July 10, 2024 • 34 mins
In this episode, Ed Zitron tracks the history of the growth-at-all-costs rot economy to a court case in 1916 that established the Shareholder Supremacy, and set the terms for General Electric's Jack Welch to fundamentally break capitalism, an era where companies moved away from building lasting, sustainable companies that created things and instead began focusing on pleasing shareholders - and how it leads to today's terrible tech companies and leaders.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Zone Media. Hello, and welcome to Better Offline. I'm your
host ed Zetron. In the next two episodes, I'm going
to walk you through a theory I have about how
(00:23):
the tech industry and CATALYSM at large became the playground
of asshole do nothing management dictators that see human beings
as assets and the customer as kind of an annoying
diversion from growth. But before I go any further, please
check the episode details of this for a URL that
has sources for everything that I'm talking about in this
and future episodes. I want you all to be able
(00:46):
to follow along with everything I'm saying. Don't take my
word for it, take the many, many links that I've included.
It's important that you're just as informed as I am here.
But now to the episode, and I promise you, once
we're done with this two parter, every thing that's happening
will make a little bit more sense, even though it
all feels just chaotic and offensively stupid, disconnected from reality
(01:10):
in many ways. I've been working on this episode and
its follow up for years, watching these trends, getting steadily
more pissed off. As you've probably heard, Unable to see
the big picture, because I've been picking up things as
I go, even since twenty twenty, when I started writing
my newsletter, there was something going on that I just
couldn't quite get. It's been really hard to understand how
(01:31):
companies like Meta can run terrible companies with decaying services
that are also somehow wildly profitable, or how Meta, Microsoft
and Google keep proliferating this unprofitable, unsustainable generative AI tech
that takes water from the desert and strains our power
grids to produce these deeply mediocre outcomes based on incredibly
vague promises, and then see their stock presses go up
(01:54):
despite them not making any money. And I've been craving
this way too expe the whole growth at all cost mindset.
I've explained what it is so many times, but there
is an answer, and it's fairly simple. The customer, and
by extension, the service provided to the customer, isn't really
the primary concern of many many companies these days. It's
(02:17):
all about shareholder value. And while this may seem a
little bit obvious, it requires also a little bit of
a history lesson to really explain how profoundly damaging what
I call the shareholder supremacy really is. And I know
you're probably going to think, well, we all knew the
increasing shareholder value was what stocks were about, right, I
(02:38):
really need you to understand what that means. Our journey
takes us back almost one hundred years, long before the
creation of the Internet, the iPhone, Facebook, the Better Offline podcast,
you know, the major things in the tech industry. We're
going to talk about the figures that predate the villains
I've covered in the past, the Altman's, the Sun Darpichais,
the probagar Ragavans of the world. But despite their historical
(03:02):
distance from this current era, these past figures are important
to know and understand because they fundamentally shaped the culture
and the psychology of today's managerial elite, and crucially built
the incentive structures that guide companies into hell. These stories
explain the often paradoxical motivations of modern capitalism, where those
who make short term decisions that invariably result in long
(03:24):
term pain and in many cases decline, see a big reward,
whereas those who built sustainable businesses that actually innovate and
don't treat their customers and employees like don't are ignored.
If not actively maligned for a lack of growth, but
like I said, it's time for a history lesson. In
nineteen sixteen, the Ford Motor Company had an idea to
(03:46):
use its surplus capital to invest in new plants to
increase productions of Ford's model T car, which the company
had continually made cheaper, or keeping wages for its workers.
High Ford, who I should be clear, was a horrible
piece of shit thankfully burning in hell right now, intended
to cut dividends to shareholders in favor of investing in
its employees and infrastructure, which anchored minority shareholders who already
(04:09):
incensed that Ford had prioritized the company's success and its
employees happiness over making the stock price go up, leading
to the famous Dodge versus Ford Motor Company case that
would define and ultimately doom modern capitalism and in many
ways birth the growth of all costs rot economy. The
Michigan Supreme Court found that a business corporation is organized
(04:31):
and carried on primarily for the profit of the stockholders,
and that the powers of the directors are to be
employed for that end, and intimated that cash surpluses should
not be saved to invest in upcoming projects, but distributed
to shareholders. Because Ford had shown that it was good
at making money, Ford was directly forbidden from lowering prices
and raising employee salaries and forced to issue a dividend
(04:54):
by a court. That's the free market, baby, That's how
it used to work, and I guess that's how it
works nowadays anyway. To be clear, the statement around corporation's
duty towards shareholders was made a beta dicta. This means
it was not actually legally binding, despite over one hundred
years of people acting as if it was, citing it
(05:16):
in cases, using it as a justification to destroy so
many lives in favor of growth. This statement not even
a legal precedent. A statement was the beginning of what
I called the shareholder supremacy. When companies moved away from
building lasting, sustainable companies that created things that instead became
these nasty growth bitches that focused on pleasing shareholders. It
(05:39):
birthed a short term mindset focused on increasingly abstracting a
company away from the production of goods or services and
promoting growth mechanics that increased stock valuations and made for
better balance sheets. The cult of shareholder supremacy, which some
people call shareholder primacy is one disconnected from production, and
I'd argue humanity it's solf. It's this weird, continual shell
(06:02):
game where companies do things not to produce, like an
outcome in real life or a thing that people like
and pay for, but to manipulate investors in the markets themselves,
though at this point kind of feels like investors and
markets are kind of in on the con These tactics
should be immediately recognizable to anyone who's followed my work
over the last few years. If a company share price
(06:24):
to clients and management smells a shareholder revolt, they can
induce their numbers by laying off a few thousand workers
or adopting of specious new technology like generative AYI or
the metaverse and then doing a big media blitz to
show everyone how cool and growth hungry they are. Or
they can do the really annoying thing, which is a
share buyback program where the company just buys its own stock,
(06:46):
which then bumps the value of the stock. That whole
situation I really need to look into more because it
doesn't seem good. And also on top of that, that
money is being diverted away from research and development. And
employees sees. And it was this movement, this shareholder supremacy movement,
that created the nebulous creature known as management. I realize
(07:09):
there are many definitions of management, but the manager we
see today is a figurehead that exists at increased company
value and make speeches rather than have any kind of
domain expertise or bona fides. They're just a person with
the ability to move numbers around and point of people
and say get this done, even if this, in this
case means makes something worse as a means of cutting
(07:31):
costs or layoff a few thousand people so that number
go up in the eyes of the shareholders supremacist. The
CEO of a tech company isn't someone that builds, or
invests in or proliferates technology, but a kind of stage
magician accountant hybrid that uses a combination of sleight of hand,
and they promises to convince those around them that a
(07:52):
company is of future, occasionally resulting in the company developing
something involving technology. Yet it took decades for the damage
from Ford versus Dodge to really set in when in
nineteen sixty A horrible little Man, a goblin creature worse
than hell called Jack Welch would join a company called
(08:14):
General Electric, one founded co founded i should say, by
light bulb inventor Thomas Edison, to sell things like light
bobs and refrigerators, and yes, I know, a bunch of
military stuff too, but putting that aside for a second.
