Get Latest Business News from All Over the World 24/7 throughout the Year: Firms should always focus on bad news, according to a book Bill Gates says all leaders must read this summer

Bill Gates has recommended reading "Lights Out: Pride, Delusion, and the Fall of General Electric."
Gates said it was hard to read criticism of fellow leaders but that he got a lot out of the book.
One key takeaway of the book for Gates was not to focus exclusively on good news.
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In his annual summer reads recommendation this year, Bill Gates mostly suggested books that strengthen the relationship between humans and nature.

One title in particular, however, stands out: "Lights Out: Pride, Delusion, and the Fall of General Electric."

As explained in Inc, this book is a warning about how the leaders of General Electric, one of the world's largest companies, were so blinded by their success for so long that it got too late to do anything about it.

"I was eager to read 'Lights Out: Pride, Delusion, and the Fall of General Electric' by the Wall Street Journal reporters Thomas Gryta and Ted Mann," said Gates in his blog, Gates Notes. "I wanted to understand what really went wrong and what lessons this story holds for investors, regulators, business leaders, and business students."

Adding this to his recommendations may not have been easy for Gates, however, as the book is a critique and analysis of decisions that should never be taken in a company - and General Electric was one of Microsoft's first customers.

"At times, it was a bit hard ... to read such harsh criticism of fellow leaders," Gates added, "[b]ut I got a lot out of reading this book."

Here are some of the main takeaways of the book, according to Gates.

Don't be too ambitious in the short term

"One of GE's greatest apparent strengths was actually one of its greatest weaknesses," Gates said in his blog.

GE always met or exceeded Wall Street analysts' predictions in its quarterly or annual results.

But what happens is that they were simply serving investors and stock market performance, which isn't always an indicator that all is well.

A company can have a sizeable turnover but if it's lower than analysts' expectations, analysts will publish negative comments and share prices will plummet.

Conversely, a company can make huge losses, but if they're lower than analysts' expectations, its share price will soar.

Lights Out reveals some questionable methods GE used to arrive at the numbers it felt it should.

Seeking this short-term profit weakened the company.

Don't focus exclusively on good news

"In many companies, bad news travels very slowly, while good news travels fast," Gates said.

The leader said he tried to fight this at Microsoft - whenever an employee told him positive news, Gates would ask him what wasn't going so well.

While some might find this off-putting for employee morale, the ultimate message is not to motivate people to focus only on the good news, as it may mean you don't get to the bad news in time.

Don't fool yourself and definitely don't fool your team

Believing that they could have it all was one of General Electric's biggest mistakes.

Investors had full confidence in the company, but that confidence should never transfer over to the leaders themselves.

Unfortunately, it did.

So they tried to dip their hands into almost every jar they could, including filmmaking, insurance, finance, and nuclear power plants - as well as making light bulbs and household appliances.

"GE didn't have the right talent and systems to bundle together a dizzying array of unrelated businesses and manage them well," said Gates. "GE successfully persuaded people that its generalists could avoid the pitfalls that had tripped up big conglomerates in the past."

"In reality," he explained, "those generalists often didn't understand the specifics of the industries they had to manage and couldn't navigate trends in their industries."

If customers and partners believe your company is the best or the most cutting-edge, they will trust it - but if a leader assumes it to be true and has no concerns nor any capacity for self-criticism or improvement, he or she is lost.

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