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JEFF IMMELT: --three things today are very much a winning hand, as you look at GE, not just in 2007 but in 2008 and beyond. Now, we're not big for the sake of being big. In other words, I always talk about size from the concept of being able to use our scale to drive future growth.
And so, when you're sitting here today, you're a lot younger than I am. And you're thinking a little bit about the future. Basically, what we do-- what I do in my job is I make bets. And on behalf of our investors and employees, we bet on six big themes if you look at the next 5, 10, 15 years. So I thought it might be of interest to people in the room today.
The first one is infrastructure. And whether it's in the developed world or developing world, people don't have enough transportation. They don't have enough energy. They don't have enough roads. They don't have enough water. And we've become kind of the definitive infrastructure company in the world. We've got about $60 billion in revenue. You know what? We'll probably double that in the next three years.
We are the profound-- whether it's in emerging markets or the developed world, there'll be about $5 trillion dollars invested in the next 6 or 7 or 8 years in infrastructure. And one of the things I learned in business school-- you may want to write this down-- is that, if you want to grow, hang around people that are spending money. It's one of those things that always works. And so, we hang around people that are spending money. And right now, they're investing in infrastructure.
The second thing is emerging markets. I joined GE in 1982, as Carl said. 1982, the entire company was $24 billion dollars in revenue. In 2007, we'll have $32 billion just in the emerging world-- China, India, Middle East, Africa, Latin America, South Asia. This is your future, whether it's because of demographic growth or the amazing transfer of wealth into oil and natural gas and natural resource-producing regions, this is a long-standing trend that I think is going to carry forward for many years. And so, your future as business school students, no matter what your nationality, is largely going to be played out over the emerging markets over the coming 5, 10, 15 years.
The third place we invested was environmental technology, environmental science, an initiative we call Ecomagination. That's $14 billion dollars in revenue inside the company. This year, it'll be $20. By 2010, that's just accelerating and exploding. Renewable energy, water desalination, hybrid technologies-- this is going to be, again, a big growth platform for my company and a big place where a lot of you are going to have to continue to invest.
Now, high energy prices help drive it. The need to reduce greenhouse gas emissions, that drives it. But this has gone from being the purview of far left-wing thinking in the United States and liberal centers and things like that. This is mainstream today in the US. And Europe is ahead of us. Asia is ahead of us. And this is going to be a big part of where we go in the future.
The fourth place we're investing is demographics . We are long in health care. And we're long in consumer finance. We've made a lot of investments. Because whether it's aging population in a country like the United States or more access to health care in the emerging world, health care is going to be a big important market. And GE wants to have that basic foundation in health care when we look at the future. So demographics are going to be a big driver of what your future is going to look like.
The fifth area is digital connections. We're big in the entertainment business. We're big in the financial service business. We're big in the health care business. The transformative role that the internet plays and digitisation plays is going to transform all of those businesses. And we've made big investments, both in terms of business development and also in terms of what we do in the company to make sure we've got a great digital framework as the company goes forward.
The last thing that I really consider one of the important areas is what I call origination and risk management. In financial services today, there's still a lot of liquidity out there. But we've invested in 12,000 originators, 5,000 risk managers. We know how to get access to pools of capital, redeploy them, earn money for our investors. And we think companies that know how to do that are going to be successful in the future.
So infrastructure, emerging markets, environmental technology, demographics, digital connections, and origination and risk management-- these are the six things that are going to drive the growth of GE in the next 5 or 10 or 15 years. We're big in big markets. And there's no reason why our company couldn't double in size in the next 5 or 10 years. But it's by doing those things well.
I would say, for business school students, I grew up in the era that-- I would say, the first 20 years of my career, what I learned in business school was about people and how to do things. We were kind of the "How" generation-- management tools, process tools.
What I would tell you today, in a provocative way, is I think the era of general management is over. In other words, being generalists and being trained just in general management-- I think that was the world I grew up in. That's not the world you're going to grow up in. You're going to grow up in what I would call the "What and the Where" generation. You've got to be people that know how to pick products. And you got to know where to sell them.
So I would say, generalists-- the era of generalism is ended. And now, it's the era of domain. People that know science, products, technology, services, and what regions of the world to take them, that's who's going to be successful in the future. I graduated from business school in 1982, went to work for GE right away. I was a product manager in our plastics business.
So I basically worked with automotive industries to get them to apply our plastic to instrument panels. That's how I started. So I went from doing cases, being the CEO, to being-- [CLICKS]-- a guy right in the trenches, doing marketing. And then, I was a sales manager in our plastics business. And I was in Texas. And I would go to Lubbock, Texas to sell plastics to molders who would make parts, computer housings, and stuff like that.
And then, I was a global sales leader in our plastics business. And then, I went to our appliance business. And I ran our service operation in appliances. And I helped fix 3 and 1/2 million compressors. And I used to have a uniform that had my name on it. And I would go out and make tech rides with the guys in the field. I was the worst screwdriver guy in the history of the company. But I did it, you know, because--
[LAUGHTER]
And then, I went and ran our plastics business. And then, I went from running our plastics business to running our health care business. And when I started, it was about a $3 billion business. When I left, it was about a $10 billion business. And then, I became CEO. Who would have thunk it?
But I started-- basically, came straight off this campus, just like you, and went right to Detroit and started selling plastic. Didn't think about, hey, I can't do this. I have an MBA. That's what I did. And I'd say a couple of things I would tell you about a career.
