A Dialogue with Jack Welch on Strategy & Success
2007 World Business Forum
Led by MSNBC personality, Maria Bartiromo

Maria: How do you see things economically speaking?
I think we’re doing very well, record stock market, 4.6%, created 9 million jobs in last 4 years, budget deficit of 1.2% is lowest in the developed world. We’re in the midst of a slow down, have to handle this housing crisis and LDL debt out there. We’ll slow down a bit, corporate earnings will surprise us. Costco is up 12% this morning.

So much angst out there …you create that!
I don’t disagree that the media gets hysterical about things, 2/3 of American people in a poll by WSJ says we’re in a recession, but why are people so nervous?
I think there’s so many media outlets all looking for an angle, that they can pound home the slightest bit of negative news and no positive news gets reported. How many people would know that our budget deficit is lowest in the developed world, and that 1.2% is half of the last 50 years?

Why do you think President Bush doesn’t get credit for this?
I think he’s a marginal communicator.

How then should he be communicating this great story and get a little of the credit for this great time?
To defend him a bit, Iraq has overtaken the psyche of the public. Maybe a fireside chat. We had this shift bill, Healthcare for Children, his 4th veto was done under a blanket, he was hiding, now what happens when you veto a bill labeled Healthcare for Children, if he believed in it, and had valid reasons, a veto has to define himself. If you don’t, someone else will. His opponents have been showing sick children and then scrooge not supporting them. If you believe it go on National TV and explain rationale, why it’s good for people, why not a tax burden on them. He could have defined himself. The point for us here is to take it as a lesson, if you have a controversial decision, you’d better get out front and make it clear to every constituency and not hide, make it and go back to the office.

Who do you see exhibiting the best and strongest leadership?
I’d go at it another way, whose policies do I favor. I personally believe that this tax bill drove this economy. Look at Eastern Europe, why would France, Germany lowering taxes, we’re talking about raising them when our deficit is lower than theirs. I favor Giuliani’s policies, Hilary’s are fair and towards income redistribution. Of the policies, I like Giuliani and Rodney’s policies.

What about fact that top 1% of country makes wealth creation, and rich people pay 15% and rest of country is paying 30%?.
How much of the 5% do they pay? Would you believe the top 25% pay 65% of the taxes? Wealth creates wealth, Senator McCain said, "how come the lower votes don’t feel it, they worry about health care benefits?" 4% real earning power, fast as it’s been in 20 years, we’re in latter stages of recovery, personal income of working people has gone up in real terms 4%. We’ve got with globalization, we’re raising votes everywhere. Why do you think Chinese and US have a closer relationship? Because of trade, the more interdependent we are because of trade the better the chance of peace. Example of Pakistan, number of jobs we have in India was more important. Interplay of corporations with India was more important than the state department chatter, India couldn’t afford to say we are a nuke country and we’ll use it. We are raising 20 million Chinese every year.

Spending cuts? This is the weak spot?
In the last year, 12 months, spending has only gone up 2.6%, we have put a lid on this issue. Now, they’ll say that’s the max we can do.

Back to China, a market where US companies want to get in, seems we get to a certain point and things shut down, do we need to be tougher to China?
We are exporting tons of things to China, we are building with competitive Chinese companies. When I retired 6 years ago we had a billion dollars business there, we’ll do $8B now. Motors companies, computer companies are doing well there. I think China is in an evolving process, this rhetoric of yelling about their currency will not affect them. Before the Olympics they’ll shut everything down for the TV cameras. Best shot is to command to stop now before the Olympics occur.

What is most important market people need to get into globally speaking?
Depends on the company, products … China and India offer great opportunities, Russia is scary as hell.

Putin -- Told he has taken stakes in companies.
Absolutely, he is the luckiest man alive, oil went to $80, yet manufacturing is where it was, distributing that wealth to lots of people, people are feeling better, Russia has got its mojo back. They hated the decade when they weren’t relevant, and they were irrelevant and now they are back at the table beating their chests and feeling good about themselves. I would find it scary if not in the oil related business to make a capital investment there. It’s a dicey place.

Do you think Putin steps down in 2008?
He’ll put his friend in, he’ll be Prime Minister, and more important than ever. The people in the street are living better than they had. In Red Square you’d see lines with people trying to get food or clothing, today you see Dior, Chanel, a rack of incredible stores, and people are wearing these incredible outfits, real money. Oil has delivered to Russia an incredible gift.

Not just Russia, this money is flowing into this country, do you worry that some of this money is floating away, the Dubai Company,etc. Is this company protectionist?
The Dubai thing was nothing, most of our military goes to Dubai ports now, and now we say it’s a freak to have them here.

