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Jack Welch: Managerial Genius Who Made One Disastrous Mistake

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Jack Welch was an extraordinarily successful CEO, who in two decades made GE—a legacy company if ever there was one—the most valuable company on Earth, and then lived long enough to see it all fall apart. When Welch stepped down, GE was the envy of the business world and had a reputation for training superb managers and being a giant with the agility of a ballerina. By the time Welch died, the company had become a stunning symbol of gargantuan strategic mistakes and executive incompetence.

But the fall of GE doesn’t diminish Welch’s achievements during his years in the corner office. His failure wasn’t in how he ran his ever-expanding, ever more profitable kingdom but, to be blunt, in who he picked as his successor. This was tragic, as Welch had a number of capable choices, many of whom went on to manage other major corporations. My grandfather, B.C. Forbes, founder of our company, always said that you’ll learn more about a business’s prospects by accurately sizing up its CEO—what he liked to call “the head knocker”—than by studying its balance sheet.

 

When Welch took the reins in 1981, GE, like the U.S. economy, was tired and underperforming. The company was in scores of businesses; in a sense, it was a mutual fund that also actively managed the operations of its holdings. Welch was a driven, high-energy leader, who shook up GE from day one and never stopped. Being around him was a bracing experience, as you visibly felt his almost superhuman focus and intensity. He was also refreshingly outspoken. I had several chats with him about the Federal Reserve and its belief that prosperity causes inflation, a mistaken notion that Welch ripped into with gusto. 

Under Welch, GE remained a multidimensional outfit but one that relentlessly shed underperforming operations, as well as “unproductive” employees. Promising entities and industries were actively pursued. Deals were done at a dizzying pace. 

The most notable pursuit of opportunity lay in finance. The booming 1980s and 1990s saw the creation of an array of new instruments to finance new and existing businesses and shake up stodgy, underperforming ones. GE didn’t let its industrial legacy get in the way of aggressively expanding in this arena. GE Capital became a colossus and a profit machine.

PICTURE

The booming global economy was a helpful tailwind during Welch’s reign, but make no mistake, GE was at the forefront of events. Its total return to investors easily outpaced the broad stock market. Despite the firings and layoffs, GE’s payroll expanded, as did revenues. 

The economic crisis of 2008, seven years after Welch retired, nearly sank GE, because GE Capital was dependent on short-term financing, which just about dried up during the panic that fall. GE Capital had also not been closely or skeptically managed, as other parts of GE traditionally had been. These blunders lay with Welch’s successors.

But there was a bigger mistake. Unlike it had done with finance, GE failed to see high tech as a ripe field with enormous long-term potential so didn’t go for it aggressively and nimbly. Its high-tech forays were too late and stultifyingly bureaucratic. 

GE’s story in this century is a textbook example of the fact that in free markets, today’s success doesn’t guarantee tomorrow’s. It’s a lesson that too many people overlook, particularly regarding the seemingly unassailable power and position of our high-tech biggies. 

– Steve Forbes, Chairman and Editor-in-Chief of Forbes Media.

Entrepreneurs

Houseparty: Is The Hit Coronavirus Lockdown App Safe?

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Houseparty, with 10 million downloads on Android and millions more on iPhones (Apple won’t confirm exact numbers), has become one of, if not the hit app of the coronavirus shutdown. Vogue even called it “the quarantine app you need to download immediately.”

It lets users start and join a handful of games – Heads Up!, Quick Draw! and Trivia – all with live video and chat. And, thanks to COVID-19 restrictions on people leaving the house, the Epic Games-owned property is scoring many more fans.

But Is Houseparty Safe To Use?

There is some good news on the safety front: there are no obvious flaws or dangers with the app. Forbes had cybersecurity and privacy researcher Lukas Stefanko take a look at the Android version of the app to see if there were any other potential issues. He said there was nothing of concern.

“I analyzed the app’s permissions usage and since the app provides video chats with your friends it is logical that requested permissions are necessary. I haven’t found any shady misusing of them by the app,” said Stefanko, a researcher with cybersecurity firm ESET. “The app doesn’t provide a lot of in-app options and settings, which creates less scenarios for exploiting security issues.”