The first one is, do what you love. In other words, follow your own internal compass. Business school students are notoriously bad at picking what's next. You tend to follow what's now. What's now is almost never relevant five years from now. So since you're not going to guess which industry is going to be successful, do what you like to do.
And I never cease to be amazed. My business school class put two people in GE, 2. And 18 people went to work at Atari. Anybody ever hear of Atari today?
[LAUGHTER]
OK, so don't follow your friends. Follow your soul. Second thing, be a listener. Listeners do better. And be a learner. Listen and learn. Because basically, all you basically learn in business school is this ability to learn. And you don't want to let that go to waste. A 65-year-old in GE who still can learn is valuable to me. A 30-year-old who thinks they know it all has no value to me. So be a learner.
Third, be a risk-taker. I know that this is a great school. All your schools are great schools. You spent a lot of money to go to business school. The one thing having an MBA gives you is a chance to take risks. And whether that's five years out of business school or, in my case, 25 years out of business school-- you know what? I have a risky job. But I know I can get another job, right?
And so this knowledge-- whether you're 25 or whether you're 55-- the knowledge that you can get another job always gives you a little bit more courage to do the things you want to do. And the last thing I would tell you-- my least favorite course in business school was Organizational Behavior. I thought it was a big bore.
I want to do the capital asset pricing model, finance, marketing. Give me something real to do. But you know, all I spent time on today is people. I wish I had paid a lot more attention in OB than I did. So pay attention to people. And if you do those four things-- follow your heart, be a learner, have courage, and care about people-- if you do those four things, if that's how you leave business school, you're going to have a great and successful career.
So Carl, with that, let's take the questions. It's great to be here with you. And we've got a great talent from CNBC here with us today.
CARL QUINTANILLA: Where?
JEFF IMMELT: So I look forward to the questions. Thanks.
CARL QUINTANILLA: Let me just follow up on a couple of things.
JEFF IMMELT: Shoot.
CARL QUINTANILLA: A practical question for an audience of business students-- class of '07 was graduating at a time when Blackstone was going public. There seemed to be no end for appetite for young people who had an education in finance. Class of '08 is going to face a much different reality. You're a grad student getting your MBA in '08. Are you worried about the job market?
JEFF IMMELT: Look, I think the job market is going to be not quite as good as it was in '07. But there's still going to be a lot of jobs out there to be had. We're going to recruit. Other people are going to recruit. I'd urge you just not to pay any attention. In many ways, what I would tell you, is that 2007, 2008, will be more normal than 2006.
2005 and 2006, when you look back in your business careers, will be viewed as being goofy stuff. The private equity, competing with consulting firms, and stuff like that-- it was just unnatural. There was just too much capital. Again, remember, I graduated in 1982 from business school. And I basically had $50,000 in debt.
And all I had was a Visa card, Carl, at the end. You know what? In fact, I was out of money at the end. And I had a Visa card that had a $300 limit. And I was at, like, $700.
[LAUGHTER]
And I kept getting these letters from Visa saying, cut your card up and send it back in. And I'd say, yeah, right, guys.
[LAUGHTER]
I'm really going to do that. Unemployment in the United States was in double digits. Interest rates were 18%. Oil, in those days, was very high. And you know, what you learn is that these things come and go. These eras come and go. And what you really got to do is follow what you want to do.
CARL QUINTANILLA: And to follow up on that, as you said at the top, you've seen many bubbles burst. You've seen lots of markets reprice. $40 billion though in write-downs from financial services firms so far and there's more to come-- why aren't you more worried about the spillover effects onto the American consumer from things like a housing recession? From things like a capital markets meltdown?
JEFF IMMELT: Carl, again, I don't want to be casual about it. Because I think there still can be contagion, right? There still can be contagion. But unemployment in the US is 4.5%. Basically, everybody that wants a job has a job. When I look at very fresh data, it's says people are still going to the store. They're still buying things.
And so, as you know, Carl, basically, you've got a housing recession. But a lot of the other stuff is what I call pro-on-pro. It's a hedge fund and a money mutual fund. And it's just a bunch of guys that just dropped their guard and did stupid stuff. And so, it doesn't have to blow back, I don't think, on the broader economy.
You know, again, I think there's lots of liquidity. These sovereign funds around the world have $15 trillion of capital out there waiting to be placed. These are places like Saudi Arabia, Abu Dhabi, Dubai. They have an incredible amount of money. The Russians have an incredi-- so there's still capital out there to be placed. It's just being repriced. And this massive repricing, there's just going to be a lot of carnage while we go through that.
But unemployment's low. Interest rates are low. There's a lot of things that, I think, can say it doesn't have to be devastating. What it means is a slowdown in the US and reasonable strength on a global basis.
CARL QUINTANILLA: One last question about leadership-- you've been characterized as a CEO who has worked harder to, maybe, form consensus and build teamwork than some of your predecessors at GE. How do you foster that kind of environment and yet remind people that, when you make a decision, it's a firm one.
JEFF IMMELT: Carl, what I would say is that, when I think about the top 50 people in the company, any one of them at GE can go run a Fortune 200 company, any one of our top 50 leaders. We were on the cover of Fortune a couple of weeks ago as the best company for leaders. That's terrible for me, right? Because the headhunters say, hey, my god, let's go get a GE guy. You know, that's great.
