#116 Jeff Immelt: Leadership In A Crisis

Former General Electric CEO Jeff Immelt looks back on his two decades with the company and the strategies he used to lead during three separate crises. In this episode, Immelt discusses what happened during those events and why, what it was like to take over for GM icon Jack Welch, getting the information you need to make decisions, activist investors, fighting complexity, the mismatched timelines between CEOs and shareholders, unions, and so much more. Immelt is currently a venture partner at New Enterprise Associates and a lecturer in management at the Stanford University Graduate School of Business. He served as the Chairman and CEO of GE from 2001-17, and is the author of the 2021 memoir Hot Seat: What I Learned Leading a Great American Company. -- Go Premium: Members get early access, ad-free episodes, hand-edited transcripts, searchable transcripts, member-only episodes, and more. Sign up at: https://fs.blog/membership/ Every Sunday our newsletter shares timeless insights and ideas that you can use at work and home. Add it to your inbox: https://fs.blog/newsletter/ Follow Shane on Twitter at: https://twitter.com/ShaneAParrish Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  You know, good leaders absorb fear in a crisis. So they absorb all the things that are going on, but they don't point fingers. They don't point blame. They just kind of soak it all in. They're able to keep a flexible point of view and what I call two truths, which is great things can happen, terrible things can happen. And you need to kind of keep your mind open to both those things at the same time.

• 0:41Shane Parrish?

  Welcome to The Knowledge Project, a podcast about better thinking, problem solving and decision making. I'm your host, Shane Parrish. If you're listening to this, you're not currently a supporting member. If you'd like special member only episodes, access before anyone else, transcripts, searchable transcripts and other member only content, you can join at fs.blog. Check out the show notes for a link. Today I'm speaking with Jeff Immelt, the former CEO of General Electric. Jeff was the CEO during three major crises, 9/11, Enron and the financial crash. His legacy at GE is at best controversial. In this wide ranging conversation, we dive into what happened and why,

• 1:23Shane Parrish?

  what it's like to follow in the footsteps of someone who many consider to be a great leader and the reality behind that. Getting the information you need to make decisions, activist investors, fighting complexity, the mismatch timelines between CEOs and shareholders, unions and so much more. It's time to listen and learn.

• 1:49Shane Parrish?

  Your legacy at GE is at best controversial. You made thousands of decisions impacting millions of people, often under extreme uncertainty and constant media scrutiny and second guessing. You inherited a pile of shit following a cult like leader and then steered the company through 9/11, Enron and the financial crisis. What was the hardest part of your tenure at GE?

• 2:12Speaker 00

  Oh gosh, the hardest part was really the financial crisis in that.

• 2:19Speaker 00

  It was sheer fright for probably sixty or ninety days. You know, it was such a big company with so many people. There was so much going on. There was so much unknown. And I literally didn't want to go to bed at night because I didn't want to wake up the next morning. Because you just didn't know what you'd see. So I'd say for an intense period of time. That was the hardest stretch of ninety days I've ever had to go through. And then I would say following a very successful leader. But tripping into a completely different time. So it wasn't that he was bad or good. He was great in the time that he lived in.

• 3:04Speaker 00

  But the time that I was leading the company was so dramatically different. It was more global. It was more technical. There was more interest in social concerns. Activist investors. You go down the list. And just taking a group of three hundred thousand people and saying, I know this is the way we did things. Now we have to do things differently. That takes persistence and add to it three black swan events and four recessions. It's just perseverance every day.

• 3:38Shane Parrish?

  You took over September tenth, two thousand and one. And everybody thought GE was great on the outside. It's one of those things that looks great on the outside, but inside you knew it wasn't quite right. It's hard to drive change when your team and everybody feels like it's pretty perfect. And I'm looking back, I'm curious as to the lessons you learned. It seemed that you inherited a team of, I don't know, sycophants and idol worshippers. How did you, how did you approach that?

• 4:07Speaker 00

  I tried to be directional.

• 4:11Speaker 00

  But I almost had to be incremental. So, you know, I think when you take over for somebody that's that famous, if you will, you have to say, look, here's where we're going. We're going to be more technical. We're going to be more global. We're going to be closer to the customer. But we're going to change step by step versus saying, I'm going to blow the place up and we're going to start over. We're going to reset everything. And I think to a certain extent, Shane, you know, it kind of worked until the financial crisis, right? So, you know, I wanted to pivot into being more industrial. I wanted to invest in healthcare and aviation and life sciences and renewable energy and things like that. And that's what we were doing.

• 4:52Speaker 00

  We're kind of using the financial service cash to help fund some of those things. You know, our investors, really all they recognized was kind of like earnings per share growth. So, you know, we were doing it in a language that they understood. The financial crisis really set us back in that context. So, what did I learn? Look, I had a strong point of view of what I wanted the company to be. I stuck with that. I, in many ways, brought the team with me, right? So, the good people stayed and we were able to make that transition. I think we're rebuilding the investor base in a very positive way. But, you know, what I say in the book in the last chapter is, you know, I had probably a window of time after nine eleven that I could have put a couple stakes in the ground

• 5:35Speaker 00

  and said, look, this is just going to be a very different company. And I didn't pick that way. I mean, there are good reasons why I didn't, but I didn't pick that path. And, you know, one thing led to another. Look, it was certainly something I think about for sure, you know, because you couldn't have seen the financial crisis at that moment. But by the time the financial crisis hit, not having GE Capital be smaller. You know, clearly was a mistake, right? So again, right after nine eleven, the world was in such disarray. Having the world in disarray, a new CEO and a new strategy all at the same time seemed too risky for the company, let's say. But, you know, I could have made a different decision and didn't.

