Ray McDaniel came to a CEO Boot Camp on his fifth day as CEO in 2005. He came back to a dinner before another Boot Camp six years later to answer the question “What do you wish you’d known then that you know now?” He said three things:
- “I wish I had known the world was about to blow up.” Moody’s had systemically rated companies credit way too high going into the 2008-2009 downturn.
- “I wish I’d known that companies get mad when you downgrade their credit ratings, but when you downgrade countries’ credit ratings, they raid your offices and put your people in jail.”
- “I wish I’d known how much fun it was to testify in front of Congress. I would have called in sick.” Congress people don’t so much ask you questions as use you as an excuse to make whatever points they need to make to their constituents.
Moody’s just announced that Robert Fauber will take over as CEO from McDaniel effective January 1, 2021. Now McDaniel can tell Fauber what he wished someone had told him in 2005. He could give Fauber three envelopes or he could take the same general advice that he wish he had given to himself and apply it to today’s circumstances. Those morph into:
- The world has blown up and will never be the same.
- Think beyond companies and beyond countries to cross-border players.
- Testifying in front of congress is fun. (Not.)
The world has blown up and will never be the same
Anyone that tells you they know how Covid-19 is going to play out is either lying, delusional, running for President, or all three. But here’s what we do know:
- Covid-19 is one of the seminal events of all our lives.
- Almost everything is disrupted.
- All the king’s horses and all the king’s men won’t be able to put the world back together again resembling what it was in any shape or form.
Covid-19 is arguable the mother of all Black Swan events, not so much in that it’s a massive Black Swan event itself (which it is,) but in that it is going to give birth to a whole generation of Black Swan events.
We’re living in a word in which one of the most successful CEO’s of our time, Meg Whitman, can go through almost $2B and effectively bankrupt streaming platform Quibi in six months.
We’re living in a world experiencing one of the biggest transfers of wealth between the winners and the losers since Rome conquered the known world.
Fauber needs take all this into account as he and his team try to help others navigate financial markets.
Think beyond companies and beyond countries to cross-border players.
In some ways, McDaniel had it easy. While he couldn’t predict how different countries were going to react to what Moody’s did, at least he knew where the countries were. Fauber’s going to have to deal with cross-border players like Google and Facebook and Alibaba and Tencent that have shown a complete disregard for individual countries’ rules, locating their operations wherever best suits them and moving them at the drop of a Bitcoin.
It’s hard to rate companies’ credit when you can’t pin down their locations.
Fauber and his team need to figure out news ways of evaluating companies as the rules constantly evolve.
Testifying in front of congress is fun
Well, that advice from 2011 still holds. The divide in congress is deeper and more challenging than it ever was. Look at Amy Coney Barrett’s hearings in front of the Judicial Committee. Steven Covey must be turning in his grave. He suggested we should “Seek First to Understand, Then to Be Understood.” None of the questions were designed to help people understand Judge Barrett. They were all designed to make points to future voters.
Fauber’s not going to change the political realities Moody has to deal with. But he does need to understand them and take them into account.
McDaniel was right then; and he’s still right. Fauber, and each of us, should be aware of the ever-changing nature of our world, look beyond our own narrow horizons, and learn to accept what we cannot change.