A culture that disdained bad news contributed to overoptimistic forecasts and botched strategies
Jeffrey Immelt, the longtime boss at General Electric Co. , was a polished presenter who held court each year at a waterfront resort off Sarasota, Fla., where industrial executives and Wall Street listened for his outlook on the conglomerate.
“This is a strong, very strong company,” Mr. Immelt said at the event last May.
.. GE’s precipitous fall, following years of treading water while the overall economy grew, was exacerbated, some insiders say, by what they call “success theater.”
Immelt and his top deputies projected an optimism about GE’s business and its future that didn’t always match the reality of its operations or its markets
.. “The history of GE is to selectively only provide positive information,” said Deutsche Bank analyst John Inch, who has a “sell” rating on the stock. “There is a credibility gap between what they say and the reality of what is to come.”
.. “GE itself has never been a culture where people can say, ‘I can’t.’ ”
.. GE once had the highest market value of any U.S. corporation. Its alumni have gone on to run companies such as Boeing and Chrysler.
.. Few knew just how badly ailing the American icon was. Even GE’s board didn’t realize the depth of problems in the biggest division, GE Power, until months after directors had replaced Mr. Immelt
.. A spokesman for the former CEO pointed to his decision to purchase $8 million worth of GE shares in 2016 and 2017. That included 100,000 shares in mid-May at a price roughly twice today’s.
.. But Mr. Immelt didn’t like hearing bad news, said several executives who worked with him, and didn’t like delivering bad news, either. He wanted people to make their sales and financial targets and thought he could make the numbers, too, they said.
.. Over the past three years, GE spent more than $29 billion on share repurchases, at an average price of almost $30, twice the current level. That included billions of dollars spent less than a year before GE suddenly found itself strapped for cash last fall.
.. Trian Fund Management LP, which invested $2.5 billion in GE in 2015, wanted it to buy back even more stock. The activist investor urged the company to borrow $20 billion for repurchases (which it didn’t do), based on a belief that the profits Mr. Immelt was promising would send the stock soaring when they arrived.
.. Instead, at Mr. Immelt’s retirement in August the stock was below its level when he took over 16 years earlier. Including dividends, GE gained 8% with Mr. Immelt at the helm, while the S&P 500 rose 214%. Since he stepped down, the stock has lost about 43%, erasing almost $94 billion in market value
.. Instead of $2 a share GE now projects $1 to $1.07.
.. Several directors discussed in November whether the entire board should be fired
.. Jack Welch, delivered steady profit growth and sent shares soaring in the 1980s and ’90s by striking deals and aggressively slashing costs and jobs. Mr. Welch also built up a huge lending business called GE Capital that for years generated outsize profits—but nearly sank the company during the financial crisis on Mr. Immelt’s watch.
.. Results were strong at two of GE’s big units, aviation and health care (medical equipment).
.. Acquiring companies that help drillers pump and transport fuel, he had GE spend more than $14 billion over 10 years, most of it based on higher oil prices than today’s.
.. Mr. Immelt’s optimism was part of the problem, according to some people close to the situation. They said he told the board that management had identified risks in the power business, yet downplayed them. The probability and risk were way off, one said.
.. Lisa Davis, the U.S. chief of Siemens, said the German company’s executives “have seen this decline coming for the last several years.” So Siemens had reduced its capacity in its power business, she said, while GE bought more.
.. According to former executives, the upgrades meant lower service fees for customers, in exchange for one-time upgrade costs, meaning that future sales were being pulled forward.
The Two Things That Will Determine Netanyahu’s Fate
With the Israeli police recommending that he be indicted, the prime minister is entering a major battle for political survival.
.. Twenty-one years ago, in early 1997, the Israeli police announced its recommendation that Benjamin Netanyahu, then a 47-year-old first-term prime minister, be criminally indicted for breach of public trust.
.. The attorney general in 1997—a well respected jurist beyond suspicion—decided that the case was too weak for trial. Nor did the police recommendation alone cause Netanyahu’s coalition partners to leave the government or go to new elections. And so, the 1997 police recommendation notwithstanding, Netanyahu survived politically and continued to serve until 1999, when he was defeated in the ballot box.
