Ed Clark was the CEO of TD for 12 years and is widely credited with turning the institution into a retail banking powerhouse and successfully navigating the turmoil of the 2008 financial crisis. Today he is the Chair of the Vector Institute for Artificial Intelligence and a Partner at Radical Ventures.

Last week Ed sat down with Jordan Jacobs, Co-Founder and Managing Partner of Radical Ventures, to discuss the lessons he learned from 2008 and to share his thoughts on how businesses and government can weather economic upheaval. He also touched on the important role technology and AI will play in the economy that emerges from this crisis.

The following questions and answers have been edited for length and clarity.

Jordan Jacobs

It feels like we’re in uncharted territory. The economy has essentially ground to a halt. We’re seeing record unemployment numbers, followed by record stimulus dollars from governments.

And, while unprecedented in scale, the closest moment in recent memory to this economic shock was in2008 — do you see similarities between the financial crisis and what’s happening today?

Ed Clark

The 2008 financial crisis was a balance sheet crisis largely associated with one sector. Today, we’re dealing with an income depression brought about by a global pandemic. Just as doctors can’t predict what will happen to this virus, it’s hard to know what’s going to happen. And while a recession could still turn this moment into a balance sheet crisis, it’s worth noting that in 2008, people in the US and countries like Spain lost their house — their most valuable asset. It’s not clear that’s going to happen this time around.

Another difference is the speed and geography of this moment. The fiscal crisis played out over 2007, 2008 and 2009. Here, we have six to eight weeks and the world has gone from operating to being totally shut. While there were some places that were not badly impacted in 2008 . For example the commodity boom in 2008 benefited countries like Canada. But I don’t see any place that won’t be hurt by this crisis.

In 2008, TD was lucky because of couple of decisions we made. The financial crisis centered around structured credit derivatives. At one point, we were in the top 10 players in the world in that product with hundreds of billions of dollars of credit derivatives on our balance sheet. But it was clear to me that people didn’t understand the risks. And so, in 2005 and 2006, we made the decision to get out. At the time, people thought we were stupid because we were paying competitors to take these assets off of our balance sheets.

JJ

Can you talk to me about what it was like as a leader through the financial crisis, managing your teams and your customers?

EC

Leadership matters in these crises. As a leader, you have a real obligation to be calm, to think ahead and to try to take some of the pressure off the organization. Even if you’re not sleeping at night.

Because of our strong balance sheet, TD didn’t lay off people. But there was guilt, because our customers were coming into our branches with horror stories about their own circumstances. So we started a program where we gave every branch money to give away every week. So if someone came into the branch and told one of our associates, “I’m going to get kicked out of my apartment because I can’t pay my rent.” We could help them cover that month’s rent.

JJ

You’re not talking about loans, you’re talking about a gift?

EC

These were just gifts. Here’s the money you need. We didn’t advertise it, because people would think we were doing it for the wrong reasons.

JJ

The government has stepped in with significant stimulus efforts. You were adamantly opposed to banks taking money in 2008. Why was that — and are today’s circumstances any different?

EC

There’s a price to getting bailed out. Even though our stock had fallen, we went out and raised money [via the stock market]. We paid our dividend. I think the bank came out of the crisis with a better reputation than when we went in.

I think business leaders need to run their companies in a resilient fashion.

New York’s Times Square in March, 2020

JJ

You advocate for focusing more of the stimulus right now on the little guys. Like the independent restaurant operator who might not employ thousands of people, but employs a couple of dozen people who rely on that business to support their families.

We’ve seen some controversy around large companies receiving stimulus money from government, which effectively privatizes the upside but socializes the downside. How do you ensure the money goes to the right places?

EC

Not to get too philosophical, but it’s hard to run a society if leaders don’t have a moral code.

I’m probably a hardliner on this, but we do have a system called CCAA (Companies’ Creditors Arrangement Act). We have bankruptcies. And companies just don’t disappear. What disappears is equity and some of the bond holders’ value. We have a mechanism to solve this problem for large businesses. Small businesses, on the other hand, are more likely to get wiped out. How does that small restaurant ever get back in business? So, I’m a bit of a hard liner. I don’t really like corporate welfare.

JJ

We’re seeing an acceleration of technology adoption right now. Whether it’s Zoom calls for people working from home or manufacturing plants looking to robotics to better address the safety of their workforce. Should companies be making these kinds of investments to build more resiliency into their businesses?

EC

Depends on where you are. There’s an old joke about a guy travelling in Scotland who asks for directions to Oban and a fella responds: “Well, don’t start here.”

Initial conditions matter. If you’re a small business or you’re a startup, your job right now is to ask how do I survive and how do I preserve what’s critical to my business model going forward?

If you’re running a big business that has a huge balance sheet. The question is: “what have I learned and what will I change?”

If you look at TD, there are currently no call centres operating. All the calls are now being managed by people working from home. That happened within two weeks. And people thought that would be impossible. Same with the trading floors — most of them are now remote. I don’t think businesses or people will go back to how it was before.

If you’re a big business you should be thinking: What did we learn that we could do that we never thought we could do. And then take advantage of that new knowledge.

For startups, there are a lot of companies out there that were trying to change the world, but the world wasn’t changing. But now there’s an opportunity because no one is going to go back to do things the way they did before.

JJ

On that point, our portfolio companies at Radical Ventures are seeing inbound interest increase dramatically. For example, we invested in a company called PocketHealth which replaces the need to go into a hospital to get your diagnostic images burned on a CD. They enable all that to be done digitally. You can access the images and share them to a doctor digitally, and then doctors can share among each other, inside a hospital or across hospitals. That business was growing fast before the crisis, but suddenly demand increased 300% and all of the hospitals that were scheduled to launch over the next six months called and said “we need to deploy this in the next couple of days.” Do you think companies will think about technology in a different way coming out of this crisis?

EC

Technology adoption is a human issue — it’s an organizational issue. When you look at healthcare sector coming out of this crisis, we certainly have to have more resiliency in the system and better supply chains. Technology can play a big role here in capturing efficiencies.

Look at the Kaiser health systems in the United States, 48% of test results are delivered remotely to people, so they don’t have to come into the hospital, wait in a waiting room to see the doctor for two minutes, just to be told the results are good. In Canada, before this crisis, that number was around 1%. But obviously that changed and the system quickly adapted to deliver results remotely. It all works, and it’s saving the system money. So we’re learning.

There is a huge amount of data in healthcare, but little information. AI [artificial intelligence] uses data to give you information and I believe it is the key to this system becoming more efficient. I’m hoping to convince the government that we can run healthcare dramatically better by leveraging this technology. We can then reinvest money captured from these efficiencies. Because one of the messages of this crisis is that we need to spend the money now to make the healthcare system more resilient. This is not going to be the last pandemic.

— R —

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