Welch originally joined the company as a junior chemical engineer,
a job he lasted him for roughly one year before
he was given the power of the manager. I really
(08:39):
cannot express enough how bad Jack Welch was for the world.
He is damaged to the world itself, to global economies,
to the hundreds of thousands of people laid off because
he taught people how to do this. He is on
the scale of a war criminal. I'm sure he has
led to actual deaths, but he's definitely ruined lives. He
(09:02):
showed corporate America how unprofitable having a soul was. He is,
to quote Robert Evans on behind the bastards. The reason
you were laid off, you and every single other person
who was laid off to make a company more money.
But I'll get to them. Eight years into his tenure,
Welsh would become the VP and head of General Electrics
(09:23):
Plastics division, and to quote David Gallis's The Man who
Broke Capitalism, believed that business was a Darwinian competition where
he was better than the rest, which caused him to
push g to the limits. In practice, this meant that Welch,
as the manager of a factory trying to develop a
new kind of plastic in nineteen sixty three, continually pushed
his team to move faster, run more experiments, whatever it took,
(09:49):
which led to a massive explosion at the factory thanks
to Welsh pushing his scientists to use an untested process
where oxygen moved through a highly volatile solution. If you've
listened to the Behind the bar Asked episode, don't worry.
I'm not going to go over all of it, and
I have my own nasty little take now. Kind of
like Robert said on Behind the Bastards, one would think
(10:09):
that you'd get fired for blowing up a factory, especially
if it was your decision making that led to the explosion,
But this story instead became a kind of noxious management
consultant fable about failure and was, to quote David Gellis,
a point of pride for Welch, one that demonstrated a
healthy appetite for risk. Welch became g's head of Plastics
(10:32):
five years later in nineteen sixty eight, and would use
his aggressive and dangerous tactics to grow Moral, a kind
of plastic that's well suited for things like electronics, into
a billion dollar business, and crucially, becoming head of plastics
gave Welch his very first stock options and potentially his
first erection, which in turn began his obsession with stock
(10:52):
valuations and I'm, of course referring to the stock options
giving him that obsession. In nineteen seventy seven, Welch was
one of a chosen few in line to take over
the then CEO, Reg Jones, and was handed a series
of business units to run as a test to see
if he had it in him, including G's appliance businesses
(11:13):
and most important of all, ge Credit, which I'll get
back to in a minute, because it's extremely bad what
happens with that. As Gellis recounts, Welch decided that despite
(11:33):
its profitability and continued growth, Appliances would face competition from
overseas and that the right move was to start laying
people off. This was a huge success at the company
in so far as it boosted profits, and other divisions
copied his idea gleefully firing thousands of people from a
company that grew successful by investing in making itself a
(11:54):
great place to work. It's so good. I love all
of this. It makes me happy. I don't feel angry
at all anyway. To quote gallous, Welch dispensed with the
notion that mass layoffs were a measure of last resort
and labor was a cost, not an asset. Before Welch,
layoffs were something that happened when the company was collapsing,
(12:15):
not as a means of boosting one's balance sheet. Thank you,
Jack Welch, Thank you very fucking much. I'm actually not
being angry enough here. There is no way to show
how angry a person should be at Jack Welch for this.
I hope he burns in goddamn hell with Henry Kissinger, Anna,
Ronald Reagan and Maggie Thatcher and the rest of these bastards.
(12:39):
I should do a shirt around the assholes. That does
sound good, anyway. Forget all that for a second. We
have a podcast to record, continuing the story about this
piece of shit. Welch would become CEO in nineteen eighty
one and in the space of two years, would layoff
over seventy two thousand people. One tactic he would employee
with stack ranking, or so known as their vitality curve,
(13:01):
or as you'll soon understand why, rank and yank, where
high ranking managers were forced to rank their subordinates and
fire the bottom ten percent. This tactic later spread to
and poison countless other companies, including Amazon, Google, Activision, Blizzard,
and Microsoft, which has since stopped using it. It's worth noting, though,
(13:23):
that not every implementation of stack ranking usually results in
immediate payroll carts. Those perceived as low performers may be
denied bonuses or raises, or issued warnings or put on
a performance improvement plan, which is almost always a precursor
to a firing, kind of like taking a break from
a relationship, or they're just encouraged to leave or bullied
(13:43):
into doing so. But even in the most benign for
lack of a better word, form, it's a pretty horrendous
management tool. If you have a team of ten excellent workers,
but only eight can get a bonus or a positive ranking,
you have two left out who were considered inadequate, not
based on a lipmus of whether they're good at their jobs,
(14:03):
but whether they're not as good at their jobs as
other people. You pretty much guaranteed to kill morale and
team cohesion. But perhaps that was the point. Welch's nasty,
shitty little philosophies have deeply damaged the concept of management itself,
turning managers into these tiny little accountants that see labor,
(14:25):
as Welsch did, as a cost center, and managers as
this protected class above the fray. They don't do work.
They tell you to do work. Their job is showing
your work to someone else and saying it's theirs. They're
the ones telling you that you must come back to
the office, despite the fact that you can't tell what
the hell they're doing all day. They're there all the time,
(14:46):
but they don't seem to produce anything other than reports.
These people are a direct symptom of the poison in
the veins of capitalism, which I know is far from
god damn perfect, but it's so much worse than it
was caused by Jack Welch, who reframed the definition of
a good company to mean one that grows profits while
(15:08):
controlling labor costs, and this is how Jack Welch got
the nickname neutron Jack, referring to the thermonuclear bond that
kills people but leaves infrastructure intact. But I mentioned GE
credit earlier for a reason. G credit was where Jack
Welch would really make his marking get into the guts
(15:29):
of the business. General Electric was at a time a reliable, profitable,
and sustainable company, and was able to fairly easily mobilize capital, which,
of course Jack Welch loved, claiming that compared to the
industrial operations, I did know this business seemed an easy
way to make money, and that you didn't have to
(15:49):
invest heavily in R and D, build factories and bend
metal to make money off of credit. In the first
few years of his tenure, Welch would aggressively expand, According
to David Ellis, is the man who destroyed capitalism, G credit,
buying up companies that had nothing to do with manufacturing,
including Kidder Peabody, an investment bank that would eventually turn
out to have falsified three hundred and fifty million dollars
(16:12):
in profits, a thing that also didn't get Jack Welsh fired.
G Capital would expand internationally, ballooning to three hundred and
seventy billion dollars in assets by the time that Welch
left the company in two thousand and one. According to Gallison,
likely referencing a CNN article and including the links a
one point, G Capital was America's largest equipment leaser, leasing
(16:35):
hundreds of thousands of vehicles, handling credit operations for companies
like Kodak, becoming a backbone of America's increasingly debt ridden economy.