• 6:19Shane Parrish?

  Is that something you regret now? Or is that something that you you made the right call? It was just hard to live with?

• 6:25Speaker 00

  You know, it's funny, I I've always, you know, been comfortable being myself. I I never wanted to be him. And in some ways, I I never felt burdened by all all that he stood for and all that he did. Earlier, you know, probably in the mid nineties, I almost got fired. And and, you know, what that teaches you is you really don't need that person. When you go through a process of almost getting fired, you kind of say to yourself, okay, he's great. I admire him, but I can live without him because he can live without me. And so that was a good thing to go through. The hard thing was outside the company, right?

• 7:05Speaker 00

  The hard thing was, I spent fifteen years hearing every Jack Welch story. What was it like to follow him? What was he like? Things like that. And I remember, like, I was in Japan in two thousand thirteen, and I was talking to a big conference. And the reporter beforehand said, you know, you've got had such an interesting career. What was it like, you know, following Welch? I said, I laughed. I said, oh, you know, I've been asked the question in every, you know, in every language. I just kind of shrug it off, etc., etc. So we go out in front of two thousand people. It's the first question he asked. I want to say, dude, I thought we handled that backstage. Do we have to do this? Do we have to go through

• 7:46Speaker 00

  this again? So, you know, those things were nuisance. But I enjoyed working for him immensely. I liked him a lot. I learned a lot from him. But the world just changed so dramatically that a different playbook was required.

• 8:02Shane Parrish?

  Tell me about the story of you almost being fired.

• 8:04Speaker 00

  Yeah, I was in GE's plastics business for a lot of my early career. And in nineteen ninety four, there was a lot of inflation, and we were stuck with some long term contracts. We couldn't get price up fast enough. We we got crushed with inflation. Our margins went down, and we missed our numbers by probably twenty five percent or thirty percent. We always had a kickoff meeting and he seeks me out at the kickoff meeting and corners me like in the lobby of the hotel. And, you know, I was talking to some friends and pretty soon they all disappear. And it's just the two of us. And he said to me, you know, Kevi,

• 8:47Speaker 00

  you just had the worst year in the company. You're the worst human ever. You're the worst person ever. You just did a terrible job. And I just stood there and took it and I said, look, Jack, you're never gonna have to fire me. I'll quit on my own, but we're gonna get this turned around. It's gonna work, et cetera, et cetera. You know, careers are good days and bad days. And what it teaches you is like, you're kind of the same person on a bad day as a good day. And you can kind of make it through those things. And you don't need, I, I said, look, after having been through that, I said, I don't need him in my life. I, I, I can, I can be a good employee, but not say, he's not going to define who I am and what I do and how I think about myself. He just won't.

• 9:28Shane Parrish?

  Oh, that's awesome. What, what would you say is the most important lesson you learned from Jack?

• 9:34Speaker 00

  What Jack did as a masterclass was how to lead at scale. He created an aura. He had a voice for 300,000 people. He had a voice for 500 people. He had a voice for 20 people. He had a voice for one person. He, he could change octaves and how he spoke. He knew how to measure people to, to create success. So he knew how to instrument. He was a great communicator. And he, more than anything else, put human resources on the map. You know, HR was a backwater, kind of stooges function in the 1970s and 80s. Everybody that got ahead in HR had been in union relations at a moment in time when, you know, professional

• 10:18Speaker 00

  workforces were exploding. And he really put, he really cared about people and the human resource side. And so. You add all those things up, he could manage big institutions, I think, better than anybody I've ever seen before or after.

• 10:34Shane Parrish?

  And that's just based on messaging or charisma? Or how do you ascribe like?

• 10:39Speaker 00

  I think, no, I think it's also the little things, instrumentation, his own personality, but creating horizontal teams, knowing how to set measures, set priorities, set goals, you know, consistency of message, investment in talent and building pipelines of talent. You know, all those things I think added up are really key to kind of running things that matter.

• 11:04Speaker 02

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• 11:35Speaker 03

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• 11:58Shane Parrish?

  You couldn't help, I think, in some of the research I did for this and work for Jack and not sort of respect him. And then there was a certain sort of sadness, I think, to the fact that he went on CNBC multiple times and sort of threw you under the bus. How did that make you feel?

• 12:15Speaker 00

  Yeah, it was a complicated relationship. You know, Shane, so I would say he was a guy I loved and learned from. I ran the company in a different way. He wasn't always as supportive as I thought he could be, including that time on CNBC. But every time we had a very tough decision to make, I would always call him. Even after we'd had bad relations and bad words. When I had something really difficult that I wanted to think my way through. I would pick up the phone and call him and pick his brain. So, you know, like I said, it was a complicated relationship, but one that was, you know, at the end of the day, I I had more respect for him, but I wish sometimes he had done things differently.

