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The Roots of the Financial Crisis and the SolutionBy John Allison

FREEDOMTeachingTeachinga series of speeches and lectures honoring the virtues of a free and democratic society

always enjoy the opportunity to talk to bright young people who will be future

leaders in our society. I want to begin by congratulating all of you; first, on simply your choice to be here, your choice to reflect that ideas matter, that intellectual curiosity matters, that learning matters. It’s a very important choice.

I know you’re all achievers, or else you wouldn’t be here. I think that’s a really good thing because achievers usually make the biggest difference. However, achievers have an interesting attribute: they almost always see life as a series of mountains, and they’re looking for the next mountain to climb. In many ways, that’s a good thing. However, there are times when you simply ought to enjoy the view from the top of the mountain. When you’ve accomplished something difficult and done it very well – and that’s what you’ve done today – I hope you’ll get that warm glow inside, which is the ultimate reward for achievement.

Today, I want to talk about what’s been going on in our economy and relate it to the issue of leadership. We are in a very transitional period. We’re fighting some of the biggest economic challenges in generations. We’re making some decisions that will have a profound impact on the quality of life of all the people in this room. Unfortunately, we’ve misidentified a lot of the problems, and therefore, we have misidentified the cures.

I want to share with you a few thoughts on the financial crisis, from both an economic perspective, then more importantly from a philosophical perspective. And then, out of that, I will offer all of you a leadership challenge. I will offer it because you are going to have to lead us in the right direction in the long-term.

Looking at the financial crisis, I have four basic thoughts.

John Allison served as the CEO of BB&T Corporation, one of the nation’s top 10 financial holding companies. Its bank subsidiaries operate 1,800 financial centers around the country. He retired as chairman of BB&T in 2009.

Allison has been recognized by the Harvard Business Review as one of the world’s top 10 CEOs. In addition, he was awarded the American Banker Lifetime Achievement Award in 2009 and was inducted into the North Carolina Business Hall of Fame.

Allison is actively involved in educational and community organizations. He serves on the Wake Forest University Baptist Medical Center’s board of visitors, the Board of Visitors of the Center for Organizational Leadership and Ethics at Duke’s Fuqua School of Business, and at the Kenan Flagler Business School at UNC in Chapel Hill. He is currently the distinguished professor of practice on the faculty of the Wake Forest University School of Business.

In this issue of Teaching Freedom, John Allison, former chairman of BB&T, gives the

commencement address to the 395 graduates of The Fund for American Studies’

summer Institutes in Washington, D.C. The address was given at Georgetown

University’s historic Gaston Hall. In his comments below, Allison explains the genesis

of the current financial crisis, gives solutions to the problem, and challenges the

students to lead lives that will prevent similar catastrophes in the future.

As chairman of BB&T, Allison kept the institution on a steady course of growth,

providing service to its customers and a great return to its shareholders. BB&T is rated

one of the country’s safest and soundest financial institutions.

To view a video of this speech, visit: www.TFAS.org/Videos.

Government policy created the financial crisis. We live in a mixed economy. That mixture varies a lot by industry. Technology is probably 20% government, 80% free market. Financial services is probably 70% government, 30% free market. It’s not surprising that the most regulated segment of our economy is where we’ve had the biggest financial problems.

Government policy created a “bubble” in the residential real estate market. That “bubble” burst, as all “bubbles” do, and that was transmitted into the capital markets and into the economy in general, destroying trillions of dollars of wealth and creating high unemployment levels and negative economic growth.

It is true that individual financial institutions made some very serious mistakes. They had serious failures of leadership that caused those problems, and I have no empathy for those institutions. In my world view, they should have been allowed to fail. However, those mistakes were secondary, because they were done in the context of this overriding government policy.

Most unfortunately, almost everything we’ve done to deal with the financial crisis – while it may have some benefits

in the short-term – will be detrimental to our long-term well-being.

How did we get here? What happened? We overbuilt residential real estate to the tune of $1 trillion plus. We built too many houses. We built houses in the wrong places. We built houses that are too big. We should have been investing in technology, manufacturing capacity and education. We should have saved more and we should have spent less.

