When It Gets Ugly: Leadership Matters – Lessons from 1980s

“When you’re thirsty, it’s too late to dig a well” Ancient Proverb

In Part I of this series, I pointed out:

The lessons I learned [during the depression, followed by my study at the University of Wisconsin of FDR’s speeches] shaped my life, and were more than helpful during the financial crisis of the early 1980’s when I became President of a troubled bank. The 1980’s insights were the subject of my 1991 book about that crisis, Crash Landing, Surviving a Business Crisis. In Part II of this blog, which will follow in the near future, I will share a few of those insights.


Part II

In 1983 our “JRG” law firm – Jacobs, Robbins and Gaynor et al – was the largest law firm on Florida’s West Coast. Our firm’s annual Holiday Party was one of the top social events of the year, attended by as many as 3,000 clients, friends and staff.

I didn’t intend to be a banker, much less a bank president. I loved practicing law. We had a great group of lawyers, wonderful clients! But I was also one of the founders, shareholders, and directors of Park Bank of Florida. And Park Bank, then 6 years old, wasn’t fairing well in the rapidly changing environment of bank deregulation, with interest rates as high as 18% on deregulated bank deposits.

The bank began to get troubling examination reports from the FDIC. Early in 1983, we had a tough boardroom meeting about what we were doing and should be doing. I took a “six-month leave of absence” from our law firm to help straighten out the bank. Unfortunately, the loan portfolio was worse than we thought. More bad reports, more tough boardroom meetings, and, in the end, we replaced management and I agreed to serve as bank president, CEO, and Board Chair, confident we could solve the bank’s loan portfolio problems.

With loan losses piling up, as CEO. I became concerned we would lose the cadre of dedicated, hard-working people we had assembled. Fortunately, we didn’t. Constant. straight-forward communication helped. In early 1985, I called the staff together and talked about Our Tough Decisions of 1984. We included a copy of the talk in Inside the Park, our monthly newsletter to staff and shareholders.

Inside the Park News Letter

The talk begins as frank as I could be:

“Tough decisions never come easy. Deciding to increase our loan loss allowance … was a very tough decision. … Add that tough decision to the decision we made to adopt conservative accounting methods and it makes our 1984 collective decisions even tougher. … We reported a 1984 loss of $0.48 a share. All total, that is $5.37 million. A lot of money. Had we not made these tough decisions, we might’ve looked better, but we would not have been better, and what we are is what counts. We are in the business of providing financial services for a long time. And, we must look at our business that way. We cannot hide from tough decisions if we are to reach our true potential, and that is our objective.”

And closed with optimism:

“Some have said that what has happened to us is that we have become faced with nearly insoluble problems. We saw what others perceived as problems as opportunities. It’s an old proverb: ‘We are continually faced by great opportunities brilliantly disguised as insoluble problems.'”

My planned 6-months banking experience stretched itself to three years. Unfortunately, in the end, the bank couldn’t be saved. True to the ancient proverb, we had started to dig our well too late.

And Ernest Hemingway was right in his 1926 novel, The Sun Also Rises: “‘How did you go bankrupt?’ Bill asked. ‘Two ways,’ Mike said. ‘Gradually and then suddenly.'”

We struggled valiantly through the “gradually” for almost three years. Then bam! There was the “suddenly,” when the bank’s overwhelming loss of capital, eaten up by troubled loans, forced its failure.

I delivered the keys to Florida’s Division of Banking on Valentine’s Day, 1986. The litigation that followed wasn’t over until 1992. I lost the law firm, millions of dollars, and a few friends who had invested in the bank and thought we should have done better.

I also didn’t intend to write a book, a personal story about bank failure, but when our gallant efforts proved futile and Park Bank collapsed I was baffled:

How could a group of eight highly successful, active, bright businessmen – Park Bank’s founders and directors – have missed the early trouble signs? Why did we fail?

In 1991, my research complete and the litigation nearly over, the results of my study, Crash Landing – Surviving a Business Crisis, was published.

The Two Most Critical Points learned from Park Bank’s Crash Landing:

Economic disasters follow the curve of a hockey stick. The hockey-stick disaster curve graphs to “The Hemingway Law of Motion:” Gradually, then Suddenly.

That’s the risk curve the Coronavirus quick economy decline appears to be taking. U.S. economy deteriorating faster than anticipated. “Already, it is clear that the initial economic decline will be sharper and more painful than during the 2008 financial crisis.”

Goldman Sachs predicts a 24% drop in economic decline in the April-June 2020 quarter-annual period.

CEO’s, their executives and their boards – in government and in industry – too frequently create environments that make timely detection of, and reaction to, trouble difficult. It’s not possible in this short blog to sort out the entire bevy of lessons I learned and wrote about, but this point is prime:

We humans ignore or refuse to accept signs of potential trouble that disagree with our personal versions of the world.

In Crash Landing I identified our penchant for setting up interpretative defenses that bind us from reality as the Principle of Defective Observation:

Our human observation is defective because each of us interprets events we encounter and data we receive in ways that enhance our self-image and stabilize our perception of the universe. Our interpretation leads us to block out recognition of potential signs of trouble that threaten or are inconsistent with our self-image and world-view, and to assign wrong interpretations to the signs we identify, so as to minimize their importance.

