I recently finished reading "The Man Who Broke Capitalism," a new book by New York Times business reporter David Gelles. The book describes how Jack Welch, while he was CEO of GE in the 80s and 90s, fundamentally changed the way corporations operate. I reached out to Gelles because his book provides essential insights into corporate behavior today. This conversation has been edited for length and clarity. I hope you enjoy it. — Judd
Thank you for this conversation. I grew up in a GE town where Jack lived. Three shifts, noon lunch whistle, acres and acres of GE buildings and parking lots and employees. My dad installed Jacks pool and plenty of his house projects; his daughter was my chemistry lab partner in high school. Then the decline came, and the PCB pollution, and the job loss. Our vibrant Main Street became a ghost town, four theaters closed, shops for every specialty gone, uncles and grandfathers left with a shrinking retirement anchored to GE stock and gutted benefits. While Jack moved on and up. My father will not buy a GE product, not even a light bulb.
My condolences. This is in a nutshell everything that this book and Judd's column speaks about. I STILL have some of the GE stock that my father bought. I inherited it from my mother and watched it sink like a stone. It's not worthless, but...
I got an MBA in 2012 and at no point during the two-year program did I recall hearing any professors talk about raising wages for employees. It was all about revenue growth - negative externalities (e.g., climate change) be damned - and keeping costs (e.g., reducing wages, outsourcing) as low as possible. GE was imploding at the time, following the 2008 financial crisis, and yet we talked about Jack Welch's management philosophy as the gold standard for how to run a corporation. The concept of shareholder primacy is indoctrinated early in these programs, which tend to produce future executives. Schools are changing their tunes rapidly, but it definitely feels performative.
This is our system top to bottom. I owned a small business in which many of the things we sold required a licensed refrigeration tech to do the start up and maintenance. It was difficult to find someone that would consistently do a good job. Then I found a young man starting his business who was thorough, punctual, knowledgeable etc etc. I started giving him all my business and referred others to him.
He became successful and started making good money. After a couple of years he came in to tell me he was shutting down his operation. When I asked why he said “I’m tired of working so hard. A friend and I are going to sell used cars. You buy some cars that run, sell them for the down payment and get the monthly payment for awhile. “They” stop paying, you repo the car and sell it to someone else. It’s a goldmine”.
Silly me, I was looking at my customers as “partners” helping them with their business needs, not as suckers.
It would appear greed and expediency broke capitalism. The big boys taught the little guy to “get away with it”.
One thing that can't be forgotten when we talk about living wages, if Starbucks is similar to many other service industry jobs, it's nearly impossible to get a full time schedule. Even worse, it's very hard to get a consistent schedule, you never know from week to week what shifts you'll be working, and possibly not even how many hours. Not only does this make it harder to budget, it directly attacks the ability of workers to arrange things like child care.
And now we have one of our political parties which has made as one of its "raison d'etres" to ensure maximum corporate profits. At the same time, it has successfully convinced half the people in this country that nothing else matters.
As long as the GOP can warp American laws and culture to favour the super-rich, they will continue to bribe them. The only thing the GOP worships more than money is power.
"An evil GOP enemy will burn his own nation to the ground .. just to rule over the ashes."
For years I've been scratching my head, trying to put my finger on what happened in corporate America. Something shifted and things went down hill from there-THIS is it-Jack Welch!!! Going to get this book
Welch was an insidious force in Corporate America. After he left GE he was celebrated and lauded and wrote a column for BusinessWeek while the "empire" he built crumbled all around him in real-time. The "innovation" of GE financial has been replicated across the retail sector with extremely harmful effects on consumers as well.
One significant typo is “shareholder privacy” rather than “shareholder primacy”. That doctrine is the intellectually fraudulent justification for much of corporate malfeasance of the last 40 years.
Thank you for the correction/clarification. As I was not a business major, I read “shareholder privacy” and figured it was a term of art, and made no sense to me. “Shareholder primacy” is comprehensible.