How did we make a mistake of that magnitude? When you think of the size of that mistake, it almost always has to relate back to government policy. While there were a series of factors, we have three primary culprits: (1) bad decisions by the Federal Reserve; (2) the Federal Deposit Insurance Corporation (FDIC); and (3) government housing policy, specifically Freddie Mac and Fannie Mae, the large government-sponsored enterprises that assist on mortgages.

The fundamental cause of the financial crisis is mistakes by the Federal Reserve. Now, this is something that many people have learned in school, but they don’t understand its implications. In 1913, the monetary system in the United States was nationalized. If we have problems in the monetary system, by definition they’re government policy problems. If

interstate highway bridges were falling down, we’d say, “Well the government owns the highway. If the bridges are falling down, that’s a government problem.” The government owns the monetary system.

The Federal Reserve was created, in theory, to reduce volatility in the economy. They have reduced volatility in the short-term, but created bigger problems in the long-term. Why is that? In a free market, because we’re not omniscient, we’re constantly in a correction process. Businesses are constantly failing and new businesses are being created. When you take out the bottom side of that correction process – when you keep businesses from failing – you actually push problems into the future, and you get bigger corrections in the long-term.

In addition, the very existence of the Federal Reserve has created a great deal of leverage in our economy. A state can borrow a lot of money because it can tax people. But at some point a state runs into limits on its borrowing capacity – California has hit a limit. The Federal Government can borrow a lot more money because not only can it tax, but also because it can print money. And it’s been doing that. In fact, the inflation rate since the creation of the Federal Reserve is 2000%. In addition, the Federal Reserve, because it’s tried to take out the corrections in the economy, has encouraged people not to save because people save for risk in the future. And if we’re not going to have any volatility, then we don’t have a high savings rate.

We also have some very specific mistakes by the leaders of the Federal Reserve. Alan Greenspan created what’s called negative real interest rates. That means if inflation is 3%, you can borrow money at 2%. You can’t create a bigger incentive to borrow money than that. And then, Ben Bernanke, the current head of the Federal Reserve, raised

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interest rates 425% in two years and then inverted interest rates. That means short-term rates were higher than long-term rates.

Financial institutions borrow short and lend long. When you invert interest rates (markets never invert interest rates – only the Federal Reserve can invert interest rates) financial institutions are encouraged to take a lot more risk. And that’s why most of the bad loans were made late in the economic cycle.

In a very fundamental sense, the Federal Reserve created too much money, which resulted in a bubble (i.e., a massive misinvestment, mostly in real estate) in the economy. Without their mistakes, we couldn’t have had the correction problems we’re facing today.

The second culprit was the Federal Deposit Insurance Corporation (FDIC). FDIC insurance sounds like a good thing. Unfortunately, FDIC insurance destroys market discipline. We saw that in our business in the Atlanta market, where a lot of community banks have failed. We took over one of those failed banks. This is a typical community bank story. In this situation, 10 guys were in the motel business. They put in a little money, created a bank, and leveraged that bank tremendously by paying high rates on Certificates of Deposit. The depositors didn’t care about the health of the bank because they had deposit insurance protected by the Federal Government. And then the bank lent money to the owner cronies in the motel business, who all went broke. The FDIC lost about 50 cents on the dollar.

On a bigger scale, large financial institutions like Countrywide, Washington Mutual, IndyMac and Golden West – who all effectively failed – used FDIC insurance to buy lots of deposits and make high-risk loans. They never could have raised that much money in the capital markets without deposit insurance.

The proximate cause of the financial crisis were decisions made in relation to government housing policy. The government raised the home ownership rate above what’s called the natural market rate, under the theory that owning a home is a good thing.

Owning a home is a good thing, other things being equal. However, there’s no evidence that owning a home causes people to change their behavior. Encouraging people to buy homes they can’t afford, getting young people to buy homes before they’ve learned to save, and encouraging people to buy bigger homes than they can afford is not a good thing. Tax policy supported housing, but the negative trend we’re dealing with today began with the Community Reinvestment Act. Again, it sounded like a good idea but the practice had major negative effects.

