No company embodied American ingenuity, innovation, and industrial power more spectacularly and consistently than the General Electric Company. GE once developed and manufactured many inventions we take for granted today. In this episode, William Cohan, author of The Power Failure: The Rise And Fall Of An American Icon, explores how a once-great company spirals down and wound up, broken in tatters. He also dives deep into GE’s management culture, its pioneering doctrine of shareholder value, and its seemingly hidden blind spots, which will reveal that GE was not immune from the hubris and avoidable mistakes suffered by many corporations. If you are on a journey to exit rich, build that success and never allow those cracks to form in your formidable foundation through this episode. Tune in to this fantastic episode and learn from William’s cautionary tale for the ages!
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Power Failure: The Rise And Fall Of General Electric With William Cohan
I’m so excited because we have a famous person that I’m going to be interviewing in this episode. His name is William Cohan. He has quite the experience and a resume. He’s pretty much done almost everything there is to do but he continues to create. William Cohan has been a former senior Wall Street M&A investment banker for many years at Lazard Frères.
Lazard Frères started in New Orleans started by three French brothers who moved from the Alsace region of France in the 1848 era to New Orleans and opened a women’s fashion clothing store. It was in New Orleans for one year when a fire swept through the store. They saved the inventory and then moved to San Francisco and opened a store to sell clothing and other merchandise to gold miners during the gold rush. They got into the gold business and then the banking business.
Do you remember what part of New Orleans? I’m just curious.
No. I assume it was the business district, such as it was in 1848.
Which is exactly where I am in Poitiers.
You are probably now in the old storefront that used to be the Lazard brother’s store.
Probably. What a great bit of history. I will have to go look that up. You’ve also worked with Merrill Lynch and JPMorgan Chase. William is a three times New York Times bestselling author of non-fiction narratives about Wall Street. Money and Power: How Goldman Sachs Came to Rule the World was the first time Goldman Sachs’s Business Book of the Year Award.
The book about Lazard called The Last Tycoons was the one that won the 2007 Financial Times Goldman Sachs Business Book of the Year Award.
We also have, House of Cards: A Tale of Hubris and Wretched Excess on Wall Street. Do you have anything to add there?
That’s the one that’s potentially being made into a TV series.
What is the third book that I’m leaving out?
There’s The Last Tycoons, House of Cards, Money, and Power, which is about Goldman Sachs, all New York Times bestsellers, and then a book called The Price of Silence that was about the Duke Lacrosse scandal that was also a New York Times bestseller.
What was that scandal about? That was your Four Friends.
Four Friends was a different book. The Price of Silence was about the 2006 Lacrosse scandal at Duke, where I went and where I’m a graduate. I wanted to write about what happened.
Was that New York Times?
That’s a New York Times bestseller, yes.
You also have a book that came out about four friends.
It’s about four friends of mine from high school called Four Friends, and then my new book, which is called Power Failure: The Rise and Fall of an American Icon, which is about the rise and fall of GE, the General Electric company.
We are going to dig into that. Let’s talk a little bit more about you because you are so phenomenal. For many years, William was a special correspondent at Vanity Fair. He also writes or has written for ProPublica, the Financial Times, The New York Times, Institutional Investor, Bloomberg Businessweek, The Atlantic Fast Company, The Nation, Fortune, POLITICO, ARTnews, and Barron’s.
He previously wrote a biweekly opinion column for The New York Times, an opinion column for Bloomberg view, as well as for the Deal book section of The New York Times. He is a non-staff on-air contributor to CNBC and also appears on CNN, MSNBC, and BBC TV. He also has appeared three times as a guest on The Daily Show with Jon Stewart, the NewsHour, the Charlie Rose Show, The Tavis Smiley Show, and CBS This Morning, as well as numerous NPR, BBC, and Bloomberg Radio programs. He was formally a contributing editor for Bloomberg TV.
He is a graduate of the Phillips Academy Andover. He went to Duke University and Columbia University School of Journalism, and the Columbia University Graduate School of Business. He lives in New York City with his wife and sometimes his two sons. Welcome to the show, William Cohan. It’s my absolute pleasure to have you here.
It’s nice to be here. Thank you.
I want to dive into your book but before I do, you’ve accomplished so much, and you continue to accomplish, create and write. Was there anything that I missed, and what were you like as a little boy?