From a privacy perspective, there’s one obvious issue that some might want to note before diving in: games are open to any of your friends and any of your friends’ friends, unless you lock the “room” where you’re playing. That’s easily fixable, however, with a simple hit of the padlock button at the bottom of the screen. If you don’t lock rooms down, there’s a chance people you don’t know will invade your fun.

What Does The Privacy Policy Say?

There’s also nothing obviously outrageous in the Houseparty privacy policy. Perhaps the most concerning, though, is that it can collect “anonymized and aggregated information, such as de-identified demographic information” and “de-identified location information.” As seen in recent news about antivirus company Avast, even when location data is “de-identified,” it’s still possible to find out who the person is by linking it with other information. (That kind of aggregated location tracking is something global governments have considered using to follow the spread of coronavirus. Perhaps they could ask Houseparty to help out as they’ve reportedly done with Facebook and Google.)

Whilst the app collects contacts so you can find friends to play with, the company promises it “will never share your phone number or the phone numbers of third parties in your contacts with anyone else.”

There is the standard warning that user data can be used for more targeted advertising. If you’re concerned enough about that, there are further steps you can take to protect your private information and still use Houseparty.

How To Use Houseparty Privately

There are a few things you can do to boost the privacy of your Houseparty games. First, head to settings, which can be found by first clicking the smiley face at the top left of the screen, then hitting the cogwheel button when the menu appears.

Then you can turn on private mode, which locks every room you’re in. You can also go to the permissions section and turn location on or off. It’s turned off by default, so leave it that way if you want to ensure your whereabouts are private. And if you want to go even further protecting your identity, use a fake name and birthday in the profile section.

It’s also possible to opt-out of receiving any emails, texts or notifications about Houseparty offers. Go to section 5 of the Houseparty privacy policy (it’s brief, don’t worry) to find out the best way to opt-out of each. To withdraw consent for Houseparty to use any of your personal data, users can also email [email protected]

One other neat trick learned whilst using the iPhone version of the app: hold down on the Houseparty icon and click on ‘Sneak into the House.’ That means that when you go in, none of your contacts will be notified.

Thomas Brewster, Forbes Staff, Cybersecurity

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Billionaires

How To Become A Billionaire: Nigeria’s Oil Baroness Folorunso Alakija On What Makes Tomorrow’s Billionaires

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One of only two female billionaires in Africa, with a net worth of $1 billion, Nigeria’s oil baroness Folorunso Alakija elaborates on the state of African entrepreneurship today.

The 69-year-old Folorunso Alakija is vice chair of Famfa Oil, a Nigerian oil exploration company with a stake in Agbami Oilfield, a prolific offshore asset. Famfa Oil’s partners include Chevron and Petrobras. Alakija’s first company was a fashion label. The Nigerian government awarded Alakija’s company an oil prospecting license in 1993, which was later converted to an oil mining lease. The Agbami field has been operating since 2008; Famfa Oil says it will likely operate through 2024. Alakija shares her thoughts to FORBES AFRICA on what makes tomorrow’s billionaires:

What is your take on the state of African entrepreneurship today? Is enough being done for young startups?

There are a lot of business opportunities in Africa that do not exist in other parts of the world, yet Africa is seen as a poor continent. The employment constraints in the formal sector in Africa have made it impossible for it to meet the demands of the continent’s working population of which over 60% are the youth. Therefore, it is imperative we harness the potential of Africa’s youth to engage in entrepreneurship and provide adequate assistance to enable them to succeed.

Several governments have been working to provide a conducive atmosphere which will promote entrepreneurship on the continent. However, there is still a lot more to be done in ensuring that the potential of these young entrepreneurs are maximized to the fullest. Some of the challenges young startups in Africa face are as follows: lack of access to finance/insufficient capital; lack of infrastructure; bureaucratic bottlenecks and tough business regulations; inconsistent government policies; dearth of entrepreneurial knowledge and skills; lack of access to information and competition from cheaper foreign alternatives.

It is therefore imperative that governments, non-governmental agencies, and the financial sectors work together to ameliorate these challenges itemized above.

