Being cute. And, you know, I think the regulators tried to work with what was in the best interests of society, and the banks had to raise capital, reduce their leverage, and be a lot less risky.
In my case, I started as CEO, we had about 200 risk limits. You know, what's our total exposure? I don't know, to Russ, that would be one risk limit. When I retired, we had 25,000. Wow. So the regulated sector I feel very good about.
The amount of debt that is being raised to support the AI sector is staggering. And not all of that will perform. So who ends up paying for that? My hope is not ordinary people who are in the system because it's the government, taxpayers, have to get in to save the system.
I don't think it's remotely the same as 2008. 2008 was special in a horrible way. Yeah. And we actually had a test during Covid, and the system showed a great deal more resilience than it would have without that.
And I'll give you an example of that, because at the time I was chairman of the Financial Services Forum, which is the largest banks in the country. And we voluntarily borrowed from the Fed's discount window, which is what you do when things are tough. We did it. We weren't under duress to do it. The banks that were small, that were under duress, could do it without embarrassment.
And secondly, we voluntarily withheld all buybacks. We said we're going to hold our capital even though we felt totally secure. And it was our way of saying that we're in partnership with the government this time. We're not trying to, like, take a little advantage here. We're going to work together. And that was, it was great the way people got together on that.
So as somebody who started my career the youngest person in the room, and kept that going for a while, I usually find myself the oldest person in the room. And I guess that's what happens. And how do you stay current in a position where you're rising in a corporation, the age of the people around you is getting, on average, younger and younger, and the market out there that right now in your role as a Disney board chair is even younger than that. How do you stay current with what's going on?
Well, I'm not demonstrating that in this particular venue, but I think I ask more questions than I answer. So I'm curious how other people think, and I'm not so interested in what they think, but the process of how they think, how they analyze certain information coming into them, which end up with an answer that I disagree with is less relevant to me.
I read, you know, all the usual FT, the Foreign Affairs. I'm on the Board of Council of Foreign Relations, and when I was in the job, I would talk to people two or three levels below me a lot. Not gratuitous. Like, wouldn't it be nice to bring in one of the young interns and talk to them? No, real talk. Like, what do you think? And you're making the decision? What would you do with this?
So leverage talent around you, ask questions. And then I'm lucky to have two very curious and incredibly different children. And I hear from them all what I should be doing. One is a musician and one works at the Pentagon in national security law. So they come at things from very different, but they meet in the middle, and seem to be the one that bears... irrespective of your children.
But it's, I think that's so important. And one of the joys of being at Columbia, I teach occasionally at the business school. And, you know, you just, you realize that it's... You can't learn at the pace you used to learn, at least I can't. So you have to leverage other people's learning pace in order to keep up. And that's what I've...
So I'm going to ask a question, then we're going to go to the audience questions. So this is just get ready for the microphones.
Noting looking back, having had to make decisions in crisis with incomplete information, as every leader of every major organization in a crisis does, what have you learned from the things that have gone right and from the things that have gone wrong? And what would you share with students about how to think about the balance of needing to make a decision in real time, and knowing that you don't know everything you could know?
Well, it's very hard. Culture. We're brought up where we're not supposed to get things wrong. Everything is geared towards getting things right. But if you have 100 decisions in front of you, the only way you won't get any wrong is to make none, and by doing that, you're making a bad decision.
So you have to accept in decision making you will be wrong, and you shouldn't be surprised by it and say, well, that's my reward, if you will, for having made a lot of decisions. So I'm completely fearless about getting things wrong. Obviously if you don't get most right, then you shouldn't be in the job. So there is ultimately retribution.
The way I've tried to make decisions is I ask people with a problem. I often ask people, I give them pieces of the problem and then rank order. Like if you have two options, would one be a nine out of ten and the other a two out of ten? Or is one a two out of ten? Is one an eight out of ten and one a seven? How seriously they can, how convinced they are around their view.
And then always try to assess probability of upside of any issue and probability of downside, and then magnitude of upside and magnitude of downside. And most issues that would come to me would have, you know, relatively, it was relatively clear that it was more likely than not or less likely not.
And assessing that properly. And if I didn't really care, I delegated to somebody else to make the decision. But that's a simple but pretty useful framework for any decision you've got to make, you know, whether it's going on a date or enrolling in a class or whatever is probability of upside.
Downside is like a waste of time. Or it could be good, you know, waste of time or not. No, it's not a waste of time. Could it be great? Could it be good? Or could it be ho hum. And you kind of go through a simple methodology and then draw on other people to understand. I'm always trying to understand other people's thinking about problems. I know how I've been doing it for a while, but sometimes people surprise you, they just have different views. You've got to be open to the different way of thinking.