You didn’t miss anything. I spent seventeen years on Wall Street but that’s ancient history and long and involved. I had the typical middle-class upbringing in Central Massachusetts. I watched The Three Stooges and other sitcoms. There were only three TV stations back then, black and white TV that became color. There was no streaming, no cable, and no clicker to change the channels. You do your homework, you watch some TV and read the newspaper. A typical American upbringing in the early 1960s.
What was your favorite stooge? Is it Larry, Curly or Moe?
I liked Shemp. I don’t know if you remember Shemp.
I don’t remember Shemp.
He had dark hair. He was a bit goofy. They were great. I loved the Three Stooges. My mother hated it when I watched them but I loved them.
There were only three shows.
There were only three TV stations and networks. It was ABC, NBC, and CBS. That was it.
What were your other favorite sitcoms?
I loved I Dream of Jeannie, Bewitched, McHale’s Navy, and F Troop. People don’t even know what that is anymore. Also, Gilligan’s Island. These are all great shows. People talk now about the golden age of television but back then, there were some powerfully great sitcoms. That was a whole generation of Americans.
I remember I Dreamed of Jeannie and Bewitched. I used to watch those, for sure. You’ve spent seventeen years on Wall Street. What can you tell us about M&A? I do M&A. I buy, sell, fix and grow companies. I have been doing it for many years. Let’s dive into M&A. What do you see as the future M&A as you knew it in the past?
You know this.
Yeah, I know but my readers might not know it.
M&A advisory work goes through cycles when valuations are high, and CEOs are feeling confident about the future of their company, and their stock prices are high so that they can use the stock as currency. There has been a lot of M&A business in the last few years, not in 2022 but in 2021 and 2020. We are talking several trillion dollars’ worths of M&A business and numbers in terms of volume that when I was in my heyday on Wall Street, I could only dream about.
In 2022, that’s way down because the equity markets have reversed. The debt markets are pretty closed the confidence level among CEOs is way down. There are a couple of big deals that are starting to happen. Again, Johnson & Johnson bought a medical drug company, and Blackstone bought a division of Emerson Electric. Things are happening a little bit but the volumes are way down and that’s the way it is.
It was up in 2021, for sure. I know you don’t like labels. Do you feel we are in a recession or headed toward a recession? What are your thoughts?
You are right. People like to say, “Are we in a ‘recession?’” To me, there’s the old saying that a recession is when your friend is out of work, and a depression is when you are out of work. At the moment, with the unemployment rate being so low and employment at near all-time highs, as long as people are gainfully employed and getting paid, they do feel the effects of inflation eating deeper and deeper into that paycheck.A recession is when your friend is out of work. A depression is when you're out of work. Click To Tweet
As long as you’ve got a job and are getting a steady income, it’s hard to feel like we are in a recession or that the economy is so bad. With the Fed raising interest rates intentionally and deliberately and will probably raise another 75 basis points now is going to ripple through the economy, and access to capital is going to be more expensive and is going to slow way down. That will slow the economy down, whether it results technically in a recession remains to be seen. I don’t think it matters.
What matters is how people feel about how far their paychecks go or whether they can afford to buy the things that they need. Food and gas are expensive. Everything always seems expensive, especially so now. As long as that’s the way people feel, it’s not great for the economy but as long as they also still have their job, we will be okay.
When waves of layoffs start coming, that’s when people start feeling it and whether or not we will technically be in recession or not. We are in pre-recession because layoffs are coming, and the economy is slowing. That’s going to mean more and more job losses. That’s a spiral downward that we will all begin to feel soon enough.When waves of layoffs start coming, people start feeling it and whether or not we will technically be in recession. Click To Tweet
People are going to have to budget and get rid of some discretionary spending. I see the Fed’s increase in interest rates is definitely killing deals and slowing deals down. We’ve got a $60 million deal we are working on. It had been under due diligence for a year, and the buyers were like, “Every day this is costing me money.” A lot of buyers are backing out of the deals and are very slow to pull the trigger these days. We also have the midterms coming up. People always want to wait and see. Do you have any other advice or tips on M&A selling companies because that’s my bread and butter? That’s my passion. That’s what I do. Any tips for the readers on mergers and acquisitions before you dive into your book?
We are in a period now where it’s hard to get things done because sellers’ expectations are still high. We are only coming off of the stock market being at an all-time high. It takes time for people to readjust their views of what their valuation should be for their company. Whereas buyers adjust much more quickly and see, “The stock market is down, the debt markets are closed, and the cost of money is higher. The economy is looking shakier. I’m going to cut my valuation metrics.” In that environment where the buyers have adjusted but the sellers haven’t, it’s hard to get deals done. That’s all I would say about that.
