April 4, 2011
American Corporate Partners
SUMMERS: Thank you very much, Sid, and for your determined efforts to change my drinking habits. (laughter)
It’s good to be here. You know, in many ways, this gathering is about some of the things that are best about America. One of the things that I’m proudest of, out of my time at Harvard as President, is that I was the first President in the Ivy League in 30 years to attend an ROTC commissioning ceremony, because I believed that, as a country, we are strong because we are free, and we are free because we are strong.
And while I don’t agree with every policy that our government pursues, I don’t agree with every aspect of the military’s policy. While I was not a supporter of the Don’t Ask, Don’t Tell policy, it was my conviction that Harvard enjoyed the privileges of American citizenship as an institution, enjoyed the support for free speech, for free writing, for a general freedom.
And with that support, with enjoying the privileges of citizenship and responsibility, that responsibility included support to our armed forces, support for the people, with our armed forces, and that’s what this organization is about. That’s what many of you have done. I’m just delighted in this small way to honor your service.
Another thing that is a great strength of our country is something that de Tocqueville noticed when he came to the United States in the 1800s. And that was the tremendous capacity of Americans to form associations for virtually every purpose, to come together, to volunteer.1 And that’s what ACP is about. It’s not a government program. It’s not a for-profit initiative of a corporation.
It is, what is actually one of America’s most distinctive strengths. It is a voluntary association of citizens that want to make the country better, and don’t think that responsibility should be left only to government. It’s doing it in its sphere. There are thousands of – millions of – other institutions doing it in their spheres, and it’s a huge strength of our country.
I’m a Democrat. Some of the people in my party got it wrong, but I actually think that when the first President Bush spoke of “a thousand points of light,” he was actually saying something that was very important about the strength of our country.2
So I congratulate American Corporate Partners, and I especially congratulate those who serve.
Now, I was asked to talk about some lessons of leadership. If any of you have ever followed my career, it’s had some very good moments, it’s had some moments where I might have taken a mulligan, if I had it to do over again. So let me try to suggest half a dozen, sort of, observations about people who have succeeded. And I’ve observed, in people who have succeeded, by implication, it will be relatively clear how to fail, if that’s your objective.
First, know what you want to do in any position that you hold . There are a distressing number of people who – they know they want to be the Undersecretary of X, where they know they want to be the Secretary of X, or they know they want to be the CEO of Y, or the CFO of Z. And the reason they want to be it is because they believe in climbing ladders, and it’s the next rung for them. But they don’t actually know why they want to have the job, in terms of what they want to do.
Know, in any job you’ve been in for three months, you should know when – or successful people do know, if their retirement party was being scripted from the job, what would they like to have said about the difference they had made when they were in the job.
For me, when I joined President Obama, I said in a sense that I knew that answer. Part of the answer was, I wanted to help him do whatever he wanted to do. I was staff, after all. The other part of my answer to that question, it was to say that my daughters had just completed an American History course. They had not heard anything about the 1982 recession, even though I thought it was a big deal. They had not heard anything about the 1987 stock market crash, even though they – I thought it was a big deal, as an economist. They had not heard anything about the 1907 financial panic, even though I thought it was a big deal. But they spent six weeks studying the Depression of the 1930s and everything that followed from it.
But we would have succeeded if this economic fluctuation, this financial crisis, was not an event in history books 30 years from now – if we had managed a sufficient response that was a normal fluctuation. Now, you can agree or you can disagree with whether that was the right objective for me to set, as the President’s economic advisor, but I had an objective. And so I could ask myself, is what I’m doing today contributing to that objective? If so, good for me for doing it.
Is what I’m doing not going to affect whether we have that kind of success? Is it going to matter for whether we solve this well enough so that it doesn’t appear in history books?
For people who succeed, they may not always tell you what it is, but they know what they are trying to do in their job. And the answer isn’t, get promoted to the next job. The answer isn’t, make a lot of money. The answer isn’t, position yourself to be hired away to do X. The answer is, there’s something they want to do that might not have been done by somebody else if that other person was in the job.
So that’s the first attribute that I observe, a first attribute that I observe in people who succeed.