• 13:00Speaker 00

  That would have been more helpful.

• 13:02Shane Parrish?

  Want to come back a little bit to the financial crisis. Was there a moment where you feared for bankruptcy?

• 13:07Speaker 00

  Oh, I think there was a moment, Shane, during the financial crisis. When we basically felt like the capital markets could actually close. And if the capital markets actually closed, you know, we were so big. It would have been hard to navigate through it. You know, everybody likes to dump on government, but you know, Hank Paulson, Tim Geithner, Ben Bernanke, they did a great job. You know, I'd say without that kind of sure handed leadership. We would have had a real challenge kind of making it through.

• 13:42Shane Parrish?

  How did the Warren Buffett deal come together?

• 13:45Speaker 00

  You know, so if you think about the book, Shane, it's like crisis, change, crisis, change, crisis. So that's kind of the arc of the book. So, chapter five is about the financial crisis and you know, Washington Mutual. So, most people think about the day Lehman Brothers went bankrupt as the worst day in the financial crisis. But it actually was the day Washington Mutual went bankrupt, which was like two weeks later on a Friday. Because all the bondholders got wiped out. So that was a really bad day. And my CFO came in my office at like Friday at six o'clock and said, look, we got to raise fifteen billion dollars on Monday. And I just said,

• 14:29Speaker 00

  I don't know what you're talking about. You know, we just did this one, you know, these three things, we should be safe for a while. He said, look, I don't care what you think. We're going to do a board call tomorrow morning. Goldman Sachs is on its way out here to Fairfield. And so that set off a weekend where, you know, I had a board call on Saturday morning. All telephonically, so nobody was there. And I said to my board, hey, hey, guys. You know, things are pretty shaky out there and we got to go raise $15 billion on Monday. And you could just hear silence on the phone. Roger Penske, who was one of my favorite directors, he leaps in and says, let's get the money, guys. Let's go, let's go. Guys, good job. Let's go get it. So we spent the next 24 hours planning.

• 15:13Speaker 00

  And then Sunday evening, we had to launch the equity raise on Monday morning. Six banks in Europe went bankrupt, Wachovia was on the operating table, and TARP, which was the government program, failed on Sunday. And I had to make the decision whether we were going to go on that Monday, on Sunday night. And it was like the most pressure, I could barely breathe. That I'd ever felt, and we decided not to go. The market was down 1,000 points the next day. We would have gotten crushed. And then in the interim 48 hours, I called Warren because he had done a similar deal with Goldman Sachs. Not so much that we needed his money, but we needed his seal of approval.

• 15:56Speaker 00

  And we added him to the raise and we were able to go out on Wednesday of that week and raise, I think it was $16 billion, which was the second largest secondary raise in history, after Visa, who had taken the company public. So it was just frightful, but again, you know, it's where the relationships I had built with Warren over time.

• 16:22Speaker 00

  You know, paid off because I think he trusted me and he believed in the company and and his investment really mattered at that moment in time. So when I look back, Shane, over 16 years, that was probably the single most important decision I ever made. You know, the next day I I got my teeth kicked in for having to go to it, right? So, you know, the pastors yelled at me and, you know, the media was tough, but man, I certainly never felt bad. I felt great about where we were.

• 16:51Shane Parrish?

  I want to come back to leading in a crisis in a second, but one of the things you said there is strikes me is really important. You you were almost paralyzed by fear, but not quite. How did you end up making a decision in that moment?

• 17:05Speaker 00

  I think there's two pieces to it. One is a sense of responsibility. And the other one is just like growing up and even when I was CEO, the sense of if you do your best and your intentions are right, you can live with the consequences. And, you know, there's a thousand books that get written about leadership and change and all that stuff. Actually, knowing what to do isn't that hard. Knowing how to do it isn't that hard. Knowing when to do it is really hard. You know, having a sense of, okay, if I go Monday, I get killed. If I go Wednesday with Buffett, I make it to shore. Or doing a deal or selling a business or waiting too long or going, I I think there's

• 17:47Speaker 00

  a sense of when that most good leaders have a perspective on. They wait, but they don't wait too long.

• 17:55Shane Parrish?

  Do you think that's intuition? Or is that something that you can learn? Like, what, how do you navigate when?

• 18:01Speaker 00

  I think it's a function of information. So some people need too much information. Some people say, look, I have 80% of what I need and that's enough. So what I find is that different people distill information in different ways. And and so you you have enough information to make a decision. And then you try to balance other social factors, like if I don't move now, what happens next and things like that. And you have to balance those two things. I hate to call it intuition because it sounds too squishy, but I think it's some combination of intellect, curiosity, and and just comfort in your own skin that there's not one thing you can do and not be criticized. So you're you're not really in the game of perfection. You're in the game of progress.

• 18:47Speaker 00

  And particularly in a crisis, I see lots of leaders in a crisis look for style points. You know, sometimes style points are survival. You're breathing. You made it to tomorrow. That's great, right? Therefore, if you get criticized, it just doesn't matter that much.

• 19:02Shane Parrish?

