The amazing thing: Paulson really didn’t have anyone else to turn to. Dimon was quite literally the only chief of a major bank to have properly prepared for the hundred-year storm that had hit Wall Street with such vengeance. Everyone had known that the capital base of the financial sector had been in desperate need of shoring up the capital base of the financial sector had been in desperate need of shoring up, but Jamie Dimon was alone among his peers in having actually done something instead of just talking about it. As a result, of all the actions taken by the government in the 15 months since the crisis had started, the only thing that had really worked was giving it to Jamie.
Much of the melodramatic coverage of Wall Street postcrisis has focused on its flaws — the hubris and the greed. Jamie Dimon’s story contains the opposite — the values of clarity, consistency, integrity, and courage. By sticking to them, Dimon has unquestionably become the dominant banking executive of his era. “Banking is a very good business if you don’t do anything dumb,” says Warren Buffett. “Morris Shapiro said long ago that there are more banks than bankers, and that’s fundamentally the problem. But Jamie is a banker from head to toe.”
Dinner at their house was really fun. It wasn’t just “Pass the potatoes.” Whatever the topic was that day, it was taken very seriously.
Imagine 80 or 90 people, most of them feeling insecure, that they were an admission mistake of some sort. And Jamie raises his hand and says, “You’ve made a mistake.” Everyone froze. We all thought he was committing suicide. But Jamie walked up to the board and changed a few things, and the next thing you know, the teacher said, “Oh my god, you’re right.” It was a confidence without fear.
Dimon was near the top of the class. “Part of his psyche is having a strong enough ego to be willing to say, ‘I want to know why you did better than me,’” says Burke. “To put himself out there like that.”
Every year, new students are told that half of their grade in each course will be based on class participation. The result: a room full of overanxious overachievers trying to interrupt one another, for fear of not being noticed by the professor. One the second day of class in his first year of business school, Dimon was speaking when another student began wildly waving a hand. Dimon turned toward the student and said, “Put your fucking hand down while I’m talking.” The student slumped down into his seat, and Dimon moved right on with what he was saying.
Dimon was intrigued. The potential riches aside, one major drawback of the investment banking business is psychological. At their core, investment bankers don’t actually build anything; they move other people’s money from hither to yon and grab a piece of it as it’s passing by. And here was Weil, offering an entree at the very top of American Express. Dimon accepted the offer — for two-thirds of what Goldman was offering.
“My goal in life was not to be an investment banker,” Dimon recalled. “I loved the concept of helping build a company … the whole painting. Something that was yours over a long period of time that you could be really proud of.”
Sandy Weill saw Jamie Dimon for what he was: an ambitious young man with an enormous capacity for hard work. “You can’t bluff your way into being a Baker Scholar,” he thought. And Jamie Dimon saw Sandy Weill for what he was: a minor legend on Wall Street who was offering the young man a ride in an express elevator to the executive suite.
You can’t control income. It varies based on conditions outside your control. But you can control expenses.
“Now they can’t get to me anymore,” Weill said, revealing, not for the first or the last time, the deep-seated insecurity that drove him to succeed.
They protected the Amex brand like you wouldn’t believe. The customer service was fabulous.
By that, Weill meant he would have meetings with people, then return to the office and offload any research about a prospective opportunity on Dimon, whose desk was littered with prospectuses and financial statements. Buried in the numbers for 12 to 14 hours a day, Dimon grew especially found of Warren Buffett’s missives out of his Omaha-based Berkshire Hathaway. He was smitten whenever anything came out from Berkshire Hathaway. He would say, “You have to read this! It’s the greatest annual report I’ve ever read! He’s brilliant!”
His second career had taken on a distinct whiff of failure by this point, and Jamie Dimon couldn’t help wondering what life might have been like had he taken that job offer at Goldman. “I was looking into the abyss a little bit, pretty much a kid who was not getting experience nor making money in the meantime. Of course I thought I might have made a mistake.”
Bob was — and is — the velvet fist. He’s also smart, but he didn’t wear it on his chest. And he taught me one of the most important things in my career, which is not to rest on your laurels. He would emphasize the negatives. But only when it came to the business. He always made it fun. I’ve learned a tremendous amount from him.