.. he is entering a major, perhaps final battle for political survival... Case 1000, involves a longstanding Netanyahu household practice of receiving regular gifts from a small set of multi-millionaires, some with business interests in Israel... “Receiving gifts from friends is not forbidden” is the Netanyahu public defense... the case reflects the widespread perception that the Netanyahu family enjoys the good life just a little too much for public servants, and often disregards norms and perhaps even the law in pursuit of perks. Netanyahu, in this regard, ushered in an age of leaders who didn’t espouse the modest, even austere image of the early-day Israeli leaders... Case 2000, involves the media, and it is in many ways far more troubling. Netanyahu has been media-focused and media-savvy, more than any other Israeli leader... he Madrid peace conference of 1991. He was armed with perfect English, a baritone voice, and an American style of speaking, replete with well-crafted sound-bites, visual gimmicks, and—a novelty in 1990s Israel—an interest in the minutiae of interviews: how to apply makeup and which camera angle to choose for best effect... He seemed then to be part of a wave of young, attractive American-style politicians around the democratic world, such as Bill Clinton, Tony Blair, and Gerhard Schroder, even if ideologically he was much closer to Ronald Reagan, Margaret Thatcher, and Helmut Kohl... Over the decades, he has paid a great deal of attention to message management, and, increasingly, to management of the media itself... In 2007, however, something dramatic changed. The main newspapers in Israel suddenly found themselves outmatched in their own game: a new publication, Israel Hayom (“Israel Today”) appeared on Israeli streets. Rather than a hostile tone toward Netanyahu, Israel Hayom (also known as the Bibi-paper) propagated an adoring tone toward Netanyahu and his family, and a hostile one toward Olmert, the center, and the left. Israel Hayom’s cover price was unbeatable: 0.00 shekels... No one suffered more from the entry of Israel Hayom than the old papers, chief among them Yediot Ahronot. The Israeli public took up the free publication; when Netanyahu became prime minister Israel Hayom also adopted a positive, optimistic tone about the direction of the country, and all this at no financial cost to the reader. It became the mostly widely read publication, dethroning Yediot Ahronot after many years, and causing havoc throughout the press scene... Case 2000 surrounds a shocking revelation: a tape recording unearthed in a separate investigation of apparent negotiations between Netanyahu and the publisher of Yediot Ahronot. The purported deal was a detente between the two warring factions: the publisher, Noni Mozes, would provide more favorable coverage for Netanyahu in his paper, and Netanyahu would limit the circulation of the competitor Israel Hayom to weekdays, leaving the lucrative weekend editions to Yediot Ahronot... Netanyahu has claimed that he was just bluffing; there was no real quid-pro-quo, merely a proof of precisely what Netanyahu had been saying all these years: The media moguls were out to get him.. the deal never came to fruition.. the police claim, Netanyahu was not bluffing; he convened parliamentarians to see what legislation might be promoted to limit his own ally publication and looked into implementing the deal. He was, they claim, conspiring to use his official position to the benefit of a commercial entity in exchange for a political favor. If a correct interpretation of the facts, that is bribery... Netanyahu has now publicly acknowledged that the “Israel Hayom bill” (not Iran, or the Palestinians, or economic affairs) was the reason for calling the elections.. Some members of his own party would hope that he resign without an election, meaning that one of themwould replace him temporarily... He may point to the letter of Israeli law, which does not require a prime minister’s resignation until conviction (despite precedent to the contrary.. Israelis are correct, however, that the string of corruption cases in the past two decades have brought a new a level of shamelessness to Israeli political life... If his term ends in the coming year it will be because he is forced to: most likely his partners eventually force him to resign, or the voting public opts for someone holding a broom.
The Mind Meld of Bill Gates and Steven Pinker
Mr. Gates readily acknowledged that the person he is today is not one he would have recognized when he was in his 20s and single-mindedly building Microsoft. “I was a zealot,” he said. “I didn’t believe in weekends. I didn’t believe in vacations. I knew everybody’s license plate so I knew when they were coming and going. That was my life: doing great software.”
.. Plus, you don’t want a tech company run by somebody in their 60s. At least I didn’t want to. I ended up retiring at 53.
.. But for a young man in his 20s, writing software night and day may be the best way to add to human welfare. I’d never heard of vaccines. I didn’t have any money. But the personal computer, the internet, hey, that’s what I was good at. And I enjoyed doing it every day.
.. I came across statistics that homicide rates in the Middle Ages were about 35 times what they are today in Europe. When I posted this online, I started receiving correspondence citing more examples: The rate of death in warfare has come down by a factor of 20 since 1945. Domestic violence is down. Child abuse is going down. I was sitting on all these data sets showing reductions in violence that few people were aware of that I thought ought to be better known.
.. That “things getting better” is the greatest story that no one knows.
.. there’s the idea that we can’t want something good for ourselves without wanting it for everyone.
.. What makes Papua New Guinea — where there’s no police and revenge after revenge — different from Western society is that when we give ourselves over to the law, we want it to be executed impartially. We gain stability. But if you could get your son off, of course you’ll try.
