How Technology Giants Die

For nearly 100 years, there was no more important technology conglomerate than GE. A brief list of its inventions includes: the carbon filament lamp, the central power station, the X-ray machine, the first voice radio broadcast, the electric cooking range, the American jet engine, the first commercial nuclear power plant, the washing machine, man-made diamonds, the toaster oven, and 100 other devices. Its technology has been deployed on the battlefields of World War II, the kitchen of a suburban parent at dinnertime, and the silicon rubber in Neil Armstrong’s astronaut suit. In the nineties it was the most highly valued company in the world. To like the company was to like apple pie, baseball, and red pickups driving through a cornfield. GE was America, and America was GE. 

Now, after nearly two decades of underperformance and decay, the conglomerate will be broken up into the only three remaining businesses of value: healthcare, aerospace, and energy. How did it come to this? And perhaps more importantly, when will it happen to the tech giants of today—as it inevitably will. Just as GE felt untouchable in the nineties, so do Apple, Amazon, and other tech giants feel now. But the second law of thermodynamics comes for everyone. Entropy will rear its ugly head, and a new corporate king will be crowned.

This question feels especially poignant with the recent swath of tech layoffs. Announced cuts so far include 12,000 at Alphabet, 10,000 at Microsoft, 18,000 at Amazon, and 11,000 at Meta. This is the most definite sign of weakness from these companies in over a decade. Should investors be concerned?

To determine the answer, we need to study how GE got to where it is today.

The best book to read about GE is Power Failure: The Rise and Fall of an American Icon by William D. Cohan, which was published in late 2022. The book excavates the history of the company in painful, excruciating, exacting, sometimes exuberant, 748 pages of extensively footnoted detail. It is accepted strategy theory that generational companies can be built off of flywheels, as GE did—but what happens when they spin for too long? 

Electric flywheel

There are two ways to evaluate GE: as a business with the typical considerations of cash flow, profit margins, and the like, or perhaps more accurately, as a vehicle to enable a couple of old white dudes’ hubris. Let’s start with the first. 

General Electric was incorporated on April 15, 1892 in New York City. The company’s creation was a somewhat unhappy marriage between two companies: Edison’s General Electric and the Thomas-Houston Electric Company. Based on the fame and fortune of Edison, you may assume that Edison’s company was swallowing the THEC, but the opposite was true. By the time the merger occurred, Edison had the firm impression of a heel on his backside: GE’s financiers orchestrated it as a way of giving Edison a boot out the backdoor and politely retiring him. How the famous inventor of the lightbulb lost control of his own company to spreadsheet jockeys is instructive to GE's evolutions over the next 100 years. The cycle of invention to money management will inform the rest of this piece.