The financial crisis of 2008-09 destroyed the careers of many of Wall Street’s top bankers. The CEOs of Citigroup, the Bank of America and Merrill Lynch, among many others, lost their jobs. Some even lost their companies, like the bosses of the investment banks Bear Stearns and Lehman Brothers.
But one top banker that not only survived but thrived, and indeed emerged with an institution even bigger and stronger, was Mr Dimon. Under his crisis-time leadership, JPMorgan Chase didn’t need to be bailed out. It also took over the rump businesses of Washington Mutual – once America’s largest savings and loan association – and Bear Stearns. Which makes apt the title of another biography of Mr Dimon: Last Man Standing. If bankers could be heroes, he would be one.
Eight years on from the crisis, he’s standing taller. Despite shed- ding businesses, including private equity, physical commodities and consumer banking outside the US, JPMorgan Chase is America’s largest bank and the world’s most valuable by market capitalisation (US$245.1 billion as of Oct 6).
How did he do it, and what lies ahead?
1. Stay focused.
In a biography of Dimon titled The House of Dimon, one of the stories about the chairman, president and CEO of JPMorgan Chase is that he walks around with a folded sheet of A4 paper in his pocket. “He writes something down. That gets done. He blocks it out,’’ said one of the bank’s former board members David Novak.
That tells you a bit about Dimon’s management style: Attention to detail. Always looking out for ways in which something can be improved. Makes sure he doesn’t forget it. And when it’s done, moves on, looking for the next thing.
Then there’s his attitude to communication. In our conversation at the top floor of the Shangrila Hotel we get onto the topic of good writing. “There’s this quote” he says. “I’m sorry I wrote you such a long letter – I didn’t have time to write a short one.’
“I tell that to people in management. Sometimes they’re talking and you don’t understand what they’re saying. So then I say: You know what? Stop talking. Put it on paper.”
2. The fear of failure
“In 1865 when John Pierpont Morgan was sent by his father Junius to the US, the US had started to industrialise and money from continental Europe was going into railroads, steel, coal and urbanisation. However, if there was a risk committee meeting then they may have said: ‘Hey, young JP, they have a civil war over there, who knows if they’re going to survive. The pollution is terrible – and look at what’s going on with the politics. So whatever you do, don’t take too much risk in the United States.’
“If he had taken that advice, we’d have missed the best 100 to 150 years ever. You have to be very, very careful when overreacting in business to risks. Of course, you can’t run a business that is engaged in risky activities by their nature and not keep a very close eye on it, but as I tell my board, if we’re wrong about something, this is the consequence. We may be wrong sometimes, but we’ll be okay.
“So, no matter what happens anywhere, JPMorgan Chase will survive. We don’t take risk in any one area that could make us fail – and we’ve operated like this well before stress testing was introduced. You can take the worst-case scenario in China and we’ll be fine. Don’t get me wrong, it will hurt – it might be a bad quarter or two, or a year – but we’ll be ok. In business we can’t just pull way back because we’re afraid of headwinds.”
3. The “threat” of fintech
He acknowledges that fintech is particularly good in some areas – reducing pain points for customers and providing cheaper solutions – though not always; for example, money transfers by PayPal are more expensive; PayPal scores on convenience, but not on economics. But banks are also doing a lot of what fintech companies do, he points out.
“Technology is a constant,” he says. “It’s been there my whole life – digitisation, computerisation, big data power, all of that. We have to use technology to do a better job for our clients – that’s our job.
“(Banks) use big data to do underwriting, so do we. They use the Internet to serve clients, so do we. We just added P2P (person-to-person) banking, real time. I can give you Robo-investing for free if you’re my client – there’s nothing magical about Robo-investing in itself. I can give you online trading for free. There are a lot of things we can do for our clients for free.
“So it’s not like we’re sitting ducks. We spend US$9 billion a year on technology. We have 40,000 technologists, including 15,000-20,000 programmers and engineers, who are building new things all the time. We study and analyse fintech companies and we’re willing to partner, collaborate or compete with them.”
4. Brexit and China
“Brexit poses some potential problems for us. People say ‘you’re threatening to move jobs.’ (Prior to the Brexit referendum in June, Mr Dimon warned of up to 4,000 job cuts in the UK if it voted to exit the European Union). We’re not threatening anything. We simply have to operate under the laws of the Eurozone and the laws are written in a certain way. So we may have to move people out. There’s plenty of uncertainty and many important decisions are not upto us, it’s upto them. But we’ll deal with that when we get there.
“As for China, the likely outcome in 20-30 years is that they will have a fully developed market economy in a fully developed nation, with 30-40 per cent of the top global 3,000 companies. That’s what we’re planning for. And yes, they’re going to have ups and downs like everybody else.”
Adapted from The Business Times.