The Ricochet Podcast - We Bring Good Things to Life

Episode Date: June 25, 2021

We’re rollin’ in the dough this week with a double dip of interesting business talk. First up are Thomas Gryta and Ted Mann of The Wall Street Journal who look at the rise and fall of one of America’s iconic companies. In Lights Out: Pride, Delusion, and the Fall of General Electric, Gryta and Mann lay out the consequences that came from believing in the mythology GE created for itself. Source

At LiveScoreBet, we love Cheltenham just as much as we love football. The excitement, the roar and the chance to reward you. That's why every day of the festival, we're giving new members money back as a free sports bet up to €10 if your horse loses on a selected race. That's how we celebrate the biggest week in racing. Cheltenham with LiveScoreBet. This is total betting. Sign up by 2pm 14th of March. Bet within 48 hours of race. Main market excluding specials and place bets.

Terms apply. Bet responsibly. 18plusgamblingcare.ie This meeting is being recorded, Dave. I have a dream. This nation will rise up. Live out the true meaning of its creed. We hold these truths to be self-evident. That all men are created equal.

How should the Department of Defense think about critical race theory? With all due respect, that's a bunch of malarkey. I've said it before and I'll say it again, democracy simply doesn't work. Mr. Gorbachev, tear down this wall. It's the Ricochet Podcast with Rob Long. I'm James Lyleks, and today we talk to Thomas Greider and Ted Mann about GE and Carol Roth about small business. So let's have ourselves a podcast. I can hear you. Welcome, everybody, to the Ricochet Podcast number 550. That's a landmark, right, Rob? Rob Long, one of the founders this year.

Peter Robinson is off on assignment, as we say when we know that he's doing no such thing. And it's just... On assignment. It's just... I would hate for that to be like what that... I would hate to know what that assignment was. Well, I'd like to think of him as some sort of covert agent dropped behind enemy lines with a camouflaged sweater tied around his neck. And I'm performing some sort of, you know,

he's going deep behind the Iron Curtain to interview somebody for uncommon knowledge. Anyway, you've joined Ricochet or have you? Ricochet, after all, is your home for sane, center right conversation on the Internet, the place you always wanted to find. And if you would like to know a little bit more and you're not a member, we have a special code for you, which will give you a little later, which give you three free months. So, Rob, we have had the last week discussing, it seems, CRT, right? All of a sudden, this seems to be part of the national discussion, unless you're on the left, in which case it is a completely irrelevant subject that the right is using to blind people's eyes to the myriad successes of the Biden administration. Did you see the president's address yesterday where he answered some questions and made some rather odd remarks that I think if had they come from that other guy, hair would be on fire and they'd be invoking the 25th Amendment?

No. Short answer is no no i didn't see it i i'm trying not to see anything that's my that's my my current posture is to just to is to is to be blind um i have a feeling that's going to just make my blood pressure slightly higher also i was just too busy uh um i was reading all this morning about um this horrible thing in miami this in surfside this uh this apartment building collapse um so i'm sort of full up with uh i can't i can't add to that tragedy with another tragedy put it that way so in other words how long are the blinders going to be on for the entirety of the summer because i don't want to see think of you like old dauben clutter you know clock yeah around know, clock around Manhattan with little things that keep you from looking right or left, but just straight ahead.

I will begin paying attention in the first 100 days of the Mitch Daniels administration. So when you say that it angers up the blood and it makes you get your blood pressure going up, does that mean that what Biden says, the way that it seems to just pass without notice, that that angers you? Or is it something else that's going on that you don't want to know about? I mean, I find, you know, I mean, look, you're taking to heart Biden's behavior. Nothing is nothing is surprising, right? It is not surprising that he is getting away with just the the most rudderless incompetence. It's not surprising to me that everything is sort of that all of the problems that we have that we still have are now not being discussed.

And then all the problems that we didn't have for eight years, we're now talking about again or the other way around. I mean, that is none of that is surprising what is surprising to me right just in politics are are two things right one is that now we kind of really do know that the the the heart and soul whether it's i mean they're not representative in the population but the general uh political angle of your average 45 or 50 year old black female is a pretty winning if you're if you're if your business is to run and win in elections that seems to be the intersection of a lot of votes um and i'm not saying that you have to capture that population i'm saying that the the things that that population. I'm saying that the things that that population right now, the attitudes they're expressing, one of them is they do not believe that they should defund the police. They believe they should have more police.

And the second is they do not believe in critical race theory. They kind of roll their eyes at that. And they're but they're not saying that all the cops are great and that there's not still some racism there it seems like the moderate position and if you're eric adams who just basically won uh the democratic primary for mayor in new york city and and with a margin that suggests that he is a shoe in to become the next mayor of new york city um even though he's probably incredibly unprepared his campaign in new New York City was exactly that. He ran.

That's a very, very liberal area. And he ran on law and order. And that suggests that that that's to me, that suggests that the people of America and the voters of America haven't gone insane, which you cannot say for its leaders. No. So that's what people are saying is that the the Biden administration is now pivoting to crime and blaming guns. I think the the president Biden

said that they'll tell you that the spike in crime is in cities controlled by Democrats. Don't believe them, which is different than saying that it's not true. It's just saying, don't believe them, believe them, believe your lying eyes right so do you think observer of the scene and former new yorker that you were that actually this pivot is going to work because they have a large base which is ideologically predisposed to blame the police capitalism societal inequities etc and that you unless you address those things everything else is punitive has a disparate impact and it's not going to work right whereas most people are just hungering for more play and here when you say more police it's always well you know the police show up after

something has happened the police are just because you have more police doesn't you're going to have less crime which isn't but it's but it's going back to the old ideas of having presence right of having somebody around of having the idea that the society is policed in a general fashion and that you can't just get away with stuff what's more it's also i mean there's a strange psychological thing about propping up the police's feelings about their job which seems to be an impossible thing to put into policy right part of the yeah i mean yeah i i'm just um it isn't so much that benign the cop on the beat. I mean, one of the reasons why crime went down in New York City, aside from some legitimate demographic changes, which were, you know, if you believe for economics were brought about by Roe v.

