In Lights Out: Pride, Delusion, and the Fall of General Electric, GE’s decline, set against Huawei’s rise, highlights a fundamental divergence in how large organizations confront pride, complexity, and long-term strategy. As Gryta and Mann show, GE became captive to its own legacy and to Wall Street expectations, relying on financial engineering and optimistic narratives to obscure weakening industrial fundamentals. Huawei, by contrast, advanced through disciplined execution, sustained investment in R&D, and a readiness to absorb short-term costs in pursuit of long-term capabilities, even under severe external pressure. Together, these trajectories underscore the book’s central lesson: pride and delusion can hollow out even the most storied giant, while focus, learning, and adaptability can still build enduring strength in a hostile environment.
From Financial Engineering to Productive Power: Financialization versus Industrial Primacy
The contrast between General Electric’s decline and Huawei’s rise can be understood most clearly through the lens of financialization versus industrial primacy. As Lights Out: Pride, Delusion, and the Fall of General Electric demonstrates, GE’s downfall was not the result of a single bad decision, but of a long-term strategic shift in which financial returns increasingly took precedence over industrial strength. Huawei’s ascent, by contrast, reflects an opposing logic: finance as a support function for production, not a substitute for it. This divergence offers a powerful framework for understanding corporate resilience in an era of technological competition and geopolitical pressure.
At the core of GE’s failure was the transformation of GE Capital from a supporting arm into the company’s primary profit engine. Under Jack Welch, financial services grew from a modest contributor into a source of more than half of GE’s profits, reshaping incentives across the firm. Financial returns were faster, smoother, and easier to manage than the cyclical and capital-intensive realities of industrial businesses. As a result, managerial attention, talent development, and internal prestige gravitated toward finance, while industrial rigor eroded. What had once been America’s flagship industrial enterprise increasingly resembled a sprawling, opaque financial institution.
This financial dominance did more than distort incentives; it actively masked industrial weakness. GE relied on accounting adjustments, earnings smoothing, and aggressive assumptions—particularly in long-term service contracts—to present an image of stability and growth even as core businesses struggled. Industrial underperformance in units such as Power was concealed not by improved productivity or demand, but by financial maneuvers that delayed recognition of losses. Over time, this “success theater” crowded out operational truth, leaving leadership and investors alike with a dangerously incomplete picture of the company’s health.
Financialization also introduced deep systemic fragility. GE Capital’s dependence on short-term funding markets, especially commercial paper, exposed the company to liquidity shocks that were poorly understood and insufficiently disclosed. Off-balance-sheet vehicles and internal cash-generation techniques further obscured risk rather than transferring it. When the 2008 financial crisis hit, these vulnerabilities became existential, forcing GE to rely on extraordinary government support. Later revelations—such as the massive insurance reserve shortfall—confirmed that long-tail financial risks had been buried beneath years of short-term optimization.
Huawei’s trajectory stands in sharp contrast. The company never allowed finance to become an independent profit center; internal financial functions exist primarily to support operations, investment, and scale. Capital allocation has been consistently directed toward research and development, manufacturing capabilities, and supply-chain resilience, even during periods of revenue pressure. Huawei’s private, employee-owned structure insulates management from quarterly earnings pressure, reducing incentives for accounting games or balance-sheet engineering. Finance serves production, rather than the reverse.
This contrast carries broader implications for the China–U.S. technology rivalry. Many leading U.S. firms increasingly emphasize capital efficiency, share buybacks, and margin optimization, reflecting a mature but highly financialized corporate model. Chinese technology leaders such as Huawei compete instead on productive capacity, technological depth, and the accumulation of real capabilities. In a world shaped by sanctions, supply-chain disruptions, and strategic competition, industrial cash flow and engineering competence prove more durable than financial leverage. The lesson echoed by Lights Out is clear: when finance displaces industry as the organizing principle of a firm, decline becomes a matter of time; when industry remains primary, endurance and renewal remain possible.
