‘Lights Out’, GE and the fall of Elite Higher Ed Educational

Lights out: pride, deception and the fall of General Electric by Thomas Gryta and Ted Mann

Released July 2020.

There is this belief in higher education that never much will change when it comes to status, rank and influence.

This belief is wrong.

How could it be that history is not a predictor of future performance when it comes to higher education? To answer this question, we have to look outside of science.

General Electric’s story is as good a starting point as any other.

Lights out Details of how GE has grown from one of the most valuable, respected and admired companies in the world to a medium-sized company. To get a feel for how quickly GE has declined, take a look at this graph, which shows the steep decline in the company’s market capitalization from its peak in 2000 (~ $ 587 billion) to today (~ $ 55 billion) represents.

Lights out, written by two WSJ reporters, tries to explain how GE could have lost 90 percent of its value in two decades. While the book is not trying to learn broader lessons from organizational decline (a missed opportunity), I think we can apply some of GE’s lessons to higher education.

in the Lights out The fall of GE is largely due to the mistakes of its management team and board. The person most responsible for GE’s demise is the CEO from 2001 to 2017, Jeff Immelt.

The authors of Lights out conclude that Immelt made a mistake by focusing on raising the stock price (through share buybacks and continued dividends), making poor strategic bets (like in the oil and gas services business) and overpaiding large acquisitions (such as Alstom for $ 13.7 billion). The book is also critical of GE’s digital efforts, particularly its failure to build the industrial internet platform known as Predix.

For the most part, I find the efforts to attribute GE’s difficulties to individual fault not convincing. As far as I can see, Immelt and his management team made some good decisions (e.g. losing GE Capital and focusing on building an industrial internet) and made some bad decisions (especially all of these share buybacks).

If Predix had started, or if GE had planned energy markets better, journalists and investors might have praised Immelt rather than condemned it.

So what lessons could we learn from GE and? Lights out for higher education?

First, we should not rule out that a college or university in the top 25 in today’s ranking and status will be in a position similar to that of GE in two decades. We should imagine an elite college or university slipping into the middle of the pack.

I take the second lesson from GE and Lights out it’s about working towards a number instead of showing off strengths. GE was laser focused on its stock price. Ultimately, these actions resulted in the stock price weakening. Colleges and universities can focus too much on US news and other rankings. This focus can lead to schools deciding to improve the ranking in the short term, but this can seriously injure them in the long term.

An example of a misguided focus on metrics is selectivity. While US News has deleted admission rate data from its ranking formula, are the factors that are representative of that Selectivity. A school that took in many more students would see its ranking drop. The scarcer the value, the more elitist a school will feel, the scarcer the admissions offices for a school are.

But is scarcity a reasonable (or even justifiable) measure of the success of higher education? Elite colleges and universities can drive the development of affordable, high quality online degree programs on a large scale. How many schools at the top of the reputation ranking do not take this opportunity out of a mostly inarticulate (often actively rejected) belief in the importance of scarcity in relation to reputation?

Higher education will not find out its future by just thinking about higher education. We need to look outside of science and use these examples where possible to reflect on our possible higher future prospects.

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