Data Sheet—How GE Veered Offtrack With Digital Strategies

It is painful, but necessary, to read about failure in business.

By any measure the decline of General Electric these past months is an epic fail for the ages. Fortune’s Geoff Colvin should know. He repeatedly profiled the storied industrial conglomerate during the tenure of its departed CEO, Jeffrey Immelt. Colvin explained in past years what made Immelt a worthy successor to the legendary Jack Welch. He also described Immelt’s struggles to achieve adequate growth at GE—long before its grave problems emerged.

But nothing prepared Colvin or GE’s investors for the precipitous collapse of the company’s market value in the immediate aftermath of Immelt’s abrupt retirement.

In a stunning article titled “What the Hell Happened?”, Colvin describes a company that made poor investment decisions, allocated capital badly, and suffered from a decline in its vaunted corporate culture.

The irony is that GE had fashioned itself as an industrial leader of the digital revolution. It was to be a major player in software and putting sensors on its powerful equipment. Immelt’s successor, John Flannery, isn’t backing away from GE’s digital strategy. But he is scaling back its software aspirations and no longer using the flowery language Immelt’s team favored to describe GE industrial hipness.

Colvin’s telling is a sympathetic tale of what can go horribly wrong when a great company becomes distracted or otherwise makes the wrong decisions. GE under Immelt by no means did everything wrong, and Colvin gives the company its due in that regard. But it didn’t do enough things right. It’s a sobering tale.

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The New York Times published in print Wednesday a piece that echoed the argument I made in Data Sheet about Facebook. I contend that 1990s-era distinctions between print newspapers and newfangled “social networks” are irrelevant. A publisher is a publisher, and Facebook ought to be treated like one under the law. One European lawyer sums it up nicely. As The Times describes it, he argues that social media companies must block offensive content without censoring legitimate debate, and it must foot the bill the same as any other publisher. “If they can’t do it, they should get out of the kitchen.”

Precisely.

NEWSWORTHY

We're about to make millions of dollars in frozen orange juice. The Justice Department and the Commodity Futures Trading Commission have opened a criminal probe into possible market manipulation in the markets for bitcoin and ethereum, Bloomberg reported on Thursday morning. The probe is said to be looking at whether some traders engaged in spoofing, or the placing of a high volume of phony orders, and wash trading, in which a person trades back and forth with themselves. The price of bitcoin dropped below $7,400 on the news.

Ready for my closeup. Growing rapidly and reducing its losses, Uber said its gross revenue jumped 55% in the first quarter to $11.3 billion, while net revenue after accounting for payments to drivers was up 70% to $2.5 billion. Uber's net loss before interest, taxes, and other expenses was $312 million, about half the level of a year earlier. Uber did have an overall profit in accounting terms of $2.5 billion, thanks to the sale of its businesses in Russia and Southeast Asia for a gain of $2.9 billion. Uber also won't be reviving its self-driving car tests in Arizona, where a pedestrian was killed in March, and will focus on restarting its Pittsburgh effort by year end (which seemed to be news to some key Pittsburgh officials).

Trash collector. To comply with Europe's General Data Protection Regulation, Apple created a "Privacy Portal" for customers in the region that lets them download all data collected under Apple ID accounts, including activity on the App Store, AppleCare support interactions, and uploaded photos. The portal will be made available to customers in the U.S. and elsewhere in coming months, Apple said. At the other end of the GDPR compliance spectrum, Pinterest said it would have to temporarily shutter its popular Instapaper read-it-later app and service in Europe as it tries to comply with the law. Access will be restored "as soon as possible," the company said.

Your concern is the bus. Speaking of the iPhone maker, Apple's once-ambitious plans to build self-driving cars are off the table for now, the New York Times reports. The company was unable to strike deals with BMW and Mercedes-Benz, and is left with just a partnership with Volkswagen to build an autonomous shuttle bus that will run between Apple campuses, according to the report.

Role model. Elon Musk went on an anti-media Twitter rant worthy of President Trump. "The holier-than-thou hypocrisy of big media companies who lay claim to the truth, but publish only enough to sugarcoat the lie, is why the public no longer respects them," the Tesla CEO wrote in one.

Role model, part two. Speaking of the President's online rants, a federal judge ruled that the president's Twitter account constitutes a public forum subject to the protections of the First Amendment. As a result, Trump and his aides cannot block people from reading his feed, Judge Naomi Reice Buchwald concluded. "No government official—including the President—is above the law and all government officials are presumed to follow the law as has been declared," Buchwald wrote.

Copycats. After Seattle ignored protests from Amazon and imposed a so-called head tax (because it is calculated based on a company's number of employees), several cities in and around Silicon Valley are considering following suit. San Francisco, Mountain View, Cupertino, and East Palo Alto are all looking at imposing the same kind of tax.

Replay booth. I mistakenly described Facebook’s Terragraph project in yesterday’s newsletter. It’s developing a collection of low-cost wireless technologies for dense urban areas, not building free Wi-Fi networks.

FOOD FOR THOUGHT

Mega billionaire and Microsoft co-founder Bill Gates is a voracious reader and he's out this week with his list of recommended summer books. It's not exactly beach going fare. And some books, like Lincoln in the Bardo by George Saunders, which won the Man Booker Prize last year, aren't really overlooked gems needing this kind of promotion. But if you're seeking erudition on global challenges or wanting to explore rich histories, there are a few choices, such as:

Factfulness, by Hans Rosling, with Ola Rosling and Anna Rosling Ronnlund. I’ve been recommending this book since the day it came out. Hans, the brilliant global-health lecturer who died last year, gives you a breakthrough way of understanding basic truths about the world—how life is getting better, and where the world still needs to improve. And he weaves in unforgettable anecdotes from his life. It’s a fitting final word from a brilliant man, and one of the best books I’ve ever read.

IN CASE YOU MISSED IT

Twitter Has a New Plan to Keep Imposters from Sowing Confusion During the Midterm Elections By Jonathan Vanian

Critics Ask Amazon to Stop Selling Facial Recognition Technology to Police By Sarah Gray

Why Everyone Hates Their Cable Company Even More This Year By Aaron Pressman

Facebook Introduces Home Services to Marketplace By Lisa Marie Segarra

New Chrome Extension Warns You of Stolen Passwords By Erin Corbett

Commentary: Why the GDPR Will Make Your Online Experience Worse By Daniel Castro and Michael McLaughlin

BEFORE YOU GO

The Simpsons might be one of the longest running shows in television history, but it lost its edge years ago. Series creator Matt Groening has a shiny new thing, however. His new animated series, Disenchantment, will spoof the fantasy genre and star Broad City actress Abbi Jacobson providing the voice for protagonist Princess Bean. The 10-episode first season debuts on Netflix on August 17.