Blockchain and Cryptocurrency - What to Know

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Transcript below.

Erica D'Eramo 0:09

Hello, and welcome to the two peers podcast season two. I'm your host, Erica D'Eramo. And today I'm joined by a special guest, Karen Scarbrough. Karen is going to talk to us a little bit about blockchain, cryptocurrency - just give us some information about how we can get involved and develop our understanding.

Erica D'Eramo 0:37

So welcome, Karen.

Karen Scarbrough 0:39

Hi, Erica. Thanks for having me.

Erica D'Eramo 0:43

So, tell us a little bit about yourself, Karen, like your background, and maybe how you got involved or developed a curiosity around blockchain?

Karen Scarbrough 0:53

Sure. Um, so I actually graduated from university as an engineer, but I went into supply chain because I was really interested in understanding how just businesses and systems operated at a global scale. And when blockchain was first coming out, as a innovative technology, a lot of the applications first pointed towards supply chain, and I was really interested in something that could solve kind of the fires, so to speak, that I was putting out every day as a long term solution rather than than just a day to day fix. So I got interested in the tech. I learned how to program and develop applications within blockchain, specifically within Ethereum, that was the most prominent at the time. And since that the space has really evolved and what's more interesting now is what it can do on the the financial side realistically, and there's probably much more that blockchain can do in the future. That definitely what's happening from a financial perspective is really interesting to follow and pay attention to and not just the pricing, it's definitely the the way things are being built and the new designs of a financial system. To be honest, the price is probably the least interesting aspect of things right now.

Erica D'Eramo 2:27

Yeah, it's probably the piece that gets the most attention. But I feel like at least for myself, I hear a lot about blockchain. I hear a lot about cryptocurrency. But I'm not sure that I really understand it. So can you tell us a little bit about what exactly is blockchain?

Karen Scarbrough 2:45

Sure. So some of the components that make up blockchain, I think it's easiest to explain what those components are first, and then kind of add them up together. So one thing that we're used to from databases and networks is what we call different nodes in a network. So nodes would store a replication of the data set that you're looking at. So if you have a couple of different nodes, maintaining a database, each node would have a replication of the database. And what's different in blockchain is, unlike the nodes from a closed database system, any nodes can participate in this replication of data, because they've designed what they call a consensus mechanism that ensures that any party who verifies tran... what we call transactions, so updates to the data, essentially, is ensured to be to have integrity within the system. So the what these creators of blockchain essentially did was take the the benefits of decentralized systems and they came up with a really interesting what they call game theory, or game theoretic way of making the system open, but also secure. So we can get into a little bit more about what that means. But the the whole system integrity is maintained by different forms of cryptography as well. So like, for example, verifying transactions and that you as Erica signed that you want to send the, you know, X amount of money to somebody is verified through forms of cryptography. And then there's a couple of different ways that the nodes which you realistically call miners, that maintain the network and add these blocks to the blockchain, there's a couple of different ways that they compete in which to, quote unquote, win the block. So, they do that, because when they win the block and are the, basically the miner chosen to add a block onto the blockchain, they're rewarded in cryptocurrencies. So the incentivization is that these miners spend their energy, their compute power to participate in the blockchain. And therefore, they should be creating correct transactions and the reward for that is the reward in cryptocurrencies. So there's some newer forms of consensus out for certain, I think, proof of work, which is what that's called, will likely go away in the next few years. The way that mining is being redirected is that instead of compute power, proving your integrity in the network, miners instead lock collateral up in the network and say, well, I'm going to give 32 Ether to the network, and they can hold on to that, and I'll verify transactions correctly, until I want to withdraw that and not participate as a miner anymore. So again, it's iterating on itself and saying, okay, we got this open system to work, how can we make it better? So that's a really long introduction. But there's just been so much happening that I don't want to leave out what's happened first versus what's happened now.

Karen Scarbrough 6:43

So we can go further into any of those components, for sure.

Erica D'Eramo 6:48

Yeah, no, it sounds fascinating. So when you say they can provide Ether? Is that a type of cryptocurrency?

Karen Scarbrough 6:57

Yes, so most people are probably familiar with Bitcoin that the first public blockchain with crypto currency out there, there had been other decentralized, or I don't know if they were decentralized, but there were other forms of digital cash in the past that other creators had tried to prolifo... proliferate. But Bitcoin was the most successful, I think, in part due to just the design of open participation and its global scale. What Ethereum did differently is Bitcoin users can send Bitcoin to and from participants on the network, and Ethereum, you can add programming to that. So instead of me just sending you Ether, I could say, if seven days from now I have 100 Ethers send 10 to Erica. So that enables you to build more sophisticated applications with the logic built into the financial system. So it that's why the majority of the the coins that you see out there on the list, they actually are built on the Ethereum network, 'cause you use that kind of logic to build tokens. There's certainly a lot of other blockchains coming up, that work in the similar way that have claims of improving upon the consensus mechanism. They may be faster, say they're cheaper or whatnot. But that premise of moving from just a blockchain that sends and receives cryptocurrencies to one where you have programmable logic is the most interesting component of what you can do with blockchain right now.

Erica D'Eramo 8:54

So when we use the term cryptocurrency and we use the term blockchain, what is the relationship between those two? Is it interchangeable? Or what's the relationship?

Karen Scarbrough 9:06

It's a good question. So because blockchain has been a big topic within enterprises as well, so those blockchains that you see that companies are using that are using them to track and trace something in supply chain or do some kind of verification among a consortium, those blockchains don't have cryptocurrencies associated with them. And the reason for that is that they're private. So if a company knows that they're only going to have themselves and their suppliers and industry partners that they have agreements with participate in the network, then they don't need this incentivization for actors to behave truthfully. Where the cryptocurrency comes in is when Bitcoin or Ethereum, as an open network, wants to allow everybody to participate, but there's got to be a sort of skin in the game measure. One, for miners to put in correct blocks, and that they won't put a bad block in and say, well, you know, all of a sudden I have a million Ether and I'm just going to take that and cash that out. Other miners would see that in the network and say, no, that's not right, we're not going to add that block. And then also, there's transaction fees associated with things on the user side as well. So for example, if the network has a high amount of usage, and lots of people want to send transactions, the transaction fees will actually go up on these networks, and those transaction fees are received by the miners again, but it actually does a an OK job right now at balancing the amount of network traffic on the blockchain as well, these public blockchains because, you know, if you've read recently, the the fees are actually really high on some of these blockchains. And you've got a lot of developers and cryptographers looking at ways to design better optimization around that. So it's, it's kind of like a self propagating cycle, really, is that, as the fees go up, people look for ways to to get around that. And then, uh, you know, that makes the whole system theoretically better, and that that cycle kind of starts over again. And it's ultimately supposed to be a good way to maintain the network and incentivize participation, but also, not just, I would say, needless transactions that makes a user really think do I really want to put this on the blockchain? Or should I be doing this and another format off chain? So they work in a couple of different ways the the cryptocurrencies do to facilitate what's happening. And I should add too that, there's two different frameworks that you want to think in as well. There's protocol cryptocurrencies. So like, your bitcoins and your Ethers that are the ones that maintain the the main blockchain, and those are the ones that are paid transaction fees in. But there's also, because Ethereum has that programmable logic, you can actually use code to create a token on top of the network as well. So some of the examples of those that you might have seen in the news, there's a stable currency called USDC. So USD Coin, that's a token that's built on top of the Ethereum network. There's others like Dai, which is another stable coin: D, A, I. That's also built in that manner. And there's, there's really 1000s of them. I mean, I could go through them all, and probably mentioned another one or two here, but that that realistically gives you the whole picture of what's happening with cryptocurrencies, in terms of blockchain. So the summary is that they're needed for public blockchains because they maintain the integrity of the network and incentivize people to behave in the right way to maintain it. And then there's in blockchains, like Ethereum, where you can program on top of it, you can also program cryptocurrencies on top of it for specific applications.

Erica D'Eramo 14:04

So whenever you mention miner, I think of someone who can't buy alcohol, but actually, in this case, it's miner with an E, correct? And what what is that person?

Karen Scarbrough 14:15

Right!

Erica D'Eramo 14:16

What's like the definition of a miner?

Karen Scarbrough 14:19

Good question. Though, there's somewhat, uh they, miners on the network, basically, when we say blockchain, you think of blocks and a chain, right. And that is the way the data on the network is maintained. So in Bitcoin every 10 minutes, you have a new block and Ethereum it's about every 15 seconds, you have a new block of data. And it's based on time and so it's a chunk of transactions basically, and a little bit more cryptography and things mixed in but the miners are the ones that produce these blocks. So if you want your transaction included in a blockchain, it's the miners who would verify it and add it to a block. And the the tie in there is that the miners, because it's open, and anybody could participate, like theoretically, and it's, it's happened, I mean, you can have miners that come in and say, well, I would like to create a block where I own, you know, a million Bitcoin or something like that. And they'll try to include a false block. What the network is built to do is that you should have enough miners incentivized to earn cryptocurrencies through through mining and maintaining the network that a faulty block wouldn't be included. So the miners are the maintainers of the network, and the builders of it really. And the novel part is just again, going back to you could have malicious actors come in and say, I want to include a faulty transaction, but because like, for example, I know, I believe Bitcoin and Ethereum have over 10,000 nodes throughout the world. And that's probably more than that. But if you get one out of those 10,000, trying to put up something false, the other ones are going to say, well, we have no interest in crashing this network and the price of bitcoin or Ether going down, so we're not going to include your faulty transaction, we're going to show what actually happened and maintain the network with integrity. And that's like, how it's supposed to ultimately be maintained that that game theory around if you are mining, you want more than most parties, that it's a good network that people want to use it and they trust it. So that's kind of the the reciprocity there.

Erica D'Eramo 17:07

So what are some other terms that we should maybe know or be familiar with? We've kind of covered blockchain and cryptocurrency and, and some others throughout this discussion, and now miners. Are there any others that get you know, any other terms that get thrown around that perhaps people should be aware of?

Karen Scarbrough 17:29

So I have alluded to code being built on top of Ethereum, and that would be referred to as a smart contract, that people often call that. It makes it sound like a financial agreement, but really what all a smart contract is, is code. So you can have a smart contract that has nothing to do with sending cryptocurrency back and forth, but just, you know, stores something like a "Hello World" expression. So that's one distinction to note there. And then probably another one to be familiar with is decentralized finance. That's, that's also been a popular terminology that's been coming out. So decentralized finance refers to financial applications that have been built with code smart contracts on top of these decentralized, public blockchains. And they're a bit different because it's not codifying old financial systems, like you wouldn't take what a bank does today and just put that in code and put it on a blockchain. Like, the differences lie in the fact that the smart contracts themselves can actually hold value. So that's a that's a pretty novel aspect to understand. So like if, if a company writes a smart contract, where, let's say I send 10 Ether to that smart contract, that 10 ether is debited from my account. So it's no long... it's not in my account. It's not in the developer company's account. It's in this smart contract that they've built, it's in code. They can write a smart contract like that, for example, that somebody else can take out a loan or something against my 10 Ether. And you can programmatically maintain the integrity of that loan. And there's a couple of different ways that they do that, but that's a good short example of what's happening is that the the value isn't being held in centralized systems for decentralized finance, it's been held in smart contracts. And they're programmed in such a way that they facilitate things like loans and exchanging and even insurance that we do today in our financial systems, but they're not operating at the same way when you get down to a granular level, because you've got these smart contracts, maintaining what's going on, not the centralized systems that we we had in the past.

Erica D'Eramo 20:29

So that, you know, brings me nicely to one of my next questions, which is what do you see is sort of some long term macro impacts of blockchain and cryptocurrency or maybe even just decentralization?

Karen Scarbrough 20:45

It's a good question. I think we're shaping, and the days of depending on how regulations go, and the innovations go it could shape up in lots of different ways. And what ultimately, the aim is to enable, I would say, a lot more frictionless personal banking, in a lot of ways. And that can span everything from, you know, alternative currencies and exchange rates across borders to the example I just mentioned, where you know, somebody putting up collateral for a loan, it's far easier then applications that we've had in the past and a lot more open. And I guess, I don't want to say more easily maintained, but it's something that that when I say easily maintained, what I what I more mean, is that because the whole system works together, and you could and what's happening is on the blockchain, because you can build an exchange, a loan system, an insurance platform, and all these different applications, they're not disjointed anymore, they actually talk to each other and build on top of each other because they're built on the same protocol. So like, for example, like imagine if we all use like a different internet today. And I had to connect to one internet to get Facebook and one internet to get Google like, eventually, what happened in the days of the early internet is we all agreed on one protocol that pretty much whatever website you want to access, uses the same underlying protocol. And that's what's happening realistically, with things being built in decentralized finance and public blockchain is we're agreeing, as a financial system, okay, I'm going to build this on this protocol, as an exchange, and there's going to be this company that builds a lending system, this company that builds a insurance system. And because it's all in the same protocol for a user, you can actually connect what you want to do far more easily in a lot of ways than we can today where we have to go to these different institutions to do different things.

