The full text of Dialogue/Speech/Discussion in the first "Nikkei Global Management Forum"

[SEKIGUCHI] Thank you very much, Mr. Welch. Thank you for joining us today for the Nikkei Global Management Forum. This conference is organized for the business leaders who want to be the top leaders for the 21st century. Jack Welch, GE, have been well-received as a good business model for Japan, and people would like to hear you in person. GE is generating over 100 billion dollars in revenue and 10 billion dollars in profit per year, and still growing very fast. First of all, we'd like you to explain your philosophy of management and why GE has been so successful.

[WELCH] Well, I think the opening remarks summarize what we all try to do. Before I give any great words of wisdom, I want you to know that in the 18-19 years that I've been doing this, I've probably made every mistake there is to make in business. And, I'm reminded when I see Mr. Inamori of Kyocera that when we went up against him head-to-head in the ceramics business, he brushed us aside like a little fly.

So, I give you these comments with a certain amount of humility born out of a long history of trying a number of different things.

I think if you look at the philosophy we have at our company, anyway, it's a pretty simple one. It is "everyone counts" -- absolutely every person counts. No mind can be wasted. We work desperately to get everyone involved. It doesn't matter how many stripes you have on your shoulder, the rank in the organization -- the best idea wins everyday. So, that's a key part of how we think about business.

The second thing is: we try to become a learning organization. I believe a company's ultimate competitive success is its ability to learn, to transfer that learning to other parts of the company and act on it rapidly. To look everywhere at this conference, other companies, no one in the world manufactures products any better than Toyota. So, we run to their factories and try to learn. Hewlett Packard does a nice job of product introduction cycles. We run to their factories to learn. Motorola started Six Sigma; we ran to their factories and learned, and expanded it from there.

So, around the world, GE people everyday wake up trying to find a better way. And I think that on that fundamental structure -- and then hiring the very best people that can work, motivating them and rewarding them is a model that works, for us anyway.

[SEKIGUCHI] During the 80s Japanese management was considered a good business model in the United States. But now Japanese companies who are business leaders are having problems. I wonder what are the problems, do you think? And how can Japanese resolve them?

[WELCH] These things go in pendulums. In the 80s, America was dead -- that was the view -- Japan would conquer the world in business. Now, people say America is going to solve the problems. The Japanese economy and the Japanese business process is going through a cyclical change. But you still have a highly educated workforce, great leadership in many companies.

One of the things that has hurt Japan, a bit if anything, is that the ability to change rapidly in an increasingly global world has not been as easy in the short-term for Japanese companies. But, I've been confident -- you know I've said this to your paper several times -- I'm very confident that this is just a time, a snapshot in time, and that Japan will adapt with all its resiliency to these changes.

But the speed of change has been a mismatch for some of the deep culture in Japan. But that will all come about and be ironed out early in the next century.

[SEKIGUCHI] You mention cultural things. A particularly serious problem that we are facing is employment. Companies want to be very profitable, but business leaders are expected not to lay off people in this country. I think you cut 170,000 people in your first three years of restructuring General Electric. I wonder what the Japanese business people can learn from your strategy, and I wonder how we can implement that scheme.

[WELCH] See, there's an amazing misconception about cutting.

Our employment was reduced by well over 100,000 people. We sold our semiconductor business to another company. We sold our housewares business to another company. We sold our air conditioning business to another company. We sold our television manufacturing business to another company. We sold the largest coal company in the world in Australia to another company.

We restructured our company, yes some jobs were lost. But we sold off businesses that we thought we could not compete in the next decade and twenty years ahead. And, we didn't hold on to weak businesses.

So, I think you and your readers ought to think about what restructuring is. It's taking weak businesses and putting them together with strong businesses in another company so that they can flourish.

One of the biggest sins of management -- and if I may say so, a bigger sin in Japan than many other places (with apologies I say this) -- is the idea that you hold on to number four and number five and number six businesses under the umbrella of, quote, "good, kind management to employees."