Performance Illusions and Organizational Truth: From Numbers Management to Reality Discovery
The contrast between General Electric’s decline and Huawei’s resilience can be framed as a clash between a “making the numbers” culture and a truth-seeking organizational system. As Lights Out: Pride, Delusion, and the Fall of General Electric makes clear, GE’s failure was not simply strategic or financial, but epistemic: the firm systematically privileged reported performance over operational reality. In doing so, it built an organization optimized to meet targets, not to understand itself. Huawei’s alternative model highlights how institutionalized truth discovery, rather than confidence signaling, becomes a decisive advantage in environments of uncertainty.
At GE, the imperative to hit quarterly numbers shaped behavior at every level. Missing targets carried severe reputational and career consequences, creating a climate in which bad news was feared, deferred, or concealed. Managers learned that dissent and realism were liabilities, while optimism and compliance were rewarded. Even internal audit and finance functions—nominally designed to surface risk—were incentivized to find accounting adjustments that would smooth earnings. Over time, this fear-based system suppressed early warnings and normalized practices that management privately understood to be unsustainable.
As a result, managerial effort shifted from fixing underlying problems to managing appearances. Accounting techniques such as service-contract “catch-up” adjustments, pension assumption changes, and off-balance-sheet transactions inflated reported profits without improving cash generation or competitiveness. These actions were often technically permissible, but strategically corrosive: they replaced operational discipline with narrative control. What later leaders derided as “success theater” allowed GE to project confidence even as its industrial core weakened.
The long-term consequence of this culture was that structural problems were discovered only when they became unmanageable. GE Power’s cash crisis surfaced just weeks before a leadership transition, despite years of reported profitability. Massive insurance liabilities, assumed to be long exited, suddenly reappeared as multibillion-dollar reserve shortfalls. Even core product failures, such as turbine blade defects, emerged only after widespread deployment and revenue recognition. In each case, the issue was not a lack of data, but a system that filtered out uncomfortable truths until markets or regulators forced disclosure.
Governance failures compounded the problem. The board, reassured by management’s optimism and coherent narratives, failed to press for rigorous interrogation of cash flow, risk exposure, and operational assumptions. By the time external scrutiny arrived—through SEC investigations or market collapse—the organization no longer had the internal credibility or institutional reflexes to respond effectively. The system had been designed to defend the numbers, not to challenge them.
Huawei’s organizational logic diverges sharply. Rather than suppressing bad news, it institutionalizes dissent through formal red-team structures, internal critics, and routines of self-criticism. Management explicitly tolerates short-term losses in pursuit of long-cycle technological bets, reducing pressure to disguise setbacks. Ren Zhengfei’s repeated warnings that success breeds complacency reinforce a culture in which confidence is treated as a risk, not a validation. Information is valued for its accuracy, not its convenience.
This distinction carries significant implications for the China–U.S. technology rivalry. U.S. firms shaped by capital markets and quarterly narratives risk strategic surprise when internal truth is subordinated to investor signaling. Huawei’s emphasis on early warning, realism, and internal contradiction makes it more adaptive under sanctions, export controls, and technological chokepoints. In competitive environments defined by uncertainty rather than steady growth, organizations that prioritize truth over optics are better positioned to endure. As Lights Out ultimately suggests, the danger is not failure itself, but systems that make failure invisible until it is irreversible.
When Scale Obscures Responsibility: Conglomerate Opacity versus Modular Accountability
The contrast between General Electric’s decline and Huawei’s adaptive strength can be understood through the tension between conglomerate opacity and modular accountability. As Lights Out: Pride, Delusion, and the Fall of General Electric documents, GE’s vast, centralized structure—once celebrated as a source of resilience—gradually became a system that obscured economic reality. Huawei’s organizational design, by comparison, emphasizes modular clarity, explicit ownership, and rapid recombination of capabilities. This structural difference shaped how each organization perceived problems, allocated capital, and responded to external shocks.
