Better Offline - The Shareholder Supremacy

Episode Date: July 10, 2024

In this episode, Ed Zitron tracks the history of the growth-at-all-costs rot economy to a court case in 1916 that established the Shareholder Supremacy, and set the terms for General Electric's Jack Welch to fundamentally break capitalism, an era where companies moved away from building lasting, sustainable companies that created things and instead began focusing on pleasing shareholders - and how it leads to today's terrible tech companies and leaders. LINKS: https://tinyurl.com/betterofflinelinks Newsletter: wheresyoured.at Reddit: http://www.reddit.com/r/betteroffline  Discord chat.wheresyoured.at Ed's Socials - http://www.twitter.com/edzitron  instagram.com/edzitron https://bsky.app/profile/zitron.bsky.social  https://www.threads.net/@edzitron  See omnystudio.com/listener for privacy information.

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Another podcast from some SNL late-night comedy guy, not quite. Unhumor me with Robert Smygel and friends. Me and hilarious guests from Bob Odenkirk to David Letterman, help make you funnier. This week, my guest, SNL's Mikey Day and head writer, Streeter Seidel, help an a cappella band with their between songs banter.

Where does your group perform? We do some retirement homes. Those people are starving for banter. Listen to humor me with Robert Smigel and Friends on the IHeart Radio app, Apple Podcasts, or wherever you get your podcasts. Why are we all so obsessed with romance? On the Radio 831 podcast, join us,

Sanjana Basker, and Tyler McCall. As we unpack, the trending tropes, fuzzy adaptations, book talk drama, and celebrity love stories with hot takes and sharp guests. Each episode digs into what these stories reveal about desire, fantasy, identity, and how we love now. Listen to the Radio 831 podcast on the IHeartRadio app, Apple Podcasts, or wherever you get your podcasts. AllZone Media. Hello and welcome to Better Offline. I'm your host Ed Zittron. In the next two episodes, I'm going to walk you through a theory I

have about how the tech industry and capitalism at large became the playground of asshole do-nothing management dictators that see human beings as assets and the customer as kind of an annoying diversion from growth. But before I go any further, please check the episode details of this for a URL that has sources for everything that I'm talking about in this and future episodes. I want you all to be able to follow along with everything I'm saying. Don't take my word for it, take the many, many links that I've included. It's important that you're just a as informed as I am here. But now to the episode, and I promise you, once we're done with this two-parter, everything that's happening will make a little bit more sense, even though it all feels

just chaotic and offensively stupid, disconnected from reality. In many ways, I've been working on this episode and its follow-up for years, watching these trends, getting steadily more pissed off, as you've probably heard, unable to see the big picture, because I've been picking up things as I go. Even since 2020, when I started writing my newsletter, there was something going on that I just couldn't quite get. It's been really hard to understand how companies like Meta can run terrible companies with decaying services that are also somehow wildly profitable, or how Meta, Microsoft and Google keep proliferating this unprofitable, unsustainable, generative AI tech that takes water from the desert and strains our power grids to produce these deeply mediocre outcomes

based on incredibly vague promises and then see their stock prices go up despite them not making any money. I've been craving this way to explain the whole growth at all cost mindset. I've explained what it is so many times, but there is an answer and it's fairly simple. The customer, and by extension the service provided to the customer isn't really the primary concern of many, many companies these days. It's all about shareholder value. And while this may seem a little bit obvious, it requires also a little bit of a history lesson to really explain how profoundly damaging what I call the shareholder supremacy really is. And I know you're probably going to think,

well, we all knew that increasing shareholder value was what stocks were about, right? I really need you to understand what that means. Our journey takes us back almost 100 years, long before. the creation of the internet, the iPhone, Facebook, the better offline podcast, you know, the major things in the tech industry. We're going to talk about the figures that predate the villains I've covered in the past, the Altmans, the Sondar Pishais, the Prabagar Raghavans of the world. But despite their historical distance from this current era, these past figures are important to know and understand because they fundamentally shaped the culture and the psychology of today's managerial elite and, crucially, built the incentive structures that guide companies into hell.

