Power Failure: The Rise and Fall of an American Icon

by William D. Cohan Narrated by Eric Jason Martin

Overview

NEW YORK TIMES BESTSELLER

The New Yorker Best Books of 2022 ¿ Financial Times Best Books of 2022 ¿ The Economist Best Books of 2022

The dramatic rise-and unimaginable fall-of America's most iconic corporation by New York Times bestselling author and pre-eminent financial journalist William D. Cohan

No company embodied American ingenuity, innovation, and industrial power more spectacularly and more consistently than the General Electric Company. GE once developed and manufactured many of the inventions we take for granted today, nearly everything from the lightbulb to the jet engine. GE also built a cult of financial and leadership success envied across the globe and became the world's most valuable and most admired company. But even at the height of its prestige and influence, cracks were forming in its formidable foundation.

In a masterful re-appraisal of a company that once claimed to “bring good things to life,” pre-eminent financial journalist William D. Cohan argues that the incredible story of GE's rise and fall is not only a paragon, but also a prism through which we can better understand American capitalism. Beginning with its founding, innovations, and exponential growth through acquisitions and mergers, Cohan plumbs the depths of GE's storied management culture, its pioneering doctrine of shareholder value, and its seemingly hidden blind spots, to reveal that GE wasn't immune from the hubris and avoidable mistakes suffered by many other corporations. 

In Power Failure, Cohan punctures the myth of GE, exploring in a rich narrative how a once-great company wound up broken and in tatters-a cautionary tale for the ages.

Editorial Reviews

Publishers Weekly

09/26/2022

Cohan (The Last Tycoons), a journalist and former investment banker, delivers an ambitious history of General Electric, suggesting that the company’s story offers “a cautionary tale about hubris, blind ambition, and the limits of believing—and trying to live up continuously to—a flawed corporate mythology.” The author tracks that mythology, which “embodied both the muscle of American business—entrepreneurial drive, inventiveness, financial legerdemain— and its weaknesses,” from the company’s early days in the late 1800s with Thomas Alva Edison and Charles Albert Coffin at the helm, through the reigns of Jack Welch, “the octogenarian titan of American capitalism” who took over GE in the middle of a price-fixing scandal in the 1960s, and Jeff Immelt, who was running GE’s medical equipment business when he was tapped to be CEO in 2001. Meticulously researched, Cohan’s history covers the EPA/Hudson river scandal in the 1970s (in which GE was caught dumping chemicals), the late-’90s immersion of “Six Sigma” statistics-based practices into corporate life, and intense succession battles. Cohan’s access to the major players bears significant fruit, and the resulting narrative is dramatic without being overblown, making for a gripping account of a corporate behemoth and the men who ran it. Business history buffs, take note. Agent: Joy Harris, Joy Harris Literary. (Nov.)

From the Publisher

"An epic piece of work."  
—MIKE BARNICLE, MSNBC Morning Joe

"A riveting, magisterial work of business history."
—FAST COMPANY

“A sweeping tale of ambition, arrogance, egos, and feuds—and how they brought down a once-great company.”
—KIRKUS REVIEWS

“Meticulously researched . . . Cohan’s access to the major players bears significant fruit, and the resulting narrative is dramatic without being overblown, making for a gripping account of a corporate behemoth and the men who ran it. Business history buffs, take note.”
—PUBLISHER'S WEEKLY

“Absorbing . . . a book so comprehensive it gives the impression that all that can be said about Jack has finally been said.”
—MACOLM GLADWELL, The New Yorker

“Often-engrossing account of the unraveling of General Electric Co. . . . rich anecdotes of what transpired in the boardroom and how these captains of industry doomed what was once a great company.”
—THE WALL STREET JOURNAL

“[Cohan’s] account of the internal political machinations that accompanied GE’s humiliating decline is backed by impressive research and remarkable access to the key actors, notably Welch . . . It all makes for gripping reading . . . a tour de force.”
—FINANCIAL TIMES