Let’s dive into the Power of Failure, talking about GE and the rise and fall of an American icon. Where would you like to start on your book? Would you like to start under Jack Welch’s watch? I met Jack Welch. I shared the stage with him. He was very nice.
When was that?
That was in 2012, 2013, 2014 or somewhere in that range.
Was it after he was CEO?
Correct. Do you want to start there? Why don’t you give us a synopsis of your book? Why did you write this book and take us through it?
As you were saying, I went to Columbia Journalism School, and then I was a newspaper reporter in Raleigh, North Carolina, at the Raleigh Times, covering public schools in Wake County, which was an interesting job. A very poorly-paying job but interesting. I went back and got my MBA from Columbia. My first job after graduating in 1987 was working at GE Capital in New York City, financing leverage buyouts. Providing financing to take companies private or have buyout firms buy divisions of companies.
I was there for ’87 or ’88, and then in part of ’88 or ’89, I worked for the Chief Credit Officer of GE Capital in Stanford, Connecticut. Basically, in two years, I had this incredible exposure to GE and GE Capital. I had that in my professional experience. I’m not sure I knew what I was doing at that time but I did it and learned a lot.
I went and worked at Lazard, Merrill Lynch, and JPMorgan Chase. In 2004, I decided to go back to writing, and this is my seventh book. It turned out that by some sort of serendipity which I find extraordinary, the guy who was my officemate when I first started at GE Capital in New York was a guy named John Flannery, who stayed at GE.
Jeff Immelt was the CEO after Jack Welch, and John Flannery became the CEO. My friend, who I had known for 30 years, became the CEO of GE. That was quite remarkable, and one thing led to another. In my conversations with him over the years and when he became CEO, things were unraveling a bit at GE. He would occasionally share with me how difficult it was to be the CEO of GE at that time and how many of the things that have now become public he was uncovering for the first time.
He would say to me things like, “You should write a book about GE, and I said to him, “I can’t, John. You are my friend and the CEO. I can’t do that. I couldn’t be objective,” but after fifteen months as the CEO, he got relieved of his duties unceremoniously and unfairly, I might add. That’s when I decided I would write this book to try to figure out what happened.
Effectively, this once incredible company that started in 1892 has to some extent Thomas Edison the great inventor in its DNA and was the world’s greatest conglomerate, most valuable company, admired company, and revered company. The company with the manager of the century, that was Jack Welch and the twentieth century had, was now in the process of dissolving.
Beginning in 2023, it will start breaking itself up into three pieces. This company which was once worth more than $650 billion, the most valuable company in the world at that time, is now worth a fraction of that. It was roughly $85 billion on a good day. It’s breaking itself up into three pieces. Effectively, there was a dead body on the floor, and I wanted to know how it got there. As an investigative journalist and book writer, I decided this would be my next great mountain to climb, and it was quite a journey. It was quite hard. It was three years of my life.
I can’t even imagine. I wrote Exit Rich in six weeks.
Normally, I can write these books in about two years but this one was an extra degree of difficulty because I started in 1892 and am going to the present. It was a big, important, sprawling, and complicated company with a lot of personalities, twists, and turns. The great thing for readers is that the story and personalities are incredible. You can’t beat Jack Welch as a personality and Jeff Immelt as a foil and all of the crazy things that have happened over the years. It’s an amazing narrative. It’s an amazingly gripping story, and I figured out what the heck happened in the end but it took a while.
What can you walk us through where you are not giving away the book but you whetting their appetite to run out and get it?
It’s a fine line to walk.
One thing that I know that I read in your notes is that Welch was almost fired after being announced as the new CEO because of a drunken party at a celebratory party that shocked Reg Jones.
That is true.
We’ve all had those holiday parties.
This was a party to celebrate Jack’s selection as the CEO that was thrown by his predecessor, Reg Jones. Reg Jones was a straight-laced, buttoned-down, and old-fashioned born in Britain and moved to Trenton, New Jersey. He went to Wharton and was pretty straight-laced and formal. He was an advisor to Jimmy Carter, who wanted him to be in the Cabinet but declined. He was one of the proponents of the business roundtable.
