A tale of the cost-cutting tape
There’s no disputing that Elon Musk is one of the leading businessmen of our era. He has a net worth of around $400 billion these days and leads prominent businesses including Tesla, SpaceX, X, Neuralink and xAI. And he has become known for moving fast, cutting costs and pushing the workers who remain beyond what they thought possible.
In many ways, that recalls a previous titan of industry, Jack Welch, who 25 years ago was considered the greatest businessman of his generation. It raises an intriguing question: Is Musk as influential a business leader as the former General Electric chief? Are the two men even comparable?
By some lights, the two aren’t remotely the same. Welch was no entrepreneur but instead was the ultimate corporate chameleon, the son of a train conductor who started his career in G.E.’s plastics division and spent his whole career at the conglomerate.
Musk, on the other hand, hailed from a prominent South African family, before emigrating to Canada and then to the United States as a serial entrepreneur.
And while the two were both politically conservative, Welch was more of a country-club Republican, partial to golf and no fan — at least earlier on — of Donald Trump. While a savvy political operator, Welch was unlikely to have decamped to Mar-a-Lago to personally and intensely cozy up to the president-elect, as Musk did. (In 2016, Welch withdrew his support for Trump as the Republican presidential nominee, writing on social media, “Unfortunately, wrong messenger…Party must change nominee now.”)
But the two shared a common business philosophy: Cut as much fat as possible.
Welch believed G.E. had become too bureaucratic and bloated. He slashed billions of dollars in costs, and prided himself on weeding out employees who just weren’t making it. He became an apostle of the Six Sigma approach, inspiring other C.E.O.s. Corporate profits — and G.E.’s stock price — exploded under his watch.
That won Welch acclaim from investors and surviving employees. Consider this: When he became G.E.’s chief in 1981, its market value was $12 billion. At his departure, right before Sept. 11, 2001, that had grown to some $650 billion, making the conglomerate the world’s most valuable company by many stretches. G.E. became known as an incubator of top managerial talent, with alumni becoming C.E.O.s of many Fortune 500 companies. But it also made Welch a polarizing figure: He became known in many circles as “Neutron Jack,” a moniker he despised.
Musk essentially took Welch’s playbook into overdrive. The social network now known as X operates with just 25 percent of the work force it had when he acquired it in 2022. Tales of his relentless cost-cutting at Tesla and SpaceX are the stuff of biographies, and they can now be seen at work in the Trump administration. And Musk has made no apologies for his approach, acknowledging that he has had to sometimes rehire workers in crucial roles.
That approach has certainly cost Musk some popularity among much of the general public recently, and he still faces lawsuits from aggrieved former employees of X. But investors have snapped up debt in X at par, seemingly hopeful that the company’s prospects are on the mend. And he has seemingly inspired counterparts at Meta, Google, Amazon and beyond to rethink how to get by with less — much less. At Meta, Mark Zuckerberg has openly spoken about cutting “low performers”; shares in the parent company of Instagram and Facebook have increased nearly 50 percent in the past year, putting its market value at nearly $2 trillion. Similar conversations are going on throughout Hollywood and on Wall Street.
Other moves by Musk appear to be gaining adherents in corporate America. His dispute with the Delaware Court of Chancery over a $50 billion pay package helped drive the tech mogul to reincorporate Tesla and SpaceX in Texas, a move that other companies are now considering, in a development that is causing consternation within the First State. (By contrast, Welch moved G.E.’s headquarters to Fairfield County, Conn., from Manhattan, for space and a more bucolic vibe rather than for tax or legal reasons. Few other corporate titans followed suit.)
Despite pockets of criticism, Welch was seen as a more conventional business celebrity. His 2001 memoir, “Straight From the Gut,” was a runaway best seller and a “lessons learned” manual for would-be C.E.O.s, and Sacred Heart University in Fairfield still features the Jack Welch College of Business and Technology (located, ironically, in the old G.E. headquarters).