Wade, one of the things that happened was that they had cops on the street who could stop you if search for a weapon. I mean, stop and frisk. Stop. And then actually the term, as my friend Heather McDonald always says, the term is stop question and frisk. But the idea was that you and this is Giuliani policy was that when he was in favor of gun control, which is that you had strict gun laws in New York City, not because you thought you could eliminate guns in New York City, but because it could put you could put somebody who was carrying a gun in prison for 48 hours. And if you continue to do that, you would see a marked decline in violent crime, which in 1990 was the high point or the low point, depending how you look at it, a violent crime in New York City. And after that, it plummeted. It plummeted and it plummeted because of these tactics that were then called

like literally gun control, gun, gun, handgun legislation, handgun regulations in New York City were imposed by Rudy Giuliani. They brought crime down in New York City were imposed by Rudy Giuliani. They brought crime down in New York City just really because of the incarceration effect. And the people who who are in favor of handgun control in general are against that. So it's it shows you this, that there are a couple, two or three or four shibboleths in the left wing pantheon that are that are inviolate.

And there are some that are violatable, violable. And handgun control is one of them. Right. You know that everything bows to a larger progressive movement. That's that's I guess that's the more articulate way to say what I was going to say. Right. That's the problem. The guns are the problem. We have to we have to get guns off. So they have a series of things which actually work. Unfortunately, they result in more incarceration, more justice in system involved people, as the phrase goes. And in some places, maybe in most have a disparate impact in current thinking. If you have a disparate impact, according to Kendi ism and the rest of it, that is proof of a racist policy. Right. So they can't go back to that.

What they have to do is they have to go with confiscation and they have not confiscation. They have to go with laws that somehow, by their miraculous application passage, hoover up the guns into imaginary magnet that hovers over Manhattan. But it's not going to happen. So, I mean, the Democrats occasionally, like we saw in the 90s with Clinton and we saw with Biden, for heaven's sakes, talking about wilding and savagery and the unreformed characteristics of the people who are doing these things. The Democrats will occasionally pivot to this and get really hard on crime, but they can't anymore. They can't because the base that is the loudest, not the one that does maybe all the voting, but that is the loudest, is demanding a completely different set of things and delegitimizing the the arrows that they used to have in their quiver.

So they can talk about it, but it's not going to work. And at this point, I don't believe that the people who were saying defund the police and yes, we mean abolish them. I know we don't. How dare you? I know we don't. But we should are rhetorically positioned to be able to make that argument to people. I mean, here in Minneapolis, I'm just deathly curious to see how our city council turns out. They may just turn out one set of progressive incompetence for us that is just as incompetent as before, but but different faces. So I don't think this is going to work for them. I don't think that they're able like they did in the 90s. I mean, Clinton was the moderate guy, right? He was right. He was from the center. He was a hundred thousand new cops on the street. People forget. Right. Nineteen ninety six,

ninety seven, a hundred thousand new cops on the street. Poor little Bob Dole didn't have a shot. Right. And it's there. I mean, after a year of defending uprising, not riots, but uprising after a year of saying that that January 6th was an insurrection that almost toppled the the the nation's government. But yet having people show up in Lafayette Park and throw bombs and the rest of it was just somehow high spirits and youthful exuberance. They don't have the retort. They they they cut themselves off at the knees. Well, that's able to list. I know last year. No. Well, maybe. Of course.

Always. Maybe. We'll see. We'll see. I mean, the indications are that you can see that in a city. This is a city like New York City was extremely liberal that you can run and win. You can run and win as a law and order Democrat, which should surprise precisely zero people in America, because the truth is in American politics, a southern conservative Democrat is a very, very powerful, powerful political position to take. It's like the country as a whole tends to lean to patriotic. Old line democrat values that's just kind of what it is and it's what always had a hard time for republicans but hard of republicans because they have to sort of break into that um but my other general rule of thumb about american politics and it doesn't matter whether it's new york city or you know uh sioux city iowa uh the the candidate who is the least weird and the and the most normal and can behave like a human being for at least five seconds or longer than his or her opponent is going to win.

And that pretty much I just the way you look at it, the thing like that's pretty much who wins elections. And that's the sad thing. But it's but maybe it's just human. But well, it's difficult for people running for president or for the mayor of New York City or for dog catcher to behave like human beings. And the one who does usually wins. We're talking about New York City. And of course, that's the most important city in the world. But I think the national mood probably doesn't cast its eyes to New York as the bellwether or the example for us all. I think it's the general sense of urban disorder elsewhere. Minneapolis, Chicago, San Francisco, Portland, all the rest of these places. If it was just New York, nobody would care. But there's the feeling that everything

that was done that was done in the aughts and the tens that revitalize the American city seems to have been undone in a trice. And that's, that's a free floating set of perceptions about things that is going to influence the way people feel about their particular locality. I see it here. Nobody's talking about New York. Right. They're talking about the carjacking. They're talking about the continued disorder and these specific little, I mean, we're talking to one intersection in Minneapolis, dominated the news for a year. And now we have a second intersection that is dominating the news

in as much as the cops have to show up at two o'clock in the morning with SWAT vehicles and tear gas because some couple heads have blocked off a street again. Hey, listen, I've got to tell you something here. You are probably wondering, gosh, what is going to happen in the future with this country, as do we all. But the thing of it is, is there's ways to support those institutions going forward that want to do good works. And in doing so, you can do something good for yourself as well. That's because we are sponsored today by the Novus Society at Donors Trust. It's the principled and tax friendly way for those under 40 to begin their charitable giving journey. Do your charitable efforts feel like a drop in the bucket without any lasting impact? Well, that's how Molly and Tim felt. Like many listeners

to our podcast network here, they make gifts to important causes throughout the year. But since Molly and Tim are busy professionals with a couple of young kids, the gifts were hurried, right? They just yell, Gary, get it out, get it out. Well, in search of a strategic, efficient approach to giving, Molly and Tim opened a donor-advised fund with the Novus Society at Donors Trust. You've heard us talk about Donors Trust before, right? It's donor-advised funds that offer a smart, tax-advantaged, private way to simplify your charitable giving. As part of the Novus Society at Donors Trust, donors under the age of 40 get access to the same charitable giving account, but with a lower minimum investment. It's more than simply a smart way to manage your charitable giving.

