Dean Clough

June 10, 2022

Portico Darwin: It Was Jack Welch


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Elephant in Room
I have expressed myself many times regarding January 6:  Trump and his fellow seditionists should be jailed, at a minimum, and immediately.  The evidence is already overwhelming, and that includes on people like the traitor Ginni Thomas.  The Republicans must come to their senses RIGHT NOW and help us recover as a nation.  I can't believe how we've let our standards slip so; but it's not too late.

Anything new from last night does not change my belief that January 6 is the single worst day in modern American history.  Worse than Pearl Harbor.  Worse than JFK, MLK, and RFK.  And worse than 9/11.  There must be swift and sure punishment for those that would undermine our democracy.

Here is the brilliant Heather Cox Richardson and her take on last night's proceedings - it's a comprehensive summary if you're looking for one.

June 9, 2022 - by Heather Cox Richardson  

We Now Return to Our Regular Programming (And It's Long!)

For a long time now, I've mostly blamed "Saint" Ronald Reagan and other Milton Friedman acolytes for the state of our nation today.  A nation where being rich is all that matters, and if you need help, that's your problem (and fault).   

I've even read two whole books on the subject, and have suggested them here before for those that have an interest in how we got here.  The books were both written by Kurt Anderson and are called "Fantasyland" and "Evil Geniuses".   I still recommend both highly, but now there is some new information.

In fact, shocker, I was wrong.  It was not Ronald Reagan or anyone else, or at least not to the degree I always assumed.  It was the deified Jack Welch, the Chairman and CEO of General Electric from 1981 through 2001 that did it. 

Let me be among the first to say:  fuck you very much, Jack Welch.  My angst stems from having just read the new book "The Man Who Broke Capitalism", by David Gelles.  It provides ample evidence that it was Welch, at least primarily, that moved us from a paternalistic "Golden Age of Corporations" to the kill-or-be-killed primacy of shareholder capitalism we still suffer with today.

Prior to Welch's arrival, General Electric was a model of the benevolent corporation.  Workers were cared for, well-paid, and respected for their contribution to the overall success of the corporation.  Many returned the favor by staying with the company for their entire professional careers.  Often this spanned generations, with children following their parents on to GE's many assembly lines in the US.  Remember, in 1981, GE still made TV's and appliances right here in the US, especially in big company towns like Louisville, KY - at its peak, GE employed thousands of people there and in towns like Erie, PA and Schenectady, NY. 

Imagine:  middle class Americans made televisions here, in this facility.  And we could all afford them.  This was "Appliance Park" in Louisville.


But that was bad for the company, right?  They didn't make any money, right?  Of course, that's wrong - at the time of Welch's hire in 1981, GE was one of the most profitable and valuable companies in the world.  In fact, at the time, 

the company ranked No. 1 in major household appliances, No. 2 in air conditioners, No. 5 in consumer home electronics, No. 7 in commercial appliances, and No. 1 in coin-operated appliances. 

GE wasn't the only one.  Most corporations, by 1981, still considered their customers and employees to be of paramount importance.  But Jack Welch changed all of that, and he's really the first to make increasing shareholder value as the ONLY thing that mattered.  So where his predecessors at GE and peers like Boeing, AT&T, and 3M all sought a balance between owner profits and stakeholder benefits, Welch didn't see the point. 

Upon his ascension to the top at one of America's most storied and largest companies, he instead focused on one thing, and one thing only:  making GE's stock price go up.  How to do that?  Meet or beat Wall Street's quarterly earnings expectations.  And how to do that?  Welch, constantly and over 20 years in charge, used these three methods:

  • Downsizing
  • Dealmaking
  • Financialization

And the fact is, he was the first - ever - to employ them at scale.  He saw employees as cost centers, not assets, so would cut thousands of jobs in profitable divisions, leaving a hollowed-out middle class in community after community.  But of course, that makes growth tough, so Welch also mostly invented the modern-day world of mergers and acquisitions.  He bought growth.  And the financialization.  Oh, the financialization.  It can be quite easy to make quarterly numbers year after year after year when you're able to cook the books via your black-box GE Capital division.  It's all true.

