When it comes to leading through hard economic times, Jeff Immelt knows a thing or two about crisis leadership.
After officially becoming the CEO of GE just four days before 9/11, Immelt almost instantaneously found himself and the company in a period of crisis. At the time, the company had a part in insuring the World Trade Center and also owned NBC.
In an afternoon “fireside chat” on the first day of Venture Atlanta 2022, moderator Vanessa Larco, Partner at New Enterprise Associates, spoke with Jeff Immelt, who was CEO of GE from 2001 to 2017. With decades of experience, Immelt offered up some lessons in leadership for founders and investors who may be panicking in the midst of a potential further economic downturn in the year ahead.
To summarize, Immelt believes we are not in a time of economic crisis. Instead, this is just part of a regular cycle. He was keen on how you should approach investment decisions differently in hard economic times, and he also offered some advice on how you should manage your team at a time like this.
Check out the full discussion with Jeff Immelt below.
Leading Through Difficult Financial Environments: Fireside Chat
Vanessa Larco: Hi everyone. Welcome to our chat about leading through turbulent times here with Jeff Immelt, former CEO and Chairman of GE. Really excited to have this chat and excited to be in Atlanta.
Jeff Immelt: It's great to be back in Atlanta. I've met so many old friends here today, and Vanessa's a Georgia Tech grad, so it’s almost like home.
Vanessa: Yeah! So leading through financial crisis. I'm excited to dig into this with you because you led GE through some very interesting times. And now you sit on several boards from Series A companies like Arkestro, all the way to post-IPO companies like Twilio and Desktop Metal. So you're seeing everything across the board and hopefully applying some of the things you've experienced in the past to these startups.
So Jeff, are we in a time of crisis?
Jeff: No. I think, you know, being around in 2008 and 2009 or some of the other really volatile things I've seen, you know, like when you were afraid to get up in the morning to read the Wall Street Journal or turn on CNBC, that's a crisis. This is a cycle. This is a classic cycle. I think what makes it feel like a crisis, you know, Vanessa, is the fact that we've had a whole generation of business people that haven't seen inflation, that haven't seen interest rates go up. So it feels maybe a little bit more stark than it really is. If this had happened in like 1997, you'd say, ah, just another cycle, right? So I think one aspect is just to get people calm and figure out ways to get through this in the best way possible.
Vanessa: Well, I'm excited to talk to you about what you've learned while leading one of the biggest companies on the planet. I think you win the award for craziest first week in a gig that I've ever heard. So why don't you tell us a little bit about your first week as CEO at GE?
Jeff: Yeah, so I became CEO on September 7th, 2001 and September 11th happened like three days later. And you know, the world just kind of changed. We were in the insurance business, so we insured the World Trade Center. We owned 1,200 aircraft, we owned NBC, we had financial services, so basically the crisis was all around us. I think through that and other things that I've gone through Vanessa, there are some attributes that are the same as you go through these crises and cycles.
The first one is: a leader has to absorb fear. You can't be a generator of fear. You have to kind of give steady guidance.
You have to stay focused on what's going on. It's like driving a car through a rainstorm. You turn down the radio, you turn on the lights, you do the same thing. I think whether it's a small company or a big company, you have to be very deliberate in your steps. You don't want to panic, you don't want to take missteps. You have to take one step after another.
You have to, in an organization, find the problem solvers. Not everybody's a problem solver, and in fact, very few people are really a problem solver. You have to seek them out.
But maybe the most important thing you have to do in a crisis is hold two truths at the same time. One, is that things can always get worse, right? Doesn't matter how bad they are today, they can always get worse. Trust me, I've been there. But the other one is there's gonna be a future. If you go back to that moment in time, between, let's say September 11th and October 1st, 2001, we loaned about $20 billion to airlines to help them from going bankrupt. We took the long view: these are our customers. We didn't know what was gonna happen. We made an incredible amount of money on the things that we did. If you talk to KKR or Blackstone, they acquired all the aviation supply chain right after 9/11. Private equity went out there and acquired all of 'em. So if you can invest in a good business at a really dark time, that's when investors really have a chance to make supernormal returns. And so that's, you know, that's how you make it through a crisis. Some defense, some offense.
Vanessa: What about priorities? Do priorities shift in times of crisis? What are the top priorities?
Jeff: I think now I'll put my small company investor hat on. In a time like crisis, get cash, get it now. Don't worry about where your stock price goes. Don't worry about where your valuation goes. Get cash, right? Give yourself a chance to play another day. And that's where I see people tend to focus on the wrong things and you get swallowed up by events, but you have to keep that as a number one priority.