But at the end of the day, any one of them can go run their own company. What I can give them is a better platform, really, a great canvas to paint on. Now, five or 10 times a year, I look around that room of 50 and say, OK, I've heard enough. Here's where we're going. And I don't want any lip from anybody, OK? Saddle up, here's where we're going.
Now, if I did that 15 times, I wouldn't have the best 50 people in the world. And if I did that three times, we'd have anarchy. We wouldn't get anywhere. But I think, generationally, there's a lot of different styles that are out there. What you've got to do is have a style that works for you. And you have to have a style that works in the time that you're in.
And basically, the people that I'm working with today, immediately, are between 35 and their mid-50s. And they're turned on to different things than people were of the last generation. And you've got to be able to captivate these people if you want to lead them in the future. That's just the way it goes.
CARL QUINTANILLA: All right, thank you, Jeff. Now's the time that I know you've all been looking forward to, some questions from our audience. We're going to begin here at Cornell. I think we have a couple of questions from people who have actually pre-submitted their questions. So we'll start right here with this young lady at the mic.
SPEAKER 1: Hi, thank for being here today. My question for you is, how do you encourage innovation while maintaining short-term profitability?
JEFF IMMELT: It's always a great question to ask. Because as a big public company, for me to say that I wasn't at all caring about quarterly earnings or things like that, my nose would grow, right? It's just, you've got to be able to do both. But at the same time, I run a company that has been around for 130 years. And so a lot of what we do has to be about the future.
And so, what I basically do is I pick leaders. But I also kind of override what those leaders do. And protect $6 billion of funding in research and development. And I have line-of-sight to it. And I protect it. And I make sure that that money gets spent in technology and innovation.
But look, we'll do an engine called the GEnx engine for the Boeing 787. This is a $1 billion dollar program, a $1 billion dollar program. It's got new materials. It's got a lot of stuff that people from Cornell and engineers from Cornell have gone to work on. It's $1 billion. That engine breaks even in 2018, right?
It's nothing but a negative in the third quarter, fourth quarter, of this year. But yet, the team will keep investing and keep spending. Because they know that it's going to set up future generations of profit pools and of customer satisfaction. So that's what we do. So look, the reason to come to work at a company like GE is because we do have the resources and the spending and the funding that's going to let you live your dreams.
What I tell people at business schools is, you can go to work in a lot of different places, right? If you want to be in the front seat of history, come to work at my company. Whether or not China is going to be big, whether or not India is going to be big, whether or not there's a future for nuclear power, whether or not there's an electronic medical record in the United States, whether there's a cure for Alzheimer's, how big solar becomes-- I'd love to wimp out and say, oh, these are going to be entrepreneurial companies that do that.
Rubbish. Rubbish. That's going to happen at GE. We bought this crappy little wind business when wind was nothing but a hula-hoop-- $0.25 a kilowatt hour, nothing but a hula-hoop. Now, it's $0.06 cents a kilowatt hour, because we've industrialized it. It's a $5 billion business.
So look, I mean, big companies take a lot of heat, some of it deservedly so for being short-term versus long-term, things like that. But if you want to see history, I just won't concede any of it has to happen in Silicon Valley in somebody's garage. I think we can do a lot better, a lot more effectively, a lot more efficiently inside our company.
SPEAKER 1: Thank you.
JEFF IMMELT: Great.
CARL QUINTANILLA: Let's go live to Columbia University, the Lions in New York. Columbia, do you have a question for Jeff?
JEFF IMMELT: Maybe.
MIRANDA CHEN: Hi, Jeff. I'm Miranda Chen. I'm a second-year MBA student at Columbia Business School. I had a quick question for you. GE is aiming to grow organically two to three times faster than global GDP. At the same rate, 10 years later, revenue would approach $750 billion. At what point is GE just too big?
JEFF IMMELT: Well, you know , it's always a great question. It's a--
[LAUGHTER]
I always tell people that we're just like everybody else. It's just more zeros. You know, it's kind of a--
[LAUGHTER]
But in 1982 when I joined, GE was considered a big company. And we were $20 billion. In 2008, we'll be $195 billion dollars. We're still considered a big company. But it doesn't feel any different in 2007 than it did for me in 1982. So I think, in some ways, it's all about how you run the company.
To run a company our size, you've got to have great people. You've got to have great processes. You've got to have leaders who you trust and respect. I think, at some point, do we become too big? Maybe. At some point, you just might run out of bandwidth. And you might run out of management systems. And it might be so distributed at some point that it's really hard.
I don't see that yet. I think, to me, if we can attract and retain-- if we can recruit and retain the world's best people, then we will be able to continue to scale and continue to grow. If ever we become too bureaucratic, if ever we become too slow-moving-- mainly because of our growth and our size-- then we may have been too big.
I was watching one of the news shows yesterday. And they were talking about subprime. And this guy was making the case that guys like me don't track the details. That's why Citigroup failed or Merrill Lynch failed, versus private equity. And these guys are combing through the details all the time. That's BS.
We comb through details. We have processes that allow us to comb through details. And my boss, Bob Schwager, who's right here is on the audit committee from Cornell. Believe me, there's not one point in time that any of us ever run GE like a big company. We run it like it was a grocer store on the corner.