These stories explain the often paradoxical motivations of modern capitalism, where those who make short-term decisions that invariably result in long-term pain and in many cases decline, see a big reward, whereas those who built sustainable businesses that actually innovate and don't treat their customers and employees like done, are ignored, if not actively maligned for a lack of growth. But like I said, it's time for a history of. lesson. In 1916, the Ford Motor Company had an idea, to use its surplus capital to invest in new plants to increase productions of Ford's Model T car, which the company had continually made cheaper or keeping wages for its workers high. Ford, who I should be clear, was a horrible piece of

shit, thankfully he's burning in hell right now, intended to cut dividends to shareholders in favor of investing in its employees and infrastructure, which angered minority shareholders who already in sense that Ford had prioritized the company's success and its employees' happiness over making the stock price go up, leading to the famous Dodge v. Ford Motor Company case that would define, and ultimately doom, modern capitalism, and in many ways birthed the growth at all cost raw economy. The Michigan Supreme Court found that a business corporation is organized and carried on primarily for the profit of the stockholders, and that the powers of the directors are to be employed for that end, and intimated that cash surpluses should not be saved

to invest in upcoming projects, but distributed to shareholders because Ford had shown it was good at making money. Ford was directly forbidden from lowering prices and raising employee salaries and forced to issue a dividend by a court. That's the free market, baby. That's how it used to work, and I guess that's how it works nowadays. Anyway, to be clear, the statement around corporations duty towards shareholders was made a beat-addictor. This means it was not actually legally binding, despite over 100 years of people acting as if it was, citing it in cases, using it as a justification to destroy so many lives in favor of growth. This statement, not even a legal precedent, a statement, was the beginning of what I call the shareholder supremacy, when companies moved away

from building lasting, sustainable companies that created things and instead became these nasty growth pitches that focused on pleasing shareholders. It birthed a short-term mindset, focused on increasingly abstracting a company away from the production of goods or services, and promoting growth mechanics that increased stock valuations and made for better balance sheets. The cult of shareholder supremacy, which some people call shareholder primacy, is one disconnected from production, and I'd argue humanity itself. It's this weird, continual shell game where companies do things not to produce like an outcome in real life or a thing that people like and pay for, but to manipulate investors in the markets themselves, though

at this point kind of feels like investors and markets are kind of in on the con. These tactics should be immediately recognizable to anyone who's followed my work over the last few years. If a company's share price declines and management smells a shareholder revolt, they can juice their numbers by laying off a few thousand workers or adopting of species new technology like Generative AI or the Metaverse, and then doing a big media blitz to show everyone how cool and growth-hungry they are. Or they can do the really annoying thing, which is a share buyback program where the company just buys its own stock, which then bumps the value of the stock. That whole situation I really need to look into more because it doesn't seem good. And also

on top of that, that money is being diverted away from research and development and employee salaries. And it was this movement, this shareholder supremacy movement, that created the nebulous creature known as management. I realize there are many definitions of management, but the manager we see today is a figurehead that exists to increase company value and make speeches rather than have any kind of domain expertise or bona fides. They're just a person with the ability to move numbers around and point of people and say, get this done, even if this, in this case, means make something worse as a means of cutting costs

or lay off a few thousand people so that number go up. In the eyes of the shareholder supremacist, the CEO of a tech company isn't someone that builds or invests in or proliferates technology, but a kind of stage magician accountant hybrid that uses a combination of sleight of hand and vague promises to convince those around them that a company is the future,

occasionally resulting in the company developing something involving technology. Yet it took decades. for the damage from Ford versus Dodge to really set in when in 1960, a horrible little man, a goblin creature, worse than hell, called Jack Welch, would join a company called General Electric. One founded, co-founded, I should say, by light bulb inventor Thomas Edison to sell things like light bulbs and refrigerators, and yes I know, a bunch of military stuff too. But putting that aside for a second. Welch originally joined the company as a junior chemical engineer,