I would argue that that's the cruelest form of management. Everyone of you that keeps a weak business, a tired, sick business in your company, subsidiary that isn't doing well, is being cruel; it is an abuse of power, because you are sending human beings who are on this earth for something like 75 years, who spend 40 years of their life working in a company, and you send them every day to a hopeless situation under the umbrella of "kind Japanese lifetime employment."

They can have lifetime employment by being merged with a strong company, so that they go to work every morning with their eyes lit, their faces smiling, instead of drudging off to those terrible subsidiaries that sit in number four, five and six position.

My challenge to you is to make winners out of every business in your company. Don't carry losers. Merge losers with winners for greater strength. That's what a kind manager does; that's what a good manager does.

It's not this false kindness of keeping people staring out a window, running an elevator or doing something else. It's giving them a real job in a winning environment.

[SEKIGUCHI] I understand what you are saying, but please think about this case: If I am an employee at General Electric, and I really like General Electric, and although I work in a bad sector, I might be willing to work for General Electric for my life. See, in that case, what would you suggest to that employee?

[WELCH] I think you work for businesses. In General Electric, if you're a great aerospace engineer, you like the aerospace industry, you're excited about it, when we merge you with Lockheed Martin, you get a bigger field to play in. Your life is more exciting. You don't leave your factory, the factory is sold. The plant is sold. You have a chance in a bigger business to participate.

GE is a series of businesses. It's a series of human beings. Now, taking them to greater environments is a far better game than keeping them in a terrible environment and saying, "They work for GE."

I wouldn't want to work for any certain company in a terrible environment for 40 years of my life. I want to work in a good business. That's why I joined business. And, I want people in GE who want that just as much, who want to work in great businesses, who want to win in global markets, who want to excite employees, who want to reward employees, who want to see employees flourish.

God almighty, how do you want to go in and watch people with their heads down, no smiling, working in hopeless situations? That is crazy! That's not culture, that's not kindness; that's cruelty.

[SEKIGUCHI] But when you became CEO of General Electric, I think that you already knew which section is winning and which is losing. That's why you could make a choice. But now we are coming into the really new economy -- the Internet is typical -- where new things are coming. We can't choose which businesses will really win in the future.

[WELCH] Look, I can remember going to a European company and sitting down with a CEO in the late 80s. It's a Dutch company similar to GE. And we had wine and we had dinner. And he told me his view of the world. And I told him my view of the world.

We got in the car on this rainy, damp night and drove to Amsterdam. You can imagine the Dutch night, misty. And I was with my partner Paulo Fresco. And I turned to him and I said, "One of us are gonna get fired in the next three years." 'Cause his view of the world and my view of the world are upside down.

The moral of the story is: I was lucky so I'm sitting here. But in the end, we all make these bets.

I got out of the semiconductor business, which has been a great business for some people. I got out for two reasons: One, it was highly cyclical and two, it demanded lots of capital. I thought I could deploy GE capital better elsewhere, and I didn't want the cyclicality that comes with it. A decision.

By getting out, we were able to put R&D in GE into key businesses like power systems, medical, aircraft engine. Many of our traditional competitors -- Japanese and Europeans -- all poured billions into semiconductors. They didn't invest in these other businesses that we had. So, we got a big lead and jumped out in front and we weren't putting money up.

For some years they looked brilliant because when semiconductors go up, they go way up. The problem is that when they go down, they go down even faster. But, they're always taking big amounts of capital.

Now, that was a huge decision that could have been right or wrong. And there is no right answer. For us it was right. There's no perfect answer to any of this. For us, it was right.

Now, as we go into the next century, it's clear that most of us in this room know pretty much which businesses of ours we'd like to get out of, which businesses we'd like to add. In the last 90 days, we've made 64 acquisitions, places we want to go -- almost one a day. Last year, we made 108 acquisitions, two a week.

So, we know where we want to go. And, we're also getting rid of some things. Time will tell whether my successor is sitting here 10 years from now.

[SEKIGUCHI] Well, you are already in the number one, number two situation in every market. There might be a chance that you might fall into number three or number four.

[WELCH] I'd either find a way to get back into number one or two, or get out. I don't want our organization going to work in hopeless situations. When number one sneezes, number four gets pneumonia. The impact on the smallest person is enormous.