We look at details, we look at processes, we look at people like it was not some obscure big company, but like it was really focused. So we may run into it someday. But we've been able to scale the culture and the values and the people in a way that I don't think we're close to that level yet.
CARL QUINTANILLA: A quick follow-up-- have the parameters by which you decide whether something is a good strategic fit for GE changed since you started?
JEFF IMMELT: I think so, Carl. In other words, I've come to the conclusion that we, basically, have to nest businesses inside, let's say, a market that we've already got some presence in. And so, when I look at getting in new businesses, like water, I try to associate them with a bigger concept, like infrastructure, as fast as we can. Because they just get lost.
And so, you can't let that happen. You know what? I would say, Carl, everything we do has to be able to take advantage of scale at some point in time. Because that's why we exist. We exist because the breadth and the depth of the company allows these new ideas to take place.
CARL QUINTANILLA: Let's go live to the University of Texas at Austin. Your question for Jeff--
JARED GRAVO: Hi, Jeff. This is Jared Gravo with the University of Texas.
JEFF IMMELT: Hey, Jared.
JARED GRAVO: The question we have is, GE is known for the development of the great leaders. How has globalization affected how you identify and develop leaders, knowing that Western culture may not necessarily translate to emerging markets?
JEFF IMMELT: You know, it's a great question. About half our business is outside the United States, half inside the United States. And half our people are outside the United States, half inside the United States. And our business outside the US is growing at twice the rate as our business inside the United States. So driving globalization, keeping up with globalization, is something that really is important for the future of the company.
If you look at the top 500 leaders in the company, about 1/3 have a non-US passport, maybe close to 40% today. So the company is globalizing very quickly. Now, what I would say is that what we've tried to do over time is we've tried to incorporate inside our own culture as a company the new things we've seen and the new things we learn about China. We try to incorporate the things we've seen and we learn about Europe.
We've tried to continue to evolve and change the culture of the company to reflect what it means to be a global company. And so, we've tried to evolve the company successfully along those lines. At the same time, we've tried to decentralize decision-making, so that local teams can develop products, can develop marketing approaches, pricing, risk management into their local countries.
In the end, I'm convinced that business converges. In the end, I think that the culture and values to run a multinational company-- you shouldn't have five different cultures and seven different sets of values and 18 different processes. We're going to have one. And I think, over time, that one evolves and changes, because of what you're doing around the emerging markets. But it's not different in the emerging markets versus what it is in the developed world.
You just can't run the company that way. And I would say I'm more convinced of that as time goes on. I am just more convinced that business is one of the few institutions around the world that harmonizes. Now, it's not to say that you don't have to be fast. And it's not to say that you don't learn new things. You're constantly learning new things. But I think business is one of the few sciences that harmonizes as time goes on.
And Carl and I were talking earlier about-- in case none of you heard, Fox launched The Business Channel, right? Which is something that we just want to crush them, nothing short of that.
[LAUGHTER]
We just want to crush them.
CARL QUINTANILLA: We didn't use that word.
JEFF IMMELT: But you know, I think, unlike news, where people can have a point of view, or one might be more right, one my people more left, one might be more [INAUDIBLE], one might be more global, what Fox is going to find is that business is business. The basic storytelling around business-- there's not two different ways to tell a business story. In the end, there's only one.
And so, I think GE will become a more global-acting company. But in the end, we'll have one culture and one set of values.
CARL QUINTANILLA: You've had to translate Ecomagination into a bunch of languages, I imagine.
JEFF IMMELT: Every different language. And really, I tell it differently in China than I do in France. But it's the same initiative. Right, it's the same. You're not going to lecture the Chinese government to say, you can't use coal. But you've got to have a set of coal technologies that work in China. And then, what you do is you take them down the learning curve fast in China. And you take that technology back to the United States. And that's how you can use one management system even while the company globalizes in an incredibly accelerating away.
CARL QUINTANILLA: Let's go to Ann Arbor, get a question from the University of Michigan.
WILL RICH: Hi, Jeff. I'm Will Rich from the Ford School of Public Policy. And I was wondering, where do you see climate change legislation going? And what strategies do you think are viable for making sure that legislation is consistent with GE's goals?
JEFF IMMELT: You know, I came about climate change, really, from a technical standpoint. In other words, I was doing business reviews inside GE in 2003. And we basically looked across our set of businesses. And whether it was in our locomotive business or our jet engine business or our water business or our gas turbine business, we were working on technologies that fundamentally reduced emissions, improved fuel efficiency, made better use of natural resources.
And so we studied, as a company-- I had teams of people studying the technology of global warming. And I had teams study the public policy around both energy policy and global warming. And I just came to a couple sets of conclusions. One is that global warming is a technical fact. It's caused by man.
You know, I'm an old-- very old-- applied math major. And there's all these causation. It's a complex kind of linear programming model to see whether or not that means that there's going to be icebergs in Manhattan someday or things like that. I don't need to know that much to say, OK, I know enough to think that the technology is there when any polling we did among people said that the consciousness and awareness was much higher around global warming. And we believe that technology could be a solution.
So we started attacking this technology from a marketing standpoint. And three or four years later, we've gone from about $5 billion in revenue to $14 billion in revenue. We've doubled what we spend on R&D. We've lowered our own emissions and saved money doing that. And we've been transparent with the public.