Membership in the Nova Society is also an opportunity. At LiveScoreBet, we love Cheltenham just as much as we love football. The excitement, the roar, and the chance to reward you. That's why every day of the festival, we're giving new members money back as a free sports bet up to €10 if your horse loses on a selected race that's how we celebrate the biggest week in racing cheltenham with live score bet this is total betting sign up by 2 p.m 14th of march bet within 48 hours of race main market excluding specials and place bets terms apply bet responsibly 18 plus gambling care.ie to join a community of peers who share a commitment to philanthropic freedom and the principles that secure liberty.

Plus, membership in Novus Society connects you with a broader donors trust network of valuable assets through a person's philanthropic journey through your life. Be a part of a new generation of givers. Join the growing community of liberty minded donors at the Novus Society. Go to www.novus.org slash ricochet to find out. That's www.novussociety.org slash ricochet. And we thank Donors Trust for sponsoring this, the Ricochet podcast. And now we welcome to the podcast, Thomas Greiter and Ted Mann. Ted Thomas, right for the Wall Street Journal. You may have heard that publication. Thomas got his degree from Columbia and Ted got his from NYU.

They're out with a new book, Lights Out, Pride, Delusion and the Fall of General Electric. Gentlemen, I grew up in a house, 1962 Rambler, that had a GE push button range with a Cal Rod heating elements that you knew if you touched them, you'd have blisters for the rest of your life. And it was rust colored. It was high tech. And as a little kid, I remember looking at that great old GE logo and thinking, this is America.

This is the future. This is wonderful technology. But yet I look about. I'm not sure I own a single GE product. Maybe something's financed by them. But the company and its greatness and its power and its posture in America seems to have evaporated. As you say in the title of your book, Pride, Delusion and Fall. Let's start with the fall. What happened? It all came crashing down. I think if you've read the book, you know, you know, our take on it is really the sort of mythology of GE kept it alive, maybe a little bit, you know,

we're at a level a little bit longer than it, than it should have been and allowed certain decisions to survive before the, the sort of chickens came home to roost. But it all sort of quickly came, you know, over a year or so, a lot came out around their finances and around sort of, you know, the financial outlook and such that had been projected for this company was not very realistic and its growth prospects weren't really there. And never mind all of the sort of historical mythology around GE being sort of the greatest managed company in the world and sort of cranking out these managers. Ted, let you get a word in.

Well, yeah, I agree with all that. There was an unsustainability to GE that they were getting away with because they were GE. And it was years after Wall Street and major investors had decided they just didn't like conglomerates anymore. They didn't buy the logic that you can manage this many disparate lines of business and really see clearly enough to manage them well. GE was allowed to persist as GE because they were the biggest gorilla of them all. And because they had really convinced a lot of us and a lot of other people and themselves that they were such good managers that they could simply do this. They used to say, not even kidding, that the thing about GE

managers is that they could go into any business and run it well because they were just that good at managing. It didn't really matter what it was. And I think that as the book tries to explain, the problems that really drove this thing out into the light and triggered the collapse were both very immediate short-term decisions that were terrible, like a very large acquisition of a power competitor that was one of the worst corporate acquisitions in recent memory. And then also structural things that the management under Jeff Immelt knew they had to change. The biggest of those was a huge over reliance on financial services at a time when investors were so spooked by the financial crisis that they were never really going to be comfortable with GE until they shrunk this thing. And so trying to pivot away from financial services, trying to do so with some industrial

bets that went bad, and then thinking you had a better handle on the way the company was working internally when in fact, your biggest unit of all the power business was really aggressively accounting and essentially profiting on paper while bringing very little cash, if any, in the door. And you do all those three things at once and it will blow up. You know, I was at NBC when GE bought NBC. And it did seem like they believed that, well, and, you know, TV shows, light bulbs, you know, aircraft engines, same, same.

And that seemed silly to all of us. And we were sort of waiting for it to collapse and it took a long time to collapse and i guess my question is why was it so hard for people to find out as you say in your book that one of the ways they would you know one of the attractions to shareholders and investors of GE was there was pretty consistent earnings. And whatever the volatility was in the world, in the marketplace, whatever the volatility was in the economic cycles, GE delivered the same. And it never occurred to anybody in the same way it never occurred, I guess, to Madoff investors that that's just a kind of strange that we all have ups and downs. Why didn't I guess what I'm looking for is, was there a quiet hero here? This one person who said, Hey, wait a minute. The only reason they made the number of this quarter is because they sold, as you mentioned in the anecdote, they sold

a diesel engine back to the bank to mark the cash that they know they could buy the diesel engine later after reporting. Was there anybody there saying, I mean, what I'm looking for is the guy, the little analyst who said, this is all the emperor has no clothes. And then the little analyst gets fired or like beat up in the bathroom because you're not supposed to say bad stuff about GE. I don't know, Tom, let me know if you disagree. I think it was more the case that finance looked so good under GE Capital. You mean? Yeah. Yeah. Thank you. GE Capital. It was such an easy way to make money compared to industrial businesses, which it's really hard to make money. You have to make huge investments and they take a long time and you've got to guess right.

