"The book America needs now: the legacy of toxic leadership, and how to undo it"
Picture this: I'm a little kid in my living room in West LA, watching an episode of "60 Minutes." A group of distraught factory workers have their factory closed and their jobs destroyed for no discernible reason. By who? "Neutron Jack" Welch, the CEO of General Electric. Wasn't the factory making useful things? (It was.) To compete with Japan, didn't we need *more* manufacturing? (We did.) How would these highly-specialized workers survive? (Who cares!) The firings seemed senseless, capricious, and cruel. Why was Welch being such a dickhead? That's when I understood the "Neutron Jack" moniker: like a neutron bomb, Jack Welch left buildings standing while annihilating the people inside them.

That negative impression of Jack Welch persisted for some time. But then, over the years, I kept seeing articles and magazine covers praising him for his managerial acumen. The chorus of commendation was so loud that I had to pause to reconsider. After all, he met quarterly earnings estimates umpteen times in a row! He made GE the most valuable company on Earth! He was Fortune's "Manager of the Century"! I must have been missing something; clearly these business folks understood what was *really* going on.

Except that they did not. This little kid grew up, got his business degree, and realized that Jack Welch was one of the *worst* CEOs of all time. He destroyed GE, brainchild of Thomas Edison and *the* iconic American company—the maker of everything from light bulbs and washing machines, to jet engines and giant 10-story hydroelectric turbines.

So I was thrilled to see a new book finally endeavor to dismantle the cult of Jack Welch, exposing his managerially toxic and morally bereft ways. Comeuppance at last!

Turns out I *was* missing something after all. Welch was far, far more destructive than I had ever imagined.

David Gelles makes the case that Jack Welch's damage reverberated far beyond the confines of GE into the world economy and society at large. Can one man really do that much damage, though? If the guy was super smart, blindly ambitious, greedy as hell, sociopathic, unwise, with legions of well-placed protégés, he could.

According to Gelles, "Welch employed three main tools in his crusade: downsizing, dealmaking, and financialization."
• Downsizing: Welch "was the first CEO to take a healthy company and treat it like a turnaround job, preemptively laying off tens of thousands of workers." He popularized mass firings, moving jobs offshore, and outsourcing. I didn't realize 250,000 GE workers lost their jobs during Welch's tenure — that's the population of Madison, Wisconsin! So much for "Generous Electric."
• Dealmaking: When he couldn't sell more toasters and jet engines, Welch artificially boosted the bottom line by making nearly 1000 acquisitions for $130B, most having nothing to do with GE's core business.
• Financialization: First, he got rid of GE's manufacturing businesses and instead beefed up GE Capital, its investment and insurance arm, so GE could make money without having to make things. Second, he used share buybacks and accounting fraud to meet Wall St forecasts quarter after quarter.

Welch's protégés then went off to deploy these tactics, making them part of the modern corporate playbook, and wrecking dozens of decent companies in the process: John Trani at Honeywell and Stanley Works; Larry Stonecipher at Boeing; Jim McNerney at 3M and Boeing; Bob Nardelli at Home Depot and Chrysler. They not only laid off thousands of workers, but also killed innovation.

These Welch Weenies and their Welchist tactics are still affecting us today. You can draw a straight line between the obsessive cost-cutting tactics of GE acolytes and the failures of the Boeing 737MAX. Turns out when you cut corners and rush production schedules of passenger jets, planes go down and people die.

That's what makes Welchism so damning: its disregard for basic human welfare in favor of maximizing share price. When did people go from being the main show to becoming overhead? 1981, apparently—when Welch took over GE: "There is capitalism in America before Jack Welch, and after him. His career serves as a line of demarcation, a split between the past and the present. Look at the trend lines for any number of key economic indicators—wages, mergers and acquisitions, manufacturing jobs, union representation, executive compensation, corporate tax rates—and it’s clear that right around 1981, the year Welch took over, things started to go off the rails."

One more thing started to go off the rails right around then that's beyond the scope of the book: the well-being of Americans. That's when the "deaths of despair" from hopelessness, addiction and suicide started ticking up, culminating in a *decline* in US life expectancy starting 2017—the only such decline in rich countries. Coincidence? I don't think so.

Gelles closes with some sensible ideas for reversing the damages of Welchism: better pay; employee profit- and equity-sharing; putting workers on boards; capping executive compensation. Principles of "stakeholder capitalism" can mitigate some of the toxic, short-termist effects of Milton Friedman's frankly sociopathic doctrine of maximizing shareholder value, while bringing us closer to the "Golden Age of Capitalism" when the thriving of employers and employees were intertwined. Capitalism isn't the enemy. Greedy, short-sighted assholes with bad ideas are.

Gelles's fluent prose and seamless storytelling turn what could be a somber subject into a fast, stimulating read. Mainly, though, we all need to read this because Welchism and greed have arguably become the operating system of American society. That ain't sustainable. "The Man Who Broke Capitalism" depicts a gigantic train wreck unfolding in slow motion—but we have the pause button. We're here on Earth to take care of one another. We can move towards that today by giving less power to rich jerks, and electing wiser, kinder people with our long-term interest in mind. Jack Welch is dead. Let's make sure his toxic ideas die, too.