Now, I come at this purely as a business person. I always tell people, I've never camped. I'm not an environmentalist. I have no fundamental touch for that, no soul for that. This is not a corporate social responsibility program. This is purely one CEO that says, look, you've got to be on the right side of society. You can't run a company and be on the wrong side of society.
And so, it's not a question of whether we get carbon cap and trade system. The question is, when do we get a carbon cap and trade system in this country? And that's going to bleed on a global basis. It's already happening in Europe. And so, you get paid to see what's next.
Now, from a public policy standpoint, I don't think there's any chance that we get legislation in this administration. I think if you get Democrats in the White House in 2008, I think it's likely that you get some kind of combination energy bill and climate bill. And Republicans-- you know, I don't know. It depends on who ends up in power. But I think you can't be a CEO and be blind to changes in technology and changes in terms of where public policy is going.
And this is just one where there's probably 30 to 50 companies that totally see the world the same way we do. Soon, it will be 100. Soon, it will be 200. And this is just one where you got to get on board.
CARL QUINTANILLA: Did you see "30 Rock: this past week?
JEFF IMMELT: I did. Unfortunately!
CARL QUINTANILLA: Alec Baldwin's character uses a green initiative to sell more GE washers.
JEFF IMMELT: Yeah.
CARL QUINTANILLA: How do you navigate that kind of cynicism? That you're in it for the money and only for the money? Or--
JEFF IMMELT: Look, see, Carl, I think what's perfect about this initiative, from my standpoint, is nobody really likes it. In other words, the left wing says exactly what you say. The left wing says, GE, you're a 125-year-old company. You get Superfund sites. You're a complete bozo. And how dare you say that you can have an environmental initiative.
And the right wing says, this is junk science. You're full of it. This is crazy. It's going to kill the economy. And we're perfectly in the middle, right? At last shareholders meeting, at the very end, I had Sister Pat, who always got on us on the PCBs in the Hudson River. And she was arguing with the guys from the Cato Institute.
And they're both typically pick on me. But they're picking on each other. And I said, this is beautiful. I'm in, like, the seventh ring of hell. This is just one of those-- but look, I sit here and say, we're going to spend $1 billion to dredge the Hudson River. Because from 1950 to 1975, we put PCBs in the Hudson River, always using permits. Never did one thing illegal.
All the people that worked in the PCB factories have now outlived all their peer groups. So it's been technically proven that PCBs aren't a carcinogen, right? It's been studied 25 times. It's always been definitively proved it's not a carcinogen. Yet, society changed its mind. Society changed its mind. And we're a good company that's got money. And we're going to spend to clean it up.
So having seen all that, when you see stuff like this, you just can't listen to all these groups. You got to get our investors and our company out ahead of it. Because that's what you get paid to do, is take unpopular stances.
CARL QUINTANILLA: And you can do it without coming out, talking about causation in a way that some might find political.
JEFF IMMELT: Look, I think, everything gets politicized, Carl. I mean, everything gets politicized today. But I say, I'm pro-science. GE, as a company, the ability and has the credibility to say, I'm not political. But I'm pro-science. Let's study science. Let's drive innovation. And quite honestly, I think it's one of the things that's wrong with this country is that we've given up our mantle as being the scientific and innovative leader in the world.
And look, that may be OK for everybody else or the Republicans and Democrats. That ain't OK for GE. That's not a position that my company is ever going to take. We're about innovation. We're about technology. That's who we are.
CARL QUINTANILLA: Let's go live to Duke, get a question for Jeff-- for Jeff.
SPEAKER 2: Hello, Jeff, my name is [? Jante ?] [? Fen ?] from Duke University. Here is my question. GE has always been able to reinvent itself and remain at the forefront of innovation. What do you think contributes the most to that?
JEFF IMMELT: You know, I think, generation after generation in GE, is that we believe that we stand for three things. One is integrity. And first and foremost, it's always been a company that has been trusted. And we guard our brand. And we guard our image very closely.
The second thing is, we've been a company that's always been dedicated to performance. And so financial performance, doing what you say you're going to do, there's just nothing that replaces that. And we don't apologize for that. We're a tough-minded performance-oriented company.
And the third thing is we've always been dedicated to change. We have a healthy disrespect for history. And so, when somebody comes into a management meeting and says, this is the way we did this in 1985, or we've never done it this way, people roll their eyes. And you get cast as an old-timer, right? And so, we have these three things going for us, which is integrity, performance, and change. And I wouldn't have it any other way.
And the day after I leave, whenever that is, my replacement is going to say, who cares about Immelt? Really fundamentally. We live in this moment. We live in this day. We live in this era. Let's go. And I happened to replace a reasonably famous guy.
[LAUGHTER]
I forget-- and I got to tell you. I've answered the question in the media 10,000 times in 1,000 different languages. What was he like? Jack Welch, Jack Welch, Jack Welch-- inside my company, I've never once had to deal with any of that. Inside our company, GE people like change, liked the fact that there was going to be change, wanted to do something new. And that's a big difference.
The one place I would never do a press interview was Japan. Because Japan built statues to Jack. Everybody else loved him. But Japan-- he was like the idol of all idols. I remember, one time I was in the JAL waiting room, waiting to see the CEO. And he had his family album there.
And I was looking, just gazing through his family album at a picture of his wife and his daughter's wedding. And there was a picture of Jack in his family album.