[SEKIGUCHI] Let me put my question this way. Your annual sales in your service sector already has a 60% share. And I heard you are expecting to have 75% by the year 2000. I assume GE has been a kind of general electric company since Thomas Edison founded it. But I'm very skeptical about the concept of the company. I wonder what is your company's mission now? Is that a manufacturing company or a financial company, or whatever?

[WELCH] You are making a mistake in that question that every journalist makes. You're either in one thing or the other. How do you become a great services company? You only become a great services company if you have great technology.

For example, let's take aircraft engines. GE has the 115,000 lb GE90 driving the Boeing 777X, the newest plane in the world, the highest thrust engine in the world. Let's take power systems. GE has the H turbine -- newest introduction, highest firing temperature, lowest emissions, highest efficiency -- just being introduced. Let's take medical systems. GE's LightSpeed is two years ahead of anybody else in terms of scanning speed and ability for resolution.

That's all because of big investments in R&D to drive products. Once you get that technology, you migrate the technology down across your install base. You cannot become a services company -- either in financial services where intellectual capital is the issue or in manufactured products -- without great technology.

Otherwise, you become just a wrench turner, an oilcan producer. You've got to provide technological solutions as a service company, not light overalls and wrenches. So, you can't be a services company without being a technology company.

What makes services expand so much faster is services are as wide and as large as your imagination. You can see all the opportunities that come from it.

When we were selling jet engines, you put two or four on a wing -- that was it. Now, we overhaul them. Now, we have in-flight monitoring of the engines. Now, we lease the planes because we have contacts with the airlines. Now, we do pilot training. All these things from broadening the horizon of services.

So, great products get you there, and then your imagination takes the service thing as wide as you can dream. Without great products, though, you get nowhere.

[SEKIGUCHI] But although you may spend a lot of money in R&D, we have not had a lot of new invention, or really new technology out of General Electric for the last two decades.

[WELCH] Why don't you give me in the last twenty years the great new inventions -- why don't you give me some of them?

[SEKIGUCHI] Well, computer or Internet, or Internet-related things...

[WELCH] We're all over the Internet. We're users of the Internet. We're massive users of the Internet. We've got billions of dollars of sales on the Internet. The Internet isn't a business. It's an enabler of business.

Computers we chose not to be in. Semiconductors we chose not to be in.

But we have all the technology in power -- 13 billion dollar company, leading everyone by a mile. Medical systems -- leading everybody by 10-15 points of share. In aircraft engines, we've gotten close to 60% of the orders for 10 years of all the new engines.

So, that's where you put your technology.

There hasn't been a new polymer invented in the last 10-15 years -- there are combinations of polymers.

I find our research taking our leading positions to greater things by always pushing the envelope, but I don't particularly think -- dabbling in something new; I haven't seen a lot of new things. I've seen a lot of expansions of existing things.

[SEKIGUCHI] NBC invested money into Snap a few years ago. I think that's a good decision, but I think that GE is not a really major player in the Internet world, now. Microsoft is now exceeding in market capitalization beyond General Electric. So in that sense, GE does not have the image as a leader of the economy. When I visited the company General Electric Information Service two years ago, they said that "General Electric is rather behind because my boss does not really understand the technology." How would you respond to that?

[WELCH] Well, I think without question that I was not the first person to the Internet. No question. Microsoft's market cap is an appreciation of the great growth rate Microsoft has had. But that has nothing to do with General Electric. General Electric's market cap has grown 25% a year for 18 years, to now 415 billion dollars of market cap. We'll put that record up against most people. Twenty-five percent a year for 18 years.

Now, Microsoft has done a fabulous job. Congratulations. Hats off. They've got a great industry; they're doing a great job. But that has no bearing on us. How are we doing against the players that we play against.

[SEKIGUCHI] Today's theme is kind of leadership. What kind of leadership is needed for business people? If you compare Bill Gates and you, yourself; Microsoft's Bill Gates is kind of a new type of leader in the world. And, of course, you're a well-admired person in the world. But, how do you compare those two people.

