Kevin: December 1980, Fairfield, Connecticut. The chairman of General Electric is asking his executives to imagine dying with him. Reginald Jones is 63. He's a British-born accountant who has spent his whole working life at this company. And right now, he's the most respected chief executive in America. The company he runs makes toasters, light bulbs, jet engines, locomotives, and refrigerators. It employs about four hundred thousand people, and it's the last surviving member of the original Dow Jones Index for eighteen ninety six. And Jones is retiring. So he calls in the men competing to replace him one at a time, shuts the door, and asks each of them the same question. You and I are flying in one of the company planes. It crashes. We're both killed. Who should be the next chairman, General Electric? After a few months, three finalists remain. Two are engineers who've spent 30 years doing everything right. The third is the 45-year-old Luce Cannon from the plastics division with a heavy Boston accent and a stutter he's carried since childhood. His name is Jack Welch. On December 19th, 1980, the board hands Welch the job, and the next 40 years of American capitalism. Is shaped in his image. But what if the vote goes the other way? What if the most respected company in America gives the top job to the man who builds jet engines? Let's hit Ctrl-Z. Welcome to Control Z Rewritten, the podcast where we take the biggest decisions in history and ask, what happens if they go the other way? Not random what-ifs, real 50-50 calls with alternatives that were actually on the table. one decision, we hit Ctrl Z, try it the other way, and see what changes. In 1980, a job at General Electric came with a deal. You gave the company your working life, and it gave you a wage that rose every year, a guaranteed pension, and the reasonable expectation that your kids would work there after you. Employees had a nickname for the place Generous Electric. The deal was the standard operating model of big American business at mid century, and nobody embodied it like the man at the top. Reginald Jones was born in England in 1917. He came to America as a kid, eventually graduated from Wharton School of Business in 1939, and then joined General Electric that same year. He never worked anywhere else in his career. He rose through the ranks as an accountant, he was a chief financial officer by 1968 and CEO by 1972, and he doubled the company's sales while simultaneously growing profits. He advised presidents Ford and Carter, and he co-chaired the Business Roundtable, the private club where the bosses of the biggest corporations in the country decide what business wants from government. In 1981, that club put the era's philosophy in writing. A corporation, the roundtable declared, must be a thoughtful institution which rises above the bottom line to consider the impact of its actions on all. From shareholders to the society at large. Hold on to that sentence. There was a competing business philosophy in circulation, and in 1980 it lived mostly on the fringes. A decade earlier, in September 1970, the economist Milt Friedman had published an essay in the New York Times arguing that the social responsibility of business is to increase its profits. Full stop, nothing else. Most executives read it as a provocation. The people acting on it were not respectable. They were called corporate raiders, investors who bought a chunk of a company's stock, threatened to seize the whole thing, and forced management to either pay them off or tear the business apart. Victor Posner had been running that place since nineteen sixty six. Carl Ikon launched his first raid in nineteen seventy eight against a Pond, a maker of ovens. And a financier named Michael Milgin at a firm called Drexel Burnham Lambert was building a machine that funded raids with junk bonds, high-risk IOUs sold to anyone who was chasing a high interest rate. In 1980, every serious executive in America considered these men low moral vandals. Jones spent his final years in office running the most elaborate succession contest in corporate history. He started with a long list in the mid seventies, cut it to six contenders by nineteen seventy-seven, then to three vice chairmen in August nineteen seventy nine, all moved to Connecticut to compete in plain sight. The losers of the early rounds walked straight into big jobs elsewhere. Stanley Gall, who ran industrial products, left in nineteen eighty to take over a Rubbermaid, the housewares company his father co-founded. And then there was the finalist nobody in the building could quite. Believe. John Francis Welch Jr. grew up in Salem, Massachusetts, the only child of a railroad conductor, with a stutter his mother Grace told him was proof his brain worked faster than his mouth. He earned a PhD in chemical engineering, joined GE Plastics in Pittsfield, Massachusetts in 1960, but nearly quit inside of a year when the company gave him the same standard $1,000 raise as everybody else. For context, that's roughly eleven thousand dollars in twenty twenty-six. He stayed and made vice president at 36. He ran consumer products and the credit arm by the late 70s, and colleagues found him profane, impatient, and essentially allergic to every ritual the institution held sacred. One company