Second attribute, being trusted. Very few people succeed on – if any – succeeds on an enduring basis if they are not trusted by the people they work for, by the people who they work with, and by the people who work for them. That doesn’t mean that this is like George Washington and the cherry tree. That doesn’t mean that no successful leader has ever said something that wasn’t precisely true. That doesn’t mean that no successful leader has ever done something that maybe wouldn’t be what you teach your 12 year old to do. If I claimed that, I’d be saying something that wasn’t so.
But you’ll find very few people who succeed who aren’t trusted to do the right thing when it was important by the people who are closest to them in their work.
It was very interesting for me to watch, work closely, for Bill Clinton over some years. Bill Clinton didn’t always do the right thing, with right in quotation marks. There were issues where Bill Clinton did the expedient thing. But when it was really important, when it really mattered for the future of the country, he did the right thing. I saw it up close when Bob Rubin and I told him that in our judgment, the national interest required a $25 billion loan to Mexico committed over a three day period. That was, to that time, the largest American bit of foreign aid since the Marshall Plan.3
His political advisors first thought we said $25 million. We clarified that we had said $25 billion. They announced that 80% of the American people were appalled by the idea of making the loan to Mexico.4
Clinton didn’t hesitate. He said, I’ve got only two questions. I know this might not work, he said, but I have two questions. One is, do you guys think that if we don’t make this loan there’s a real risk of something catastrophic? We said yes. He said, second, if we do make this loan, do you think there’s a real chance, not a certainty, that we can avert that catastrophic happening? We said, yes. And he said, then I couldn’t look myself in the mirror if I didn’t do this. Yes, there’s an election coming up, and you know something? If we make this loan and it turns out wrong, that might have consequences for the election. But that’s as it should be in the democracy. You make the best decisions you can, and you accept the consequences.
He didn’t do that every time he was picking a person for a job in the sub-Cabinet, or picking an ambassador. But when it was really, really important, he did the right thing. And that earned him a great deal of trust from everyone whom he worked with.
So, know what you want to do. Be someone who can be trusted and relied on by the people you work with.
Third, be good to the people who work for you. I’ve hired a lot of people, been involved in advising and hiring a lot of people in my life, for a lot of different positions. I’m a person who does not believe in ‘never look back.’ I believe the only way you make yourself look back – the only way you get smarter is to look backwards, and to actually figure out why you made a mistake.
So on a certain number of occasions when I’ve hired somebody who didn’t work out for a position, or I recommended somebody for a position who turned out not to fit in at all, I have gone back and tried to analyze what went wrong. And I have discovered an absolute pattern. On every occasion when it went wrong, if we had asked people who had worked for the person in a previous job, we would have figured it out.
We asked people who were his boss, and he managed upwards, and he didn’t manage – he was a great success at kissing upwards, but he was terrible managing downwards. We sometimes asked people who worked with him, who were loyal to him. But when it went wrong, the people who worked for the person always knew that they were lazy, always knew that they didn’t have any capacity to pay attention to detail, always knew that they cut corners.
So the people who develop people, the people who are good to the people who are working for them, are the people who have a much larger influence through time.
You know, I’m proud of several things coming out of my career. I’m proud of some of the things that I did as Secretary of the Treasury, as President of Harvard. But I am as proud of the fact that I had the wit to appoint a fairly obscure professor named Elena Kagan to be Dean of Harvard Law School. I’m proud that I picked the young undergraduate that nobody knew to come work for me at the Treasury, and that woman is today the number two person at Facebook, driving that company forward.
I’m proud that there’s a young guy who was 32 who I promoted from Deputy Office Director to Undersecretary of the Treasury over my years. His name is Tim Geithner, and he is the current Treasury Secretary.
So no rewards. The importance of treating right the people you work with is the third attribute that I would cite for people who are successful.
Fourth, very few things in life are certain. People who make good decisions very rarely are people who see the world as being painted in black and white, without any grey. I learned when I worked with Bob Rubin a technique that he did occasionally to me, and I’ve done more frequently to people who work with me.