  It strikes me that, I mean, you got to manage through three distinct crises. Very few CEOs have ever done that, especially about such a large company with such a long tenure. It strikes me that there's people that finger point during a crisis and there's people that do things. And the overlap between those two groups is really small. I'm curious as to what you learned about leading in a crisis. What can companies take away from this today to prepare for future crises and do now?

• 19:33Speaker 00

  You know, good leaders absorb fear in a crisis. So they, they absorb all the things that are going on, but they don't point fingers and they don't point blame. They just kind of soak it all in. They're able to keep a flexible point of view and what I call two truths, which is great things can happen, terrible things can happen. And you need to kind of keep your mind open to both those things at the same time. You know, really in a crisis, it's important for leaders to be great communicators. What is too much information, what's just enough? And then you want to be really observant to see who is with you. So, you know, in other words, Shane, I lived through the nine 11 and some

• 20:15Speaker 00

  people ran for the hills and some people were steadfast. By the time I got to the financial crisis, I told the people that were steadfast and said, okay, those of you that are going to run, you know, you, you're, you're not on the A team. The A team is people that were steadfast during nine 11 because I know I can trust them to kind of give me the, the truth. So that's on one side. I think the other piece of your question, which is a really good question and really important, which is How do you pick up those risks, really tail risks that are really enterprise risks for the company? And so, one of the things that I get concerned with is, you know, if you pick up

• 20:59Speaker 00

  an annual report for any company, or a 10K or 10Q, they'll have 45 risk factors, right? If you have 45 risk factors, you really have none. I would much rather see a company list, here are the three biggest risk factors, and make the CEO, not the auditing firm, not the CFO, make the CEO write a letter to investors around those three risk factors. So if you think about, you know, think about the financial crisis. What did we get wrong? We were too big in aggregate size. It wasn't that we were, we had a lot of toxic assets. It wasn't that we were redlining risk and things like that. We were too big. We weren't asking the right question, given the size of where we are. That's one we could have done a better job on.

• 21:43Speaker 00

  You know, with COVID, I don't know who's gonna see a pandemic, right? Other than having a strong balance sheet, I think people that say they forecast COVID, I don't get it. I don't see it. Or 9/11, for that matter. But risk factors matter. It's important to have your fingers on what are the really essential risk factors.

• 22:02Shane Parrish?

  I want to ask a follow-up to that. Before we do, I just want to ask, are there routines or habits that you had that helped you get through this, like exercise? Or what were the things that grounded you throughout the crisis?

• 22:14Speaker 00

  I've always been an exerciser. So having, you know, trying to stay as close as you could to kind of a normal lifestyle. I always got energy off of forward motion. So I didn't want to have a thousand meetings in headquarters. I wanted to go out and do a town hall in Cincinnati or Atlanta and hear what's on employees' minds and console them and make them feel better. So I was always in a crisis, believed in forward motion. And, you know, I never canceled meetings. Like, I see people, the second you start canceling meetings, particularly in a big company, you worry 300,000 people. You say to them, "Man, we are, you know, we are really in trouble."

• 22:58Speaker 00

  And so you try to keep as much of a schedule as you possibly can.

• 23:01Shane Parrish?

  Now, I want to come back to sort of the the black spawn preparedness, if you will. You said in the book, you're trust me, company until you're not. And I'm sure that's a powerful lesson when you're dependent on the kindness of strangers. Looking back, how do you feel about balance sheet management and fragility? How do you consider the need to keep up during the good times and balance that, which might mean carrying more debt with playing offense through the entire cycle?

• 23:26Speaker 00

  It's a great question. So part of your question is transparency. There was a time, particularly early on, when investors invested in our company, but didn't really know what they were investing in. So so after nine 11, our biggest shareholders sold half their stake when the markets opened after nine 11. And the reason they told me is they didn't realize how big we were in the insurance business. You know, you kind of said, well, that's not my fault. That's really your fault, or it is my fault, but it's both of our faults. And, you know, that's, that's, that's a element of transparency. So one of the elements is making sure people know outsiders know what they're investing in and why they're investing.

• 24:04Speaker 00

  And then, and then to your point, I think, you know, the notion of not redlining in the good times and trying to be as thoughtful as you can possibly, you know, striking the right balance between growth and safety is something that is an art. It's something that's important. You know, you have to think about that all the time.

• 24:24Shane Parrish?

  Let's switch gears and talk a little bit about decision making. A CEO, you have a lot of information coming to you all the time. How do you filter what's important from what's not? And how do you quickly determine who knows what they're talking about from who's bluffing?

• 24:39Speaker 00

  I think some of this is philosophy, and I've seen it change, but I always like to have meetings in big rooms with lots of people that were where the decision making was transparent. We had lots of different points of view. I think by the time, you know, when I started the job, I didn't know a lot about a lot of the businesses. But by the time I finished, I knew more. So when you don't know as much, you want more information, both inside and outside the company. You try to create a situation where you have differing points of view or welcome differing points of view. And then ultimately, you want an outcome, which is a decision. But I, I, I never wanted to do that by myself. I never wanted to do that with one or two people or just the board. And then I, I find in a room, there's kind of four types of people, right?

