Reuters/Eduardo Munoz
Passersby laughed when they saw 25,000 sandbags piled in front of the entrance to Goldman Sachs headquarters in autumn 2012. The next day, the laughter died down as Hurricane Sandy flooded New York City, knocking out the city's electricity and wreaking havoc.
The photo of the brightly lit Golden Sacks skyscraper against the rest of the empty and dark buildings was a clear illustration of who was prepared for the unexpected and who was caught off guard by it.
“We learned a lot from 9/11, so when we built our building, we built it with a lot of redundancy, and a lot of backup power, and obviously invested a lot in testing and preparation and resilience in planning,” — Goldman CEO Lloyd Blankfein explained to New York magazine. Remarkably, such prudence, rather than admiration, has prompted a barrage of criticism along the lines of, "The fact that the NYU hospital is dark but Goldman Sachs is well-lit is everything that’s wrong with this country".
Investor Jeremy Giffon explained why this is his favorite business photo: "It's amazing that they built the building long before and were like, we're not going down. Like Goldman Sachs does not die. And I think that's probably some kind of deep entrenched thing in their DNA. You would ask, you can see other banks in that picture, why weren't they built with generators? What culture went into one bank doing that and the others not doing that?"
Defending against catastrophic risk always seems silly and inappropriate while things are going well. And to calmly withstand a shock, you have to create redundancy in the system in advance. Which from a day-to-day operational perspective seems criminally inefficient, especially when cash resources are limited.
Investing in linear scaling of a profitable model is easy, due to the short feedback loop. It is psychologically difficult to invest in defence against a force majeure that may never come. But it is precisely this kind of strategic foresight on the verge of paranoia that distinguishes the founders and CEOs of those companies that not just survive but thrive in a crisis. This is the area of non-linear investments and asymmetrical results. There is no simple formula here; it is already an art.
Yours sincerely,
-Alexander
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