However, the biggest event was the decision by Bill Clinton in September 1999 to set a goal for the government-sponsored enterprises Freddie Mac and Fannie Mae to have half their loan portfolios in affordable housing – what we now call subprime lending.

Interestingly enough, a number of economists, including liberal economists, said this was risky because these companies – Freddie Mac and Fannie Mae – are so big. The legitimate affordable housing market is not that big in comparison. If they actually achieve this goal and get half their loans in affordable housing, it could break Freddie Mac and Fannie Mae. And they are so big this could take out the

economic system of the United States. And these economists said it could happen in 10 years. Nine years later, the prediction happened.

Freddie Mac and Fannie Mae would never have existed in the free market. They existed because their debts were guaranteed by the U.S. Government. Even before they went broke, they were leveraged 1000 to 1. That means they had $1,000 of debt for every dollar in equity. They owed $5 trillion. Now, remember, a trillion is a million million. As taxpayers you assumed those liabilities. Congratulations. You now owe $5 trillion. Politics played a huge role in Fannie and Freddie. And I think you’ve gotten a little flavor of politics. I was personally involved in that process. I was on a committee of the Financial Services Roundtable, which is made up of the largest bank holding companies in the United States, for nine years. We were trying to do something about Freddie Mac and Fannie Mae.

We looked at the numbers. It was mathematically certain that Freddie and Fannie were going broke. A 15-year-old would have said, “Hey, these guys are going broke!” We met with Congress on numerous occasions to discuss this issue with lawmakers. They absolutely would not listen to us.

Congress would not listen to us for a number of reasons. First, they had a “religious” belief in affordable housing. Second, Freddie Mac and Fannie Mae were the largest contributors to the Democratic Party and one of the largest contributors to the Republican Party.

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“When you take out the bottom side of that correction

process – when you keep businesses from failing –

you actually push problems into the future, and you

get bigger corrections in the long term.”

So, by not listening, Congress evaded what would have been obvious to everybody in this room.

In a certain fundamental sense, the reason we had a financial crisis is the Federal Reserve printed too much money trying to avoid a natural market correction process and that led to problems in the future. It ended up in the housing market because of Freddie Mac and Fannie Mae, and that’s why we faced this troubling outcome.

Of course, a number of individual financial institutions and their leaders made bad mistakes and made the crisis worse. Personally, I would have let these companies fail.

What’s interesting, though, is to reflect not on the economics, but on the philosophy underneath those decisions. And then out of that to connect to a personal leadership challenge I will give to you.

What really caused the financial crisis was a combination of altruism and pragmatism. Altruism says everybody has a right to a house, but who provides the house? It says everybody has a right to free medical care, but who provides the care? My right to free medical care is my right to imprison a doctor to provide me that medical care, or to imprison somebody else to pay for that doctor to provide me that medical care.

This is exactly the opposite of the American concept of rights. In the American concept of rights we each have the moral right to what we produce – what we create. But we don’t have the right to what anybody else produces. Altruism leads to a redistribution from the productive to the non-productive, and it says that nobody has a fundamental right to their own life.

Altruism gets combined with pragmatism in business. Because, you can’t really run a business in a market

economy as an altruist. So, business-people become pragmatists, and the rule of pragmatism is to do what works. Unfortunately, many things that work in the short-term are very destructive in the long-term. Subprime lending and affordable housing worked for a long period of time, and then became a disaster. Pragmatists can’t be rational, as rationality demands a long-term perspective. Pragmatists can’t have integrity. That’s why a lot of business-people don’t have integrity. Integrity demands a long-term perspective.

Combine altruism and pragmatism, and you get what I call the “free lunch” mentality. In the last presidential election, neither candidate offered any serious solution to Social Security or Medicare even though those programs have huge deficits. And if the candidates had, they likely wouldn’t have been elected.

The free lunch mentality leads to a lack of personal responsibility. That is ultimately the death of democracies. The

Founding Fathers feared the tyranny of the majority. What they were concerned about was the protection of individual rights, freedom of speech, freedom of religion. But they also recognized that when 51% of the people figure out they can vote to get a free lunch from 49%, pretty soon the party’s over. Because then 60% want a free lunch from 40%, then 70% want a free lunch from 30%, and finally the 30% quits.