a job he lasted him for roughly one year before he was given the power of the manager. I really cannot express enough how bad Jack Welch was for the world. His damage to the world itself, to global economies, to the hundreds of thousands of people laid off because he taught people how to do this. He is on the scale of a war criminal. I'm sure he has led to actual deaths, but he's definitely ruined lives. He showed corporate America how unprofitable having a soul was. He is, to quote Robert Evans on Behind the Bastards,

the reason you were laid off, you and every single other person who was laid off to make a company more money. But I'll get to that. Eight years into his tenure, Welch would become the VP and head of General Electric's Plastics Division, and, to quote David Gellis is the man who broke capitalism, believe that business was a Darwinian competition, where he was better than the rest,

which caused him to push GE to the limits. In practice, this meant that Welch, as the manager of a factory trying to develop a new kind of plastic in 1963, continually pushed his team to move faster, run more experiments, whatever it took. Which led to a massive explosion at the factory, thanks to Welsh pushing his scientists to use an untested process, where oxygen moved through a highly volatile solution. If you've listened to the Behind the Bastars episode, don't worry, I'm not going to go over all of it,

and I have my own nasty little take. Now, kind of like Robert said on Behind the Bastards, one would think that you'd get fired for blowing up a factory, especially if it was your decision-making that led to the explosion, but this story instead became a kind of noxious management consultant fable about failure, and was, to quote David Gellis, a point of pride for Welch, one that demonstrated a healthy appetite for risk. Welch became G's head of plastics five years later in 1968, and would use his aggressive and dangerous tactics to grow norrel, a kind of plastic that's well suited

for things like electronics into a billion-dollar business, and crucially, becoming head of plastics gave Welch his very first stock options, and potentially his first erection, which in turn began his obsession with stock valuations, and I'm of course referring to the stock options, giving him that obsession. In 1977, Welch was one of a chosen few in line to take over the then-CE CEO, Reg Jones, and was handed a series of business units to run as a test to see if he had it in him, including GE's appliance businesses, and most important of all, GE credit, which I'll get back to in a minute, because it's extremely bad what happens with that. Another podcast from some SNL late-night comedy guy, not quite.

Unhumor me with Robert Smygel and friends. Me and hilarious guests from Jim Gaffigan to Bob Odenkirk to David Letterman, help make you funnier. This week, my guest, SNL's Mikey Day and head writer Streeter Seidel, help an a cappella band with their between songs banter. There's the worst singer in the group. The worst? Yeah.

Me. Is there anything to the idea that because you're from Harvard, uh, you only got in because your parents, made a huge donation. The group. The yard herds, right? That's the name.

The Harvard Yard. They're open. Do you have a name suggestion? We're open. Since you guys are middle aged, one erection. Listen to humor me with Robert Smygel and friends on the I-Heart Radio app, Apple Podcasts, or wherever you get your podcast.

Humor me. I need some jokes to make me seem funny. Run a business. not thinking about podcasting, think again. More Americans listen to podcasts than ads supported streaming music from Spotify and Pandora. And as the number one podcaster, IHearts twice as large as the next two combined. So whatever your customers listen to, they'll hear your message. Plus, only IHeart can extend your message to audiences across broadcast radio.

Think podcasting can help your business. Think IHeart. Streaming, radio, and podcasting. Let us show you at iHeartadvertising.com. That's iHeartadvertising.com. one, it's Ryder Strong and Will Ferdell from PodMeets World. And now the Podmeets Twirled podcast. We're two men who were completely clueless to reality TV, who now have covered Dancing

with the Stars, traitors, and we're gearing up for the season finale of Survivor. So yeah, now we're experts. I know we annoyed a lot of our listeners by our severe lack of survivor knowledge. That is the point of the show. I'm just going to remind you. I have watched some Survivor. I obviously haven't watched enough. Did people not like it?