They made so much money for so long that even though there were analysts on the street years and years ago saying, this thing is kind of a black box. we don't really know what's in it. And it feels great that they every single quarter make their numbers, but these aren't the highest quality earnings, as they would say. And that was completely changed by the financial crisis, because everyone had been able to live with the black box when it meant that like the profits from that unit always made sure that no one else ever missed the overall corporate target. And then when you saw how close the crisis came to bringing that entire company and hundreds of

thousands of workers down, no one was ever really comfortable with it again. And so then it became more of a situation of executives wanting to say, hey, we got through the crisis. We actually, they will always tell you, gee, capital itself didn't lose money over the course of that year. The government helped them do that. But they would, they, I think they would sort of want the market to say, okay, we're back. We can go back to the way things used to be. And that just was never going to happen. And that you saw in the share price for years and years, not getting back to $30 Warren Buffett's famous statement is that we know when, when the, when the downturn comes,

it's sort of like when the tide goes out at the beach, you can suddenly see who's been swimming naked. So I guess my question is, all right. So, but I mean, I, I, I, I read business books every now and then I'm 56 years old. Jack Welch was a big hero for 25 years this guy has been in my at a pantheon of smart managers people why isn't jack welch going for president why isn't all that stuff a reputation that he cultivated with books and columns and tv appearances and so now poor jeff emm, who I guess when he took over,

there was this famous bake-off with a bunch of executives who were all racing for the emperor, and he won. But then the company kind of took a nosedive, and the story is, well, Jack Welch ran the company really well. Jeff Immelt made all sorts of stupid mistakes. Jeff Immelt's back. All they need is a new Jack Welch. Is that – I mean, if you're Jeff Immelt, all sorts of stupid mistakes. Jeff Immelt's back. All they need is a new Jack Welch. Is that, is that, I mean, if you're, if you're Jeff Immelt, are you saying,

Hey, this is BS. Or are you saying, yeah, I made a bunch of mistakes. I mean, whose fault is it? Is that what I'm trying to say? It can only be one person. Got to blame one person. It's not that simple. It just isn't. It isn't. I mean, Jack Welch,

he did a lot of great things. He was undeniably a great CEO for GE. I mean, he really changed, especially going back to when he first came in and the way he sort of overhauled the management processes of that company. And some of the things I think that people admire about Welch and still do or could be valid. Right. And I think ML would probably say all those things you said, but like, Hey, wait a minute. Like I was sort of set up here. I mean, not only was he left with the company that Welch was running, but he was also left to run it under very different circumstances. Right.

Like, you know, to your question earlier, did anybody call this out? Well, like for sure. I mean, PIMCO back 20 years ago was saying, wait a minute, GE is issuing all this commercial paper and they don't have anywhere near the money that they need to be able that got them in a lot of trouble in the financial crisis. So, I mean, it's, it really, it's what, it's why we wrote the book. It's not, it's not clear cut. It's not that, you know, Welch was brilliant. Immelt comes in, he ruins it. You know, Immelt is, he ran the place for 16 years. I mean, I think it's hard for Ted and and i to to sort of digest this idea that it was uh that he has no culpability um you know but it's kind of you got to look at the board the board

was supposed to be overseeing him but then what was his influence on the board so i don't know it's hard to say one person i guess you know i'm trying to drag out a bunch of like uh larger conclusions here it does seem strange to me that um the the the guiding business philosophy in the 40s 50s 60s or post-war to the 60s was conglomerate conglomerate conglomerate multiple brands under one roof and you run it with scientific management principles that you learned in business school and you can it is light bulbs and TV shows. It's all the same. And a smart company is a conglomerate because it's protected against sectors that drop and sectors that rise.

And then that went out of favor. But for some reason, GE, in this weird kind of retro fashion, in the teeth of the anti-conglomerate movement built a conglomerate and people just kind of said okay well except for them i mean isn't this a case of what we do sometimes where we we have we have principles that we believe and things that we believe and then with some there's an outlier we go well except they're special they're different was that at all at play just the psychology of like like, well, you know, he wrote a book.

Everybody loves the book. He's a best selling. You know, they must know something, even though it doesn't seem to make any sense to us that a large company can do all those things efficiently. I think I think I see the point you're making. And I think it's partly the specific cultural place that that company occupied in American life. I mean, you were talking about the stove. Like this is the company that sold the home appliances to millions and millions of middle-class Americans that sort of defined what a middle-class home for someone who had made it meant for so long. The aviation business is, you know, even more definitional to like, you know, what, what makes a plane fly and what are, what are the airlines and the air framers comfortable with? And so there was, they were this entity that was not just their balance sheet and their ticker

symbol. They, they had this much larger cultural resonance, you know, they had Vonnegut and Reagan and, you know, you know, generational influence. And I think that was part of it. And then like the other thing. And this came up a lot when we were going through some of the track record on M&A and on a really bad track record of overpaying for acquisitions. Part of the issue here is their size. They were still really, really big. And there is this groupthink that was expressed to us by a few people we talked to, where even if you would kind of lose the battle on like, we really shouldn't be paying this much for this thing. Everyone thought we're a gigantic

aircraft carrier. This thing isn't going to kill us. You know, what's it going to do? Bring down GE. And the problem is that's a dangerous way to think. Because ultimately, if you really do make the wrong decision at the wrong time, you can get in real trouble really fast. OK, so I'm going to buy two copies of your book and I'm going to send one. I'm going to send one to Tim Cook at Apple, which makes software and hardware and watches and now TV shows and soon cars, I guess. And I'm going to send one other. And he's a brilliant, brilliant manager, incredible CEO. He, he, he, he did the impossible. He followed Steve jobs at Apple and got applause, right? That was a doomed position and he turned it into a success.

And I'm going to send another copy to Jeff Bezos, who's the genius. He's the richest guy in the world. And he's like, when I order your book, I can get two copies of the book here in 20 minutes because of Jeff Bezos. But he's also going to buy a movie studio. And he also has another television studio. And he has a chain of grocery stores.