The United States was founded on exactly the opposite moral ethic, and it is, in fact, the solution to our problems. Life, Liberty and the Pursuit of Happiness. Each individual’s moral right to their own life, including each individual’s moral right to the product of their own labor (even if they produce a lot) and including the right to give it away if they choose to give it away on their own terms. This ethic demands personal responsibility, because there is no free lunch. It also demands people to think rationally, to take a long-term perspective, to have integrity, to have self-discipline.

When most people hear “Life, Liberty and the Pursuit of Happiness,” they think of liberty, and liberty is incredibly important. However, liberty is an old idea. The world-changing idea is the “Pursuit of Happiness.”

Before Jefferson, before the thinkers of the Enlightenment, everybody existed for somebody else’s good; the good of the king, the good of the state, the good of the church. Nobody existed for their own good. Jefferson said that each of us has the moral right to pursue our personal happiness. We’re not guaranteed success in that pursuit, but we have that right.

The United States was the first country ever founded on the idea that people should act in their rational self-interest, properly understood. And that’s really a deep idea. Acting in our rational self-interest does not include taking

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THE FUND FOR AMERICAN STUDIES • WWW.TFAS.ORG • 800-741-6964

“We need to go back to

the principles that made

America great in the

first place – individual

rights, free markets,

personal initiative and

self-responsibility. And

we need people like the

students in this room to

help make that change

happen.

advantage of other people. Taking advantage of other people is self-defeating in the sense that you might fool Tom and Jane, but pretty soon they’re going to tell Dick and Harry and nobody’s going to trust you. You’ve probably seen that in your relationships with other people. In addition, trying to manipulate other people’s minds is very self-destructive. So, acting in your rational self-interest is not about taking advantage of other people.

But on the other hand, it’s not about self-sacrifice. I want to ask you a question, a very important question. Do you have as much right to your life as anybody else? Of course you do. Acting in your rational self-interest is not about taking advantage of other people, and it’s not about self-sacrifice. It’s about what I call the Trader Principle. And the Trader Principle is that life is really about creating value for value. It’s about getting better together.

In our business, we help our clients achieve economic success and financial security, and we make a profit doing it, getting better together. In fact, there are only two stable relationship conditions, win-win and lose-lose. Whenever we get greedy and we set up a win-lose, pretty soon our partner’s going to get bitter. You see that sometimes in spousal relationships, and we end up with a lose-lose. Interestingly enough, whenever we get self-sacrificial, we set up a lose-win. We’re going to get bitter, and we’re going to end up in a lose-lose relationship. So, really, life is about creating win-win relationships. And you should ask yourself, in any meaningful relationship, what’s in it for you? Because if there’s nothing in it for you, the relationship won’t work. You should also ask, what’s in it for them? How will this relationship benefit them? Or else in the long-term, the relationship will not work for you.

Of course, it’s in your rational self-interest to help your family, your

friends, and the people you care about because you care about them and because they’re valuable in your life. Something I say to college-age students is “Love is the ultimate expression of selfishness.” If you love your children, helping your children is not a sacrifice because you love them. For example, say you’re getting ready to get married and your future spouse comes up to you and says, “Honey, I’m so excited about marrying you. This is the biggest self-sacrifice I’ve ever made.” It’s not something you want to hear!

I happen to believe it is in my rational self-interest to support the United Way. The United Way is an umbrella charity organization that does a lot of good in the community. I wouldn’t want to live in the kind of community that would exist without a United Way, and I wouldn’t want my children to live in that kind of community. So, acting in your rational self-interest is actually a complex idea. It’s not about taking advantage of other people, but it’s also not about sacrifice. It’s about asking yourself, “What kind of world would I like to live in?” It’s not a linear view, but a view that holds the context “What kind of world would I like to live in, and what would I enjoy doing, creating that kind of world? What would be meaningful to me in that process?”

