Josh Aguilar – GE: Lessons From the Rise and Fall
Colossus
Josh Aguilar is a senior equity analyst at Morningstar. We cover GE’s business strategy, how it lost the right to be an industrial conglomerate, and the role GE Capital played in its rise.
It would be an understatement to say that GE looks very different today than during its peak in 2000. As you alluded to, GE was worth nearly $600 billion or so. Many of your listeners are going to remember that CEO Jack Welch was named Manager of the Century by Fortune. And he humble was then called the world’s most admired company by that same publication and the most respected company by the Financial Times. GE was in fact, the most valuable company. Flash-forward today gone are the days when a larger than life figure like Jack Welch would wax poetic of GE being the place where one’s dreams could come true and management was considered one of GE’s structural competitive advantages.
Problems could be pegged on two areas to answer the question. One is culture, and two is capital allocation. To a certain extent, they worked in tandem with one another. Welch’s issues were really two-fold, short-termism at the cost of rational long-term decision making. Secondly, a failure to mitigate downside risk.
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