Should they be reading this book? Tom, you have to swing at that. I mean, come on, everyone should be reading this book tom you have to swing at that i mean come on everyone should read the book okay all right that's a softball forget it you know what i mean i get what you're you're you're you're you're pointing at them and saying are they not conglomerates right i mean i'm pointing i'm actually saying even broader who's the this is not a one-off story. This is an ancient story. And who's next? So I think when you think about GE, some of the stuff that Ted was talking about,

you do have to think about the perspective of the time, right? Like GE, when the electrification of the country, you know, in their media business as well, right? I mean, you're talking about perhaps a large, well-capitalized conglomerate is the only company that could sort of get that done, right? AT&T, Ma Bell, Monopoly eventually need to be broken up. Needed at the time, but its usefulness evolved. evolved um so does amazon you know are they are they are they gonna head down the road that she is i mean i can't speculate specifically on a company but um i mean i it does seem you know will you have a company that's involved in you know he has separate companies at live score bet we love cheltenham just as much as we love football. The excitement, the roar and the chance to reward you.

That's why every day of the festival, we're giving new members money back as a free sports bet up to €10 if your horse loses on a selected race. That's how we celebrate the biggest week in racing. Cheltenham with LiveScoreBet. This is total betting. Sign up by 2pm 14th of March. Bet within 48 hours of race. Main market excluding specials and place bets. Terms apply. Bet responsibly.

18plusgamblingcare.ie I understand that, but Jeff Bezos is in, you know, he's into launching rockets into space and going to newspapers and obviously Amazon's gigantic. Does it make sense to have, you know, media paired with getting free deliveries to your house? I don't, I guess I don't really see the, the, the efficiency there. Maybe there is some,

but again, as sometimes happens, it could just be that your margins are so fat that as Ted was just saying, and you're big enough that you can sort of hide these things inside your company and it doesn't matter. So you don't have to worry about it. Well, but it's not, I mean, we used to say in TV business, we say the way you become the number four network is you first have to be the number one network. That's how that works. You don't go from three to four, you go from one to four. And, um, I'm just looking for the next number four. I want to, I mean, there's want to, I mean,

there's a little, I mean, I was gonna say, I know you gotta run, but there's a little schadenfreude in this book. Cause I'm reading, it's like all these smart people I, you know, see marching around and like when there's suits and like on CNBC and talking like they know stuff, they don't know stuff. I mean, you're putting your finger right on it too, where like the part of the issue here, part of the problem for them was a real belief that their management system had solved the problem of their complexity that their process would let them see what they had to see before the problem got too great

and you find out if you trust your process i'm a sixers fan we trusted the process guess what it doesn't work out and the same thing happened here like if you trust the process and there's a flaw you find out when it's too late sometimes to do anything you guys it's a great book i really it's a i um thanks for coming and and um um i think it's it's it like it has more meaningful more meaningful information good gossip too by the way i know that's probably not what you want to hear but but also just a way of looking at um sometimes what the smartest people in the room are missing you know like people live in next to niagara falls just don't hear the water anymore and um in that respect it's a incredibly great uh cautionary tale with a lot of good stuff

in it so thank you for coming the book is lights out pride delusion and the fall of general electric by thomas gritta and ted man am Am I saying it right, Gritta? Gritta. Gritta. Thomas Gritta and Ted Mann. Guys, thanks for coming. Thank you. Thanks for having us.

Take care. Well, no doubt when GE shakes itself out, there'll be some people who have to be shown at the door, find a nice cardboard box on their desk, and you know, if you're in HR, that's tough. You're running a business, HR issues can kill you. Wrongful termination suits, minimum wage requirements, labor regulations, compliance, and HR managers are not cheap. No, the average is 70,000 bucks a year. Well, Bambi spelled B-A-M-B-E-E was created specifically for small businesses. You're not GE size, good,

but you got problems, right? And that's where Bambi helps. You get a dedicated HR manager who can craft HR policy and maintain your compliance all for just how much? $99 a month with Bambi. You can change HR from your biggest liability to your biggest strength. Your dedicated HR manager is available by phone, by email or real-time chat from onboarding new people, determining the older ones. They customize your policies to fit your business and help you manage your employees day-to-day all for just $99 a month.

It's months to months, no hidden fees, cancel anytime. You did not start your business because you wanted to spend time on HR compliance. No, let Bambi help. Get your free HR audit today. Go to Bambi.com slash Ricochet right now, this very moment to schedule your free HR audit. That's Bambi.com slash Ricochet, spelled B-A-M to the B-E-E dot com slash Ricochet.

And we thank Bambi for sponsoring this, the Ricochet podcast. So maybe they're going to help you also with your personal finances. I don't know if you have a Roth IRA somewhere. Speaking of Roth, it's Carol Roth. That's right. Carol Roth hosts the Roth Effect right here in the Ricochet Audio Network. And she's got a new book out, The War on Small Business. How does that fit with Bambi?

Perfectly. How the government used the pandemic to crush the backbone of America. And man, is that pertinent. Carol, welcome. So nice to be with you guys. It certainly is. I live in a city that has been hammered. Small business was absolutely demolished by the pandemic. Here in Minneapolis, we have a weird commercial ecostructure downtown. We have a skyway system where all

The stores that would normally be on the ground floor have been Elevated up to the second, which is great because it gets Cold and people can walk around and not die Or lose a tote. But the pandemic, The lockdown, did everybody go home For two weeks and then never come back again? Wiped it out. It's starting to clamber,

Clutch its way back, but it's Just devastating. I walk through building after building that is empty and it just it's the most crushing thing to see. And when you extrapolate that over the whole country, it's absolutely nightmarish. Now, of course, everybody will say is, you know, I love small business. It is indeed the backbone of America. But, you know, what exactly happened here? How did the government crush these places and who is going to flow into these empty spaces and fill them up? Because would say it's the government reaction to the pandemic that caused this. And this is the most underreported story of the last sort of 12 to 15

months of the government picking winners and losers, deciding who is essential and who is, quote, non-essential, who could thrive and who would fight to survive. And they ultimately enabled with their cronies at the Federal Reserve, the biggest wealth transfer that we have ever seen in history. So if you go back to 2020, as you were alluding to those big companies taking everything over, you had seven technology companies that gained three point four trillion dollars trillion in value while hundreds of thousands of small businesses had closed by June of last year. Millions of more were fighting to survive. So the ultimate polarization, the ultimate wealth transfer and power consolidation, and that's really the overarching theme of the book, is decentralization, which not only small business represents from an economic standpoint, but we're seeing it in gig work.