A lot of people say, “Well, the problem is everybody’s selfish.” I disagree. I had a friend who drank 24 beers a day, got cirrhosis of the liver, and died. People say he was selfish. No, he was self-destructive. I think the problem is people don’t really act in their self-interest. They don’t have a sense of purpose. They don’t take care of their minds. They don’t take care of their bodies. They don’t create meaningful human relationships that make their life most valuable. If most people really thought about how to live a good life for themselves, 95% of our problems would go away and we could easily deal with the rest. The United States was founded

on this idea. It underlies free markets. It underlies a free society. It’s a very fundamental idea.

Where do we go from here? What’s happening in our society? Here’s the challenge to you. I’m in the category that thinks we’re probably in some kind of economic recovery. I think the next five years will look like stagflation, which means relatively high interest rates, relatively slow growth and unfortunately kind of a permanent level of too-high unemployment. What really concerns me, and should concern this group, is what happens 20 or 25 years from now. We have the recipe for an economic disaster, if we’re not very careful. If you look at the actuarial liabilities – the unfunded commitments we’ve made under Social Security and Medicare, plus the new healthcare legislation, and the unfunded pension plans we have with State employees – we are running annual operating deficits of over a trillion dollars, we have a dysfunctional foreign policy, a big demographic problem with the retirement of the Baby Boomers, and a failed K-12 education system. By any kind of objective standard, we’ve got some whopping challenges.

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In fact, in 20 or 25 years, if we don’t change direction, the United States will go broke. Now, countries don’t go broke the way companies go broke. They usually hyper-inflate. They print a bunch of money and become a third-world economy like Argentina, with a much lower standard of living. The good news is we can change direction, but we have to change direction now. And we need to go in almost the opposite direction of where we’re going today. We need to go back to the principles that made America great in the first place – individual rights, free markets, personal initiative and self-responsibility. And we need people like the students in this room to help make that change happen.

I’ll challenge you on two planes. First, you must understand both economically and philosophically the ideas that made America great in the first place. Second, you must be sure that you as an individual are a principled individual, and when you become a leader, that you are a principled leader. That’s because we have certainly had many failures of leadership. We’ve had these failures in politics and in business, all that relate to principles that are linked to ethics.

At BB&T, we have 10 core values. Whatever economic success we’ve had at our organization is not because we’re all that much smarter than anybody else or because we have better strategies. It’s because we’ve had these fundamental principles and have not compromised in our commitment to them. We know they work.

Underlying these 10 core values are what I consider the three great virtues – purpose, reason and self-esteem. As human beings, we are purpose-directed entities. We have to know where we’re going in order to get there. All organizations (businesses, civic organizations, universities, etc.) are simply groups of human beings. For organizations to be successful, the people in those organizations must become vested in the purpose of that organization. While the content of the purpose will vary a lot, the context, I would argue, is the same for everybody in this room. The context of purpose has two components.

The first component is that every person in this room wants to make the world a better place to live. I don’t believe you would be here today if you didn’t want to make the world a better place to live. This can be achieved in many ways. You don’t have to go to Africa and feed hungry children to make the world a better place to live. Businesses make the world a better place to live. Businesses create better products and better services that improve the quality of life. In fact, the primary difference between the quality of life in the United States and the quality of life in Africa is we have better businesses.

When business leaders forget they’re in business to make the world a better place to live, bad things happen to their businesses. Good doctors, good teachers, and good homemakers make the world a better place to live. Lots of ways exist to make the world a better place to live, but

you need a sense of purpose. That sense must be based on a deep belief that what you’re doing is improving the world for you and others around you.

The second component of purpose is equally important and far under-discussed. You need to make the world a better place to live by doing something you want to do for you. You have a fundamental right to your own life. And even if you were to make the world a better place to live but didn’t enjoy doing it, you would have wasted the most precious thing you have, which is you. And if you try to make the world a better place to live doing something you don’t want to do, the odds are you won’t do it very well. So, you need to make the world a better place to live by doing something you want to do for you.