Erica D'Eramo 23:20

So that sort of makes me think about regulation, then what eventually, do you see the state of regulation with regard to cryptocurrency or I guess, do you have any thoughts on the current state and maybe the future state?

Karen Scarbrough 23:36

I think the discussion between you know, what's happening with inflation and fiat versus crypto is one that, you know, it's just a that's a hard one to comment on, because it's, there's so many factors that play into that, but I think what's more important to understand is what you can do as a personal user with cryptocurrency versus cash, because the other reason why cryptocurrency is so interesting is that you can hold funds in your own personal digital wallet, that you are the only one that has the the password to it. That introduces a lot of challenges, because if you lose it, you know, obviously you don't have a backup to potentially get your cryptocurrency back. So there are tons of risks involved there. But it also is something that opens up, you know, a lot more seamless of a financial system and a lot of ways just on the digital side. So to thrash out what that means a little bit more. If I go to a central exchange, and I buy Ether with my cryptocurrency, what I can do is I can take that that cryptocurrency that I bought and say I want to send it to this address. And a cryptocurrency address is like, you might have seen them in the news, they look like 0x, seven, four, etc, you know, 64 numbers leading off of that it's just a randomized set of numbers. But when you send that from the centralized exchange to your wallet, you can you control where it goes, it can go in and out. So it's, in many ways, it's a bit the equivalent of taking out a chunk of cash from your bank. And, you know, once it's in your wallet, realistically, the bank doesn't know where it goes from there. The catch 22 of cryptocurrency, and where some of the regulation gets interesting, is that because blockchain keeps a record of all the transactions, realistically, if you take out cryptocurrency from an exchange, and then send it to somebody else, people can see that you've done that, because these systems are public right now. There are lots of different privacy solutions coming out that might change that in the future. But as far as an auditing system, it's actually a lot better than cash. There's a big misconception about a lot of criminal activity happening with cryptocurrencies. Smart criminals really aren't doing that. I mean, that it happens all they can fully see that. But if it was really this private, great system for criminals, I think we'd see a lot more activity of it. There's some reports that have said that that criminal activity has even gone down in the past couple of years, and the reason for that is the auditability of it. And the fact that you can go back and see, well, if this address, got Bitcoin from this address, and sent it here, this must have been what they did with it. So there's some regulation, proposals around exchanges being responsible for reporting above a certain threshold that if they if you withdraw this much amount, then the exchange has to report that, and then the exchange has to report where you sent it. That's actually far more invasive than what we have for cash right now. So like, for example, if I withdraw cash from a bank, like, they report that I withdrew the cash, but they don't know where I spent it, so they don't report it. So there are some lawmakers that want to put that extra reporting burden really, on some of these centralized institutions. And yeah, that's kind of up for debate, it would make it a little bit harder as to some of the innovation in some ways. But, you know, that's just being discussed at the regulator level. You know, with these systems being live for bitcoins, you know, 20, oh, gosh, almost 20 or no, not 20, 12 years now. And then, with Ethereum being live for six years, or, yeah, six years this year, I think. Anyways, like that's already that the the cat's kind of out of the box already. And that kind of transmission's happening. So it'll be interesting to see which way it goes. But users just have to be conscious that it hasn't been fully determined how these systems should operate. And I feel like we're trying to allow for innovation but also maintain the integrity of the financial system as well. So the hope is that we reach the right balance with that.

Erica D'Eramo 29:19

So what do you personally see as some of the risks involved in either partaking or investing at this point?

Karen Scarbrough 29:31

So there's lots of risks because the... so you can definitely...

Erica D'Eramo 29:38

You mentioned a couple like forgetting your password.

Karen Scarbrough 29:42

Absolutely. So the market in general is unlike anything that can be mirrored in traditional markets. People don't know how to value these cryptocurrencies yet and that's why you see, in part these wide swings of prices. And you do have instances as well, where a small amount of users can possess a large amount of tokens depending on which one you're trading. So that is also something to be aware of is that we talked about these systems being decentralized. But if you have a core group of users kind of having the majority of the tokens, that's also not a great thing for market control and fluctuations, in many ways, so it's the volatility that that's out there and the fact that people don't know how to value these things, that gives it such a wild, swinging price differentiator. And then when you get, especially for decentralized finance, these systems are all are all new. So in many ways, they're like, you can see that they're, you know, quote, unquote, working because they have users, things have worked thus far. That doesn't mean down the line, that it's not going to have issues. So there have been hacks, and even not like code hacks in the smart contracts, but like, for example, there was one platform that pegged their price oracle, so where they were getting their price, from a certain website. And that particular website had a big price swing that day. So the other websites moder... monitoring cryptocurrency prices didn't see this. So what happened on that platform is that because of these wild price swings, the loans were called in, and many people were liquidated because of it. So it's, it's not something that like, they hacked the, you know, loan or borrowing platform code. It worked as it should. But, you know, these price oracles were erroneous that they were looking at. So there's things like that, that that can happen. There's all sorts of components in these systems now where people just have to take into consideration that if one of these goes wrong, that's when issues come up. And then there's also a catch 22 in that, unlike traditional financial systems, a lot of these don't have emergency brakes. So, you know, like, with what happened with Robinhood and GameStop, and how they stopped trading, you know, whether you think that's a good thing or a bad thing, that's another discussion. But you know, there were sort of emergency brakes built into the system, so to speak.

Erica D'Eramo 32:58

I won't comment. It's a different podcast episode.

Karen Scarbrough 33:04

But in crypto currencies, you don't have those emergency breaks. So, you know, that is something to consider as well is that you just have to be really responsible and aware of what you're getting into and be prepared with what you're putting up for risk to be there. So, yeah.

Erica D'Eramo 33:28

Kind of buyer beware.

Karen Scarbrough 33:30

Yeah, exactly. I mean, I, it's I think these systems have a tremendous opportunity and innovation to make things better than existing systems, but, you know, at the same time, it requires people to be aware of because, yeah, there's still just so much in flux. So I think the better you can promote what's actually going on, as opposed to buy this token then, you know, retire next week, is all the better because it's, it's amazing what's being built but the buyers need to be just as informed in this as they would in a lot of other undertakings and financial systems.

Erica D'Eramo 34:20

So when you talk about cryptocurrency, and we talk about different coins, what, what are some of the different types of cryptocurrency out there right now? And how would one decide? I mean, are they all the same? Or is there some differentiator? Is it just like gambling or how would you make a decision about where to focus?

Karen Scarbrough 34:45

Yeah, there's so there's a couple of different categories there. We already mentioned the the protocol tokens, so the ones that are rewarded to the miners that people pay transaction fees in, like Bitcoin and Ethereum. And then more than that, there's the tokens that can be built in the smart contracts and the toe... in the code. So I mentioned earlier there's cryptocurrencies now that are pegged to fiat and one of those is USDC, and that institution basically keeps US dollars in a bank on a one to one basis of the the tokens that they issue. The other stable token that's interesting is called Dai. And it's D, A, I. It's made by a company that called MakerDAO. And I hesitate to say that because it's actually a decentralized system where, you know, if MakerDAO actually went down tomorrow, you'd still have Dai. So and how that works is you lock collateral in a smart contract that based on the ratios that are decided by that team, you basically received Dai, which is pegged one to one with the US dollar. So there's, gosh, there's over $2 billion tokenized in Dai now that are pegged to the US dollar, and they're collateralized with things like Ether and a couple of other cryptocurrencies on the Ethereum blockchain. And a good kind of lead in is, I mentioned the company, MakerDAO that's maintaining this. So there's also a maker token, which functions as what they call a governance token. So those tokens allow you to vote in protocol changes. So like, for example, if you wanted to decrease the collateralization rate, you could buy some MKR token and participate in that voting structure. And, yeah, there's also, I guess, a broader category of that is like utility tokens, that power basically like a specific network. There's a company called Brave, which has made a browser that has built-in ad blockers. And essentially, if you are shown ads like you can be re... you can receive micro micro payments in their token. So people have made specific tokens for their application, they've made these governance tokens, there's stable tokens, and then you might have also heard of these other tokens called non fungible tokens. And basically, the interesting point about those is instead of like, a token being a part of a group, so like, for example, if I trade you one Dai, my one Dai is equal to your one Dai. Whereas if we have a non fungible token, what they call NFTs, those tokens can represent specific things. So like people are making them represent things like a song or a piece of artwork. And it's basically like a digital certificate of ownership of a specific asset. So...

Erica D'Eramo 38:29

That's fascinating. I knew nothing about that, actually.

Karen Scarbrough 38:33

Yeah, they're gaining in popularity. I feel like they're the beanie babies of the next generation in some ways.

Erica D'Eramo 38:43

So I'm curious about another element that I, you know, you hear a lot in the news, and that is the environmental impact of some of the mining and just kind of the power requirements and energy usage. So in this world where there's so much discussion about net zero and emissions and in power consumption, what, what is the implication for blockchain or cryptocurrency?

Karen Scarbrough 39:16

That's a good question. So I'll try to keep it short and we can dive into more things that we'd be more interested in. So to dive in a bit more about how mining works, this proof of work mining where you have to extend computational power. Basically how that works is you make random guesses on a computer over and over again. They use a algorithm called hashing, which is basically something that takes in an input and gives you a randomized output. And it's an output that can't be like backwards computed. So, anyways, this hashing algorithm, every time a Bitcoin block, or a Bitcoin transaction, excuse me, happens on average it takes 8.7 quintillion hashes to produce that transaction. So that is a ton of hashing algorithms. I mean, imagine if you like ran 8.7 quintillion addition, you know, sequences on your own computer. Like, it would take a lot of power. And then when you add something...

Erica D'Eramo 40:35

I don't even know how many zeros are in that number.

Karen Scarbrough 40:39

Yeah, it's a lot. But anyways, that goes back to like the computing power to that's required for it. And what's fascinating is, it's not that the production of the block requires these hashes, those hashes are there so that a miner can't just come and randomly produce a block, like, basically, it happens that as network usage goes up, like the mining will go up or down. So if you have more miners, the mining will get harder. If you have less miners, then the the mining will get easier. And it's kind of maintained that way. But that just gives you a frame of reference for like, right now, I think that calculation was done at the end of last year. It's 8.7 quintillion hashes per transaction on average. But that's a lot. And so there's wild estimates out there because you can't necessarily calculate the power consumption in detail. Because if I'm a miner, and I use some equipment to make my hashes, I may have completely different hashes, hashing equipment than what you have. And maybe I'm using renewable energy for my hashing, and you're using, you know, coal, or whatever's cheapest in your area. So you see, like wildly different estimates on, oh, Bitcoin takes as much energy as the country of Ireland, and then it's like, oh, no, they take so much more energy than that, it's more like, you know, 1/4 of Germany or something, all these different estimates that kind of swing wildly. But it goes back to we don't know all the mining equipment, we don't know what power is being used. But we know it's taking a lot of hashes to make these things happen. But that is where the move to what I alluded to earlier, proof of stake gets interesting because proof of stake takes out that need to do all those hashes, because instead of that power consumption from miners proving integrity, instead, they have their Ether or whatever cryptocurrency depending on the network locked in a smart contract, saying, I'll make a block for you. Here's a bunch of money that says I'm probably not going to, you know, produce a bad block. So, you know, let me participate as a miner basically. And instead of mi... at those proof of stake miners participating as a competition, what effectively happens is they're randomly selected to produce a block. So you basically lock your collateral in a smart contract, you may have done that with millions of other people. I don't know if it's a million yet. But it's it's good that the numbers are getting up there. But anyway, it's like you're randomly selected and if you win the block what you have to produce is a block. Because you don't have to do all that hashing, it's really simple. It's like less than 1% of the energy consumption that's involved in proof of work with all the hashing that has to take place. So I think in the long run, that proof of work will go away. And I don't know, like one challenge with the Bitcoin network is, you know, and I am no expert, but I haven't seen as much of a path to get there as some of the other networks that are out there. Like there's some networks that have already have started day one with proof of work or proof of stake. There's networks like Ethereum that have said we're going to transition and they've already started it. But the environmental concern comes from that proof of work, but again, it's a, it was a trade off in the beginning in that they had to have a way for miners to have that skin in the game, so that they participated with integrity. But obviously, you know, the world doesn't want us to waste that much energy on, you know, random guessing. And computers. That's, I mean, it's not ideal. So that's where the biggest concern comes from.