.. the proposition, Philip — which comes from Spinoza. He said those under the influence of reason desire nothing for themselves that they do not desire for all humankind. But reason is not a powerful part of human nature. Innately, we favor family over strangers, our tribe over other tribes. It’s only when we’re called upon to justify our beliefs — not consult our gut feelings, but convince others of the right way to act — that we conclude that all lives have equal value.
.. when you consider a radical change, like “Hey, let’s tear up the global trade agreements; they’re a disaster,” you’re more likely to implement it if you think things are getting worse. “Let’s tear up the treaties. Let’s try a nondemocratic approach.” Your willingness to go off the current path is much, much higher.
.. There’s a tendency in journalism and political debates to assume that it’s easy to achieve a perfect society: “Good people would do that.” The fact that we don’t means that evil people must be running the system: “Let’s throw them out and find nobler ones.” This leads to empowering charismatic despots and destroying institutions that have done a lot of good.
.. I’m sure Bill gets this all the time: “Why throw money at the developing world? They’re just going to have more babies and be just as poor.”
.. What indicator improves even faster than reduction in violence? Our distaste for violence. We’re more upset about it today. If I see someone spanking a kid — I’m stealing from Steven’s book — I might get up and say: “Hey, wait a minute!” Forty years ago, it might have been more like: “Do you want to borrow my belt?”
.. Extreme global poverty has been reduced from 90 percent 200 years ago to 10 percent today.
.. The person who invents an affordable and efficient toilet should be made a saint.
Think how much human happiness will be granted, how much human suffering eliminated. We should think quantitatively; it’s the morally enlightened way. But it’s not the way our brains evolved when we make moral evaluations.
.. One of the biggest enemies of reason is tribalism. When people subscribe to an ideology, they suck up evidence that supports their preconceptions and filter out evidence that goes against them. Contrary to the belief of most scientists that denial of climate change is an effect of scientific illiteracy, it is not at all correlated with scientific literacy. People who believe in man-made climate change don’t know any more about climate or science than those who deny it. It’s almost perfectly correlated with left-wing versus right-wing orientation
.. But I’m optimistic. I do think awareness of how things have worked is important to recreate a conservative center — that is, make us careful about what we change.
.. innovation is not viewed as an unalloyed way to improve the human condition. And that’s fair, because it’s not pure. Does social media split us into tribes in a way that’s dangerous? Does it create, even in high school social circles, a channel for bullying, or a desire to look perfect in photos?
.. There are certain things that governments are always going to do better than private innovators. Basic research, for instance.
.. PG: Name a problem we may think of as intractable that you’re optimistic about solving in the near future.
SP: War between countries. Civil wars are harder to eliminate because there are so many insurgent and militia forces. But there are only 192 countries. They could agree not to declare war on each other. I think we’re on the way.
John Stuart Mill Showed Democracy as a Way of Life
Donald Trump is always trying to cure his loneliness by making friend/enemy distinctions; trying to unite his clan by declaring verbal war on other groups; trying to shrivel his life into a little box by building walls against anybody outside its categories.
.. Richard Reeves points out that in “On Liberty,” Mill used the words “energy,” “active” and “vital” nearly as many times as he used the word “freedom.” Freedom for him was a means, not an end. The end is moral excellence. Mill believed that all of us “are under a moral obligation to seek the improvement of our moral character.”
“At the heart of his liberalism,” Reeves writes, “was a clearly and repeatedly articulated vision of a flourishing human life — self-improving, passionate, truth-seeking, engaged and colorful.”
.. He championed the labor movement, was the first member of Parliament to call for women to be given the right to vote, was the leading British philosopher of the 19th century and served as a loving son, husband and friend.
.. Mill had an optimistic view of human nature and probably an insufficient appreciation of human depravity
.. Mill was living in a Victorian moment when the chief problem was claustrophobia — the individual being smothered by society. He emphasized individual liberation. His emphases probably would have been different if he had lived today, when our problem is agoraphobia — too much freedom, too little cohesion, meaning and direction.
.. His example cures us from the weakness of our age — the belief that we can achieve democracy on the cheap; the belief that all we have to do to fulfill our democratic duties is be nice, vote occasionally and have opinions.
.. Mill showed that real citizenship is a life-transforming vocation. It involves, at base, cultivating the ability to discern good from evil, developing the intellectual virtues required to separate the rigorous from the sloppy, living an adventurous life so that you are rooting yourself among and serving those who are completely unlike yourself.
The demands of democracy are clear — the elevation and transformation of your very self. If you are not transformed, you’re just skating by.