General Electric Jack Welch vs Jeff Immelt
General Electric under Jack Welch
THE HEXAGRAM
RETURN. Success.
Going out and coming in without error.
Friends come without blame.
To and fro goes the way.
On the seventh day comes return.
It furthers one to have somewhere to go.
After a time of decay comes the turning point. The powerful light that has been banished returns. There is movement, but it is not brought about by force. The upper trigram K’un is characterized by devotion; thus the movement is natural, arising spontaneously. For this reason the transformation of the old becomes easy. The old is discarded and the new is introduced. Both measures accord with the time; therefore no harm results. Societies of people sharing the same views are formed. But since these groups come together in full public knowledge and are in harmony with the time, all selfish separatist tendencies are excluded, and no mistake is made.
The idea of RETURN is based on the course of nature. The movement is cyclic, and the course completes itself. Therefore it is not necessary to hasten anything artificially. Everything comes of itself at the appointed time. This is the meaning of heaven and earth.
All movements are accomplished in six stages, and the seventh brings return. Thus the Winter solstice, with which the decline of the year begins, comes in the seventh month after the summer solstice; so too sunrise comes in the seventh double hour after sunset. Therefore seven is the number of the young light, and it arises when six, the number of the great darkness, is increased by one. In this way the state of rest gives place to movement.
THE LINES
Six in the second place means:
Quiet return.
Good fortune.
Return always calls for a decision and is an act of self-mastery. It is made easier if a man is in good company. If he can bring himself to put aside pride and follow the example of good men, good fortune results.
THE MOVING HEXAGRAM
HEXAGRAM 19 – Lin – Approach
APPROACH has supreme success.
Perseverance furthers.
When the eighth month comes,
There will be misfortune.
The hexagram as a whole points to a time of joyous, hopeful progress. Spring is approaching. Joy and forbearance bring high and low nearer together. Success is certain. But we must work with determination and perseverance to make full use of the propitiousness of the time. And one thing more: spring does not last forever. In the eighth month the aspects are reversed. Then only two strong, light lines are left; these do not advance but are in retreat (see next hexagram). We must take heed of this change in good time. If we meet evil before it becomes reality – before it has even begun to stir – we can master it.
I used to tell everyone that Jack Welch would be a great CEO because he had the Mandate of Heaven. No one would believe it. Everyone thought that he was such a genius that he did not need the Mandate of Heaven. To them I say: if he was such a genius and did not need the Mandate of Heaven how come he made a terrible mistake in choosing his replacement? The Superior CEO recognizes when Heaven bless him and does it publicly.
General Electric Co. GE under CEO Jeffrey R. Immelt
Jeffrey R. Immelt’s Performance: ROI= (52.62%) Annualized Return= (7.29%)
SPY’s Performance: ROI= 186.46% Annualized Return= 6.21%
W. J. McNerney’s Performance: ROI= 10.91% Annualized Return= 1.73%
SPY’s Performance: ROI= 4.07 Annualized Return= 0.66%
Jeff Immelt became CEO of General Electric on September 7, 2001. Since then, his performance has been absolutely dismal as evidenced by the 50% drop in the value of the stock since his appointment. His performance has been so poor that he was named one of the five worst Non-Financial-Crisis-Related CEOs of 2008 by the Free Enterprise Action Fund.
Jack Welch made a terrible mistake when he chose Immelt as GE’s CEO. Jack Welch assumed that because he himself was touched by Heaven that Immelt would be touched by Heaven also. When Jack Welch became CEO, his Hexagram was The Return of the Light or the Turning Point (Hexagram 24) which is one of the most favorable times to invest. Indeed, he turned the company around but he never recognized his Heavenly support. By not recognizing it, he probably felt that the heavenly support would be there forever.
By comparing Immelt’s performance with McNerney’s, it becomes evident that Jack Welch should have chosen James McNerney (hexagram 15 Modesty for Boeing) rather than forcing McNerney out after choosing Immelt. Welch’s linear thinking forced him to use all the information available of the past to pick a future CEO. But the universe is not linear. The Universe is cyclical. The universe had ordained that the 7 fat-cows period presided by Jack Welch would be followed by the 7 thin-cows period presided by Immelt. Welch never took into consideration the future time-space or outcome that would have resulted in choosing each of these two managers. Only the I Ching would have shown him the future time-space of General Electric. Choosing Immelt created a negative time-space for General Electric as his performance has shown. After a decade, all he has to show for his efforts is a 50% drop in the value of the stock.