[WELCH] Well, he's a lot richer. And, he's probably a lot smarter. He knows his industry much deeper than any industry I know. The last business I knew was the plastics business -- really knew. So, Bill is a pioneer, a terrific guy. He's gotten rich. A lot of his people have gotten rich. He's brought great innovation to the Internet. I have nothing but admiration for him.

I have many businesses. My job is building an organization of leadership of people.

We have different jobs. So, he's richer, smarter. He's probably done a few other things better. But I can beat him in golf.

[SEKIGUCHI] But I heard recently you started e-mailing a lot and you sent your information to your colleagues via e-mail. I wonder how such new technology will affect your management style.

[WELCH] It will affect all of our management styles by the fact that information will be available to everyone instantly. So, everyone is going to start with the same fact base in a company. And, so knowledge won't be power anymore. The manager who withholds information will no longer have anything new on people.

A leader will have to be coach, energizer, excite people, lead them. But he won't be able to get their authority from (inaudible) of power.

As for me, I use e-mail for two purposes: one is for general information to 400,000 employees that we send out after every key meeting so that everyone has the same facts that we just talked about at our meeting within an hour, everyone in the organization around the world.

The second thing I use e-mail for is on trips like this, or on routine communications to people. As you stop at each place, you send them a message back. It's very easy, very handy -- do it in your own timeframe.

But when I still have something absolutely critical that I want to get done, I pull out the black pen, I get the paper and I pour into the letter and I fax it to everyone. I find e-mail doesn't give me enough emotion. It's sort of passionless. The thickness of my pen, the thickness of what I write generally indicates the intensity of the issue. So, I find a fax more helpful in those things.

[SEKIGUCHI] I'd like to discuss the economic situation in general related to IT. Chairman Greenspan of the Federal Reserve Board mentioned that the U.S. economy is coming into a new phase, the so-called "new economy" since two years ago. I wonder whether you agree with him and how you observe the current U.S. economic situation.

[WELCH] Well, I'm not sure how to describe what's happening, but let's talk about some results. We've had steady growth. Unemployment is low. There is no inflation. And, consumer confidence in America is very high. As a result of that, right now in this period, we're enjoying relatively low interest rates and a long nine-year expansion.

I'm not smart enough to know exactly how long it will last. I know information is an important part of it. I wouldn't be able to quantify exactly how much of it is because of more rapid information.

Why don't you just for a moment (inaudible) if I could get the audience to think back to the minute to when I got my job. It was December of 1980. 1980. Now, let's assume that in December of 1980, although no one had ever heard of me, I was sitting on this stage and I had a reporter asking me questions.

Here's how the questions would have gone:

"Do you think American manufacturing is finished and Japan has taken over the world in manufacturing?" That's question number one he would have asked me.

Question number two he would have asked me, "Inflation is now 17% in America. Will double-digit inflation go on forever?" That's what he would have asked me. Reporters were asking those questions then.

Then the third question he would have asked me, "Oil is 35 dollars a barrel today, and we think it's going to go to 100, if you can get it. What do you think of oil going to 100 dollars, Mr. Welch? And, will there be any oil available?" Those were the questions I was being asked when I started the job.

What's the importance of telling that story?

How many of you if I were here three years ago, do you think the questions from the magazine writers and news press would have been, "How are you going to deal with the upcoming Asian crisis?" No way. Not one of them wrote about the upcoming Asian crisis. The point of the story is: It's not exactly what you predict; it's how you react, how agile an organization is to deal with whatever happens. That's the critical part of the story.

Most of us aren't able to predict Asian crises. I don't know whether this economy is going to go perfectly straight up as it has for nine years. I don't know whether there's a "new economy." I know there's some changes in it. I also know I better have a company that no matter what happens has got leading business positions that can react to it, and react to it fast.

So, we spend less time worrying about exactly what's going to happen precisely, and a lot more time being sure that we can react to it.

[SEKIGUCHI] But in such a new economy, I think there might be a lot of new problems that we are facing. For example, intellectual property infringement, privacy issues, and speculative money is moving around the world and hurting some in certain countries, or manufacturing industries. What do you think about the problems that we are facing?

