• Big Mistakes

How Just One Man Destroyed America's Manufacturing Industry

General Electric's 1953 annual report boasted of balancing workers, shareholders and customers evenly. By 1999, its chairman was crowned Manager of the Century for dismantling that exact balance — and calling it genius. Jack Welch inherited a postwar compact where productivity and pay rose together for 31 years. He replaced it with "rank and yank": firing the bottom 10% of staff annually, forever, plus a doctrine of fix-it, close-it, or sell-it for any business outside the top two in its market. GE cut 112,000 jobs in five years while GE Capital, its finance arm, grew to generate half of company profit — turning a manufacturer into a shadow bank riding a $14B-to-$600B valuation curve. GE Capital nearly sank the company in 2008, requiring a federal bailout. Welch later called shareholder value "the dumbest idea in the world" — after the applause, and the layoffs, had already reshaped a generation of management. Timestamps: 00:02:25 GE's 1953 annual report boasted of balancing workers, shareholders and customers equally — the opposite of what came later 00:12:37 Welch's vitality curve forced every manager to fire the bottom 10 percent of staff annually, forever, regardless of performance 00:16:02 GE Capital, the finance arm, grew to generate roughly half of company profit, eclipsing the industrial business it was named for 00:26:12 The 2008 crisis forced a federal bailout of GE Capital, the finance arm that had powered half of company profit 00:26:56 Welch called shareholder value the dumbest idea in the world in 2009, after decades teaching companies to chase it Read More

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