Jack was a much more hail-fellow man, a gregarious, Irish Catholic guy from North of Boston in Salem, Massachusetts. He was an only child and always punched above his weight, literally and figuratively. Jack liked to party. At this party that Reg Jones had for Jack upon announcing that Jack was going to succeed him, it was at the hotel on Madison Avenue. Jack partied it up, and Reg was appalled at Jack’s behavior. Jack thought he might get fired because Reg was so upset but then the next day, all these people who had been at the party were calling Reg saying, “What a great guy Jack was and what a great choice Reg had made to choose Jack to be GE’s CEO. That was the end of that.
I was interested in having you on. That’s why we reached out because I’m an entrepreneur. I live, breathe and eat entrepreneurship, and many businesses go out of business. Steve Forbes, who endorsed my book, Exit Rich states that 88% to 90% of businesses on the market would never sell as well as I do. Great big brands are heroes. They go to zero or go out of business. I wanted our readers to know that if this could happen to GE, this could happen to you. Understand the pitfalls and what happened. What went wrong?
It’s a very good point you made. It’s a cautionary tale because if it can happen to one of America’s most admired companies and the most valuable company in the world, why can’t it happen to Google, Microsoft, Apple or whatever the most admired companies are now that we think are infallible? The truth is that mistakes get made, and Jack makes mistakes. Probably, one of his biggest mistakes, at least, is what he told me was in selecting Jeff Immelt as his successor. He thought it was a good idea at the time. In 2000, he thought it was the right choice but ultimately, it proved to be the wrong choice or Jeff did not handle his assignment enough.The fall of General Electric is a cautionary tale because if it can happen to one of America's most admired companies and the most valuable company in the world, why can't it happen to Google or Microsoft or Apple, whatever the most admired companies… Click To Tweet
He would say that Jack dealt him a bad hand. Jack told me repeatedly that he thought he had dealt Jeff Immelt the royal flush and blamed Jeff for misplaying it. Both are spinning the truth. The surprise lies somewhere in the middle. Jack made mistakes. He would have been the first to admit that. He made mistakes and usually recovered from them. I will give you one example. He bought Kidder Peabody in 1986, which was an old-line Wall Street investment bank.
He had bought RCA for $6.4 billion, which was the biggest M&A deal of all time to that point. RCA owned NBC. That’s how GE got NBC back, as it turned out. GE started NBC Radio Network in the 1920s, which is another part of the story. They were then forced to divest it in the 1930s. Jack bought it back in 1986, and then he bought Kidder Peabody. He was feeling hubristic because the RCA deal was such a good one but Kidder Peabody turned out to be a disaster.
First, there was an insider trading scandal involving a banker named Martin Siegel, who had left Kidder and gone to Drexel Burnham but had done a lot of damage at Kidder before he left. There was another trading scandal involving a guy named Joseph Jett. Basically, between the two of those, the firm was kaput. It costs GE a lot more than they thought but in the end, Jack was able to sell parts of Kidder Peabody to PaineWebber, another brokerage firm for PaineWebber stock.
Right around the turn of the century in 1999 timeframe, PaineWebber was sold to UBS, the big Swiss bank, for $10 billion. Jack and GE got $2 billion out of that deal, and they had only paid $600 million for Kidder. Long story short, that worked out. Another mistake Jack made also worked out. You may or may not remember. Right as Jack was about to retire in 2000, Jack decided that he wanted to buy Honeywell. United Technologies surprised Jack by agreeing to do a deal for Honeywell.
Jack had looked seriously at buying Honeywell too but decided it was too expensive but when United Technologies announced a deal for Honeywell, taking Jack by surprise, he decided that could it be that GE had to buy it instead. He made a higher offer. Honeywell’s board eventually went with GE, and it was a $40 billion deal.
It would have been the largest deal in GE’s history. The US approved the merger but then the European Union didn’t like the idea of the merger and said to Jack that he had to divest a bunch of the businesses of Honeywell and Jack did not like that at all. He complained to me and to others that it was like wanting to buy an 18-hole golf course but only getting 15 holes. Jack decided to walk away from the Honeywell deal in 2001. Shortly thereafter, Jeff Immelt took over as CEO four days before September 11th.
In retrospect, it would have been a good thing for GE to have completed the Honeywell deal even though Jack wasn’t going to get all that he wanted out of Honeywell because the EU was going to force him to sell some pieces. Not only did Honeywell go on to be worth more than GE in the subsequent years but GE needed to diversify its income stream away from GE Capital.
Buying Honeywell would’ve allowed the industrial side of GE to become a bigger part of GE’s profitability because during the 2008 financial crisis, companies in the financial services businesses if you will recall, had quite a tough go of it. Half of GE’s earnings came from GE Capital. It was the largest nonbank in the country and one of the largest in the world.
