Originally published in Nikkei Asia's “Henry Kravis: My Personal History"
Chapter 18
9/11 and later a global financial crisis
The 2000s were a profoundly challenging and turbulent time for the U.S., marked by a series of unprecedented crises that tested the resilience of individuals, corporations and the nation as a whole.
The decade began with a series of coordinated terrorist attacks on the U.S. on September 11, 2001.
I was in Paris on a business trip when I received an urgent message from my assistant in New York: "A plane has crashed into the World Trade Center."
As I turned on the television, the images of the burning towers and their eventual collapse filled my eyes with tears and my body with shock and disbelief. It reminded me of the day President John F. Kennedy was assassinated in 1963, a moment of profound national tragedy. For modern America, 9/11 was a devastating experience -- a direct attack on American soil that aimed to instill fear and disrupt the very fabric of our society and freedom.
Upon returning to the U.S., my immediate focus was on the well-being of our employees. The emotional toll was immense, with some losing friends and others facing the loneliness of empty apartments. George Roberts and I made it a priority to ensure that our employees and their families had access to mental health support. Unfortunately, providing such care has become a recurring necessity, particularly during crises like the global financial crisis and the COVID-19 pandemic. It has become clear that companies must have robust support systems in place to help employees navigate personal loss and global events.
Before 9/11, the financial markets were already on shaky ground due to the bursting of the dot-com bubble. In the late 1990s, simply having ".com" in a company's name could send its stock price soaring to irrational levels. When I visited Silicon Valley, I encountered entrepreneurs who believed that going public was a strategy in itself, driven by the allure of "eyeballs" -- a term used to describe the number of website visitors. This euphoria was short-lived as the bubble burst, leading to the collapse of numerous technology companies and exposing serious vulnerabilities in the market.
In 2002, further destabilization came with high-profile accounting scandals at companies. These cases of corporate fraud were not just financial disasters, they were a betrayal of investor trust and a blight on capitalism itself. The fallout led to new regulations designed to restore confidence in the financial markets, but the damage was already done.
Then came the global financial crisis, precipitated by the collapse of U.S. investment bank Lehman Brothers. No one had experienced anything like the 1929 stock market crash. "Focus on what you can control," co-founder George (Roberts) and I would reiterate within the walls of KKR.
Bankruptcies of banks and corporations rattled markets and investors. We had to focus on protecting our investments in our portfolio and keep our eyes open for new investment opportunities. We wanted to be ready when the markets stabilized and opened up. Indeed, banks and insurance companies came rushing in seeking capital.
Treasury Secretary Hank (Henry) Paulson, Federal Reserve Chairman Ben Bernanke and Tim (Timothy) Geithner, the president of the Federal Reserve Bank of New York were the right people in the right positions.
They did an incredible job of navigating uncharted waters by moving quickly on good ideas of what to do. As they had shown after the 9/11 terrorist attacks, the American people united in a crisis.
The lessons we learned from these crises have profoundly shaped our approach to business. Before the global financial crisis, we were primarily focused on individual companies, often neglecting broader geopolitical risks and macroeconomic factors. These events underscored the importance of integrating a more holistic view into our investment strategies. Understanding the larger macro-economic and geopolitical environment is now a fundamental part of our diligence and decision-making process.