Yeah. Just because we... Yeah. We'll be recapping the big conclusion in the 50th season, from the final attempts at gameplay, to the desperate pleas of finalists, to a bunch of... Ha, ooh. Ha, ha, ooh.

Again, we are experts. So make sure to tune in to Pod Meets Twirled for all our Survivor 50 takes. Listen to PodMeets Twirl on the IHeart Radio app, Apple Podcasts, or wherever you get your podcasts. As Gellis recounts, Welch decided that despite its profitability and continued, continued growth, appliances would face competition from overseas and that the right move was to start laying people off. This was a huge success at the company, insofar as it boosted profits,

and other divisions copied his idea, gleefully firing thousands of people from a company that grew successful by investing in making itself a great place to work. It's so good, I love all of this, it makes me happy, I don't feel angry at all. Anyway, to quote Gellas, Welsh dispensations, with the notion that mass layoffs were a measure of last resort, and labor was a cost, not an asset. Before Welch, layoffs were something that happened when the company was collapsing, not as a means of boosting one's balance sheet. Thank you, Jack Welch. Thank you very fucking much. I'm actually not being angry enough here. There is no way to show how angry a person should be at Jack Welch for this. I hope he burns in God damn hell with Henry Kissinger and Ronald Reagan and Maggie Thatcher and the rest of these bastards.

I should do a shirt around the arseholes. That does sound good. Anyway, forget all that for a second. We have a podcast to record. Continuing the story about this piece of shit, Welch would become CEO in 1981 and in the space of two years would lay off over 72,000 people. One tactic he would employ he was stack ranking, also known. as their vitality curve, or as you'll sue understand why, rank and yank, where high-ranking managers were forced to rank their subordinates and fire the bottom 10%. This tactic later spread to and poison countless other companies, including Amazon, Google, Activision Blizzard, and Microsoft, which has since stopped using it. It's worth noting, though, that not every

implementation of stack ranking usually results in immediate payroll cards. Those perceived as low performers maybe denied bonuses or raises or issued warnings or put on a performance improvement plan, which is almost always a precursor to a firing, kind of like taking a break from a relationship. Or they're just encouraged to leave or bullied into doing so. But even in the most benign, for lack of a better word, form, it's a pretty horrendous management tool. If you have a team of 10 excellent workers, but only 8 can get a bonus or a positive ranking, you have two left out who are considered inadequate, not based on a litmus of whether they're good at their jobs, but whether they're not as good at their jobs as other people.

He pretty much guaranteed to kill morale and team cohesion, but perhaps that was the point. Welch's nasty, shitty, shitty little philosophies have deeply damaged the concept of management itself, turning managers into these tiny little accountants that see Labor, as Welch did, as a cost centre, and managers is this protected class above the fray. They don't do work, they tell you to do work. Their job is showing your work to someone else and saying it's theirs. They're the ones telling you that you must come back to the office, despite the fact that you can't tell what the hell they're doing all day.

They're there all the time, but they don't seem to produce anything other than reports. These people are a direct symptom of the poison in the veins of capitalism, and which I know is far from goddamn perfect, but it's so much worse than it was, caused by Jack Welch, who reframe the definition of a good company to mean one that grows profits

while controlling labor costs. And this is how Jack Welch got the nickname Neutron Jack, referring to the thermonuclear bomb that kills people but leaves infrastructure intact. But I mentioned GE Credit earlier for a reason. G.E. Credit was where Jack Welch would really make make his marking, get into the guts of the business. General Electric was, at a time, a reliable, profitable and sustainable company and was able to fairly easily mobilize capital, which of course