• 25:23Speaker 00

  One are, are people that always are on point and always make good points and are always self-aware. The second is, are, are, are people that just talk too much and are always blathering and don't make a lot of sense. And they're, it's tough to filter through. The third is people that know the right answer, but don't speak. And then you have the people that know that they're right. They know you're smarter than you, and they just silently sit there and smolder. You know, the, the fourth kind are the ones that always say, I told you so, after the fact. And the other three just kind of learn to live with it. And, and that's how every time goes. But I coach leaders to make decisions in a, in a big room, in a, in a big room.

• 26:05Speaker 00

  Where people know what you were thinking, why you were thinking it, what the options were. And here's why you did what you did.

• 26:13Shane Parrish?

  Can you double click on that a little bit? Coaching people to make decisions. What are the patterns that you see repeated over and over again? The mistakes that people make or the, the patterns of success that you see?

• 26:23Speaker 00

  Yeah, I'd say, uh, the, the key points of success and failure are people need the right instrumentation. So they need to know what metrics, what analysis they need to see and what matters. So that's number one. They need to have a, a team, a core team that gives them expertise and wisdom. Right? That's number two. And they need to have their own self-confidence to just pull the trigger. That's, that's three. And I'd say, when I work with companies today, the first two are pretty easy to put in place. But I think it's, it's, it's, you've got to push sometimes leaders to say, just make the decision.

• 27:05Speaker 00

  I think in a crisis, maybe the time we live in today, maybe it's always been true. But I, I actually think it's a bigger mode of failure when people don't know, won't make a decision. Than when they make decisions and some of them are wrong. I, I weigh those two unevenly because I, I just think progress is more important than perfection. You don't make progress unless you make decisions. That takes a certain amount of confidence. So you're just going to have to make clear yes and no answers. But instrumentation, team, confidence, those three things. And then there always has to be feedback loops. You know, what, what did we learn? Why did we, why did this work? Why, why did this not work? Some people can only make a decision in private.

• 27:49Speaker 00

  They only want to make a decision. They, they'll say, okay, the meeting ends. You walk in your office with one other person, your CFO, let's say, and you say, okay, we're going to do this. And then all the 20 people that you're with are all saying, why did she do that? What was she thinking? You know, what, what was the reason? And I think that's less optimal than when you make the decision and live with the consequences.

• 28:11Shane Parrish?

  I like that a lot. Where does the confidence come from? Where does the confidence to make a decision, especially during a crisis or a difficult period of time, come from?

• 28:18Speaker 00

  So I'd say some of it is just environment you grew up in. What, what you're, what you're used to, what you're willing to do. And some of it's just experience. You know, some of it is just you, you get a pattern recognition. You, you know, you can survive your own failures. And some of it's experiential. You know, Keith or, or Beth, they're super smart in this area. If they say yes, I'll never overrule Dennis. You know, if Dennis says, don't do it. I wouldn't care if there was like the entire Marine Corps outside the door. I'm not going to do it. You know, so you start having good pattern recognition around which voices break out, which ones you trust.

• 28:59Speaker 00

  There's nothing that makes a team crazier than repetitive analysis with no action. It, it's just, and I'd say particularly today, in, in, in a times of crisis, people, if you're waiting for the perfect moment, it doesn't, it's not going to come. Yeah, we're not asking people to solve every problem simultaneously, but let's solve the most important one with a real priority.

• 29:22Shane Parrish?

  How did you fight complexity at GE?

• 29:25Speaker 00

  I, I'm going to give you two prisons. I'd say one strength of people today has to be harnessing complexity. There's a difference between being complex and being complicated. And there's a difference between being simple and simplistic, you know? I would say Amazon is complex, but it's not complicated. It's a software company, right? They have certain things they stand for. Walmart is simple, but it's not simplistic, right? It's everyday low prices. And so one piece of it is learning how to look kind of horizontally. How do you share practices across a conglomerate? How do you, how do you make good systems thoughts about? You know, if I'm in the aircraft engines business and I'm in the financing business, there's ways that we can do, use that for great success.

• 30:09Speaker 00

  And I would say harnessing complexity is actually a strength. Being complex is it takes 20 signatures to sign a lease. 12 layers of management between the factory floor and somebody that's running a business. That's complexity. You, you don't return your phone calls. You make your assistant return phone calls. That's complexity. And so I think you have to constantly be on the lookout for, you know, how fast is it to make decisions? How much overhead cost do you have? How do you know who people work for? If you have a bunch of people that are dot, you know, double dotted line. I, I went chain to a factory in Peterborough in Canada one time where we made large motors,

• 30:51Speaker 00

  traction motors, and they were doing terribly. And I was traveling through Canada and I said, let's stop at Peterborough because they really are struggling. And I sat in a room with maybe 15 people and we went around the room and there was no plant manager. Everybody had a different boss, somewhere in New York, somewhere in Atlanta, somewhere in Houston. And I said to the person traveling with me, okay, let's cancel this afternoon. I'm going to draw an org chart for this factory. And by the time we leave here today, we're going to simplify this thing. We're going to name a plant manager. So all the people that these guys worked for all were pissed off at me, but it was a way to send a, a signal that that kind of complexity can't exist in the company.

• 31:35Shane Parrish?