[LAUGHTER]
I said, man, this is crazy. So finally, I've been doing it for five years. And then, [INAUDIBLE] says, we got to do an interview with it. We've never done an interview with it. I said to the PR guy, I'll do it. But I just can't do any Jack questions. So the guy, the reporter, comes in and says, hey, I want an interview. Blah-blah-blah. And I said, fine. He says, and I know, no Jack questions.
I said, cool. I'm cool with that. And he says, OK, now, what was it like to work for Jack Welch?
[LAUGHTER]
Ah! Change-- change-- have a healthy disrespect of the past. It's why we always hire you. Each generation brings the fresh new ideas that are so critical to us.
CARL QUINTANILLA: Speaking of which, Indiana's been waiting patiently to ask a question. Jeff, let's get a question from IU.
SPEAKER 3: Good evening, Jeff. I'm [? Sweta. ?] And my question for you is, in the last few years, GE has shown an ever greater willingness to hook up with other companies, even if it has meant taking a minority position. By following this low-risk and high-return strategy of entering new markets, does GE worry that it might be losing control or compromising its core competencies? Thank you.
JEFF IMMELT: I think you always have to worry about, can you bring enough to be as capable when you do joint ventures, particular when you have the minority stake in joint ventures. But what I balance with that is, if you think that, really, the two cross-currents that you're going to face when you graduate from the Johnson School, one is globalization. And the other one is technology.
And basically, what's going to shape your lifetime are going to be those two factors, however they play out in the world over the next 25 or 30 or 40 years. Now, when I think about technology, look, GE has got a tremendous core of technology. But when it comes to thin-film solar technology, maybe we can't do that all in-house. So we might go take a 30% stake in an IPO startup-- pre-startup-- so that we can see where thin-film goes versus molded silicone. And we can place some bets across the board. And I think a company's ability to do that is really important.
Geographically, we look at our playing board. And we say, gosh, it would be great to be in Turkey. So I go to the board and say, I'd like to make an investment in Turkey. And the board says, what do you know about Turkey? And I say, well, I don't know. We got 30 people there, something like that. I know where to find it on the map.
But here's all the trajectories around Turkey. It's going to be a place-to-be. It's the gateway between the Middle East and Eastern Europe. I believe in it. We've got to get there somehow. And so versus just building a little popcorn stand, what we decided to do is invest $1 billion dollars and get a 26% stake in the third biggest bank in Turkey, so when we go, we go.
Now, for me to go to the board and say, let's buy the whole bank. Let's spend $5 billion. And the board would say, well, you don't know anything about Turkey. What the hell are you doing? And I wouldn't have a second answer to that, right? They'd basically be right.
But we can take a stake that we did three or four years ago. And now, four years later, we're big in Turkey. We started with a minority jayvee. But we brought a turban business, aircraft engine business, other things with it. So I think, with the pace of globalization, the pace of technology, doing joint ventures is the only way that you can get out there fast enough. And it mean, sometimes, you're going to have to have minority stakes. But you've got to pick your partners well. And you're going make a few mistakes as you go through that.
CARL QUINTANILLA: In a way, they're canaries in coal mines. Would you agree?
JEFF IMMELT: Exactly. Carl, that's definitely the way to think about Turkey. And look, I'm a big-- not that I'm that smart. Because you're already there. But look, solar is going to be one of the answers of the energy future. And there's probably a half a dozen technical paths you can go down. At the end of the-- guys, gang, I'm big enough to put a chip on each one.
They don't all have to be 100% out of my brain into the field. Some can be joint ventures. Some can be-- but what's important is, I don't think anybody is smart enough right now to pick which one is going to win. But let's sprinkle some seeds across the board. That's the key.
CARL QUINTANILLA: Let's take another question. This one from our audience at Cornell. Yes, sir.
SPEAKER 4: Hello, Jeff. My name is Maneesh [? Parkov, ?] the first-year student at the Johnson School. My question is actually related to GE's corporate strategy. Is GE planning to grow organically from its existing businesses? Or like, vertical and horizontal integration? Or is it planning to enter new businesses?
JEFF IMMELT: Every great company has to be able to do both. We set a goal on organic growth just because I thought that was an important metric, in terms of how to build a growth culture inside the company. And organic growth is really a function of getting in the right markets and then having initiatives that are going to allow you to grow organically over a long period of time. And I'd like that to be the major thrust of what we do, is organic growth.
I just think it's the most investor-friendly. It's the most high-return. And so, at our foundation, we want to do organic growth. Now at the same time, we generate $25 billion in cash flow every year, probably $15 billion of free cash flow every year after we pay the dividend. So we've got a lot of capital to do acquisitions. And so, we'll always add, to the organic growth, some acquisitions that we want to do as well.
I'd say, for the next three or four years, I don't see getting into a brand-new business. What I see in the next three or four years are making bigger investments in energy, bigger investments in health care, maybe a few bigger investments in the entertainment business, and building onto businesses that we've got right now. But I think every company-- I think we've become, as a company, too dependent on acquisitions. And that's a bad place to be. You want to be in a position where it's nice to do deals, but you don't have to do deals.
MATT LOWENBRAUN: Hi, Jeff. I'm Matt [? Lowenbraun, ?] a first-year here at Columbia Business School. My question is about Ecomagination. Ecomagination has been an important theme at GE for several years now. And GE recently announced it will invest more than $1 billion in Ecomagination R&D in 2007. Could you talk about some of the innovations we can expect to see in the near future? And how we can expect them to impact our lives?
