Hank Paulson and the Peak/End Question

A few nights ago, I asked Hank Paulson, the United States Treasury Secretary during the financial crisis of 2008-9 and former Goldman Sachs CEO, the Peak/End question.

Having used the Peak/End question many times before, I knew that it has broader application than the narrower definition in The Peak Interview book.  In the job interview context, the question is designed to create a real peak for the person answering the question.  I was actually hoping it would turn out that way last night, but by the time I got to ask the question I suspected something else would happen, and it did.

The other night’s topic was US-China relations in 2013 and beyond.  When Paulson was with Goldman Sachs, he made upwards of 70 trips to China and has close personal relationships with the past and current leadership.  He has established the Paulson Institute at the University of Chicago to promote international engagement on issues of global scope, with particular focus on cooperation between the United States and China. However, in his introductory talk he made it clear that he would also be happy to talk about his role in the financial crisis of 2008.

One way or another Mr. Paulson is doomed to be remembered primarily for his actions during the five days of turmoil between September 15 and September 19, 2008.  That he would bring it up himself hinted that he wanted to talk about it.

During his talk, I also observed a number of behaviors that are classic signs of  struggles with the truth.  At one point, he answered a question by saying “No” while nodding emphatically.  He shrugged while talking; he smiled moments when it seemed inappropriate to do so, etc.   

I don’t mean to suggest that Mr. Paulson is dishonest.  Rather, I had the impression that perhaps he is at war with himself.  Given the prominence in his life of those five days in 2008, and his apparent desire to talk about them, I can’t help but wonder if that’s what the war is about.

It is said that events are neutral, yet what we live are the stories we tell ourselves and others about those events.  Those stories are part of how we create the identity that we want others to have of us, and that we want to have of ourselves.  They often are how we make ourselves feel better about the events we’ve precipitated.  

The Peak/End question is simply this: “You’ve had an interesting career.  Looking back through that career, what is the one thing you’re most proud of?”

Mr. Paulson has done lots of things in his life that must have had clear and unambiguous benefits to people.  He’s been very active in conservation and has no question that global warming is real and manmade.  He has helped establish nature preserves and national parks in China.  He has already donated in excess of $100 million to conservancy causes and has pledged his entire fortune to the effort upon his death (why people don’t do this when they are alive is a mystery). This is clearly a huge priority for him.   In answer to the question I thought he might have gone there.

He also must have been involved in at least one transaction at Goldman Sachs that had positive human consequences in the face of many that probably didn’t.  But he did not go there either.  

Instead he went to his role in the financial crisis as his best moment.  It is possible that those five days in 2008 sustain an identity crisis for Paulson.  No matter how many times he says he chose the best possible action to avert a global meltdown of the financial system (which may be true), the fact will remain that the most obvious direct beneficiary of his action to bail out AIG was Goldman Sachs, his former employer and the source of his extraordinary wealth.

Psychologically, if you say something often enough it becomes your truth, your story.  Perhaps that is what he is doing.   Honestly, I feel badly for him because if he has this identify crisis, it is irresolvable.   Nothing will change the simple fact that his action saved Goldman Sachs.

Paulson mentioned the quandary of a counterfactual.  The economic collapse that he believes his action avoided is a counterfactual.  That is, we cannot know that a worse crisis would have occurred if he had acted differently.  Equally counterfactual is an outcome that might have turned out better, not for Goldman Sachs, but for millions of people who saw much of their savings and none of their debt disappear in the crisis. For Paulson, hanging his identity on this moment will always be murky.  

Perhaps he would be happier if he could just let it go, be satisfied that perhaps he did his best, and leave the learning to others.  Then, he could choose something else as his proudest moment.  He has many such moments from which to choose.   

The Peak/End question usually will help you see who a person really is. Unlike Paulson, almost everyone else answers the Peak/End question by telling a story about the impact their action had on specific other people.  For example, yesterday I attended a presentation a fellow gave regarding the recent sale of the company he’s run for several years.  He talked about all the difficulties and frustrations and risk associated with such a transaction. Toward the end of the question period I asked him a version of the Peak/End question, “Through the months of this transaction, what was most gratifying to you personally?” 

He didn’t hesitate for a moment.  “Well, after the transaction was complete I was shocked to learn the new owners were planning to let go five of our managers.  This was unexpected and would have been devastating to those people.  I argued with the new owners and managed to convince them not to do that.  And I have to tell you, that gave me such a wonderful feeling … you know it’s one of those great moments in life to be able to do something good for someone else, even though they’ll never know it.”