Jamie approached everything with total fury. Nothing was an idea that merely lingered. It was always 90 miles an hour. When I first met him, I used to call him “the lawn mower.” He’d cut it all off before realizing that he might have made it a little short. Then he’d say, “It’ll grow back. Let’s move on.”
And a third and final one: don’t go chasing the flavor or the month unless you actually know its ingredients. Just because other people are making money in something, don’t be tempted to follow suit unless you understand the complexities involved and how they profit from it.
Over the next 7 months, Dimon dug into Primerica’s businesses and financials until he was certain he understood very aspect of the exceedingly complex company. “Numbers leaped off the page and told Jamie whole stories. And there were a lot of stories to tell.”
Every single person involved on the Commercial Credit side would go on to give the 32-year-old Dimon primary credit for structuring the transition. Although he eventually passed certain tasks on to others, he handled all the gory details, from determining write-downs and purchase accounting adjustments to formulating the financial projections to convincing investors and rating agencies that the newly merged Primerica would be strong going concern.
That’s the most perceptive and sophisticated and clear presentation I have ever seen.
In different times, and with a different seller, the business might have fetched an eight-figure price. But Weill, smelling desperation, offered a paltry $4M for 16 branch offices and about 500 brokers.
The man was extremely sharp. He could do five sets of computations in his head. But given his mandate from the get-go, he had few interpersonal skills. He never had to learn them. Most of us have to go through the ranks and learn some humility, but he never had to. He was dictating to everyone from day one.
Those who worked with Dimon soon became the most desirable people in the organization, as they would have been schooled in discipline and direction. “If they survived with Jamie, they could survive with you.”
With the executive transition, Weill had a revelation. If there’s something that almost all new CEOs like to do, it’s to dump some underperforming division right from the get-go, allowing them to start their tenure with a clean slate and solidly performing businesses.
He was shocked by the capabilities of his longtime friend. If Dimon had 10 meetings a day with 6 people at each meeting coming in to brief him on topics x, y, or z, Paul watched in awe as it became painfully clear that Dimon invariably knew more about every topic than anyone else in the room, including those presenting.
After initial success, Greenhill’s team proved largely incapable of luring a meaningful number of their old clients from Morgan Stanley. Investment banking is all about personal relationships, and the idea that they’d raid not only Morgan Stanley’s personnel but also its client list had been a large reason for hiring Greenhill in the first place.
It was during this period in Dimon’s career that the seeds of an eventual falling-out with Weill were planted. As much as Weill was willing to let Dimon do behind the scenes, he was not prepared to share the limelight.
Still, Dimon initially failed to recognize the shift in his boss’s perspective. “It was still a little bit of a kid,” he recalls.
If he’d been more inclined to pay better attention, Dimon would have noticed growing angst emanating from the CEO’s office. Weill came to believe that Dimon was deliberately keeping him out of the loop at Smith Barney during this time. On one occasion, Dimon said in front of the room, “You’re making a mistake. You, Sandy.” What some had admired as youthful self-confidence now took on a note of arrogance. “He’d always respected his own intellect,” one former colleague recalls, “and reasonably so. But this was something else entirely.”
And so two large egos collided with full force. Weill later wrote of his surprise that his “junior partner” had “somehow come to see himself as my equal.” Just to make things painfully clear that day in Puerto Rico, he added one finally patronizing chastisement for the younger man: “You need to behave. If you do, all of this can be yours one day.”
Others thought Dimon had placed inordinate importance on his own greatest strengths — analysis of financials — and overlooked the fact that Bibliowicz was indeed a marketing talent.
It is amazing that when two men joined forces in a display of empire building for the ages, their relationship started to come undone over nepotism. What’s more amazing is that each man had a critical shortcoming that did not allow him to find a way out of the situation. Weill could be so single-minded about his own needs and wishes that he failed to consider the position he put others in. And Dimon, ever the moralist, could not bring himself to bend in one instance that nearly anyone would have given him a pass on.
“Jamie was demanding. He was relentless,” remembers his assistant Sweeney. “And he always wanted the one thing I hadn’t done. I’d walk in there with my pad of paper and he’d given me 10 things to do. I’d go back to my desk. An hour later, he’d call me and I’d have already done 9 of them. And he’d ask for the 10th. And he pounded and pounded and pounded until you got it done. By the third time he asked for something, you better have been at a funeral, because that was the only acceptable excuse for not having it finished.”