Should they be allowed to own 20% of NASDAQ?
Absolutely.

What are you thoughts on investors investing there?
They’ve got enormous wealth, they bet on our entrepreneurship on this country. I’d worry more if they poured money to Japan or Germany. They come here because we’ve got people in this room who are entrepreneurs, driving new ideas, and concepts – this is a place that’s growing.

People say US is losing it’s competitiveness, business is going to Shanghai, what do you think about it?
Both things are true, but this country isn’t losing its competitiveness, look at bio tech and oil, and aerospace industries. We’re not losing our edge. In Mass., we lost our competitiveness in the leather industry, it went to the Carolinas. Business goes to where it becomes more valuable. I don’t see us losing competitiveness.
Last 4 years we’re grown GDP 3%. Trillion dollars of growth, last 4 years is current size of the Chinese economy. Put into perspective, when we grow 3%, we grow $400 billion.

Is Manufacturing no more important in this country as it was?
It’s an overstated # anyway, was 18% 20 years ago, and now down to 12-13% . Natural evolution.

Detroit is under pressure, what are answers for auto makers?
Better cars. More innovation, should have led hybrid brigade. Digital equipment fell apart in Mass., and they are now part of HP, and they are gone from Mass, they didn’t compete effectively. Competition is about winning, there’s a book about that by the way! It all goes to charity though.

Leadership… you are well known for choosing great leaders, sticking with them and fostering them, how do you find leaders?
It’s a feeling, the old 4E’s, ability to energize others, execute, all wrapped up and passion and caring. Three things: authenticity, comfortable in own shoes, are they real. 2nd thing: can they see around corners, toughest to understand, anyone can see the competitor, but what about tomorrow and 5 years from now. What’s coming around the corner, not what’s straight. 3rd thing: resilience, everyone gets knocked on their ass every time now and again, you have to be able to get back on the horse. No company is a linear straight line. Authenticity, resilience, and ability to see what’s not obvious coming around the corner.

How do you learn how to anticipate?
I live trying to figure that out. I think it’s a born curiosity, if you’re not curious, you won’t see what’s around the corner. Example: Gary Kurzoff -- If you can last 10 years to get to 2017, there will be an exponential change like the internet, life expectancy will be that way. For those along the curve, how do you make the next 10 years. If you’re 40 it’s good, but my age it’s not so hot.

What’s the next step?
Hubris. Companies get that way too, this is our way, the way we do it. A company is great when it is a learning organization, insatiable desire to get ideas. If you could suck out the best ideas of the people next to you then you’d be smarter. That’s how companies have to think, go down and see the other company and what they are doing. Example: Southwest Airlines, most people make the tour but don’t get the magic sauce. You have to be open when you go to a place. People are proud to share things with you. The amazing thing is the pride people have in showing you their good works. People go to work and you come out to ask them questions, they couldn’t be more excited. So be curious, search for new ideas every day, don’t be afraid to ask and go find out how others are doing.

What is the next big thing, what would you go into business today?
I’d go into an area I loved. Trendiest, is merger of info-technology and nano-technology, studying human genome, trace disease, ability to understand the body through info, medicine coming together will be incredible. No field in Biotech that isn’t a winner. But I might not love Biotech. Do what turns your crankers, you’d be better doing what you love than going to some place that has a high growth rate.

Audience Questions & Answers:
Q: I differentiate my team under automotive business, based on the criteria of job descriptions, but how often should you act on the 10%, I give a weekly update, but how often should I act on the lower 10%, when do I pull the trigger, 2 quarters in a row, once a month, every year?
A: Differentiation is identifying the top people who are the middle and then dealing with the bottom weak performance. No answer to right time. You’ve told them where they are, how to improve, what to expect. I appraise the people 4 times a year, every quarter, tell them if I like what they are doing and what they need to improve. Of 12-18 months we came to agreement that it’s time to move on, they’d have a soft landing and go somewhere else. With Sales you do it weekly?

Q: If you’re in the bottom 10% and improving, you are safe.
A: But 2 months, you might become neutron jack, 2 months seems a little hasty.

Q: It’s the management that’s not easy to replace.
A: Informal quarterly, handwritten always, you and the person with 15 min. talks 4 times a year on that subject, actions on compensation, will reach agreement that it’s time to move on. My biggest gripe about business is nobody should be a manager and have people that work for them not know where they stand. None of you should work for a series of bosses that haven’t told you where they stand.

Q: 2nd year MBA student, you spoke about oil and global impact and Mr. Greenspan spoke about … impact on global economy, will it affect our domestic economy in the long run?
A: US is not pulling behind I believe, our energy lab at MIT has more entrepreneurial projects than any other area, in alternative energy sources, and I’m sure CalTech is doing the same thing. Enormous venture capital going into this field. Question is what do I think about global warming?