Erica D'Eramo 45:23

Interesting. And are you seeing any sort of regulation or lobbying for this or activism around pushing cryptocurrency and blockchain to a more environmentally friendly model?

Karen Scarbrough 45:41

I think you do see a lot from people who are critics of public networks in general. And the, there's also been studies that have said 34% of mining and public networks that use proof of work actually already use renewable energy sources as well. So I mean, probably the biggest concern is just what Bitcoin is going to do, because I, there realistically are no more networks that are coming to light that are using proof of work, because it's not the best design anymore. And then...

Erica D'Eramo 46:29

Interesting.

Karen Scarbrough 46:29

...Ethereum has its transition plans. So the probably the biggest question from a future standpoint is just what's going to happen with Bitcoin and proof of work?

Erica D'Eramo 46:41

What is the market share that Bitcoin has, if they're one of the key players?

Karen Scarbrough 46:47

Well, I mean, as a value proposition, they, you know, obviously have the largest market cap, but from a transaction activity perspective, gosh, there's there's like 10x or more happening on other blockchains. So I think, you know, Bitcoin people are interested in for the price, for this opportunity to be a world reserve currency, if it ends up in that way. But realistically, the actual activity and and people actually, moving cryptocurrencies from here to there, building in logic, actually using it on a day to day basis, is happening on other networks. So, where that leaves proof of work, we still don't know, because the the Bitcoin network was, I mean, all these networks are designed in slightly different ways than another like, you know, you don't realistically have smart contracts on Bitcoin. I think there's some people in Bitcoin who would challenge that and say, you can do a smart contract on Bitcoin if you really want to, but it's, it's not the same as other networks. So, yeah, it just leaves a big question of a network that big, with that much value, you know, what's the the transition plan? And, yeah, well, we'll see where it ends up in the long run, in many ways. So another thing to consider, and it gets really interesting, is that as Bitcoin mining and this, like hashing function got such a rise in popularity, the hardware has gotten better. So there's whole hardware industries that have made specific hardware for Bitcoin mining, and it's also gotten more efficient in a lot of ways in what it's doing. So I think, overall, the kind of exciting thing to think about with a lot of these systems is that because they're open, as long as people find value there, innovators will innovate. And, you know, theoretically make it better. So I don't think there's any malicious parties out there that want to maintain proof of work, because it's a better system, and, you know, we got to have that. I think, maybe that's a little bit optimistic to me, but I think that the free market is intelligent enough to, or, you know, not that they're unintelligent, but you know, that there's that genuine drive to like, make it better. It's just figuring out the solution, I guess you can say. And that looks different for different networks.

Erica D'Eramo 49:38

And steering the ship probably looks different for, you know, for something like Bitcoin that, like you said, has attracted a lot of attention and very high amounts of, of just monetary investment. Might be a bit harder to steer the ship and make changes, but...

Karen Scarbrough 49:59

Yeah.

Erica D'Eramo 50:00

So. I, one of the primary reasons that I really wanted to invite you on to the podcast to talk about this is because I feel like there's a perception that cryptocurrency and Bitcoin and blockchain are all sort of the domain of the tech bros and you sort of envision like a white dude in Silicon Valley, talking about, you know, mining for coins, I guess. And I feel like it can maybe be intimidating for people who don't envision themselves that way, or don't feel that this is a space that they would be welcome in. So tell me a little bit about your thoughts on that.

Karen Scarbrough 50:50

There's so many components to this industry now that I think on the spectrum of, you know, whether your strength is in creativity and design, or communication, or organization and project management, or as a programmer, or a developer, like that's a place for excelling in all those areas. So it's definitely, from what I've seen, you know, it's not just the technologists' domain anymore. And it's really exciting because it's more than just a technology, it's a financial system, it's a new design. It's about user experience, as well, which, as designers will tell you, that's just a whole domain in and of itself. So there's just so many components that you can participate in, that I think people that are interested, you know, spending a little time in the ecosystem, just maybe listening to some different podcasts or reading some articles. There's lots of companies hiring and it's using the skills that you have to make the industry as it is better. Because it definitely needs more strength in it to refine what's happening. So yeah, there's a lot of different ways to do that now, I'd say.

Erica D'Eramo 52:28

And probably wou... that the industry, I guess, I guess we could call it an industry, would benefit from the diversity of thought of having people from a variety of backgrounds across the gender spectrum involved in, in sort of this development and the future.

Karen Scarbrough 52:46

Yeah, I'd say so. And I think programming, developers, technology in general, you know, the, the repres... representation of women is, you know, unbalanced and for for different reasons, but what's absolutely fantastic about this industry is that, you know, most of it is open source, if not all of it. And that really breaks down kind of the barriers to entry of who wants to get involved. So like, in comparison, you know, an industry like we've worked in like oil and gas, if you want to learn how a piece of equipment works, like you got to go talk to all these different people, it may or may not be written down. What's wonderful about public blockchains, in general, is that code's open for anybody to go and read and spend some time on to understand. So I think that can open up a lot of doors that haven't been as easy in other industries.

Erica D'Eramo 53:50

Yeah, you don't need a helicopter to go check it out.

Karen Scarbrough 53:55

Yeah, exactly.

Erica D'Eramo 53:56

Yeah. So if somebody wanted to learn more, you mentioned podcasts. What you know, where would you point someone to if they wanted to do some more research and maybe dip their toe?

Karen Scarbrough 54:10

Yeah. So the podcasts out there that are great. There's one called Bankless that that does some great overviews. There's another called Zero Knowledge that gets into a lot of the cryptography side. It's it's fantastic if you want to learn the cryptography but if you're just starting out in blockchain there's also ones like Epicenter. Another podcast is called Unchained. And all of them to some degree use a little bit of their own lingo for blockchain, but there's been a lot of people posting articles on Medium. There's a, there's a great newsletter called Week in Ethereum, that gives an overview from a developer perspective and then, you know, also what's happening in the industry. And yeah, I mean, it's sometimes it's hard to differentiate what's happening from a, an article point of view versus under the hood, with developers and technologies, but I would say the best source of information is trying to get it directly from people building things, rather than, like third party sources that are that are writing on them because there's so much blogs and articles from people who are building applications or protocols. Like that's really the the best place to start. And this industry in general does do a pretty decent job at, you know, what people are working on they'll write about or put go on podcasts about, so, you know, like...

Erica D'Eramo 56:01

Like we're doing today.

Karen Scarbrough 56:03

Yeah, exactly. But I would say definitely, it's kind of hard to decipher what's going on, if you go to a mainstream media outlet. I think there's a lot of confusion at that level. But if you go to the source, there's a lot more clarity.

Erica D'Eramo 56:19

And how about organizations? Are there any sort of organizations that are focused on this that people could find some community in?

Karen Scarbrough 56:28

Yeah, I know almost in every major city there's either some kind of Bitcoin meetup or Ethereum meetup that different people host. And then there's a lot of projects, too, that just have an open chat forum and applications like Telegram or Discord, to ask questions as well. And yeah, I mean, because this is a online first kind of community, I think there's a lot of opportunity that if you don't feel like you're in the right city, you can actually connect with people a lot more easily than you probably think, just by the nature of what it is.

Erica D'Eramo 57:15

Yeah, that's, that's really interesting. So I think we've exhausted sort of all the areas that I wanted to explore but I'm interested if there were any parting thoughts that you wanted to leave us with on, you know, blockchain, cryptocurrency and, and the future?

Karen Scarbrough 57:37

Um, I guess I would say, like I got involved in 2017 was when I first started working in the industry. And I have just continuously been amazed at how many problems they've that that different developers and researchers have solved and made better and not that everything's perfect yet. But I think there's just such an amazing room to grow. And you've got lots of brilliant minds working on this stuff. So if anything, I hope the discussion kind of led people away from price tickers, and more interested in actually what's going on. Because it's worth it to just spend some time and understand because it's definitely has huge opportunities for the future.

Erica D'Eramo 58:26

Yeah, absolutely. This has been fascinating for me, and really, really insightful. So I appreciate you dispelling quite a few myths and giving us a bit more vocabulary and understanding to to help maybe introduce us and do a bit more research after this. Actually, I'm probably going to start digging into some of those other areas to learn more. So thank you, Karen. We appreciate it.

Karen Scarbrough 58:53

Awesome. Thanks for having me.

Erica D'Eramo 58:55

Thanks. And for our listeners, you can find more information about Two Piers on our website at twopiersconsulting.com. And you can follow us on all of our social media channels. So Facebook, Twitter, Instagram and LinkedIn and we look forward to seeing you at the next podcast.

Diversity on the Board

Photo courtesy of Unsplash.

Transcript Below

Erica D'Eramo 0:06

Hello, and welcome to the Two Piers Podcast. Today we will have a special guest joining us from the business world. His name is Cliffe Killam, and he recently took the helm as Chairman of the Board of the Laredo Chamber of Commerce. And he has quite the story to share with us.

So Cliffe, welcome to the podcast.

Cliffe Killam 0:38

Thank you, Erica, for for having me. Excited, excited to be here.

Erica D'Eramo 0:41

Yeah, we appreciate it. So we really want to explore some of the stories that you have to share with us. But first, I wanted to get a little background on you. So tell us a little bit about yourself.

Cliffe Killam 0:56

Sure, yeah, happy to share that. I'm the president of Killam Development and Killam Oil Company. And we're a family owned, private family owned business. And I work here with my my father, we're based in Laredo, Texas. And we've been in business for over 100 years, and I'm the fourth generation. And my brother also works here as well in our field operations. And, yeah, we, you know, in terms of a little bit about me, I sort of have a little bit of a different background for the oil and gas industry. I have an undergraduate degree in English literature from Boston University, after I got out of college, worked as a field hand and kind of doing manual labor out there in the oil field. And said yeah, this is kind of a chance for me to kind of put the books down and kind of get my hands dirty. And that was a great experience, met some great people that way. And then I ended up going to the University of Texas, getting a master's degree there in a program called Energy and Mineral Resources, which at the time was housed in the petroleum engineering college and later got moved to the Jackson School of Geosciences. And that program is basically an interdisciplinary program that pulls from all the different disciplines that might be helpful to have a career in the oil and gas field. And from there, I moved to Houston, worked for a company called Wood Mackenzie, and did research and consulting there, and then got a job for a company called Harrison Lovegrove. The first day I started working there, we were, it was announced that we were acquired by Standard Chartered Bank, so became part of their corporate finance group. And we are one of the called top three, international M&A for in the upstream oil and gas business. And after that, did that for a little while, and then finally came home to, back to Laredo, and have been working here for about a decade.

Erica D'Eramo 3:00

Wow. So that's quite the journey. And I have to imagine that that journey has probably been through a lot of kind of male dominated spaces, a lot of oil and gas that I'm hearing. So that's what makes this kind of story that we wanted to talk to you about all the more interesting. So you took the helm as Chairman of the Board of the Laredo Chamber of Commerce, and you made a bit of a splash with some of your leadership decisions there. So tell us a little bit about that.

