How can you make better decisions in an uncertain world (without reacting emotionally in a crisis)?

What does Robert Rubin’s The Yellow Pad teach about risk management, leadership resilience, and learning from mistakes?

The Yellow Pad by former U.S. Treasury Secretary Robert E. Rubin shares practical decision-making principles for uncertainty: respond, don’t react; assess low-probability catastrophic risks; lead with curiosity and authenticity; and run honest retrospectives to improve judgment over time.

Continue reading to use Rubin’s method on a real decision today—map best-to-worst outcomes, stress-test tiny-probability risks, and write a short retrospective that upgrades the next call you make.

Recommendation

During a distinguished, diversified career in the public and private sectors, former Goldman Sachs executive and US Secretary of the Treasury Robert E. Rubin faced his share of difficult, controversial decisions. He learned that solid decision-making requires adhering to specific principles. At the same time, he discovered, you must recognize the always unpredictable human element, since no event ever unfolds exactly as planned. Rubin harnesses his knowledge and experience to explain how you can arrive at the best decisions despite life’s uncertainty and complexity.

Take-Aways

• A prisoner’s insight made a lasting impression on former US Treasury Secretary Robert E. Rubin.
• Risk management demands acknowledging the remotest possibilities.
• Mental toughness enables strong leaders to overcome bumps in the road.
• Great leaders are curious, authentic, and true to their beliefs.
• Traditional management often overlooks the human element.
• Taking a retrospective view provides clarity and fosters more effective decision-making.

Summary

A prisoner’s insight made a lasting impression on former US Treasury Secretary Robert E. Rubin.

Robert E. Rubin was having second thoughts. He had accepted a prisoner’s handwritten invitation to speak at San Quentin, the infamous California state penitentiary. Rubin wasn’t certain that men living behind bars would identify with his experiences as a Wall Street executive and Washington political veteran. Several weeks before his visit, he spoke on the phone with a few prisoners.

“Most impressive was how forthright these men were about the crimes they had committed.”

One inmate, reflecting on his criminal past, explained that reacting is impulsive and emotional, but responding requires you to pause, assess the circumstances, and weigh the possible repercussions of your intended actions. In Rubin’s view, the inmate grasped a concept that eludes many CEOs and policymakers.

Making an informed decision amid intense upheaval requires special skill. Experience alone is insufficient when events unfold at lightning speed because disruption can trigger unwise reflexive behavior.

“I’ve seen otherwise excellent leaders and thinkers abandon a sound approach to decision-making when extreme disruption strikes.”

It’s normal for human beings to react emotionally, particularly amid vast change. To balance such impulses, develop the discipline to acknowledge your emotions while not allowing them to dictate your actions. The ideal time to work on discipline is before a crisis. If you understand your “emotional biases,” you can regulate them during risky crunch times.

Risk management demands acknowledging the remotest possibilities.

After President Bill Clinton concluded an Oval Office meeting with a handful of his top advisers, Vice President Al Gore invited Rubin into his office. Gore wasted little time. He explained with grave seriousness that global warming poses an enormous threat to the world and that the nation’s top officials had to address it immediately. At the time, people had heard of climate change but had never discussed it with any urgency.

If human activity was causing rising temperatures and spawning noxious emissions, Gore argued, those activities could poison the atmosphere for decades. Most world leaders did not share Gore’s urgency. As time passed, global warming inflicted significant damage before governments began to regard it as a serious issue.

“In the late 20th century, most people either denied the evidence that climate change existed or failed to fully grapple with the implications.”

In the ensuing years, Rubin’s conversations with scientific experts confirmed Gore’s warning: Climate change exists and is inherently dangerous. Government and business leaders also began expressing concern. In 2016, Rubin and Henry Paulson, who served as treasury secretary under President George W. Bush, approached the Securities and Exchange Commission. They told the SEC that they believed financial establishments should openly acknowledge the possible costs of global warming. Though SEC chair Mary Jo White agreed theoretically, she explained that no procedures existed that enabled the government to calculate or disclose such figures.

“If more leaders around the globe had thought about the issue the same way Al Gore did, the world today would be a different and much safer place.”

The climate change issue showed Rubin the types of problems that can erupt if you disregard a risk until you have all the facts. Decision-makers routinely must determine a course of action without knowing every detail of a situation or the potential outcomes that will result from their actions. They solicit information from experts and rely on their experience to arrive at a decision.

Ideally, you could forecast a decision’s degree of risk by positing a single outcome. But in risk management terms, risk is a range of possibilities from the least desirable outcome to a surprisingly positive one, with the midpoint representing the likeliest result. Sensible risk management should never ignore the possibility of a catastrophic outcome, even one with a very low probability of occurring. Though uncertainty is tricky to quantify, it’s an inevitable part of decision-making.

Mental toughness enables strong leaders to overcome bumps in the road.

The best leaders maintain their confidence in their decision-making abilities, regardless of outcomes. Professional basketball players believe their next shot will go in the hoop even if they’ve missed previous attempts. Strong leaders are unfailingly resilient: They don’t dwell on failure or overly celebrate success. Leaders’ ability to press forward and embrace optimism is critical within organizations, particularly because employees pay attention to leaders’ emotional signals.

“You must be able to learn from mistakes, but you can’t obsess over them.”

Successful leaders are mentally tough, particularly in response to public criticism. Rubin recalls how Timothy Geithner, also a former secretary of the treasury, remained steadfast during the Great Recession, despite championing a policy that both Democrats and Republicans roundly criticized. Geithner’s plan ultimately stabilized the economy and promoted a recovery.