If I went to Bob and said – my responsibilities were on financial issues – if I said to Bob, you’re Secretary of the Treasury Department. The Treasury Department needs to tell the IMF to do X, Y, and Z, he would say, that’s what you think, Larry? And I’d say, yeah. And he’d say, well, Larry, what are the best three reasons not to do X, Y and Z? And if I said, well, it’s just obvious – I mean, there’s just no reason not to do X, Y and Z, we just obviously should do X, Y and Z. He would say, let’s have a meeting to discuss that issue in detail a week from Thursday, and let’s invite these 12 people to the meeting, just so we can have all perspectives on X, Y and Z.
If, on the other hand, I said, well, I’ve thought about X, Y and Z. There are actually three legitimate questions about X, Y and Z. The first legitimate question is A. But when I thought about it, on balance, I really think we’re better off doing X, Y and Z, though A is a serious issue. The second legitimate question is B. He’d say, it sounds like you thought about that more clearly, more carefully, than I’ll ever have a chance to, so you do whatever you think is best, and I’ll support you.
And I’ve done that constantly. People come to me with a recommendation, I normally ask them why not to do it, because I assume they know why they want to do it. And what I want to make sure of is, that they’ve really thought through all of the aspects very carefully.
The world, the vast majority of the time, is not completely simple, and people who succeed are people who recognize its complexity.
And I guess the last attribute that I think is a feature of successful leaders, is that they’re always trying to push the edge. They’re always – they want their mistakes to be of trying to do too much, of trying to leap too high, of having excessive ambition, rather than of being cautious. And I think that’s an important trait.
I always thought the reason to be good at minimizing, controlling and containing risk was, it enabled you to do more. It enabled you to bring about more change. It enabled you to push harder, you would be able to control the risks, and would contain the problems.
So my philosophy has always been, and I think it’s a philosophy that I’ve come to in my thinking about the leaders who have been greatest, they didn’t do things just for the sake of doing them, but they didn’t set their sights low. They saw opportunity in whatever situation they found, and they thought the rest was for another day. And they pushed the pedal to the metal for as long as there is – they were in a leadership position. And I think that’s also a feature of people who succeed in leadership positions, that they have that kind of tremendous energy and determination to do the right thing.
Robert Kennedy said, “some people ask why – I ask why not.”5 And that’s a very powerful – that was always, for me, a very powerful idea about leadership.
So, if your vision can be big, if your thought process can be careful and disciplined so that it harnesses that vision effectively, if you’re able to have it not be about you, but about the people whom you work with and who work for you, if you are able to work for them, even as they’re working for you, if trust is the coin of your realm, and if you know what you want to do, you’ll succeed in every position you hold. Thanks very much.
The floor’s open. By the way- yeah, go ahead.
M: Well, I have the first question, so it must have been fascinating to work for two presidents – can you compare and contrast leadership styles of President Clinton and Barack Obama?
SUMMERS: It was a great privilege to work for both of them, and they had things in common. They were both very smart, they were both very serious when it was important about doing what was right for the country. They both had an appreciation for the fact that there were many different points of view on issues, and that you didn’t run to judgment without hearing the many different points of view on a given issue. Those elements were in common, but other elements were different.
When you work for Barack Obama, if a meeting was scheduled at 9:00 o’clock, it was 30% likely to start before 9:00 o’clock, and it was 60% likely to have begun by 9:15. If you had written a memo for Barack Obama before the meeting, the odds that he would have read your memo were 98%, and if he had not read your memo carefully, he would begin by apologizing for the fact that he had not read your memo. His having read your memo, he would not appreciate your using your time at the meeting to read your memo to him, or to summarize your memo for him.
He would occasionally ask questions about something specific to kick the tires and check that you knew what you were talking about. But once he had decided you probably did know what you were talking about, he would focus himself in a very substantial way on the kind of perspective only he could bring – how your policy on bank recapitalization fit with the broad strategy of his Presidency, and he would figure that if the question was whether you should use preferred stock or common stock, that you probably knew the answer to that better than he did, and he would not seek to delve into that matter in any detail.
And at some point in your meeting, his assistant would come in and would hand him a card, indicating that it was getting to be time for the next meeting, and the odds were a virtual certainty that you’d be out of there within five minutes of his receiving that card.
So, it was crisp, smart, disciplined, serious, in those ways. Working with Bill Clinton was different.
