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Can you imagine Winston Churchill having said this to the British people during the German Blitz of WW2?

“Bank runs are especially dangerous because they feed on themselves, sowing panic as people worry that their own deposits may be at risk.”

David Leonhardt, New York Times, March 13, 2023

A time of crisis is the ultimate test of leadership. It is especially at such times that words matter. What leaders say, the words they choose to use, can inspire courage and determination, bring people together with a spirit of unity, create a vision for how we can get through the trials, and what we will be like on the other side of the tunnel.

The words of a leader can remind us that “we have nothing to fear but fear itself.”

Or the words a leader chooses to use can sew fear and breed panic, instigate finger-pointing and polarization, and spark a self-fulfilling prophecy of dread and doom.

The recent banking crisis will be a test for politicians of both parties, regulators, and business leaders. The words they choose will be as important as the policies they pursue. Will they give the American people the confidence that we are a strong nation that has survived much worse in the past, and assure us that we will make it through this challenge as well?

Or will they foment the sort of panic that causes people to make runs on banks and cash out investments, thus increasing the probability of economic recession?

Here’s a real-world example of the difference leaders can make during a crisis.

In the immediate aftermath of the 9/11 terrorist attacks, there was a collective panic attack in the executive offices of airline companies. Within one month – far faster than any sober analysis of the attack’s impact could occur – they laid off more than 100,000 employees.

James Goodwin, then-CEO of United Airlines, sent a message to every employee stating: “Clearly, this bleeding has to be stopped – and soon – or United will perish sometime next year.”

United will perish! Can you imagine Winston Churchill having said such a thing to the British people as German bombs were falling on London and Coventry?

At a time when our nation needed and deserved courageous leadership from these airline executives, we got a knee-jerk panic response that, beyond the impact on all those newly jobless airline workers, was a key factor in pushing our economy into a recession.

The only exceptions were Southwest Airlines and JetBlue, neither of which enacted layoffs. At Southwest then-CEO James Parker sent a message to every employee assuring them that Southwest was a strong company and their jobs were safe. (I once had dinner with Jim and his wife. He told me that it wasn’t a hard decision for him to make, it was the only decision he could have made.)

In the succeeding years, United and the other major air carriers all went through largely self-inflicted bankruptcy. Southwest Airlines and JetBlue continue to prosper.

Fear makes people do stupid things

In his book on managing toxic worry, psychiatrist Edward Hallowell wrote that fear is the most serious of all learning disabilities. Fear clouds our thinking and causes us to do things that are not in our own best interests.

Words matter. When leaders are fear mongers, they provoke followers to do stupid things. In the banking crisis example, if a leader’s words stampede people into cashing out their retirement investments at the bottom of a bear market, then that leader has betrayed the trust of followers.

Leadership Duty #1

In one of the greatest survival stories of all time, Sir Ernest Shackleton kept his men alive through one harrowing crisis after another following the wreck of their ship Endurance in the ice of Antarctica. His first duty to his crew was to sustain their courage and their optimism.

For two years Shackleton used words to keep his men focused on a better future, to keep them working together toward that common goal, to keep their hope alive. He assured them that no one was going to die and that he would get them all home. Promises that he kept.

That is what the best leaders do. Because words matter.