Q: Impact any tech boom will have global economy?
A: Will be slow, but hopefully get us energy independent. I’d like to see nuclear power getter a better shake in this debate, why should the French have 70% and Japanese have 55% on nuclear power. We ought to be able to be smart enough and have safeguards, while we develop these sophisticated technologies. Building 3 nuclear power plants would do a lot better than buying another light bulb. Short term yes. All these things can come along, but nuclear is fastest answer all along. I wish I didn’t have a GE label on me, I’d talk about how this country will fall behind because they don’t have electrical power. I think this country would be better off to take nuclear from 20% to 45%.

Q: Recently become 8th grade math teach in rough school in Philadelphia, the children are constantly being challenged to do what we wouldn’t think about doing in math, but I want to integrate business practices in my classroom, what are your thought on business and education and the relationship?
A: I thank you for what you are doing in that area, a great contribution. Presumptuous for me to tell you. Where you’re playing, maybe there are models from junior achievement to bring into the classroom, it’s taken kids and brought business education, so I’d talk to the junior achievement people.

Q: I come from Romania, what do you advise managers to do who act in fast changing environment, Romania is growing 6-7% a
year, many businesses growing 30-40% a year, and many people are head hunted away for jobs.
A: Your job is to become a talent magnet, provide most exciting place going, at least equivalent wages or better, delegate more, make the environment. My experience in Hungary and Czechoslovakia, you have to delegate and trust more, let people grow as well, you’ll have a better chance to keep people. Let them grow and celebrate every victory. In a place like yours, growing like this, there ought to be kegs of beer, atmosphere where you can hardly wait to get there. We had more problems in Hungary with the bosses, sitting on people. Then as other companies came to the country we had to shape up. Create atmosphere of excitement, the same things Microsoft has fought with over the years, now Google is going through, create a plan, your imagination to make your place the exciting place in Romania.

Q: Currently director of Operations of small manufacturers of a larger conglomerate, what advice would you provide to our division while we are expanding international quickly, trying to balance struggle for lean organization and leverage resources? What would you do to manage up the org. chart?
A: Toughest job you have is not the person running the $100MM operation, but starting at the $100,000 operation in the new country. Can’t let the HR people or anyone else to define the quality or level of the job, scope of job, by number of sales and income you have. Put the best and brightest into the new venture into the new land. Companies often make this mistake, and put people who are 2 years from retirement in. You want the hottest young guy you’ve got. When we moved to Asia, we took the hottest young guy in Hong Kong and then in Beijing. He was the Pied Piper, now he’s running Boeing. Your job is to not just look in your operation, that conglomerate has people you’ve met, seen, hung around with – go after them and make the case why they have to go.

Maria: Don’t you worry you’ll lose that person’s strength where he is.
Okay, then don’t expand!

Q: As a college senior getting ready to graduate, what are the obstacles you see facing my generation and how do we overcome these?
A: We think your generation is the most exciting to date. We took 35 business schools and met with exciting entrepreneurs, I don’t find this group entitled, I find them energized, nose against the glass, wanting to win, more entrepreneurial, not wanting to slot into big company atmosphere. You have an expanding economy, low unemployment, jobs are plentiful, you have to go there and just deliver. When you go to your next job, and your boss says get these 2 things in order, you get two more and make it 4. Your job is to teach them things they don’t know, take all that enthusiasm, that you’ve learned the last 4 years, always give your boss more than they ask for. If your boss asks you a question, by definition, they know the answer, they just want you to confirm it. Go back at them with a broader insight, bigger insight. You’ll stun them. Over-deliver is the biggest thing you put on your forehead and go do it, good luck.

Q: Statement you made earlier about how important you made about executives to be curious and not invent it here, how would you evaluate our current executive branch to date, how do you evaluate our current administration in openness and curiosity and who do you believe exhibit this?
A: I voted for this administration twice and I’d give them low marks on curiosity, open to new ideas and trying new things. On new candidates, I don’t know enough, but I will by the time I vote. You’ve got to have someone open to a changing world filled with global dynamics, all of us have to put that into our cap when we evaluate the candidates. I don’t have the answer of the new ones.

Q: I’m a second year MBA at Babson in MA. I have a family company I plan to take over after I graduate in manufacturing. You mentioned China, do you have any insight on changes that might have impact on smaller companies who outsource to China …?
A: Outsourcing has to become part of your supply chain. If it’s just getting something cheap where you don’t have quality control it isn’t worth doing. Your best bet would be to get near big companies, find out who they use in China in suppliers, who are valuable that have checked out, where they have their quality people located, and see if you can piggy back off their suppliers. For a small company to go over there you are running a big risk without a knowledge base. Talk to the GE’s, the Boeings, Apples, Dells who do it every day over there and figure out your needs and what your products are and see how it would fit with your products.

