GE Powered the American Century, Then It Burned Out

The article ended with an invitation to people who know about GE or some such to comment, but apparently need to be a subscriber to the WSJ to do that.

Subscribe to the WSJ? When I was at FedEx, I subscribed to the WSJ, got the copy each day, but soon concluded that the content was not very useful, had serious flaws like your "no insight", and have nearly totally ignored the WSJ since.

"Gossip"? I agree. And I have an explanation that applies to the WSJ, Forbes, etc.: The writing is not to be informative but a manipulation of the assumed emotions of the readers. The manipulation is to write the stories so that a reader can imagine that they are C-level or BoD people, have a vicarious emotional experience, and, thus, tell themselves that they are learning about business. No, they are learning about applied formula fictional, manipulative story telling. The stories concentrate on gossip, cut of the jaw, grimace on faces, style of eyeglasses, and other personality fluff as if that is what is really important; no, it is what is assumed a reader, maybe the guy in the mail room, the floor cleaning squad, or a security guard, can best find interesting. It is as if the assumption is that only a tiny fraction of the population cares about serious business information but nearly everyone has emotions. Manipulation of emotions, not meaningful information.

A good fraction of the comments mention the stuff that GE has long believed that "a good manager can manage anything" or some such. I heard this strongly when I worked at GE. To me the problem with that claim was that it called for management with too little knowledge of the business, just as in your "no insight".

Yes, early in my career, I was at GE: I was the applied math, statistics, digital filtering, fast Fourier transform, numerical analysis, curve fitting, etc. guy at the HQ of GE Time Sharing. Looking back, the place was devoid of "insight".

In the WSJ article, they keep mentioning GE Power. Okay, that has to do with gas turbines. Yup, GE got into that field early in the history of aviation for turbines for superchargers for airplanes at high altitude with thin air. There the need was just desperate.

Sooooo, GE has gone now nearly 100 years with gas turbines. More generally apparently a pillar of the business has been urgent demands from the US military: (1) The engines on the FedEx planes were from GE in Lynn, MA and originally for a USAF drone. (2) The bigger part of GE aircraft engines was in Ohio and did the big high bypass gas turbine engines, IIRC, originally needed for the Lockheed C5A.

[For subsonic flight, high bypass works better than pure jet. Why? For throwing mass m out the back at velocity v, pay (1/2)mv^2 in energy but get momentum change, which is what moves the plane, mv. So to get the most momentum from the given energy from the fuel, want lots of m and less of v. So of course do throw some hot air out the back but also have a big fan, ducted propeller, grabbing huge volumes of air and pushing it out the back around the core that is burning the fuel, that is, bypassing that core. Of course, Pratt & Whitney, Rolls Royce, and some others around the world also are into aircraft jet engines.]

Theme: GE was really slow to come up with new businesses. That is, their Power division is from initiatives nearly 100 years old. It's been a good business, but there have been too few such while the rest of business charged ahead, e.g., with computing while GE missed out.

GE was early in both transistors and computing. Some of their computing was the computer for the MIT Project MAC, MULTICS. Suddenly some in GE saw that their transistor business was no longer just a profitable cash cow, that technology progress, really integrated circuits, would mean new R&D and capital expenses. So, the generalist managers with "no insight" bailed -- got out of the transistor business and sold the computer division to Honeywell. But MULTICS was a big deal, the first with a lot of stuff, e.g., attribute control list security (ACLs) still important, and lots more. IIRC we can trace much of the architecture of the Intel chips, 386 on, back through Prime Computer (a super-mini computer based heavily on MULTICS and started by some Honeywell engineers) to MULTICS.

Lesson: Due to the generalist managers with no insight, GE missed out on the future of computing.

For more, in principle, there's no good reason GE could not have done what Intel, Microsoft, Cisco, Google, QUALCOMM, Facebook, Amazon, Apple, etc. have done.

Lesson: GE just did NOT do well cooking up good new businesses internally. Yes, the generalist managers would buy businesses based on whatever, sell divisions based on whatever, but for all that financial musical chairs, with only a few exceptions, e.g., GE Capital, long essentially an unregulated bank, just would not think hard about the future of new directions in business.