  I want to get back to one thing you, you did there. You went to the factory, you got firsthand experience, you saw what was going on, corrected the problem. I'm assuming the, the performance turned around after that. But one of the big problems, I would assume being CEO, especially with 300,000 people is how do you see reality? You have all these filters between the problem and you. And then those filters are not only. Intelligence filters, like you can't rely on somebody who's to distill complexity into something simple because they might make a mistake. But you also have political filters. I'm vying for a job. I want to look good. I'm in competition with this other person. How do you get to the bottom of things? How do you see reality?

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• 33:11Speaker 00

  Some of it's culture, right? Some of it is empowering people that you trust. And hopefully, if you empower people that you trust, then they empower the people they trust and it goes down, right? And you set a culture that works because people are empowered to make decisions. That's, culture is one big piece of it. The other piece of it is you can't spend time in the office. You have to see things for yourself. So I always made it a point to travel. I would travel to businesses, I would travel to customers, I would travel to markets, regions. And you would see from the ground up what was really going on, what was reality to the people that did work.

• 33:54Speaker 00

  And I became a good student of how people did their work, right? It's not that I knew how to do everybody's job. But I knew how to watch how they did their jobs. And so I could get a pretty good sense, you know, over the arc of my career in terms of what was productive work and what was unproductive work. And so I, I think how you spend your time is incredibly important. There's some metrics that matter like management layers, meeting times, you know, things like that, that you can manage in aggregate where it always leads to more bureaucracy than you want. And then I think you have employee scores and things like that. So I think metrics, time allocation, culture,

• 34:37Speaker 00

  and you've got to make sure that when you're a big company, that the size works and doesn't get in your own way.

• 34:43Shane Parrish?

  I remember reading in the book, you, you said, some people say, just do the right thing. Don't worry about the share price at all. And I think your word was you call that naive. I'm wondering why was that naive? And then what are some of the other things that people, that you hear, that you feel are just really naive for somebody running a big company under all these different pressures and pulls?

• 35:04Speaker 00

  All are derivatives, right? So they're all derivatives of how do you balance short term and long term thinking? And not that I always did it right, but I, I look at other CEOs and I look at people that I respect, and they're always able to balance the right decisions in the short term and do the right things in the long term and not get confused between the two. And, you know, every time you say that, look, I don't care what the investors think. And then you don't own the company and an activist investor shows up, you end up backpedaling on all the things you said about like, I don't care what investors think. And you end up spending, you know, all your time playing defense. So good leaders know how to fuse short term and long term.

• 35:48Speaker 00

  They know how to fuse social needs with competitive needs. You've just got to be mindful of both. I grew up in a generation where we could move work wherever we wanted to and we could close factories. Nobody could get in our way for in the 1980s and 1990s and 2000s. That changed. That changed when President, the financial crisis. It changed when President Obama was president. It changed around the world. And, you know, President Trump didn't invent protectionism. He kind of Americanized it, but anybody that didn't see that train coming for like 10 or 15 years was crazy. So in the in the 2000s, you started moving factories back. You started

• 36:32Speaker 00

  understanding that the number of employees you have is actually quite material to how the world looks at you, right? So that was completely different in 1990 and 2020, 30 years, completely different. You know, you've got to just be able to smooth it out, make make the pivot yourself when the pivots need to be made. Not be judgmental about one is right and one is wrong, but just say, look, those two have to coexist at the same time.

• 37:01Shane Parrish?

  I'm curious, one thing you didn't really go into much detail on in the book is unions. When are when are unions a good thing? When are they a bad thing? Did they ever prevent you from doing the things you wanted to do? When do they help? When do they hurt?

• 37:14Speaker 00

  My father was a GE employee, so nobody ever had to explain to me the value of a job, the value of a GE job. And I carried that with me really through my life. I always met the CEO, the the union leader was a guy named Bob Santamor. I actually write about him in the acknowledgements of the book. I liked Bob, you know, in other words, you never could say I liked him out loud because it would get him fired and maybe me fired. But we spent a lot of time together and what I liked about working with Bob was he was pure. He was solely about jobs and you could work with him on healthcare, other things, as long as there was some way you could demonstrate to him

• 37:57Speaker 00

  that we were willing to move jobs to help him out. And we did some, you know, not hugely, but we did the ones that matter. And so I think, look, if you had asked me this question 15 years ago, or even 20 years ago, I would say you know, I was trained to say unions are terrible. And if you're a plant manager and you get unionized and you're a plant, you're probably going to get fired. In some ways, there hasn't been enough texture, enough context around.

• 38:27Speaker 00

  Working men and women and how important they are and how they should be treated. And to a certain extent, we're all paying the price for that right now. So.

• 38:34Shane Parrish?

  Wait, double click on that for a second. I don't, I don't quite understand that.

• 38:38Speaker 00

  Yeah, again, it goes back to say, look, I can close a factory, move all the jobs to Mexico, and I'm still going to be a hero. In 1992, you know, that was the world we lived in. You know, that can happen once or twice or three times, but when it happens for an entire generation, you end up with a hollow, hollowing out of kind of the workforce that's not constructive and not, not real, right? So if you take a job, let's say, let's say building refrigerator. And you say in Mexico now, you're going to pay somebody $6 an hour. And let's say Louisville, Kentucky, you're going to pay somebody 22 bucks an hour, 25. You've got transportation costs, quality, automation. It takes you fewer people to make it in Louisville than Mexico.