The governments of African nations should provide and strengthen its infrastructure (power, roads and telecom); they should encourage budding entrepreneurs by ensuring that finance is available to businesses with the potential for growth and also commit to further improving their business environments through sustained investment; there must also be a constant push for existing policies and legislation to be reviewed to promote business activities.

These policies must also be enforced, and punitive measures put in place to deter offenders; government regulations should also be flexible to constantly fit the dynamics of the business environment; corruption and unethical behavior must be decisively dealt with and not treated with kid gloves. We must empower our judicial system to enable them to prosecute erring offenders with appropriate sanctions meted out. There should be no “sacred cows” or “untouchables”. The same law must be applied to all, no matter their state or position in the society; non-governmental organizations can also provide support for them through training and skills acquisition programs that will help build their capacity; they could also provide finance to grow their businesses; more mentorship programs should be encouraged, and incubators of young enterprises should be supported by public policy aimed at improving the quality of these youths and their ventures; and also, avenues should be created where young entrepreneurs will be able to connect, learn and share ideas with already successful well-established entrepreneurs.

What, according to you, are the attributes needed for tomorrow’s billionaires?

There is no overnight success. You must start by dreaming big and working towards achieving it. You must be determined to succeed despite all odds. Do not allow your setbacks or failures to stop you but rather make them your stepping stone. Develop your strengths to attain excellence and be tenacious, never give up on your dream or aspiration. Your word must be your bond. You must make strong ethical values and integrity your watchword. Always act professionally and this will enable you to build confidence in your customers and clients. 

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Entrepreneurs

The Sun King Bows Out: Legendary Hotelier Sol Kerzner Has Died

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Solomon (Sol) Kerzner, one of the world’s most innovative hoteliers, founder of the Southern Sun hotel group, Sun International and Kerzner International, has died of cancer surrounded by his family at the Kerzner family home, Leeukoppie Estate, in Cape Town, South Africa. Always a maverick, Kerzner was a titan of the hotel and resort industry who redefined the scale and scope of integrated destination resorts worldwide. He was 84.

The son of Russian immigrants, Kerzner was born in Johannesburg, South Africa, in 1935. The youngest of four and the only son, Sol was a working class boy from a rough neighbourhood but he would grow up to become one of the most influential entrepreneurs in South Africa. Having founded the country’s two largest hotel groups — Southern Sun and Sun International — Kerzner would go on to achieve international prominence with groundbreaking resorts that helped transform the tourism industries not only of his home country but of Mauritius, The Maldives, The Bahamas, Dubai and other important international destinations.

Kerzner’s career in hospitality began in 1962 when he decided to leave the accounting profession and purchased The Astra, a small inn in Durban, South Africa. Kerzner quickly transformed this rundown establishment into one of the most popular hotels in the area, a success that whetted Sol’s insatiable appetite for innovation and demonstrated a trademark ingenuity that would define his 60-year career.

Kerzner’s most monumental and controversial achievement was the creation of Sun City.  Here, in an area north of Johannesburg where there were no roads and no infrastructure, Sol imagined and delivered the most ambitious resort project in all of Africa. Commencing work in 1975, over the next ten years, Kerzner built four hotels, a man-made lake, two Gary Player golf courses, and an entertainment center with an indoor 6,000-seat arena, which played host to a world-class roster of artists including Queen, Frank Sinatra, Liza Minelli, Shirley Bassey, as well as huge world title fights, and many other spectacular events. Once again, Kerzner defied the naysayers to train a best of breed workforce and to operate Sun City on a totally non-racial basis. Even the most cynical of visiting overseas journalists had to concede defeat in trying to find racism behind the operation of the vast resort.

Sol is survived by his children Andrea, Beverley, Brandon and Chantal and ten grandchildren. His eldest son, Howard ‘Butch’ Kerzner died in 2006.

Sol Kerzner will be buried at a small, private funeral with only immediate family in attendance.

Back in 2014, the Sun King was featured on the cover of Forbes Africa for the 3rd Anniversary Issue of the magazine.

In 2018 he was honored with the Life Time Achievement award at the All Africa Business Leaders Awards (AABLAs).

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