Worse, it worked exactly as he hoped.  GE's stock price and value exploded.  In an era from where the ethos of "greed is good" emerged, Welch was LIONIZED and IDOLIZED on magazines and on TV.  He was making a killing for himself and Wall Street.  Main Street?  Not so much.

The employees and the towns in which they lived (and thrived for decades previously) didn't fare so well.  In fact, most saw their jobs eliminated, sold, or moved.  Here are some of Jack Welch's other greatest hits:

  • Goodbye defined-benefit pensions, hello 401k
  • Outsourcing
  • Offshoring
  • Relentless cost-cutting, regardless of corporate profitability
  • Stock buy-backs
  • Executive compensation goes crazy-town, in relation to the average worker

I was surprised to learn that it was Welch who first employed things we now assume as normal.  But his whole approach represented the first major breach in the unspoken agreement between employer and employee, and we're still paying for that breach.

Oh, and as a special bonus:  Jack Welch was a Textbook example of toxic masculinity.  To paraphrase from the book:  "These dumb motherfuckers don't know anything.  I know more than they do.  Tell me again why I am paying these dumb fucks?"  Managers up and down the org chart lived in constant fear of their division not making their quarterly numbers.  For the record, I saw this first hand while consulting at GE Capital in the late 1990s, at Genstar Container Corporation.  Gosh, I can only imagine the financial shenanigans.
I know it seems implausible that most/all of what ails us now can be blamed on one single, Napoleonic individual.  But the problem is "Welchism" was seen as a triumph at the time, consequences (unintended or otherwise) be damned.  So that meant that Jack Welch's underlings would be hired away from GE to work their magic in other corporations.  The book highlights how companies like Boeing, AlliedSignal, Tyco International, WorldCom, Enron, and AT&T - all led by Welch proteges - met with less-than-desirable outcomes when downsizing, dealmaking and financialization were the main products.

Example:  the environment at Boeing that led to the 737 Max scandal is a direct result of a Welch underling, Jim McNerney.  Not to mention Boeing's fall from grace as one of America's most respected engineering companies.  And remember:  it wasn't just former GE executives emulating Jack Welch.  By the late 1990s, he was seen as an almost God-like figure in business, and had many imitators.  His words and methods were accepted as gospel, and we are still living with the fallout.

But I will conclude on a positive note.  We are perhaps now recognizing the benefit of a more balanced approach, thus the renewed emphasis on stakeholder capitalism. 

But is it too late?

Check out the boldness of one Rikki Aurich, the noted dining and movie critic, hailing from the hardscrabble streets of Tiburon:

Love Tommy’s Joynt, we were frequent patrons (before a movie at AMC 1000 of course) but disagree with your review of Maverick.  Thought the movie was great and may I say surpassed the original?   

"Great"?  Citizen Kane is great.  I'd say even Animal House and some recent James Bond movies with Daniel Craig are great.  I'll give you Top Gun:  Maverick as being a great experience.  But it is not a great movie.  I mean, it's certainly no North by Northwest!

Certainly an avid reader of this blog, I was quite pleased to see Bill Gates and I on the same page (great pun!):

5 Great Books for the Summer | Bill Gates

If you've paid attention here, or listened to me at parties, you know I've been pushing The Ministry For The Future for quite a long time.  Amazing book.  And it's a bonus that Bill is pushing my hero Ezra Klein's book, too!

Thank you to any one else other than Bill Gates that is reading this newsletter.

Here is Whitney Houston's singular performance of "The Star-Spangled Banner" and also "America the Beautiful" from Super Bowl 25 in 1991. 

Does anyone really want to lose this amazing country of ours over a complete and awful slimeball like Trump? 


About Dean Clough

Plans To Enjoy Life.