Jack Welch loved, claiming that compared to the industrial operations I did know, this business seemed an easy way to make money, and that you didn't have to invest heavily in R&D, build factories and bend metal, to make money off of credit. In the first few years of his tenure, Welch would aggressively expand, according to David Gellis' The Man Who Destroyed Capitalism, G-credit, buying up companies that had nothing to do with manufacturing, including Kid a P-Body, an investment bank that would eventually turn out to have falsified $350 million in profits, a thing that also didn't get Jack Welch fired! G- Capital would expand internationally, ballooning to $370 billion in assets by the time that Welch

left the company in 2001. According to Gellis, and likely referencing a CNN article and include in the links, at one point G-E Capital was America's largest equipment, Lisa, leasing hundreds of thousands of vehicles, handling credit operations for companies like Kodak, becoming a backbone of America's increasingly debt-ridden economy. To quote Gellis, by the time that Welch left, GE Capital was effectively a giant unregulated bank, investing in all kinds of risky debt instruments, including, in shrewdellas. insurance products, credit cards, I think even like tie auto loans. It's so weird.

And crucially, Welch's legacy is one where at the time he was considered a genius that had taken General Electric's market cap, which is just the sum of all available shares, from $14 billion to $400 billion, all through a very specific kind of financial trickery, where GE would move things around, laying people off buying new companies, selling old companies, getting into new industries to match the numerical analyst expectations, and make earnings targets. In a forning and quite embarrassing piece from 1997, years before Welch would leave and G credit would actually lead to its collapse in some levels, reporter John Curran describes how G-E capital grew by seeing new opportunities and immediately growing a new business in any new

market it could, taking advantage of capital's low cost of funds, at one point both leasing equipment to companies and buying it back, refurnishing it and selling it to other companies, which isn't necessarily a bad business, but at this point, how many goddamn businesses can you be in, Jack? Well, you can't be in any, you're burning in hell. What a shame. In the space of a few decades, Welch had taken General Electric from a company that made light bulbs and refrigerators and plastics to one that continually played with the numbers as a means of boosting its stock price, including a $10 billion stock buy back in 1990. And the New York Times' John Holution noted that G was only investing 2.4% of its revenues in research and development, nearly a full

percentage point below the national average at the time. At this point, I really want to take a step back and just point at that, which is, this was the first company that really just fucked with capitalism. And there's a whole separate episode if I wanted to in the economist Milton Friedman, who is also a scumbag who I also hope is burning in hell. Rant aside, note what GE went from what GE became. GE was able to raise these funds. They were able to grow so big and do all this stuff because their company was so reliable.

They didn't have terrible turnover. They had happy employees. They had sustainable products. They had their own products. Their own patents. They owned. They had scientists that worked there for decades. And then Jack Welch came along and destroyed all of that

while making it, quote, a better company. What a worse company. This is the man who taught the market how to eat shit and love it. I am sorry that's gross, but that's really what we're looking at here. To be clear, at this point, General Electric was an absolute dog of a company. As David Gellis noted in a Reddit thread, Welch operated at a time before Sarbanes-Oxley, a sweeping series of financial reforms instituted after the Enron scandal.

that required companies to do these annoying little things like disclose off-balance sheet financial arrangements. So, you know, a series of loans or credit agreements you made with someone that are not on your balance sheet. I have no idea how that was legal. But, and many other financial disclosures were also required that would have likely made what Jack Welch was doing before this a lot harder to play, which Welch claimed in 2002 would suck risk out of the system and cause people to not go for their dream. Gross way of pertinent, Jack, but also wrong. These things only made people get a little bit clever. But Welch's tenure was one that destroyed General Electric's ability to innovate,

while turning it into one of the most wildly profitable companies in the world. All through this nihilistic form of capitalism, where growth is really all that matters, even if it means making worse products, constantly entering and exiting industries, reducing spending in research and development for the products that made, your company's name, outsourcing multiple parts of the company to avoid paying benefits and higher American wages and generally treating human beings like an inanimate asset. And yeah, if you're thinking this sounds like every company, this is why this is the guy. As a result of all of this, when Welch left General Electric, it entered a prolonged period of decline as it became obvious

that it'd become, as Gellis had called it, a giant, previously at least unregulated bank, one operating in too many industries in a new regulatory environment that worked against them. General Electric and its bloated, messy asset portfolio were central to the 2008 financial crisis, with GE capital overexposed to the crisis, while also invested in subprime mortgages that would eventually see the company find $1.5 billion by the SEC. Though GE would still make nearly half of its profits from its financial arm in 2013, it would also sell off most of it of $26.5 billion, start starting in 2015. And while one might say, wow, this was a great moment where the company moved away from

