US Bank CEO Assays a Challenging Economy
Richard K. Davis, chairman and CEO of U.S. Bancorp and a CSUF alumnus, was a keynote speaker at the 17th Annual Economic Forecast Conference, sponsored by U.S. Bank and presented by the Orange County Business Council and Cal State Fullerton’s Mihaylo College of Business and Economics. His talk followed the forecast presentation of economists Anil Puri, dean of the Mihaylo College, and Mira Farka, associate professor of economics and research associate in the Institute for Economic and Environmental Studies.
The following is an edited transcript of Davis’ comments. To hear his 33-minute speech, click here.
Boy Scouts, raise your hand. Boy Scouts in the room. Plenty of you, yes. I’m a reject. I never made it past Cub Scouts.
I really didn’t. I really tried. But this is your motto. Be prepared. I looked it up. What a fitting way to start today’s conversation.
So, let’s think about what is stopping us.
The rhetoric we hear about so much is why aren’t people spending? Why aren’t companies hiring? Why aren’t we moving forward? The first is fear. Right? Fear is indelible. It is something that is very real. It’s tangible.
Then, there is this thing called loss of faith. Really? I mean, where was your faith before, and I’m not talking spiritually. I’m talking business. Did you have a core faith before? Did you lose something along the way?
Actually, if you are old enough, like me, and if you know how to either color your hair or to shave it, loss of faith is kind of a material presumption that you really had a faith before. You are always evolving, in terms of your faith in business. I’m going to ask you to go back and either get it or create it for the first time. But I’m not buying the loss of faith piece.
The last one is uncertainty. Oh my God. Uncertainty. I’m so uncertain. Everyone is so uncertain. Really? Were you ever really certain about anything in life? Think about it. We have all always been uncertain. It’s the part we love about life. It keeps us alive and keeps us knowing that there is going to be something different tomorrow.
Look Beyond Fear
So, let me translate that into something that I enjoyed and talked to some of my employees about. It’s one of my most reluctant favorite movies. Who saw “The King’s Speech”? Right? If you did, you saw it on a long airplane flight and there was nothing else on.
So, my wife, my high school sweetheart from Glen Wilson Heights School in Hacienda Heights, went to see this in the middle of the winter. She said, “You’ve got to come and see this movie. I’ll see it again with you, if you will come and see it.”
I really was reluctant. But I do like popcorn. We had a pretty good seat. So it was working for me.
The movie starts out with a very, very heavy orchestral piece. The music is very heavy. It’s dirge like. You’re not exactly sure why. The motion picture starts bringing you in closer and closer to this adult man, who is very, very uncomfortable. He looks very nervous. You are not sure why.
He starts parading through these dark colored corridors. As it turns out, it’s in the back of the stadium somewhere in Great Britain. He is making his way with the music getting heavier and heavier to this center of a huge throng of people in a stadium. They’re all waiting for him.
There is this big, old, heavy, black iron microphone. As the music gets to its absolute crescendo, he stands before the microphone. He has to say something. As it would turn out, we find out later that this is one of the sons of the King of England. It is actually the second son.
The King of England is not able to make a presentation at this sporting event for these many, many thousands of Brits. So he asks his son to make the speech. We find out very quickly the son is unable to speak. He literally can’t find his voice. He is a stutterer and he doesn't have the courage to speak. The music helps you out, because otherwise you are thinking this is not that interesting.
As the story goes on, the first thing you learn about him is he has an amazing partner. That is the first clue here. His wife is amazing. She cajoles him into receiving help for his speaking issues. The second thing is, he finds help from the most unlikely place, a commoner. An Australian, who is not even from Great Britain, who is going to be his reluctant teacher. He wants to do this all in the guise of secrecy.
Then finally, you discover at the end that he has at least managed through this process. Oh yeah, by the way, his older brother didn’t take the throne. He gets stuck with the job. At the very end he has to talk to the Brits on the eve of the war. At the end, you find out whether it works out.
