Chapter Content
Okay, so, let's talk about these businesses that, well, used to be icons. You know, companies that were just, like, the top dogs in their fields.
There's this quote, I think it kinda sums up a lot of what went wrong. It's from a former Boeing CEO, Harry Stonecipher, and he said, basically, that he wanted to change Boeing "so it’s run like a business rather than a great engineering firm." Which, I mean, yeah, he acknowledges it *is* a great engineering firm, but he felt that people invest in companies to make money. Which, okay, fair enough, but maybe not the *only* thing that matters, right?
Take ICI, for example, this huge British chemicals company. Back in the day, going into their headquarters was like visiting, you know, a national treasure. The building itself was amazing. Their goal, according to their own annual report, was to be the *world’s* leading chemical company, and, like, enhance the wealth and well-being of everyone involved – shareholders, employees, customers, the whole community.
And they were innovative. They started with explosives and dyes, then moved into fertilizers and petrochemicals, and then, post-war, they got into pharmaceuticals. They were really good at attracting top talent, like this chemist named James Black. He discovered beta-blockers, which were, like, the first really effective anti-hypertensive drug. And ICI, get this, they were willing to take losses for *years* on their pharmaceutical division because they believed it would pay off in the long run. Talk about long-term thinking.
But, you know, companies can get complacent, right? ICI did. They brought in a new CEO, John Harvey-Jones, to shake things up. He did, but some say that was the beginning of their downfall. In the early '90s, this investment firm bought a small stake in ICI, and suddenly the company was focused on the stock price.
They spun off their pharmaceutical business, Zeneca, for a huge profit. Basically, they stopped investing in new stuff and started focusing on, you know, maximizing shareholder value in the *short* term. Which, of course, meant they wouldn't have bothered with a pharmaceutical division in the first place.
James Black, the beta-blocker guy? He left ICI and went to another company, where he discovered Tagamet, an anti-ulcer drug. It was hugely successful, leading Glaxo to develop a similar drug, Zantac, that became a massive bestseller. Black, it turns out, probably created more shareholder value than almost anyone else in Britain – just not for *ICI*.
The company's share price initially went up, but then it started to decline. They sold off their other businesses to fund acquisitions, but, as usual, overpaid for the new stuff. Loaded with debt, they were eventually bought out by a Dutch company. It's a pretty sad story.
Then there's GEC, another huge British company, this time in electronics. They were all about tight financial control. But some people thought they focused too much on safe, public sector contracts and not enough on new technology. After the old CEO retired, they started selling off their traditional businesses and buying into the New Economy bubble. And you can guess how well that went, right? It ended in disaster.
Over in America, there was General Electric, GE. They were the poster child for shareholder value for a long time. The CEO, Jack Welch, was famous for managing earnings and making sure the stock price went up every quarter. He even got the nickname "Neutron Jack" because, like the neutron bomb, he would cut jobs but not damage property. GE expanded into financial services, which masked some problems in their core businesses. But when the financial crisis hit, they were in big trouble. The stock price crashed, and eventually the company broke itself up.
And let's not forget the retail giants. Sears, once a legendary American company, got overtaken by Walmart. Instead of competing on price and innovation, they diversified into financial services. It didn't work, and they ended up selling off those businesses. Sears Tower? Sold. The catalogue? Gone. Eventually, Sears went bankrupt.
In Britain, Marks & Spencer was the equivalent of Sears. They were beloved by middle-class shoppers. But they got greedy, raised prices, and squeezed suppliers. Customers noticed, and sales plummeted. They never recovered.
Boeing, you know, used to be all about engineering and innovation. They built the 737 and 747, two of the most successful airplanes ever. But then, they got focused on shareholder value. They acquired McDonnell Douglas, a company known for cost-cutting. They started buying back their own shares to boost the stock price. And when Airbus came out with more fuel-efficient planes, Boeing decided to just reconfigure the old 737 instead of designing a new one. That's how we got the 737 MAX, which, well, didn't end well, did it?
IBM, another icon. They were all about "respect for the individual, superlative customer service, and technological excellence." But in the '90s, they got overtaken by the personal computer revolution. They recovered, but their new mission became to enhance the stock price. How? By cutting costs, mainly by offshoring customer support. It didn't work. Revenues fell, and so did the stock price.
So, what's the lesson here? It seems like a lot of these companies, when they started focusing on maximizing shareholder value above everything else, ended up losing their way. They stopped investing in innovation, they cut corners, and they lost touch with their customers. Maybe there's something to be said for having a purpose beyond just making money. Just maybe, that's where the *real* money is.
And finally, just a quick note on Deutsche Bank, you know? It was once a leading financial institution in Germany. But then it got caught up in the wave of financialization and became, well, basically an ethically questionable hedge fund. They were involved in all sorts of scandals, including money laundering and funding Jeffrey Epstein. The bank almost collapsed. Eventually, they had to wind down their investment banking activities. Their stock price plummeted. Anyway, that's it for today. I hope this was helpful and gave you some food for thought.