Cliffe Killam 3:35

Sure. I, I'm assuming you're referring to, I ended up appointing 10, 10 of my Board of Director appointees were all, were all female professionals, female leaders. And yeah, so really, really excited about that. You know, you know, basically every every chair gets an opportunity each year to, to make 10 appointments. And so I got my, my daughter was born on September 18th. And I was made the chairman on October 1st. And so we're, you know, so my, that was sort of in the back of my mind, and I went to the to our office over there and sitting sitting at the table with some of the staff and we were talking about, well, you know, what are some of the things I have to do now as chair and so we also have to go through these appointees. So I said, "Well, why don't we go, you know, kind of work on that?" And so as we're going through, you know, in my mind, I was trying to find, you know, people that were, you know, highly qualified professionals that also represented a diverse, diverse elements of our local economy. And so that was really what I was trying to do. And so I started kind of listing the names of people that I had worked with in some capacity on other boards are professionally and people that were highly accomplished. And so, you know, getting this cross section of the logistics industry and, you know, the real estate industry and, you know, healthcare and, you know, other other elements of, of the economy. And so, you know, we, we kind of looked kind of, as we kind of listed the names there, they just so happened to all, all six of them were were, you know, female leaders, and it wasn't really, you know, just sort of happened to shake out that way. And then that's where I kind of paused. I was reflecting on that, and I kind of looked up, and in the board room, there, you know, we have the, the Laredo Chamber has been around for over 100 years, and they have all the, you know, all the photographs of all the different previous chairs. And I asked, "Well, you know, how many, how many women have been chairs in the past?" And, you know, it's only been like, maybe, three, three or so, and, and then I was thinking about my daughter, and thinking about how she needs more female, you know, I want her to have more, you know, female role models in her life, and, and, and more, but, you know, more so. And so, yes, then we're there. Then I said, "Well, you know, in terms of the next four appointees that we have to make, you know," I said, "has anyone ever appointed 10 women before in our history, to this, to the Chamber board?" And so they said, you know, "No, that's never happened before." And I said, "Well, let's, let's make it happen." And so then I kind of asked, the staff just said, you know, you know, "I also don't want to be blinded, I don't want it to just be people that I know, you know, are there other other female leaders that are supporting the organization in some capacity on a grassroots level, that are really putting the time in that, you know, maybe I just happened to not know them very well. And that you think would be, you know, strong additions." So they made some additional recommendations. And that's kind of how we came up with our, our 10 appointees. And it's, it's really, you know, had a big a big impact. And, you know, even more so than that I, you know, could have imagined, and I can elaborate on that as well, if you'd like.

Erica D'Eramo 7:34

Yeah, absolutely. Let's explore that a little bit. But first, I want to understand why, why was it important to you to increase female representation? You kind of mentioned role models, etc. But was there anything else in that decision?

Cliffe Killam 7:53

You know, I wanted to, you know, I really, there was, there's primarily two things in my mind at the time. One was, I was thinking about my daughter, and you know so, she was sort of an inspiration for me to, and I wanted, and then in turn, use that so that she could be inspired. And I thought it was important, you know, when I was thinking, you know, 5, 10, 20 years down the road, you know, I hope that there's going to be more female chairs, photographs of them, you know, that had previously led the Chamber in the years to come. And so it's important for me to help to, you know, create some of those, you know, pathways. And then in addition, I also wanted to signal to the marketplace, that we were going to be doing things differently. And so, this was one way to basically say, we're going to we're going to do things there, you know, this is this is at the same thing I would say, too is, I mean, I, to certain degree, I, to be candid, I think I maybe didn't fully appreciate the impact that this would have in the community and at large. You know, I guess it's, you put 10 men on there, people wouldn't think twice. And so for me, I said, well, put ten women, I mean, it's, it's, I didn't really fully appreciate, you know, how that would make people feel in a positive way. And and really, it was, it's become a learning experience for me as I've had different female leaders come and confide in me and talk to me about different situations. And so it's really, it's not something that I think people often openly talk about, but I guess because of this, it really created a some additional conversations that helped me to appreciate I guess, how much of an impact it had.

Erica D'Eramo 9:57

Yeah, that's that's really kind of moving actually. So I, I'm interested in this, in this kind of selection that you went through, you spoke a little bit about your selection criteria, but I'm interested in how you think it might have differed, in this case, from how board members have been selected in the past that you ended up with a slate already kind of starting out with six members, or six selections that were already female leaders. So how do you think your selection criteria in this go around, may have differed?

Cliffe Killam 10:38

Well, you know, I don't want to I mean, what I would say is, I can share with you how I approached it, and, and I can't really speak to, you know, how other people approached it, but I can share with you mine, which was, it was important for me, to, to, the Laredo Chamber of Commerce is meant to represent as a non, it's a nonprofit that represents the business interests of, of its local economy, of the local, you know, the community that it represents. And so whatever is that kind of cross section of the economy, you want to find different folks that represent those different lines of businesses in there. So I made sure we had representation, I wanted to make sure we had representation in the logistics industry, and we in the real estate industry, I wanted to make sure that we had various educational institutions represented, higher education, as well as on a high school level that we had the, you know, hotel, hospitality industry represented, financial services. And, and so those are some of the different, you know, different industries that we had. And so I just picked different people and, you know, that either, you know, own their own business, or had been in a leadership role within a company. And, and that was sort of the criteria, and many of these ladies have, you know, I had worked with in some capacity in other nonprofits, or professionally and people that I respected and, and I thought, you know, they would add a lot of value, and really were, you know, got things done. And so that was, that was what I was looking for: people that can help. You know, you as the chair, you're, you're only there for, at least at the later Chamber of Commerce, you're only there for one year. And so I wanted to find people that would help me be more effective as a leader.

Erica D'Eramo 12:50

Yeah, that sounds like a really robust set of kind of selection criteria. So I'm, I'm curious, you mentioned that there's been a really positive impact, positive feedback. And I do want to explore that a bit more. But first, have you been confronted with any resistance around this decision?

Cliffe Killam 13:12

Um, you know, I, I wouldn't say that there was any resistance, I think was generally received extremely positive. I would say that there's maybe even a handful of people that approached me that it's not that they were resistant to it, but maybe they had a harder time putting it into, into context or into you know, perspective, and kind of understanding the decision. And so in certain ways, they've kind of said things that, you know, under, underminded, you know, sort of that decision, in a way, and again, I don't think there was any kind of, you know, malice per se, I think sometimes maybe it's just a generational thing, or it's, they just have a hard time understanding it, so, there were some comments that we're, you know, kind of oriented towards, you know, you know, sort of saying, oh, aren't aren't you, you know, you know, sort of having all these women around you, you know, isn't that such a nice, you know, sort of, you know, sort of more of a, I guess, I guess you say sexist way, you know, kind of oriented that way. And again, I think, you know, these are kind of typically older, you know, older people, I guess just sorta maybe had a hard time and I've had and it's not just from men, I've also heard from women. Very similar, you know, type of way of describing it, and I just think maybe, I don't think, you know, maybe I just sort of see you know, and see the best people, so I just I don't necessarily think they're coming in with a negative way of looking at it. I think it's just something that's a little harder for them to, you know, it's more of a generational type thing.

Erica D'Eramo 15:14

Yeah. And normalizing kind of seeing women in positions of power is, is part of the journey, I think, right, that we normalize it. And sometimes when I hear you talk about this, this story, or this, this journey that you guys have been on, it makes me think about this quote from Ruth Bader Ginsburg, and she said, "When I'm sometimes asked, 'When will there be enough women on the Supreme Court?'", basically, and she says, you know, "When there are nine." And people are shocked, and then she recounts, you know, but there, there have been nine men plenty of times, and no one ever raised a question about it. So when we normalize just seeing all men, all women, and nobody blinks an eye at it, that's when we kind of know that we've reached equality, perhaps, but just normalizing seeing women in positions of authority and power, I think, is part of the journey.

Cliffe Killam 16:11

For sure, for sure, that's, you know, we're you know, I mean, again, I go back to my daughter, you know, you know, so I mean, I want her to be this, you know, kick ass, you know, person, and let her, you know, I want her to do all the, you know, all the things that she wants to do in life and accomplish, and I think, you know, feel empowered, and to do the things that she wants to do with her life. And so, you know, I, like you said, I mean, there shouldn't be any boundaries or limitations for that. And so, I think that, you know, in order to, you know, create the world we want to live in, we got to do something about it now, you know, and so, and that's just kind of one small way, they just sort of, as you say, kind of normalize things are kind of, you know, it shouldn't be, I mean, in many ways, it shouldn't be a big deal, you know, and so and so I hope that over time that that's, you know, and, and also, I mean, I, you know, Laredo is a, I mean, it's got its own distinct culture and values. And so there's a little bit of machismo here and stuff. So, you know, I think also that kind of, you know, just sort of, you know, change, changing things up a little bit, and like you said, you know, normalizing those kinds of things.

Erica D'Eramo 17:23

It's interesting, because I think it's, it's actually pretty consistent across the US that purchasing power in many households is, in many cases held by women. Interestingly, and so, you know, what, to what extent did women's participation in the economy kind of play into your decisions?

Cliffe Killam 17:53

Um, you know, not so much. I mean, I, you know, I was really looking for accomplished executives, and, or people that represented other institutions that had leadership roles in different institutions. So, you know, like educational institutions, or maybe other nonprofits and to build those relationships. So it was, it was, it was more about, you know, finding, finding people that, that really were effective in, in making, making things happen. So that's, that's really what I was kind of looking for is that was kind of the main criteria for me was, you know, finding effective managers, leaders, people that are involved in the community, that are going to put the time in to volunteer, and ultimately, what, this is a volunteer organization, that they're going to be committed to helping us be better. And, and so, you know, this organization focuses on a lot of it is very much oriented towards government affairs. And it's on policy issues on a local level, a state level and on a federal level. And so we know we've written like, as an example, the Laredo is the largest, largest inland port in the country. $300 billion worth the trade coming through here. 18,000 trucks on the road, but Laredo also, you know, but under the previous administration, the bridges here were shut down for non-ess, quote, unquote, non-essential travel. And so you know, Mexican nationals coming to the US is a big part of our economy in terms of tourism and dollars spent, but we wrote letters in support saying, hey, look, this is really affecting the whole border region, and this is really important to us or when USMCA was happening, you know, write, you know, writing letters on that, having meetings on that. So those are the kinds of different issues, you know, with, with the, with the COVID happening now, you know, we're writing letters to and having meetings with our mayor and county judge and our governor, and talking about, you know, hey, you know, this is affecting bars and restaurants and hospitality industries and these other businesses, and, you know, what you're calling non-essential, you know, our people's livelihoods. And so, really just, you know, our job, you know, I think of the the mission of the Chamber is to, is to listen, support and advocate for our members and the business community. So that's, that's, and that was, so that's kind of, I was looking for people that were going to help, help me fulfill that mission.

Erica D'Eramo 20:55

Yeah, so really action oriented?

Cliffe Killam 20:58

Yes.

Erica D'Eramo 21:00

So what benefits have you seen so far, what impacts have you seen, I guess, of the, this kind of fresh slate of, of appointees?

Cliffe Killam 21:10

One of the things that I'm super excited about, and I was not expecting was that you the, the women that I appointed on there, you know, they got super fired up, and kind of, you know, it kind of really galvanized them. And so now, we're creating a Women Leadership Program as part of the Chamber. And so I'm really excited about that. They are, they're bringing in the other female members that are part of the Chamber. And so what they're doing is, they're looking at creating mentorship programs for female professionals, they're looking at also doing a speaker series to bring in different, you know, female leaders and thought leaders to come into town and speak to a female audience, but also a broader, you know, broader audience as well, but already, you know, kind of thematically on on some of those different issues. And then also looking at creating some fundraising events as well around recognizing female business leaders, and community leaders. So this has sort of emerged, it's this kind of really, you know, this, this import, now important part of the Chamber, and I'm absolutely thrilled about it, because it's, it's, it's my hope, and I think that will be is that this is now going to be a part of what we do in perpetuity. And so we're going to work really hard to maintain that. So I hope that, you know, my daughter will be able to be, you know, mentored through this program, you know, you know, 20 years from now and be able to, you know, go to some of these different, you know, lecture series, and all these other things are happening. So we're, you know, they've really, it's been really embraced by the membership. And it's actually helped us to recruit more female members and professionals. And so it's just this this virtuous cycle has been created. So it's really, it's really been very cool.

Erica D'Eramo 23:27

That's awesome to hear. That's really heartening. I think a lot of times when we hear stories like this, or just any effort towards increased diversity, and representation, there's always the challenge of like, is this a philanthropic effort? Are we doing this to be nice to women? And so I wanted to hear a little bit more about that, like, what are the actual business impacts of this? And it sounds like this is not just to be nice to women, right? This is actually improving the accessibility of the Chamber of Commerce and improving the operations. Have you seen any examples of kind of the way you've done things previously, versus the way you're doing them now changing?