speechwriter summed it up pretty bluntly. The fact that this man is even an officer in the General Electric Company. much less a candidate for chairman, just astonishes me. But on december nineteenth, nineteen eighty, the board picked him, the eighth chairman in company history and at age forty five, the youngest ever. The Wall Street Journal wrote that GE had decided to place a legend with a live wire. And here's what the live wire did, because you need the shape of our timeline before we create the new one. In his first five years, Welch cut the workforce from 411,000 people to 299,000, 112,000 jobs, roughly one in four, while the company still posted record profits every year. Now layoffs had always existed as a last resort for dying firms, but Welch made them a strategy for a thriving one, and that was new. Newsweek named him Neutron Jack in 1982, after the bomb that kills people but leave the building standing, and he hated it. In April 1984, he sold the housewares division to Black Decker for $300 million. This was the irons, the toaster ovens, the coffee makers, basically all the products that had defined GE for three generations, gone in an instant. He bought and sold hundreds of businesses. He grew the credit arm into a bank that eventually produced about half the profits, and he delivered earnings so smooth that GE met or beat Wall Street's estimate every quarter from 1995 into 2004. It was a streak so perfect that federal regulators later called it fraud and made the company pay $50 million. But none of it hurt his reputation. By the late 1990s, General Electric was the most valuable company on Earth. It was worth $600 billion at its peak. And in November 1999, Fortune magazine named Jack Welch the manager of the century. He retired in September of 2001 with the largest severance in corporate history, $417 million. And his trained executives went on to run Boeing, 3M, Home Depot, Honeywell, and Chrysler. In 1997, the business roundtable formally updated its creed. The paramount duty of management, it now declared, is to the corporation's stockholders. Reginald Jones's sentence about rising above the bottom line was deleted. And many of you know how the company's story ends. In June of 2018, General Electric was removed from the Dow Jones, just the last original member, gone. And on april second, twenty twenty four, it was split into three pieces, and the name disappeared from the stock market entirely. The eighth chairman built the most celebrated corporation of the twentieth century, and two decades after he retired, it was gone. Now let's hit Control Z. Edward Hood grew up in Zebulin, North Carolina. He earned his pilot's license at 15 and then earned two degrees in nuclear engineering before joining GE's jet propulsion business in Ohio in 1957. At 32, he ran the program to build engines for a supersonic airliner. Then he led the C F six, the engine that carried the company back into passenger aviation. The one hanging under the wing of the DC 10. The eighth chairman of General Electric is 50 years old, and he builds machines whose failures kill people. Now, everything up to this vote is documented history. But from here forward, we're in the alternate timeline. So Jack Welch doesn't stay to serve his rival. The man who nearly walked out over a $1,000 raise resigns by the spring. In the real timeline, every executive who lost this race left within a couple of years, and this one leaves the fastest. He lands at RCA. RCA in 1981 was drifting, unprofitable, run by committee, and actively looking for an outside chief executive. And in our world, it settled for an oil executive. In this one, it hires the hottest rejected manager in America, and Welch does at 30 Rockefeller Plaza. Everything he was about to do in Fairfield, Connecticut. He strips the staff, he sells the side businesses, keeps NBC in the defense electronics, and triples the stock by 1986. Investors love him. But the impact on American capitalism is almost nothing because RCA was a broken mid size firm, and brutality at a broken company is exactly what turnaround men had always been doing. The shareholder revolution needed a healthy giant as the proof point. Welch is running a small, troubled one, and he ends the decade rich and feared, but he's not the man primarily responsible for corporate America's shift to vulture capitalism. Now back at GE, Hood is running the company the way the 1980 annual report promised. And that report is real, you can go and read it. Nearly $2 billion a year goes into automated factories. And robotics under a program the company actually called the reindustrialization of America. The economic recession of 1981 and 82 will force layoffs, but Hood makes them the old way. They're negotiated with the unions, they're announced with visible regret, and they're aimed at businesses who are genuinely losing money. Now, some fights are lost in every time. So Japanese manufacturers take the television business before the decade ends, here as everywhere. But the irons and the toaster ovens keep rolling out of Louisville, the appliance campus stays full, and the stock behaves like what it is: a well-run industrial giant growing a little slower than the market wants. The magazine covers of this decade belong to builders, people like Stanley Gall, the man who