Working with Bill Clinton, the odds that your meeting would have started before 9:00 o’clock were zero. The odds that your meeting would have started by 9:15 were 50%. The odds that he would have read your memo were one in three. The odds that he would successfully read your memo, by turning the pages and grasping the essence in your first two minutes of talking during the meeting, were 100%.
The other side though – and this is why different leaders lead in different ways the other side of that lack of discipline that I described is, the odds that he would bring something substantial from his own life to the topic of your meeting were extremely high. You know, you’re talking about bank recapitalization- well, you know, the Journal of Finance just happened to be sitting around the White House Library, and he read it. He happened to get a memo from the Brookings Institution, and he happened to study it. He was having dinner with a few investment bankers, and they were talking.
Whatever the subject was, he had a capacity to bring knowledge and an anecdote from somewhere. I would watch him go around the room and talk about the – talk to the members of his Cabinet, and he would talk to me about whatever it was, the economics of Japan, and I’m pretty good at this stuff, so I kind of thought I would be working from an advantage, though I was working to keep up. Then he’d turn to Madeleine Albright, and he’d talk about Bosnia, and it sure seemed to me like he knew about it, as much about Bosnia as she did. And then he’d turn to the Secretary of Transportation, and he’d talk about, you know, what was new in highway paving. And he’d know as much about that as the Secretary of Transportation would.
So it was a kind of omnivorously knowledgeable leadership strategy, where he was much more heavily engaged in everything, but it came with much less discipline. So the odds, that when his assistant brought him the card that said he only had five more minutes for the meeting, the odds – the expected length that you’d be there was another 15 to 20, which had something to do with the fact that the next guy’s meeting was very, very likely to start late.
So they were both terrific to work with. They were both very smart and serious, but they were very smart and serious in somewhat different ways, both of which, I think, served to bring out the best in people, and bring out the best in people in quite different ways.
M: You mentioned a series of people that you noticed in your past and promoted or hired, and then brought up with you and found they’re unsuccessful in the future. So my question is from the perspective of a mentee, how do you believe it’s best to get noticed, and start a career, take those stepping – stones, and then find opportunities?
SUMMERS: The single best – the first, second and third best way to get noticed is to do a great job. People have a way of noticing people who do a great job, whether they work real hard at putting themselves forward, or whether they don’t. And if you put yourself forward but you’re not actually doing a good job, not that much is going to come from it.
So I would say, that as people have interacted with me over time, I’m sure there are some who have done a really good job but were too meek about it, and so I didn’t really notice. I’m sure that has happened.
But I would guess that for every time that’s happened, there were five people who were focused – five times, when somebody was focused on getting face time with me, when they should have just been focused on doing a good job and letting it flow after they did a good job.
So the most important answer to your question is to really try very hard to do the best job that you can.
I think the second trait I’ve found is, people who are open to criticism, and want to learn how to do it better, because that is the only way you learn. And I’ve noticed that some of the people I find most effective, if they do a piece of work for me, and I say, thanks, you really did a good job on that, they said, you know, just for the future, I think this kind of situation is going to come up again – is there anything I could have done better? Or is there anything that we could do better?
And, you know, just – the world, being what it is, almost everything can be done better, and so you usually learn something about how to do your job better if you ask the question. And people who are most effective, I find, are people who are not defensive about – Julie, who Sid praised, she’s wonderful in many respects, but this was certainly illustrated for me the other day. I was supposed to speak at my – at a gathering sort of like this, at my stepdaughter’s high school. And my calendar said 7:30. And I was sitting and having dinner at home when the school called at 6:50 to see where I was, because the event started at 6:45.
So we got in our car, and we rushed over, and I got there at 7:00, so we were 15 minutes late. We did the event – it went well, and I came home, and I was not so happy about having been 15 minutes late. So I called Julie. Principle one, trust the people you work with if you want them to trust you.
So I said, Julie, I don’t know what happened, maybe you could figure it out just so we could learn. They thought the event started at 6:45, and I was 15 minutes late. The only reason I was 15 minutes late was because they called me. And she said, “gee, Larry, that’s terrible, let me look into it.”