Given all the negative lines in the Time-Space of the General Electric-Immelt combination, the best course of action is for him to resign. What is even more worrisome is the warning in the last line:
Six at the top means:
Horse and wagon part. Bloody tears flow.
Confucius says of this line: “Bloody tears flow: one should not persist in this.”
Even though all analysts will laugh at the possibility the I Ching can predict the future for managers and investors, those who are still invested in General Electric should seriously consider selling the stock until the Board of Directors changes Immelt for someone who would create a better Time-Space for GE’s future.
The I Ching’s recommendation to Immelt was to establish as his main project the rebalancing of GE’s portfolio and to manage the risks (Initial Difficulties) involved in the project.
Everyone knows GE’s main problem was caused by one of its divisions – GE Capital. What Bernanke said about AIG comes to mind: “This was a hedge fund, basically, that was attached to a large and stable insurance company.” Some would say that GE was a Hedge Fund that was attached to a large and stable industrial conglomerate.
Immelt cannot escape the responsibility of having sufficient time (from 2001 to 2008) to:
1) Rebalance the corporation’s portfolio,
2) Reduce its dependence on GE Capital’s income (over 50% of total corporate income) and
3) Diminish GE Capital management’s excessive power.
Immelt’s failure comes from his lack of Modesty as evidenced by the fact he failed to protect GE from one of the Universe’s most inexorable laws by applying it to the corporation.
· The I Ching says: “It is the law of earth to alter the full and to contribute to the modest. High mountains are worn down by the waters, and the valleys are filled up. It is the law of fate to undermine what is full and to prosper the modest. And men also hate fullness and love the modest.”
General Electric Jack Welch vs Jeff Immelt
3.1.9. GENERAL ELECTRIC
- Date:
March 27, 1992
- Question:
What would be the outcome if I were to invest in General Electric?
- Results:
Sixth throw 8 at the sixth line (top line)
Fifth throw 8 at the fifth line
Fourth throw 8 at the fourth line
Third throw 8 at the third line
Second throw 6 at the second line (moving line)
First throw 7 at the first line (bottom line)
Hexagram:
24 Return (Earth on Thunder).
This is a Thunder Hexagram because the bottom is Thunder
If we read in Book Two Chapter 2.3 The Hexagrams Interpreted we would find the following for Hexagram 24:
2.3.24 RETURN (THE TURNING POINT)
ISSUE:
The CEO – managing his return – joining the good executives left behind to fix the corporation
LESSON:
Hexagram 24 is the opposite of Hexagram 23 where five YIN lines representing the bad executives in control of the corporation are pushing out the only YANG line representing the good CEO. In Hexagram 24, after all the bad executives had pushed him out, the good CEO returns to the corporation to join the few good executives remaining. The shape of Hexagram 24 of one YANG (whole line) line at the bottom and five YIN lines (broken) on top indicate that a good CEO is returning to fix the corporation’s problems caused by the bad executives’ poor policies. He is about to join the good executives he once had to leave and eliminate the corrupt executives slowly. This is the end of poor management. Thus it is a positive Hexagram.
This is part of a natural and inevitable cycle of changes. In Hexagram 23 the corrupt executives influenced the CEO to the extent that they almost took over the control of the corporation. They practically threw him out of the corporation. Now the good CEO is coming back and is bringing with him the capable executives. This is Heaven sent. The natural forces, which support the good CEO, will help him transform the corporation without much effort. The more modern managerial concepts, which are more in tune with the actual times, will push out the old managerial concepts. This is done with the backing of all the good executives of the corporation and openly for everyone to see.
The I CHING advises the CEO who intends to turn this corporation around, to carry out two basic policies: openness and gradual progress:
a) Openness means a continuous communication process. While the corrupt executives were secretive in the execution of their plans, the CEO who is reaching out to the good executives should be open in the communication and execution of all plans and seek the support of the employees.
b) Gradual progress means that in the beginning of a positive cycle of change the positive forces are too weak to be forced into action. The CEO should keep in mind that success is assured because it is part of a natural process; therefore there is no reason to rush it. This represents only the beginning of their managerial efforts. This effort cannot be forced, as he could destroy it, just like forcing the growth of any newborn thing.
