The Man Who Broke Capitalism

Gelles, a New York Times reporter, argues that Jack Welch's twenty years at General Electric established a management model that spread across American business and did serious damage, and that Welch's reputation as the century's greatest manager should be reconsidered.

His case has three parts. Downsizing: Welch cut over one hundred thousand jobs in his first years and made large-scale layoffs a routine management tool rather than a response to distress. Dealmaking: GE made hundreds of acquisitions and divestitures, which Gelles argues substituted portfolio activity for operating improvement and made the company impossible to analyse. Financialisation: GE Capital grew to produce roughly half of the company's profits, which meant an industrial company's reported earnings depended on a lightly regulated finance business funded in commercial paper markets, and this is what nearly destroyed GE in 2008.

Gelles also documents the earnings management, arguing that GE's remarkably smooth reported earnings growth was produced by adjusting reserves and timing gains at GE Capital, and that the SEC later found accounting violations.

The diffusion argument follows Welch's executives into Boeing, Home Depot, Albertsons and elsewhere, where Gelles traces similar outcomes.

The book is argued from a position and Gelles attributes to Welch a great deal that was happening across the economy for other reasons, including competitive pressure, capital market structure and technology. The specific evidence on GE Capital, on earnings management and on the successor companies is well documented.