The means by which we accomplish our purpose is our capacity to think. We use the term Reason. Everything that’s alive has a method of staying alive. A lion has claws to hunt with and a deer has speed to avoid the hunter. We have the capacity to think. And our capacity to think is literally our only means to survival, success and happiness. I’m sorry, but there are no shortcuts and there are no free lunches.

I talk a lot to the employees at BB&T about thinking. I don’t know how much we can impact people’s IQ, but we can choose to make choices that impact our thinking capacity in a very fundamental way. The most important choice you can make is to live your life as a lifelong learner. This demands that you have an active mind. And if you look at people who are lifelong learners, they tend to read more and they take more advantage of educational seminars like this. But they primarily learn from their experiences. As human beings, we are primarily experiential learners. And if you look at people who are superior experiential learners, they do two simple but profound things well.

“The next time you hear something that you know

at some deep level you really ought to examine,

have the courage to examine it. People that are

superior experiential learners evade less and

therefore learn much more rapidly.

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Probably everybody in here has learned from mistakes. You’ve probably made mistakes that have transformed your life. However, probably most of us realize we don’t always learn from our mistakes. We’ve probably done things, and we’ve done them over and over again, that we aren’t too happy about, and said, “Oh, I’ve done that before.” Unfortunately, a lot of times we don’t learn from our mistakes. The reason we don’t learn from our mistakes is the ultimate psychological sin of evasion. Evasion occurs when you’re presented with some piece of information that at some level you know needs to be examined. But you refuse to examine it because it threatens something you want to believe about yourself, or you want to believe about the world, so you literally don’t hear it.

And when you evade, you are detached from reality and bad things happen. In my career, I started as a lender to small businesses. The number-one reason small businesses fail is the leader of that business evades. Things are going along fine and then something happens in the economy or something happens at home. The leader of that business doesn’t want to hear about it, the leader runs that business right into the ground.

The largest financial institution in the world, CitiGroup, hired a group of geniuses, PhDs out of Harvard and MIT, to run their affordable housing (now subprime) lending business. It may have even been a legitimate business when they started it.

I guarantee, long before any of us heard about subprime lending and the economic destruction that came out of the process, those geniuses in the back room of CitiGroup knew something was going wrong. But what did they do? They evaded. They evaded because they didn’t want to give up the money. They didn’t want to give up the economic profit their company was making. They

ran that company right into the ground.

Unfortunately, everybody evades. You evade. Your moms, dads and friends have been telling you about your evasions. The next time you hear something that you know at some deep level you really ought to examine, have the courage to examine it. People who are superior experiential learners evade less and therefore learn much more rapidly.

The second thing that superior experiential learners do is recognize that life can be a constant education if you choose to make it one. At BB&T, we operate with a series of community banks. When I would go visit those community banks, one of the things we did was have a luncheon with our local advisory board members, who were business and community leaders.

I never had a boring luncheon. The attendees were always asking questions. They were popping ideas out. They were in a search process. And you could understand why they had been so successful in what they were doing, because they had very active minds. They were in focus. They were paying attention.

Unfortunately, a lot of people live most of their life out of focus. And when you’re out of focus, you can’t learn and you can’t grow. Superior experiential learners evade less and stay in focus more, which is a huge competitive advantage in life.

An interesting thing happens when you’re clear about your purpose and use your thinking capacity to accomplish a purpose: you get to do something very important. You get to raise your self-esteem and recognize your value.

At high levels in organizations for groups like this, unfortunately, the reason people fail is not because they aren’t smart enough, and it’s not because they aren’t well-educated.

It is because they have some subconscious belief, based on low self-esteem, that leads to self-destructive behavior. For people like those in this room, that is going to be one of your long-term challenges. On a more general level, self-esteem is the foundation for happiness, and happiness is the end of the game, right? Happiness is the end of the game.

And I use happiness in a very deep Aristotelian sense of a life well-lived. Not a good time on Friday night, but a life you can look back at and say, “I’m proud I did what I did and made the choices I did.” If you think about businesspeople, sometimes we get confused. Sometimes we think it’s about money. There’s nothing wrong with money. Money is a good thing. But money is not an end. It can be a means to an end, but it’s not an end. Happiness is the end, and happiness comes from having a high level of self-esteem.

