Our theme song is “Mr. Fortune,” by the Hitchhikers; the rest of the music was composed by Luis Guerra. You can subscribe to Freakonomics Radio on Apple Podcasts, Stitcher, or wherever you get your podcasts.
Here’s where you can learn more about the people and ideas in this episode:
- Jeff Immelt, former C.E.O. of General Electric.
- Hot Seat: What I Learned Leading a Great American Company, by Jeff Immelt and Amy Wallace (2021).
- Lights Out: Pride, Delusion, and the Fall of General Electric, by Thomas Gryta and Ted Mann (2020).
- “What the Hell Happened at GE?,” by Geof Colvin (Fortune, 2018).
- “G.E.: 2017 Annual Report,” by General Electric (2017).
- “Export Nation: How U.S. Metros Lead National Export Growth and Boost Competitiveness,” by Brookings Institution (2010).
- “How to Succeed by Being Authentic (Hint: Carefully) (Ep. 438),” by Freakonomics Radio (2020).
- “Extra: Jack Welch Full Interview (Ep. 326),” by Freakonomics Radio (2018).
- “A Conversation With PepsiCo C.E.O. Indra Nooyi (Ep. 316 Update),” by Freakonomics Radio (2018).