[WELCH] Well, let's start with speculative money. Speculative money only works when people understand flaws in an economy, see economic imbalances and go invest in it because a country has not had a good fiscal policy or a good monetary policy. So speculative money is only a discipline on governments and businesses that aren't behaving appropriately. It clearly does open up governments and regions to more scrutiny. The first part of your question was...

[SEKIGUCHI] Intellectual property issues.

[WELCH] No question. I'm sure when we left the farm and went to the industrial revolution, we had to deal with a million different things. And we are going to have to deal with issues like privacy. Whole businesses are going to change. How would you like to be in the distribution business in Japan right now? How would you like to be counting on distribution? Distribution is going to change totally. All the inefficiencies of distribution are going to disappear. Now how long it takes to disappear in Japan, I don't know. But you can sure bet your life that people are not going to go through three stages to get a product from here to here when everybody can look at how to get the product fulfilled directly. So all of the inefficiencies in these systems are going to be taken out. And there is going to be dislocation. But it's going to happen. It's going to happen sure as you can bet you're sitting here that it's going to happen.

So there are going to be all kinds of changes. This is a revolution that is bigger than anything in our lifetimes. And we are going to have to deal with it in a whole myriad of new ways, many of which we don't even understand yet.

[SEKIGUCHI] You mention the government's role. I wonder what you expect from the government because a lot of economic activities are now beyond the governments' sovereignty. For example, your software business, software manufacturing comes from India. I read that 30% of your software is from India. What can you expect of the government?

[WELCH] What we want from governments is a set of laws and rules. That's all. We expect a sovereign government to give us the play book if you will. What you can do within the playing field. Define the boundaries. For example, the only time that you like regulations is if you go to a country that doesn't have any. Think about that. When you can't protect your intellectual property. When you don't have bankruptcy laws. When you can't have protections for civil behavior. So in the end we expect a government to provide a consistent, strong legal system with laws that we understand aren't changed by humans with a stroke of a pen.

That's why in the midst of this crisis, we have invested so heavily in Japan. We believe that this country, with it's set of morals and laws, is fundamentally sound and will grow in the next century. We think progress has already begun. We didn't invest a dollar in Russia, not a dollar because we had no comfort that the rules of engagement were defined. So I think it's clear that governments have a big role. Fair, open playing field with defined rules.

[SEKIGUCHI] Isn't there any conflict between the benefits of the private sector or private companies and the benefit of the country?

[WELCH] Every smart leader understands one thing. Please come to my country, employ my people, let them reach their dreams, be very profitable so I can get the tax revenue. It's that simple. Smart leaders understand that. Good leadership understands that. And you've seen that. Invest your capital in my country so foreign direct investment increases. Employ my people. Be profitable and pay my government taxes so I can educate the young.

[SEKIGUCHI] We received a lot of questions for you from the floor so I'd like to read some questions. What is needed for the Japanese business executives? What is lacking from the Japanese business managers? What would you suggest that Japanese companies do to resolve the current situation in Japan?

[WELCH] I don't have the magic formula for telling Japan how to do things. But I do have one feeling that, as I opened up with...let me tell you how I recruit against Japanese companies. I try and tell our people, I try and tell the young Japanese that I meet, "Come join us." You won't have to wait your turn. You won't have to get my age to get a good job. Opportunities are everywhere. I'll give you stock options. I'll let you participate in the ownership of the company. And if you are 30 years old and you want to run a business, you can do it in my company. If you are a woman, you have lots of opportunities.

That's how I recruit. Whether or not that is helpful, I have no idea. Maybe it's not going to work. So far it has worked very well. We get very young excited people, energized, doing all kinds of things. My advantage is I can show -- I have 17,000 employees now in Japan -- I can show them great career paths and they don't have to wait until they are 50 to get a good job. I don't know if that's true in Japan or not but it helps me recruit.

[SEKIGUCHI] The high growth of General Electric is coming from overseas. So I wonder how you persuade local people to understand GE's values or GE's philosophy. Every country has a different culture and customs.