“Well-researched and compelling . . . Cohan suggests the fall wasn’t inevitable. But personal ambition and feuds hastened G.E.’s undoing, providing a useful case study for any corporate leader.”
—ANDREW ROSS SORKIN, DealBook newsletter

“If corporations can be said to have personalities then journalist William D. Cohan is one of his generation’s most adept analysts of the quirks, neuroses, and pathologies that drive them to success or failure . . . the rise and fall of GE’s recent top executives, especially Jack Welch and Jeff Immelt, is well-trod territory, but Cohan brings new insight to their reigns. He also delves much deeper and further back than others have for clues in what shaped this company and how it, in turn, shaped our corporate culture.”
—TOWN & COUNTRY

"Cohan’s thorough research and interviews with Jack Welch and others give readers a firsthand look at the rise and fall of an American institution."
—LIBRARY JOURNAL

“The story of General Electric is, in part, the story of American capitalism writ large. In Cohan’s capable hands it is also the story of people — people both extraordinarily gifted and monumentally flawed. It is the people who keep the 800-plus pages of Power Failure turning.”
—THE BERKSHIRE EAGLE

“This exhaustively researched and insightful history of General Electric from Air Mail Writer at Large William D. Cohan puts into enlightening context the company’s groundbreaking rise, its cult of financial leadership and success—once the envy of the world—and its unimaginable fall.”
—AIR MAIL, "Best Books of 2022"

“This page-turner should be required reading for anyone trying to understand the spectacular crash of one of America’s most-vaunted corporate success stories.”
—JANE MAYER, author of Dark Money: The Hidden History of the Billionaires Behind the Rise of the Radical Right

“General Electric was once the most important, powerful, and influential company on Earth—and this is the definitive story of how it got that way and what happened next. William Cohan takes us inside the company’s boardrooms and factories with a rollicking and fascinating tale of corporate brilliance, bitter infighting, business daring, and monied folly that illuminates not just General Electric but the world and economy it helped create.”
—CHARLES DUHIGG, bestselling author of The Power of Habit and Smarter Faster Better

“With the sweep and authority of an accomplished historian, the digging of a fearsome investigative reporter, and the storytelling skills of a novelist, Bill Cohan takes us from the nineteenth-century birth of GE, to its rise as America’s most-valued company in the twentieth, to its near death in the twenty-first. With incredible access to Jack Welch and the major actors in this drama, he paints a panoramic view of America and of capitalism, how it has changed and still must.” 
—KEN AULETTA, bestselling author and contributor to The New Yorker

“Cohan rides this wild tale like a racehorse to the bitter end. It’s all here: the birth of this most American of inventive American companies and the triumphs, flaws, and missteps to come. If at 130 years old, GE has indeed fallen, this masterful work remains.” 
—MARK SEAL, author of Leave the Gun, Take the Cannoli: The Epic Story of the Making of The Godfather

“For most of our lives GE was one of the familiar, trusted U.S. companies, and in the early 2000s still the biggest company on Earth. In one generation this icon of the American corporate imperium has turned into an icon of American corporate failure. We’re fortunate that the great business chronicler William Cohan has now applied his extraordinary reporting skills and lucid, knowing prose to tell this story in breathtaking detail from beginning to bitter end. Power Failure is fascinating and definitive.” 
—KURT ANDERSEN, bestselling author of Evil Geniuses: The Unmaking of America

“This epic tale of arguably the most dominant corporation in American history has it all: money, power, sex, and larger-than-life characters, from Thomas Edison to “Teflon Jack” Welch and beyond. Cohan’s fine pacing and narrative flair make for a page-turner that becomes a compelling story of American capitalism itself.” 
—JONATHAN ALTER, author of His Very Best: Jimmy Carter, a Life

