GE: Government Enterprises

By Daniel Indiviglio

The last talk of the day was with General Electric's Chairman and CEO Jeffery Immelt. He spoke about how GE manages to survive year after year. They do it by reinventing themselves constantly. I guess a good analogy for those pop culture lovers out there might be that GE is the Madonna of industrial companies. Immelt's talk was surprisingly frank.


He made several striking comments. One was:

The customer isn't always right.

Now, he doesn't mean that in the traditional sense, like GE tells their customers to buzz off if they complain about GE products. He means something more like, if consumers don't demand something that you want them to buy, then you have to kind of create that demand for them. An earlier speaker named Shai Agassi, the founder of a company called "Better Place" that produces clean energy vehicles and infrastructure has a similar view of the importance of creating demand for its products where demand has traditionally been weak.

So how does a company create demand? You can do that through advertising or propaganda. Another way might be through hiring good lobbyists in Washington to urge Congress to shape laws to benefit your products. Or if you're savvy, you might just be predicting that consumer demand will change.

You might think that GE focuses primarily on the last of those approaches. According to Immelt, one of these areas is cheaper healthcare equipment. He sees emerging markets like China and India having an enormous demand for such products. As these markets develop, healthcare becomes more important, but they will still be relatively poor and unable to afford much of the expensive equipment found in U.S. hospitals. Here, they foresee future demand, so they're investing in creating the products for it.

But then Immelt revealed another reason why GE has been so successful over the years. He said:

It's never been a free market; it's never gonna be a free market. That's just the way it is.

He went on to explain that public policy is an important consideration for GE, and his company seeks to adapt free market principles in highly regulated industries.

And later he said:

The fact that I'd like GE to work in concert with where government policy is in the U.S. doesn't mean that I'm a traitor or a bad guy, I think it's just being practical that that's gotta happen.

If you read between the lines here, I think it's clear that, if the government seeks to create demand by enforcing consumer behavior one way or another through regulation or policy, then GE wants to be there to reap the profits. It also follows that GE will likely take a "practical" approach and probably has a significant lobbying presence in Washington. That might be smart business, but reveals that GE's philosophy focuses more on profit and less on free market ideals.

This article available online at:

http://www.theatlantic.com/business/archive/2009/06/ge-government-enterprises/19434/