Even though all of the focus in the 2008 financial crisis was on Wall Street Banks, GE Capital was in dire straits and almost filed for bankruptcy twice and had to get a quiet bailout from Hank Paulson and Sheila Bair, the head of the FDIC. Jack’s made two big mistakes. One was, as he said, choosing Jeff Immelt as his successor, and the other one was not completing the Honeywell deal.
Nevertheless, despite both of those things, when Jack turned the company over to Jeff Immelt on September 7th, 2001, GE was the most valuable company in the world, and Jack was the most respected CEO. The company was one of the most admired. It’s hard to say, as Jeff does, that he got dealt a bad hand. I would say he got dealt a pretty good hand that could have been much better but was still pretty damn good. By the time that Jeff took over, four days later, we had 9/11, and the world had changed dramatically after 9/11, as we all know.
We can take those lessons and make them relatable to smaller-type businesses. You always got to be extremely careful who you hire and who you put in charge. Do your vetting but as you said, it’s extremely important that there are always two sides to every story. Also, acquisitions can catapult your company to the next level or can break your company. You got to be extremely careful and make sure you do your due diligence.
Also, the CEO has to understand what the drivers of his or her business are. GE Capital was responsible for 50% of GE’s earnings. Jeff Immelt, even though he went to Harvard Business School, was more of a marketing guy. I don’t think he understood finance or the risks that were embedded in GE Capital or in the way GE Capital financed itself, which was borrowing in the short-term commercial paper markets and then lending out money on a long-term basis.
It was doing the classic mistake that banks make when they get into trouble, which is borrowing short and lending long. I don’t think Jeff Immelt appreciated the risks that were inherent in that. Come 2008 when Bear Stearns, Lehman, and Merrill Lynch went down the tubes. Also, Morgan Stanley and Goldman Sachs almost did. It’s no surprise that GE Capital was teetering on the brink of bankruptcy as well.
When did you leave Wall Street?
In January 2004.
You didn’t get the repartee for 2008.
I’ve written two books about the financial crisis. One is House of Cards, which was about the collapse of Bear Stearns, and Money and Power, which was about Goldman Sachs but it’s also about how Goldman Sachs avoided the fate that Bear Stearns and Lehman suffered.
There’s a movie out about the Wall Street crisis too. I forgot the name of it. I watched that movie.
There have been several. One of them was Too Big to Fail, which was based on Andrew Ross Sorkin’s book of the same name but there have been a number of movies about the financial crisis.
Those are the three main lessons there. What else could you tell us about the rise and fall of an American icon? I want to take a pause. People ask you questions. Ask questions as to why I’m asking questions about acquisitions, M&A, and the book. Anything you want to, he’s open to answering questions.
What else was contributing factor to the rise and fall?
People forget how important the technological innovations that GE was responsible for and how important they were to our everyday lives. The light bulb, electric power, air conditioners, refrigerators, microwaves, X-ray machines, and MRI machines. GE was one of the first manufacturers of electric cars about 100-plus years ago. At one point, Henry Ford was working for Thomas Edison in trying to develop electric cars, which GE did manufacture. The problem back then, which is not too dissimilar from now, although there has been a lot of progress, is that the charge on the batteries for the electric cars back then didn’t last that long.People forget how important the technological innovations that GE was responsible for and how important they were to our everyday lives. Click To Tweet
Whereas you could fill up your car with what was then a very inexpensive tank of gas because they had discovered oil and that could be refined into gasoline. They had the combustion engine that Henry Ford helped develop that relied on that as well, which was much cheaper and much more efficient than an electric car at that point. That was the end of electric cars back then. GE created the electric grid in Manhattan. It provided electricity for the subway systems in Manhattan. It provided electricity up and down the East Coast. It made the turbines for other utilities across the country.
It made the first jet engines, and its jet engines are still the envy of the world. It’s creating jet engines that now can run on hydrogen or even electricity that doesn’t require jet fuel. That’s being developed. It’s providing the engines for a new breed of supersonic jets. It’s MRI machines and X-ray machines, and EKG. All those healthcare machines are the envy of the world, too.
We’ve taken all that for granted now. It doesn’t seem all that new and exciting anymore. In the 1920s, GE would provide financing to people who wanted to buy refrigerators, stoves, fans, electric clocks or whatever it was because, during the depression, it was very hard to get money to buy those things.