To quote Gallus, by the time that Welch left, G
Capital was effectively a giant, unregulated bank investing in all
kinds of risky debt instruments, including insurance products, credit cards.
I think even like tai auto loans. It's so weird.
(16:59):
And crucially, Welch's legacy is one where at the time
he was considered a genius that had taken General Electrics
market cap, which is just the sum of all available shares,
from fourteen billion dollars to four hundred billion dollars, all
through a very specific kind of financial trickery where g
would move things around, laying people off, buying new companies,
(17:22):
selling old companies, getting into new industries to match the
numerical analyst expectations and make earnings targets. In a fawning
and quite embarrassing piece from nineteen ninety seven, years before
Welch would leave and G Credit would actually lead to
its collapse in some levels, reporter John Curran describes how
G Capital grew by seeing new opportunities and immediately growing
(17:45):
a new business in any new market it could, taking
advantage of Capital's low cost of funds. At one point,
both leasing equipment to companies and buying it back, refurnishing
it and selling it to other companies, which isn't necessarily
a bad business, but but at this point, how many
goddamn businesses can you be in Jack where you can't
be in any You're burning in hell? What a shame.
(18:07):
In the space of a few decades, Welch had taken
General Electric from a company that made light bulbs and
refrigerators and plastics to one that continually played with the
numbers as a means of boosting its stock price, including
a ten billion dollar stock buy back in nineteen ninety
and The New York Times as John Hallushah noted that
g was only investing two point four percent of its
revenues in research and development, nearly a full percentage point
(18:30):
below in the national average at the time. At this point,
I really want to take a step back and just
point at that, which is this was the first company
that really just fucked with capitalism. And there's a whole
separate episode if I wanted to win. The economist Milton Freeman,
who is also a scumbag boy also Hope is burning
in hell rant side note, what ge went from, what
(18:53):
G became. G was able to raise these funds. They
were able to grow so big and do all this
stuff because they come He was so reliable, They didn't
have terrible turnover, They had happy employees, they had sustainable products,
they had their own products, their own patents, they owned,
they had scientists that worked there for decades. And then
Jack Welch came along and destroyed all of that while
(19:17):
making it quote a better company, what a worse company.
This is the man who taught the market how to
eat shit and love it. I am sorry, that's gross,
but that's really what we're looking at here. To be clear,
at this point, General Electric was an absolute dog of
a company. As David Gellis noted in a Reddit thread,
(19:40):
Welch operated at a time before Sarbines Oxley a sweeping
series of financial reforms instituted after the Enron scandal that
required companies to do these annoying little things like disclose
off balance sheet financial arrangements. So you know a series
of loans or credit agreements you made with someone that
are not on your balance sheet. I have no idea
how that was e and many other financial disclosures were
(20:03):
also required that would have likely made what Jack Welch
was doing before this a lot harder to play, which
Welsh claimed in two thousand and two would suck risk
out of the system and cause people to not go
for their dream gross way of pertinent Jack, but also wrong.
These things only made people get a little bit clever.
(20:26):
But Welch's tenure was one that destroyed General Electric's ability
to innovate while turning it into one of the most
wildly profitable companies in the world, all through this nihilistic
form of capitalism where growth is really all that matters,
even if it means making worse products, constantly entering and
exiting industries, reducing spending in research and development for the
products that made your company's name, outsourcing multiple parts of
(20:49):
the company to avoid paying benefits and higher American wages
and generally treating human beings like an inanimate asset. And yeah,
if you're thinking this sounds like every company, this is
why this is the guy. As a result of all
of this, when Welch left General Electric, it entered a
prolonged period of the client as it became obvious that
(21:09):
it had become, as Gellis had called it, a giant
previously at least unregulated bank one operating in too many
industries in a new regulatory environment that worked against them.
General Electric, in its bloated messi asset portfolio, were central
to the two thousand and eight financial crisis, with G
capital overexposed to the crisis while also invested in subprime
(21:30):
mortgages that would eventually see the company find one and
a half billion dollars by the SEC. Though g would
still make nearly half of its profits from its financial
arm in twenty thirteen, it would also sell off most
of it for twenty six and a half billion dollars
starting in twenty fifteen. And while one might say wow,
this was a great moment where the company moved away
(21:51):
from Jack Welch's legacy, the company would then proudly announce
that this would allow them to return ninety billion dollars
to investors in the form of stockby and dividends by
twenty eighteen, promise I'm not actually sure it ever kept,
though it recently announced it planned a fifteen billion dollar
buyback in May. Ah nah, Well, this just kind of
(22:11):
seems like a con. I realized that this was an
extremely long and arduous history lesson, but it's necessary to
express the incredible evil and darkness that was Jack Welch
(22:32):
and his horrifying legacy is poisonous philosophy, that everything must grow,
that the value of the company is only that which
it returns to the shareholders, and that human beings are
a cost to be moderated. These are all things that
have been inherited by companies you know today, not just
in tech as well, but I mean, look at Meta,
look at Google, look at Microsoft. Microsoft. I think this
(22:56):
week laid off over one thousand people and they posted
I think over over ten billion dollars a profit, maybe
more than that. It's all Jack Welch. It's all MBAs
following Jack Welch. During Jack Welch's tenure, by the way,
he ran something that I found really gross on top
of all the other stuff that was gross, and it
(23:18):
was something that David Gallis referred to as a campaign
against loyalty, claiming that the psychological contract has to change
and that loyalty, to Jack Welch was not giving time
to some corporate entity in return for shielding and protection
from the outside world. You know, some kind of value
exchange where your labor is traded and they keep you
because you're good at the job and you want the
(23:38):
job done well. No, no, no. What Jack Welch believed
loyalty was was an infinity among people who want to
grapple with the outside world and win, I assume by
blowing up factories and acquiring fraudulent investment banks, you know,
moving fast and breaking things, the meritocracy, making the numbers
(23:59):
look right. All of these things that you hear, all
of these things that Jack Welch did, have been picked
up and run with by companies that you've worked for,
Companies that you've worked with, Companies that you've seen fire
people as they make billions of dollars. Where do you
think these people learned it from? Where do you think
(24:19):
people gained the ability to run a company that binged
and purged assets like Google, taking on entirely new, unrelated
business lines as a means of expressing growth to the markets,
like Facebook did when it acquired Oculus and WhatsApp. And still,
despite your legacy being one of abject destruction and recklessness,
like Mark Zuckerberg, you still get called an amazing leader
(24:41):
by The New York Times as recently as twenty twenty two.
After hundreds of articles and multiple books talk about how
bad you are a business, there's still people telling you
you're good. Why do you think Mark Zuckerberg is still celebrated?
Why do you think that Wanka gets to fuck around
on a goddamn hoverboard sailing across with an American flag
and people go ooh, mister Zuckerberg, You're so impressive. Fuck
(25:04):
that guy, Fuck them all. I'm sorry, I know i'm ranting.