We're seeing it in the creator economy. We're seeing a cryptocurrency, whatnot, decentralization fighting against central planning. And as we have moved away from free market capitalism to more central planning, we continue to have these horrible outcomes. Hey, Carol, thanks for joining us. We just had on, I think you heard a little bit of it, the guys who wrote this terrific book on GE called Lights Out. Yeah, we actually have a copy of it. Definitely great, great book. So that, you know, the premise of that book, or I mean, maybe I'm imposing, projecting my premise on it, is that, you know the premise of that book or i mean maybe i'm imposing projecting my premise on it is that you know big stuff isn't safer big conglomerates aren't safer they're not better for the economy they're actually a lot of things that there's a lot of things wrong about them

and a small decentralized economy a lot of little you know mom-and-pop stores is probably better and safer and you know gives you better service um but that doesn't seem to be for a long time we have said on our you know conservative or at least conservative economics i said well you know you say that but walmart delivers stuff to you cheaper than the store on main street and yes it has destroyed main street in some small towns but you know the benefits are that you're gonna the consumer can choose a much lower price and probably better hours and all sorts of things. So is efficiency like that bad? So I think there's a conflation of issues there.

So there is- Well, that would be traditional for me, by the way. And traditional in everything that has to do with finance and economics, by the way. It's a widespread problem. So there is the creative destruction that happens over time in free markets where better technologies come along, more efficiency comes along, and there is a natural falling out that happens. And I think that that is incredibly healthy. What's not healthy is when those consolidations and deaths happen with the central planners making the decisions. And I would say that if you don't have that even playing field, you end up with a tilted

playing field. So in the example of Walmart, we imported deflation as we sort of exported capitalism and we imported central planning from China based because our central planners thought they were so smart and they were going to export democracy and capitalism to China. And we were going to open this up, which ended up benefiting a few big companies, killed small businesses, killed manufacturing, suppressed wages, all of those kinds of things. So, you know, the reason in part that Walmart is so successful is specifically because of the meddling of the government in the free market. So if you are able to compete your way to the top,

and by the way, as GE proves, it's very difficult to do that and to stay there over long periods of time. If you're able to do that for some period of time, God bless, you should do that. But when you're getting favors, that becomes the problem. I guess I'm just going to take a little detour here because you made me think about something that we did import deflation, meaning we imported goods that were very cheap. And if you're was looking for it, and we all know it, like you look at the prices of items on a graph past 10 years they they've every single thing's gone down except health care and education and when one of the things that are subsidized right those things the price of subsidized also where the government has interfered in the market right right um but on the other hand the people have expressed this

thing you know you talk to somebody who's older and you say to them, you say you ask about Starbucks and they'll say, you know, I never thought I would live to see the day that people would spend four dollars or five dollars for a cup of coffee. That's insanity. But people do. People did. Or Starbucks, a giant company. So somewhere there was a kind of a price insensitivity in the American consumer in a lot of places, again, this is a detour, but because you know about economics, if inflation is going up, are those places at risk? The places where we're like, well, everything's doing good and everything's cheaper, so I'll spend $4 on a cup of coffee. What's the harm? But when inflation goes up and everybody feels the pinch across the board, across their entire grocery and shopping list, are those kind of weird little luxury items we all kind of looked away,

the avocado toast and the Starbucks coffee, are they in trouble? So I think there's sort of two different ways to look at that. One is what's known in economics 101 is the elasticity of demand. There are certain things where there's a very elastic demand, certain things where there's inelastic demand, and obviously how much somebody is willing to pay versus substitute for something else is different. The other issue is you have to remember that we're in sort of three different economies. There's like the crazy, super wealthy, there's sort of the people in

the middle and the people who are really struggling, and they're all going to have different outcomes. So there are a lot of people. I mean, right now, if you looked at the end of April, beginning of May, personal saving rates, it is still almost at 15 percent, which is like exponentially higher than it has been historically. The government's been sending me money. Right. The people have paid down a ton of debt. So there is a lot of capacity to go out. And by the way, pent up demand because people were in large part mandated to stay home. So there is a lot of pent up demand to go out and do those things. But certainly not every person is going

to do that. It's going to depend on your own personal situation. So it depends on the customer base. But at least for some period of time, I do think given how much has been saved and with some of these luxuries, especially the demand for those, I think that some of those bigger companies will be able to absorb those luxury items where your small

business who now has to pay three times as much to get a hamburger meat is not going to be able to do so. So. All right. So we should go back because the book is The War on Small Business, How Government Used the Pandemic to Crush the Backbone of America. So I'm walking around. I live in New York City, walking around New York City last night. And there's a bar, very well-known bar. And I'm talking and they're the cities let people serve drinks on the street and cities let people serve outside and create outside terraces. I guess the state has on Wednesday night, I think, close of business Wednesday, the state announced it didn't announce, but the state removed the the plenipotentiary emergency powers from the governor, which meant that all of his covid related regulations had been had been pulled, which meant that every every bar and restaurant that had arranged itself to be able to sell alcohol and drinks to go where suddenly they were given 24 hours to stop that and so this guy runs this bar i was asking about he goes it's we're gonna lose twenty thousand dollars and and there's nothing we can do about it and it does

seem that the last thing is certainly in new york where we are just, just beleaguered with this terrible government. The last thing these governors thought about were small businesses, small stores, small shops. That's they don't care. They didn't care. And they, and even now, even at the end of the pandemic, which it really is in New York city, the last coup de grace is, Oh, and you're, it's not over for you either. We're actually going to hurt you some more. Yeah.