The I CHING also advises the CEO to rely on his own insight. The good CEO should know when the good times for the corporation are coming and when the corrupt executives have been eliminated. He should also: a) exercise patience, b) gather all the good executives and c) openly proclaim his strategy for the corporation.
For the investor, this Hexagram is propitious for investing
Moving Lines
Six in the second line
Issue: The CEO – managing his return – joining the good executives left behind to fix the corporation – turning around out of conviction and will power
Managerial Lesson: The I CHING describes a CEO who turns around by reaching out for the good executives left in the corporation. Together they return to take control of the corporation in spite of the bad treatment they were subjected to previously. The I CHING advises the CEO that for the change to be deep he should allow the good executives to bring back their entire teams without any opposition. This will encourage the good executives to perform much better, will provide the CEO with the strength to fire the bad executives and, what is even better, will rub off on the attitude of the CEO. The good executives will always gather together as like attracts like.
Investment advice: Invest.
The Change
19 Approach. (Earth on Lake).
This is a Lake Hexagram because the bottom is Lake.
If the CEO executes his plans, he will take his corporation from a Returning position to an Approaching position.
New Hexagram
If we read the Chapter the Hexagram interpreted we would find the following for Hexagram 19:
2.3.19 APPROACH
THE CORPORATION – GRADUALLY APPROACHING SUCCESS
ISSUE:
The CEO – managing the “approaching” success and the “approaching” failure
LESSON:
Hexagram 19 focuses on the CEO’s managerial efforts to deal with an approaching boom as well as with an approaching bust cycle. As the cycle of economic expansion approaches bringing with it greater profitability for the corporation, increases in revenues are assured, but so are the eventual decreases in revenues.
The I CHING advises the CEO to prepare for the worst during the times of the best. When the cycle of economic expansion approaches, the CEO must do two things:
1) Get the most out of the cycle by working very hard, and
2) prepare the corporation for an “approaching” future economic recession.
All cycles, including the economic ones, consist of expansions and contractions, with ups and downs following each other in periods of sevens. That is why, the I CHING warns the CEO to be careful because after the seventh period there will be a downturn in the economic cycle. The CEO, who prepares during the seven fat cows’ period has nothing to fear during the seven thin cows’ period.
The I CHING says: “If we meet evil before it becomes reality-before it has even begun to stir-we can master it”.
Conclusions
- Present position: the original Hexagram is positive because it points to a Return to better conditions. This is auspicious because the CEO has Heaven’s Mandate.
- Moving lines: the moving line is positive because it points to the CEO’s return to make drastic changes – Neutron Jack is taking firm control of the corporation and is cleaning up the house. It recommends we invest.
- Future position: the new Hexagram is a Lake Hexagram, which is excellent because it is close to Heaven. If we see the graphic of the Hexagrams, we can see that the CEO will move the corporation from a Lower YIN position of Hexagram 24 to a Greater YANG position of Hexagram 19. We can visualize this if we see the graphics of the Great Cycle, where the motion is from Thunder, and a poor position in the Cycle, to Lake, one of the better positions of the Cycle.
Returns
According to Microsoft Investor, a $10,000 investment in General Electric from March 27th, 1992 to March 27, 1998 would have turned into $ 49,864 or a return of 398%.
General Electric Co. GE under CEO Jeffrey R. Immelt
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HEXAGRAM 03 – Chun – Difficulty at the Beginning
Above K’AN THE ABYSMAL, WATER
Below CHEN THE AROUSING, THUNDER
The name of the hexagram, Chun, really connotes a blade of grass pushing against an obstacle as it sprouts out of the earth hence the meaning, “difficulty at the beginning.” The hexagram indicates the way in which heaven and earth bring forth individual beings. It is their first meeting, which is beset with difficulties. The lower trigram Chen is the Arousing; its motion is upward and its image is thunder.
The upper trigram K’an stands for the Abysmal, the dangerous. Its motion is downward and its image is rain. The situation points to teeming, chaotic profusion; thunder and rain fill the air. But the chaos clears up. While the Abysmal sinks, the upward movement eventually passes beyond the danger. A thunderstorm brings release from tension, and all things breathe freely again.
THE JUDGMENT
DIFFICULTY AT THE BEGINNING works supreme success,
Furthering through perseverance.
