GE’s chief executive, Jeff Immelt, opened the Net Impact 2009 conference this morning at Cornell University and, as usual, he was thoughtful and provocative. He was bullish on GE, of course, but, after this tough year for the U.S. economy, he sounded more pessimistic than usual about where the country and its economy are going.
The American consumer, the financial services industry and the construction industry were the major drivers of America’s long boom, going back to the 1980s. None is likely to drive economic growth in the future, Immelt said.
Instead, he noted, growth will be most robust in the developing world–places like China, India and Brazil that have bounced back more quicly than the U.S. from the global downturn–and it’s by no means clear that U.S. industry is positioned to capitalize on that growth.
There’s more growth outside the United States than there is inside the United States. We have to recognize that our destiny is connected to the emerging world. We have to repurpose ourselves as an exporter.
The trouble is, the U.S. isn’t educating as many engineers as it should be, he said. Nor are the U.S. government and U.S. companies investing as much as China, say, in energy research and development. Public policy. also remains a big question mark when it comes to energy because, so far at least, Congress has been unable to pass regulation of global warming pollutants. Other countries are moving faster.
“There’s going to be 10 million jobs created in clean energy,” Immelt said. The question is, will those jobs be in the U.S., in China, or elsewhere?
In the audience for Immelt were more than 2,000 members of Net Impact, a great organization whose purpose is “to inspire, educate, and equip individuals to use the power of business to create a more socially and environmentally sustainable world.” (Disclosure: I’m a new member of the Net Impact board.) Immelt has made GE’s “ecomagination” campaign a hallmark of his tenure as CEO and he said his focus at the company has been to marry capitalism and sustainability.
Immelt began his conversation with the Cornell president, David Skorton, by contrasting the state of the U.S. economy when he began his career with the economy Net Impact members will find as they begin their business careers. (Note: these may not be his precise words but they are close.):
In 1982, the year I joined GE, about 10% of the earnings of the S&P 500 were in financial services. The US was a net exporter. R&D as a percentage of GDP was in the mid single digits. GE revenues were 80% in the U.S., 20% out of U.S.”
By 2007, financial services earnings as a percentage of the S&P were about 45%. The U.S. was a net importer…R&D as a percentage of GDP had slipped to about 2%.
None of these trends are good, of course. By contrast, GE continues to invest in R&D–about $3 billion in energy technology alone, Immelt said. And about 80% of GE’s revenues come from outside the U.S. His not-so-subtle message was that the U.S. needs to behave a lot more like GE. Fair point, although some GE shareholders might disagree–the company’s stock price remains well below what it was when Immelt took over in September 2001.
Some other highlights from Immelt’s talk:
He’s a bigger believer in wind power than in solar. He had resisted investing in wind at first. “The team pitched me wind for two years. I said this is a hula hoop.” But when Enron went bankrupt, and its wind business became available at a discount, Immelt figured he’d take a flyer on it. “For $200 million, how wrong can we be?” Today, wind is a $6 billion business for GE. Solar energy, he said, remains too expensive to compete, at least for now.
He’s serving President Obama, but didn’t vote for him. Immelt called himself a lifelong Republican, but he agreed to serve on the president’s Economic Advisory Board. Obama, as it happens, has been very good to GE–the company’s wind business, its investment in battery firm A123 Systems, its work on the smart grid and its research into cleaner coal all stand to benefit from administration policy.
He tries to guard against hubris. “Do we get too big and too arrogant to see what’s going on,” he said. “Arrogance is a terrible blinder.”
He still thinks green is green. He said the value that GE brings is its ability to marry capitalism and sustainability–by making and selling products and services that solve the world’s big problems. He said: “You can build a different business model, you can solve global issues, you can impact a new set of customers and you can make money. We’re proud of that. We don’t back off that. That is who we are.”