“Power Failure by William Cohan is a tour de force of reporting, a deeply researched chronicle of the flawed personalities and dysfunctional company politics that led General Electric, once hailed as the great American corporate success, to self-destruct. The story reads like a tragedy.”
—LIAQUAT AHAMED, author of Lords of Finance and winner of the Pulitzer Prize

Library Journal

11/01/2022

General Electric (GE), which started with Edison's incandescent lightbulb, grew into a company that owned subsidiaries in nearly every industry until its demise in 2021, when it announced it would split into three different enterprises focused on aerospace, healthcare, and energy. Such an important and massive conglomerate that dominated American business for most of the last century requires a substantial tome, which is exactly what Cohan (The Last Tycoons: The Secret History of Lazard Frères & Co.) delivers. The book comes in at just over 800 pages, with more than half dedicated to the tenure of Jack Welch (1981–2001) and Jeff Immelt (2001–17). It also points to how those two men not only embodied GE but came to represent the American CEO. The author's analysis not only focuses on the influence of these two CEOs, but it also delves into the financial health of the company to depict how specific events, such as the 2008 global financial crisis, put cracks in the foundation of the company that led to its rapid demise. VERDICT Cohan's thorough research and interviews with Jack Welch and others give readers a firsthand look at the rise and fall of an American institution.—John Rodzvilla

Kirkus Reviews

2022-08-26
A business journalist traces the rise and fall of General Electric, the company that once exemplified American business.

There was a time when GE, a key player in the electricity revolution that powered America in the 20th century, was a leader in innovation and acumen, a reputation that persisted into the postwar era as it became a diversified conglomerate. Now there are only scattered fragments and a broken reputation. In this hefty study, Cohan, a former investment banker who has written multiple books on finance and Wall Street, delves into the records of the company’s early days, but he also presents the results of his interviews with CEOs of the modern era: Jack Welch, Jeff Immelt, and John Flannery. The current CEO, Larry Culp, declined to participate. Welch’s drive took the company into new areas, but his tenure was also problematic. GE’s strength was always industrial operations, but Welch moved it into media and financial services, using its internal bank GE Capital as the springboard. Welch picked Immelt as his successor but later said that the choice was a mistake. Immelt, for his part, claims that he spent much of his tenure cleaning up disasters that Welch swept under the rug (all of which he covers in detail in his 2021 memoir, Hot Seat). By the time Welch stepped down in 2001, the company had become dangerously overextended. The 2008 financial crisis exposed the corporation’s myriad weaknesses, and a painful period of sell-offs began. Flannery tried to bring order to the chaos with a proposal for radical restructuring, but he was fired after only 15 months. This is a long, complicated story, and there are times when Cohan struggles to keep the sprawling cast of squabbling characters organized. As he capably shows, all of GE’s leaders made mistakes, but there was also a pervasive sense of hubris. Would-be corporate titans, take note.

A sweeping tale of ambition, arrogance, egos, and feuds—and how they brought down a once-great company.

Product Details

BN ID:	2940178764190
Publisher:	Penguin Random House
Publication date:	11/15/2022
Edition description:	Unabridged

Read an Excerpt

Chapter One

A Child of
Two Fathers

Ask most people about the origin of the General Electric Company in and around 1892, and you'll hear all about Thomas Alva Edison and his inventions-the carbon filament incandescent lamp, the dynamo, the phonograph, and the motion picture camera. But GE, and its extraordinary success after some initial financial hiccups, was actually more the doing of another restless entrepreneur, Charles Albert Coffin, whose visionary thinking and aggressive acquisitions drove the company forward in its early years. Coffin doesn't get nearly the accolades, or ink, of Edison, but it turned out that Coffin was by far the superior businessman, a gene Edison lacked. In any event, Coffin and Edison started out as competitors in the race to electrify America, but they soon joined forces and both of their powerful DNAs would become entwined in GE.