Why I like this, is because I think about our individual positions and where we stand on this. This fellow took fear and turned it into courage. That is what is so cool about this movie. He was absolutely stupefied with fear. He did not want to go get help. He didn't think he would ever find a way through this. He had the courage. There is nothing more to it than courage.
Turn Loss of Faith Into Belief
So, Boy Scout or not, I will ask you to think about where your courage level is at times like this, when there is so much uncertainty.
[In the movie], there was a moment in time, when he went to see the fellow for the first time. The fellow put earphones on him and asked him to listen to a very heavy orchestral piece and then asked him to read something aloud, while he couldn't hear himself. Do you all remember that?
It turns out, he spoke quite well. I thought this was the magic of the science. They never visited it again. But it was that moment, where this fellow believed, both his teacher and the man of whom I’m speaking, that my God, it is possible.
So finally, this guy takes uncertainty and gets ready for it. He actually did not know he was going to be the King of England. He did not know they were going to war. He did not know he would have to be a speaker for the rest of his life. But in fact, he prepared for the worst and was ready for the situation.
So, thinking about that, what I want to think about here today is this news you have heard from Mira and Anil. You knew you were going to hear it. Heavy, heavy stuff. What do you do with it?
So, I think you know where I’m headed. When you think about it, outlooks and forecasts are kind of like this Doppler. Kind of like weather people, economists don’t have to be exactly right.
If you are going on a trip, if I said today, “I’m flying to Hawaii on Saturday,” you might go to www.weather.com just to see if it is going to be 82 or 84. If you are flying this week into Minneapolis, you would be at www.weather.com, just to see if it}s going to be 34 or 38. But you would want to know the precipitation. You want to know the highs and lows. You would change your plans because of something that hasn’t happened yet that somebody is guessing on your behalf might be there when you get there.
In fact, this is kind of like we need to think about where we are going to need to be. We need to prepare for that moment. So, the outlook can be something amazing like nice and sunny. It can be rainy. So, the question is really, as you get a forecast, do you prepare because of it or do you get all upset about it?
Think about it. Preparation can be used for your benefit. If you want to get upset about it, you can do that as well. But it will not be very productive.
So, my forecast is it’s raining. Get an umbrella. Then I would say, start walking. Get on with it. Don’t sit here and cower. Don’t be consumed by the fear, by the uncertainty, by the loss of faith. Move forward.
So, I’ll give you my five-day forecast. I will give you, as well, my long‑term forecast. I know, it’s quite profound, isn’t it, coming from a banker guy, right?
I belong to the Business Council, which is a United States organization of about 80 CEOs of the largest companies in America, both private and public. We just finished our own survey of presumed futures and forecasts.
Our conclusion was that the U.S. economy forecast is volatile, uncertain and has a very weak base case. Further, we said of the global economy surprisingly identical things.
Pretty gloomy, bring the raincoat. Don’t expect to have a whole lot of fun.
But, we also then went out and said in the same survey, looking ahead three years, how do you rate the prospects for your industry? This is the long‑term forecast.
Sixty-two percent — we’ll call it two-thirds and this is the employers ... two-thirds believe it will be moderately better. Not substantially better. But not the same, worse or really worse. So, there is pretty good hope.
If you know that this is what you will need in three years, then you get on it right now. You develop talent. You develop your future employees. Work with your institutions. Work with Cal State Fullerton. Work with even those that are not sponsoring this event. Work with the business leaders and those institutions and tell them what people you need three and five years from now, so they can put that in the curriculum today, so they will be ready for us when we need them.
You can’t change the economy exactly. But you can affect it. You can change the politics directly and you can affect it. So, whatever your leaning is, whatever you believe in, use your vote. Use your voice and get out there and make a difference. If you like it, then protect it. If you don’t, then change it. But for heaven’s sakes, it’s the number one thing.
Number two, best skilled labor force. That fits in with the three‑year plan. The organizations and the locales that have the best operating environment for business. That is taxation. That is regulation. That is all the things that we talk about.
If you have found yourself as a business leader complaining and whining all about regulation or taxation and you haven't told anybody who can actually change it, then stop talking. Either stand up and own it, or just don’t spend time on it. Because we need you to get those voices to the people that actually know it matters.