Jack Welch's legacy, the company would then proudly announce that this would allow them to return $90 billion to investors in the form of stock buybacks and dividends by 2018. I promise I'm not actually sure it ever kept, though it recently announced it planned a $15 billion buyback in May. I don't know. All this just kind of seems like a con. Another podcast from some SNL late-night comedy guy, not quite.

Unhumor me with Robert Smygel and friends. Me and hilarious guests from Jim Gaffigan to Bob Odenkirk to David Letterman, help make you funnier. This week, my guest, SNL's Mikey Day and head writer, Streeter Seidel, help an a cappella band with their between songs banter. There's the worst singer in the group. The worst? Yeah.

Me. Is there anything to the idea that because you're from Harvard, uh, You only got in because your parents made a huge donation. The group. The yard birds, right? That's the name. The Harvard Yard.

But they're open. Do you have a name suggestion? We're open. Since you guys are middle-aged. One erection. Listen to humor me with Robert Smigel and Friends on the I-Heart radio app, Apple Podcasts, or wherever you get your podcast. Humor me.

I need some jokes to make me. See funny. Run a business and not thinking about podcasting, think again. More Americans listen to podcasts than ads supported streaming music from Spotify and Pandora. And as the number one podcaster, IHeart's twice as large as the next two combined. So whatever your customers listen to, they'll hear your message. Plus, only IHeart can extend your message to audiences across broadcast radio. Think podcasting can help your business.

Think IHeart. Streaming, radio, and podcasting. Let us show you at iHeartadvertising.com. That's iHeartadvertising.com. Hey, everyone. It's Ryder Strong and Will Ferdell from PodMeets World. And now the Pod Meets Twirled podcast. We're two men who were completely clueless to reality TV,

who now have covered Dancing with the Stars, traitors, and we're gearing up for the season finale of Survivor. So yeah, now we're experts. I know we annoyed a lot of our listeners by our severe lack of survivor knowledge. That is the point of this show. I'm just going to remind you. I have watched some Survivor.

I obviously haven't watched enough. Did people not like it? Like what was just because we? Yeah. We'll be recapping the big conclusion in the 50th season from the final attempts at gameplay to the desperate pleas of finalists to a bunch of ha, hoo,

aha, ooh, ha, ha, ooh. Again, we are experts. So make sure to tune in to PodMeets Twirled for all our Survivor 50 takes. Listen to PodMeets Twirled on the IHeard Radio app, Apple Podcasts, or wherever you get your podcasts. I realized that this was an extremely long and arduous history lesson, but it's necessary to express the incredible evil and darkness that was Jack Welch and his horrifying legacy.

Is poisonous philosophy that everything must grow, that the value of the company is only that which it returns to the shareholders and that human beings are a cost to be moderated, these are all things that have been inherited by companies you know today, not just in tech as well, but I mean, look at meta, look at Google, look at Microsoft, Microsoft, I think this week, laid off over a thousand people, and they posted, I think, over $10 billion of profit, maybe more than that. It's all Jack Welch. It's all MBAs following Jack Welch. During Jack Welch's tenure, by the way, he went something that I found really gross on top of all the other stuff that was gross, and it was something that David Gellis referred to as a campaign against loyalty.

claiming that the psychological contract has to change, and that loyalty to Jack Welch was not giving time to some corporate entity in return for shielding and protection from the outside world, you know, some kind of value exchange where your labor is traded and they keep you because you're good at the job and you want the job done well. No, no, no. What Jack Welch believed loyalty was was an affinity among people who want to grapple with the outside world and win.

