Jack Welch explains shareholder value for us

I went to a strange event at Bloomberg world headquarters this evening. First came drinks and hors d’oeuvres. (I sort of cut in front of Wendi Murdoch in the drinks line, but she didn’t get hostile or anything.) Then came a panel discussion featuring Joe Stiglitz, Meredith Whitney, Jack Welch, Oliver Sarkozy (Carlyle Group financial institutions dude and Carla Bruni’s half-brother-in-law) and Austan Goolsbee. The NYT’s Andrew Ross Sorkin was the moderator, although about midway through he had to cede the microphone to Bloomberg’s Al Hunt who was supposed to facilitate questions from the audience and the Internets (the Sorkin segment was much livelier).

Anyway, my favorite moment came when Sorkin said he’d been talking to somebody (my guess: Alex Berenson), who said that Welch and his fixation on short-term earnings at GE had been as much to blame for the financial crisis as anybody. Said Welch:

I was there for 80 quarters. I find it difficult to think of 80 quarters as short-term.

You have to eat while you dream. You have to deliver both short- and long-term. The idea that some jackass can sit in an office and say, “Don’t bother me, I’m thinking about 10 years from now.” …

Stocks Rally Further in Run-up to EU Summit

MOSCOW — Global stocks enjoyed one of their best days in weeks on Tuesday ahead of a summit of European leaders that’s expected to be dominated by calls to boost economic growth.

Europe remains the focus of attention across all financial markets in the run-up to the June 17 Greek election that could go a long way to determining the country’s membership of the euro as well as the future of the single currency zone.

http://www.124monkeys.com Sean DeCoursey forgot his password

Nice. Welch basically took an argument, extrapolated it to a ridiculous extreme, then said because the extreme was stupid, so was the argument.
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In addition to that, he’s wrong. You definitely should have some people in your company thinking about ten years from now, in case there are new technologies on the horizon which have a chance of invalidating your current business model.
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I mean, here’s a perfect example. Xerox and the Detroit 3 both faced severe pressure from Japanese companies in the 1980′s. Xerox completely redesigned their company and all of their processes. They took a beating for awhile, but emerged a much stronger and more competitive company. Detroit closed plants as it lost market share in order to keep the company running at maximum capacity and sold off the plants for short term one-time $$’s. By putting off long-term benefit reforms for short term profitable gimicks, Detroit doomed itself and by doing the opposite Xerox maintained its position as a world dominant company.
epicureandealmaker

Welch’s claim to fame and great talent (other than self promotion) is consistency. He made his name and GE’s high multiple by delivering eerily consistent earnings growth quarter in and quarter out for 80 quarters. Never mind that he had to build one of the largest unregulated banks (GECC) on the planet and set a new standard for earnings manipulation to do so.

A nearly straight line runs from GE to Enron’s shenanigans. That is part of this man’s legacy, too.

In the real world, Jack, there’s only one thing that comes “straight from the gut.” It’s strangely reassuring to see that you’re still full of it.
arbitrarystring

It’s telling that he said “80 quarters” rather than “20 years”.
Justin Fox

@arbitrarystrong: Sorkin had been talking about the fixation with quarterly earnings in his question, so that’s why Welch put it that way. Then again, he didn’t appear to need to do any thinking to know immediately how many quarters he had spent as GE’s CEO.
qqi239

IMHO, the drinks should not be served at such events: even sober journalists and economist do not make much sense.