I'm no, I'm pissed. But when I read this story back,
when I see this, it's like watching someone give a
disease to someone else deliberately and then check in to
make sure they're still sick years later. And the anger
I feel, as I've mentioned in other episodes, is because
Jack Welch is also the reason why there's not as
(25:27):
much money going into research and development. He showed tech
companies how to do it. He showed other companies how
to do it. This man is the outbreak monkey of
the rot economy. His dark influence has deeply poisoned American
capitalism and created an environment where the only good companies
are those that grow forever. His acolytes include David Calhoun,
(25:49):
once considered in line to replace him at GE, who
later moved on to Boeing, where he worked as a
director of the board from two thousand and nine until
he became the lead independent director in twenty eighteen and
then chairman in twenty nineteen and then CEO in twenty twenty,
a period in which he was accused of strip mining
Boeing by pushing to cut costs with aggressive outsourcing. Hey,
(26:11):
if you worked out weathers is going yep. During his tenure,
two Boeing seven three seven Max eights crashed, one in
twenty eighteen just outside of Jakarta, killing one hundred and
eighty nine people, and another in twenty nineteen en route
Nairobi that killed one hundred and fifty seven, followed by
a door flying off an Alaska Airlines fight in January
twenty twenty four that led to an investigation where Alaska
(26:33):
Airlines claim that it found many loose bolts on its
now grounded Boeing Max nine planes. Bob Nardelli, one of
the three finalists at g that competed to take over
if the Welch got the job, went on to become
the CEO of the Home Depot in two thousand. He
boosted profits immediately by aggressively cutting costs, and when the
stock didn't stay competitive with lows, which is for non
(26:54):
American listeners. Another hardware store, nar Delli, chose to cut
experienced full time employees in favor of part time workers,
eroding Home Depots already shaky position in the market, until
he was paid two hundred and ten million dollars to
leave the company in two thousand and seven. Robert Sophie,
I will take two hundred and ten million dollars. That's
my cost. Otherwise the podcast will continue. Every single one
(27:18):
of these men fails upwards because shareholders supremacy is what
truly dominates the markets and modern capitalism. It's this sense
that what matters is growth and shareholder value, even if
shareholder value really means making a very specific group of
people richer and showing perpetual growth to match the numbers
of Wall Street. Welch himself he had this one really
(27:43):
disgraceful way of putting it, that you can't grow long
term if you can't eat short term, and that the
main social responsibility for a company is to win. The
crucial way to summarize Jack Welch was that he was
for the majority of his career not actually engaging in
the pross of labor or doing any work. He started
as a chemical engineer at General Electric in nineteen sixty,
(28:05):
but was a high ranking manager three years later, no
longer participating in the actual process that made the company rich.
As Welch grew more powerful in the organization, he further
distanced himself in production. By the time he was CEO
in nineteen eighty one, Jack Welch hadn't done a real
job in nearly twenty years. Under Welch, General Electric distance
itself from producing things too, and taught the economy that
(28:27):
one didn't have to run a good business to be
a good company, just one with the right numbers. And
Knowing all of this, it's important to note that Welch
was until fairly recently, as I've mentioned, considered a hero,
and somehow one of the first people to criticize him
was Malcolm Gladwell in October twenty twenty two, only a
couple of weeks before The New York Times would publish
(28:49):
a piece calling Welch an amazing leader who inspired his
colleagues to accomplish more. Because Welch's horrifying methods were so
effective at boosting stock prey, he was at a time
considered one of America's greatest CEOs, with Forbes calling him
a managerial genius and one of the greatest business minds
of the time. No hate to my friends at Forbes,
(29:11):
but you also put Sam Bakmanfree Elizabeth Holmes on the
cover you gave the Clink, or Guy thirty under thirty,
despite that all being made up to you gotta lie.
Actually check these companies out anyway. The problem is that
the Moniker greatest CEO, in part thanks to Welch, no
longer means somebody who makes a good company with happy
(29:32):
customers and sustainable profits that will stand the test of time.
A CEO is no longer a person that built a
company and runs it to provide a service, but the
person that can make the company look good on paper,
meaning that the company in question looks like it's growing,
either in quarterly earnings or when presented to a dipsh
adventure capitalist that hasn't participated in any kind of work
(29:53):
or production in years or decades. Executives of companies are
no longer people that built things, that take that expertise
and maybe try and build it further on a national
or global scale. But this rotating cast of like skexist
style people from the dark Crystal with Masters of business
administration from Ivy League universities that all have had jobs
(30:16):
with product in the name for ten years or twenty
years beforehand. People that have the right credentials who can
continually fail at their jobs, much like prabagar Ragavan did
when he took over Google Search after running Yahoo into
the ground, because they're not measured at being good at anything,
because really, what is a CEO at this point? They're
(30:37):
not measured on efficacy. They're measured on their ability to
increase numbers, to make the number go up, and these
metrics are often esoteric ways to express growth, something that
David Gellis reports was commonplace in Welch's world, where senior
management would just adjust inventory to show the appearance of profit.
Feeling that and this is a quote that the only
(30:58):
way to achieve the enormous increases in sales and profits
was to bend the rules. Little note for edheads here,
go back to the Facebook episode the Facebook two party did,
but specifically the people killing Facebook. There was a bit
in that episode where I mentioned how people were trying
not to gain the system, they were afraid of being
(31:19):
allowed to gain the system because Mark Zuckerberg wanted ten
percent year over year perpetual growth in these growth metrics.
It's the same thing, and it's all thanks to Jack Welch,
who gave birth to this monstrous fake business person and
this culture of the overpaid and ever distant manager and
chief executive, a con artist that moves numbers around to
(31:41):
make rich people happy, one that will never and maybe
never has participated in the value exchange that makes them rich,
or while lacking any real appreciation or respect for labor
or the products, or the company or really anything, all
while demanding complete fealty from the workers that they have
no respect for. These people have now mentored themselves across
(32:03):
generations of business freaks, hiring them and training others to
be like them, poisoning private and public companies and investment
firms and landlords. And they're everywhere now, these people, these
people who find ways to abstract themselves away from creating
value while extracting as much of it as possible. And
it's exactly this type of person that's currently destroying Silicon Valley.
(32:27):
In the next episode, I'll show you exactly how damaging
Jack Welch's growth. The all cost legacy has been to
the tech industry, leading to the rise of a special
kind of specious management consultant personality that creates nothing while
taking everything. Here's a preview, though. Want to know who
recommends Jack Welch's winning yet, Sam Oltman. Anyway, see your
(32:51):
next episode. Thank you for listening to Better Offline. The
editor and composer of the Better Offline theme song is Matasowski.
You can check out more of his music and audio
projects at Mattasowski dot com, m A T T O.