lost the succession race. Now turning RubberMade from a $309 million housewares maker into a product machine headed for $1.5 billion in sales. Then comes 1989. Through the 1980s, the corporate raiders have gone from nuisance to national force, taking apart one slow conglomerate after another. Now let's quickly step out of the timeline for a second. In November 1988, in the real world And in the alternate one, the buyout firm KKR wins a hostile fight for RJR and Nabisco, the tobacco and food giant, at $25 billion, the biggest takeover ever, and proof that no company is too large to be taken. Now back to the timeline. The biggest remaining target for them is a sprawling, deliberate, dividend-paying General Electric. And in the spring of 1989, a Raider Syndicate comes for it. financed with Milken's junk paper. The fight lasts eight months, and like the football team, the Raiders lose everything. GE builds nuclear reactors. Hood's own C F6 engines hang on the new Air Force One rolling towards delivery. Congress erupts at the idea of a group of debt-financed investors owning the country's defense plants. Delaware's brand new anti-takeover law Passed in 1988 in both timelines, holds, and the pension surplus and triple A credit lets Hood and GE simply outlast the takeover attempt. The raid collapses in hearings and injunctions before Thanksgiving, and a year later, the firms that financed it are gone. In February 1990, Drexel Burnham Lambert goes bankrupt. And in April, Milken pleads guilty to felony securities charges. The junk bond market collapses, a recession follows, and every retrospective on the 1980s reaches the same verdict. Greed was tried, and it failed. The philosophy of the Raiders dies with them, because every famous man who practiced it is now a felon, bankrupt, or both, and no respectable company anywhere is demonstrating that the playbook works. Shareholder primacy dies with Drexel. And the business roundtable's 1981 sentence, the corporation that rises above the bottom line, just stays on the books. Nobody respectable ever gives America a reason to repeal it. The 1990s put the old deal on trial, and the old deal wins. Now, companies still die in this timeline, and dying companies still cut jobs. IBM nearly collapses in 1993. The mainframe loses to the personal computer, the losses run into the billions, and the new chief executive named Lou Gerstner cuts 60,000 jobs just to keep the lights on. That happens in both worlds. But the major difference is that in our alternate timeline, healthy companies don't cut people to raise the stock price, because no one has ever shown that that is something that works. And then a healthy company tries. In January 1996, AT<unk>T, profitable, enormous, a national institution, announces 40,000 job cuts. And its chairman, Robert Allen, becomes the face of a Newsweek cover story titled Corporate Killers. That cover ran in our timeline, too. The difference is what happens next. In our world, Wall Street rewarded the cuts and the anger faded. In this one, there is no precedent anywhere. No beloved blue chip that spent a decade proving that layoffs buy a premium stock price. So the stock doesn't move while the public Rage intensifies. Alan does find one public defender. Jack Welch, 60 years old now, retired from RCA since 1990, tells a fortune reporter that Allen is doing what a chief executive is paid to do, and that the market will reward his nerve. The big institutional shareholders, the pension funds that own ATT by the billions, watch a chairman gutting a healthy workforce with no plan behind it. And by the fall, his own board retires him, with half of those cuts quietly rescinded. The lesson every chief executive takes from 1996 is the exact opposite of the one ours learned. Cutting a healthy workforce gets you fired. In our timeline, the man who gave that quote is three years from being named manager a century. In this one, Jack Welch is a retired electronics executive with a house on Nantucket. And the call about Allen is the last time a national magazine asks his opinion on anything. Now, Al Dunlap still exists. Chainsaw Al, as they call him, still fires 11,000 of Scott Paper's 29,000 people in the mid-90s. He still walks away with roughly $100 million, takes the act to Sunbeam, cuts that company in half. And in 1998, Sunbeam collapses in an accounting fraud scandal, and Dunlap is fired in disgrace. Now, all of that happens in both worlds. But what changes is Al's obituary. In our timeline, Dunlap is remembered as the crude, cartoonish extreme of a respectable doctrine. But in this one, he's remembered as the doctrine. The entire idea given one honest test at two companies. Ending in wreckage and a fraud file. The heroes of this decade are builders. Stanley Galt finished the job at Rubbermaid. By 1991, the housewares maker from Ohio was on Fortune's most admired list alongside the biggest corporations in the country, and then he retired. And within months, Goodyear called. The tire maker was in trouble, and it wanted the 65-year-old to come back and revive it. He did. The other admired path of the 90s belongs to the founders building software companies in Silicon Valley and in Seattle. In November 1999, when Fortune hands out its manager of the century, the title this time goes to Bill