I think the second one, Vanessa, is to keep focused on what it is you want your company to do in the first place. Like if you're running a small company and you're having margin issues and you cut R&D, you're just gonna keep cycling down the same path, right? So make those kinds of trade offs.
And the last thing is try to find ways to look for opportunity. Because there are always gonna be other people that are out there that aren't gonna take the same long term view that you're gonna take.
I think that's the kind of priorities: cash, solve the right problem, stay focused on the long term, and you’ll get through things.
Vanessa: Yep. So another period of your leadership that I find really interesting is the earthquake in Japan in 2011 and the nuclear meltdown that ensued. Tell us about that day, because I have so many questions.
Jeff: So you've got, like, this is a real hit parade here.
Vanessa: I'm going through like all the worst times in your life, just like in order.
Jeff: No, but this is kind of an interesting perspective. You know, we made the reactors—the nuclear reactors. They were in Fukushima. It was just this horrible disaster. And you never know when a crisis is gonna come your way. So you just have to maintain a sense of calm as it comes. And I had been on a global trip, I was actually in Australia at the time, and this was really scary because there was nobody that could get to the plant. There was a helicopter that was sending images, but you couldn't see what was going on. So it's like 4:00 AM in Australia. I'm doing this crisis phone call. There's a CNN scroll saying, you know, “Fukushima Disaster,” “Worst ever,” “All GE reactors,” “Gonna have to shut down Tokyo and Los Angeles,” you know..
Vanessa: Food supplies potentially contaminated.
Jeff: My general council's freaking out and saying, “Oh, we gotta do all this stuff,” and I end that meeting and I have to go down and do an all-employee meeting with a thousand employees who had nothing to do with the nuclear business.
So, you know, I teach a business school class, and my students all say, we get taught about transparency. Good leaders have to be transparent. You gotta be transparent all the time. So if I was transparent at that moment in time, I would've walked in that room with a thousand people and said, “We are screwed. Catch the next plane, join a different company, whatever it takes,” right? Just go, you know.
But that's not what you do, right? You say, “Hey, we’ve got this little thing going on in Japan. Don't worry, our best people are working on it, but let's talk about your business. Let's talk about where we are here.” And, I think as you're going through a crisis or if you're in a small company now and you're worried, give your team things that they can work on, don't lean over backwards to scare them. Give them problems they can solve. Put the cycle in terms they can understand. And I think that's how you keep teams together during the worst times.
Vanessa: Yeah. You had to make a lot of decisions in these times of crises, right? We talked about how you kept GE afloat after the 9/11 situation, also in Fukushima, like lots of decisions get made in a short amount of time that could potentially impact the entire trajectory of your business. A lot of the leaders here are making decisions with very imperfect data or little data, but it just feels like in times of crisis, it adds a whole new layer for.
Jeff: For sure. I think the first thing is, whether you run a big company or a small company, it helps to have a point of view. You know, in other words, when you don't have perfect data, you need things that kind of shape your perspective. During those times, you need to make decisions on how much data you need to have before you make the decision, because you can't ever have perfect data.
Some leaders like to make decisions with two or three people. Some leaders like to make decisions in big rooms with lots of people around. I favored big rooms because I wanted to get as many different voices as you can. Knowing what to do when you make a decision is actually quite easy. It's actually super easy. Like knowing when to do it is the hard part, right? So, getting your own sense of time and then ask for help.
I ask for help. Decisions come at you fast and furiously. And we talk about crisis versus cycle. So after Lehman Brothers went bankrupt, that actually wasn't the worst day. The worst day was when Washington Mutual was sold to JP Morgan. All the bond holders got wiped out and the Goldman Sachs bankers came to Fairfield where I was working Friday evening and said, “You guys gotta go out and raise $15 or $20 billion next week,” right? This is to support GE Capital. Now some of you guys, that seems like a big number. It is a big number, but the problems are the same. It's just more zeros that I had to deal with, right?
So it took a while for them to convince me. I called a board meeting Saturday morning, and this was before Zoom, so it was just like a telephone post in the middle of a conference room. My CFO, my general counsel, me, and 12 or 15 board members on the call, you know, “Hey guys, kind of rough out there. We're gonna go raise $15 billion next week.” You know, just dead silence on the other lines. “Is that okay with you?” You know, you guys—and dead silence, right? It was just too much to bear. But things were moving so quickly, you had to kind of have that kind of interaction. And Roger Penske, who a lot of you may know because you're race car drivers and things like that, he was a really great board member and he shouts out over the phone, “Hey guys, good thinking, let's go get the money. It's the right thing to do. Good luck. Let's go do it.” And then like 12 other people say, let's go get the money, let's go get the money, right?