[WELCH] As I told you in the very first thing, we only have two things. Give people voice and give them human dignity. Don't make them do silly jobs. Don't make them do menial tasks. Don't make them wait until they get grey to get promoted. Excite them. Everybody in every country, whether you're American, Indian, Chinese or Japanese, you want to have voice in your institution and you want to have dignity and pride in your job. That is what we sell everyday. I'm not the big shot. They are equal to me in ideas. Away we go and have discussions about ideas and best practices. So, I don't think if you had something that was cultural and you tried to transfer it, it might be very difficult. Respect the local culture but give people voice and dignity.

[SEKIGUCHI] General Electric is well-known as a company which adopted the Six Sigma approach in a perfect manner. Could you explain the benefits of Six Sigma and what are the difficulties you had when you implemented it?

[WELCH] The benefits of Six Sigma are far bigger than what we thought. I'll be telling a journalist someday when I'm sitting on the beach what a brilliant idea Six Sigma was and how it changed GE and did all these things. It wasn't that perfect. We had a desire to improve our customer satisfaction and our quality. We looked around. There were many slogan programs -- Total Quality Management and all these other things -- this was a quantitative program so we put it in. Highly rigorous training.

Like everything in a big company we exaggerated it. We said we had to have our best people, only our best running it. We had to give stock options to all of the people in the quality program. They had to become owners of the company. We drove it very hard. We had to have an accounting person on every quality project. We didn't want quality "for quality's sake," we wanted quality to deliver us economics. So it wasn't just a quality program for quality's sake. Every project was measured financially.

Now, what were the pitfalls in beginning it? We didn't put all of our best people on the project. People pushed people over to the quality program. So when it came time to give out the stock options, I said only the quality people are getting the options this year. I started getting phone calls. "I don't have enough options." "What do you mean? I thought you put your best people on quality!" "Well, I didn't put all my best people on quality. I didn't do that."

So it took us almost three years to get into the culture that only the very best could become black belts. The best salesperson, the best engineers. So that the organization said, "Do they mean this? They are taking that person?" It was a symbolic move in the organization. Now what has happened with Six Sigma is it has become much bigger than a quality program. It has become a management program because it puts a whole set of rigorous thinking into the management process. And so instead of just being a quality program it ended up being probably our best management tool. Having that happen was an afterthought. Of course we'll take credit for planning that whole thing beautifully. But, of course, it didn't happen that way.

But now our best people have black-belt approvals. They think differently about projects. They can go to multifunctional jobs and analyze them better. So it's true that of all the management training we do, it's the most critical thinking we put into the management training process. And it turned out to be a lot bigger than we thought.

[SEKIGUCHI] You are an excellent business leader in the world. But I'd like to ask you what your goal is for your life.

[WELCH] Well, I'd say the exciting thing for me now is to see that has happened to so many good GE people. Our employees today, they are our largest shareowner. Our employees own 25-30 billion dollars today, with today's market value, of GE. They own almost 10% of the company. Thirty thousand of our people have stock options. We have many people who have changed their lives. Their children are going to school. They have second homes. They are able to take care of their parents. They have money they never thought they would have. They are able to dream about things for their families.

It is the most rewarding thing you can imagine. I have plenty. I'm a fat cat. I have lots. But they have lots. We have thousands of people who have made over a million dollars in stock. They have all participated. And families have all forever changed. To have that much impact on that many lives, to me is the most rewarding thing I have ever experienced. We were in Indonesia the other day in the midst of their trouble. And to watch GE people doing these incredible things with the poor in Indonesia, donating some of their money to that, it brings a tear to your eye. It's remarkable.

This whole spirit of enhancing the lives of so many people is by far the biggest reward of this job. I'm sure it is for all of you too.

[SEKIGUCHI] You may have a lot of pressure from the business community and social community. I wonder how you can maintain your health. Actually, this question is from a doctor.

[WELCH] Well, knock on wood, I feel great. And, you know, we have a great team. This isn't one person. I sit here and answer questions or chat with you but we have got this marvelous team. People say to me, "How do you play golf so well?" if I play well. And I say, "Because I play a lot." I play more golf now than I did before I was CEO because I am able to get off and do it. So I work like crazy and I play hard. And who knows. Let's keep hoping that he can ask the question 10 years from now.