At GE, conglomerate complexity made it increasingly difficult to understand unit-level economics. Financial disclosures were dense, selective, and often intentionally opaque, reinforcing the idea that only insiders could truly grasp how profits were generated. Earnings were reported at the corporate level while the sources of those earnings—particularly accounting adjustments in long-term contracts or cash-management techniques—were left unexplained. Over time, this opacity eroded the ability of investors, directors, and even senior executives to distinguish genuine performance from accounting artifacts.
The corporate center amplified this problem by extracting value while diffusing accountability. Overhead costs, centralized initiatives, and internal transfers were pushed down into operating units, yet performance was judged against targets set from the top rather than against true economic returns. Decision-making authority was centralized, but responsibility for outcomes was fragmented. When divisions faltered, the causes were difficult to trace, and the corporate center remained insulated from direct blame. Even seasoned insiders struggled to assess the real condition of major units without physically visiting operations and reconstructing the numbers themselves.
This structure allowed weak businesses to survive far longer than market discipline would otherwise permit. Profitable units and financial operations routinely cross-subsidized underperforming divisions, masking deteriorating competitiveness. GE Capital, in particular, provided liquidity and accounting flexibility that softened quarterly results and delayed reckoning. Industrial businesses such as Power, Oil & Gas, and legacy manufacturing units appeared viable on paper long after their underlying economics had turned negative. The result was not strategic patience, but prolonged denial.
The consequences of this opacity became evident only when the system could no longer absorb the strain. Cash shortfalls, hidden liabilities, and failed acquisitions surfaced abruptly, often during leadership transitions or external scrutiny. By then, the problems were no longer incremental but existential. The conglomerate structure that once promised risk diversification instead concentrated risk by preventing timely exits, corrections, or restructurings.
Huawei’s organizational logic operates in the opposite direction. Its businesses are modular, with clearly defined profit-and-loss responsibility, even when they share platforms or technologies. Strategic initiatives are governed through war-room-style mechanisms with explicit owners, timelines, and escalation paths. Headquarters functions primarily as an enabler—allocating resources, coordinating capabilities, and removing bottlenecks—rather than as a rent-extracting center. This architecture preserves transparency while allowing flexibility.
The implications extend beyond firm-level management to the broader China–U.S. technology rivalry. Large U.S. conglomerates often struggle to reallocate resources quickly under pressure, constrained by opaque structures and internal cross-subsidies. Huawei’s modular clarity allows it to recombine capabilities—across chips, operating systems, cloud infrastructure, and power electronics—when confronted with sanctions or supply-chain disruptions. In environments defined by technological blockade and strategic uncertainty, accountability at the module level enables adaptation at the system level. As Lights Out implicitly warns, scale without transparency breeds fragility, while modular accountability turns complexity into a source of resilience.
Fragility by Assumption, Resilience by Design: Risk Blindness versus Stress-Based Planning
The divergent trajectories of General Electric and Huawei can be understood through a contrast between risk blindness and stress-as-baseline planning. As Lights Out: Pride, Delusion, and the Fall of General Electric shows, GE operated on the assumption that extreme shocks were unlikely and manageable, an outlook reinforced by decades of apparent stability and managerial confidence. Huawei, by contrast, built its strategy around the expectation that disruption, constraint, and hostility were normal conditions. This difference in how risk was imagined—and institutionalized—proved decisive.
At GE, tail risks embedded within GE Capital were systematically underestimated or ignored. Leadership believed that the company had largely exited the insurance business, yet retained long-duration reinsurance liabilities that were both poorly understood and deeply exposed to adverse outcomes. These obligations remained off the strategic radar for years, only to reemerge as a multibillion-dollar shock once auditors were forced to reassess them. Similar complacency characterized GE Capital’s exposure to subprime mortgages and commercial real estate, where internal warnings were acknowledged but subordinated to growth targets and short-term returns.
