Summary:
In 2008, Ruth Porat signed on to advise Treasury Secretary Henry Paulson as he navigated the nation’s economic crisis. What lessons from that critical point in her career did she carry forward?
Talk about a trial by fire. With the national and global economy tottering on the brink of ruin, Ruth Porat was called in to help. Her lessons from this season of extreme peril are essential for any and every leader.
In 2008, when you were still with Morgan Stanley you answered the US Treasury Department's called for help and became an advisor to the in Treasury Secretary Henry Paulson to deal with the country's financial crisis. What are your biggest takeaways from that financial crisis lessons that every aspiring leader can learn?
It was one of the most profound times in my career because I felt I could take skills I had developed over many years as a banker and apply them to something that was so critical for the country at the time. The key, there were a number of key lessons and what really struck me when I came out here I was often asked about the financial crisis which seemed to be somewhat irrelevant because we were living in a time of extraordinary opportunity and technology wonderful growth but as I reflected on the lessons from the crisis I think your question is precisely the right one they are lessons that are relevant for everyone.
I think one of the most important is to know your source of vulnerability and to protect against it early so for a bank the greatest source of vulnerability was liquidity. Without liquidity you choked as a bank you choked as a financial system. Trying to solve that on the eve of the crisis was impossible whereas doing it even three months earlier would have been very doable so focus early on source of vulnerability.
The other really critical one is to ensure that you're investing in the systems in analytics to have visibility about your business you know I often use the metaphor you would not drive a car with mud on the windshield yeah you'll have to clear it away and then you can drive at a faster pace well with AIG what they failed to see was the risk taken on in a derivative subsidiary in London that put the entire company at risk and it was the lack of analytics date and data that put them in this position.
That was their mud on the wind shield.
That was a big layer of mud on the windshield and so one needs to invest early to ensure you have all the analytics and tools. The other it was something that secretary Paulson said to me in the crisis he said you must have the will and the means and too often by the time you have the will you no longer have the means and by that he meant the political will and the financial means yeah and that's relevant I think for every business because it is hard to make these calls but you are otherwise wasting resources that should be going elsewhere so make those tough calls early and the last one I would say is about having the right people in the right place when you're in a crisis you don't have time to learn and so having people who have instinct based on experience really allows you to skip ahead several chapters in the what do I need to do now and so ensure that your team has a mix of those people's. Some that bring the ability to actually understand the couple of chapters ahead.