(33:12):
S O W s ki dot com. You can email
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and go to our slash Better Offline to check out
our reddit. Thank you so much for listening. Better Offline
(33:34):
is a production of cool Zone Media. For more from
cool Zone Media, visit our website cool Zonemedia dot com,
or check us out on the iHeartRadio app, Apple Podcasts,
or wherever you get your podcasts, wos, Sponge,
Zone Media. Hello, and welcome to Better Offline. I'm your
host ed Zetron. In the next two episodes, I'm going
to walk you through a theory I have about how
(00:23):
the tech industry and CATALYSM at large became the playground
of asshole do nothing management dictators that see human beings
as assets and the customer as kind of an annoying
diversion from growth. But before I go any further, please
check the episode details of this for a URL that
has sources for everything that I'm talking about in this
and future episodes. I want you all to be able
(00:46):
to follow along with everything I'm saying. Don't take my
word for it, take the many, many links that I've included.
It's important that you're just as informed as I am here.
But now to the episode, and I promise you, once
we're done with this two parter, every thing that's happening
will make a little bit more sense, even though it
all feels just chaotic and offensively stupid, disconnected from reality
(01:10):
in many ways. I've been working on this episode and
its follow up for years, watching these trends, getting steadily
more pissed off. As you've probably heard, Unable to see
the big picture, because I've been picking up things as
I go, even since twenty twenty, when I started writing
my newsletter, there was something going on that I just
couldn't quite get. It's been really hard to understand how
(01:31):
companies like Meta can run terrible companies with decaying services
that are also somehow wildly profitable, or how Meta, Microsoft
and Google keep proliferating this unprofitable, unsustainable generative AI tech
that takes water from the desert and strains our power
grids to produce these deeply mediocre outcomes based on incredibly
vague promises, and then see their stock presses go up
(01:54):
despite them not making any money. And I've been craving
this way too expe the whole growth at all cost mindset.
I've explained what it is so many times, but there
is an answer, and it's fairly simple. The customer, and
by extension, the service provided to the customer, isn't really
the primary concern of many many companies these days. It's
(02:17):
all about shareholder value. And while this may seem a
little bit obvious, it requires also a little bit of
a history lesson to really explain how profoundly damaging what
I call the shareholder supremacy really is. And I know
you're probably going to think, well, we all knew the
increasing shareholder value was what stocks were about, right, I
(02:38):
really need you to understand what that means. Our journey
takes us back almost one hundred years, long before the
creation of the Internet, the iPhone, Facebook, the Better Offline podcast,
you know, the major things in the tech industry. We're
going to talk about the figures that predate the villains
I've covered in the past, the Altman's, the Sun Darpichais,
the probagar Ragavans of the world. But despite their historical
(03:02):
distance from this current era, these past figures are important
to know and understand because they fundamentally shaped the culture
and the psychology of today's managerial elite, and crucially built
the incentive structures that guide companies into hell. These stories
explain the often paradoxical motivations of modern capitalism, where those
who make short term decisions that invariably result in long
(03:24):
term pain and in many cases decline, see a big reward,
whereas those who built sustainable businesses that actually innovate and
don't treat their customers and employees like don't are ignored.
If not actively maligned for a lack of growth, but
like I said, it's time for a history lesson. In
nineteen sixteen, the Ford Motor Company had an idea to
(03:46):
use its surplus capital to invest in new plants to
increase productions of Ford's model T car, which the company
had continually made cheaper, or keeping wages for its workers.
High Ford, who I should be clear, was a horrible
piece of shit thankfully burning in hell right now, intended
to cut dividends to shareholders in favor of investing in
its employees and infrastructure, which anchored minority shareholders who already
(04:09):
incensed that Ford had prioritized the company's success and its
employees happiness over making the stock price go up, leading
to the famous Dodge versus Ford Motor Company case that
would define and ultimately doom modern capitalism and in many
ways birth the growth of all costs rot economy. The
Michigan Supreme Court found that a business corporation is organized
(04:31):
and carried on primarily for the profit of the stockholders,
and that the powers of the directors are to be
employed for that end, and intimated that cash surpluses should
not be saved to invest in upcoming projects, but distributed
to shareholders. Because Ford had shown that it was good
at making money, Ford was directly forbidden from lowering prices
and raising employee salaries and forced to issue a dividend
(04:54):
by a court. That's the free market, baby, That's how
it used to work, and I guess that's how it
works nowadays anyway. To be clear, the statement around corporation's
duty towards shareholders was made a beta dicta. This means
it was not actually legally binding, despite over one hundred
years of people acting as if it was, citing it
(05:16):
in cases, using it as a justification to destroy so
many lives in favor of growth. This statement not even
a legal precedent. A statement was the beginning of what
I called the shareholder supremacy. When companies moved away from
building lasting, sustainable companies that created things that instead became
these nasty growth bitches that focused on pleasing shareholders. It
(05:39):
birthed a short term mindset focused on increasingly abstracting a
company away from the production of goods or services and
promoting growth mechanics that increased stock valuations and made for
better balance sheets. The cult of shareholder supremacy, which some
people call shareholder primacy is one disconnected from production, and
I'd argue humanity it's solf. It's this weird, continual shell
(06:02):
game where companies do things not to produce, like an
outcome in real life or a thing that people like
and pay for, but to manipulate investors in the markets themselves,
though at this point kind of feels like investors and
markets are kind of in on the con These tactics
should be immediately recognizable to anyone who's followed my work
over the last few years. If a company share price
(06:24):
to clients and management smells a shareholder revolt, they can
induce their numbers by laying off a few thousand workers
or adopting of specious new technology like generative AYI or
the metaverse and then doing a big media blitz to
show everyone how cool and growth hungry they are. Or
they can do the really annoying thing, which is a
share buyback program where the company just buys its own stock,
(06:46):
which then bumps the value of the stock. That whole
situation I really need to look into more because it
doesn't seem good. And also on top of that, that
money is being diverted away from research and development. And
employees sees. And it was this movement, this shareholder supremacy movement,
that created the nebulous creature known as management. I realize
(07:09):
there are many definitions of management, but the manager we
see today is a figurehead that exists at increased company
value and make speeches rather than have any kind of
domain expertise or bona fides. They're just a person with
the ability to move numbers around and point of people
and say get this done, even if this, in this
case means makes something worse as a means of cutting
(07:31):
costs or layoff a few thousand people so that number
go up in the eyes of the shareholders supremacist. The
CEO of a tech company isn't someone that builds, or
invests in or proliferates technology, but a kind of stage
magician accountant hybrid that uses a combination of sleight of hand,
and they promises to convince those around them that a
(07:52):
company is of future, occasionally resulting in the company developing
something involving technology. Yet it took decades for the damage
from Ford versus Dodge to really set in when in
nineteen sixty A horrible little Man, a goblin creature worse
than hell called Jack Welch would join a company called
(08:14):
General Electric, one founded co founded i should say, by
light bulb inventor Thomas Edison, to sell things like light
bobs and refrigerators, and yes, I know, a bunch of
military stuff too, but putting that aside for a second.