We do this – each of us – for very human reasons related to the defense of our personalities and our attempt to provide ourselves with a secure, stable universe. The net result is that our internal observation systems fail to endow data with the appropriate relevance and meaning. The evidences reaching us don’t convince us fast enough the trouble is on the way.

In 2015, in Wonderlust, I examined our denial of trouble signs, in the context of the unwillingness of many of us to recognize and minimize the dangers of climate change. I framed the issue with a discussion of Supreme Court 5-4 decisions. The 5-4 decisions are not the result of 5 judges being smarter, better educated, or having access to different facts or legal authority. All 9 justices attended the same two law schools, had many of the same instructors, heard the same legal arguments, and read the same legal briefs and authorities. The differences come from their political orientation, shaped by their beliefs.

The differences in our political approach to the seriousness and the solutions to solve the Coronavirus pandemic reflect the same sort of belief differentials. In Red and Blue America Aren’t Experiencing the Same Pandemic, Ronald Brownstein reports:

That disconnect is already shaping, even distorting, the nation’s response to this unprecedented challenge—and it could determine the pandemic’s ultimate political consequences as well…. Democrats consistently express much more concern about it than Republicans do, and they are much more likely to say they have changed their personal behavior as a result.The Bulwark recently documented.

The disconnect is also evident in the Senate in its development of its $2 trillion Coronavirus relief bill. Politico reports Democrat Senator Schumer said after March 22, 2020 negotiations didn’t produce an agreement:

“There were some serious problems with the bill leader McConnell laid down. Huge amounts of corporate bailout funds without restrictions or without oversight — you wouldn’t even know who is getting the money. Not enough money for hospitals, nurses, [personal protective equipment], masks — all the health care needs. No money for state and local government, many of whom would go broke. Many other things.”

In Wonderlust, I argued that God didn’t make half of us humans politically conservative because conservatives are always right; and He didn’t make the other half of us liberals because liberals are always right. These differing viewpoints are meant to be ferreted out, understood by discussion and negotiation, and settled in compromise after careful consideration of the views of people who think differently than we do.

In his book, Why Do They Vote That Way?, Jonathan Haidt writes:”You can’t understand complicated social or political issues until you have listened to people who do not share your own preconceptions.” He also points out that political decisions are fundamentally moral decisions. The difference between political views shapes what is considered moral. Haidt’s prime moral foundations are:

• Care/harm
• Fairness/cheating
• Loyalty/betrayal
• Authority/subversion
• Sanctity/degradation
• Liberty/oppression

Conservatives, Haidt concludes, do a better job than liberals in balancing their concerns for all six moral foundations; liberals concentrate on three: care/harm, fairness/cheating, and liberty/oppression – with emphasis on care/harm.

How will these differentials play out in our government regarding the Coronavirus pandemic?

Haidt writes: “Conservative morality rests on all six foundations, although conservatives are more willing than liberals to sacrifice Care and let some people get hurt in order to achieve their many other moral objectives.”

That differential is reflected in Wisconsin Senator Ron Johnson’s comments included in Part I of this blog: “But we don’t shut down our economy because tens of thousands of people die on the highways. It’s a risk we accept so we can move about. We don’t shut down our economies because tens of thousands of people die from the common flu” and Texas Lt. Gov. Dan Patrick’s comments that he’s “not living in fear” and is “all in” for lifting social distancing guideline.

It’s also reflected in President Trump’s March 23. 2020 tweet that he may lift the federal coronavirus guidelines, “We cannot let the cure be worse than the problem itself” and his followup that the US is not “built to shut down.”

Essentially, The conservatives approach parallels the approach of Italy, now overwhelmed with Coronavirus disease and death. Early on, Prime Minister Giuseppe Conte encouraged Italian to continue to live their lives as they have been doing. From the article:

In the critical early days of the outbreak, Mr. Conte and other top officials sought to down play the threat, creating confusion and a false sense of security that allowed the virus to spread. They blamed Italy’s high number of infections on aggressive testing of people without symptoms in the north, which they argued only created hysteria and tarnished the country’s image abroad…. “They were convinced that the situation was less serious and they did not want to hurt the economy too much,” said [Lombardy regional president, Attilio] Fontana.

Scientists tell us the pandemic can be stopped, but it will take harsh measures:

Terrifying though the coronavirus may be, it can be turned back. China, South Korea, Singapore and Taiwan have demonstrated that, with furious efforts, the contagion can be brought to heel.

Whether [those countries] can keep coronavirus suppressed remains to be seen. But for the United States to repeat their successes, it will take extraordinary levels of coordination and money from the country’s leaders, and extraordinary levels of trust and cooperation from citizens. It will also require international partnerships in an interconnected world.

The furious efforts include “testing, testing, testing” and isolation, advises Dr. Bruce Aylward, with 30 years experience fighting polio, Ebola, other diseases and now Coronavirus.

How vital to our Nation are tough negotiations and broad-based consideration for the varying concerns of liberals and conservatives over the Coronavirus bailout package? As you read the debate and results, read them in the context of Haidt’s 6 Moral Foundations, and the varying emphasis of liberals and conservatives.