Gates. Executive pay still climbs exponentially. The stock option machinery is written into the tax code in both timelines, and the nineties bull market is enormous. But without a doctrine to justify it, the boss of a big American company earns about a hundred times the median worker by the year 2000. In our world, that same year, the number is 366. And here, one more habit never forms. Buying back stock, a company spending its profits to purchase its own shares in order to push the price up, became legal to do at scale in 1982. When the Securities and Exchange Commission under Reagan adopted a rule protecting companies that buy their own stock from manipulation charges. Now that exists in both timelines, but here it stays a niche tool because there's really nothing that requires it. American companies keep sending roughly half their profits to shareholders and holding the rest for factories and research and raises, the same split the country ran on in 1980. The doctrine of the Raiders spends the whole decade waiting for a respectable champion, and none ever comes. In 1997, Boeing buys McDonnell Douglas. The Cold War is over, the Pentagon has told its contractors to merge or die, and the deal happens in this timeline for the same reason it happened in the real one. It brings a hard-charging executive named Harry Stonecipher into the company, a manager raised in the jet engine business, president of the merged giant. And a man with strong opinions about how much engineers should be allowed to spend. Now, before I go any further, you do need to know what happened in our world. In our timeline, executives trained at Welch's GE took over Bowen. First it was Stonecipher, and then Jim McNurney, one of the men who lost the 2000 contest to succeed Jack Welch himself. Stonecipher articulated the mission to the Chicago Tribune in 2004. When people say I changed the culture of Boeing, that was the intent, so that it's run like a business rather than the great engineering firm. Headquarters moved from Seattle, where the engineers and factories were, to Chicago in 2001. And in twenty eleven, facing a newly re-engined Airbus jet, McNerny rejected building a new airplane and chose the cheap option. Bolt bigger engines onto the seven hundred thirty seven. A design from the 1960s and promised the airlines that their pilots wouldn't need a single hour of simulator training. Making that promise work required a piece of hidden software called MCAS, which could push the plane's nose down on the word of one sensor, but which the pilots were never told existed. On October 29th, 2018, MCAS pushed Lion Air Flight 610 into the Java C. killing 189 people. On march tenth, twenty nineteen, it did the same to Ethiopian Airlines Flight three hundred two, killing one hundred and fifty seven more. Boeing paid two and a half billion dollars to settle criminal fraud charges, and a Justice Department official said its employees chose the path of profit over candor. By one accounting, four of the chief executives who ran the company across that era trace straight back to Welch's GE. Now come back to the Ctrl-Z timeline where none of that happens. Starting with the sentence, run it like GE. Those words mean nothing here, because the company they point to is a steady dividend machine in Connecticut that makes dishwashers and jet engines. There's no template for investors to demand. So when Stonecipher pushes to run Boeing tighter and cheaper, the board hears him out And then keeps the engineers in charge of the one decision that defines the place, whether an airplane is ready. Headquarters stays in Seattle, next to the people who build the product. And when Airbus launches its re-engined jet in 2010, Boeing's directors make the choice their own leadership was publicly leaning toward before the panic, the all-new airplane. They call it the 797. It costs more and takes eight years. It enters service in 2019, and every pilot who flies it trains in a simulator first. Which brings us to two ordinary mornings. October 29, 2018, Jakarta. Lion Air Flight 610 lifts off a few minutes past 6 AM with 189 people aboard. In a 737, the airline has flown for years. It then lands 35 minutes later at Pangkal Penang and passengers. Pull their banks from the overhead bins, complain about the early hour, and then scatter into their money. The other day is march tenth, twenty nineteen. Adis Ababa. Ethiopian Airlines Flight three hundred zero two climbs out over the highlands with one hundred and fifty seven people aboard and then touches down in Nairobi two hours later. A Sunday morning, a jet bridge, and a crowd waiting at arrivals. Across those two flights, three hundred and forty six people go home, and they never know the difference. Because in this timeline, Nobody has ever heard of Lionair Flight Sixty. It's a Tuesday morning in Erie, Pennsylvania, in 2026. A machinist gets up before dawn, the third generation of his family to hold a badge at the locomotive works on the east side of town. On the kitchen counter sits a general electric toaster built in Louisville. He drives to a plant that's half the size his grandfather knew, thanks to automation, and the television in his living room is still Japanese. But the plant is open. His paycheck buys about a quarter more than his counterparts does in our