Great leaders are curious, authentic, and true to their beliefs.

Rubin believes all great leaders have “energetic curiosity.” That curiosity leads them to take a skeptical approach and to search for answers beyond obvious conclusions. For example, Gus Levy, the former CEO of Goldman Sachs, often instructed employees, “Never assume anything.”

Being actively curious motivates you to expand your horizons and learn about subjects outside your profession or favorite activities. Stay willing to probe the world around you.

“Energetically curious people are often interested in an enormous range of things, not just those most closely relevant to their lives.”

Authenticity is a character trait that serves leaders well. Following his tenure as treasury secretary, Rubin joined Citigroup in an advisory role to help smooth its merger with Travelers Insurance Group. Standing backstage shortly before a press conference, Citigroup co-CEO Sanford Weill asked Rubin to wear a pin with the company’s logo. It was a reasonable request, but Rubin felt uncomfortable sporting a logo, so he declined.

Being true to yourself requires consistency. It often means tactfully disagreeing with someone else’s observations or opinions, even when going along would be an easier course. Rubin recalls Oval Office meetings with President Bill Clinton in which some officials appeared to acquiesce to Clinton rather than speak their minds. Failing to be forthright may be momentarily more comfortable, but when you blunt or blur your message, you are doing a disservice to your constituency or your organization.

Traditional management often overlooks the human element.

Rubin was not impressed when Lawrence Bossidy, a top executive at General Electric, shared his management philosophy during a presentation to Goldman Sachs partners in the 1980s. Rubin doubted that Bossidy’s principles for handling people at a traditional top-down organization such as GE would work in other corporations. While Rubin acknowledges that every organization needs an effective management system, he prefers to focus on people’s individuality and uniqueness.

“My skepticism of specific rules and highly detailed lists of do’s and don’ts is one reason I tend not to read books on management.”

Jacob Goldfield, a youthful trader Rubin supervised at Goldman Sachs, sometimes walked around without his shoes. He also could be rebellious and hypercritical. Goldfield’s behavioral quirks annoyed some senior employees, but Rubin saw him as a talented, perceptive individual whom he accurately predicted would one day become a partner at the firm.

Good executives set aside their personal feelings and make decisions on the basis of the best interests of their organizations. However, they should remain empathetic and patient if someone stumbles. Top managers give their people credit for their departments’ successes, accept the blame when something goes awry, and never criticize their employees publicly. Good managers are open to feedback from everyone, regardless of title or experience.

Organizational culture fuels each employee’s success or lack of success. A company’s strategic and tactical priorities may change according to circumstances, but organizations must avoid deviating from their foundational values.

“In organizations, success accrues upward. If the group does well, it reflects well on the leader.”

When Rubin was at Goldman Sachs, he financially rewarded employees who positively influenced its culture. At the Treasury Department, he wouldn’t employ anyone he believed could potentially harm its culture – regardless of the individual’s talent or potential. As a leader in the public sector, Rubin couldn’t increase salaries or give employees bonuses, so he rewarded them with recognition and, when appropriate, additional prestigious responsibilities.

Taking a retrospective view provides clarity and fosters more effective decision-making.

To make intelligent and informed decisions moving forward, look backward. Many leaders underestimate the importance of analyzing their past actions. They tend to believe that favorable and unfavorable outcomes are by-products of arriving at a particular decision. Scrutinizing the thought process that led to your previous decisions helps you avoid overconfidence as you evaluate a new decision.

“The way that much of society performs one of its most important functions – learning from what has already occurred – is broken.”

Early in his career at Goldman Sachs, Rubin had the opportunity to become a partner in White Weld, a traditional financial investment company. His superiors at Goldman Sachs convinced him to stay with the firm and offered him a partnership at the end of that year. Merrill Lynch eventually acquired White Weld after it experienced severe difficulties. And, Rubin’s professional trajectory worked out well at Goldman Sachs – though he came to realize that he’d almost made a rash, ill-informed decision that could have damaged his career.

In some instances, carefully considered decisions still generate negative results. In the 1990s, President Clinton provided financial aid for Russia’s faltering economy on the basis of reforms he expected to take place under then-President Boris Yeltsin. Russia’s recovery was unsuccessful. Paul O’Neill, the incoming treasury secretary under then-newly elected President George W. Bush, said that failure proved that the Clinton administration’s efforts were misguided. Rubin maintains the decision was correct, despite the outcome.

“Intellectual openness creates an environment where people can work with the leaders to make the best decisions.”

Organizations are often quick to assign blame, even if they have rigorously analyzed their decision-making mechanisms. Consequently, employees who fear being scapegoated by their superiors may choose “self-preservation rather than self-evaluation.” This leaves leaders without these employees’ input, which could have been very valuable, and it illustrates how chastising, blaming, or unfairly punishing people for making honest mistakes can fuel an unhealthy culture.

Accordingly, Rubin seldom states his negative judgments of anyone’s actions in public, as long as the people who made poor decisions undertake unflinching reviews of how their actions led to unsatisfactory outcomes.

About the Author

Robert E. Rubin spent 26 years with Goldman Sachs and then served as the 70th United States Secretary of the Treasury from 1995 to 1999. He is chairman emeritus of the Council of Foreign Relations and board chairman of the Local Initiatives Support Corporation (LISC). He is co-founder of The Hamilton Project, a Brookings Institution project focused on economic growth.