Self-esteem is a complex subject; however, I will offer two thoughts. First, self-esteem is fundamentally self-confidence in your ability to live and be successful, given the facts of reality. So, you earn self-esteem by how you live your life. Nobody can give you self-esteem and you cannot give self-esteem to anyone else. You cannot give your children self-esteem. Self-esteem is earned by how you live your life. Live your life with integrity and you will raise your self-esteem.

The second thought about self-esteem is this: the vast majority of your self-esteem will come from your work, whatever you choose it to be. I use work in the very broad context; raising children is very important, very hard work. Because you spend so much time, so much effort, so much energy at work, it will drive your self-esteem, which is why work is so important. I tell all the employees of BB&T that it is very important to BB&T that you do your job well, but it is far, far, far more important

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Teaching Freedom is a series of remarks published

by The Fund for American Studies, a nonprofit

educational organization in Washington, D.C.

The speakers featured in each issue of Teaching

Freedom delivered their remarks at a TFAS institute

or conference or serve as faculty members in an

institute.

The speakers who participate in the educational

programs contribute greatly to the purpose and

mission of TFAS programs. The speeches are

published in an effort to share the words and

lessons of the speakers with friends, alumni,

supporters and others throughout the country and

world who are unable to attend the events.

8

to you that you do your job well. You might fool me about how well you do you job, you might fool your boss about how well you do your job, but you’ll never fool yourself. If you don’t do your work the best you can possibly do it, given your level of skill and your level of knowledge (you can’t do the impossible), you will lower your self-esteem.

Here’s the good news: the reverse is also true. Do your work the best you can possibly do it, given your level of skill and knowledge, and you will raise your self-esteem. That’s also true of your college work. Do your college work the best you can possibly do it, given your level of skill and knowledge, and you will raise your self-esteem. And that’s a whole lot more important than whether you get good grades or graduate with honors because it’s about who you are. For our employees, that raising of self-esteem is a whole lot more important than whether they get a promotion or

more money, because it’s about who they are as individuals.

I want to make one important societal integration on this idea. Take a brick-layer. He has a tough job. He doesn’t make a lot of money, but makes enough money to take care of his family. Maybe life is a struggle, but his family gets by. And maybe his granddaughter becomes a CEO of a large organization, maybe not. That brick-layer gets something very precious from his work. He gets to be proud of what he’s done. He gets to be proud of the family he’s helped create. He gets something very precious. Take that same brick layer and give him welfare. He may be better off economically, but the brick-layer is much worse off spiritually. He loses something that is extremely precious – he loses his self-esteem.

There’s a lot of discussion and concern in our society today about security.

Americans care about security. But the United States is not the land of security. The United States is the land of opportunity. People didn’t get on a boat and come to Jamestown to be secure. The United States is the land of opportunity – the opportunity to be great, the opportunity to fail and try again, and most importantly, the opportunity for that brick-layer to live life on his own terms, to create the kind of life he wants to live, given his own set of beliefs. That is a precious kind of opportunity, and that is the American sense of life. That is what is so precious for us to preserve.

I want to congratulate you again on being here and congratulate you on your achievement. I am confident that you will be principled leaders, and we need that kind of leadership to create the kind of future we all want.

Thank you very much.

“There’s a lot of discussion and concern in our society today about security.

Americans care about security. But the United States is not the land of

security. The United States is the land of opportunity.

MARK YOUR 2011 CALENDARS FOR EXCITING TFAS EVENTSEuropean Cruise with The Weekly Standard and TFASMay 12 - 22, 2011 Spain • Portugal • France • Belgium • Englandwww.TFAS.org/cruise

44th Anniversary Annual ConferenceApril 14-15, 2011Washington, D.C. • Annapolis, Md.www.TFAS.org/44th

Leadership Network ConferenceOctober 14-15, 2011Dallas, Texaswww.TFAS.org/Fall

Visit www.TFAS.org for information on all TFAS events, or contact Jane Mack at jmack@TFAS.org or 202-986-0384.