In government. One of the things that was always striking was that when you had a low probability of a catastrophic outcome, your risk tolerance was very low. But when if things failed, your risk tolerance was higher.
Nuclear war is an example of that. You wouldn't take a 2% risk of nuclear war, but you would take a 20% risk of maybe not having designed a program exactly correctly, because you could fix it.
Yeah. Business doesn't face as many life or death kinds of decisions, but it's kind of a similar kind of metric.
I was always looking, I measured myself each year on whether something happened inside the cost of half of 1% of our capital. So, you know, it's like a simple analogy. Maybe it's a house, if certainly if there's a big catastrophe. How much of the house are you going to allow to be burnt down or damaged or flooded before you get really upset about it? And my view was half of 1% if it did that.
One of the bedrooms is gone. I'm really, that's a real failing. And that metric I applied consistently. If issues couldn't destroy half of, in numerical terms, we had about $100 billion of money capital. So half of 1% is $500 million.
So I was looking for what we could lose $500 million. And if we could lose 300, I wasn't that interested. But 600, I was very interested. But it kept you focused on what actually matters, given the size of what we're doing? And that magnitude assessment is very important.
So when I asked James how he wanted to handle questions, should we get them in writing or around the mic, he said, just make sure we leave enough time to take questions, particularly from you. So we're going to have the microphones walking around, and we've got a little over 15 minutes, so we can take a couple of questions at a time, maybe. And we've got a few.
Hi. Thank you very much for your time. I'm a second year student at SIPA studying development practice. I'm very intrigued to know if your thinking as chairman was different when you were working in the financial sector versus now as the chairman of Disney, because I kind of see them in opposite ends of the spectrum, where one, you have to really focus on money and the numbers versus Disney. I think you're kind of selling dreams. And yeah, and I was intrigued when you said how you really focused. It was employees first for...
You were at Morgan Stanley, versus I know at Disney they have a culture of really customers first. And so I was wondering if any of your approach or your manner...
Well, that's a very good question. Just to clarify, employees first when there's a crisis. That's when you went to first protecting them and their families. At Morgan Stanley, clients always come first. So I think Disney did the same thing when they went through a crisis in Covid, when all the parks were closed, they were worried about what impact that would have on employees and their families.
In fact, Morgan Stanley, when we went through Covid, we decided to guarantee everybody's job for the end of that year, so one thing they didn't have to worry about was, do I have a job? They had enough to worry about their parents' health. But that was a guarantee, I can't guarantee you get a 5% return on your portfolio. You know, they're both very high talent industries. I would say there's more in common with them than not. They both have a lot of ego. They are very driven.
You know, it's obviously from my perspective, talent development, succession and strategy. And dealing with how people interact. Now physically, given so much is done online, dealing with the evolution of the streaming platform versus traditional linear. You're dealing with the explosion of sports in this country. They happen to own ESPN. And how do you leverage that capability? You're dealing with making bets on videos across the seven studies you have with uncertain returns. That's not very dissimilar to some aspects of what we do. Separate what they do day to day and just look at the business structure, it's not as dissimilar as you think there.
Obviously, we get tremendous creative people at Disney that do all the robotics and Imagineering and, you know, and all the people who work in Pixar and create all the animated studio work. So you're dealing with a different type of person, for sure. I started on Wall Street when I left Australia. That's my big confession. But it's the same kinds of problems. It's about people, talent, respect, values. Then it's about industrial logic of businesses, scale, capital returns. Disney is putting $60 billion into their ships and parks around the world. They've just announced they're opening a park in Abu Dhabi, Dubai. Before this, they've got parks in China, Tokyo, and in France. So it's global. So it's not as different as you would think. But what you can't do is bring a Wall Street mentality. You have to bring a business mentality and not say, well, hang on, in Wall Street we treated bonuses in this way or we treated capital planning this way. No, bring a business mentality fit for purpose of what their business is.
So I'll do shorter answers.
I wanted to ask that when you first entered the world of finance, investment banking was an end in itself. Today, I see young people are looking to do the same, but they plan their next move before making the first one. So for organizations like Morgan Stanley, how do you cultivate talent in a generation like this where every move is so structured? How do you cultivate talent amongst the young?
So I'm sorry, how do we cultivate people who will work in a structured environment versus... So not just the structure, but the fact that loads of young people are going to work in investment banking, the private equity fund.