Welch originally joined the company as a junior chemical engineer,
a job he lasted him for roughly one year before
he was given the power of the manager. I really
(08:39):
cannot express enough how bad Jack Welch was for the world.
He is damaged to the world itself, to global economies,
to the hundreds of thousands of people laid off because
he taught people how to do this. He is on
the scale of a war criminal. I'm sure he has
led to actual deaths, but he's definitely ruined lives. He
(09:02):
showed corporate America how unprofitable having a soul was. He is,
to quote Robert Evans on behind the bastards. The reason
you were laid off, you and every single other person
who was laid off to make a company more money.
But I'll get to them. Eight years into his tenure,
Welsh would become the VP and head of General Electrics
(09:23):
Plastics division, and to quote David Gallis's The Man who
Broke Capitalism, believed that business was a Darwinian competition where
he was better than the rest, which caused him to
push g to the limits. In practice, this meant that Welch,
as the manager of a factory trying to develop a
new kind of plastic in nineteen sixty three, continually pushed
his team to move faster, run more experiments, whatever it took,
(09:49):
which led to a massive explosion at the factory thanks
to Welsh pushing his scientists to use an untested process
where oxygen moved through a highly volatile solution. If you've
listened to the Behind the bar Asked episode, don't worry.
I'm not going to go over all of it, and
I have my own nasty little take now. Kind of
like Robert said on Behind the Bastards, one would think
(10:09):
that you'd get fired for blowing up a factory, especially
if it was your decision making that led to the explosion,
But this story instead became a kind of noxious management
consultant fable about failure and was, to quote David Gellis,
a point of pride for Welch, one that demonstrated a
healthy appetite for risk. Welch became g's head of Plastics
(10:32):
five years later in nineteen sixty eight, and would use
his aggressive and dangerous tactics to grow Moral, a kind
of plastic that's well suited for things like electronics, into
a billion dollar business, and crucially, becoming head of plastics
gave Welch his very first stock options and potentially his
first erection, which in turn began his obsession with stock
(10:52):
valuations and I'm, of course referring to the stock options
giving him that obsession. In nineteen seventy seven, Welch was
one of a chosen few in line to take over
the then CEO, Reg Jones, and was handed a series
of business units to run as a test to see
if he had it in him, including G's appliance businesses
(11:13):
and most important of all, ge Credit, which I'll get
back to in a minute, because it's extremely bad what
happens with that. As Gellis recounts, Welch decided that despite
(11:33):
its profitability and continued growth, Appliances would face competition from
overseas and that the right move was to start laying
people off. This was a huge success at the company
in so far as it boosted profits, and other divisions
copied his idea gleefully firing thousands of people from a
company that grew successful by investing in making itself a
(11:54):
great place to work. It's so good. I love all
of this. It makes me happy. I don't feel angry
at all anyway. To quote gallous, Welch dispensed with the
notion that mass layoffs were a measure of last resort
and labor was a cost, not an asset. Before Welch,
layoffs were something that happened when the company was collapsing,
(12:15):
not as a means of boosting one's balance sheet. Thank you,
Jack Welch, Thank you very fucking much. I'm actually not
being angry enough here. There is no way to show
how angry a person should be at Jack Welch for this.
I hope he burns in goddamn hell with Henry Kissinger, Anna,
Ronald Reagan and Maggie Thatcher and the rest of these bastards.
(12:39):
I should do a shirt around the assholes. That does
sound good, anyway. Forget all that for a second. We
have a podcast to record, continuing the story about this
piece of shit. Welch would become CEO in nineteen eighty
one and in the space of two years, would layoff
over seventy two thousand people. One tactic he would employee
with stack ranking, or so known as their vitality curve,
(13:01):
or as you'll soon understand why, rank and yank, where
high ranking managers were forced to rank their subordinates and
fire the bottom ten percent. This tactic later spread to
and poison countless other companies, including Amazon, Google, Activision, Blizzard,
and Microsoft, which has since stopped using it. It's worth noting, though,
(13:23):
that not every implementation of stack ranking usually results in
immediate payroll carts. Those perceived as low performers may be
denied bonuses or raises, or issued warnings or put on
a performance improvement plan, which is almost always a precursor
to a firing, kind of like taking a break from
a relationship, or they're just encouraged to leave or bullied
(13:43):
into doing so. But even in the most benign for
lack of a better word, form, it's a pretty horrendous
management tool. If you have a team of ten excellent workers,
but only eight can get a bonus or a positive ranking,
you have two left out who were considered inadequate, not
based on a lipmus of whether they're good at their jobs,
(14:03):
but whether they're not as good at their jobs as
other people. You pretty much guaranteed to kill morale and
team cohesion. But perhaps that was the point. Welch's nasty,
shitty little philosophies have deeply damaged the concept of management itself,
turning managers into these tiny little accountants that see labor,
(14:25):
as Welsch did, as a cost center, and managers as
this protected class above the fray. They don't do work.
They tell you to do work. Their job is showing
your work to someone else and saying it's theirs. They're
the ones telling you that you must come back to
the office, despite the fact that you can't tell what
the hell they're doing all day. They're there all the time,
(14:46):
but they don't seem to produce anything other than reports.
These people are a direct symptom of the poison in
the veins of capitalism, which I know is far from
god damn perfect, but it's so much worse than it
was caused by Jack Welch, who reframed the definition of
a good company to mean one that grows profits while
(15:08):
controlling labor costs, and this is how Jack Welch got
the nickname neutron Jack, referring to the thermonuclear bond that
kills people but leaves infrastructure intact. But I mentioned GE
credit earlier for a reason. G credit was where Jack
Welch would really make his marking get into the guts
(15:29):
of the business. General Electric was at a time a reliable, profitable,
and sustainable company, and was able to fairly easily mobilize capital, which,
of course Jack Welch loved, claiming that compared to the
industrial operations, I did know this business seemed an easy
way to make money, and that you didn't have to
(15:49):
invest heavily in R and D, build factories and bend
metal to make money off of credit. In the first
few years of his tenure, Welch would aggressively expand, According
to David Ellis, is the man who destroyed capitalism, G credit,
buying up companies that had nothing to do with manufacturing,
including Kidder Peabody, an investment bank that would eventually turn
out to have falsified three hundred and fifty million dollars
(16:12):
in profits, a thing that also didn't get Jack Welsh fired.
G Capital would expand internationally, ballooning to three hundred and
seventy billion dollars in assets by the time that Welch
left the company in two thousand and one. According to Gallison,
likely referencing a CNN article and including the links a
one point, G Capital was America's largest equipment leaser, leasing
(16:35):
hundreds of thousands of vehicles, handling credit operations for companies
like Kodak, becoming a backbone of America's increasingly debt ridden economy.
To quote Gallus, by the time that Welch left, G
Capital was effectively a giant, unregulated bank investing in all
kinds of risky debt instruments, including insurance products, credit cards.
I think even like tai auto loans. It's so weird.