Having worked for local government for most of my work life, I saw firsthand how government jobs were the ticket to the middle class, especially for minorities and women. There were/are public sector unions, but once government started outsourcing and laying off employees, the unskilled, lower-paid and trades jobs disappeared, and then middle management jobs started to disappear, along with benefits, retirement, paid vacations and sick leave, job stability, etc. As taxpayers one might argue that government now operates more like a business and that is good for stakeholders, i.e. taxpayers. As in corporate America, that may be good in the short term, but in the long term it has negative ramifications for society as a whole, such as increased levels of poverty.
100%. I repeated it in my earlier comment as a subtle way to show the correct term. It's an extremely destructive dogma, particularly when "shareholders" are largely hot-money hedge funds with no long-term horizon.
I’m fortunate to work for a company that never bought into the Jack Welch mantra. We will never be the cheapest supplier, so instead, we go for top quality and service, and we get paid for it. And to do that, you need hourly workers who are well trained and who care enough to do it right every time. You can’t achieve world class quality with low wages and 25% annual turnover. Too many American companies joined the race to the bottom, the China, low-cost model, instead of looking at Germany. Customers will pay for superior products with zero defects.
It’s been my understanding for a couple decades that Welch’s approach brought the end of ‘compassionate’ capitalism, where the worker class isn’t considered at all in the boardroom. I’d say his vision panned out spectacularly. For CEO’s and shareholders. But it forever scarred the landscape for the worker, warped the economy and as well as our political system. And here we are now…not exactly a vision of loveliness!
My parents owned an appliance store that was a GE franchise. Their storefront was on a main street in a small suburban town. Everyone in town shopped there.
When Jack Welch became CEO, he allowed big box stores to buy white goods and brown goods in bulk nationwide. Although my parents offered easy credit and serviced what they sold for free, price became the determining factor for sales. Eventually, my parents could not compete on consumer prices, and they were forced to close their store after almost 50 yrs in business. Welch's business model killed many small businesses
Thank you for this conversation. I grew up in a GE town where Jack lived. Three shifts, noon lunch whistle, acres and acres of GE buildings and parking lots and employees. My dad installed Jacks pool and plenty of his house projects; his daughter was my chemistry lab partner in high school. Then the decline came, and the PCB pollution, and the job loss. Our vibrant Main Street became a ghost town, four theaters closed, shops for every specialty gone, uncles and grandfathers left with a shrinking retirement anchored to GE stock and gutted benefits. While Jack moved on and up. My father will not buy a GE product, not even a light bulb.
My condolences. This is in a nutshell everything that this book and Judd's column speaks about. I STILL have some of the GE stock that my father bought. I inherited it from my mother and watched it sink like a stone. It's not worthless, but...
I got an MBA in 2012 and at no point during the two-year program did I recall hearing any professors talk about raising wages for employees. It was all about revenue growth - negative externalities (e.g., climate change) be damned - and keeping costs (e.g., reducing wages, outsourcing) as low as possible. GE was imploding at the time, following the 2008 financial crisis, and yet we talked about Jack Welch's management philosophy as the gold standard for how to run a corporation. The concept of shareholder primacy is indoctrinated early in these programs, which tend to produce future executives. Schools are changing their tunes rapidly, but it definitely feels performative.
“It's what you document day after day: companies saying one thing and doing something entirely different with their money.”
A well-deserved compliment. Thank you for your reporting. It is so valuable and much appreciated.
The acceptance of utter and repeated lies dooms a society.
This is our system top to bottom. I owned a small business in which many of the things we sold required a licensed refrigeration tech to do the start up and maintenance. It was difficult to find someone that would consistently do a good job. Then I found a young man starting his business who was thorough, punctual, knowledgeable etc etc. I started giving him all my business and referred others to him.
He became successful and started making good money. After a couple of years he came in to tell me he was shutting down his operation. When I asked why he said “I’m tired of working so hard. A friend and I are going to sell used cars. You buy some cars that run, sell them for the down payment and get the monthly payment for awhile. “They” stop paying, you repo the car and sell it to someone else. It’s a goldmine”.
Silly me, I was looking at my customers as “partners” helping them with their business needs, not as suckers.
It would appear greed and expediency broke capitalism. The big boys taught the little guy to “get away with it”.
One thing that can't be forgotten when we talk about living wages, if Starbucks is similar to many other service industry jobs, it's nearly impossible to get a full time schedule. Even worse, it's very hard to get a consistent schedule, you never know from week to week what shifts you'll be working, and possibly not even how many hours. Not only does this make it harder to budget, it directly attacks the ability of workers to arrange things like child care.