Notice I didn’t accuse her of having goofed it up, and she didn’t say, it wasn’t my fault. She looked it up, and sure enough, she sent the guy she had interacted with at my daughter’s high school a note with a copy to me – “Dear Bob, Larry tells me the event went very well, I’m very glad about that. I am really sorry for the confusion resulting from Larry’s being late. Here is a copy of the e-mail from you that I used in setting Larry’s calendar, which said 7:30. I hope this helps to explain, and if there’s something we should have done to avoid the confusion, please let me know.”
So, you know, that was 100% – turned out that it was 100% their fault, but we didn’t get mad – she didn’t get mad at them, she wasn’t defensive about it. She wanted to learn how to do it better. On the other hand, she wasn’t going to be walked all over. The guy was going to see the e-mail that he had sent that had caused him to have a late speaker.
Well, the point of the story is that a lot of people in those situations would have reacted in a much more defensive way. You just tend to learn more and get along better if you can avoid being defensive.
F:I’m curious to know what resources that you draw from personally, what will enable you to enhance your own leadership capacity?
SUMMERS: I mean, I try to – I try to ask for feedback a lot. And I try to make it easy for people to tell me that I should do something differently than what I did. Then I try to respond – there’s a proverb I quote probably once a week or once every two weeks in a whole set of settings. I say, it’s a Russian proverb, that “when three people tell you you’re drunk, go to sleep.” (laughter)
But the contexts in which I use that are when I want to do something and I get a few people’s advice, and they’re all telling me I’m crazy. I decide I usually am, that I probably am crazy. One of the sort of rules of leadership that I try to use, with very few exceptions, is in a setting where I’m supposed to be the leader – I figure there’s a reason why they chose me to be the leader, rather than the other people to be the leader, so I have a role. On the other hand, if I’m right, I can probably persuade some of the people I work with that I’m right, and I don’t have to persuade everybody. I might not even have to persuade a majority. But if l can’t persuade anybody that I’m right, very likely I’m wrong. And I want to choose a different technique.
So for me, the main resource is trying to be very, very open to feedback, and my errors, which are many. As somebody in a leadership position, I tend to be in too much of a hurry, I tend to be a bit too demanding, and I tend to think a little bit too much about asking challenging questions, which is good, in a way, but it means I’m providing too little positive reinforcement in many settings.
And it seems to me, the least you can do, if those are going to be your errors, is to create an environment where anybody who wants can say anything to you without being worried about what the consequences will be.
And so that’s sort of what I try to do. And I guess, a different kind of answer to your question would be, I try to ask myself, when I’m frustrated or irritated or angry or disappointed or displeased, how long from now will I care about this? And the vast majority of the time is, the answer is, l won’t remember it next week. I won’t care about it or remember it a week from now or a month from now. And that’s a very useful perspective to have.
And every once in a while, the answer is, well, this is really going to be fundamental, and this is going to be something that’s unusually important for and likely to have consequences for years, and then the question doesn’t make you feel better.
But I find that trying to project yourself forward and asking “for how long this will matter?” can be a very helpful, sort of device for trying to deal with situations that involve a person.
M: We’ve got time for- sorry- one last question-
SUMMERS: I’ll take two more. Yours and yours.
M: You made a comment that one of the things to be a leader is, you don’t really want to just be somebody that looks for the next rung. Yet, that seems to be embedded in an awful lot of cultures. So as a leader, how have you been able – or, what are your suggestions to avoid that, to not create a culture where everyone is just looking for the next step up?
SUMMERS: You sort of negatively reinforce it. You work for me, you come talk to me, you ask me, you know, I’m a Dean at Harvard, how can I do a better job? What suggestions would you make? You’re a staff person at the NEC, you come and you say, how can we give better advice to the President? Well, I’ve got a long time for you. And maybe – my answer may be right or it will be wrong, but it will be carefully considered.
You come and you ask me, gosh, I’m a Deputy Assistant to the President, I’d like to be an Assistant to the President, what do you think I need to do to be an Assistant to the President? You’re not so likely to feel positively reinforced in your conversation with me.
So I think the number one thing is, you just create a culture of what’s valued as trying to be better, not what’s valued as the consequence of trying to be better.
The second thing is, you try – and this is a very hard thing to do – you try to create a culture where you don’t reward squeaky wheels. And that means, you know, I’ve watched universities. There are two kinds of universities.