Maria: What is the most important language to study in school?
A: Chinese is a great language. I think it’s an advantage, you have to believe that China and US and India are going to be the game. Also any Latin American, Spanish and Mandarin are the two.

Q: Have you ever thought of a couple of terms in Oval Office?
A: I’d be the worst politician, I don’t hold back my views. Do you think these people are telling the straight stuff?

Q: You mentioned authenticity, great leader, top priority, with leadership, can you talk about a moment in your life where you felt a greater calling, the transformation from I to We that you had a greater purpose?
A: I was lucky to work for a company that had lots of different divisions, I early on was promoted to a job that was over my scope. I realized it was about the team, the best people you can absolutely touch. Finding the best people and letting them flourish and getting a kick out of their success. Greatest think you’ll get out of leadership is seeing others flourish. An MBA answers the questions by having the answers. They go to a job, get promoted, and most of them fail on this one note, they don’t realize it’s not about them any more, it’s about their people. They will get promoted from the glory of their people. Some people have to understand that growing people is what will make you great. Having them reach dreams they never thought possible, you will make them a star. I had it in my early 30’s.

Maria: What if you have someone on the team who is working for themselves and not the team?
A: That’s why you have the 4 appraisals a year. If it doesn’t change the next time, or the next time, you’ll have to grow. Make appraisals real, tell them where they stand, how you feel about them and what they have to do to win.

Q: I want to ask you about trusting your gut and your instincts for being a good leader.
A: Gut is nothing more than recognition, you’ve seen it before, experienced it in some form or another. A counter-intuitive answer, gut to me is extremely valuable on deals, decisions to invest. On people, I think your gut is pretty bad because you base it on personality, smell, feel. I think you want a lot of opinions and input for that. Getting people into a job is very very hard, so your job is to get as much input from those around you, who’ve worked for them, sat beside them. Gut is great on deals and learning more about people by interviewing is better on people.

Q: Two things, one is celebration and one is education. They both have same ending and they both mean act up. Active, celebrating, the process of education. Education is the most basic business in any country, it’s us and all around us. We can’t continue to separate out business community and education community.
A: When I retired from GE we had 45,000 mentors around the country mentoring kids. We changed the education system in NY, and Bangalore, India. Business has to win so they can mentor and give back to the community. Clear recognition that the business of business is education as well as business. All schools in NY are involved with business leaders in NY. Business is intertwined with education, but again we beat on our education system. It’s hard to get into the education system. It’s a hard business. Every great school could fill the class they fill with 5 other classes. The cooperation of business is making it work.

Q: Comments on diversity of inclusion in the work place?
A: Businesses want to reflect what its customer base looks like. Practical drive by businesses to get people of different gender and color in the place, will make them more successful going forward.

Q: I come from far away, 24 hours flight to get here, from small place in Indian Ocean, Marishish. High tourist resort, globalization is having indicative effect, as an island economy how should we …
A: My experience with Marishish is has they captured it’s greatest asset, it’s beauty and resort capability. Has it made it a destination for more than a few of the rich, a place where a Disneyworld type thing, where people want to get there and see it. Your biggest asset is your beauty. Your hotels are marginal, golf course is awful. It’s a fact. So you’re talking about globalization, you have real assets, you’ve been given this beautiful land, and have you captured its essence in making a destination for many people and not a few with private jets. Make it to be an absolute must be there place. I have not seen a rapid escalation of that in 15 years.
Maria: Use what you have is the premise.

Q: Thoughts on relationship between business leaders and not for profits, and back.
A: We wrote a column and then got hammered on it, we have friends who work in non-profits who wanted to come back to business and had a tough time, and we lumped gov’t and non-profits in carelessly. We didn’t make the distinction clear enough. But I still think businesses are wary of taking people back other than professionals who have been in the gov’t. that can help them. Drug companies will take back regulators, FCC lawyers will be welcome back. As far as middle level job it’s more difficult. As far as business is concerned, the public sector doesn’t work. You might get one great donor from a good family, without it, the drive wouldn’t be as successful. The interaction of business with critical fund driving, Sloan Kettering here in NY, works harder. People love to give back.

Q: What is the responsibility of not-for-profit back to business?
A: To deliver quality care, that the dollars they are raising are being wisely spent. Give the community a transparent of where the money went and what it means.

Q: Business of Baseball, how responsible is Joe Torre for the NY Yankees?
A: Joe is without precedent the best manager in baseball history. Class act in every way, and his boss has been a true horse"s ass.