Connecting the Dots

Mr. A.P. Gianini, the son of Italian immigrants, opened a savings and loan in a corner of a saloon in San Francisco in 1904. He was not a highly educated man having been forced to drop out of school at the age of 14 due to the death of his father. Prior to starting the bank, he made a small fortune in the agriculture business and retired early at the age of 31. After serving on a bank board, he was motivated to risk everything and start the Bank of Italy because he felt the banking system catered only to the wealthy.

In 1906, an earthquake devastated the City of San Francisco. Gianini, committed to his mission, set up wooden crates in the midst of the crumbling and burned ruins, and began lending out money to needy merchants and individuals who needed help rebuilding. He did this with no documents, but merely on a handshake and on the good word of his customers. Years later, after he had transformed his fledgling institution into the Bank of America, he recounted with pride that every single loan he made in those initial years was repaid.

This story is not completely unique. You will find it in the histories and recollections in towns and cities across the country. The tragedies and disasters that have been part of our American history have often been met with a helping hand. Whether it’s a result of droughts, depressions, or earthquakes, people like Gianini have understood that no person is an island. Capitalism cannot exist as an island. If brave people are not willing to take a chance and help people rebuild in the midst of tragedy, then nothing can succeed around them.

The crisis that we face now is somewhat different. It is a man-made disaster. More importantly, it is a man made disaster that is a result of a common destruction of faith and trust. The result is that instead of pulling together to solve our significant problems we are pulling apart. We blame instead of fix.

I think a lot about what Gianini would do today. Would he set up his crate and lend needy people money or would he be too afraid if he did he wouldn’t see them again? Is trust so damaged in the fabric of our society that we are destined toward a downward spiral of destruction?

I don’t believe so. I think Gianini would lend again. I don’t think he would because the government compelled him to. I am sure he wouldn’t do it because he was just a good guy. He would do it because he had to. He would have to because he would know that it was the only way for his savings and loan to prosper. The only way that any of us can prosper is to rebuild and reestablish a system of faith and trust.

I was reminded by a friend that one of the benefits of Gianini’s handshake deals was that he could feel the texture of the person’s hands and look into their eyes. The texture of his borrower’s hands told him if the person was used to hard work. By reading their eyes, he felt he could divine whether they would pay him back. He was determined to lend to only people that would pay him back and would work their tails off to do so.

Not being around a century ago it is difficult for me to understand if the character in most people is different now. Certainly, people need a helping hand up. However, will most people work hard and take responsibility for their own financial situation enough to be an acceptable financial risk. Clearly, we built an environment and culture that is not altogether accepting of personal responsibility.

Ultimately, the system of accountability, responsibility and trust is a necessary ingredient for our collective success. If your neighbor doesn’t think it is his responsibility to pay his bills, then that is his problem. If all of your neighbors don’t think it is their responsibility to pay any of their bills, then it is everyone’s problem. There is no government, no institution or company, or individual like Gianini that can support a neighborhood like that.