GE was America's most admired company — then its own conglomerate model destroyed it

Under Jack Welch (CEO 1981-2001), General Electric became the world's most valuable company, a sprawling conglomerate spanning aviation, healthcare, power, finance, media and more. Welch's model — acquire, optimize, and use GE Capital's financial arm to smooth earnings — was celebrated as the template for the modern corporation.

But the model was fragile. GE Capital, which generated roughly half of GE's profits, was a massive, lightly regulated financial institution embedded in an industrial company. When the 2008 financial crisis hit, GE Capital nearly collapsed and required a government backstop. Successor Jeff Immelt spent years shrinking GE Capital and trying to refocus on industry, but the conglomerate's complexity made it ungovernable.

By 2018, GE's stock had fallen 75% from its 2000 peak. New CEO Larry Culp cut the quarterly dividend to a penny a share — only the third reduction in the company's 119-year dividend history — replaced its CEO twice in two years, and began breaking the company up. The case became a cautionary tale about the conglomerate model: the complexity that creates diversification benefits also creates opacity, and the financial engineering that smooths earnings eventually breaks.