Leadership Mindset in Times of Crisis
Navigating Slow-Rolling Catastrophes and Black Swan Events
Lately, my team has raised many thoughtful questions and concerns about the state of the world, our preparedness, and how I might respond if we faced a black swan event. The reality is, there's no perfect script for handling these crises—every response must be carefully tailored to the unique circumstances and environment at that moment. However, preparation is both possible and essential. By drawing on history’s most insightful examples and developing mental toughness, we can build a solid foundation to confront uncertainty head-on.
Great leadership emerges most clearly during challenging times. When conditions are stable, leadership can appear effortless. Yet the true test occurs during slow-rolling catastrophes or sudden black swan events. These moments demand more than technical skills—they call for grit, a steel backbone, virtue, and a clear-eyed mindset. Effective preparation isn’t just about managing immediate crises; it’s about mentally and practically equipping ourselves for whatever the future may hold.
Understanding the Threats
As a Certified Development Company (CDC), B:Side Capital operates closely within the banking and broader financial sectors, making our risks slightly different from traditional banking. While we share many vulnerabilities, such as economic uncertainty, interest rate volatility, and technological disruptions, we also face unique threats, including turmoil within the Small Business Administration (SBA) and political or regulatory changes. These elements directly impact our operations and stability.
The banking sector itself faces significant structural vulnerabilities that impact our work directly. Commercial real estate (CRE) exposure presents a notable systemic risk, particularly among small and mid-sized banks where CRE loans represent up to 45% of their assets. The high concentration of CRE loans and significant leverage among these institutions create potential liquidity crises, particularly in an economic downturn or market correction.
Furthermore, insolvency risks are growing due to increasing non-performing loans, especially in the non-owner occupied CRE segment. Large banks are also vulnerable, with severe pressures from rising non-performing CRE loans potentially triggering broader financial instability. Liquidity issues exacerbated by bank runs—whether organic or intentionally manufactured—pose another major threat. Events like the rapid collapse of Silicon Valley Bank highlight the fragility of depositor confidence, illustrating how quickly a deliberate or panic-driven bank run can destabilize the entire financial system.
Historical crises, such as the 2008 financial collapse, remind us of the dangers of overlooking accumulating risks until it’s nearly too late. Today, the banking and lending sectors must remain vigilant against similar vulnerabilities exacerbated by geopolitical tensions, regulatory uncertainty, and deliberate destabilization attempts.
Grit: The Essential Ingredient
What distinguishes successful leaders during crises is grit—the mental toughness to persist despite daunting circumstances. Leaders with grit remain calm, assess situations clearly, adapt swiftly, and persevere consistently, regardless of setbacks or adversity. Grit isn't just persistence; it's the capacity to sustain passion and effort even when faced with repeated challenges.
Winston Churchill exemplified this quality during World War II. At Britain's darkest hour, Churchill embodied resilience, confronting difficult truths head-on and inspiring a nation to endure prolonged hardship. He understood that maintaining morale was crucial and communicated directly and honestly, preparing his people not just for immediate challenges but for sustained adversity.
Similarly, Franklin D. Roosevelt demonstrated remarkable grit during the Great Depression. Rather than succumbing to fear or despair, he led with conviction, continually offering practical solutions and fostering collective resilience. Roosevelt's determination not only navigated the country through economic turmoil but also built long-lasting confidence and optimism among citizens.
Virtue: Guiding Leadership Through Crisis
Virtue plays a crucial role in crisis leadership, acting as a compass that guides decisions through turbulent times. Leaders who consistently demonstrate moral clarity, integrity, and fairness build lasting trust—an invaluable resource during crises. Virtuous leadership prioritizes ethical principles over short-term gains or convenience, thereby creating stability and confidence among stakeholders.
George C. Marshall is an enduring example of virtuous leadership. Throughout his military and political career, Marshall’s integrity and principled decision-making fostered deep trust within alliances and teams. Even amid significant setbacks, his unwavering commitment to honesty and accountability enabled him to maintain unity and effectiveness.
In lending, banking, and CDC operations specifically, virtue remains critical. Transparency, honesty, and accountability aren't merely idealistic goals—they are essential operational standards during times of uncertainty. Ethical conduct reassures partners, stakeholders, and customers, especially when facing regulatory shifts or disruptions within essential entities like the SBA.
Steady Nerves: Facing the Storm Calmly
Maintaining steady nerves involves more than just remaining outwardly calm—it requires the clarity to evaluate situations objectively and the composure to act deliberately under intense pressure. Leaders with steady nerves balance urgency with patience, combining decisive action with thoughtful reflection. This steadiness provides the stable leadership necessary to effectively guide organizations through volatility and uncertainty.
President John F. Kennedy's actions during the Cuban Missile Crisis offer a powerful illustration of steady nerves in action. Faced with potential nuclear catastrophe, Kennedy demonstrated extraordinary composure, meticulously evaluating his options, consulting closely with trusted advisors, and ultimately making clear, measured decisions. His calm demeanor and thoughtful communication prevented panic and helped avoid escalation into disaster.
Similarly, leaders must display a similar steadiness. Whether confronting economic volatility, regulatory upheavals, operational disruptions, or cybersecurity threats, the ability to remain composed and clear-headed significantly influences outcomes. Calm and decisive leadership reassures teams and stakeholders, maintaining operational continuity even amidst severe turbulence.
Inspirational Leadership: Confidence in Crisis
Inspirational leaders don't merely weather crises—they harness them as opportunities to grow stronger. They instill confidence through clear communication, decisive actions, and resilient attitudes, transforming challenges into catalysts for innovation and improvement.
During the 2008 financial crisis, JPMorgan Chase CEO Jamie Dimon notably stabilized his organization through transparent communication, swift action, and visible confidence. His proactive approach demonstrated how effective leadership shapes outcomes rather than simply reacting to events.
In times of uncertainty, inspirational leaders connect deeply with their teams, clearly articulating realistic paths forward, acknowledging difficulties openly, and setting a tone of unwavering confidence. This empowers their teams to tackle obstacles creatively, bolstered by trust in their leaders’ capability to navigate adversity effectively.
Preparing for the Unknown
The truth is, it's impossible to predict exactly when or how a black swan event might unfold—but lately, I can't escape the feeling that such an event could be just around the corner. Preparation isn't about having perfect foresight; it's about building a resilient culture capable of adapting swiftly to sudden disruptions.
Leaders can significantly enhance preparedness by continuously engaging in scenario planning and encouraging strategic thinking about risks among their teams. Organizations that prioritize adaptability, maintain financial and operational flexibility, and invest in ongoing learning create an inherent advantage. The key isn't to predict every possible threat, but to develop agility and responsiveness, enabling rapid pivots when the unexpected inevitably occurs.
The Final Word: Leadership for All Seasons
Effective leadership anticipates adversity, recognizing early warnings, responding with integrity, and maintaining composure when others falter. Leaders who embody grit, virtue, and steady nerves don't merely survive crises—they convert them into opportunities for lasting growth and organizational improvement.
Ultimately, true leadership isn't solely defined by crisis response; it's measured by the quality of preparation and the ability to confidently guide teams through future uncertainties. While we can't predict every event that will come our way, we can trust in our preparedness, our resilience, and our collective strength. By facing uncertainty together with courage, clarity, and determination, we ensure that even the toughest challenges become stepping stones toward greater strength and success. Together, we're ready for whatever lies ahead.