Earlier quoted context omitted.
> Conglomerates of disparate businesses never work in the long term Tell that to Yamaha, Mitsubishi, Siemens, 3M, etc
Most of FAANG as well.
I think time will tell how they do in the long term.
What Happened to GE? (2021)
131–140 of 160 posts
Re: What Happened to GE? (2021)
#132Lesson from GE: Financial engineering is not engineering. Further lessons from GE: * Gaming the system internally or externally is something a CEO needs to actively manage and defeat, not reward. * Trying to turn businesses based on contracts for delivery (with lumpy revenue/risks) into contracts for service and recurring revenue is a dangerous game, because you take your eye off the ball that is delivering the produ…
> Conglomerates of disparate businesses never work in the long term Tell that to Yamaha, Mitsubishi, Siemens, 3M, etc
Siemens is by no means an example of good performant conglomerate.
Re: What Happened to GE? (2021)
#133What's striking about this article is Gates's refusal, even now, to say anything bad about Welch. Why is that? The vast majority of the bar culture problems are traceable to Welch, as is the shadiness of GE Capital.
Due to that friendship, I doubt the book has real value. It's propaganda for those in GE that ought to be in jail, or at least recognized as at least the "good game players that played by the dubious rules until the field was destroyed."
Which friendship? Gates didn't write the book, two WSJ journalists did.
Re: What Happened to GE? (2021)
#134> Although Steve Ballmer and I made our share of strategic mistakes, we were maniacal about making sure our numbers were rock solid and avoiding incentive systems where people could cram a lot of sales into a quarter in order to look good or meet some quota.
Great to see the self awareness here.
Re: What Happened to GE? (2021)
#135Earlier quoted context omitted.
> the finance market does not care if layoffs will impact the company's competitiveness in 5-10 years This doesn't make sense to me. Are there no 5-10 year derivatives?
Aren't all of them quantitative instead of qualitative? Every trader I know in Big Finance is basically creating/using statistical models based on books' numbers vs other books, not analysing a company's products and labour potential on a human level.
You know all of the quant traders (they work at very obscure places like jump, sig, rentech, shaw, and 2 sig)
There are still fundamental investors out there
Re: What Happened to GE? (2021)
#136> For example, Gryta and Mann report that GE would sometimes artificially boost quarterly profits by selling an asset (e.g., a diesel train) to a friendly bank, knowing that it could then buy back the asset at a time of GE’s choosing. So fraud?
I'd be interested in reading the book to get more detail on that. Sale and leasebacks (which often include buyback options) are a fairly common capital management measurement in the asset finance sector.[0] GE could have been committing fraud or this could be sensationalist reporting of a mundane financial management technique. 0: https://en.wikipedia.org/wiki/Leaseback
Great points. It depends on how confident you are in the claim that the primary purpose was “artificially boost quarterly profits.” No particular evidence presented in the excerpt.
Re: What Happened to GE? (2021)
#137Earlier quoted context omitted.
It is fraud when you don't tell that openly and pad books by it, but it is an okay tactic as a hedging risk as long as you are open about it.
Meaning as long as you mentioned it in the fine print on page 497 of your financial statement?
You got a better way to explain the transactions? If you're saying the transactions should be illegal, there are plenty of scenarios where these transactions wouldn't be weird or horrible. How to differentiate which are OK and which aren't?
Re: What Happened to GE? (2021)
#138Earlier quoted context omitted.
> perpetually underperforming businesses Is this a bad or good thing for sustainability?
You're suggesting the answer by asking the question, but yes, companies that consistently deliver moderate performance (are less extractive and don't maximize gains) would generally be better for the world as a whole than highly optimized, fragile corporations that deliver maximal returns by chewing up everything in their path. They'd even, in the longer run, be better for their own shareholders and their descendants…
They might even help in closing (or reducing) the gap between the rich and the middle class. But, as there are no incentives for such behavior in society any longer, I doubt we will see widespread adoption until it is inevitable.
Re: What Happened to GE? (2021)
#139Earlier quoted context omitted.
No, it changes the risk profile. It’s not much different to selling your house to someone and then renting it back.
Claiming the sales as a profit in the above situation is dubious. When I leaseback an asset I previously owned, I am taking a long term liability which is larger than the profit. This is totally fine in the case of something like an office building - a company probably won’t be around or be fit for the lifetime of the building - but dubious for core company assets.
For a car? A car will definitely not outlast most viable companies. What if it's cars for a car rental company? I believe the car would be a core company asset then. But if you don't label it as revenue, what DO you label it as? I'm not an accountant, only have rudimentary accounting knowledge, but don't see any options other than revenue there.
Re: What Happened to GE? (2021)
#140Earlier quoted context omitted.
> perpetually underperforming businesses Is this a bad or good thing for sustainability?
You're suggesting the answer by asking the question, but yes, companies that consistently deliver moderate performance (are less extractive and don't maximize gains) would generally be better for the world as a whole than highly optimized, fragile corporations that deliver maximal returns by chewing up everything in their path. They'd even, in the longer run, be better for their own shareholders and their descendants…
Thank you for reply. I truly couldn’t tell whether underperformance was a threat to the longevity of a company.