And now we have one of our political parties which has made as one of its "raison d'etres" to ensure maximum corporate profits. At the same time, it has successfully convinced half the people in this country that nothing else matters.
As long as the GOP can warp American laws and culture to favour the super-rich, they will continue to bribe them. The only thing the GOP worships more than money is power.
"An evil GOP enemy will burn his own nation to the ground .. just to rule over the ashes."
- Sun Tzu, with apologies
My thoughts on this topic:
GREED is truly the most terrible challenge of our times, and capitalism is its tool, its means to power and more greed.
>>> Greed is a (contagious) mental illness, an unfillable hole, a hunger that denies justice, a brutal expression of broken egos.
Greed is having a million times as much as the poor and still feeling you don't have enough.
Greed consumes the earth without respite, and is a cancer on humanity.
Greed destroys us and our children and their future.
Greed is death.
For years I've been scratching my head, trying to put my finger on what happened in corporate America. Something shifted and things went down hill from there-THIS is it-Jack Welch!!! Going to get this book
Welch was an insidious force in Corporate America. After he left GE he was celebrated and lauded and wrote a column for BusinessWeek while the "empire" he built crumbled all around him in real-time. The "innovation" of GE financial has been replicated across the retail sector with extremely harmful effects on consumers as well.
One significant typo is “shareholder privacy” rather than “shareholder primacy”. That doctrine is the intellectually fraudulent justification for much of corporate malfeasance of the last 40 years.
Thank you for the correction/clarification. As I was not a business major, I read “shareholder privacy” and figured it was a term of art, and made no sense to me. “Shareholder primacy” is comprehensible.
Having worked for local government for most of my work life, I saw firsthand how government jobs were the ticket to the middle class, especially for minorities and women. There were/are public sector unions, but once government started outsourcing and laying off employees, the unskilled, lower-paid and trades jobs disappeared, and then middle management jobs started to disappear, along with benefits, retirement, paid vacations and sick leave, job stability, etc. As taxpayers one might argue that government now operates more like a business and that is good for stakeholders, i.e. taxpayers. As in corporate America, that may be good in the short term, but in the long term it has negative ramifications for society as a whole, such as increased levels of poverty.
100%. I repeated it in my earlier comment as a subtle way to show the correct term. It's an extremely destructive dogma, particularly when "shareholders" are largely hot-money hedge funds with no long-term horizon.
I’m fortunate to work for a company that never bought into the Jack Welch mantra. We will never be the cheapest supplier, so instead, we go for top quality and service, and we get paid for it. And to do that, you need hourly workers who are well trained and who care enough to do it right every time. You can’t achieve world class quality with low wages and 25% annual turnover. Too many American companies joined the race to the bottom, the China, low-cost model, instead of looking at Germany. Customers will pay for superior products with zero defects.
It’s been my understanding for a couple decades that Welch’s approach brought the end of ‘compassionate’ capitalism, where the worker class isn’t considered at all in the boardroom. I’d say his vision panned out spectacularly. For CEO’s and shareholders. But it forever scarred the landscape for the worker, warped the economy and as well as our political system. And here we are now…not exactly a vision of loveliness!
My parents owned an appliance store that was a GE franchise. Their storefront was on a main street in a small suburban town. Everyone in town shopped there.
When Jack Welch became CEO, he allowed big box stores to buy white goods and brown goods in bulk nationwide. Although my parents offered easy credit and serviced what they sold for free, price became the determining factor for sales. Eventually, my parents could not compete on consumer prices, and they were forced to close their store after almost 50 yrs in business. Welch's business model killed many small businesses
Just sittin' over here in the Amen corner.
Good job.
How I despise the tax break these 1% snow job corps received in 2017 on the backs of the American worker. May karma visit Welch and his followers.
And maybe that's where the far right mantra of no one wants to work any more originated.
It would be harder to acknowledge that the workplace sucks because of corporate greed.
Thank you for your continuous and thorough work.
Minor aside here but I really appreciate you linking to an independent source for buying the book. Makes a huge difference!
Best Popular Information piece yet. Thank you.