I didn’t just add politicians. I am adding regulators, because there is plenty there for them to hear.
Then finally, in the long‑term forecast — if you guys could just move it forward that would be cool too — this would be United States now, the ability to make hard economic decisions.
Because, let’s get on with it. This is like the Band‑Aid. Let’s rip it off and get on with this. If we do something like $1.2 trillion or $1.3 trillion to just get the minimum standards, we will be in this for much longer. The doctors were great, right? There is going to be a great deal of effect of that and a lot of austerity programs. There probably will be some more chanting in the streets. But we need to move onto that.
You need to be owners of that. It is going to be tough. We need to be there to lead those through that.
Coherent, pro‑growth economic policy, good grief. I’ve had my own opportunity to be at the White House a number of times to hear the issues and share them. It is so complicated that what we really need are more people who are in business, in those positions of power, so that they can translate the words, because they are not unable to understand it. They’re not unable to hear it. They just don’t know what to do with it.
Because I remember in ’07, we thought it would be short‑lived. I remember in ’10 — last year — we thought it was about halfway and my whole speech was halftime. It turns out that we are still in the locker room. It’s just an extra-long halftime. It really is going to be a long, tough slog. I don’t even know what that word means. But it’s interesting.
It’s called a cycle for a reason. So don’t you dare get rid of that wisdom that came with the gray hair or the loss of hair and act like you don’t know it. There will be a recovery. It’s going to be good. When it happens, we will be ready for it, if you are thinking that way. So, this global recovery ... this is super boring now that I see it.
I say worry about yourself. Worry about your family. Worry about your team. It will take care of itself.
Lack of confidence ‑‑ this is where I started. Why aren’t you investing? Because I’m afraid. Why aren’t you growing? Because I lost faith. What are you worried about? It is still you. You can control your life. You control your destiny. Get on with it and be the people who are making this happen and stop listening.
How many people have you heard say, “If I wasn't actually reading the paper or listening to the news, I would think things were pretty good.” Well, then stop reading the paper and listening to the news for God sake. But just start believing it.
So, I’m closing here. If it’s raining, get an umbrella. Start walking. Go buy your swimsuit. The rain is going to pass. It is going to be good again. It just depends on how you handle yourself right here and now. So, with this duration that matters, I’m going to tell you that what I think it does is duration requires patience. I was going to use wisdom, but you can be wise and young.
Patience for this requires this opportunity to be prepared. Back to my Boy Scout and my preparation. So, as I close, I’ll give you my last quick story. My wife and I, as you know, live in Minneapolis. As a result, it is boring in the winter.
I’m talking eight hours of daylight and minus degrees kind of stuff. So, it was a January, a couple of winters ago. It’s a Saturday. We are empty‑nesters for the first time. The phone rings from the University of Minnesota. It is the Raptor Center. R‑a‑p‑t‑o‑r. Big bird, raptor kind of stuff. They are calling saying, “You are supporters of the Raptor Center.” It turns out I didn’t know we were, but apparently we have given money. They said, “We would love very much for you and Teresa to join us on the release of an eagle this afternoon on the cliff of the St. Croix River.”
Wow. So we agree, gladly, to join this woman. Her name is Dr. Julie. Dr. Julie says, “OK. So, can you go now?” We can go now she said.
Close to the St. Croix River means nothing to me any more than to you. It is about 30 miles from my house. The cliff is 100 feet above the Mississippi River in the middle of a frozen tundra. So she says, “Call me as soon as you get in the car. Tell me where you are. We will sync up our arrival at the same time.”
Got it. So we get in the car and do all that. She says, “Exactly where are you?” I tell her where I am. She says, “OK. You’re probably 20 minutes away.” I said, “I have never been there, but probably.” She says, “OK. Call me in 10 more minutes and tell me where you are.” I think, “Man, Julie is a control freak at the highest level.”
So, we do the calling. All the time we get closer and closer. I swear to God, there were like four or five calls. She says, “We are about a mile apart. You are almost there.” I said, “We are. We are. Rapunzel. Rapunzel.” So, we pull around into this park. There is a park up on this cliff. It’s beautiful. There’s no one there, because why would you be there.