Compounding this problem was GE Capital’s dependence on short-term funding markets, particularly unsecured commercial paper. The scale of this exposure was vast, yet insufficiently modeled or buffered with committed liquidity backstops. Off-balance-sheet vehicles and internal cash-generation techniques further disguised the true fragility of the funding structure. Even as external critics warned of the risks, the organization treated continued market access as a given rather than a variable requiring constant stress testing.
As a result, crises were discovered reactively rather than anticipated. When funding markets seized in 2008, GE was forced into hurried appeals for government support while publicly insisting that its liquidity position remained strong. Only after unprecedented transparency—revealing the full scale of GE Capital’s balance sheet—did confidence partially return. The same reactive pattern repeated years later with insurance reserve shocks and critical product failures, each emerging suddenly after long periods of internal reassurance.
These failures reflected not merely technical gaps in modeling, but a deeper cultural and structural aversion to imagining worst-case scenarios. Risk was treated as something to be optimized away through scale, reputation, or financial engineering, rather than as a permanent feature of operating in complex systems. Leadership confidence substituted for institutional preparedness, leaving the organization vulnerable when assumptions broke down.
Huawei’s approach embodies the opposite philosophy. Its “spare tire” doctrine institutionalizes redundancy in critical technologies long before shortages materialize. Scenario planning treats sanctions, supply disruptions, and geopolitical shocks as baseline conditions rather than outliers. A conservative balance sheet, high cash reserves, and limited leverage provide room to maneuver when external constraints tighten. Stress is not an exception to be managed, but a design parameter.
The implications for the China–U.S. technology rivalry are significant. U.S. policy often assumes that chokepoints and financial pressure will induce rapid corporate failure. Huawei’s survival under sustained sanctions suggests otherwise: resilience was engineered in advance, not improvised under duress. As technological competition intensifies, advantage shifts away from those who assume stability toward those who expect disruption. Lights Out offers a cautionary lesson: organizations that do not plan for stress will eventually encounter it, while those that treat stress as normal can adapt faster when the ground inevitably shifts.
When Ambition Outruns Reality: Strategic Overreach versus Ruthless Focus and Contraction
General Electric’s decline and Huawei’s resilience illustrate the contrast between strategic overreach and disciplined focus. Lights Out: Pride, Delusion, and the Fall of General Electric shows that GE repeatedly expanded into declining, volatile, or low-quality growth markets, often driven by CEO prestige and the desire for headline-grabbing deals rather than underlying fundamentals. Huawei, by contrast, emphasizes selective engagement and systematic pruning, exiting unprofitable or politically risky markets to concentrate on core capabilities. This divergence reflects a fundamental difference in strategic philosophy: accumulation and scale versus focus and adaptability.
GE’s overreach manifested across multiple sectors. The company poured billions into oil and gas just before the 2014–2015 price crash, acquired high-risk commercial real estate and mortgage portfolios during the credit bubble, and invested in new business lines such as security, water filtration, and subprime lending that failed to achieve scale or profitability. These moves were often mistimed and poorly aligned with market realities, creating stranded assets and operational headaches. Even when the failures became apparent, the organization was slow to adjust, caught in momentum built by sunk-cost assumptions and prior commitments.
Legacy deals also reflected overreach driven by prestige rather than prudence. The NBC Universal and Alstom acquisitions, along with high-profile accounting “fixes” like the King Kong DVD adjustment, prioritized optics, market share, and executive legacy over disciplined evaluation of risk and value. In the case of Alstom, overpayment and strategic pride not only drained resources but also facilitated the eventual transfer of technology to competitors, further weakening GE’s industrial position. The pattern was consistent: high-profile bets were celebrated internally, even when financial or operational fundamentals were dubious.
Sunk-cost fallacies entrenched these losing trajectories. GE Capital’s continued expansion post-2008, the multibillion-dollar Predix and GE Digital investments, and overproduction in the Power unit reflected a refusal to acknowledge failure until consequences became unavoidable. Similarly, long-term care insurance liabilities were held for decades despite internal warnings, resulting in a $15 billion shock that surprised new leadership. Across these cases, commitment to prior decisions, rather than assessment of current viability, dictated corporate behavior.