Born in December 1844, Charles Coffin grew up in Fairfield, Maine, north of Augusta, after his grandfather, a farmer, settled there at a time when the federal government was offering free land to people who would move to uninhabited wilds. Charles's grandfather was a minister of the Society of Friends, also known as the Quakers. After graduating from Bloomfield Academy in 1862, Charles moved to Lynn, Massachusetts, to live with an uncle so that he could attend a "commercial" school in Boston. That uncle was a partner in a shoe manufacturing company, Micajah C. Pratt and Company. When Pratt died in 1862, Coffin's uncle inherited the business and his nephew joined him there. At that time, Lynn was the center of the nation's burgeoning shoe industry, and Pratt's business was an important part of it. The industry was automating rapidly, with sophisticated machines replacing the artisans and craftsmen of an earlier era. Coffin quickly proved himself adept at shoe design. He then moved into sales and proved skilled at that task as well. He started making regular calls in the western United States. It turned out Coffin was a talented businessman. He "must have borne the hallmark of genius from the outset," John Broderick, a former colleague, wrote about Coffin.

In 1873, Pratt's shoe company was renamed Charles A. Coffin and Company for its leading executive. Coffin built a new plant by the railroad station in Lynn in order to snag customers as they were coming off the train, before they could venture farther into town to one of his competitors. The company thrived under Coffin and he soon began to consider other business opportunities. By the 1880s, new inventions like the telephone (1876) and the incandescent lightbulb (1880) were poised to create entirely new industries. There were fortunes to be made in high tech, and one such invention was sitting in Coffin's backyard.

The Lynn Grand Army Post, an armory in Coffin's hometown, was considering lighting its new building with one of the newfangled dynamo systems, a forerunner of the electrical generator. Dynamos were among the first commercially viable ways to generate the electricity used in manufacturing and, eventually, to light people's homes. Silas Barton, a local newspaper owner, and Henry Pevear, a local leather manufacturer, who were tasked with the project, noticed that the building had a rudimentary yet out-of-date six-light dynamo sitting in its basement. The name on the dynamo read "American Electric Co., New Britain, Connecticut."

Barton and Pevear set off for New Britain, where they hoped to meet with Elihu Thomson, a former Philadelphia high school teacher-turned-inventor, who had moved to Connecticut and founded American Electric. Thomson had partnered with Edwin Houston, his former physics teacher from Philadelphia's Central High School. Thomson and Houston together had built a number of electrical contraptions, including induction coils, an arc lamp, and a dynamo. Thomson showed the dynamo to a friend, who then invited a curious cousin to see a demonstration of how it worked. Thomson, then twenty-six, told the cousin he could build a better dynamo, "one that will run any number of lights you want." The cousin responded well to Thomson's idea: "Let's build a four-lighter. I'll stand the expense." Thomson installed his first souped-up dynamo in an all-night bakery. The next one was in a brewery. When the brewery later caught fire, one of the firefighters sent to douse the flames couldn't get over Thomson's dynamo. "What the dickens kind of a light is that?" he said. "You pour water on her and she won't go out."

But as is the case with start-ups (then and now), Thomson and Houston were in need of capital; their initial venture together was in the process of fizzling out. When they came to Lynn to install the armory's new generator, the newspaperman and the leather manufacturer put them together with Coffin to discuss the possibility of Coffin injecting fresh capital into American Electric Co. and moving it from Connecticut to Massachusetts. On February 12, 1883, the newly recapitalized American Electric Co. opened for business in Lynn, Massachusetts, under a new name, the Thomson-Houston Electric Company. Coffin had bought out the inventors' old investors and was now in the process of recapitalizing and retooling their power and lighting company for the future, under his control.

There was one small hitch. Unlike with the shoe business, Coffin now found himself leading a business without a market. Broadly speaking, there were few customers for an electrical power company in 1883. It's hard to imagine today, but there were no grids to deliver electricity to homes and businesses; there were few, if any, electric appliances and it was a serious challenge to convince consumers that electric light was preferable to whale oil or candles. What if the whole contraption exploded? Or went up in flames? Out of necessity, the Thomson-Houston sales force became proselytizers, fanning out across the country to share the powerful message of arc lamps and electric light. The company had to teach its engineers how to install and to operate the equipment. At times, it was a hard sell, in the same way that getting people to use the internet was not so easy at first.