An observation: New York and California, the most populous and infected states, are primarily democratic states. South Florida, also heavily infected is primarily democratic as well.

For the American people, and our global neighbors, to win, the Coronavirus solution must include careful consideration and learning from the wisdom that’s sourced in the Moral Foundations of both conservatives and liberals, and a consideration of all Americans.

Our discussion continues in Part III, When it Gets Ugly, Leadership Matters – the High Cost of Loyalty, focusing on the role the moral foundation of loyalty/betrayal plays in corporate and governmental leadership.



Jonathan Haidt discusses the first Five Moral Foundations

Articles Worth Pursuing:

• VOX: Partisanship is the strongest predictor of coronavirus response

• Miami Herald: A new study shows we’re already in a coronavirus recession – and it has hit South Florida hard.

* The Center Square: Florida gun sales so brisk ammunition is being rationed

• Atlantic: The Economic Devastation Is Going to be Worse Than You Think

• NY Times: A Plan to Get America Back to Work

• Esquire: No Thanks, I Will Not Immolate Myself on the Alter of Your Stock Portfolio

The Esquire article is unsettling. Among the Esquire article’s many quotes is this quote from the conservative Federalist:

Of course, it sounds very callous to talk about considering the costs. It seems harsh to ask whether the nation might be better off letting a few hundred thousand people die. Probably for that reason, few have been willing to do so publicly thus far. Yet honestly facing reality is not callous, and refusing even to consider whether the present response constitutes an even greater evil than the one it intends to mitigate would be cowardly.

• WP: Live Updates: India declares nationwide coronavirus lockdown; WHO warns that United States could become next epicenter.

New York may be fulfilling WHO’s prediction. The state has over 25,000 cases and the rate of new infections is doubling every three days. Governor Cuomo is pleading for help: Cumo says NY needs 30,000 ventilators, pleads with feds for help.

• Fox News Texas Lt. Governor comments: Texas Lt. Gov. Dan Patrick faced a sharp backlash Tuesday for suggesting that older Americans would be willing to sacrifice their lives to the new coronavirus in order to save the economy for their kids and grandchildren. In an appearance on Fox News Channel’s Tucker Carlson Tonight Monday, Patrick defended President Donald Trump’s call for the country’s businesses to reopen their doors in a matter of weeks, despite the guidance of pub lic health officials to the contrary. ‘Let’s get back to living,’ Patrick, a Republican, said. ‘Let’s be smart about it. And those of us who are 70-plus, we’ll take care of ourselves, but don’t sacrifice the country.’ While older people and those with pre-existing health conditions face potentially life-threatening risk if infected with the coronavirus, the pandemic has affected people of all ages. Among the Democrats taking aim at Patrick’s remarks was New York Gov. Andrew Cuomo, whose state is among those hardest hit by the pandemic. ‘My mother is not expendable,’ Cuomo tweeted Tuesday morning, without naming Patrick. ‘Your mother is not expendable. We will not put a dollar figure on human life. We can have a public health strategy that is consistent with an economic one. No one should be talking about social darwinism for the sake of the stock market.’

• Detroit Free Press:“Republican Law Makers Sue Michigan Governor Over Emergency Powers”

• Bloomberg: “Does Texas Know Something California Doesn’t?”

• Tampa Bay Times: “Beware of the Blame Pandemic.”

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Robert C. Bayliss
4 months ago

Spot on Dick!

Lois and Ralph
4 months ago

You are a treasure, Jake. Thank you for continually challenging us to think and discern.

4 months ago

The Road Less Traveled By Dick, As a writer, I have to note the captivating narrative that you crafted to bring clarity to the issues you are addressing. You raise an issue often not talked about. We, as individuals, can filter our decision options through a lens that seeks out confirmation bias as the default foundation for our decision-making. Was the culture of Park Bank’s board predisposed to a kind of default process for dealing with crises? Yes, my suspicion is the board’s decision-making process excluded options that it needed to consider. The comfortable path, one that would protect confirmation… Read more »

Peter Schenk
4 months ago

Enjoyed your early experiences.
Life is not easy, but we harden to challenges.
Your banking efforts were heroic, but futile in the end.
Not sure where your politics took a similar, disastrous turn;
you find yourself in free-fall again, only this time you are unaware of your situation.
Wish you the best with the ‘China virus’.

4 months ago

I think this blog is very well written and argued. I would add a few things for your consideration. We all have filters through which we view data. A critical concern is willingness to change opinions based on data and not let faith override logical analysis. John Maynard Keynes said, “When the facts change, then my opinion changes. And you, sir?” Do conservatism and liberalism have genetic components? They may and it’s an interesting question for further study? If so, what is the optimal mixture of right and left wingers in any given society and does the optimal mixture change… Read more »

4 months ago

Stimulating reading. Trump is an unlicensed doctor who a well disguised intellectual oozing empathy.

Julie Jacobs
4 months ago

Wow!! If only more people would take these and so many of our world’s issues so seriously. Thanks for sharing and resharing your life experiences with us Pop! Love you. Julie