JEFF IMMELT: So we launched this in 2004. And now, we have 52 eco-products. And these are products that we, basically, have a pipeline of more than 200. And we actually work with an outside firm in Washington, DC that helps us brand these eco-products. And I'd say that two are the most interesting to me right now.
One is a hybrid locomotive. Mainly because I'm fascinated with the battery technology and how it can be applied, not just in a propulsion setting, but also in a plug-in hybrid setting in the automotive industry. And so, we'll have, I'd say, one of the biggest-scale, commercial, hybrid programs outside the automotive industry once we launch this product. We'll make about 100 of them in 2008 and ought to be able to scale up to maybe 200 of them in 2009. And that one, I think, to prove out the hybrid technology is really critical.
And then, we're going to have an appliance refrigerator that we're going to launch next May that will have, probably, 40% less energy consumption and will have a chip inside that a utility could go in proactively and actually shut down your refrigerator at night to be able to manage electricity. The team doesn't know it's going to be launched next May yet. But I do.
[LAUGHTER]
And I don't know how many of these we'll actually make. But I think it's so important to get these technologies out in the marketplace. I can't even tell you about everything we've learned in the user interface. And I think one of the things that I've learned from watching Steven [? Jobs ?] for a long time is his willingness to get products in the hands of customers and let them, in some ways, define the usage, in terms of where they go.
So one of things that I'm trying to do inside the company is get this 52 products up to about 200 products, find ways to test and learn rapidly. And like I said, this refrigerator-- we may only sell 5,000 of them next year. But you're going to see, I think, a real utility around how consumers use them that'll make us better, in terms of where we go in the future.
CARL QUINTANILLA: And you're working on the trash-powered car, right?
JEFF IMMELT: The trash-powered car will be there somewhere.
CARL QUINTANILLA: That's later down the line.
JEFF IMMELT: But plug-in hybrids, I think, are coming in a substantial way. I really do.
CARL QUINTANILLA: Last time, Texas wanted to know about how GE builds great leaders. Let's see what they have in store for us this time. UT--
PAUL WATTS: Hi, Jeff. Paul Watts. I'm a second-year MBA student here at McCombs. As a father of three, I'm just interested to know how you've been able to successfully balance work life with family.
JEFF IMMELT: You know, I have been married for 22 years. I've got a daughter that's a junior in college that's 20-years-old. And I have a great family. I have a great family life. And I think it's important to have some people around you who really don't care who you are and what you do and--
[LAUGHTER]
--that keep you humble and that keep you balanced. But you do have to give up, I'd say, extended-- I don't do poker-night out with pals anymore, golfing junkets. I don't see extended family. I basically am with my immediate family or I'm at work. And you're going to have to make some trade-offs as time goes on.
The other thing I'd say is I lead a simple life. I have one company--
[LAUGHTER]
--one company, one wife.
CARL QUINTANILLA: It's a big company.
JEFF IMMELT: One company, one wife.
[LAUGHTER]
I'm a clean liver. I basically don't drink much anymore. Probably the last time I had too much to drink was 15 years ago. I work out every day. You got to lead a reasonably straight life, because it's a marathon. And so, beyond just your family, you got to take care of yourself. And you've got to be agile mentally to do a job like this.
It's not it's not like you get two days away where you're not checking your BlackBerry. That's not what you sign up for when you do this. But you can do it if you lead-- I think you've got to lead a straightforward life. And I think it's important to have balance. I love my company. I my family. I don't think I have to compromise between the two. I think I can do both. And what it means-- you're going to have to make other tradeoffs.
CARL QUINTANILLA: What percentage of the time are you on the road?
JEFF IMMELT: Carl, I probably travel 60% of the time. But from the time when my daughter was born-- we lived in Chicago-- I had the Western half of the US from a selling standpoint. It's all in my family ever-- if I was home four straight nights, my wife looked at me and said, don't you have to go someplace?
[LAUGHTER]
So it's all we know. It's all we've grown up with. And that's basically what it's been about.
CARL QUINTANILLA: Yeah. One last question from Michigan.
JASON RISER: Hi, Jeff. My name is Jason Riser. I'm a first-year MBA at the University of Michigan. I have one last question for you. And that would be, if you had one thing to tell a graduate student graduating from an MBA program, what would that advice be?
JEFF IMMELT: I think it's just to follow-- this is going to sound really, really trite. But basically, you guys have 35 or 40 years to work. And you don't have to capture it all in the first six months. You've got a long time to build this resume and to build who you are and what you want to do.
I think business is a great profession. It's a place where you can use your social skills. You can use your thinking. You can do a of different things with it. But I've always given people advice to just follow the thing you want to do. And if you want to be an investment banker, go work on Wall Street. If you want to be private equity, go join a private equity firm.
If you want to be a general manager, work for a management company. If you want to be a consultant, work for BCG. But don't say, I want to run a company, and then go work for Goldman Sachs. It may work. Who knows? You could be the lucky one. But that's typically more storytelling than real. You actually do have to know things to do jobs.
[LAUGHTER]
In other words, I've been around products for 25 years. I'm a good product manager. Whether I'm in NBC or I'm in our appliance business, if people talk to me about what they're doing to position stuff, I can add value. I've been going to China for 25 years. I've built two businesses that started at zero. I know China.