Cliffe Killam 24:16

Well, I think that yeah, I mean, I would not I, you know, I, I'm, I'm, you know, I really just wanted the best, the best people to be part of the organization. And that's really, for me, that's the only thing I really kind of mattered, it sort of ended up happening that this sort of thematically, you know, kind of came together. And it's been really great to see that, you know, as I mentioned, you know, this Women Leadership Program has been created. I would say that, the, they're the, the, a lot of the female board members are, I think, just really fired up and really vested in there. And I think it also has inspired some of the, you know, male board members too and got them excited to see, hey, we're, we're changing things up. So I think, you know, overall, it's really just kind of helped to create more commitment and more more drive into getting things done and, and, you know, like many businesses and nonprofits across the country, I mean, it, COVID has been, you know, devastating. So, I think at a time when there's been a health crisis in our country, in certain ways, you know, economic crisis, and, and, and has also affected, you know, families and people in so many other ways, the isolation and so forth. I mean, I think this has really, you know, given us a sense of focus and purpose. And so I think people are just really excited to make a difference through the Chamber. And that's really been one of my goals is to, you know for the Chamber to become a really, not just some kind of a ribbon cutting organization, but to really be a platform to effect meaningful, positive change. And so that's, that's really been what I've been, you know, really focused on trying to deliver on.

Erica D'Eramo 26:27

Yeah, that, I mean, that's very inspiring, you're making me want to sign up for my local Chamber of Commerce. So hopefully, you know, we, this podcast gets heard by other people who wouldn't previously consider that and would, might think to themselves, like I could be a benefit to that type of organization, and I just never thought about it before. So thank you for that. So I'm interested in what the transition onto the board looked like, a lot of times, I think, and maybe, you know, either confirm or correct for me, um, organizations, like any other type of business are often self perpetuating with sort of bringing in informal contacts or, you know, people that you knew from your you know, your, your clubs, or your school or your friends or your net, your close network, people who look like us, act like us, are in the same circles as us. And sometimes it can be a bit self perpetuating. And that's how we end up with maybe like the boys club mentality of people that already are in our circle getting appointed to some of these roles. So in this case, you went kind of beyond your circle, and brought in new people who maybe didn't have that informal network. Have you found that there were any sort of trans, there was any transition support that was helpful for people coming into this that might not have sort of been operating in this circle before?

Cliffe Killam 28:12

You know, um, not really, I would say that, not really, I would say that, you know, all these women that were appointed, I mean, they're all very accomplished and experienced, and they've been on, you know, boards before and have been in, you know, high, you know, in executive type. So, if anything, I'm asking them for advice, you know, so, you know, I'm saying, you know, this is, you know, this, this is sort of a new, newer thing for me. I mean, I, this is the first time I've been chair of a, of a nonprofit. And so, so yeah, I, no, I kind of come in with a sense of more of humility and asking them, you know, you know, you know, how can I, you know, run the meetings more effectively, or how can I, you know, you know, how am I doing, you know, and how are we doing and kind of, you know, trying to chart out these different, you know, milestones and things we want to accomplish as an organization. So, you know, more than anything, I think it's really me, you know, just kind of talking to them getting their feedback to be quite, you know, candid and so, you know, the, really that's, you know, there's been probably one or two people on there that are, though my appointees that maybe are a little bit less experienced. But, so, you know, I wanted also to strike a balance. I mean, I didn't, you know, I wanted to also have some women in there that may be, you know, they were sort of, you know, rising stars, if you will, and so, you know, they you know, give put them, you know, give them an opportunity to to you know, get involved, rather than kind of, you know, sort of having to, you know, maybe takes longer someone's, you know, life, whatever to get into some of these different organizations on a senior level. So. So there was a little bit of that, and I and I, and I'm assuming that, you know, there's a little bit of internal mentoring there and so forth, but they're also holding their own too. And they're bringing fresh, you know, fresh ideas, to, to the meetings and to kind of some of the different initiatives that we're working on. So it's been, it's been really gratifying. So if anything, I've been trying to listen and learn from them. Actually,

Erica D'Eramo 30:46

Yeah. Wow, that sounds great. And that internal mentoring can be so valuable as well.

So I'm, I'm curious soon what you think the barriers to entry were before? Like, why is this the first time that you've had a board of? Or that you've had a full slate of appointees that included so many women?

Cliffe Killam 31:11

You know, I'm you know, it's hard for me to, to answer that, you know, I think that I don't want to cast any aspersions or anything like that, or make any assumptions. But I mean, I think that I'm sure it's, as you mentioned, I mean, sometimes people make choices that they're more comfortable with, or maybe they're more used to, or this kind of cultural things, I guess, sometimes. But, you know, I really wasn't focused on, you know, why people made those decisions in the past, I was really kind of focused on, on on the future and helping to, to make a positive impact, you know, going forward. So that was really kind of the mentality I was trying to take and just just try to be, you know, positive and really try to make a make a strong impact there.

Erica D'Eramo 32:19

Yeah, that does sound very positive. So do you think that this will be a turning point, kind of for a bit of sustainable change or representation? Do you think that maybe this won't be such a rare occurrence going forward?

Cliffe Killam 32:35

Well, I hope that's the case. I mean, that's what you know, that's what I was so encouraged, by this effort to create this new Women's Leadership Program, because, you know, the idea is that that could be coming in on an ongoing program, so there's their, you know, our, our board members, and our members are putting a lot of time and energy into creating a mentorship program and, and bringing in speakers and looking at, you know, recognizing different female leaders, so, you know, putting in sort of the foundation for that, so that this becomes a strong part of the Chamber, going forward, and, and therefore, kind of institutionalizing that in a way where, you know, it will be, it's just going to be a normal part of, part of the, of the nonprofit.

Erica D'Eramo 33:36

And love that, yeah, I love that idea of kind of institutionalizing, putting in the systems in place, so that it's not just left up to our human brains that are obviously subject to our own biases or heuristics. So I think that's great.

Cliffe Killam 33:54

Yeah, I think, you know, sometimes it's, you know, just to help you create that, you know, consistency, and sometimes people don't necessarily, I mean it's not that they, it just helps to reinforce that, you know, like you said, it helps to put it, you know, kind of structurally into, into the organization.

Erica D'Eramo 34:12

Yeah, absolutely. So, were there any, you know, final thoughts that you wanted to close with? And we really appreciate your time here, and this has been really insightful. So, any any last, like leaving thoughts that you want to leave us with?

Cliffe Killam 34:29

Well, you know, I think I, you know, like I said, it's been very insightful for me to, to you know, make these choices and then seeing you know, how how it was received in the marketplace and, you know, it's really helped to help me kind of enlighten, enlighten me more. I've had a, I've had an employee, come up to me, and tell me how much, it really meant to her and it really got her excited. And also, you know, wanted, wanting to join the Chamber. And she talked to me about her sister who's a doctor in Austin and how, you know, how people always think she's the nurse, you know, or she's the, you know, assistent in some way. And so, you know, I think that that's, you know, those aren't, those aren't conversations prior to this that anybody normally had with me or, you know, shared, shared those kind of things with me. And so I wasn't really as aware of some of the different challenges that that that women may face. And so, for me, it became a really powerful experience, you know, to have different women, you know, confide in me and, and talk to me and share different stories and how it was, you know, how that decision was so meaningful to them. And I don't think I really fully appreciated the impact until afterwards. And so for me, it's been very moving. And, and so I've really wanted to sort of embrace it. And, you know, like I said, I want to be the best leader that I can be, the best father that I can be, the best husband that I can be. And so I mean, I think that, it's, you know, this is hopefully it was, it's just one on one small step. And so, and I hope that I'm really excited to see what future things happen in the Chamber and excited to help you know, you know, be a part of that.

Erica D'Eramo 36:47

Yeah, that sounds just so impactful and valuable, as a business leader, because this is one part of your life, but you're, you're a business leader, in the other parts of your life, as well. So to have access to those perspectives, just seems so valuable and enriching as you go through your career. So I'm curious for anyone listening to this, who thinks, oh, I might want to get involved in my own Chamber of Commerce, what would you recommend? And where can people find more information about the Laredo Chamber of Commerce?

Cliffe Killam 37:22

Sure, yeah. If you can just go to the laredochamber.com and you can look, you know, look us up there. And then you can also always Google the US Chamber of Commerce, and most most communities, most cities have a Chamber of Commerce. And yeah, I definitely recommend looking into that. There's a lot of great programs there to help champion you know, the business and and also get involved in, you know, different policy issues that affect businesses. And it's a, it's a great, it's a great American institution, and nonprofit. So yeah, definitely encourage everyone to, to look into it and get involved.

Erica D'Eramo 38:11

Awesome, thanks, Cliffe. For our part, we appreciate our listeners tuning into this and they can find any information that they're looking for regarding Two Piers on our website as usual, which is twopiersconsulting.com. And then they can follow us and our stories and future podcasts on any of our social media platforms. So Facebook, LinkedIn, Twitter, Instagram, we're on on all of them. And yeah, thanks for spending some time with us today. Cliffe, we really appreciate it.

Cliffe Killam 38:46

Thanks so much, Erica. Enjoyed the conversation.

Macroeconomics & COVID-19

Photo courtesy of Unsplash.

Transcript below:

Erica D'Eramo 0:04

Hello, and welcome to the Two Piers Podcast, Season Two. I'm your host, Erica D'Eramo, and today I'll be joined by special guest Sandy Leeds. We'll be discussing some of the macroeconomic impacts of the COVID-19 pandemic, particularly on both women and communities of color. And we'll also explore some ways for us to increase our understanding of the markets.

Sandy is a faculty member in the finance department at the University of Texas at Austin. He teaches an acclaimed Macro Markets class, which is pretty renowned amongst the business students. While Sandy is a proud Crimson Tide fan, we do happen to share a Longhorn connection. Prior to joining the faculty at UT, Sandy managed money for a private money management firm. He was one of four portfolio managers responsible for approximately $1.6 billion of assets and he holds the Chartered Financial Analyst designation. But that's not all. In addition to money management experience, Sandy also has significant legal experience. He's a member of the Texas State Bar and has tried over 100 cases. He also participated in the regulation of the securities industry and is a published co-author of Investment Analysis and Portfolio Management.

One of the reasons that I wanted to have Sandy on the podcast is because of his efforts to make the understanding of markets and their movements accessible to people who may not have the opportunity to pursue an MBA. Sandy puts out a free weekly market update that analyzes and distills movements and happenings in the markets; you can sign up for that newsletter at sandyleeds.com. He also hosts a Macro Markets course that, while not free, has open enrollment, so no university affiliation is required. So Sandy, welcome to the podcast. Thanks for joining us.

Sandy Leeds 1:59

Thanks, Erica. Thanks for inviting me. I'm excited to be here.

Erica D'Eramo 2:02

So we have been seeing over the past year, some of these major impacts of COVID-19, on the markets, on the economy, and really some profound and unfortunate impacts on women and communities of color when it comes to employment and engagement in the workforce. So with the Two Piers mission, that is to create diverse and reflective workforces by unlocking, cultivating and supporting talent. These impacts are, you know, something that we wanted to explore a bit more, and we thought that you would have a great perspective on it.

Sandy Leeds 2:42

Well, it's great. I mean, these are, these are really important issues to me. So I love what you're doing.

Erica D'Eramo 2:48

Thanks. So I mean, one of the things we've seen in the news headlines a lot lately is around the metrics and statistics on women's employment numbers, and us kind of backsliding, something like 30 years with some of the the numbers that we're seeing of women in the workforce. So I was hoping that you might be able to kind of explore that with us and talk about what, what is what is the problem that we're seeing here?