How GE Capital used to be called GE Credit, became a very important player in finance because they financed the acquisitions of these GE products for customers. GE was one of the very first components in the Dow Jones Industrial Average. GE was mostly, for the longest time, an AAA-rated company. Jack Welch fell in love with the idea and told me many times that it was a lot easier to make money from money than building and manufacturing a jet engine.
He fell in love with the idea of arbitraging GE’s AAA credit rating so that GE could borrow money very cheaply and then lend it out to borrowers very expensively. That’s the way GE Capital got into as many as twenty different business lines, which I learned about when I was working for the chief credit officer. It was an incredible profit machine. To Jack’s credit, he understood the risks or had the management in place at GE Capital with Gary Wendt and Denis Nayden, who understood the risks that were potential in a nonbank bank as big as GE Capital.
Jack was like an orchestra conductor. He had risen up through the ranks of GE in the plastics division. If people think back to the movie The Graduate and Dustin Hoffman being told to go into plastics because that was the future. Jack was plastics, and GE created LEXAN and other GE plastics that got melted down and turned into cars and all sorts of other things. It became incredibly successful since it was sold to the Saudis. People forget that Jack had the ability to orchestrate this incredible collection of businesses, get the most out of people, and turn this into a well-oiled and reliable earnings machine.
The fact that something that dynamic and that successful and that was widely admired and uniquely American could dissolve and go down the tubes is, and the fact that Jack, whose most important decision was choosing a successor and blew it and admits to having blown, it’s rather Shakespearean and tragic. As I said, it was a real cautionary tale for other companies who think they are invincible.
Can GE recover from this?
No, GE will not recover from this. It’s being split up into three separate companies. A healthcare equipment company, an electrical power company, and a jet engine company. There will be no more GE after 130 years. It’s sad.
Is a name change true to the other divisions?
The healthcare business is going to be known as GE Healthcare. The power business is going to be known as GE Vernova, of all things. The jet engine business, I believe, will still be called GE. The GE as we know it will cease to exist.
It’s very sad, as you said, and it’s happened to a lot of big brands, not just GE.
Joseph Schumpeter who was an Austrian economist, talked about creative destruction. We see it happening in real-time, not only with GE and with Facebook, now Meta. Zuckerberg is at least trying to evolve Facebook away from what was an incredibly profitable business into this metaverse company, and the market doesn’t seem to be enjoying it very much. Stock is down 70%.
As more people get acclimated, that’s going to change, don’t you on the metaverse?
I don’t think so. It’s a big gamble. No, I don’t think anybody wants that.
I have a client now that’s working on that, and that’s a big part of their plan.
We will see. The jury is out.
What are the big takeaways from Power Failure?
The danger of hype and hubris. Jack probably overhyped the company. Jack had a way with the media and the business press that covered the company. He had a way with the Wall Street research analysts who covered the company, most of whom did not understand the finance part of GE. They did not understand GE Capital or the risks there. Jeff was hubristic. He thought he knew better and he didn’t really. He would tell me he liked to listen to everybody and keep good people around him but he didn’t listen to people as well as he should.
He didn’t take the advice of his top people and was content to have them leave if they disagreed with him and didn’t come around to his way of thinking. I know that’s a little harsh. He believes that Jack did not leave him nearly the hand that Jack thought he had left him but maybe it would have been better, as I said, if Jack had completed the Honeywell deal. Jeff did not understand the risks that were inherent in the way GE financed itself, especially on the GE Capital side. He didn’t listen to people who were trying to tell him about the risks.
Bill Gross, the King of Bonds at PIMCO, tried to warn him. Jeff didn’t listen. The S&P and the credit agencies tried to warn him. He didn’t listen. When he spun off GE’s insurance businesses into Genworth Financial, he left behind two businesses that would later come back to haunt GE many years later. Jeff overpaid for Alstom. He sold NBCUniversal too cheaply, and in a panic, he dismantled GE Capital after the financial crisis and had no way to replace those earnings. Mistakes were made, as they sometimes say.
That happens to a lot of acquisitions where due diligence is rushed, and buyers don’t always do their due diligence. There are always skeletons in the closet, especially on the smaller transactions, and the seller hypes things up, and the buyer doesn’t always find where the bodies are buried. It happens in normal everyday transactions too.
There’s a lot of risk in doing deals, and GE did more deals than almost any other company. It was an M&A.
However, that also was beneficial because it also probably contributed to their growth as well.