(16:59):
And crucially, Welch's legacy is one where at the time
he was considered a genius that had taken General Electrics
market cap, which is just the sum of all available shares,
from fourteen billion dollars to four hundred billion dollars, all
through a very specific kind of financial trickery where g
would move things around, laying people off, buying new companies,
(17:22):
selling old companies, getting into new industries to match the
numerical analyst expectations and make earnings targets. In a fawning
and quite embarrassing piece from nineteen ninety seven, years before
Welch would leave and G Credit would actually lead to
its collapse in some levels, reporter John Curran describes how
G Capital grew by seeing new opportunities and immediately growing
(17:45):
a new business in any new market it could, taking
advantage of Capital's low cost of funds. At one point,
both leasing equipment to companies and buying it back, refurnishing
it and selling it to other companies, which isn't necessarily
a bad business, but but at this point, how many
goddamn businesses can you be in Jack where you can't
be in any You're burning in hell? What a shame.
(18:07):
In the space of a few decades, Welch had taken
General Electric from a company that made light bulbs and
refrigerators and plastics to one that continually played with the
numbers as a means of boosting its stock price, including
a ten billion dollar stock buy back in nineteen ninety
and The New York Times as John Hallushah noted that
g was only investing two point four percent of its
revenues in research and development, nearly a full percentage point
(18:30):
below in the national average at the time. At this point,
I really want to take a step back and just
point at that, which is this was the first company
that really just fucked with capitalism. And there's a whole
separate episode if I wanted to win. The economist Milton Freeman,
who is also a scumbag boy also Hope is burning
in hell rant side note, what ge went from, what
(18:53):
G became. G was able to raise these funds. They
were able to grow so big and do all this
stuff because they come He was so reliable, They didn't
have terrible turnover, They had happy employees, they had sustainable products,
they had their own products, their own patents, they owned,
they had scientists that worked there for decades. And then
Jack Welch came along and destroyed all of that while
(19:17):
making it quote a better company, what a worse company.
This is the man who taught the market how to
eat shit and love it. I am sorry, that's gross,
but that's really what we're looking at here. To be clear,
at this point, General Electric was an absolute dog of
a company. As David Gellis noted in a Reddit thread,
(19:40):
Welch operated at a time before Sarbines Oxley a sweeping
series of financial reforms instituted after the Enron scandal that
required companies to do these annoying little things like disclose
off balance sheet financial arrangements. So you know a series
of loans or credit agreements you made with someone that
are not on your balance sheet. I have no idea
how that was e and many other financial disclosures were
(20:03):
also required that would have likely made what Jack Welch
was doing before this a lot harder to play, which
Welsh claimed in two thousand and two would suck risk
out of the system and cause people to not go
for their dream gross way of pertinent Jack, but also wrong.
These things only made people get a little bit clever.
(20:26):
But Welch's tenure was one that destroyed General Electric's ability
to innovate while turning it into one of the most
wildly profitable companies in the world, all through this nihilistic
form of capitalism where growth is really all that matters,
even if it means making worse products, constantly entering and
exiting industries, reducing spending in research and development for the
products that made your company's name, outsourcing multiple parts of
(20:49):
the company to avoid paying benefits and higher American wages
and generally treating human beings like an inanimate asset. And yeah,
if you're thinking this sounds like every company, this is
why this is the guy. As a result of all
of this, when Welch left General Electric, it entered a
prolonged period of the client as it became obvious that
(21:09):
it had become, as Gellis had called it, a giant
previously at least unregulated bank one operating in too many
industries in a new regulatory environment that worked against them.
General Electric, in its bloated messi asset portfolio, were central
to the two thousand and eight financial crisis, with G
capital overexposed to the crisis while also invested in subprime
(21:30):
mortgages that would eventually see the company find one and
a half billion dollars by the SEC. Though g would
still make nearly half of its profits from its financial
arm in twenty thirteen, it would also sell off most
of it for twenty six and a half billion dollars
starting in twenty fifteen. And while one might say wow,
this was a great moment where the company moved away
(21:51):
from Jack Welch's legacy, the company would then proudly announce
that this would allow them to return ninety billion dollars
to investors in the form of stockby and dividends by
twenty eighteen, promise I'm not actually sure it ever kept,
though it recently announced it planned a fifteen billion dollar
buyback in May. Ah nah, Well, this just kind of
(22:11):
seems like a con. I realized that this was an
extremely long and arduous history lesson, but it's necessary to
express the incredible evil and darkness that was Jack Welch
(22:32):
and his horrifying legacy is poisonous philosophy, that everything must grow,
that the value of the company is only that which
it returns to the shareholders, and that human beings are
a cost to be moderated. These are all things that
have been inherited by companies you know today, not just
in tech as well, but I mean, look at Meta,
look at Google, look at Microsoft. Microsoft. I think this
(22:56):
week laid off over one thousand people and they posted
I think over over ten billion dollars a profit, maybe
more than that. It's all Jack Welch. It's all MBAs
following Jack Welch. During Jack Welch's tenure, by the way,
he ran something that I found really gross on top
of all the other stuff that was gross, and it
(23:18):
was something that David Gallis referred to as a campaign
against loyalty, claiming that the psychological contract has to change
and that loyalty, to Jack Welch was not giving time
to some corporate entity in return for shielding and protection
from the outside world. You know, some kind of value
exchange where your labor is traded and they keep you
because you're good at the job and you want the
(23:38):
job done well. No, no, no. What Jack Welch believed
loyalty was was an infinity among people who want to
grapple with the outside world and win, I assume by
blowing up factories and acquiring fraudulent investment banks, you know,
moving fast and breaking things, the meritocracy, making the numbers
(23:59):
look right. All of these things that you hear, all
of these things that Jack Welch did, have been picked
up and run with by companies that you've worked for,
Companies that you've worked with, Companies that you've seen fire
people as they make billions of dollars. Where do you
think these people learned it from? Where do you think
(24:19):
people gained the ability to run a company that binged
and purged assets like Google, taking on entirely new, unrelated
business lines as a means of expressing growth to the markets,
like Facebook did when it acquired Oculus and WhatsApp. And still,
despite your legacy being one of abject destruction and recklessness,
like Mark Zuckerberg, you still get called an amazing leader
(24:41):
by The New York Times as recently as twenty twenty two.
After hundreds of articles and multiple books talk about how
bad you are a business, there's still people telling you
you're good. Why do you think Mark Zuckerberg is still celebrated?
Why do you think that Wanka gets to fuck around
on a goddamn hoverboard sailing across with an American flag
and people go ooh, mister Zuckerberg, You're so impressive. Fuck
(25:04):
that guy, Fuck them all. I'm sorry, I know i'm ranting.