There’s one kind where they figure out sort of how valuable your professors are, and you pay them right, and you pay them what you want – what they should be paid. And if they get an offer from another university, you say, gosh, I hope you’ll stay at Harvard, we really think Harvard’s a terrific place for you, and we really think you’re very fully valued, and we try to treat you as well as we can. Certainly, I’m happy to discuss with you your future at Harvard, if you’re thinking of moving to another university, but we’ve been trying to treat you as well as we can. That’s one approach.
Second approach is, you basically try to figure out who won’t move, and you pay them $30,000 or $40,000 a year less, and then if you turn out to be wrong, and they say, gee, I’ve got an outside offer, you push their salary up to match the outside offer.
Well, you know, you can do it the second way, and for a little while, you’ll probably save a little money by doing it the second way, but you’re likely to have an organization that’s in constant flux, because you’re basically teaching your organization to play when the ambition card gets rewarded. And as a leader, I think it’s usually better to try to set up structures where that doesn’t happen.
M: How do you see the changing future needs in America – in the US, and how we, as future leaders of the country, and of this country, where do you see the best way to lead, kind of go to work and help address maybe some of the shortcomings or just new areas that demand leadership?
SUMMERS: Machiavelli actually wrote a very good book on leadership.6 And a lot of what’s true Machiavelli said 500 years ago in a very different setting. So in terms of a number of the attributes that I’ve just spoken about, leadership, I think conditions change. Problems that have to be addressed change. But a lot of the basic characterological aspects of leadership, I think have a fair amount of constant.
I think the other part of the answer, though, would be that there really are two big changes that I think will affect leadership styles and approaches in the United States. The first is, you’re dealing with a much bigger and more diverse world . Whatever you’re going to lead in some part of America, the fraction of the rest of the world that is going to be important for what you do is much higher than it would have been 30 years ago. The fraction that a substantial part of what you do is going to involve dealing with people of different gender, different ethnicity and different race than yours is substantially greater than it was 30 years ago.
And so I think leadership styles have to adapt to dealing with a much wider range of people and perspectives and their comfort zones than would have been true in either- in an earlier time.
And the other difference is that the world is becoming much less hierarchical. And people just have to adapt to it being much less hierarchical than it used to be. I see it – I’ve seen it in organizations where – the Treasury Department, for example, it used to be the case that if a Deputy Assistant Secretary wanted to communicate with the Secretary, the Deputy Assistant Secretary had to write a memo. The memo would be cleared by the Assistant Secretary. The memo would then be cleared by the Undersecretary, and the Undersecretary would then submit the memo to the Executive Secretary, who would examine the process to check that all the people who had been consulted with should have been consulted with, and then we’d go.
And that process still exists, but in parallel, the Secretary of the Treasury now has a BlackBerry and now has e-mail, and when he wants to know something, he sends an e-mail to the person he thinks is likely to know the answer. And if he sends the e-mail to the Deputy Assistant Secretary, he doesn’t really- if the Deputy Assistant Secretary has good sense, when the Deputy Assistant Secretary answers the question, he will cc the people who are in between in the hierarchy. But he certainly will not wait to get their approval before he answers the question.
So e-mail is just one example of a whole set of things that are subverting hierarchy, and it’s much more based on what you know and what you can contribute, and much less just down the chain than it is traditionally. I think those are probably the two biggest changes in the world that I see, that leaders have to adapt to.
Thanks very much for the chance to be with you.
1 Penny Singer, “A Long History of Joining Grows Longer,” New York Times, November 16, 1986.
2 David E. Sanger, “Bush Rallies Volunteers for His New Corps,” New York Times , March 13, 2002.
3 Eliot Kalter and Armando Ribas, “The 1994 Mexican Economic Crisis: The Role of Government Expenditure and Relative Prices,” International Monetary Fund, December 1999.
4 “Vindication of the Mexican Bailout,” New York Times, January 18, 1997.
5 “Robert Francis Kennedy,” Arlington National Cemetery Website, November 20, 2001, available at http://www.arlingtoncemetery.net/rfk.htm.
6 Nicolle Machiavelli, The Prince, Oxford University Press, (1979).