Yes, but was it real growth or was it what I like to call M&A growth? This is growth that you make an acquisition. It befuddles the analysts because the numbers are all being mashed together, and you can’t tell what’s a restructuring charge, what’s a one-time charge, goodwill charges, and all sorts of impairments. It obfuscates what’s going on in the P&L of the company for another year. If you keep doing acquisitions and divestitures all the time, which they did. They were an M&A machine.
If you were an M&A bank on Wall Street, it would be great to have GE as a client. People had a lot of trouble telling you to know what GE’s real earnings were, how much was real, how much was M&A related, how much were restructuring charges, and how much were gains on sales offsetting losses and other parts.If you were an M&A bank on Wall Street, it would be great to have GE as a client. Click To Tweet
A lot of people complained. They thought that Jack was engaging in accounting shenanigans and that GE was engaged in accounting shenanigans. They paid fines because of accounting misadventures. It was hard to parse through all that. Jack felt it was very important. He told the GE he was going to make a certain amount of earnings and that no matter what, he did that.
He did that for all 80 or most of the 80 straight quarters that he was CEO of GE. He either met or exceeded Wall Street analyst expectations, which helped contribute to the incredible increase in value. When Jack took over GE’s market value, it was $12 billion, and when he was left, it was $600 billion.
What were your biggest takeaways, your biggest lessons from seventeen years on Wall Street? You got to have some huge lessons or big stories. Give us something from Wall Street or do we have to go read your books?
I would say that Wall Street is a dangerous place. People forget. We were reminded in 2008 how dangerous a place Wall Street can be, and it’s a dangerous place to work too for your mental and physical health. It’s rewarding financially but it’s a very difficult place to work. It makes people crazy.
How long do people last on Wall Street typically? What’s the average?
It burns people out. The hours are long. People treat each other very poorly. These are generalizations. There are always exceptions. I spent seventeen years, and that seemed about as long as I could possibly take it but the people I started with are still there. They have been there for 30 years or 35 years. Felix Rohatyn worked at Lazard and was probably the banker for 60 years. People who do it can’t imagine doing anything else.
I’m working for 70, 80 or 90 hours a week.
The junior people, yes, but not the senior people. They make the junior people work 100 hours a week.
What is your outcome? What is your biggest dream that will come out of Power Failure? What is your biggest hope? Obviously, it’s making New York Times again.
Every writer wants to become a New York Times bestseller.
Yeah. I’m one of them.
For people to buy and read the book, appreciate and enjoy the story that I tried to tell that I think I told. It’s an incredible story. It’s worth reading. It’s a long book. It’s a big book.
How many pages?
It’s about 750 pages. My view is if I’m reading a book that I’m enjoying, then more of it is good. I write for that way of thinking. I try to make it interesting and exciting the whole way through. It’s long but it’s an important, big story to tell. That’s why I do it.
Mine is 325 pages. You double the size. You got to be passionate about this to dedicate three years. One of the questions that came in was, does William have any advice for those writing books, finding a good agent publisher, etc.? Everybody says you don’t make money off writing books. You have to have a good ROI and return on investment. It’s a good way to capture those leads. That’s why I write books for brand awareness or lead capture. What are your thoughts? What’s your advice there?
I’m not capturing any leads.
You are not. You are a well-known author.
Whether I am or not, this is what I do now. Having been a banker, this is what I do.
What do you like better, banking or writing?
There’s no question but had I not been a banker, I couldn’t be this kind of writer. There’s a synergistic relationship between the two but I have a much better life now. I have my own equity. I control my hours. I can be where I want and when I want. Nobody is telling me what to do, how to do it or when to do it. That kind of freedom, you can’t put a price on that. That’s the opposite of what you have when you are a banker on Wall Street. You have no freedom. Everybody is always telling you what to do. Success has many fathers and failure as an orphan.
Do you have any advice for those reading that would like to get into writing or would like to write a book, writing their 1st, 2nd or 3rd book? I’ve written three. Any advice on that?
I am sure it’s no different than what you could offer but it’s hard work. You have to be dedicated to it. It’s a full-time job. You have to put your butt in the chair every day and your fingers on the keyboard. You have to have a passion for the topic because it’s going to be lonely, and there’s going to be no one helping you. If you don’t do it, nobody is going to get it done.
You can come up against mental writer’s block as well, which has never affected me because of all the concepts in my head. I know what I’m writing about, so I don’t face writer’s block but I know many other writers do. What advice do you have on finding a good agent, publisher or things of that nature? Any good advice on that?
