2010 Commencement Address
President West's Introduction
Our commencement speaker today is Mr. J. Christopher Flowers. Ralph Waldo Emerson said, “Every man is a quotation from all his ancestors.” Ralph Ellison wrote, “Some people are your relatives, but others are your ancestors. You choose the ones you want to have as ancestors. You create yourself out of those values.” Surely, Chris Flowers’ life emulates the values instilled by his ancestors in the Flowers family—people who valued higher education, Methodism, and the opportunity to make one’s life better through knowledge. It was Chris Flowers’ great-grandfather, for whom Flowers Hall is named, who was instrumental in the College’s relocation to Montgomery through his work toward uniting the two Methodist conferences, thereby strengthening higher education opportunities for Methodist men and women in Alabama. After his untimely death, Mrs. John Jefferson Flowers and her children contributed the largest gift toward the cost of construction of the building. Think now of the thousands of students and faculty and guests who have walked those halls; who have grown in wisdom in that magnificent building, one in which i am privileged to work every day. Certainly, the Flowers family of the 1900s would have been exceedingly gratified about the success of their descendant. Chris Flowers graduated magna cum laude with a degree in applied mathematics from Harvard University. He began his career at Goldman, Sachs & Co. And was among the founders of Goldman's financial institutions group. In 1998 he founded J.C. Flowers & Co., an investment firm specializing in financial services, with investments largely in the United States, Japan, and Europe in banking, insurance, and finance, and committed capital of more than ten billion dollars. Beyond his enormous success in the financial world, Mr. Flowers serves as the chairman of Nets for Life, a program aimed at reducing malaria. He is also a trustee of the New York Philharmonic Orchestra and a member of the investment committee for St. James Episcopal Church (New York). He serves on various committees for Harvard University. Certainly, he has built a legacy befitting his ancestry and one which his own descendants will admire. And so, as he comes forward, I would like to present him with the highest award offered by the president of this College, the Presidential Medallion. Graduates, families, friends, and members of the Huntingdon community, please welcome and congratulate Mr. J. Christopher Flowers.
“Constancy and Change”
J. Christopher Flowers, May 8, 2010
Thank you, Cam, for your kind introduction. I am flattered to be invited to make this commencement day address. I am an admirer of Huntingdon College. Huntingdon’s sensible motto: “Enter to grow in wisdom; go forth to apply wisdom in service,” brings to mind a quote I saw recently from Charles William Eliot, a former President of Harvard. He was asked how Harvard had gained its prestige as the greatest storehouse of knowledge, and he is said to have replied: “It is because the freshmen bring in so much of it and the seniors take away so little.”
I am very proud of you, new baccalaureates, who are recognized this day by your families, your friends, this institution, and by me, for your years of hard work and learning.
My theme today is “Constancy and Change”. One hundred years ago, the Alabama Conference Female College, founded in Tuskegee in 1854, changed its name to Woman’s College of Alabama and moved to Montgomery. Also, the College constructed Flowers Hall a century ago.
As I hope to illustrate, if we look back over this past century, many things have changed: at Huntingdon College, for America, and for her individuals and families. But I also suggest to you that some of the important things, the best things, remain the same. I think these constants are America’s promise, and the happiness found in friends, family and faith.
I hope that you will embrace change, as resistance is futile. I also hope that those core good things, those things which have stood a very long test of time, will be yours in large measure.
We stand today in front of Flowers Hall, and my name is Flowers. This is not a coincidence! My great grandfather, John Jefferson Flowers, pledged the majority of the funds to build this beautiful building, and to move what was then the Alabama Conference Female College from Tuskegee to Montgomery. After John Flowers’ death in 1905, his widow and his eight children, including my grandfather, followed through on that pledge. The move to this campus and this building took place 100 years ago.
On the surface, John Flowers and I have led very different lives, but in more important ways I believe that the similarities are a metaphor for what is best about our society.
John Flowers was born in Georgia in 1837 but lived most of his life in Alabama. After brief service in the Confederate Army, he went into the lumber business with his father in Greenville, and John Flowers earned a substantial fortune. John was a devout Methodist and a staunch supporter of the Christian church.
I was born in California and grew up deep in Yankee territory in Massachusetts, farther north than it is safe to go. I too went into business, but on Wall Street, not in Greenville. I worked at the controversial securities firm, Goldman Sachs, for 20 years. I started my own business, J.C. Flowers & Co., in 1998. Today our company is the world’s largest private equity firm which specializes in financial services. John Flowers dealt in the tangible world of lumber, whereas my business has been in the intangible realm of financial services. But we have both made our careers and fortunes in American business.
I confess, however, that I am an Episcopalian and a Yankee, and for that you can blame my mother, Ann Flowers, sitting over there. I offer my abject apologies.