This thirst for customers led to the creation of local power and light companies, backed by wealthy investors and supported by local governments eager to provide the new technology to their citizens. "Mr. Coffin and his associates set out to sell electricity," The New York Times reported. "Their main objective was to get electricity to the people. They began establishing power plants in every place possible, where people could make use of it simply by connecting up."

The company eventually moved into a new three-story building on Western Avenue in Lynn. The new building had so much space at first that Pevear, the leather manufacturer, wanted to use some of it to dry his animal skins. But the new electricity business was a big success, nearly immediately. Growth was swift. In 1884, the new venture was supplying electricity to five central stations with 365 arc lamps. A year later, there were thirty-one stations supplying 2,400 arc lamps. Business was booming in part because of a decision to use electricity to power streetcars. The horse-driven commuter systems had to go, and the electric streetcar system that the company built connecting Boston to Lynn, some ten miles away, helped put it on the map by 1888.

Coffin had an interesting approach to raising the capital he needed. Rather than approach friends and family, as was more typical, he preferred to put together a constellation of what he dubbed "men of large means." Some of his earliest investors read like a who's who of Boston Brahmins: Henry L. Higginson, an investment banker and the founder of the Boston Symphony Orchestra; S. Endicott Peabody, a merchant and father of the founder of Groton School (his great-grandfather, Joseph, one of the wealthiest men in America, made his fortune importing pepper from Sumatra); T. Jefferson Coolidge, a great-grandson of Thomas Jefferson; and George F. Gardner, another prominent Boston financier.

Soon enough, Coffin had sold off his family's shoe business to a company in Boston for $300,000 to focus his full energy on the high-risk but potentially lucrative electrical power business. He employed two tactics to fuel Thomson-Houston's growth, both of which would be familiar today-vendor financing and acquisitions. Thomson-Houston did not sell its equipment to the public but instead sold to small, poorly capitalized local electric lighting companies. While adding an element of risk to Coffin's business model-could customers afford to pay?-the strategy also allowed Coffin to achieve greater scale by being a wholesaler of electrical equipment rather than a retailer. But often Coffin's customers struggled financially. That's when Coffin decided that Thomson-Houston would provide what is now known as "vendor financing" to its customers, essentially allowing them to pay for the purchased equipment with a combination of some cash up front plus their debt or equity securities.

He also pursued an aggressive acquisition strategy, sensing that there would soon be a handful of power companies that dominated the industry, and that scale would be key to his company's success. Buying up rivals solved another burgeoning problem for Coffin: patent infringements. He had an ongoing feud of sorts with Charles Brush, the inventor of the new type of lightbulb known as a double carbon arc who had served a patent infringement notice on Coffin. To solve the litigation, Coffin bought Brush's company for more than $3 million. When he wanted to enter the streetcar business, Coffin bought the failed Van Depoele Electric Manufacturing to get its patents, and then, for a stream of royalty payments, the Belgian-born electrical engineer and prolific inventor Charles Van Depoele himself. And in 1888, Coffin bought the majority of Fort Wayne Electric Light Company, which had been selling dynamos in the Midwest and South.

As often happens during fecund periods of innovation, two or three players battle it out for supremacy. And as Thomson-Houston grew and became more profitable, it increasingly found itself bumping up against the two industry titans: George Westinghouse, who had received his first patent at the age of nineteen and had the inventor Nikola Tesla on the payroll; and Thomas Edison, who in his lifetime would amass 1,093 U.S. patents. Coffin, who was once described as "a man born to command, yet who never issued orders," would soon find himself in a battle for market supremacy with Edison, while Westinghouse would remain a thorn in his side.