Well, I think that the really big picture problem is that women have been more impacted by the pandemic than men. It's somewhat unusual, actually, that typically in a recession, men are impacted more, because you tend to see very cyclical things drop, you tend to see construction drop, which is dominated by men. You see, manufacturing slowdown, again, tends to be more heavily dominated by men, particularly in the past, but, but certainly, still a fair comment. But when you look at this, this pandemic, if you compare the jobs report that we got the first Friday of February, which tells us about our January employment, and you compare to one year earlier, the prior January, which was really pre pandemic, for the US and for the US labor market, women have lost about 5.2 million jobs since then, and men have lost about 4.4 million jobs. And so women have been impacted more. And the reasons for this are number one, obviously the service industry or the service sector, that women dominate the service sector and the service sector often requires close contact, and that's what's been shut down the most. And the other issue is that women bear a disproportionate amount of the responsibility for kids, for the home, for parents. And that's not to say that it should be that way, but rather that is what we're seeing. And so, you know, the result is when our schools are closed, it's, it's impacting women, even more. And, you know, one of the things that, that I always tell people is, you just look at, like the really basic idea of when you have people who are divorced, or people who never got married and have kids, the vast majority of the time, not all the time, but the vast majority of the time, what you see is that the kids end up with the mom. And, and then, you know, even when people are together, what you, you know, what you tend to see, and I asked my students this do long before the pandemic, I would say, how many of you would say your primary caregiver was your mother, rather than your father? And, you know, certainly the majority, and things of things have certainly changed over time, you know, I can look back to I was born in 1964. And, and I think back to, I lived in a very middle class, neighborhood, and, you know, up in New York, and Yonkers and, and it was all the dads that went to work, you know, I mean, I was out in the street playing, you're probably when I was 19. So when I was six years old, 1970 b, all the dads, and they'd all come home at five o'clock, and very few of the moms worked outside of the home. And so, but bottom line is that that's what we see. And so, you know, that's where the job losses have been. And, and, of course, you know, what we're worried about is just, you know, the, on a macro level, we worry that we're losing all this human capital, you know, we're losing the output of all of all these people, men and women, but you know, especially women, who's what we're talking about here, and productivity, and, you know, the problem that once you become long term unemployed, you sort of lose your connections to the workforce, you end up going back, it's harder to get a job, it's, it's harder to get fair pay, um, you know, we increase financial security, and you know, it, one of the things that that we have to worry about is that when these things happen, you sort of then re-victimize the victim. And what happens is that, then people consciously or subconsciously start to say, "Oh, well, you know, women have other responsibilities. And so they're going to be less reliable, when we need when we need people to work." Right? And that's, you know, that's, that just perpetuates problems like that. So, so, you know, we have a lot of problems. And as you said, you know, bringing it back 30 years, I think a lot of those views were going away, or hopefully, they're improving slowly, I think, you know, the younger generation, so much different than, than the older generation, but I think, you know, those, those the problems, and I think this really has furthered them or brought us back to them.

So we've kind of taken the mommy track and exacerbated it.

Sandy Leeds 8:09

Yeah, I think. Absolutely. And I mean, you I think one of the things that's, that's interesting is, when you look at wage inequality, you know, gender inequality with wages, um, you know, it's interesting to see, like, what the research shows about that, you know, it shows that, you know, obviously, the, the disruption in career when you take, you know, a year or two years off, or, you know, many women take five years off until you know, until the kids ready to go to school, that type of thing. That's certainly one issue. But, you know, other issues that we see are that, employers, whether or not a woman is intending to have kids start to assume that they will. Right? And, and that's, you know, the, you know, probably the most problematic, but, you know, it's sort of interesting, though, excuse me, because what you see is, um, in that research, a lot of other things that, you know, are sort of gender based, and that is that, like, particularly married women tend to not accept a job that requires moving. And, but then they move because the husband accepts a job somewhere else. And then what you have is someone who is trying to get a job without a job, right? When, when you move because of your spouse, and that's really difficult, and it's really difficult to get the correct match as far as skill set and economics and to get what you were making before. And you know, those are those are all you know, really big problems. And they, you know, if you think about it now, for a lot of people, men and women, but particularly women, you're going to have sort of being long term unemployed and looking for a job without a job. And and again, we know that's all problematic. That's all been part of the wage inequality that we've seen in the past.

Erica D'Eramo 10:10

Yeah, I think, I guess it was Einstein that said, there's no force greater than compounding interest. And I always think about that when I think about five years out of the workforce and missing out on those raises for five years, and then you extrapolate that across an entire career. And what is that? What does that do to the income inequality and kind of the final tally number of what somebody makes? And so when it comes down to who is going to take a break to take care of the kids, and you're looking at the finances, I mean, historically, we're showing that that wage gap kind of comes into play and that decision making so the person who has the higher wages kind of stays in the workforce, and the person who has the lower wages, financially, it makes the best decision for them to do the primary caregiving. So it kind of exacerbates it. Yeah.

Sandy Leeds 10:56

Yeah, absolutely. That, it's, it's more than just your income, income compounding obviously, right. It's, it's just sort of that human capital in general, the relationships and you know, just everything else. All right, I think I think it's, it makes it really hard. But I grinning potential.

Erica D'Eramo 11:13

Yeah. So what do you think some solutions to this could be?

Sandy Leeds 11:18

Yeah, it's such, it's such, these are such hard issues. But, you know, I think there are a ton of things that that we think about, I mean, I think the first thing that jumps out at everyone, and you hear from everyone say, is childcare, we need better childcare. You know, that's right now, why so many people, men and women, but again, particularly women aren't able to work right now. That, you know, we've, we've got to make childcare cheaper, we've got to make it more accessible, we've got to make it more attractive for people to work in that industry, too, right. It's a, you know, notoriously low paying job. You know, we've got to, with childcare, I'd also say, it's such an opportunity to improve our Pre-K education, which is really lacking. And, you know, it's one of the differences in, in households and I, I remember, when I started studying a lot of these issues, if you had said to me, oh, "What's more important, going to a good, you know, kindergarten, or going to a good college?" I, my thought was, "Oh, you know, you want to go to an elite college." But, you know, all the research shows, it's early education that matters, it sets you on this path to for success. And, you know, some kids are read to, you know, all the time; they grow up in a household that, that values education, if they're not, this is an opportunity to, to get them reading and to, you know, to get them to see sort of the joy of books and things like that. So I think childcare is an obvious issue, we've got to make it more accessible, and more affordable. Um, you know, we've got to, we've got to figure out how to incentivize companies to, you know, to make it easier for women to stay in, in the workforce. We've got to change the culture of companies, you know, we, we have, one of the things that we see, again, and not a comment on whether this is right or wrong, but just the fact that it is, is that, you know, women are taking all this responsibility or bear all this responsibility for you know, sick parents, kids, whatever it is. And so the result is that in a lot of these industries, that are jobs that require face time, you know, when you think about law and banking, you you don't see as many women at senior levels. And so, you know, there has to be more flexibility, you know, we have to reduce the importance of that, that face time. You know, there are little cultural issues at work that um, you know, that we have to sort of accept these gender differences that... you know, and I think this is an ironic one, but but what I always think about is that, you know, when women make mistakes, they tend to apologize, you know, funny thing, and men don't. And the, you know, these are general observations and, and I think that what you find is that apologizing is seen as a sign of weakness, right, which is insane. I mean, you know, I certainly...

Erica D'Eramo 14:31

I know, (laughter)

Sandy Leeds 14:32

You know, I certainly hope I always apologize when I make a mistake. I you know, I certainly teach, you know, all my kids, you know, my my sons and my daughter to always apologize, you know, we need transparency and financial reports, we need to understand, um, you know, the numbers of, of, you know, gender equality and wages. Um, you know, maybe what we need are incentives, tax incentives for companies. You know, we inset production in the US, why would you not incent, equality? You know, I think customers have to care, right? I mean, it has to be something that, that we care about. And I think, I think in certain fields, clients do care, right? They, they want to, they would like to do at least see diversity, they would like to see that it's not all men, you know, we, we know, I was an asset management, and we know that men and women think differently, and, you know, you're going to understand some products better than I am, I'm going to understand some products better than you do, because I use them, or you use them, right, and you see the world differently. And, you know, we all know, I don't have the numbers, you know, at the forefront, but, you know, we all know, the amount of home purchases that are done by the woman in the house, like, you know, I, you know, I'm my wife, you know, takes care of, like buying so much of the stuff I you know, I'm involved in, in so little of it, in many ways. And so, it's so important to be thinking that way. We knew that asset management, but it's got to be, it's got to be valued. You know, we've got to figure out better ways of, of, you know, helping women to get to the top, even if their career is disrupted. And, you know, I think that, that, you know, one of the things, and we've seen this at, you know, my university is that, you know, we've got to do wage surveys and make sure that wages are fair, um, you know, even in, you know, sort of liberal universities, you will find that there is inequality and, you know, inequality certainly makes people leave the workforce, if, if I'm not being treated fairly, if I'm not being respected, I will leave, I think, you know, I think one of the, you know, most important things, though, like, for a really long term perspective, is, we've got to, we've got to make women and, and, really, what I should say, is girls aware of jobs that they can get, when they get older, and when they, you know, when they go to college, and or, you know, whether or not they go to college, and after college, it's, you know, one of the things that that we tried to do, I ran this MBA investment fund at Texas for about 13 years. And one of the big problems we had was, it was all men, it was all men, you know, we would get, we would get all these applications from men, we, you know, we sometimes, we got no applications from women, sometimes we'd get one or two. And, you know, part of it was that... so, so, a woman, I worked with, Laura Starks, who's unbelievable, but you know, just just incredible what she's done. But she and I started this, this little conference for all the MBA women, right when they arrived at school, and to show them that, look, this is a field that's dying, to have women in it, um, that it's not just investment banking, where you do have to work insane hours, which, you know, again, a lot of women had already decided, look, I want to have a family and a career and banking is not going to work. Asset Management, you're not a better stock picker by, you know, working till 11 o'clock at night. And so we tried to sort of show that and we bring in, you know, very successful women from the field. But what we realized, it was already too late, it was already too late, they had gotten here. And they had already decided, you know, I mean, it's hilarious to see that, it's like, you get here, and you see the guys going to finance and the women go into marketing. It's like, you gotta be kidding me. I mean, it's, it's like 40 years ago, you know, and so, so the point is, it's too late at that point. And so we've got to start much earlier, and just sort of convincing people that look, this is a career for you. And you know, you're gonna see I mean, you see these little changes, you know, there there were, you know, women referees in the in the Super Bowl, you know, there was a woman from Vanderbilt who, you know, kicked in a college football game, those things they really do matter, I think, but but I think just on a more practical matter, you just you got to see women money managers, clients want to see it, little girls need to see it. And I think, you know, that's sort of my long tirade, but that's, you know, that's, that's, I think, what you know, what will really change things.

Erica D'Eramo 19:33

Yeah, we say the same issues in engineering as well. By the time you get to university, your pipeline has already diminished so much, nevermind by the end of university, but you raised a couple of points that I, I think are really interesting, in the context of COVID. So the face time issue, I'm wondering, with us, being forced into remote working, how much we are, perhaps, challenging the concept that you have to be in the office meeting clients face to face for X number of hours per day in order to be successful in this role. Do you think there's any opportunity for change there? Perhaps like a small silver lining on the COVID experience?

Sandy Leeds 20:19

That's interesting. You know, one of the interesting things that I've seen, you've probably seen the statistics, too, is that people are working more, people are working more from home. And I don't know, if they're just reporting that they're working more, or if they're actually working more, but I found that interesting. But, you know, I think that I think that this whole remote working is is a double edged sword. I, you know, what I'm really afraid of is, you know, a lot of these places are saying, look, you can go work from anywhere, you know, there are lots of firms in San Francisco in particular, they're saying, go work for anywhere, we're gonna adjust your pay down, if you're not in San Francisco, but but you can go live at the beach, the mountains, whatever, whatever you want to do. That sounds great. I, my real fear is this, that you are now going to be sort of a cog in the wheel, that you are, you know, are we going to promote you to a high level? Or are you you know, Erica in the mountains that handles accounts receivable, and that's sort of what you're good for. And that scares me, for everyone who's who's working remote

Erica D'Eramo 21:22

Proximity bias? Yeah.

Sandy Leeds 21:24

Absolutely. I mean, I think that you know, who's gonna get it, who's gonna get promoted, I worry will be the people who are working in headquarters. So so that scares me. But I will tell you this. I think that the the real benefit, could be particularly for women. In that, I think, as we accept remote work, I think that fits in with the flexibility. And and I think that, that, the other thing that is really helpful is if you think about that research, that I was mentioning that one of the one of the big causes of wage inequality on a gender, from a gender perspective, is the fact that women often move because of their partner. And, and they are then looking for a job without having a job. And that's just brutal to your wages, especially if you if you're at a higher level, where it's really hard to get those wages. Well, if you can at least keep your job, then from there, you can search for a job with, with the fact that you are now still making good wages, you're in a completely different position. And so I think from that perspective, it's it's a real positive, I think, the flexibility that it may offer so that we don't lose people from from the labor force, and also the fact that it will help you negotiate on a much, much better basis, I think that those things are, are possibly going to be the silver lining from all this.

Erica D'Eramo 23:01

Yeah, I think addressing that wage gap is just, and the root causes of that wage gap are, are really key to the retention factor, because of the very decisions that families have to make, right. And it becomes a compounding issue of, you know, maybe the woman isn't making as much because of wage discrimination or not, I'm not advocating for herself enough or having to take, you know, a few years off to be a primary caregiver. And then when you move that that's how the decision is made about who is the leading spouse in the lagging spouse, and so it just compounds on itself. So yeah, really interesting thoughts.