Huawei’s approach contrasts sharply. The company demonstrates a willingness to walk away from unprofitable tenders, politically constrained geographies, or failed initiatives, reallocating resources to areas of strategic advantage. This ruthless focus preserves survivability, maximizes option value, and allows the company to respond rapidly to shifting technological or geopolitical conditions. Where GE clung to legacy commitments, Huawei treats exit and contraction as deliberate levers for strategic agility.
The implications for U.S.–China technological competition are clear. Firms that prioritize headline growth and historical prestige over disciplined focus risk entrenching vulnerabilities and creating stranded assets. Huawei’s philosophy of pruning, selective withdrawal, and concentration on core strengths enables resilience under sanctions, market disruptions, and competitive pressure. Lights Out underscores that strategic ambition without disciplined contraction is a recipe for decline, while ruthlessness in focus and exit can transform constraint into a competitive advantage.
From Rubber Stamp to Resilient Oversight: Board Complacency versus Governance That Forces Dissent
General Electric’s downfall illustrates the dangers of board complacency, where governance structures prioritized loyalty, optics, and ceremonial routines over critical scrutiny. Lights Out: Pride, Delusion, and the Fall of General Electric documents a board that deferred to CEO authority, failed to challenge major strategic bets, and became largely performative. In contrast, firms like Huawei institutionalize mechanisms that compel dissent, enforce independent oversight, and align leadership with long-term viability—demonstrating the strategic advantage of governance that does not accept unquestioned narratives.
Under both Jack Welch and Jeff Immelt, GE’s board repeatedly deferred to the CEO, treating the chairman’s vision as authoritative rather than contestable. Welch-era directors described themselves as performing the role of “applause,” with minimal debate or challenge. Immelt’s dual role as CEO and chairman further centralized authority, while board composition, succession decisions, and strategic messaging were tightly controlled. Directors later admitted being swayed by Immelt’s charisma, and regulatory observers noted that the board often failed to push back, leaving structural and financial risks unaddressed.
This deference translated into a lack of meaningful challenge on major strategic bets. High-profile deals—including the Alstom acquisition, the oil and gas expansion, and aggressive EPS targets—were approved unanimously despite internal warnings or clear market misalignment. Oversight of pensions, insurance liabilities, and GE Capital’s financing risks was sporadic at best, and key oversight committees, such as the finance committee, were quietly disbanded. The board’s acquiescence allowed overextension, misallocation of capital, and hidden risks to persist unchallenged.
Board governance increasingly became ceremonial. Meetings were overloaded with agenda items, directors often disengaged, and structured engagement—such as going around the table—masked the absence of substantive scrutiny. Members were selected for loyalty rather than independence or expertise, reinforcing a culture where oversight was symbolic. Post-collapse investigations and SEC settlements confirmed that management engaged in practices that the board either implicitly endorsed or failed to detect, such as deferred monetization, service contract accounting adjustments, and long-tail insurance liabilities. The board’s function as a check on management had eroded into performative ritual.
Huawei’s governance model contrasts sharply. Employee ownership aligns incentives with long-term resilience, independent directors possess genuine veto power, and the founder deliberately imposes term limits and succession rules to prevent personal dominance. Internal mechanisms such as structured dissent, scenario testing, and transparent accountability ensure that critical issues surface before they become existential threats. These practices create a culture where disagreement is normalized, risks are surfaced promptly, and strategy is continuously stress-tested.
The implications for the China–U.S. tech rivalry are profound. While Western firms with CEO-dominated boards can become captive to narrative and prestige, Huawei demonstrates that rigorous governance and enforced dissent can produce durable, adaptive organizations. Boards that compel challenge—not merely validate—are better positioned to navigate uncertainty, geopolitical pressures, and complex industrial competition, whereas complacent boards amplify the consequences of strategic misjudgment. Lights Out underscores the lesson: oversight without courage and independence is ultimately as fragile as the empire it seeks to monitor.