I'm no, I'm pissed. But when I read this story back,
when I see this, it's like watching someone give a
disease to someone else deliberately and then check in to
make sure they're still sick years later. And the anger
I feel, as I've mentioned in other episodes, is because
Jack Welch is also the reason why there's not as
(25:27):
much money going into research and development. He showed tech
companies how to do it. He showed other companies how
to do it. This man is the outbreak monkey of
the rot economy. His dark influence has deeply poisoned American
capitalism and created an environment where the only good companies
are those that grow forever. His acolytes include David Calhoun,
(25:49):
once considered in line to replace him at GE, who
later moved on to Boeing, where he worked as a
director of the board from two thousand and nine until
he became the lead independent director in twenty eighteen and
then chairman in twenty nineteen and then CEO in twenty twenty,
a period in which he was accused of strip mining
Boeing by pushing to cut costs with aggressive outsourcing. Hey,
(26:11):
if you worked out weathers is going yep. During his tenure,
two Boeing seven three seven Max eights crashed, one in
twenty eighteen just outside of Jakarta, killing one hundred and
eighty nine people, and another in twenty nineteen en route
Nairobi that killed one hundred and fifty seven, followed by
a door flying off an Alaska Airlines fight in January
twenty twenty four that led to an investigation where Alaska
(26:33):
Airlines claim that it found many loose bolts on its
now grounded Boeing Max nine planes. Bob Nardelli, one of
the three finalists at g that competed to take over
if the Welch got the job, went on to become
the CEO of the Home Depot in two thousand. He
boosted profits immediately by aggressively cutting costs, and when the
stock didn't stay competitive with lows, which is for non
(26:54):
American listeners. Another hardware store, nar Delli, chose to cut
experienced full time employees in favor of part time workers,
eroding Home Depots already shaky position in the market, until
he was paid two hundred and ten million dollars to
leave the company in two thousand and seven. Robert Sophie,
I will take two hundred and ten million dollars. That's
my cost. Otherwise the podcast will continue. Every single one
(27:18):
of these men fails upwards because shareholders supremacy is what
truly dominates the markets and modern capitalism. It's this sense
that what matters is growth and shareholder value, even if
shareholder value really means making a very specific group of
people richer and showing perpetual growth to match the numbers
of Wall Street. Welch himself he had this one really
(27:43):
disgraceful way of putting it, that you can't grow long
term if you can't eat short term, and that the
main social responsibility for a company is to win. The
crucial way to summarize Jack Welch was that he was
for the majority of his career not actually engaging in
the pross of labor or doing any work. He started
as a chemical engineer at General Electric in nineteen sixty,
(28:05):
but was a high ranking manager three years later, no
longer participating in the actual process that made the company rich.
As Welch grew more powerful in the organization, he further
distanced himself in production. By the time he was CEO
in nineteen eighty one, Jack Welch hadn't done a real
job in nearly twenty years. Under Welch, General Electric distance
itself from producing things too, and taught the economy that
(28:27):
one didn't have to run a good business to be
a good company, just one with the right numbers. And
Knowing all of this, it's important to note that Welch
was until fairly recently, as I've mentioned, considered a hero,
and somehow one of the first people to criticize him
was Malcolm Gladwell in October twenty twenty two, only a
couple of weeks before The New York Times would publish
(28:49):
a piece calling Welch an amazing leader who inspired his
colleagues to accomplish more. Because Welch's horrifying methods were so
effective at boosting stock prey, he was at a time
considered one of America's greatest CEOs, with Forbes calling him
a managerial genius and one of the greatest business minds
of the time. No hate to my friends at Forbes,
(29:11):
but you also put Sam Bakmanfree Elizabeth Holmes on the
cover you gave the Clink, or Guy thirty under thirty,
despite that all being made up to you gotta lie.
Actually check these companies out anyway. The problem is that
the Moniker greatest CEO, in part thanks to Welch, no
longer means somebody who makes a good company with happy
(29:32):
customers and sustainable profits that will stand the test of time.
A CEO is no longer a person that built a
company and runs it to provide a service, but the
person that can make the company look good on paper,
meaning that the company in question looks like it's growing,
either in quarterly earnings or when presented to a dipsh
adventure capitalist that hasn't participated in any kind of work
(29:53):
or production in years or decades. Executives of companies are
no longer people that built things, that take that expertise
and maybe try and build it further on a national
or global scale. But this rotating cast of like skexist
style people from the dark Crystal with Masters of business
administration from Ivy League universities that all have had jobs
(30:16):
with product in the name for ten years or twenty
years beforehand. People that have the right credentials who can
continually fail at their jobs, much like prabagar Ragavan did
when he took over Google Search after running Yahoo into
the ground, because they're not measured at being good at anything,
because really, what is a CEO at this point? They're
(30:37):
not measured on efficacy. They're measured on their ability to
increase numbers, to make the number go up, and these
metrics are often esoteric ways to express growth, something that
David Gellis reports was commonplace in Welch's world, where senior
management would just adjust inventory to show the appearance of profit.
Feeling that and this is a quote that the only
(30:58):
way to achieve the enormous increases in sales and profits
was to bend the rules. Little note for edheads here,
go back to the Facebook episode the Facebook two party did,
but specifically the people killing Facebook. There was a bit
in that episode where I mentioned how people were trying
not to gain the system, they were afraid of being
(31:19):
allowed to gain the system because Mark Zuckerberg wanted ten
percent year over year perpetual growth in these growth metrics.
It's the same thing, and it's all thanks to Jack Welch,
who gave birth to this monstrous fake business person and
this culture of the overpaid and ever distant manager and
chief executive, a con artist that moves numbers around to
(31:41):
make rich people happy, one that will never and maybe
never has participated in the value exchange that makes them rich,
or while lacking any real appreciation or respect for labor
or the products, or the company or really anything, all
while demanding complete fealty from the workers that they have
no respect for. These people have now mentored themselves across
(32:03):
generations of business freaks, hiring them and training others to
be like them, poisoning private and public companies and investment
firms and landlords. And they're everywhere now, these people, these
people who find ways to abstract themselves away from creating
value while extracting as much of it as possible. And
it's exactly this type of person that's currently destroying Silicon Valley.
(32:27):
In the next episode, I'll show you exactly how damaging
Jack Welch's growth. The all cost legacy has been to
the tech industry, leading to the rise of a special
kind of specious management consultant personality that creates nothing while
taking everything. Here's a preview, though. Want to know who
recommends Jack Welch's winning yet, Sam Oltman. Anyway, see your
(32:51):
next episode. Thank you for listening to Better Offline. The
editor and composer of the Better Offline theme song is Matasowski.
You can check out more of his music and audio
projects at Mattasowski dot com, m A T T O.
(33:12):
S O W s ki dot com. You can email
me at easy at Better offline dot com, or visit
Better Offline dot com to find more podcast links, and
of course my newsletter. I also really recommend you go
to chat dot Where's youreed dot at to visit the discord,
and go to our slash Better Offline to check out
our reddit. Thank you so much for listening. Better Offline
(33:34):
is a production of cool Zone Media. For more from
cool Zone Media, visit our website cool Zonemedia dot com,
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or wherever you get your podcasts, wos, Sponge,
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