“We Will Never Forget” - But That Is Not Really True

Remembering the Past

On this 17th anniversary of the 9/11 terrorist attacks, another day that will live in infamy, the events are likely imprinted deeply in your memory. Where you were, how you felt when you heard the news and what you did after, are burned deep into your recollection. The problem is, how you remember events isn’t all that accurate. As bankers, this is a problem, as not only are our memories touchstones of our personalities, but the lessons learned from the past need to be accurate if they are to help us in the future. In this article, we take a look at the fallibility of memory and how to improve the process to increase your accuracy in banking.


The Data On Memory


We have this understanding that memory is like a snapshot or video in that once you capture the event, you can reflect and recall the details. On that fateful Tuesday back in 2001, at 8:30 am, we were on the phone talking bank M&A with Joe Linehan of KBW when we heard the first plane hit the North Tower. We remember that sound and Joe’s reaction like it was yesterday – with 100% confidence we might add.


It turns out that our memory and its accuracy is not as good as we think. A seminal study on memory was conducted by NYU where researchers surveyed 3,000 people right after the 9/11 attacks, one year after, and three years after. If you measure memory accuracy as the consistency of details, humans have much to be desired. The NYU study found that from the first survey to the second survey that took place a year later, participants could only recall the details with 63% accuracy. By the third year, accuracy dropped to 57%. Interestingly, survey participants were also asked to rate their confidence in their recollection on a scale between one and five, with five being highly confident, and confidence remained above “four” throughout the survey period despite the drop in accuracy. 




The NYU survey was based on a similar study done after the Challenger Space Shuttle explosion where 44 subjects were interviewed right after the explosion and then a year later. Every single participant altered their recollection of where they were, what they were doing and who they were with. Despite these inconsistencies, their confidence remained strong and even increased in some cases.


Bankers Memories and The 10th Anniversary of the Lehman Brothers


The subject of memory came up recently when we discussed the events post-Lehman Brothers collapse – the event that was the start of the Great Recession that took place almost ten years ago. The bankers around the table remember the Great Recession as bad but not as bad as the facts indicate. If 9/11 accuracy recall is 57% after three years, think how accurate your memory is from ten years ago about a far less traumatic event.


Lost in the conversation were some of the details about how fast the onset came on, that unemployment went from 4.7% to top 10% and that GDP contracted by 4.2%. Bankers talked about the need to increase reserve levels, but few remember that charge-offs reached 2.67%, with some sectors, such as residential construction hitting 25%. Some bankers around the table forgot that feeling of being overwhelmed in trying to deal with multiple bad credits at once. The Great Recession was a five standard deviation event that caused credit models to stop working.


“The Faintest Ink Is More Powerful Than the Strongest Mind”


This realization in the fallibility of our memory has renewed our effort to collect more data and to commit more notes to writing in order to better record our experiences, lessons learned, the sequence of events and our thoughts at the time. It is a good idea to conduct more after action reviews of every loan problem and major banking event so that future generations can learn from our mistakes and hear our lessons directly without the filter of our fallible minds.


Having more digital records of debt service coverage trends, occupancy, effective rents, and other commercial loan and deposit data will help us ten years from now as we look back on these times. We wish we would have devoted more resources collecting data back in 2004.


In short, banks should consider devoting more time to recording meetings notes and the decision process in an effort to pass on institutional knowledge. It feels like some of the mistakes we made back in 2004 could be easily repeated. We want to remember and we want to guard against the mistakes of the past. We feel the same way about 9/11. 


God Bless America


On this anniversary of the 9/11 terror attacks, we join the rest of our banking industry in remembering (as best as our memory will allow), our almost 3,000 fellow citizens that lost their lives in the tragedy and the more than 400 first responders that gave their lives during the incident.  As President Bush said, “Terrorist attacks can shake the foundations of our largest buildings, but they cannot touch the foundation of America.”


Let us never forget the tragic events of that day 17 years ago and let us be ever vigilant so that it does not happen again.