You need advice, you need people with you to give you the right kinds of input at the right time. And that's the way crises work, right? You gotta make the decision. We made the decision, we got the money, and at that moment in time, we were kind of safe for whatever was gonna happen in the financial crisis.
Vanessa: You skipped through that. You got the money, right? Like trying to fundraise when banks are all going under—
Jeff: Yeah, so here's a line I always use with founders when they're really in trouble, which I have a bunch of 'em now. I say, “You know what, Rick,” or whomever, “This is only the 17th worst thing I've ever seen.” You know, Just to try to break the ice a little bit. Like I've seen 32 things just like that, right? And so it's just conveying that you can work through these problems in a constructive way as time goes. In this case, we actually had [Warren] Buffett loan us $3 billion. That really underwrote the whole transaction and it took us six hours,
Vanessa: I'm sorry, six hours to raise?
Jeff: Yeah.
Vanessa: But, but you had to get Buffett, like Buffett was a catalyst.
Jeff: That was the key. And David Solomon, who's a good friend of mine, he's the CEO of Goldman Sachs now. He was kinda leading the equity raise. So he and I were set up in my office together with my CFO and yeah, it was probably the single best under-pressure decision I'd made in a 40 year business career. And I just got crushed, externally for it, right? In terms of having to go out and raise money and things like that.
But, you know, I think if you're gonna start a company—which I hope there's lots of entrepreneurs out here, or lots of good investors, you just have to be willing to get criticized. And the decisions that you make. I would say nobody really has thick skin. You just choose to take the high road. You have to find ways to kind of get input and keep going even when you're being criticized. And those were the kinds of times we were living in then, right? There's companies out there right now whose stock is probably down 30% this year, and the CEO is having probably the best year they've ever had in terms of the quality of decisions they're making, the steps they're taking for their future, and you just have to be contextual.
Vanessa: Yeah, I agree with that. Speaking of access to capital, how do you think of it in general? Like today it seems bumpy. We have entrepreneurs saying it's really hard to fundraise. It's one of the hardest fundraisers I've ever had, even though my business is doing great, right? Others that are saying, I just raised 150 million from XYZ over a text thread. How do we hold these things?
Jeff: It's a great question because there's money out there for sure, right? Even though the stock market’s down, interest rates are up, there’s lots of financial pressures around the system, but there's still quite a bit of dry powder that funds have, quite a bit of capital that's out there to be invested. And I think right now, if you're on the investor side, the tendency Vanessa, as you know, is to take care of your own portfolio first. So you go through the decision of how much money am I gonna have to put in my existing companies versus how much new money is out there to be had. There's that element and then there's other elements that say this is the best time to be doing investments because I'm gonna get a more economical perspective, right?
So, if you're running a fund, if you're an investor, you've gotta keep looking for good investments. Because ultimately that's how you get paid. Ultimately, you can't sit on your hands forever. I think if I was the founder raising money right now, I would put more of an emphasis on raising more at a lower valuation and raising less at a higher valuation and the sands of time, you can make all this up. But I see people being really silly about making short term decisions around, you know, not taking a down round or something like that, which I just think is kind of silly. And the last thing I'd say is look, I spent 36 years as an operator, five years as an investor. I love investors.
Vanessa: No offense taken.
Jeff: You know, operators just are more sanguine during cycles because you always feel like you can figure stuff out over time. Investors tend to get more excited as these cycles go through, right? So, you know, I'll sit in a board meeting where most of the board are venture capitalists or investors. We'll talk things through and then I'll say to the founder, here, come on, let's take a walk. Don't listen to that stuff, okay? Just keep going down this path.
Vanessa: I’m so glad we're on a board together.
Jeff: Keep going down this path because they're gonna get you in trouble. You know, there's gonna be another day. So you, you know, together we make it work, right? You know, like cycles are such a part of business. They're such a constructive part of business that it's not a terrible thing to be going through kind of what we're going through right now,
Vanessa: But companies will get wiped out.
Jeff: For sure. But you know, I would say Vanessa, money was so easy for so long. There's probably too many companies. There's probably too many things doing the same thing. Too many companies doing the same thing. There's nothing wrong with that. That's all part of the creative, part of the company building process. So there's nothing inherently wrong with that. But I think a little consolidation and a little bit of creative destruction is not a bad thing. And it's probably gonna happen in this cycle.
I would tell my friends when I went out to venture, most people that live my life either go into private equity or venture. And I had started my career selling plastic at GE, so I dealt with small entrepreneurs who ran molding shops and things like that. And I learned so much from them very early in my career and that's what I wanted to do, was work with kind of founders and entrepreneurs. And you know, I just think that the company building process is more important and that's kind of what we're gonna go through right now, right? We’re just gonna have to take it step-by-step and try to understand that during cycles is when some of the biggest opportunities exist.