While Thomson-Houston had its genteel Boston backers, Edison had in his corner none other than J. P. Morgan, the titan of American finance and the senior partner of Drexel, Morgan & Co., and Henry Villard, the journalist-turned-railroad magnate. A lawyer who had been representing Edison on patent disputes related to the telegraph introduced Edison to J. P. Morgan to see if he might be interested in backing Edison's efforts to commercialize the incandescent lamp. He was. In 1878, with an investment of $300,000-most of which went to pay for equipment-Morgan, Edison, and small group of other financiers created the Edison Electric Light Company. Edison's immediate challenge was to create a filament for the electric lamp that would not burn up. By October 1879, Edison had the problem solved. In his lab in Menlo Park, New Jersey, a carbonized cotton filament burned for forty consecutive hours.

But of course it wasn't sufficient to create merely an electric light; Edison also needed to convince people of its efficacy and to create a mechanism by which electric current could be transmitted to their homes and businesses, so that the electric light could be used. Edison needed more space for this project. In 1880, he created the Edison Machine Works in New York City, to manufacture generators, and the Edison Lamp Works in nearby Newark, New Jersey, to manufacture lamps. Edison's lamp was little more than a glass bulb with most of the air taken out of it-nearly a vacuum-and endowed with a filament of carbon "for the reception of electric energy in the airless space," according to one description.

Edison's New York City office was at 65 Fifth Avenue. As his personal assistant in New York, Edison hired Samuel Insull, a young Englishman who had worked the previous two years as the secretary to his London agent. Edison and Insull, who would later become the controversial founder of the largest electric utility in Chicago, met for the first time in the back room of 65 Fifth Avenue on March 1, 1881, two weeks after Insull sailed on the SS City of Chester from Liverpool. Edison's office was spare, outfitted with only a few walnut rolltop desks. "Edison received me with great cordiality," Insull later remembered. "I think possibly he was a little disappointed at my being so young a man. I had only just turned 21 and had a very boyish appearance." Insull recalled in some detail what Edison was wearing at their first meeting-a "rather seedy" black diagonal Prince Albert coat, a white shirt "somewhat worse for the wear"-as well as his somewhat portly shape ("although by no means as stout as he has grown in recent years"). "What struck me above everything else was the wonderful intelligence and magnetism of his expression and the extreme brightness of his eyes," Insull said.

They immediately got down to business, including discussions of how much money Edison had in his bank accounts and what securities of European telecom companies were the most salable. Like Coffin, Edison had taken payments from customers in the form of their debt or equity securities. Edison wanted to make sure his incandescent lamp factory had enough money to operate. "He spoke with very great enthusiasm of the work he had before him [regarding] the development of his electric lighting system," Insull continued, "and his one idea seemed to be to raise all the money he possibly could, with the object of pouring it into the manufacturing side of the electric lighting business, and I remember how wonderfully impressed I was with him on this account, as I had just come from a circle of people in London who not only questioned the possibility of the success of Edison's invention, but often expressed doubt as to whether the work he did could be called an invention at all." They continued their conversations until around five in the morning. Instead of feeling exhausted by Edison, Insull seemed exhilarated, "feeling thoroughly imbued with the idea that I had met one of the great master minds of the world." He allowed that he "fell a victim" to Edison's "spell" during that first meeting.

The next day, Insull was off with Edison to Menlo Park, where for the first time he saw Edison's labs and the network of electric lighting he had created in the buildings that comprised his operation. He wrote of the visit that it was "unforgettable" and at ten o'clock at night he was so moved he returned to the Menlo Park railroad station and had the telegraph operator there send messages to his friends in London about the miracle of electric light he had just witnessed. "Menlo Park was naturally the Mecca of those who looked upon Edison as the great inventive hero of the time," Insull recalled years later. "It must always be looked at as the birthplace of the electric light and power industry."

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