The Woman’s College of Alabama of 1910 was in some ways quite a different place from Huntingdon College today. For example, the 95 members of the student body were all white women. Tuition, room and board for the year was $225. Ministers in the audience take note: in those days your daughters received a tuition reduction of $100. As I am sure you are acutely aware, today the cost of a Huntingdon education is about $30,000 per year. On the other hand, median family income in America was around $750 per year in 1910 compared to about $70,000 today. So the cost of education compared to income hasn’t changed much, interestingly.
Lest you think that the Huntingdon College of that day was a party school, I quote as follows: “The question as to whether the girls should dance in the college among themselves and attend movie theaters was discussed. It was unanimously voted that both should be discouraged.” Thank goodness the authorities stamped out such conduct: who knows what wild happenings might have followed if those girls danced with each other? Moreover, the powers that be insisted that “girls shall be allowed to receive company on Sunday, for a sitting lasting not more than two hours”. I presume that was male company. Hard to get into too much trouble.
Also, as you would expect, and I quote: “Every student is expected to attend the church of her choice on Sunday morning.” At least they were given a choice!
Almost all of the girls were from Alabama.
It is interesting that the Methodist Church and John Jefferson Flowers, even in that era, strongly promoted the education of women.
The first male student, Frank Moseley, graduated in 1934, to thunderous applause, apparently. I think it is telling that neither sentimentality nor desire for greater academic depth caused Huntingdon to admit men: no, it was money. Men were good for something.
The first African American student was admitted in 1969.
Today about half of Huntingdon’s over 1,000 students are men. You are still mostly from Alabama, but your college has students from nearly 20 other states and five foreign countries this year. And 17% of the College’s students are African-American.
As you can see, social change, much of it of great significance, has transformed this college. But on the other hand, Huntingdon’s core enterprise of preparing you for a well- grounded and successful future hasn’t changed at all.
The course catalogue from 1910 included astronomy, psychology, geology, chemistry, biology, permutations and combinations in math, English poetry from Chaucer to Tennyson, and a choice of Latin, French or German. In fact I could not find a subject from that era which would not be offered today.
In the world of business, we find a similar story of constancy and change.
The United States entered a recession in 1910 which lasted for two years. In fact, there have been 20 recessions since then. The recession of 1910 wasn’t especially notable, but of course when Frank Moseley attended Huntingdon as the first male student in the 1930s, the United States was enduring the Great Depression.
As we speak today, America has started to recover from the most harrowing business slowdown since that Depression. I have myself been in business for over 30 years and this is my fifth recession. However, I have never seen anything like this before, and I think this has been a watershed event for the U.S. economy.
Let me say a word about this recession, and what I think it means.
A key event in this recession was the bankruptcy of Lehman Brothers in September 2008. Ironically this firm was founded right here in Montgomery in 1850. The Lehman bankruptcy changed the downturn from a difficult but routine recession to one which brought the world economy to the brink of disaster.
I was in Tokyo the Wednesday before Lehman went broke. I received a call from an executive at the Bank of America, asking if our company would be their partner in acquiring Lehman Brothers. By Thursday morning, we were reviewing Lehman’s books (which didn’t look very good, by the way). On Thursday night, an executive from the insurance giant AIG called me. He asked me to lunch Friday with the CEO of AIG. I learned to my astonishment at that lunch that AIG, one of the biggest companies in the world, would run out of cash the following week. AIG asked us invest capital in the company to forestall bankruptcy. On Saturday, the Bank of America informed me that they had been contacted by Merrill Lynch, and now they wanted to buy Merrill instead of Lehman. The Bank of America asked for our help. This was not shaping up as an ordinary weekend.
I had known Hank Paulson, then secretary of the Treasury, from our days together at Goldman Sachs. I told Hank that we could not buy Lehman Brothers unless we received financial assistance from the U.S. government. Hank turned us down.
I knew by Sunday of that weekend that Lehman would go bankrupt. So did Secretary Paulson and the important decision-makers in Wall Street and Washington. But none of us foresaw the calamity which would follow. Lehman was the biggest bankruptcy in U.S. history.
The fourth quarter of 2008, following that weekend, saw a Federal bailout of AIG, the bankruptcy of Washington Mutual, America’s largest savings bank, and the bailout of Wachovia Bank by Wells Fargo. Goldman Sachs, Morgan Stanley and General Electric went to the precipice of bankruptcy as well. They too would have gone under if it had not been for U.S. government intervention.
In 2009 we saw the failure of General Motors and Chrysler. Earlier in 2008, Fannie Mae and Freddie Mac had been nationalized.
This has been no ordinary recession. I believe these events mark the end of an era.
The phenomenon which made this recession different was the collapse of lending, especially bank lending. We have not seen this in other recent recessions. Even the very best companies had tremendous difficulty in borrowing money for a time. Every company was concerned about raising enough cash to function. This threatened the destruction of even very strong firms.