[SEKIGUCHI] Actually, there is another question. How can you be such a great player of golf?

[WELCH] I'm not a great player. But I like playing golf. I play a lot. I'm competitive, as you may imagine. And so I am able to enjoy it.

[SEKIGUCHI] Thank you very much for answering questions from the floor. I'd like to ask some more of my questions. I heard that you have already announced that you will be leaving the seat of CEO in the year 2000 at the age of 65. What would you like to accomplish before you retire? What kind of person do you have in mind as your successor?

[WELCH] Well, clearly I want to continue to grow the company's top line and bottom line at double-digit rates. And then whatever happens will happen. I've got a lot of people out doing things. I have no specific target to do one thing or another. Because I have a lot of people doing lots of things that will bring forth more ideas and we'll just keep expanding. So I don't have a specific on that.

The person I am going to hire is going to embody the four Es that I always talk about for all managers. He is going to have enormous energy. I mean to go to eight or 10 countries in 12-14 days. To be in a world that is changing as rapidly as this. To be able to respond to all kinds of things takes enormous energy. The most important ingredient -- the second E -- is the ability to energize others. The ability to energize others in a world where everyone has the same information. It's going to be a very challenging assignment for any CEO in the next century. And so there is going to be a need to energize others.

The third E is "edge." He's going to be able to say "Yes" or "No" and not "Maybe." You can't make 128 acquisitions in 12 months, or 64 in 90 days, if you are saying to everyone all the time, "Bring it back for another review. Let's come back and look at it again a month from now. Let's take six months to study it." In the end, you have got to move. You won't be right...all of those acquisitions I approved -- the last 64 -- every one of them was going to grow to the sky. Discounted rates of return were perfect. You know it's not going to happen. Several of them will blow up and a bunch of them won't work. That's the way it works. But you have got to be able to say "Yes" or "No" and get on with it. And you won't be right all the time.

One of the things I always say about business, and I think we all ought to think about it, is that it is like going to a great restaurant. When you go to a great restaurant and the plate comes out -- look at it in Japan when the plates come out looking so beautifully -- the preparation is exactly perfect. Go back in the kitchen and see how it is made. Take a look at what is going on there. That is what business is like. It's not perfect. It's a bunch of tries that in the end, when the journalists write about it looks like we all knew what we were doing. In the end it isn't in any way a perfect science.

And finally, the fourth E is "execution." He must be able to carry things through to fruition. You cannot have somebody who starts a Six Sigma program that won't end up energizing the whole company around it and delivering great results from it. And that takes enormous energy across the organization. Enormous repetition, over and over and over again to execute.

[SEKIGUCHI] The final question. Children will be the next-generation players in the 21st century. And I think that entering into the knowledge-based economy, education is every important for children. So how should we educate children? Or what would you expect from children?

[WELCH] That is a real last question. That is like solving world hunger. I think in the end, obviously we are going to have to have better education, more information, sensitive information. Some of my factory workers ask me, when we go around for round tables with our factory workers, "What about my children? Will they have a job in this manufacturing society that I had?" And I suggest they will but it will be different than yours probably. "But what advice do you have for me?" Be sure your child is based in information technology just the way you were based in reading and writing.

Information technology will in the end be the enabler to conduct all the commerce in any business we are in. And so the children of tomorrow are going to have to be -- and they will be -- they won't be so reverent to hierarchy. They will be far more participative in general because they will all have the same information. They will be a lot smarter and they will be totally information-based. Think of your own children or grandchildren now at age three and five on computers. That's the way we were reading small books. And so that will be a way of life, a different communication forever. Different challenges, more exciting, but I'd say a more global interactive, interreactive society where people have an even better chance to raise the standard of living of every country and to reach their own dreams.

This is all getting better, not worse. This is all more homogeneous and the more we trade together and the more we live together and the more we understand each other, the better chance for more people to reach their dreams in a peaceful constructive fashion. Japan is on its way to recovery. There will be sunnier days ahead than you have had in the last three years. The sun will shine and we will be having conversations here about the remarkable Japanese recovery three years from now. Thanks for listening.