Illusion of Control versus Designed Anti-Fragility: Lessons from GE and Huawei
General Electric’s collapse illustrates the perils of an illusion of control, where managerial confidence, scale, and systems created the appearance of stability without real resilience. Lights Out: Pride, Delusion, and the Fall of General Electric documents how GE mistook scale for invulnerability, success for robustness, and stability for adaptability. From the “Borg” corporate center to GE Capital’s sprawling operations, the company built processes and structures optimized for predictability—but dangerously untested against shocks. In contrast, firms like Huawei institutionalize anti-fragility, designing for stress, redundancy, and rapid reconfiguration.
GE’s sheer scale bred arrogance. Immelt expanded the corporate center into the “Borg,” a massive centralized apparatus intended to capture synergies across divisions through “boundaryless sales.” Yet this scale obscured unit economics, misaligned incentives, and reinforced the myth that top-down coordination alone could manage complexity. Immelt’s own remarks—“anyone could have run GE in the 1990s… even a German Shepherd”—underscored the belief that scale and systems were the source of success, rather than rigorous analysis or operational discipline. The board’s deference and a culture of “applause” reinforced this hubris.
Success was repeatedly mistaken for robustness. GE’s decades of consistent quarterly earnings masked rot beneath the surface. Power’s profits were often paper gains from accounting adjustments, GE Capital hid industrial weakness, and deferred monetization became a systemic crutch internally described as a “drug.” High-profile commitments, such as the $2 EPS pledge for 2018, exemplified the illusion of mastery: leadership equated goal achievement with operational competence, ignoring the growing fragility of the underlying business. Even near-catastrophic events—WMC mortgage fraud, commercial real estate overexposure—were treated as anomalies rather than signals.
The company’s systems were designed for stability, not shock. GE’s matrix management structure, with employees reporting to multiple bosses, enforced target discipline but prevented cross-unit learning and made systemic risk invisible. A culture that punished failure while incentivizing concealment of bad news ensured surface-level consistency at the expense of operational insight. The Corporate Audit Staff, meant to serve as an independent control, became complicit in earnings manipulation. When the 2008 financial crisis struck, GE’s reliance on commercial paper evaporated, and nearly a decade later, Power units were discovered “out of cash,” revealing how little the systems could withstand stress.
Huawei, by contrast, designs its organizations for anti-fragility. Adversity is assumed, redundancy is accepted as a cost of sovereignty, and systems are continuously reconfigured rather than maintained in equilibrium. Critical technologies are duplicated, supply shocks are modeled as normal, and scenario planning is routine. This approach ensures that shocks degrade performance gradually and predictably, rather than collapsing the system entirely.
The contrast is stark: GE’s illusion of control rewarded confidence in appearances while hiding vulnerability, leaving it exposed to cascading crises. Huawei’s designed anti-fragility treats uncertainty as baseline, optimizing for resilience and adaptability. In a prolonged techno-economic rivalry, survival and operational continuity under stress matter far more than calm-period efficiency, demonstrating the strategic advantage of systems built to endure shocks rather than merely project competence.
Final Thoughts: Systems Insight
Lights Out: Pride, Delusion, and the Fall of General Electric offers a stark lesson in how leadership choices, cultural inertia, and short-term optics can transform a storied corporation into a struggling institution. GE’s collapse stemmed from optimizing for appearances of strength, hiding vulnerabilities, and punishing dissent—creating an illusion of control that masked systemic fragility. By contrast, Huawei built its organization around the expectation of weakness, error, and external pressure, designing anti-fragile systems that assume shocks are inevitable. In a China–U.S. tech rivalry defined by sanctions, fragmentation, and uncertainty, this distinction is decisive: anti-fragility and institutional humility consistently outperform superficial excellence and dominance.
References
- Lights Out: Pride, Delusion, and the Fall of General Electric. Thomas Gryta, Ted Mann. 2020