Vanessa: I agree with that, but can we unpack that just a little bit? Like why? Why is it during these downturns, we hear about that all the time. Like, “This is the best time to start a business.” And I talk to founders like, “This sucks.” Like, I'm trying to fundraise. It's not a great time.
Jeff: Yeah, no, good times are better than bad times for sure. So let's be clear.
Vanessa: Okay. Because everyone's like hyping this up.
Jeff: Let's be clear on that. I think the difference is, if you were doing a company that did like APIs for CRM systems or enterprise software systems and evaluation is 75 times revenue, you just sit there and say that just doesn't make sense. You know, you go through the time period like we had the last three years, really good companies were uninvestable because the economic dynamics just didn't make any sense. So, that to me is the positive benefit of getting down to a more, I would say, realistic returnable investment level, number one. Number two, you know, you watch CNBC every day and let's say a company has a bad number, the stock goes down 10%, and the sell-side analyst downgrades the stock. Okay, thanks. You know, so I think there's so much knee jerk reaction that goes on during cycles that you just get good deals because there's a lot of bad investors out there. And they give you the chance to kind of pile in. So, I don't say it as you need bad cycles to get better. I say it more that you really make good investment decisions when the risk-reward is out of balance, and the risk-reward tends to be out of balance on bad days more than good ones.
Vanessa: Yeah. That's what we're seeing, I think. But I am seeing a lot of fear. So a lot of investors are paralyzed by this fear, and not to blame capital. I see some leaders also being a little paralyzed by this fear and like, “I'm just gonna fundraise when it gets better, it's bound to get better.” And so you have some people that are kind of sitting it out. Does that last, how does this play out?
Jeff: Yeah, I don't think so. Again, I think the dynamics, if you're running private investment is if you raise money, it probably needs to be redeployed in a reasonable time period. So you're gonna have more people leaning in to do good deals over time, right? And we'll see how the next couple months go. But that's my expectation.
I think that the presentations, you know, if I were running a small company looking to raise funds, my pitch would basically be the essence of what I do—so here's how it still fits even in this environment—but if I raise money now, we can last four years and at that time we're gonna have a liquidity event. So what your investment right now will allow you and me to do together is eliminate a C round, or eliminate another investment step. So I would put on a hat that's investor friendly as ways to approach where the investors are right now. And that's kind what I look for. Basically I sit down and evaluate any of these companies, it's kind of like: size of the idea, fundamentally, is it a high margin, high investment, a low investment, high margin, you know, those kinds of things. I look at the ecosystem of who's the competitors, who are the customers, how good's the team, and then who a buyer could be. So every time I sit down to look through a pitch like this, I kind of mentally go through, you know, okay, this is a small idea, but it's a small check. It's got the chance to be an 80% gross margin business with low capex. The competitors all stink. It's solving a problem for the customer, but the competitors stink. This is a third time founder, highly bankable. And Workday could buy them, right? Okay, I'll invest. Sounds pretty good, let's go. So that's kind of what I go through. And then, you know, in a crisis when you're trying to raise the next round, you have to be able to pitch back to an investor like me, how one of those five things gets better and how your approach is working, right?
Vanessa: Yeah, that’s key. And then communicating with your team, right? Your teams probably at this time are like, “Am I at the right place? Should I go somewhere big and safe? Should I drop out of the workforce?
Jeff: It's a great question. And particularly right now, you know, Vanessa, because it's just been such a fragile workforce, particularly in Silicon Valley, but really everywhere, you know, with kind of the high turnover, high churn, great resignation, quiet quitting and all that stuff. So I think you're always trying to, in a crisis, trying to strike the right balance between being really transparent and not promotional. You know, in other words, truthful. But at the same time, you have to say to people, “Here's where we're going next. Here's where we're going next. I know it was hard. We just had to lay off 80 people. It's 20% of our workforce. I hate to do it. It's incredibly hard,” but show, “In two years, here's where we're gonna be. This is the company we're building, here's what you're signing up to do.” And so, I find that founders kind of whiff on the day two story. They spend a lot of time on the day one story, but don't spend enough time on where we're going next. And that's why people stay. You know, I just think when I joined small private boards or even small public boards, I always would say to people, look, I'll join the board, but whatever you do, don't put me on the audit committee. Whatever you do, it's no fun. I'm not good at it. You know, put me on the comp committee. Being on the comp committees really stinks these days. Right. More stock options. What's working. Things like that. So I think for all of you who are founders, really understanding how people work and why they work, right?