Dimon utilized management tactics similar to those Weill employed, including shifting the most promising underlings around to ensure the broadest learning experience, even if it was not entirely clear to a lawyer such as Cavanagh why, at 26 years old, he should be mired in the budgeting process for the retail brokerage system at Smith Barney when most of his friends could already lay claim to much more obvious career paths.
Famous for his intentionally incomprehensible testimony in front of Congress — he was legendary for saying nothing in a complicated way — he was nevertheless widely trusted for his market acumen.
Awareness of any potential downside was one of Dimon’s most ingrained character traits, and although he eventually came around to the merits of the deal, he obsessed over its risks much more than Weill. This is not to say that Dimon was risk averse. But he was a numbers man to the core, and he needed to able to calculate as best he could what the risk was before he could be comfortable taking it on.
Sandy spent $9B to get a piece of paper from Warren Buffett saying what a great investor he was. He was running around showing it to people like a kid in a candy store.
And that’s when Weill lobbed bomb number two. In mid-March, while the two men went over details of the deal at Weill’s apartment, he turned to his longtime lieutenant and said, “Jamie, you’re not going to be on the new board.”
How much different history might have been had Sandy Weill done what Dimon fully expected him to — assure him that the job would soon be his. But Weill was not yet ready to think past his own career. He was living in the present, and he was sick to death of Dimon’s thinking they were equals. Dimon was his junior partner. And he didn’t need a junior partner on the board when he had an equal one in John Reed.
Dimon was dumbstruck. “Sandy, I’ve been building this company for 15 years with you — please don’t do that to me.”
“I’ve only met two men who can carry a bank balances sheet in their head: John Reed and Jamie Dimon.” Dimon also felt he had something in common with Reed. “He could be a cold-blooded analytic, and so could I.”
Deep down, Dimon knew things had taken a very wrong turn. Despite Weill’s trying to sweet-talk him into believing that the title of president meant he was well positioned, Dimon saw the empty title for what it was. “I don’t have a job, I’m not on the board, but you’re going to give me a title?”
After repeatedly proving himself to be a man with judgment and intellect beyond his years, Dimon was shown the door for behaving like a petulant teenager. Not that it was entirely his fault. In the immediate aftermath of the merger of City and Travelers, Weill openly tested his protege, as if all their years of working closely together had meant nothing. Perhaps if Dimon had been able to consider this a momentary phase in their relationship — as perhaps it was — he might have been able to restrain his worst instincts. But that’s not what happened.
A less charitable interpretation is that Weill, the master manipulator, had used Reed as a pawn in his endgame with Jamie Dimon. For all his intelligence and drive, Dimon was also predictable. Push the right button — such as giving him yet another co-this or co-that — and he would get angry. For Dimon, the co-CEO positions were an annoyance not just because he had to share power, but also because he believed them to be an inefficient way to manage. Push another button — like Weill’s asking his executives to name their successors — and you have a man ready to crack. And crack he did.
In his autobiography, Weill tries to argue that Dimon was never his heir apparent. Most knowledgeable sources consider that revisionist history. “He should have been a Soviet. You sit there and go, ‘What? Are you kidding?’ But Sandy says some things enough times that he actually starts to believe them.”
Jamie had annoyed me to no end over the last 3 years, and our relationship had gotten so dysfunctional that it plainly was hurting others in our company. Still, I felt sick given all that we had accomplished together. Jamie had wanted me to treat him as an equal partner, a desire for recognition that I understood but was unwilling to satisfy. I was nearly 25 years his senior and his demand for equal treatment was disproportionate with what he deserved.
“I want this job! I want that job!” Everybody was thinking, “Jesus Christ, man, we have just done this huge merger and all you are focused on is you?”
In the process, Weill lost the last person who worked for him who stood up to him, costs be damned. “I always think of Jamie at Citigroup,” recalls Bob Willumstad, “as being the guy who would say what everyone else was thinking.”
Weill also showed Dimon the benefit of taking the long view. As Weill showed in both phases of his career, when you worked with him it was almost impossible to view something as a stopping point. He was always thinking about what things could be. “Sandy gave him that whole concept of looking out and being opportunistic and knowing where you’re going,” recalls Joe Wright. Dimon, too, remains in awe of Weill’s audacity. “To do the deals that we did?” he recalls. “I look back at those and think, ‘God, Sandy, you had guts.’”