On the other hand, Musk is also perhaps the most famous business executive in years — famous enough to get a cameo in a Marvel blockbuster and to inspire others to get his face as a tattoo — with a fandom that makes his X account one of the most powerful bully pulpits in the world.
And his role — however nebulous — in overseeing the so-called Department of Government Efficiency is rewriting and drastically downsizing the scope of the federal government. Trump himself has consistently endorsed the effort, to the point of floating the idea of stimulus checks nominally paid for by Musk’s efforts.
While Welch nominally had checks on how far he could go — including G.E.’s directors and his third wife, Suzy — Musk’s enormous wealth and influence have made it unclear who could hold him accountable, including judges and his companies’ boards.
At this point, is it fair to ask whether Musk’s particular brand of cost-cutting and norm-breaking will be more influential?
IN CASE YOU MISSED IT
President Trump could impose tariffs on countries that tax U.S. tech giants. The White House is reportedly planning a memo directing federal agencies to look for ways to levy countries that impose a so-called digital services tax on tech businesses like Meta and Google. Many of these countries are part of the European Union. The move potentially creates yet another front in Trump’s brewing global trade war — or it’s just another bargaining chip. U.S. tech giants have long complained about the services tax, and Trump himself criticized it during his first term.
Jeff Bezos finally got his James Bond. When Amazon paid $8.5 billion for MGM Studios the deal was really a high-priced bet on just one property: James Bond. But Amazon execs fought bitterly with the Broccoli family, which had creative control, and the two sides couldn’t come to terms on how to make the next film. (The MGM deal gave Amazon only distribution rights.) But this week, the family agreed to give the tech giant total control in a deal that is likely to be worth a hefty sum. It’s yet another chapter in the tech-takes-over-Hollywood saga and it’s a big one. Look out for more Bond films and spinoffs.
MacKenzie Scott’s unconventional charitable giving got high marks. The billionaire philanthropist’s unusual approach — doling out huge grants with few restrictions — helped recipient organizations flourish with few downsides, according to a new study by the Center for Effective Philanthropy. The report, based on a survey of 813 grantees and 243 foundation leaders, was a validation of a philanthropic blitz that has given out $19.2 billion so far.
The China-Europe paradox
China and Europe are high up on President Trump’s trade-war hit list. But with each passing day, investors appear largely unfazed by the threat of a new round of U.S. tariffs on these regions.
Take Hong Kong’s Hang Seng Index, home to the tech giant Alibaba and the electric car maker BYD. It gained 4 percent yesterday and has soared more than 17 percent this year. In Europe, the Stoxx Europe 600 also finished the week on a high note, and it is up more than 9 percent since the start of the year.
Both benchmark exchanges are leaving the S&P 500 in the dust this year.
What gives? For starters, investors appear to be betting that the president’s threats of tariffs are more bark than bite.
“I think the narrative around the Trump administration, and the impact of tariffs is a kind of realization that it’s maybe not as bleak as some would have thought earlier on, in the early days of the administration,” Michael Hunstad, chief investment officer of global equities at Northern Trust Asset Management, told DealBook.
By no means has Trump rescinded the idea of tariffs. They could be announced in early April, he has said, though he has also signaled an openness to a wider trade deal with China.
The lack of clarity may have given investors enough reason to jump into what’s viewed as relatively cheap European and Chinese stocks. That’s caught some investment pros off guard.
A.I. euphoria is another factor, at least in China. DeepSeek, the buzzy new chatbot rival to OpenAI’s ChatGPT, has reignited investors’ excitement for Chinese tech stocks in a big way. Ryan Cohen, the so-called king of meme-stock investing, reportedly made a killing after piling into Alibaba, a company that’s angling for a piece of the Chinese A.I. market.
Hunstad isn’t a big believer in the long term prospects for either the European or Chinese rally. That said, he has no special read on what the Trump administration will do next about tariffs. Instead, the stock surges appear to be little more than a fairly common market occurrence: that “small amounts of good news can have big price reactions,” he said.
That leaves the question: Is bad news on the way?
— Bernhard Warner
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