Yes, there are some close parallels with IBM. I worked there, too, in an AI project at their Watson lab. For one of the problems we were trying to solve, I did, later published, some applied math, a colleague called "radical, provocative", that was much more powerful than what we were doing with AI. I also proposed a research direction, in applied stochastic optimal control, the field of my Ph.D. dissertation, but IBM and Watson management didn't want to let me do. Uh, stochastic optimal control can be a massive user of computer hardware and in a sense an ambitious direction for AI. Since then the Princeton ORFE department has been working hard on that direction.

Lesson: IBM's Watson management and IBM more generally blew a good opportunity. Reason? A big one is the "myth of the generalist manager".

Suspicion: Long the internal GE office power politics was really severe with heavy emphasis on severity and appearances over reality, lots of gossip, etc. The WSJ article hints at this, and, besides, it's standard and called "goal subordination", i.e., fight with the guy down the hall, subordinate the goals of the company to those of personal promotion via political infighting. One of IBM CEO Gerstner's early remarks at IBM was that it was IIRC "the most inwardly directed, arrogant, process-oriented company" he ever saw. From my time in both GE and IBM and the WSJ article, I have to agree with that remark of Gerstner and suspect it applies to both IBM and GE.

Fun stuff: Simple, O(n) solution to the Google lake volume puzzle:

https://news.ycombinator.com/item?id=18648999

astrange2• 8 years ago

How did you end up working at both GE and IBM? I hope you've found something better to do by now.

ghaff3• 8 years ago

Due to the generalist managers with no insight, GE missed out on the future of computing.

Of course, you could argue that any number of companies that were successful as computer companies in the 1970s and 80s didn't make (or at least successfully make at scale) the transition to any of a number of successive waves of computing.

And it's difficult to see the path to Google (though DEC had AltaVista) and certainly to Facebook or Amazon for any of those companies.

haaen2• 8 years ago

The author does write about GE's business problems. GE capital, as mentioned above. And the Alstom acquisition, which was a too expensive bet on the wrong horse.

protomyth• 8 years ago

Well, maybe their "rank and yank" fostered a low teamwork environment or they fired the people who would actually of helped them with the next big thing. Frankly, their management contribution to American business has to be one of their darkest legacies.

tinkerteller• 8 years ago

My employer is famous for hiring folks at executive levels from GE and I can tell you without doubt that most of them had been some of the the worse execs I have came across. I can easily see GE as frothing with some of the worst senior level clueless "talent" out there.

I think GE used to be great under Jack Welch because he ruthlessly demanded results. When you operate in that mode virtually anything works because everything other than success gets brutally weeded out. You can start any number of new businesses and the evolution system implemented by ruthless pruning eventually will yield successful species. After Welch left, GE decided to use most of his principles as blueprint except one: demand top notch results and ruthlessly weed out everything else. One company that operates like GE under Welsh these days is Amazon. It would be very hard for any exec to spend 5 years at Amazon without showing amazing results. On the other hand I know plenty of execs at big 5 tech who have sailed through for as much as decade by simply "managing up".

raverbashing• 8 years ago

This seems like a "darned if you do, darned if you don't" mentality

Allowing managers to coast and play office politics sucks but also squeezing them doesn't seem very positive (though I'm sure it's great for results)

Aloha2• 8 years ago

The article gives the answer early on - the company is still in a phase of change from selling GE Capital - for 20 years they were used to using Capital as a source of excess cash to paper over other temporary market issues elsewhere in the company - they no longer have that ability - so now the cyclical nature of normal business will show directly on their balance sheets and statements.

GE will probably be just fine - in a decade.

xapata2• 8 years ago

I'm dubious that business has a cyclical nature. It's hard to distinguish a random walk from noisy waves.

Aloha2• 8 years ago

Demand for certain goods and commodities are cyclical - I design dispatch consoles, we tend to get customer verticals in clusters - public safety, power/utilities, transportation and it continues in a cycle, based on replacement intervals (on a 20 year lifetime) - I know Motorola sees similar cycles too - they'll oscillate between public safety and commercial markets.

I know there are similar business cycles in aviation, power generation and industrial controls.

2sk21• 8 years ago

I agree with your assessment. GE was a conglomerate and as such the various businesses in its control operated on different cycles.

nervousvarun• 8 years ago

Absolutely agree...also didn't a similar thing happen with GM when they got rid of their internal financing division (GMAC)?

GE Powered the American Century, Then It Burned Out

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