What can these people do? What would you recommend? I mean, isn't the Chamber of Commerce supposed to, is there any redress here for small businesses who've been regulated insanely for the past 18 months? Yeah. So, I mean, I would just to lead into this, say that if you wanted to kill small business and you wanted to consolidate power and only have big businesses to deal with and get more people on the government dole, you literally wouldn't have done anything different than the things that

happen and the things that continue to happen. One of the arguments that I lay out in the book is the concept of eminent domain. A number of people have talked about that. And that's the concept that the government cannot take your property for the public good without due compensation. And so I have been advising small business owners to band together and to sue. If you've not been appropriately compensated, the Constitution protects your personal property. And I don't think we've seen enough of that pushback yet, because, you know, based on the Constitution, you can't do those kinds of things. So, you know, that's one thing that I would do. But as you're looking at the landscape of being a small business owner, one is definitely to reach out to your customer base to let them know what's going on and to be really specific on how they can best help you.

Because there are a lot of people who do want to help small business and just don't know what to do. And for people who are thinking about, do I still want to be in this business or should I start a business? Really think about the type of business that you're going to be in and how many things the government can put its hand in. Is it licensing requirements? Can you do something more scalable in terms of not having to depend on employees where you have to compete with the government? What kinds of shifts do you have to make? Which again is horrible because now you're making these decisions not based on what's right right the market demand is based on trying to get around insane government which again doesn't benefit any of us and stands in the way of economic freedom and is is part of your argument i'm part of this is part of my so this is a completely leading and gratuitous question part of my argument about things like you know like the incredible licensing

requirements that that all states have for ridiculous things. Yes. It only really hurt. I mean, it mostly hurts. Second, third rung, climbing up the ladder, individuals, tiny, not small business, but really it's like one person business. Microbusinesses. Microbusinesses.

And a lot of minority communities, a lot of vulnerable communities as well. I mean, think about hair braiding. This is something that men and women do for their kids every single day before they send them off to school. And you have to spend thousands of difficult for you to get to the next level and to have that wealth creation opportunity? And I think that's the big issue here is if you look at this, there's a clear battle going on between decentralization and centralized power. They don't want to have to deal with it. And it's broad. A lot of people don't realize the split of businesses. Like when I go around and I ask people, like, how many big businesses do you think there are in this country? People say like, oh, like maybe like a million or 2 million. There's like 10,000, maybe 15,000

big businesses. Before COVID, there were 30.2 million small businesses. And that was about half the GDP and almost half of the employment in this country. So we're not talking about like this small niche. This is literally when they call it the backbone of the economy. Like that's not a misnomer. It's literally half the economy and ninety nine point nine percent of all the entities out there. You know, oddly enough, it's not always centralized authority can be decentralized governments. We have here in Minneapolis an ordinance that says you can't sell menthol cigarettes. It's coming down the pike, whereas the cities around us can, which means that all

the little stores on the periphery lose 30, 40 percent of their business because they can't do this anymore. Anyway, point is this. When we talk about Main Street, Rob mentioned it. You mentioned it. We're talking about what Walmart did to Main Street. We all have this nostalgic regard for those pictures where you see all the neon signs and everything's full and people are walking around in hats. And it's it's just it's lovely. And you want to you want to go back there. You want to say, all right, minus the sexism and the racism and the rest of it. But there's something there. You this this this crucible of American virtue of values and decency that we see in the small town. Yet, when you look at those pictures, while, yes, you'll see Johnson's shoes and Harry's haberdashery, you'll also see all the

chains, J.C. Penney's, Kresge, Kress, Grant, Woolworth's. So even in the old days of Main Street that we've authorized, there still was big business. And it drove out old days of Main Street that we've outarised, there still was big business. And it drove out a lot of people. I mean, a lot of people went out of business when Woolworth came to town because they had the economies of scale and they could really do it well. They were the Walmart of their day. But yet we coexist. So that's my hopeful question going forward. Can we create some sort of is it likely we're able to create a model going forward where we can reconstitute this world of small business and big business in a way that works hand in glove and strode down the same main street as we did before? Of course, the road apples from the horses.

Absolutely. I mean, that's free market capitalism. And if you think about the the the spectrum of freedom and choice and transparency on one end with the sort of guard way up guardrails of protecting individual rights and property rights. And you think of force and coercion and control on the other side, we've moved away from that freedom and choice piece. Big business is not bad. There are a lot of great things about even, you know, Amazon, obviously they even enable up to 1.9 million, small medium sized businesses on their platform. So these are not all bad.

It's the tilting of the playing field. It's the special favors. It's the running around with a beauty pageant and getting promised, you know, naming rights for cities and firstborn children when Joe's Pizza Parlor can't get somebody to return their phone call. It's the fact that the government has too much purview and too much control to be able to change that playing field and to say, you're essential if you are grooming a dog's nails, but you are non-essential if you are grooming a person's nails. That is the differential. And I think that if we take that out of the equation, certainly there's always

fallout that that's, again, part of capitalism is that creative destruction, but it's not destruction by mandate. And I think there is that opportunity to coexist, but we need to get the government out of the equation. It's everybody's economic freedom. The difference is, of course, if you're doing some human's nails and you bite a little too closely they don't bite you back that's not true i always i don't doubt that in the least like roth effect is one of the great podcasts in the ricochet audio network subscribe to it carol thanks for coming on and talking about your new book which of course we must mention again to everybody so they can go out and get it the war on small business how the government used the

pandemic to crush the Backbone of America. Carol Roth again, thanks for joining us today. Thanks so much. And if I can just make a plug, if you want to put your money where your mouth is, go to bookshop.org and they will fulfill it from a local small business instead of supporting the big businesses. Capitalism is voting with your dollars.

So bookshop.org or I'm a capitalist by wherever you want. Fantastic. I think it's great. Bookshop.com. I'm going to, I'm going to order it at bookshop.org, but I know I'll probably order it at my local bookstore. Perfect. Which I discovered if you do order a book from your local bookstore, it's there in 48 hours. I wasn't going to read it in the day it took Amazon to get it to me anyway. So I can wait an extra day.

