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New book explores the legacy of business titan Jack Welch

In this article:
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David Gelles, 'The Man Who Broke Capitalism' Author, joins Yahoo Finance Live to discuss his book chronicling Jack Welch's corporate leadership at General Electric in comparison to modern-day figures like Elon Musk and former President Trump.

Video Transcript

SEANA SMITH: Longtime GE CEO Jack Welch helped revolutionize the economy as one of the world's most powerful and influential corporate leaders. In a new book titled "The Man Who Broke Capitalism," author David Gelles takes a look at Welch's legacy and lasting impact on corporate culture.

David Gelles joins me now, along with Yahoo Finance's editor-in-chief Andy Serwer. David, thanks so much for joining us here. And congratulations on the book.

DAVID GELLES: Thank you.

SEANA SMITH: So let's talk about Jack Welch's legacy. Because when we think of Jack Welch, we think of the fact that he was named the best manager of the 20th century, the fact that he was a business leader that changed corporate America. You have a different view, though, on the legacy that he left behind, saying that he ultimately hurt capitalism. How so?

DAVID GELLES: Well, all those things you mentioned are true. And that's part of what makes him so influential-- that during the course of his career, he was able to overcome that initial label of neutron Jack after he fired so many hundreds of thousands of people early in his career and become named Manager of the Century by "Fortune" magazine. But when you follow what's happened, not only at GE, but around the economy at the companies where his proteges ultimately took over, you see time and again the disastrous effects of what was ultimately a shortsighted style of management that really embodied this shareholder primacy world that we've been living in for so long now.

ANDY SERWER: Yeah, David, I saw in an interview you said that Welch belongs on the Mount Rushmore of people who messed up capitalism, or society, or our country, something to that effect. And you even sort of laid at his feet the crashes of the Boeing airplanes. How is that possible? Is that really fair to say that about Welch?

DAVID GELLES: Jack Welch, obviously, never worked at Boeing himself. But if you look at the history of Boeing over the past 25 years, you see very clearly the imprint of his leadership, his priorities as delivered through his disciples. Starting in 1997, a series of three CEOs took over Boeing and deliberately changed that company into one that resembled Jack Welch's GE.

It started with Harry Stonecipher, who joined the company in 1997 with the merger of McDonnell Douglas. It continued when Jim McNerney took over the company in the early-2000s. And it continues to this day with Dave Calhoun-- all three of those men worked directly with Welch at GE.

And implicitly-- they told me in the case of Calhoun-- they were trying to make Boeing a company that resembled Jack Welch's GE. And the results are obvious. And I can go into all the details about the individual decisions that led to that point.

But when I did a year's worth of reporting on the crashes of the 737 Max, it became clear that, yes, there was an engineering problem with that plane. But there was a bigger cultural problem inside Boeing. And that cultural problem ultimately leads back to Jack Welch.

ANDY SERWER: And why did you decide to write the book now, David? I'm curious-- I mean, Welch has been dead two years. He was CEO of GE-- well, that was 22 years ago, I think, is when he stepped down. So why now?

DAVID GELLES: Two things led me to write this book. The first was for the last five years or so, I've written the corner office column at the "New York Times," where I've been able to interview literally hundreds of CEOs about their motivations, their influences, their mentors. And time and again, Jack Welch's name kept coming up. He was living rent free in the minds of CEOs even to this day.

And that just sort of bugged me. And then there was the Boeing story. I was part of the team at the "New York Times" that investigated Boeing for that year after the tragic two crashes of the 737 MAX. And as I just said, it quickly became apparent that, yes, there was an engineering story, here but there was this deeper cultural story.

And when I saw that, it ultimately led back to Welch. And when I kept hearing Welch come up in my interviews with CEOs today, it became clear that this one man, this one CEO, who took over what was really one of the most influential companies in 1981 at a moment when that company still had unbelievable sway over the US economy, it was through his actions that we could actually understand a lot about the world we live in today.

SEANA SMITH: David, when you talk about Jack Welch's influence on business leaders, I want to bring up a quote that you recently wrote. And you said that when Trump is elected president, when Bezos argues about inflation with the White House, when Elon Musk negotiates his $44 billion deal to buy Twitter by using the poop emoji, this is the world that Jack Welch helped create. In your words, how did he pave the way for leaders like Musk and what we're seeing from many business leaders, many CEOs today?

DAVID GELLES: Welch was brass. He was brusque. He was absolutely known to be a tireless taskmaster. And he was also, it's important to remember, in retirement, an early progenitor of misinformation and, frankly, conspiracy theories on Twitter. In October of 2012 when the jobs report came out on a Friday, he took to Twitter and without any evidence alleged that the Obama administration had essentially fabricated the numbers in order to help the president's re-election chances.

That was a lie that spread like wildfire. Former President Trump, not then president, picked it up himself and said it was absolutely 100% true and that the Obama administration was monkeying around with the numbers. And other conservative pundits picked this up and ran with it.

And so when we look at the way that CEO behavior has shaped, changed, over the course of the last half century, from the sort of more patrician, almost statesmanlike quality that we saw in the post-war years, where CEOs were essentially the stewards of their company, to this brash, self-interested, argumentative, bombastic personality that we see from some of our CEOs today, that's, again, the fingerprints of Jack Welch all over our economy today.

ANDY SERWER: Yeah. I mean, there are still CEOs out there who learned at his knee. I mean, David Zaslav, right-- he was a former GE employee, correct? And he is out there cutting costs and paying himself handsomely, right?

DAVID GELLES: And he is still in power. Dave Calhoun, who was a dark horse candidate to succeed Welch, even at his succession, is still running Boeing. And the list goes on-- over the past 20 years, dozens of Jack Welch disciples have gone on and run other major American public corporations.

And time after time, as I document in the book, the same story repeated itself over and over. They were hired by this new company. The stock often popped because the board and investors thought they had the Midas touch. Inevitably, they followed the Jack Welch playbook.

They started cutting costs. They instituted a round of layoffs. The stock sometimes popped for a little bit, but not always. And within a couple of years, it was obvious that the lack of investment in research and development, the lack of investment in their people was having seriously deleterious effects on the performance of those companies. And almost without fail, those CEOs were shown sort of an inglorious exit. They got their golden parachutes, but the companies weren't better for it.

SEANA SMITH: David Gelles, author of "The Man Who Broke Capitalism," and also our thanks to Andy Serwer as well-- thanks so much for joining in on the conversation.