Nothing should be undertaken.
It furthers one to appoint helpers.
Times of growth are beset with difficulties. They resemble a first birth. But these difficulties arise from the very profusion of all that is struggling to attain form. Everything is in motion: therefore if one perseveres there is a prospect of great success, in spite of the existing danger. When it is a man’s fate to undertake such new beginnings, everything is still unformed, dark.
Hence he must hold back, because any premature move might bring disaster. Likewise, it is very important not to remain alone; in order to overcome the chaos he needs helpers. This is not to say, however, that he himself should look on passively at what is happening. He must lend his hand and participate with inspiration and guidance.
THE IMAGE
Clouds and thunder: The image Of DIFFICULTY AT THE BEGINNING.
Thus the superior man
Brings order out of confusion.
Clouds and thunder are represented by definite decorative lines; this means that in the chaos of difficulty at the beginning, order is already implicit. So too the superior man has to arrange and organize the inchoate profusion of such times of beginning, just as one sorts out silk threads from a knotted tangle and binds them into skeins. In order to find one’s place in the infinity of being, one must be able both to separate and to unite.
THE LINES
0 Nine at the beginning means:
Hesitation and hindrance.
It furthers one to remain persevering.
It furthers one to appoint helpers.
If a person encounters a hindrance at the beginning of an enterprise, he must not try to force advance but must pause and take thought. However, nothing should put him off his course; he must persevere and constantly keep the goal in sight. It is important to seek out the right assistants, but he can find them only if he avoids arrogance and associates with his fellows in a spirit of humility. Only then will he attract those with whose help he can combat the difficulties.
Six in the fourth place means:
Horse and wagon part.
Strive for union.
To go brings good fortune.
Everything acts to further.
We are in a situation in which it is our duty to act, but we lack sufficient power. However, an opportunity to make connections offers itself. It must be seized. Neither false pride nor false reserve should deter us. Bringing oneself to take the first step, even when it involves a certain degree of self-abnegation, is a sign of inner clarity. To accept help in a difficult situation is not a disgrace. If the right helper is found, all goes well.
0 Nine in the fifth place means:
Difficulties in blessing.
A little perseverance brings good fortune.
Great perseverance brings misfortune.
An individual is in a position in which he cannot so express his good intentions that they will actually take shape and be understood. Other people interpose and distort everything he does. He should then be cautious and proceed step by step. He must not try to force the consummation of a great undertaking, because success is possible only when general confidence already prevails. It is only through faithful and conscientious work, unobtrusively carried on, that the situation gradually clears up and the hindrance disappears.
Six at the top means:
Horse and wagon part.
Bloody tears flow.
The difficulties at the beginning are too great for some persons. They get stuck and never find their way out; they fold their hands and give up the struggle. Such resignation is the saddest of all things. Therefore
Confucius says of this line:
“Bloody tears flow: one should not persist in this.”
HEXAGRAM 35 – Chin – Progress
Above LI THE CLINGING, FIRE
Below K’UN THE RECEPTIVE, EARTH
The hexagram represents the sun rising over the earth. It is therefore the symbol of rapid, easy progress, which at the same time means ever widening expansion and clarity.
THE JUDGMENT
PROGRESS.
The powerful prince
Is honored with horses in large numbers.
In a single day he is granted audience three times.
As an example of progress, this pictures a time when a powerful feudal lord rallies the other lords around the sovereign and pledges fealty and peace. The sovereign rewards him richly and invites him to a closer intimacy.
A twofold idea is set forth here. The actual effect of the progress emanates from a man who is in a dependent position and whom the others regard as their equal and are therefore willing to follow. This leader has enough clarity of vision not to abuse his great influence but to use it rather for the benefit of his ruler. His ruler in turn is free of all jealousy, showers presents on the great man, and invites him continually to his court. An enlightened ruler and an obedient servant – this is the condition on which great progress depends.
THE IMAGE
The sun rises over the earth: The image Of PROGRESS.
Thus the superior man himself
Brightens his bright virtue.
The light of the sun as it rises over the earth is by nature clear. The higher the sun rises, the more it emerges from the dark mists, spreading the pristine purity of its rays over an ever widening area. The real nature of man is likewise originally good, but it becomes clouded by contact with earthly things and therefore needs purification before it can shine forth in its native clarity. 1