Weill also impressed upon Dimon the importance of getting your entire house in order, not just the shopwindow that customer see.
Buy businesses with significant cash flow, preferably at a discount, prune their expenses without sacrificing revenues, and then use that additional cash flow from those cuts to buy more companies until you end up owning Citigroup.
Jamie is the smartest man I ever worked with. But Sandy had the best instincts. I guess that’s why they worked so well together. Jamie is really about precision and knowing everything about everything. Sandy is much more conceptual, about the big picture.
Sandy Weill needs to be liked. Jamie Dimon doesn’t really care if you like him or not. Dimon will ask one or two employees to join him for drinks. Weill asks 300 people to his farm to pick apples.
Throughout his career, Sandy could engage people in a way that was unique and made them feel good about themselves and what they were doing. But Jamie has a different leadership approach, which is based more on his abilities, fairness, and directness. Sandy’s a smart guy, but his success was often based more on how he related to people.
Dimon was rich enough never to work another day in his life, but at 42, he was certainly not contemplating retirement. This was a man who, over the course of his 16 years following business school, had spent about 75 hours a week at work.
The firing sobered Dimon, taking off the frenetic, overachiever’s treadmill he’d been on since college. It was a position very similar to Weill’s after his own ouster. “It was a strange time for him. He had been running nonstop his whole working life.”
I never saw it coming. I thought one day we’d have a drink and work it out.
“Andy is one of the truly exceptional businessmen I ever met,” recalls Dimon. “He’s in a category with Jack Welch and Warren Buffett. Andy was talking about some of the stuff Jack did at GE way before Jack did it. Stuff like training people, about discipline, about honesty.”
Son, it’s not just whether you tell the truth. It’s whether you even shave the truth.
Ever the disciplined goal-setter, Dimon made a list of things he wanted to do during his time off. One thing he did was read what he wanted to — not what he had to read for work — something he’d had little time for in the past decade. He began to do so voraciously, knocking down about two books a week, primarily history. “History is humbling and inspiring. It put you in your place.” He read biographies of Caesar, Alexander, Napoleon, Nelson Mandela, and 10 US presidents, including Washington and Lincoln.
He admires Grant particularly for the lucidity of the man’s thinking. “They say his success on the battlefield boiled down to the sheer clarity of his orders.”
Dimon surprised not a few friends during this time with the thoughtfulness of his deliberations. Here he was, a lifelong workaholic, taking more time than anyone expected to plot out how best to spend the next decade or so of his career. Judy Dimon insists that her husband is not a workaholic. “He’s just one of the most efficient men alive.” He might be one of the most thorough as well. He would not take a job until he had reviewed all his options.
Dimon made another list during his time off: potential occupations. It included teaching, politics, investing, sitting on boards, and retiring. And banking.
Much of the credit for the thaw in relations was Dimon’s. Even though he has always maintained that Weill did the wrong thing, he chose to swallow his pride and apologize to the man who fired him, a man, it should be pointed out, who could not bring himself to express an apology in return.
He had come to town with a list in his pocket of what he would do in his first 100 days on the job, much of it revolving around vigorous cost-cutting that included write-downs and layoffs. At this point, the board members understood that they needed a leader willing to do the deferred dirty work of integrating all their acquisitions, and Dimon blew them away with his focus and attention to detail.
An extremely demanding boss, white-hot intelligence, did not suffer fools gladly, a strong leader who wanted a strong team.
The question they put to Dimon was simple. What other major US bank would be ready to bring in an outside CEO within the next 5 years? Citigroup was obviously off the list, and there didn’t seem to be imminent job openings at the top of Bank of America, Wachovia, or Wells Fargo. If Dimon wanted back in the game, Bank One was his best shot.
Despite the chaos in 2008 and 2009, Dimon still calls 2000 the toughest year he’s ever had professionally, by a wide margin. As the new boss with a reputation for aggressive cost-cutting techniques — read: layoffs — he was a man people hesitated to be around, for fear of slipping up. “I was pretty much alone that whole year. Working seven days a week.”