So, I am picturing Julie is going to come and join me now. OK. It is an eagle, just like that. I am picturing a large van. I am picturing a cage bigger than this podium. I’m picturing the most amazing eagle sitting and ready to roll, like you've ever seen. It’s in my head. She comes swinging around the corner. It turns out her husband, Bill, is driving the car, a bright blue Geo Metro. If you don’t know what that is, it’s a teeny little car. OK? All this is true.
She is sitting in the passenger seat with her arms wrapped around the eagle, holding it. Now I’m getting the whole point of why it’s so important we get there at the same time. I open the door. I open the door for her. She says, “Quickly, we must run to the cliff’s edge.”
I swear to God. It was like right out of “Airplane.” So, we run to the cliff’s edge. So Bill and Teresa and I get there. She goes, “OK. Now, here’s what’s going to happen. I’m going to hand you the eagle and she’s going to want to fly away.”
I’m getting that. It makes a lot of sense to me. She goes, “Now I’ll take off her little goggles.” These are like the ones you have at the suntan booth. Clearly I’ve never been. But those little ones. She goes, “When I take them off, that’s going to be her clue that she can fly. But we are not going to let her fly.”
She goes, “You need to get right at the edge of the cliff.” I’m making none of this up. “Teresa, I want you to hold his belt loop.” It all comes down right then and there to your whole life flashing before your eyes. I’m thinking we do still love each other. It’s been 30 years. But man, it’s going to be oops, he’s gone.
So, picture me. Big coats too, because it’s freezing. She’s holding underneath my coat. She’s about to hand me off the bird. She goes, “One more thing. When I hand you the bird, if you can get your composure before you let her go, she will sense this. Hold her for just one more second. Then give her all you can, as fast as you can let her go. Don’t worry. She won’t drop.” OK. Just give me the bird. She said, “Then, if you can, watch her fly and count to two seconds or 1001, 1002. You will see her just stop, just stop in dead space like a cartoon character. Then she’ll take off.”
So, whatever. Just give me the bird. Teresa has got me. I’m ready to roll. I get the bird. Take off the thing. I let her go. Finally I figure out the cliff’s edge. She needs about 50 feet to catch her wingspan. Otherwise she could hit the ground. That would be uncool after all they did to bring her back to life.
So I let her go. Actually, Bill, her husband, Bill, whoever he is, counts out 1001, 1002. Sweet. All of a sudden, the bird just stops, just like Julie said she would. Then, bam, takes off.
So, we did get a photo. It was obviously a great opportunity for this once‑in‑a‑lifetime thing. I said, “So Julie, I missed the 1001, 1002. What was that all about?”
She goes, “Oh, I meant to tell you this, but we didn't have time. We found this poor, poor eagle in early November, a victim of lead buckshot. She had swallowed a lead bullet. She was dying. We brought her back to the Raptor Center and we brought her to life.
“But the one way we bring her back to rehabilitation is to let her fly again. We teach her to fly all over again. When you teach an animal like that to fly, you should tether them to a string, so that, when you’re done with that session, you bring them back, because they want to take off and they are not able.
“So the last week or so has been her last opportunity to fly. She gets out about 400 or 500 feet and guess how many seconds that is? So when she gets to this point, she’s going to get to that far. She is so trained to stop, knowing that the tug is going to come back. Then, when she realizes there isn’t one, she will be free.”
It was very cool. So, why am I giving this to you?
Besides the fact that I want you to know my wife does love me, it is the headline.
So, what’s stopping you? We keep flying out and get pulled back. We keep getting this sense of something keeping us away. It is lack of confidence. It is lack of faith. It is fear, whatever. It's a forecast, for heaven’s sakes. It is intended to tell you how to be more prepared. Use it. Think about how you can turn these three things into courage and belief and the opportunity to actually be prepared.
So, be prepared. The Boy Scouts said it. In fact, I never made it that far. I’m counting on the rest of you to get us there.
Dec. 16, 2011