Power Failure summary

Although General Electric eventually came to resemble a complicated, symbiotic organism that took on a life of its own, a staggering sci-fi monster of finance, it was not always that way. The company evolved many times over the years as circumstances changed. 

It grew quickly from its origins in a battle for supremacy in the early electrical industry. Light bulb inventor Thomas Edison’s company merged with a rival and the company began shifting and expanding to deal with ever changing markets. 

During World War I, GE expanded to meet military needs like submarine detection, with inventions that were repurposed after the war and formed the roots of its later industrial core. Then, one of the company’s scientists developed a better radio transmitter, launching GE into that sector, where it built RCA and successfully marketed the new product it wanted to sell. 

The lax oversight that would allow GE to become a sprawling conglomerate was not in evidence in the 1930s, as GE had to spin off RCA because of monopoly concerns. (The company later bought it again when the government calmed down about monopolies). 

By the 1940s, GE had transformed into a corporate juggernaut. The core of the company had already begun to change – Fortune magazine called it an investment trust that also built things. 

If there was a place to make money, GE found it. Yet even as a huge company, it put an emphasis on strategic thinking for the future, though executives sometimes took sharply differing tacks on how to do that.  

Over time, though, the conglomerate went from a nimble market leader to a bit of a lumbering dinosaur, overly dependent on its capital business.  

Huge pressure came fast in the early 2000s, starting with the terrorist attacks of 9/11, which hammered GE. It held reinsurance on not only the towers, but also the planes. It continued in the shaky market afterward. 

A changing corporate environment meant GE and other companies were no longer permitted to run amok with little oversight. Public sentiment shifted against the company for its lack of transparency, and accounting practices that had long propped up the company’s image began to raise eyebrows. 

Although many factors contributed to GE’s fall, entrepreneurs and others would do well to heed the rather vivid object lesson: If making a huge profit requires you to give up too much flexibility, and depend on risky ventures, you might want to consider other ways of making a profit.