• 39:21Speaker 00

  My conscience, you could go through product after product and making it in Canada or the US is probably just about the same as making it in Mexico or China today. But nobody ever talks that way. No, nobody ever wants to take that on. But that's true. And, and again, that's where people are going to stand up and be, you know, be counted as time goes on. And there's going to have to be a better sense of balance of trade. If I sell in the US, I bet I have a certain amount of jobs in the US. If I sell in Germany, same thing. If I sell in China, same thing. And my generation didn't have to think that way, but the next generation is going to have to think that way.

• 40:00Shane Parrish?

  I want to switch gears a little bit here. There, there are times before you became CEO, you wrote about in the book that you wish you had spoken up. I'm thinking specifically around some of the GE Capital deals. But I'm sure there was other times. Why didn't you? And what gets in the way of a culture of honesty?

• 40:16Speaker 00

  The first thing I'd say is, you know, one of the reasons why I got ahead in the company itself is because I was a little bit of a pain in the ass. I respected rules, but I didn't always follow them. And that actually is a way to kind of break out in a big company. So it wasn't that I was totally a lamb. But, you know, one of the things you have to worry about in big legacy companies is just the power differential. You know, you have to pick your spots and there is a just such a disproportionate decision-making authority and things like that, that, you know, fighting every day doesn't make as much sense. You know, like my relationship with Jack, when I was in my domain, in the healthcare domain, I fought hard for the things I believed in and won more than I lost.

• 41:01Speaker 00

  But when I was on the G, when I was running the healthcare business and on the G capital board, it wasn't my domain per se, so it was a harder thing to push back on, even though in retrospect I wish I had. But I, I just think in a, in a very fluid world, it's just, it's hard for the leader to always ask what everybody thinks. And it's hard for the subordinate to break through the power differential, particularly in areas where you don't have as much domain expertise. I, I'll give you a funny one, but it's going to sound like so funny. So in 1997, I was running the medical business. I wanted to put daycare on the facility. So I went about doing it. Jack hears about it and reams my ass, says, look, you can't put daycare there.

• 41:44Speaker 00

  If you, if you can't put it with the union guys in Louisville, we can't put it in Milwaukee, blah, blah, blah. And I said, ah, you're wrong. Let me go do some research, I'll get back to you. So I went to the HR leader in Louisville. We got to do daycare. You, you're not going to do it because it doesn't work for you, but it works for me. I need your, I need, you gotta have my back. So she says, okay, go for it, I have your back. So I, I kept calling, chipping away and finally said, look, go ahead and do it. Just don't tell anybody. So if you're persistent, if you, if you continue to chip away, even when the power differential is vast, you can get things done. But it's one of the challenges of a big company.

• 42:24Speaker 00

  It's just making the culture such that you feel, all the right people feel free to speak.

• 42:30Shane Parrish?

  You mentioned something there about domain expertise, which I think is interesting. GE was for most of your, your time there and the time before you, I think under Jack, it was known for generalist sort of management in place in a lot of the businesses. You'd be running plastics one day and aviation the next day. Well, what are your views on that now and how have they changed?

• 42:52Speaker 00

  What I always say is that I learned so much working for Jack, but the world changed very dramatically between the 1990s and the 2000s and beyond. And I think that there is a role for generalists, but it's harder to be successful in the world today unless you're kind of deep domain, particularly technically. The best CEO I had working for me in GE was the guy that ran the aviation business. He was great at the technology, knew the people. He knew all the initiatives that the company was trying to drive, but he was just a really deep domain, technical leader. And that was really what I was trying

• 43:34Speaker 00

  to groom and what I think is important today. If you look at Bezos, you know, Amazon's a conglomerate, but it's a software company. Google's a conglomerate, but it's an AI company, you know. Walmart is huge. It's a retailer. You go, the companies that do well today are extremely deep. And I think to a certain extent, you know, not, look, we had a ton of good people, but we were creating perfect managers for private equity. You know, if you look at the, the basic GE toolkit that I grew up with, it was almost the perfect match for private equity where you took a company, you had five years to turn it around. You didn't have to make big bets on products and technology. And so I, I think to a certain

• 44:17Speaker 00

  extent, some of the people who left GE did best in private equity versus going to run other companies. But I think we live in a domain world. We live in a deep domain world.

• 44:28Shane Parrish?

  That's interesting. You said in the book that your peers promote you, but an erosion with your team gets you fired. Can you explain that statement?

• 44:36Speaker 00

  Yeah, I think when you're rising in your career, people know that those that are around you have to kind of support you, but your peer interactions aren't forced. They come naturally. And so it's ways that you can observe who actually is natural at this. Who's, who's giving more than they're taking? Who, who do people want to be around? And that's really important, right? And so when people see that, that's very encouraging.

• 45:09Speaker 00

  On the other side, like, things go wrong all the time. You know, bad markets, bad cycles, you gotta fix things. You know, those are, those are things that happen. And a board shouldn't be critical of a team that's fixing things. But when direct reports are going around the leader to the board, or acting out in meetings, then you know that when you're not there, the team's not dedicated to fixing things. They're dedicated to politics and bad behavior. So, I think you can always observe when things are wrong. Sometimes leaders can pull their way out of it, but they can't do it without their team. I would say, Shane, during the financial crisis, we were at rock bottom.

