Place the Mark: The Great Chess Match Between Goldman Sachs and AIG (2005-2008)

Elite CEOs and companies do not shy away from the noise, confusion, and chaos of shifting markets. Instead, they study them. They move their assets and players into place. They place a mark on others, including those less savvy, stuck in their mindset, unable to move, or simply certain they are right, because they always were before. If played well, they emerge even stronger in the end. This is a story of how. 

This is the short story of the long arc of events that led to the 2008 global financial crisis. It begins with warning signs to all about the dangers emerging in the subprime housing market. In 2005, many tried to get their last deals in, make their money, and then run. Others, like Goldman Sachs, began to offload their positions, pushing the risks onto others. In 2007, Goldman Sachs placed the first ever collateral call received by AIG Financial Products on the derivatives it had written for a very select slice of the subprime housing instruments. It was a shock. AIG FP executives were stuck, certain of their positions, fighting against the critics. The reality was that path to the end was already caste.  Fourteen months later, a taxpayer financed bailout became necessary to prevent AIG’s slide into the abyss, taking the entire financial system and the global economy with it.  Something happened in 2005 that manifest to the world at large in 2008, and perhaps not until 2010, when investigators released their comprehensive findings as to the causes and contributors to what became the greatest economic calamity since the Great Depression.  

Within these events, a number of lessons emerge for CEOs navigating critical moments of decision-making, including: 

• Studying the long arcs of systemic change; 
• Finding marks which can be placed amongst the competition for which players will rise and which will fall as the decision arc navigates its winding course towards an end, which in this case was a taxpayer financed bailout; 
• Understanding how the intangible of fear within the mind of the markets or public accelerates pacing of the decision arc, increases pressures on decision-makers, and allows irrational behaviors to become normalized; and 
• If you are the slow player, unable to change how you perceive and react to the unfolding shifting conditions, you risk becoming the mark.  

Chris Mailander, author of Judgment: The Art of Momentous Decision-Making (Ironheart Publishing, available on Amazon), provides several exercises CEOs can use to evaluate their own decision-making within their own situational context, all designed to provoke an a-ha moment.