Corporate Earnings, Media Hype/Myths

Everyone’s a Critic

By, 04/18/2008

Story Highlights:

  • Recently, the media highlighted critical comments made by GE's ex-CEO, Jack Welch and ex-Fed chairs, Paul Volcker and Alan Greenspan.
  • While these predecessors have plenty of knowledge and accomplishments, personal legacy preservation (and egos) may underly the comments.
  • Take critical opinions with a grain of salt—times change, and what worked in the past may not be the most suitable now.

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(Editor's Note: MarketMinder does NOT recommend individual securities; the below is simply an example of a broader theme we wish to highlight.)

Heaven knows we love having our opinions heard, and the internet and media have more than facilitated the desire. What better place to showcase our droll witticisms, mastery of language, and superior knowledge of the subject at hand than the public forum? With the proliferation of blogs, online comment boards, pundits and "Crossfire"-type TV shows, it's apparent no subject is immune to opinion and criticism, not the least society's public figures.

The media has broadcasted, in storylines reminiscent of soap operas, the return of Paul Volcker, Alan Greenspan and Jack Welch to question their successors' competencies.

Greenspan Defends Tenure as Chief
By Charlene Lee, The Wall Street Journal
http://online.wsj.com/article/SB120770060390299951.html

Embattled GE CEO Defends Strategy
By Kathryn Kranhold and Carol Hymowitz, The Wall Street Journal
http://online.wsj.com/article/SB120839179207621423.html?mod=todays_us_page_one

In recent weeks, the actions of the Federal Reserve, and implicitly its current and former chairmen, have been critically examined by Paul Volcker, the former, former Fed chairman. Interesting enough, it wasn't too long ago Alan Greenspan was voicing his own opinions on Ben Bernanke's Fed actions. More recently, Jeffrey Immelt, current GE CEO, was reproved by Jack Welch, GE's executive guru. In stinging remarks, Mr. Welch criticized Mr. Immelt, a former protégé, for GE's unexpected first quarter earnings miss. Et tu, Jack? Why the harsh words?

Perhaps with all the knowledge, experience, and personal success accumulated during those previous roles, Mr. Volcker and Mr. Welch felt their respective duties were to highlight for the public what went wrong. Or perhaps they were highlighting something else altogether—their egos maybe? Nothing makes us look and feel better than when our successes are followed by others' failures. Endless studies of first-borns and second-borns have demonstrated this phenomenon (as well as our own emotional scars, but that's another story). And when we publicly point out the failures—in light of our legacy—well, that's just icing on the cake.

Of course, it's possible the comments were intended to coach and to inspire, not to disparage. The media loves to spin words into negative, eye-catching headlines—you rarely see laudatory language making the front-page news. However, despite Mr. Volcker's and Mr. Welch's legacies and varied accomplishments, a new chairman and a new CEO are now at the helm. How these new captains steer their ships and what paths they take are no longer the worries of past captains. Sure, Mr. Bernanke and Mr. Immelt may undertake unprecedented policies—and be met with some failures—but companies and economies change and evolve all the time. What worked in the past may not be the most suitable now.

Mr. Volcker and Mr. Welch have all the right in the world to voice their opinions, but those opinions should be taken with a grain of salt—just like any other opinion. Mr. Welch even issued an apology to Mr. Immelt about the remarks in a subsequent interview, though not in time to head off criticisms about his initial comments. After all, everyone's a critic.


*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.

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