• 45:52Speaker 00

  And I, I helped cause that. And my board knew that. But my team was always with me. The guy that ran G Capital, he was committed. But so was the, so was the team at aviation and healthcare, and they were pulling their weight, and they weren't leaving the company. They were, they were saying, hey, all of us have to row together. So, you know, I'm sure people on the board said, let's get rid of this guy. But other people said, well, you know, we're in a shitstorm right now. Everybody seems to be with him. Let's, let's let him work his way out of it. That's very different when you walk in, you're not making your numbers, and everybody who's there is running their own play. That's when a board has to step in and make a change.

• 46:36Shane Parrish?

  How did you go about personally learning while you were CEO?

• 46:40Speaker 00

  I spent a lot of time networking. So, there were five CEOs in the New York City area. It was me and Ken Chenault from American Express, Sam Palmizano, and then Jenny Romney from IBM, Steve Reindman, and then Indra Newy from Pepsi.

• 47:00Speaker 00

  And Bill Weldon and then Alex Skorsky from J and J. And we had dinner every quarter. We would rotate slots and it was just kind of a lonely hearts club. And we'd sit around and talk about who's a good board member? How do you run your board meetings? How do you pay your team? Different things like that. That was great. And then I spent a lot of time, um, you know, when you run GE, everybody will see you once. So I would spend a lot of time off the beaten path, getting to know scientists and startup people and political figures, kind of out of sequence, like when I didn't need anything. Like Mark Benioff was an early friend, right? When he was just starting Salesforce and I spent, you know, I'd go to California and say, you know,

• 47:43Speaker 00

  teach me about cloud computing and how do you view CRM? And not do it at a big meeting, but doing it one-on-one over dinner. I, I spent a lot of time just seeking, seeking people out. That's, that's how you really learn. You've got it, you've got to be the initiator. You have to be constantly curious. You have to see people when you don't need anything. I mean, that's really one of the secrets to life, you know? Like everybody, when they need something, they come and say, hey buddy, you know, can you help me? That's never, that's never when you're going to learn. And people hate that. I hate that. Other people hate that.

• 48:17Shane Parrish?

  Are there any small habits that you have that you think lead to remarkable results that, um, other people don't realize?

• 48:25Speaker 00

  You know, I'm not sure I'm going to be completely profound. I think being well-read is actually extremely important, more important than people give credit to. Watching how people work, just sitting and saying, why did you do that? How did you do that? Right? What, what did you, what were you thinking about? You know, I would walk through a factory and I would stop at a station and I would just spend 20 minutes talking to the frontline people on why did you do the things you did? And I would screw up everybody's schedule, but it gave me kind of insight that was broader than getting kind of.

• 49:03Speaker 00

  Canned presentations while walking a factory. So asking people what they do. It it sounds so silly and stupid is actually quite profound. Show me how you do. Show me why you do what you do. Show me how you do what you do. I'm on the board of Twilio, a software company in California, and they make all the board members build an app. I think that's brilliant, right? Because you they they sign you a developer. I built an app that my students could have so they could, after every class, they could send a text and say, this was terrible. This was good. They could give you a ranking. So it took me four hours to build that app. The guy could probably have done it in seven minutes.

• 49:48Shane Parrish?

  Oh, wow.

• 49:48Speaker 00

  But it was.

• 49:49Shane Parrish?

  Yeah, that's the fun of it, though, right? Like, you're learning.

• 49:52Speaker 00

  Totally. No, no, totally. And it it assigned to me a developer who he and I still text today. And he's a frontline guy at Twilio, a great, great person. But it was awesome.

• 50:04Shane Parrish?

  I want to end with a question. We've been getting a lot of emails from high school teachers lately who listen to our podcast in their class with business leaders and specifically are interested in what advice you would have for high school students.

• 50:17Speaker 00

  Learn how to be a good friend. Learn how to be a good friend. You know, you you live a life with with ups and downs, no matter what you pick. And you never model your life for like a crappy day. You always model your life for a sunny day. I think if you think about yourself in terms of modeling for, you know, if you model your life to start thinking about risk at an early day, you understand that if you have a few people around you, you can make it through anything. And if you if you have nobody around you, when the inevitable, really lousy day happens, it sets you back further than you think.

• 51:00Shane Parrish?

  Yeah, that's a beautiful place to end this. Thank you so much, Jeff.

• 51:04Speaker 00

  Thanks so much, Shane.

• 51:09Shane Parrish?

  Hey, one more thing before we say goodbye. The Knowledge Project is produced by the team at Frontiers Street. I want to make this the best podcast you listen to, and I'd love to get your feedback. If you have comments, ideas for future shows, or topics, or just feedback in general, you can email me at [email protected] or follow me on Twitter at Shane A. Parrish. You can learn more about the show and find past episodes at fs.blog/podcast. If you want a transcript of this episode, go to fs.blog/tribe and join our learning community. If you found this episode valuable, share it online with the hashtag The Knowledge Project or leave a review.

• 51:50Shane Parrish?

  Until the next episode.