Previously, all branch managers had received bonuses ranging from 5% to 12% of their salary. Henceforth, the top 10% of branch managers were to receive a bonus equal to 100% of their salary; the next 10% received 50%; the next 10% received 30%; and the bottom 30% would receive no bonus at all. This was an old trick Dimon had learned from Weill in his days at Commercial Credit. He also made a number of what he called “battlefield promotions” during the first year, promoting people before he would have in more normal circumstances because he felt he had no choice.
When he issued a diktat that the banks stay open for longer hours, he was told that the move would kill morale. “Tough,” he replied, “this is what we do.” His new colleagues came to realize that although Dimon was sincere about open and honest debate, he was also unafraid to draw it to a close and make an unpopular decision. “You need people who will argue and fight but at one point, say, we’re going to take the hill. Some debates are chicken or steak. It becomes time to eat.”
He assured executives that getting rid of these entitlements would eventually make them all better off when the company started to do well again. It was a brave move, one that risked more defections than Dimon could handle in the short term. But it had the desired effect of disrupting the company’s complacent culture. “Leaders emerged,” Dimon said in late 2008. “Although some people hate your guts for the rest of your life.” He also restructured the bank’s options so that they expired in 6 years instead of 10 — a classic Dimon move. If you wanted to be part of his team, the message went, you needed to be invested in the here and now.
Problems don’t age well; denying or hiding them guarantees that they will get worse.
Bureaucracy, silos, and politics are the bane of large corporations; they must be combated vigorously and continually.
“Jamie writes a great letter,” says Buffett. “He writes it like he would write it to me if I owned 100 percent of the bank. It’s a very sensible and literate letter from a manager to his owners. You can’t find many like that. You particularly don’t find them in financial services.”
He had always been highly regarded for his intelligence and drive, and had served as CEO of one business or another at Travelers, but he had always been the number two person. Sandy was the one going out and spending time with other CEOs. Sandy was the one coming up with the strategic vision. Of course, he would throw 10 ideas against the wall and Jamie would be the one to tell him which ones were smart. But that’s very different from doing it all yourself. At Bank One, Dimon learned what it is to be a real boss.
People expected me to come in and start doing deals. But that’s not me. I’m different. You can’t start a war until you have an army, and we couldn’t even run our own business well. I said, “No, we’re going to get this thing fixed and from that strength, if something makes sense, we’ll do it.” You have to earn the right to do a merger.
Dimon has consistently referred to his first few years at Bank One as “boot camp,” and he meant what he said. His army needed to get its basic skills in order before it would be ready to set out on some sort of conquest.
Given the rot that was already being revealed within the far-flung Citi empire, it no longer seemed like an enviable position, despite Dimon’s known reputation as a “mess manager,” a boss who actually liked to clean up other people’s mistakes.
This tendency is known as “managing expectations” on Wall Street, and Dimon showed at Bank One that he knew how not to disappoint people. Having promised $2.2B in annual cost savings at Bank One, he delivered $3B by the time he was done.
I’ve seen too many boards or management when their own businesses are doing poorly, they start to bullshit about M&A. People just fall into that. So we separate it. We review our businesses and what we’re doing well organically. That kind of growth will get you a higher value for your shareholders, by the way. M&A is risky and tough, so the discipline is different. You really need to think about the landscape, to ask yourself what’s changing.
Dimon admitted a slight hesitation. “Two or three times, I felt deep anxiety about this deal,” he said. “It’s terrifying. Do you push the button or not? If you don’t, and this opportunity is gone when you want it later, you’ve made a horrible mistake. So I pushed the button.”
Mergers take their toll on institutions, and if people aren’t happy, they will leave, raise hell, or rebel, and Dimon seemed to understand that. “A merger exposes how good a leader is very quickly,” recall Harrison. “And Jamie got his hands around things very quickly.”
Two things surprised Dimon out of the gate. The first was a practical issue. The company’s technologies were far less integrated than he’d thought. The second was about the enduring nature of a powerful brand. “We could get off a plane anywhere in the world and the PM would want to see us,” he recalls. I new the name was good, but I didn’t know how good that calling card still was.” (The bank, for example, has been doing business with Saudi Arabia’s national oil company for 70 years.)
