I was reading the book Writing that Works by Kenneth Roman and Joel Raphaelson, and in the speeches and presentations chapter of this book, the authors used Robert E. Rubin's speech on uncertainty as an example of great writing. I quickly downloaded the speech and gave it a read.
Not only is it a fabulous speech because of the way it is structured, but the advice and knowledge that Robert gives is very informative. Robert E. Rubin has a belief that no matter how certain one person may think he or she is, in the end, the only thing with a 100% probability is that nothing is certain. In other words, the only certainty is that nothing is certain.
After reading this speech, I went on to read Robert's book In An Uncertain World where he talks about how he developed his principles on dealing with an uncertain world, and the economic crises that he experienced at Goldman Sachs in the risk arbitrage department and his time as Secretary of the Treasury under Bill Clinton. It was at Goldman Sachs and at his position as Secretary of the Treasury where he developed his principles on how to make decisions in an uncertain world.
Below is my summary of Robert E. Rubin's commencement speech to the 1999 graduating class of the University of Pennsylvania, and I will put a link to the transcript below if you are interested in reading more.
He starts off the speech by talking about how much the world has become interconnected since he was growing up and entering the workforce. Information travels much faster, and decisions are needed to be made much quicker. This all because of the development of globalization and technology. There are times when one country experiences a recession and then the rest of the world experiences one also. Robert uses experiences that he faced as Secretary of the Treasury such as the Mexican Debt Crisis, the collapse of the hedge fund named Long Term Capital Management, the Asian Crisis, and the Russian Default Crisis. All of these crises were causing ripples across the global economy.
"Global markets and technology have brought us together as never before. Pick up a newspaper and you'll find exchange rates for the Thai Baht and Korean Won - currencies few people worried about when I began my career. Countries that were economically irrelevant to us 25 or 30 years ago, today provide great opportunities for American businesses and consumers. But, as demonstrated during the past two years, these same nations can also give rise to financial instability that can threaten economies around the world, no matter how strong."
“In the complex world of today, decision making has become ever more difficult, but the fundamentals of decision making have remained the same. And, one lesson I can draw from my life is that effective decision making is the key to almost everything you will do.”
Robert Rubin has used four principles of decision making during his career:
(1) The only certainty is that there is no certainty
Nothing is certain in this world, according to Mr.Rubin, therefore all decisions must be made using a cost/benefit analysis, and probabilities.
“I remember once, many years ago, when a securities trader at another firm told me he had purchased a large block of stock. He did this because he was sure – absolutely certain – a particular set of events would occur. I looked, and I agreed that there were no evident roadblocks. He, with his absolute belief, took a very, very large position. I, highly optimistic but recognizing uncertainty, took a large position. Something totally unexpected happened. The projected events did not occur. I caused my firm to lose a lot of money, but not more than it could absorb. He lost an amount way beyond reason – and his job.”
(2) Every decision, as a consequence, is a matter of weighing probabilities
“A healthy respect for uncertainty, a focus on probability, drives you never to be satisfied with your conclusions. It keeps you moving forward to seek out more information, to question conventional thinking and to continually refine your judgments. And understanding that difference between certainty and the likelihood can make all the difference. It might even save your job.”
(3) Despite uncertainty we must decide and we must act
All decisions are based on imperfect or incomplete information. At one point Robert and the rest of the Treasury had to decide whether to increase the value of a country's rapidly depreciating currency*. New information kept coming available as they discussed the viable options. Time was eventually running out and the markets were ready to open, but they made the best decision that they could at the time.
*He doesn't mention which currency, but I'm guessing he is referring to the peso during the Mexican debt crisis, where his decision to stabilize the peso did calm markets.
(4) We need to judge decisions not only on the results, but on how they were made
Robert Rubin believes that the judgement of whether a decision was right or wrong should be more focused on the quality of the decision using the information available at the time instead of based on what the outcome is. He uses two examples. The time the U.S. helped Mexico's economy in 1995 by putting together to support their economy. This package worked and he felt that it was the correct decision at the the time.
The second example was when the U.S. supported an IMF program to strengthen Russia. This decision didn't work out because Russia defaulted, but Mr. Rubin felt that the decision they made was the correct one, despite the outcome. He believed, at the time of the decision, that the stakes were high and the risk was worth taking.
In his concluding marks, Robert summarizes his thoughts on decision making under uncertainty:
“Time and again during my tenure as Treasury Secretary and when I was on Wall Street, I have faced difficult decisions. But the lesson is always the same: good decision making is the key to good outcomes. Reject absolute answers and recognize uncertainty. Weigh the probabilities. Don’t let uncertainty paralyze you. And evaluation decisions not just on the results, but on how they are made.”
Video of speech: https://www.c-span.org/video/?123391-1/university-pennsylvania-commencement
Transcript of speech: https://www.treasury.gov/press-center/press-releases/Pages/rr3152.aspx