I assume by blowing up factories and acquiring fraudulent investment banks. You know, moving fast and breaking things. The meritocracy. Making the numbers look right. All of these things that you hear, all of these things that Jack Welch did, have been picked up and run with by companies that you've worked for, companies that you've worked with, companies that you've seen fire people as they make billions of dollars.

Where do you think these people learned it from? Where do you think people gained the ability? to run a company that binged and purged assets like Google, taking on entirely new unrelated business lines as a means of expressing growth to the markets, like Facebook did when it acquired Oculus and WhatsApp, and still, despite your legacy being one of abject destruction and recklessness, like Mark Zuckerberg. You still get called an amazing leader by the New York Times as recently as 2022.

After hundreds of articles and multiple books talk about how bad you were at business, there's still people telling you you're good. Why do you think Mark Zuckerberg is still celebrated? Why do you think that wanker gets to fuck around on a goddamn hoverboard? Sailing across with an American flag and people go, Oh, Mr. Zuckerberg, you're so impressive. Fuck that guy. Fuck them all.

I'm sorry. I know I'm ranting. I know I'm pissed. But when I read this story back, when I see this, it's like watching someone give a disease to someone else deliberately and then check in to make sure they're still sick years later. And the anger I feel, as I've mentioned in other episodes, is because Jack Welch is also the reason why there's not as much money going into research and development.

He showed tech companies how to do it. He showed other companies how to do it. This man is the outbreak monkey of the rot economy. His dark influence has deeply poisoned American capitalism and created an environment where the only good companies are those that grow forever. His accolites include David Calhoun, once considered in line to replace him at GE, who later moved on to Boeing, where he worked as a director of the board from 2009 until he became the lead independent director in 2018, and then chairman in 2019 and then CEO in 2020, a period in which he was accused of strip mining Boeing by pushing to cut costs with aggressive outsourcing. Hey, if he worked out where this is going yet?

During his tenure, two Boeing 737 Max 8s crashed, one in 2018 just outside of Jakarta, killing 189 people, and another in 2019 en route to Nairobi that killed 157, followed by a door flying off an Alaska Airlines flight in January 2024 that led to an investigation where Alaska Airlines claim that it found many loose bolts on its now grounded Boeing Max 9 planes. Bob Nardelli, one of the three finalists at GE that competed to take over if the Welch got the job, went on to become the CEO of the Home Depot in 2000. He boosted profits immediately by aggressively cutting costs, and when the stock didn't stay competitive with lows,

which is, for non-American listeners, another hardware store, Nardelli chose the cut experienced full-time employees in favor of part-time workers, eroding Home Depot's already shaky position in the market, until he was paid $210 million to leave the company in 2007. Robert Sophie, I will take $210 million. That's my cost. Otherwise, the podcast will continue. Every single one of these men fails upwards because shareholder supremacy is what truly

dominates the markets and modern capitalism. It's this sense that what matters is growth and shareholder value, even if shareholder value really means making a very specific group of people richer and showing perpetual growth to match the numbers of Wall Street. Welch himself, he had this one really disgraceful way of putting it, that you can't grow long-term if you can't eat short-term, and that the main social responsibility for a company is to win. The crucial way to summarize Jack Welch was that he was, for the majority of his career, not actually engaging in the process of labor or doing any work. He started as a chemical engineer at General Electric in 1960, but was a high-ranking manager three years later, no longer participated. in the actual process that made the company rich.