Sandy Leeds 23:43

Absolutely. I would also say this. I mean, it seems to just from my reading of the research that you're right, that that that does drive that sort of, you know, who's the higher earning and who's low earning, and so who do we move for? But I think that the research also shows that it's more than that, that it can that sometimes the husband is the lower earning spouse, but that is whose job we move forward to. I mean, I mean, I, you know...

Erica D'Eramo 23:56

Hm, societal as well as

Sandy Leeds 24:10

I think they're all issues and yeah, no, but I do think that's changing. I do think

Erica D'Eramo 24:15

Yeah. Well, I, you mentioned a comment about what I interpret as inclusivity, right, of women apologizing and that being seen as weakness, just some of these ways that we are shaped by society that represent in the workforce. And to me, I think, we hear a lot of talk about diversity and the importance of diversity. And we know better decisions are made by teams that have diverse perspectives, which you mentioned, that the idea of inclusivity to me is so important if we're going to bring these people into the workforce, but then punish them for behaving in the way that they've been socialized their entire lives. So if we truly want diverse thinking, it has to be more than just statistics, right? It has to be do we welcome people who apologize? And do we welcome, you know, humility or team building or some of these things that we typically associate with female behaviors? are we celebrating that? Or are we? Are we just really celebrating typically male behaviors and wanting our, our statistics to look a little different?

Sandy Leeds 24:22

Right, I think you're absolutely right. And I and and i think that what we forget is that clients customers often want the traits that we do tend to see more in women than men, that a willingness to say, you know, I don't know everything I don't, I don't understand everything, the willingness to apologize for mistakes, empathy. You know, I was reading an article recently about a private wealth management firm that caters to women. And they basically were saying, you know, what, what women clients want is empathy. They want someone who understands what their situation is, and, and you know, that the women investors were more likely to want their money to be doing something that was good, it wasn't just about having the most money, and, you know, and, and so, you know, I think I think those are all important.

Erica D'Eramo 26:22

That's fascinating. I, one of my tests, when I, when I do approach a company, and they talk to me about their parental leave, and how it's an example of them helping women particularly, I always ask, to what extent the men in the company are taking that parental leave as well, if it's available to them. And it's fascinating to me, because men are not taking parental leave, even when it's available, even when it's paid and free. So that's, that tells me very clearly that there is a there is a price or there is a stigma around the leave itself. And so I always wonder, you know, it might be paid parental leave, but what is the non-monetary price that's being paid? Because even when we neutralize the monetary aspect, men who can take leave are not necessarily taking it?

Sandy Leeds 27:14

Absolutely. I mean, you know, it's, I think that in the older generation, right, and I put myself in, in there, and I'm not saying I think like this, but I think in the older generation that is seen, that's seen as soft, right? It's that that's not what you do to succeed. And I think that I, you know, I think I think that is changing over time. And you know, I think I actually am more encouraged about gender inequality than maybe other issues. But I that I think, I think it's moving in the right direction. But I think that, um, I think it is really tough to get guys to do that. And it's, and especially in some industries, rather than, than others, and, you know, I agree with you.

Erica D'Eramo 28:05

Yeah, so this is a message to all the men out there who have parental leave coming up, please take it because it helps reduce stigma for the women who really do want to take for parental leave as well. So it's better for everyone. And those are prime prime weeks and months with the new addition to your family.

Sandy Leeds 28:22

Erica, I'll make a quick parenting comment about that. And that is that we have, we have three kids, and you know, the the, the third one was adopted. And so basically, that meant that she was bottle fed. And she was really the only one that I got up with on a regular basis. I got up every night with her. And what a huge difference I think it made. I mean, it was great for me, but I just think it's great for the relationship. And it's one of the things I tell all my you know, students as far as my my guy, the male students is that it makes a huge difference to miss that, miss out on that sleep. It really pays off. So anyway, there's my little commercial, my parenting commercial. Thank you.

Erica D'Eramo 29:09

So beyond just some of the impacts to women working in the workforce, we've also seen impacts as far as you know, other underserved communities, communities of color, etc. They've been particularly hard hit by COVID from an economic perspective, from a health perspective aspect. What are your thoughts on that topic?

Sandy Leeds 29:33

Um, you're absolutely right. I mean, I think that, you know, we we've sort of all read about the problems of that, and you say people of color, that's such a broad category, really. But when we particularly when we think about people, you know, who, if you just think of lower income, living in crowded housing and work on the front lines and not having access to health care. You know, not having assets that are benefiting as home prices are increasing and stock prices are going up. And, you know, we're seeing problems with less access to technology, so kids aren't attending school, from lower income households. You know, all those things are, are huge. And, you know, I think that I think that it's not just the pandemic, I mean, these these things have been, you know, these been issues for forever. And so, you know, I think those are the things that we're, you know, we're trying to figure out of how do we do better? And, you know, I think that a lot of these are the same sort of solutions, that, you know, we need better Pre-K, you know, for schools, we need, we need to figure out how to stop kids from from dropping out. We, you know, I think one of the biggest things is, in most parts of this country, we really do fund schools with local taxes. So if you're in a poor area, there's going to be poor funding. And, you know, we're one of just a handful of developed nations that spend less educating our low income, lower income kids than our higher income kids. That's crazy, like, how do you expect to have mobility if that's if that's what we do? Yeah, we need to make it safe to go to school. And in a lot of lower income neighborhoods, that's a dangerous walk. And, you know, we've got to, we've got to figure that out, we got to figure out minimum wage. Right. I mean, you know, that's a big issue. Right now, the Congressional Budget Office just put out a report this week about that. And, you know, it's interesting, because we know that if you make workers more expensive, you will have a loss of some jobs, right, that ultimately, you'll find that people, places will find a way to automate and that kind of thing. But the reality is, like, if you look at it, and that's what you've sort of seen that the CBO report basically says, you know, the idea of raising minimum wage is dead, because, you know, we could lose a million jobs. You know, if you look at it, it also says that, you know, we'll move like, you know, 27, will, like 10 million people out of poverty and 17 million people are likely to be better off because they were making a little bit more than minimum wage, and it's going to be raised up. And it's like, everything has a trade off, you know, everything has a trade off. And, you know, one of the things, I'll just also say that, what we've seen is that a large percentage of the country has already raised the minimum wage, right? The federal minimum wage is $7.25. But many states and cities have said, "No, you've got to pay more." We haven't seen, we haven't seen that loss of employment. And so, you know, we've got it, we've got to figure that one out. And it is it's a difficult issue, because you have really high cost standard of living in you know, San Francisco, you've got low cost of living in Mississippi, and can you you know, can you raise it to $15. And maybe it needs to be adjusted another way. But, you know, I think that's a big issue. I think, I think you you've got to have people in power, who want to help force change, I think of David Swensen is a very famous money manager, he manages Yale's endowment, and he's sort of seen as the, the guru in that field. And, you know, basically, he, you know, sometime in the last few months, he basically said, "Look, when we farm out money to money managers, we're going to be looking for diversity, you know, we we need to promote this." You know, we need role models, just like, like we talked about with the the gender issues, and, you know, you've sort of talked about engineering, but, you know, we need to do a better job of early explaining careers, you know, I think we need to get people of color near the money, right, that that to help, you know, wealth accumulation. I saw some statistics about financial planners, the CFP designation for financial planners, which I don't have, but, but just sort of looking at it. And it's like, I saw that 23% of financial planners are women, of course, you know, women make up just over 50% of our population. Black CFPs, 1.7%, you know, Black Americans...

Erica D'Eramo 34:18

That's striking.

Sandy Leeds 34:19

Yeah, black Americans, 13%, right, of our population, Hispanic CFPs, two and a half percent. That's 18% of our population, right? I mean, you've got to, you know, you, that that's a huge thing. You got to promote this wealth accumulation. And you've got to be near people who understand it, and know how to do it. And so that's really important. You've got to promote, not just like hiring, but training and mentoring and retaining and how many people are getting to senior levels. You know, we again, we need more transparency on all these things, and we need to make sure that, one of the things I I think that has certainly improved is we're getting a lot of lower income kids a lot of kids of color into colleges, but then from there, are they getting the same opportunities? You know, just I just look in the business school, when when you grew up with a dad, who was a banker, maybe a mom, but more likely a dad, who was a banker, or you know, whatever, you know how to dress, right? You know how to act in these interviews. Those are the things that if you didn't come from that, how would you know? I mean, I can literally remember I mean, this is this sounds so funny. This is, you know, this sounds like Saturday Night Fever or something but, but which that's probably, you know, a reference way before your time, Erica, but but the bottom line is, like, I remember when I was a first year law student, and I was interviewing, and after my interview, I was in the same city as my older sister who's five years older, she was like a second mother to me. And we're sitting at dinner, and she looked across to me, I was in a suit. And she said, "Alright, you have got to wear an undershirt underneath your shirt." And I was like, Yeah, I didn't, know, it's like, you know, she was lucky, I didn't have like, my collar open with my gold chains. But the bottom line is, that that's what you need. Right? And, and, you know, like, I was fortunate, because I had her five years ahead. And, you know, she was the one who told me "Look, in college, you've got to take classes from these three teachers, because they're nationally known, you've got to excel in those classes, you know, get to know them, and have them write your letters of recommendation, because that's the only way you're going to get into a top law school." Right? Who knew? I would have never known that, right. I didn't want to know any teachers. You know, I just I was just getting through. And so, you know, we need that kind of mentoring. Especially because a lot of us, you know, didn't have it unless, unless we were lucky enough to have, you know, a sibling that went ahead of us. And, you know, and I think something like you said earlier, at the end of the day, people have to appreciate that, that diversity results in more creative solutions, that it attracts clients. You know, just just from a business perspective, you have to remember that people of color are going to be the majority by 2045. And, you know, I think it's just, it's a matter of, I think most people, it's, it's not a matter of wanting to discriminate, or anything like that, I think it's a matter that most of us just tend to like people who are just like us, you know, that they look like us, they act like us, they have the same backgrounds, like, you know, you meet someone, it's like, oh, this is my long lost brother. And you know, and that's a tough one that, you know, and I think, you know, you see places like the NFL trying to say no, you know, you've got to interview others, you know, people who don't look like your brother. And yeah, you know, it's tough. But I think that when you have these natural tendencies to do that, and I think we all do that.

Erica D'Eramo 38:08

Yeah, I mean, there are many books written on heuristics and how biases work, and they're there in order to help us survive as a species. And also, they don't necessarily drive the best decisions for a business. So that's why we need to put more systemic processes in place so that we're not just relying upon our own biases for who gets the promotion or who gets the informal mentoring. You're, because you're right, there are so many unspoken rules. And this is across anyone who's not been in the tent, you know, in the inside club. They don't necessarily know those unspoken rules, they don't necessarily know to wear the undershirt or who to talk to or which, which, you know, club they should join, to hobnob. So. Yeah. How are we going to address that in a more systemic, repeatable way, that's not reliant on our human brains, which are, you know, wired for survival, but not necessarily, for the best overall outcome.

Sandy Leeds 39:13

I tell you another story with that. And the point of it is, I think sometimes you have to say uncomfortable things. Like when I was at a, I was at a big law firm. And when we were recruiting, what we would do is we would take a recruit to dinner, and then the next day, we would interview them, and basically the young associate, which was me, and, you know, I was one of a billion of them, but but the young associate would go pick up the recruit and take them to dinner and we'd meet a partner, often a partner and their spouse there. And I, we had this recruit of a woman and the partner said to her at dinner, "Why did you go to this other school rather than the University of Texas?" We were Dallas firm. And she said, "You know, I didn't get into Texas." And, you know, she didn't realize it, but at that point the interview was done. She wasn't getting a job. And, you know, the correct answer was, you know, "This school had this program, you know, program x, and that really attracted me. And I thought I was gonna get this really unique experience," and that kind of thing. And, you know, when I drove her back to her hotel, I told her, I said, you know, I said, "Look," I said, "Please don't repeat this," because the reality was, I would have been in a lot of trouble for telling her this, I said, "You're not going to get a job, you know, the odds are against you, because no one wants to hear that you didn't get into Texas." And I said, "You know, you're gonna, you're gonna have so many opportunities at these big firms," because he or she was on Law Review and that kind of thing. And I said, you know, here's, here's how you need to answer this. And, and, you know, I really questioned the whole drive, whether I should say this to her or not, and I did. And it was funny, because she wrote me a long, long letter, you know, handwritten letter, several months later, and, and basically, we just like, "Thank you so much, I would have repeated that, you know, so many times," and she told me all the different offers she got? And, you know, I think so sometimes you have to say those uncomfortable things to help people. And you know, it's one things I was always happy that I did. But I think that's, you know, that I was sort of doing what my sister said to me, although my sister had no trouble saying anything uncomfortable.