Nobody has to-- I always say, gosh. I'm thinking about what's going on with the banking system in India. I just got back. Somebody says, why don't you go hire Henry Kissinger? I say, Henry Kissinger's 85-years-old. I'm not going to go hire Henry Kissinger. I've been going to India for 25 years myself. So I'm a big believer that, go on a path that gives you the experience that allows you to do things that allows you to live your dreams.
The triple-bank shot, you know, where I'm going to four years in consulting and then two years in private equity and, then, I'm going to go run GE, that probably ain't going to work.
[LAUGHTER]
So build competency by going on that path would be what I'd say.
CARL QUINTANILLA: Last question from me is, is it true that at Dartmouth you and your buddies stole a Christmas tree from the Hanover Inn and put it in your dorm room?
JEFF IMMELT: You didn't tell the best part of the story.
CARL QUINTANILLA: I wanted to let you have some of it!
[LAUGHTER]
JEFF IMMELT: Carl, in those days, I wasn't the only guy streaking, I swear.
[LAUGHTER]
I swear, it wasn't just me. But there was some truth in that.
CARL QUINTANILLA: You all have, like, the all-clear to do whatever prank you want now, after that.
JEFF IMMELT: That's right. That's right.
CARL QUINTANILLA: Jeff, a couple of minutes to sum up and--
JEFF IMMELT: Great, Carl.
CARL QUINTANILLA: --get some last remarks in.
JEFF IMMELT: Thanks again, Carl.
[CLAPPING]
Snaps for Carl [INAUDIBLE].
[APPLAUSE]
Carl's done a great job for us on NBC and on CNBC, a second stint on CNBC. And I'm proud of the CNBC team. The entertainment business is one that, in addition to having great people and great strategies, it's all about competitiveness and quick responses. And you've got to take stuff personally. And this is one in CNBC where, if you're a business company like GE and you live in the business world, you've got to have a great network that does business.
So this is one where, when Fox comes in, we all strategize about what we need to do to be competitive. And Carl and his colleagues have done a great job.
Look, I'd make two comments. The first one is that I can't imagine a more exciting time to be graduating from business school and joining the world. I would say that, in many ways, business school-- it's really a great time that you can reflect on what you want to do. And college is a great time where you can reflect on what your dreams are and think through the way you want to approach your life and what kind of person you want to be.
And I would tell you that there's a lot going on in the world. You're in the middle of an election cycle. And in the election cycle, people tend to talk more about the things that are going wrong than the things that are going right when you're in that. But let me tell you that it is unbelievably exciting what's going to happen in your lifetime.
There's going to be cures for major diseases. There's going to be an opening up of parts of the world that have never been seen before. There's going to be an opportunity to work on energy policy, health care policy. There's going to be opportunity you all have by working with people that aren't as fortunate as you to do something about the value gap and the wage gap that is taking place in the United States and around the world.
There's going to be people that need to be led by you that you can have a massive impact on. So I can't imagine a better, more exciting time to be joining the business world. This is really going to be fun. And it's going to be exciting. And you're going to blink your eyes, and you're going to be as old as I am. And you're going to say, what the hell happened to the last 25 years? And that's how much fun you're going to have.
The second thing I'd do-- because I'm here today and nobody else is-- is tell you that GE is the best company in the world.
[LAUGHTER]
I'm always happy to come to Cornell. And it's great to be at a great school. But I want you to know that this is a company that's about the future. It's a company that will give you the platform in your business career to paint on the best canvas in the world-- an important canvas. So whether you're a mechanical engineer, you're an MBA student, you're studying finance-- no matter what you're doing, you're going to get a chance to see big ideas applied where you personally count and you can make a big difference.
So it's a great time, I think, in the world of business. And I want you, as you think about the things you're going to do and the internships and the programs and things like that, I want you to know that GE is going to be a great place, a great company, where you can build a fantastic career. So again, I'd like to say, thanks to Duke and Indiana and Michigan and Columbia and Cornell. Did I get everybody?
CARL QUINTANILLA: [INAUDIBLE]
JEFF IMMELT: And Texas and Indiana. Columbia and Cornell did participate in the Dartmouth Football Victory Program this year. I'd like to say, thanks for that.
[LAUGHTER]
And again, thanks to Cornell for hosting us today. And look forward to many times to come back here. Thank you.
CARL QUINTANILLA: Our thanks to Jeff.
[APPLAUSE]
JEFF IMMELT: Thank you. Thank you.
CARL QUINTANILLA: Our thanks to Jeff. Thanks to all the schools. Thanks to all the schools that participated. Dean Thomas, thank you to you and to Cornell for being such a great host. Thank you for coming. Have a great night.
[APPLAUSE]
Thanks a lot.
[INTERPOSING VOICES]
[CHATTER]
Jeffrey R. Immelt, chairman and CEO of General Electric Co., spoke to a capacity audience in Call Auditorium, Nov. 12, during a daylong visit to Cornell.
Immelt's talk, geared toward MBA students, was also simulcast to five other business schools: Columbia University, Indiana University, University of Texas-Austin (McCombs), University of Michigan (Ross) and Duke University (Fuqua). Among other things, he had this advice for MBA students about to enter careers: "Follow your heart, be a learner, have courage and care about people."