America, because after 1979, the country's pay kept rising with its output, the way it had done since World War II. He carries a real pension, a guaranteed check for life, the arrangement 38% of private workers had in 1980, and only one in nine has in the real 2026, with a 401k riding alongside as the supplement. what Congress originally designed it to be. His union card is nothing unusual. About one in eight private workers hold one here versus one in sixteen in our world. His father retired from the same floor at 62 and lives ten minutes away on the pension and Social Security. This fall, the machinist's daughter starts the plant's apprenticeship, four years paid, a certificate at the end, the same program that took him on at nineteen. When his block leaves for work in the morning, half the cars head for the same gates or for the supplier shops that feed them, the turbine mechanic next door, the payroll clerk across the street who works for a parts firm downtown. In our world, Erie spent those 40 years shrinking as the locomotive business cut jobs decade after decade and the supplier shops closed behind it. Here, the city is smaller than it was in 1982. The works runs with half the people it once did. But the gates never closed. The shops kept their customers, and the block still fills with cars at six in the morning. And the company behind that badge looks strange to our eyes. General Electric still exists. It's one company headquartered in Connecticut, inside the Dow, selling jet engines, gas turbines, MRI machines, locomotives, dishwashers, and that. Toaster on the counter. The credit arm stayed what Hood kept it as: a tool for financing engines and turbines. So when the financial crisis of 2008 arrived, the company took losses and then recovered. In our world, that same autumn, General Electric survived on a $3 billion emergency investment from Warren Buffett and $139 billion in federal debt guarantees. And within a decade, it was out of the Dow and being cut apart. So the breakup of 2024 never happens. The math even works for the shareholders. A person who bought GE stock in 1981 and simply held it ends up in roughly the same place in both timelines, because our version lost most of those gains after 2000. And the national numbers followed the same pattern. Half of corporate profits stay inside companies as factories, research, and raises. In our America, 93 cents of every profit dollar is paid out to shareholders. The top 1% takes about an eighth of the nation's income here instead of a fifth. A big company chief executive earns about 120 times the median worker instead of 281. Inequality still rose. It rose in every rich country on earth, and towns still lost plants they loved. But the erosion is much smaller and much slower. On paper, the two Americas are nearly the same size. The Control Z one is just richer for most of the people. When Jack Welch died on March 1, 2020, the tributes all said the same thing. He created more shareholder value than any executive in history. Now take that sentence apart, because both halves of it fail. First, he didn't create the idea. Milt Friedman published it in 1970, a decade before GE made Welch chairman. And corporate raiders spent the 80s enforcing it with borrowed money. And the value didn't last. The $600 billion company became a $12 stock, left the Dow, and on April 2nd, 2024, stopped existing completely. What Welch actually supplied was the one thing Friedman's essay and Milken's Money never had respectability. A fringe idea becomes a religion on the day a trusted institution adopts it. And in December 1980, the most trusted man in American business put the fringe in charge of the most respected company in America. The Raiders lost their war in both timelines: bankrupt, indicted, disgraced. In ours, it didn't matter, because by 1990, the most admired company on earth had adopted their creed, run by the man the century would be named for. But in the other timeline, Dies with its criminals because no one respectable ever picks it up. And you don't have to take the alternate timeline's word for any of this. Take his. In March 2009, Jack Welch told the Financial Times: On the face of it, shareholder value is the dumbest idea in the world. And in August 2019, 181 chief executives of the business roundtable Club Reg Jones, once co-chaired, signed a statement renouncing shareholder primacy and rewriting the purpose of a corporation around workers, customers, and communities. Read those two documents together, and you see what they are. The people who built the religion spent their final years trying to actually hit Ctrl Z on it. Which leaves Jones. He wrote the Statesman's Creed in 1981. Corporation that rises above the bottom line. And then, with the last and most consequential decision of a 40-year career, he personally chose the man who burned it all down. Reg Jones lived until 2003, just long enough. Decisions don't get do-overs, but on this show they do. If you like the show, please rate and subscribe wherever you happen to be listening. It helps other people find the show and allows me to understand whether people enjoy it. Also, please share this with your friends and family and anybody else you think might enjoy it. Until next time, I'm Kevin Perez Allen. Thank you for hitting Control Z.