As Welch grew more powerful in the organisation, he furthered distanced himself from production. By the time he was CEO in 1981, Jack Welch hadn't done a real job in nearly 20 years. Under Welch, General Electric distanced itself from producing things too, and taught the economy that one didn't have to run a good business to be a good company, just one with the right numbers. And knowing all of this,

it's important to note that Welch was until fairly recently, as I've mentioned, considered a hero. And somehow, one of the first people to criticize him was Malcolm Gladwell in October 22, only a couple of weeks before the New York Times would publish a piece calling Welch an amazing leader who inspired his colleagues to accomplish more. Because Welch's horrifying methods were so effective at boosting stock prices, he was at a time considered one of America's greatest CEOs,

with Forbes calling him a managerial genius and one of the greatest business minds of the time. No hate to my friends at Forbes, but you also put Sam Backman-Fried, Elizabeth Holmes, on the cover. You gave the Klingle guy, 30 under 30, despite that all being made up to. You've got to, like, actually check these companies out. Anyway, the problem is that the moniker greatest CEO, in part thanks to Welch, no longer means somebody who makes a good company with happy customers and sustainable profits that will stand the test of time. A CEO is no longer a person that built a company and runs it to provide a service, but the person that can make the company look good on paper, meaning that the company in question looks like it's growing, either in quarterly earnings or when presented to a dipship venture capitalist that hasn't participated in any kind of work or production in years or decades. Executives of companies are no longer people that built things that take that expertise and maybe try and build it further on a national or global scale. but this rotating cast of like Skexist-style people from the Dark Crystal with Masters of Business

Administration from Ivy League universities that all have had jobs with product in the name for 10 years or 20 years beforehand. People that have the right credentials who can continually fail at their jobs, much like Prabagar Ragavand did when he took over Google search after running Yahoo into the ground. Because they're not measured at being good at anything, because really what is a C. at this point. They're not measured on efficacy. They're measured on their ability to increase numbers, to make the number go up. And these metrics are often esoteric ways to express growth, something that David Gellis reports was commonplace in Welch's world, where senior management would just adjust inventory to show the appearance of profit, feeling that, and this is a quote,

that the only way to achieve the enormous increases in sales and profits was to bend the rules. Little note for Ed Heads here. Go back to the Facebook episode. The Facebook two-party did, but specifically the people killing Facebook. There was a bit in that episode where I mentioned how people were trying not to game the system. They were afraid of being allowed to game the system because Mark Zuckerberg wanted 10% year-over-year perpetual growth in these growth metrics. It's the same thing. And it's all thanks to Jack Welch, who gave birth to this monstrous.

fake business person in this culture of the overpaid and ever-distant manager and chief executive, a con artist that moves numbers around to make rich people happy, one that will never and maybe never has participated in the value exchange that makes them rich, all while lacking any real appreciation or respect for labor, or the product, or the company, or really anything, all while demanding complete fealty from the workers that they have no respect for. These people have now mentored themselves across generations of business freaks, hiring them and training others to be like them, poisoning private and public companies and investment firms and landlords, and they're everywhere now. These people, these people who find ways to abstract themselves away from creating value while extracting as much of it as possible.

And it's exactly this type of person that's currently destroying Silicon Valley. In the next episode, I'll show you exactly. how damaging Jack Welch's growth at all-cost legacy has been to the tech industry, leading to the rise of a special kind of specious management consultant personality that creates nothing while taking everything. Here's a preview, though. Want to know who recommends Jack Welch's winning? Yeah, it's Sam Altman.

Anyway, see you next episode. Thank you for listening to Better Offline. The editor and composer of the Better Offline theme song is Matt Rosowski. You can check out more of his music and audio. projects at Matersowski.com, M-A-T-T-O-S-O-S-K-I.com. You can email me at E-Z at Better Offline.com or visit Better Offline.com to find more podcast links and, of course, my newsletter. I also really recommend you go to chat. Where's Your Ed? Dot to visit the Discord and go to R-S-Better-O-Line to check out our Reddit.

Thank you so much for listening. Better Offline is a production of Cool Zone. For more from Cool Zone Media, visit our website. or check us out on the iHeartRadio app, Apple Podcasts, or wherever you get your podcast. Another podcast from some SNL, late-night comedy guy, not quite. Unhumor me with Robert Smygel and friends.

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