I just found that by and large, the people I was working with, they really didn't know how work got done. They didn't have a strong enough connection with the people that did the work with them and for them. And as a result, we were always chasing the symptom and not the cause. I ran a super big company, more than 300,000 people. I didn't do every job, but I knew how basically every job inside the company got done. And I always spent a fair amount of time trying to see it through their eyes. And I just think that, you know, Vanessa, there's just not a strong enough connection between the leadership teams and the people doing the work. And that's how this stuff gets outta control.
Vanessa: I could not agree more. And I see a lot more of that discipline in leaders of more traditional companies and a lot less of it at startups.
Jeff: See how I get treated? You know? We sit around an investment meeting, people say, well, like, this company would be so great, except they have to sell out to those big company jerks all the time. They're so stuck on their ways.
Vanessa: Yeah, I'm sorry. Well, you know board members—we're both on boards. We apparently have very different views of that, but what is the role of a board member in times of crisis?
Jeff: Great question. So I think for all of us, for the founders or people running companies, you need to see your board on the worst day possible. In other words, don't think about it when things are good and you're making your numbers and you're raising money, think about your board on the absolute worst day you can imagine. Because quite honestly, when things are good, you don't really need your board that much. Right? But when things are bad, you need 'em a lot. And I think you need to be able to go around the room and kind of see who's really committed to the company, what kind of skill set they bring. And in a time of crisis, you have some very specific swim lanes that people have to stay in. One is funding, where investors can be immensely helpful. If cash is what you need, funding is really important. If you're operationally running outta cash, you're gonna need a different set of hands in that. And so I would say a lot of the boards that I'm on don't have the right skill sets around the table to kind of make it through the kinds of environments that we're in.
I always view my role, particularly with startups, as a helper. Because I ran a conglomerate and I've done business for a long time, I can walk into a room and say, okay, this leader needs somebody that can help her sell. This leader needs somebody that can hire a finance person for them. So I think for more experienced people like me, it's finding the right niche and where it goes. But, you know, I probably talk to three CEOs every day. Every day. Because they're going through a really tough time and, you know, it's just such a lonely job, particularly in a crisis. You're getting criticized by everybody, and it's helpful to just have somebody that they can talk to.
Vanessa: Yeah. I loved when you bucketed board members in three categories. I tried not to take offense, but why don't you share those three buckets?
Jeff: I just think—and it's true for public companies as well—there's always people that just wander onto boards. They're perfectly fine people, but they just didn't have enough to do, want a little extra money, you know, and they're okay and they're on every, by the way, I'm describing every board that's ever existed. And then there's people that are really expert, but pretty narrow, in other words, they're very expert at investing or fundraising, but not broad in terms of operational and things like that. And then there's people that have seen it before, have done it before, maybe not as good at investing or things like that. And I tell the founders, you need to mentally, you need to understand who's kind of with you, who's gonna be in it, who's gonna be in the trench with you when you can't raise money or when you have a really bad quarter or things like that. And I think if you're really engaged in that way, it makes it easier to have the really hard conversations, which you have to have when you say, look, I know you founded the company, you're awesome. I love you, but you can't stay in your job. You've only earned that if you've been with them, if they know that you've tried to help. Right? So it's hard.
Again, if you're trained, if you grow up the way I grew up, you know, the company comes first. And it's always hard with founder-led companies to make that slight separation between the needs of the founder and the needs of the company. Most times, there is a hundred percent overlap, but sometimes, particularly in crises, there can be daylight. And that's some of the harder stuff you have to deal with.
Vanessa: Yep. Well, Jeff, it's been amazing. I think the takeaways I came away with were: not a crisis, in a cycle. It's healthy. So founders should be opportunistic about the opportunities and then also just be really smart around who you have around the table at your board.
Jeff: Have good people, stay first principles. You know, being on the West Coast for the last five years, the company I appreciate a lot is Apple, who at scale, they just have this product headset that, you know, I'm sure it deviates a little bit, but they stay true to it. And I think leaders that have a good first principle are gonna do well, even in a tough crisis.
The last thing I'd say is, I know we have to go, but this could be an awesome ecosystem for venture. This country needs cities like Atlanta to steal more of the venture headset. You've got great universities, you've got a big company ecosystem, you've got everything it takes. If anything, you gotta be bigger, you gotta do more, faster. But you know, particularly after COVID, people don't want to necessarily hang out in San Francisco, Boston, New York anymore. Atlanta should rule.
Vanessa: Yeah, I agree with that. Thank you all so much. Thanks, Jeff.
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