Erica D'Eramo 41:37

Yeah, I think this is one of the things that I worry the most about with the chilling effect of some of the, the narrative that we're hearing after the #MeToo movement. I mean, we're still in the #MeToo movement, but some of the commentary that I've heard about how men are just, like pulling back, and not engaging, rather than just engaging respectfully, it's, it's like, oh, I'm just gonna not take any risks. And it deprives people, women of women, particularly women of color, just anyone who needs that guidance, that kind of clue into what the what the silent messages are. I feel like they're being deprived of that whenever we sort of say like, "Oh, the safest thing is to just not go to dinner with that person or not have a beer with that person." They're missing out on kind of that, that little like, "Hey, this is how this needs to go. You wouldn't have known that unless I could be really candid with you." So, yeah, yeah. I mean, I think we'll, we'll have to find our way through it, I just hope that people are still willing to have the openness, the brave conversations and to be corrected, sometimes, you know, it's I mean, it, it can be uncomfortable, and sometimes we step on a line, and sometimes we get corrected, and, and we have to not, like run away with our tail between our legs and just come back and, and keep engaging and keep growing. So yeah, it's it's tough, but I'm, so I'm curious if there's any, any other thoughts you have on, you know, some of the some of the more systematic things that, from a macroeconomics point of view, we should be looking at, just with COVID now, in our hindsight, as we go forward?

Sandy Leeds 43:35

Well, I mean I think that from from a macro perspective, I think we need to figure out how we can avoid this happening again, you know, I think that, you know, from what I'm reading, the, the most important thing you can do is shut everything down right away. And, you know, in other words, and, you know, this sounds terrible, but it's, you've got to shut down for a few weeks right away, you've got to, you've got to actually close the borders, you've got to do everything, it just has to, you've got to get rid of the virus, because once it gets out, it's done. And, you know, there was nothing we could do after sort of the initial decisions. And so, you know, I think I think we've got to figure this this one out, because it certainly could, could happen. Again, I think that's, you know, I think that's a really big, big issue. You know, I think I think that this, you know, what everyone says about COVID is that it's accelerated so many of the trends, you know, the, the colleges that are in trouble are now in more trouble now. You know, we're so much more ready to do a meeting by Zoom rather than travel across the country. Um, you know, I think that, that it also may be accelerating inequality, income inequality, and maybe better said wealth inequality where, you know, those of us with houses and stock portfolios are doing great and as That's

Erica D'Eramo 45:00

Assets are going up.

Sandy Leeds 45:02

You know, I said several times in my class last semester that we would feel a lot different about this if stocks were still down 35% like they were in March. But, you know, the reality is that when it's not where um, you know, I don't really feel the pain, I don't feel if I in fact, I'm spending a lot less money right now. And, you know, I think that's an issue. I think one of the big macro issues that we're facing right now is, I think that we're doing all the stimulus spending, all these people have, the majority of our savings are much higher, and we've got $1.6 trillion more savings than we would have otherwise, because of all the government transfers. I personally think that, you know, we need to be doing a better job of giving money to the people who need it, rather than just in general sending out checks, you know, if you're making $100,000, and you're still working, I'm not sure why we should be sending checks, we need to be able to support the unemployed for longer periods of time. And, you know, I think it's easy when we have a crisis to spend money, but you got to remember that this is going to mean that we do less infrastructure spending in the future things that are going to, you know, make it easier for people who live in a low income neighborhood to have transportation to jobs, right. I mean, like things that really matter, you know, rather than just sending money to people who already have jobs, you know, I think I think part of what we're doing. And, you know, it's and this is a particularly easy time to do this, to say this, because the Republicans did it. And now the Democrats are doing it. Like, I think I think those are some of the really big macro issues that that we're seeing.

Erica D'Eramo 46:48

Yeah, yeah, the infrastructure comment is an interesting one, like, what are we doing for the long term to make, to make to dull the impact perhaps, of future crises like this, and having some of that underlying infrastructure is probably critical. So I am curious, for on an individual level, what your advice would be on how, you know, we can maybe break down some of these barriers around the perceived boys club of investment and talking about the markets and talking about our stocks, because I still find it somewhat intimidating to be honest, even after an MBA and after working in mergers and acquisitions. I, it's not a conversation I readily will jump into for fear of kind of not saying the right thing or being seen as, you know, investment illiterate. And yet, if you asked me to talk about a compressor, I could talk for days. Yeah, so what can we do for individuals like me that want increased awareness vocabulary?

Sandy Leeds 48:04

Well, first, let me say that if you find someone who wants to talk about a compressor for several days, let let me know, so I can stay away. The, the, and the reality is, like, I don't even know what a compressor is. But the you know, I think that I tell you, this is gonna sound funny, but I think the best thing someone could do is, they could every so often watch CNBC, and when they watch CNBC, they should have a notebook. And they should write down what all the experts say. And then look at that notebook a month later, and you'll see that just as often as being right, they're wrong, that, you know, it's, it's like when you hear an expert tell you who's gonna win a game, you know, a football game or a basketball game, that kind of thing. You know, I trust that they know a lot more than I do, that they played the game and that kind of thing. They're, they're wrong just as often as they're right. And so, you know, I think that's the first thing to do to get confidence is to realize that none of us know what's going on. You know, it, no one would have told you on March 23rd, that we were going to have this huge rally, right and stocks and that's, that's when the market bottomed or how the financial crisis was gonna end or anything like that. So I think the first thing to realize is that the biggest difference is that some people can really speak with confidence and others are humble enough to realize that they don't know. And, you know, I think from there, that what you have to do is find something that you can read that doesn't take you know, 100 hours a week, and that you can just sort of keep building and I will tell you that this that like students would always say to me, what should "What should I be reading?" And one summer, you know, when I had a couple days, I took a couple days to do nothing but asked that question, like what should I tell the students to read because I grew up reading the Wall Street Journal. You know, it's just sort of what I was used to. But there's so much now there's so much online. And, you know, I think that number one you got, you got to find what you like. But I will say I'm a huge fan of Barron's, Barron's comes out once a week it comes out Saturday morning, it's it's dated Monday, um, it actually online comes out at about 10 o'clock, you know, I guess 10 o'clock, Eastern Time, nine o'clock Central roughly, I can sort of see the articles. And the reason I think that's, that's a great source is that the Wall Street Journal and Financial Times, all those places, they tell you what the news was, like what happened. Barron's tells you how the markets reacted to the news. And I think that's what we all want to learn. I think one of the other you know, one of the other best piece of advice that I give students who want to learn this stuff is: it's great to read read read, but a great thing to do is instead of reading so many articles, and not retaining that much, is outline a few articles. And when you do that, you sort of see how ideas fit together. And that's, that's sort of that really careful reading that helps you learn. And, you know, you're not going to know everything all at once. But it's just that, that inquiry that that drives you to, to a higher level. And you know, that that'd be my best advice. But I think also, um, you know, just to realize that most, no one knows what's going to happen, if any of us knew whatt was gonna happen, if any of us knew what was gonna happen to Bitcoin or Tesla, you know, or GameStop at one point, I mean, you know, we'd all be fabulously wealthy, and but every so often, some people get lucky, but it's hard to repeat. And so you sort of have to realize that they're, you know, they're just some basic concepts we have to know about diversification and investing. And, and, you know, the most important thing is to participate. And I tell you, one last thing it was study, I saw that, that basically, they asked people how knowledgeable they were about finance. And what you found was that a lot of people assess themselves as very knowledgeable. And you know that tends to be you know, that confidence tends to be a male trait. And what happens though, is that the people who are super confident, they invest, and I would argue that, even if they do dumb things, and they underperform the market by a significant amount, they're still usually earning a positive rate of return.

Erica D'Eramo 53:00

And this is confirmation bias.

Sandy Leeds 53:03

People who don't, don't invest, because they think they know nothing, they get zero. And so, you know, I think that you really have to think about the importance of that confidence and getting and getting into the game. Because there are simple things you can do with just to putting your money in index funds, having a really long term perspective. You know, I like even at my age, where my might term isn't really as long, and I'm risk averse, when I do is I think of my money and you know our money in our family as our kids money. And they have a really long time horizon. And so that lets me have that perspective that you don't really need much more than that.

Erica D'Eramo 53:46

Yeah, that's, that, and those are, that's accessible. I think a lot of people perceive that it takes wealth to learn about wealth, it takes kind of the rich dad or the, like I said, the, you know, Executive MBA experience or whatever. And, and actually, there are publications and there are ways that we can, there's TV, there's CNBC, and there are ways that we can just increase our own vocabulary, understanding and literacy around investments in the in the markets. So yeah, thank you so much for your thoughts on that. Are there are there any other kind of closing thoughts that you had or recommendations?

Sandy Leeds 54:31

I don't know that we have anything else I think, you know, these are these are such interesting issues. I you know, they're issues that I read about all the time and you know, want to learn more about and so so I appreciate you talking with me about these.

Erica D'Eramo 54:45

Well, one resource that you have not recommended but I will recommend is signing up for your kind of weekly markets review that is very informative, and just really helps me distill down the key things that I should be understanding from what's happening in, you know, in the week. So again that you can sign up for at sandyleeds.com, and, and any other kind of events or courses that you're hosting, I think you put that up there as well and inform folks, so it's a good resource.

Sandy Leeds 55:20

I do. Well thank you very much.

Erica D'Eramo 55:22

Yeah, thank you, Sandy. We appreciate it. And for Two Piers, you can find our information on any of the social media platforms. So we're on Facebook, we're on Twitter, Instagram, and LinkedIn and you can always find us at our website, which is twopiersconsulting.com.

Welcome to Season Two!

Transcript:

Erica D'Eramo 0:07

Hello, and welcome to the Two Piers podcast and our first episode of Season Two. I'm your host, Erica D'Eramo, and today's episode will be a short one. When we last spoke, it was spring of 2020, at the end of April, actually, and little did we know what the rest of 2020 had in store for us.

Our final episode of season one discussed stress in times of confinement, and for most of us 2020 still had plenty of challenges, isolation and turbulence left to it. The Summer of 2020 saw nationwide, in fact, international demonstrations, protesting the deaths of unarmed Black citizens at the hands of law enforcement and others. We learned the names of some of those lost such as George Floyd, Breonna Taylor, and Ahmaud Arbery, joining those that have already entered our societal awareness like Eric Garner, Michael Brown, Tamir Rice, Philando Castile, Trayvon Martin, Sandra Bland, and countless others. We saw awareness increasing about institutional racism and the American carceral system. We saw lots of companies declare that Black Lives Matter and commit to doing more. Less than a year later, after a summer of societal upheaval and promises of change, it's not entirely clear how much the system has actually improved. 2020 also saw the passing of Justice Ruth Bader Ginsburg, one of our icons, and a presidential election that felt like it lasted for months.

So what have we been doing in our corner of the world? And what are we up to now? 2020 was a year of change and growth for us as we redoubled our commitment to our mission of creating diverse and reflective workforces, based on equity and inclusion. While we're hopeful about the promises that many companies have made committing to lasting change, we're looking forward to seeing some of the follow through on their words, and we're here to help make it happen. While we dearly miss in-person events, such as conferences and workshops, we've actually enjoyed the flexibility that we've gained by transitioning many of our offerings to virtual platforms. Events that had previously been scheduled for Houston, and in-person events, such as the Women Offshore annual conference, or a recent corporate workshop that we held on Self Advocacy, were instead opened up to a global audience with attendees from all over the world who brought their own unique experiences and perspectives. And some of it has been a learning curve for sure, I can safely say that I can now facilitate several hours' worth of workshops via Zoom without putting anyone to sleep, but it has been a process.

So what do we have in store for you in Season Two? Well, we've got some great guests joining us to explore a wide range of topics such as the impacts of COVID-19 on underserved communities, or one chairman's story of diversity on the board. We even have an episode about blockchain for those of us that want to learn a little bit more. We're looking forward to sharing this next season with you. And as always, we invite you to reach out via our website at twopiersconsulting.com or via any of our social media channels like Facebook, Twitter, LinkedIn, or Instagram. Thank you for joining us, and we'll see you over at Episode Two.