https://www.md-a.co/p/intellectual-laziness
The collapse of General Electric stands apart. GE was the bluest of the blue-chips: descended from Thomas Edison and J.P. Morgan, it was one of the original twelve components of the Dow in 1896, and grew to become one of the leading technology giants of the early 20th century. After WWII, GE evolved into an industrial behemoth with dominant positions in a dizzying array of electricity-adjacent markets, from jet engines and turbines to light bulbs and home appliances.
In the 1980s, GE ascended to new heights. Jack Welch took the reins as CEO in 1981, and he established GE a major player in media and financial services while reinforcing GE’s position in select attractive industrial markets. For most of the 1990s and 2000s, GE was the most valuable company in America, with a valuation topping out at over $1 trillion in 2023 dollars. While GE had some skeptics and critics at the time, it was typically seen as a corporate paragon, regularly named by Fortune as the most admired company in the world. Welch was regarded as a management guru, and his underlings were routinely poached to become CEOs at other Fortune 500 companies.
And then, a few years ago, it all unraveled in spectacular fashion. Much of the supposed success from the Welch era of the 1980s and 1990s proved to be illusory, the product of temporary tailwinds and aggressive accounting. GE’s fortunes worsened under the reign of Welch’s handpicked successor, Jeff Immelt, who took over in 2001. Immelt struggled to cope with the problems he inherited, which were compounded by the 2008 financial crisis and major missteps of his own. In 2017, when the extent of GE’s problems became clear, GE’s stock nose-dived, and Immelt was pushed out.
GE has been one of the worst performing mega-cap stocks of the modern era. A $1,000 investment in the S&P 500 in 2000 would be worth over $2,700 today (excluding dividends), while a $1,000 investment in GE in 2000 would have dwindled to only $210. Even going all the way back to Welch’s appointment in 1981, the S&P has outperformed GE by a three-to-one margin.
The reasons: style over substance, an inability to distinguish good-luck from a permanent advantage, a failed attempt to do financial services. In short, the intellectual laziness described in the title of the post.