You probably do need to have an agent to get to the publishers because the agents are the gating issues.
Once you are on The New York Times’ bestseller, it’s much easier to get in front of the publishers but any agents you recommend or any way to find good agents?
It’s word of mouth. Talk to your friends who are writers and ask them who their agent is and if they would recommend it.
I know who your agent is, and if you recommend your agent because you are my good friend, I’m talking to.
My agent is a woman named Joy Harris. She has her own literary agency and has been my agent for many years now.
What’s next for you, William? You’ve dedicated three years to this book. I’m sure you’ve got other books in the pipeline.
It’s not enough to write a book. You also have to sell a book. I’m now going into selling the book mode until the beginning of January 2023, and then I will take a deep breath, take stock and see where I am, and see if I have the energy to do this again.
To me, the selling part is harder than the writing part. You are going to do the selling and get on The New York Times bestseller. Do you have any projects in mind? You might not be able to talk about it.
I have ideas. I’m not ready to talk about them but I have ideas. We will have to see where the market is, what might be interesting, what’s going to interest me, and what’s going to interest my publisher.
You might have one book being turned into a movie.
Yes, but many slipped between the cup and the lip. You will never know.
Where should our readers go by the book? Are you in pre-sale?
On Amazon and anywhere you want to go.
Amazon and Barnes & Noble. I’m sure you are going to be in the Hudson stores everywhere.
Wherever your books are sold.
Any last-minute tips, strategies or advice? Most of my readers are entrepreneurs. They typically are starting in business but most of them are very successful entrepreneurs looking for exits, which I do help them with.
Don’t give up. Don’t lose faith.
What keeps you going?
I’m on a mission. I have a job to do. A journey of a thousand miles begins with a single step. You got to keep after it every day.A journey of a thousand miles begins with a single step. You got to keep after it every day. Click To Tweet
You have been an amazing guest. I can’t wait to hear about your next project when you make The New York Times bestselling author, which I know you will. We will have you back on because I know it’s going to be a great story on demand. Thank you so much for coming on, William Cohan. You have been a great guest. Thank you to my audience. Thank you to all the Exit Rich subscribers. If you haven’t subscribed, make sure you go subscribe to Exit Rich.
Make sure you share this episode with your friends, your colleagues, and your fellow entrepreneurs. Share it with your network. Get the word out there. Let’s help William Cohan become a fourth-time New York Times bestselling author. We are entrepreneurs helping entrepreneurs. Let’s make that happen. Thank you, William, so much for coming on.
Thank you, Michelle. Take care.
Let’s all exit rich if we can.
- William Cohan
- Money and Power: How Goldman Sachs Came to Rule the World
- The Last Tycoons
- House of Cards: A Tale of Hubris and Wretched Excess on Wall Street
- The Price of Silence
- Four Friends
- Power Failure: The Rise and Fall of an American Icon
- Exit Rich
About William Cohan
A former senior Wall Street M&A investment banker for 17 years at Lazard Frères & Co., Merrill Lynch and JPMorgan Chase, He is a 3 times New York Times bestselling author of non-fiction narratives about Wall Street: Money and Power: How Goldman Sachs Came to Rule the World FT/Goldman Sachs Business Book of the Year Award.; House of Cards: A Tale of Hubris and Wretched Excess on Wall Street; and The Last Tycoons: The Secret History of Lazard Frères & Co.,
His new book Power Failure: The Rise and Fall of an American Icon, about the rise and fall of GE, once the world’s most powerful, valuable and important company, will be published in November 2022. He is a founding partner of Puck, a digital publication owned and operated by journalists, and a writer-at-large for Air Mail.
For 13 years, he was a special correspondent at Vanity Fair. He also writes, or has written, for ProPublica, The Financial Times, The New York Times, Institutional Investor, Bloomberg BusinessWeek, The Atlantic, Fast Company, The Nation, Fortune, Politico, ArtNews, and Barron’s. He previously wrote a bi-weekly opinion column for The New York Times, an opinion column for BloombergView, as well as for the Deal book section of the New York Times. He is a non-staff, on-air contributor to CNBC and also appears on CNN, on MSNBC and the BBC-TV. He has also appeared three times as a guest on the Daily Show, with Jon Stewart, The NewsHour, The Charlie Rose Show, The Tavis Smiley Show, and CBS This Morning as well as on numerous NPR, BBC and Bloomberg radio programs. He was formerly a contributing editor for Bloomberg TV.
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