Love it. That's fantastic. All right, Carol, thank you so much. Thanks, Carol. Before we get to something else, I want to tell you at the very top of the show, I talked to Rob about whether or not he was worried about Biden or worried about critical race theory. Here's something interesting about CRT. Critical race theory. You've heard about it. You've heard that it's sweeping American higher education. At Wake Forest University, not yet Woke Forest, the Department of Mathematics and Statistics has implemented, quote, anti-racist math, end quote, coursework. What does that mean? In spring 2021, the University of New Hampshire began offering a class on, quote, racism in science, end quote. And the University of Pittsburgh's medical school

has even added a vow against systemic racism to their 2,500-year-old Hippocratic Oath. At first, do no harm? I guess that's not enough. If it's happening at universities throughout America and across curricula, from history to architecture, from medicine to economics, it's happening everywhere where you probably are interested in looking as well. Critical race theory, the idea that America is still an inherently racist country and that each American must be reprogrammed to dispel his or her intrinsic racism is opposed by an overwhelming majority of Americans. Yet leaders in higher education, from prestigious Ivy League campuses to state schools in the deep South, continue to impose this radical ideology on students and faculty alike. Founded by a Cornell law professor,

criticalrace.org, that's right, criticalrace.org is the most definitive resource for students, for parents, alumni, university donors, and all Americans concerned about the continued creep of CRT into higher education. The investigative journalists at Legal Insurrection Foundation provide you with all the latest updates on how individual schools are implementing critical race training, how local, state, and federal governments are getting involved, and how some parents and states are fighting back. To stop this toxic and, frankly, un-American ideology, we must be diligent. CriticalRace.org is the resource you need to stay informed about this assault on higher education

in America. Don't delay. Visit CriticalRace.org today. That's CriticalRace.org. And we thank CriticalRace.org for sponsoring this, the Ricochet podcast. And now, of course, it's time for the highly valued, much coveted Lilacs post of the week. The James Lilacs member post of the week. And that was so good. That was so precise and so tight because it was dropped in, in post-production. Anyway, well,

that's quite wise. Point of it is, is there were so many great posts this week and I don't want to always give it to the same people who write. And I always want to find somebody who I was, you know, popping up from, from the ricochet is so broad and so deep and has so many people in it.

I don't want to say that just because I chose this, there weren't some really fantastic standout posts because there were. There was one about beauty and leftism that ended up being a discussion of historical abolition of slavery, which I found interesting. But I picked one from Preston Storm, who said, I wish libertarians would pick better battles and heroes. And there's a picture of John McAfee. And I did that just simply because it was an opportunity to talk about McAfee

and an opportunity also to just talk about how crazy sometimes libertarians get with the people that they worship. Rob, I don't know if you've been following this, but there was this big flare up to have yesterday on the Twitters because somebody thought that McAfee had a dead man switch that when he died, either his inability to, to ping something or something would happen that would trigger the

release of 31 terabytes of information on public officials and blow the lid off. This would be it. This right. This is the one where finally everything is going to be revealed. And it seemed to me to be a libertarian version of QAnon, that there's always a great moment right around the horizon where we're going to find everything, learn everything, and it will change everything. Yeah, I mean, the McAfee thing is weird. I mean, it's funny thinking about that post because I totally agree that the and I hear that argument and that complaint mostly from libertarians. Libertarians are always saying, why are we why are we so weird? Why do we pick these weird things? Which I think is a very libertarian attitude, which is sort of self-questioning. It's like, it's up to us.

The McAfee stuff is like, you know, look, the more microphones we have in the world, the more people are stepping up to the microphones, the more we realize that a lot of people are kind of nuts. When you had to stand up in the, you know, speaker's corner in Hyde park in London or on the street corner here, it kind of kept a lot of the crazy just kept walking by. And now it's really easy to to be nuts. And that's what we're discovering.

I don't think it's a I don't think it's a trend so much as it's been revealed or revealed. Revealed. Right. Twitter, a recent survey said that three percent of the people in the country do 90 percent of the tweets. And the majority of the people who are on there are extraordinarily partisan, all about the in group and something like plus 45 Democrat. But they still drive the narrative because that's what the media likes to huff as much as they can and tell us matters to the rest of the world. If Twitter went down for a year, I think we would begin to rebuild the ashes and cinders of society. But as it is right now, it's just simply too much fun. It's this Pavlovian box that everybody gets into and they just keep hammering the lever for the daily outrage of the day. Well, we are not going to outrage you by treading on your attention anymore.

I have Peter Robinson here. Of course, he would insist on going on and on and on about some matter. But you know what? It's just, it's just Robin me. So we can, we can only diss him in his absence, but we can get out on time and let you all get on with your life as well, which means you've got the time to go to Amazon or to Apple and leave us five-star reviews. You've got time to check out those links on donors, trust Bambi and critical race.org, join them, help them, support them, and you'll support us. And of course you can listen to the best of Ricochet in your local stations. Check your local listings. It's on the Radio America Network.

We now reveal that we are done, and we let you get on with your life. Rob, it's been a pleasure. We'll see everybody at the comments at Ricochet 4.0. Next week, James. Pick it up every morning from the long clocks. Want to take the 815 into the city? There's a whistle up above and people pushing, people shoving And the girls over try to look pretty And if your dreams aren't time, you can get to work by 9

And start your slave and job to get your pay If you ever get annoyed, look at me, I'm self-employed I love to work at nothing all day. And I've been taking care of business every day. Taking care of business every way. I've been taking care of business. It's all mine. Taking care of business and working overtime.

Workout. We're out of business and working overtime. We're out. There's one easy as fishing. You could be a musician. If you could make sounds water mellow. Get a second-hand guitar, chances are you'd go far if you're kidding with the rat-bunch of mellows. People see you having fun

just a lion in the sun. Tell them that you like it this way. It's the work that we afford and we're all self-employed. We love to work, it's not that all day. And we've been taking care of business. Ricochet. Join the conversation. All right.