-- Ali Binazir, M.D., M.Phil., Happiness Engineer and startup coach, author of The Tao of Dating: The Smart Woman's Guide to Being Absolutely Irresistible, the highest-rated dating book on Amazon, and Should I Go to Medical School?: An Irreverent Guide to the Pros and Cons of a Career in Medicine

PS: For further reading on capitalism going off the rails and sensible ways to fix it, I highly recommend Kate Raworth's Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist and Douglas Rushkoff's Throwing Rocks at the Google Bus: How Growth Became the Enemy of Prosperity.

I feel like I have been waiting for this book my whole career! Finally someone has the courage to say not only does the Emperor have no clothes, Gelles effectively and successfully unmasks the great fraud perpetuated by Jack Welch and his acolytes. Gelles lays out the evidence of how Welch rose to power and how he decimated profitable businesses in order to chase short-term earnings (laying off people and closing factories does wonders for your stock price short-term). But ultimately this quarter-to-quarter mindset covers up all times of financial manipulations and fraud.. Not only can this impact the long-term viability of a company (just look at GE now as it is being sold off for parts), but it also devastates the employees, retirees, families and whole communities. Gelles describes Welch as a virus and his "lauded" approach to leadership (by Fortune Magazine, and others), has spread to other corporations. I have worked in many organizations where executives wanted to adapt many of Welch's leadership development processes such as "stack ranking" etc. and had to point out the potential downsides on the culture and morale buy adopting this type of performance management. What is fascinating as Gelles points out, is that when GE leaders went to become CEOs at other corporations, the GE playbook failed miserably but typically the damage was already done before they would exit with a huge severance package. They would focus on such severe cost-cutting that it would completely hollow out the business and leave many employees out of a job. One of the most costly examples is the rise of the CEO at Boeing (former GE) who applied the GE Playbook and cut costs, cut engineering talent and outsourced the building of and safety of planes. We know now the terrible history of the Boeing Max 737 and crashes which Gelles has reported on brilliantly for the New York Times. Today, business people are scratching their heads on why there is a rise in unionization and union campaigns - yet GE, Bezos, Musk, Zaslav, have created workplaces that hates labor and workers and is dehumanizing. Corporate greed has decimated the middle and working classes and entire communities particularly outside urban centers. If this all sounds dire and pessimistic, Gelles does end with examples of corporations that are doing right and getting out of the quarterly earnings report pressure and mindset - such as Unilever. Gelles outlines specific actions Executives can take as well as legislation. He provides a new framework for how to measure success of corporations.

This book is a must-read and is one I will refer back to. I highly recommend it!

Everyone who has ever taken a business course knows the name, Jack Welch. When I was studying for my business degrees, his book "Straight from the Gut" was one of my required readings. He was one of the first celebrity CEOs as he radically changed the way not only GE, a household name in manufacturing, but business was conducted. Jack's legacy and techniques are still used today in corporate America.

What this book explores that is unique is to talk about the long term effects of Jack's strategy. He bought small companies and either transformed them or destroyed them. This made way for the destruction of main street to be bought by major corporations to basically put them to rest. It created the big push in the "Too Big To Fail" movement amongst corporations. It brought about the loss of a true free market, which capitalism as an economic concept is based on.

Before reading this book, I hadn't really seen the correlation behind Jack Welch's strategy and the long term effects it has had on our current American economy and how it pushed us into a late stage of Capitalism.

I do wish this book would have given more insight into the numbers versus the strategy theories. They are well documented, even from studies on GE and Jack Welch, but to look at the way it affected short term and long term economy and the damage it did to a true free market would have helped drive these points further.

What this book did well is provide a critical eye to how revering a single strategy can provide short term benefits to a single company but following that strategy has very negative long term effects on the economy as a whole. I do also enjoy that the author added his own commentary on how he feels we can potentially start to think about fixing this, but I fear that it may be a little too late. You'd have to continue to showcase the damage of buying and breaking apart Main street by Wall Street really damages the economy as a whole in order to combat the effects. You'd have to teach across every school the ethical nature, not just the one that provides the most profit in a short term.

I wouldn't blame only Jack Welch either, but his widely public strategy and promotion of how he changed GE should be reviewed as not a success story, but a short term success for a few and a long term failure on the ethics of business.

The Man Who Broke Capitalism
David Gelles




The Good, The Bad, The Ugly of running a Large Cooperation!




Having grown up in the suburbs of a city hosting a large General Electric plant and both parents working for the same, the name Jack Welsh was ever present. A special thanks to Mr. Gelles for bringing to l;ight the rest of the story in an expanded and all telling manor.

I found his understanding and explanation of the subject matter easy to comprehend. The expanded information as to the broader consequences of Welsh's thinking was eye opening.

Others, I'm sure, will enjoy this well written volume that illustrates sometimes the out of norm thinking of those in powerful positions.


Spencer Birt