The root causes of the recession have been widely discussed, but they boil down to too much debt. In many ways around the world there is too much debt. American families on average have too much debt. So do companies and banks. And so do state governments and the U.S. government. This problem is not confined to the U.S: it is an issue in many countries and is essentially a worldwide phenomenon.
On the other hand, several rapidly growing and large developing economies weathered this recession well, especially China, but also including India and Brazil.
As I have said, I believe that this recession, like the depression, will signal major changes for the world which is your future. Behavior among U.S. individuals and businesses will shift toward more savings and less debt. The national government and state governments will have to pare services to reduce their debt as well. While this reduction in debt is undoubtedly a good thing in the long run, over the next several years it will mean more unemployment and slower growth. However, I think these changes will ultimately help to rebalance the U.S. economy for strong long-term success.
Also, I believe this recession will mark a decisive shift in economic power from Europe toward Asia.
Demographics are a powerful force driving this shift: the low birth rates and low rates of immigration in Europe and Japan inevitably mean declining economic weight. Britain, Japan, Germany and Italy all are now losing population. Fortunately, however, the growth rate of the U.S. population is about equal to the world’s population growth rate.
The world of American business has changed dramatically over 100 years. Indeed, the flexibility and adaptability of American business is one of its greatest strengths. For example, the details of John Flowers’ business world and my own are vastly different. However, the core qualities which made John Flowers a success are still the essential qualities today: education, hard work, tenacity, intelligence and especially character. As banker J.P. Morgan himself put it in 1912: “The first thing is character, before money or anything else.”
I have absolutely no doubt about the future success of American business. Our company does business almost everywhere, and yet America remains the best and most dynamic business environment in the world. America also has by far the biggest economy and it will remain this way for decades. It is true that America’s business rivals have evolved since 1910. It is obvious that today China presents a formidable commercial challenge to the U.S.A. I have no doubt that as your careers advance, by far the two most important countries in the world will be America and China.
But as Warren Buffett, who is no fool, put it when he bought Burlington Northern Railroad last year: “It’s an all-in wager on the economic future of the United States”. He wagered on the U.S.A. for his biggest investment ever, just six months ago. Not China.
The immediate geopolitical concerns of the United States have changed radically over the last 100 years, indeed throughout America’s history. But America has always faced large challenges; that doesn’t change. And America has overcome those challenges time and again.
In 1910, America was a few years away from the European cataclysm of World War I. When I graduated from college 30 years ago, much energy was focused on the Soviet Union and the possibility of nuclear apocalypse. Today we are concerned about a possible rivalry with Asia.
As I prepared for these remarks, I had the occasion to look back at my own graduation from college in 1979. At that time, the United States’ economy was in a period of difficulty, including rapid inflation and business stagnation. Also, the United States and the U.S.S.R. faced off in the cold war, and China was a very poor country, only recently recognized diplomatically by the United States, and irrelevant economically. The commencement speaker at my graduation was the Chancellor of West Germany, Helmut Schmidt. His remarks were mostly about the nuclear stand-off between NATO and the Communist bloc. I am sure he would never have guessed that in 10 years the Berlin wall would fall and East and West Germany would be reunited. Much of what concerned Chancellor Schmidt became quickly irrelevant.
I am sure that this great nation will find its way through today’s issues as it has in the past. In a way, it is reassuring to realize that although the details of today’s challenges are different and daunting, America has always faced large challenges.
But most importantly, amidst these changes and constants in the external environment, the core ingredients of personal happiness remain the same. Family, friends and faith have the same central role in our lives today as they have in the past, and they will continue to in the future. And America’s opportunity is central to our personal well-being.
This occasion is, I believe, a fitting metaphor for these constants. The Flowers who is standing in front of you is a different person from the Flowers of Flowers Hall 100 years ago. The individuals of whom we are proud today, you new graduates, are different individuals from those of the past. The granular particulars of today’s problems and opportunities are not the same as they once were.
But family and faith mattered greatly to John Flowers, they mattered greatly to the society in which he lived, they matter greatly to me, and I think they matter greatly to you. My mother, Ann Flowers; my cousin, Bitsy Youngblood (also a direct descendant of John Jefferson Flowers); and my friend, Anne Gray, are here today to illustrate this for me, and I hope for you, who are also surrounded by friends and family. We are very fortunate indeed to have these constants as well as these challenges which give purpose to our lives.
I expect that in the year 2110, a descendant of one of you will be here making similar remarks to mine today. Huntingdon will be going strong, America will be a place of opportunity, and families and faith will be central to people’s lives.
So, in conclusion, I congratulate you again on your hard work and achievement; I urge you to take advantage of change while having confidence in your future; and I hope for you that the good things in life will be yours in abundance.