As always, Dimon stamped out internal politics wherever he could. In early executive meetings at JPMorgan Chase, a few people thought it in their best interests to try to pull him aside afterward and whisper their thoughts about this person or that one. He quickly made it clear that he was uninterested in such grade-school tactics. “If you can’t say it in the room, don’t say it at all,” he told more than a few executives. (He later elaborated to Fortune on his irritation with obfuscation. “In a big company, it’s easy for people to b.s. you. A lot of them have been practicing for decades.”)
Never one to lack swagger, Steve Black had told anyone who would listen after the merger between JP Morgan and Chase that he was going to build world-class capabilities in parts of the business where they were deficient.
If there’s anything Dimon hates, it’s unallocated expenses. Sitting down with divisional managers in the summer of 2004, he explained that the profit and loss statements would need to be redone so that the results would better reflect the reality of their business. “OK, but we can’t do it for the 2005 budget, so we’ll do it for the 2006 budget,” one executive suggested. “Oh no. We’re doing to do it right now. We’re going to get in this room and do it ourselves.”
These grandiose plans aside, the company still struggled to deliver on its bottom line. In the 3rd quarter, with earnings down 13%, Dimon didn’t try to sugarcoat the situation. “These are terrible results. We don’t feel good about it.” That left little for anyone else to say. If you admit your mistakes, Dimon’s theory went, you save yourself the hassle of having your critics point them out to you.
Dimon’s new colleagues had by now experienced his insatiable appetite for detail — there were no numbers or statistics that he wasn’t interested in, whether it was the number of tickets bought for a Billy Joel concert or the number of phone calls people made each day. “Sometimes, all that matters are the details. Sometimes details will sink you. CEOs should drill down.” By drilling down, Dimon meant sitting down and spending three hours or more every month going through 50-page books prepared for him by every division head, with the numbers from the prior month. “One thing Jamie brought with him to the company is the commitment to understanding a basic fact. And that’s that every single risk you’re taking can be broken down to its smallest components and therefore be better understood. All it takes is time and effort.”
What mattered to Dimon was that people got paid for performance and that the right people were doing the right jobs. That’s about it. “That’s why Americans love sports. There’s a purity in it — you win or you lose — but in corporate America when you strike out, there’s always some excuse. Leaders should step down when a company does poorly, not be given increased pay.”
As many years as he’d been in the business, Dimon had not yet grown bored with old-fashioned relentlessness; he was like a football coach content to stick to a dominating ground game. “He just pounds through and pounds through and pounds through, as opposed to someone who tries really clever plays.”
In recognition of the power of technology to position the bank for the future, Dimon named the CIO to the firm’s 15-member operating committee. “Technology is to us what manufacturing is to GM,” he told a reporter, explaining that good information systems are a “moat” that protects a business from rivals.
He stressed the need for “honesty,” “integrity and honor,” and doing “the right thing, not necessarily the easy or expedient thing.”
Dimon remained preoccupied with preparing the bank for a time when the froth came to an end. “You don’t run a business hoping you don’t have a recession,” he liked to say; and he spent countless hours on scenario planning, with an emphasis on bear-market possibilities. He remade the company’s information systems so that he could get the reports he needed when he needed them. This allowed him to make rapid strategic decisions, and also gave him another way to hold his people accountable.
We think the business should be prepared for adverse times. In fact, we think if you’re strong in adverse times that puts you in the position where you actually can do more interesting things, either hire people or buy other companies that are having a tough time.
Run your business knowing it might be sunny, it might be stormy, or in fact it might be a hurricane. And be honest about how bad a hurricane might be.
As often occurs with Wall Street alchemy, a good idea started to be misused — and a product initially devised to insulate against risk soon morphed into a device that actually concentrated dangers.
“I’d love to say we saw what was coming,” Winters later said, referring to the housing collapse that crushed the value of these securities. “But that would be a lie. We just couldn’t see the return in them.”
The idea that Wall Street functioned merely as intermediary was officially out the window. Wall Street firms were acting like drug dealers who forgot the cardinal rule of the trade: don’t start taking the junk yourself.
The source of the trouble seemed so small, so laughably remote, as to be insignificant. But isn’t that always the way?
Investment bankers were well compensated for ignoring the risks. Huge bonuses were paid from CDO deals, even though large piece of these deals ended up sitting on the companies’ own balance sheets. It was a salesman’s nirvana. If no one wanted to buy the product you created, your own company would buy it from you, paying full commission.
One of the toughest jobs of the CEO is to look at all the stupid stuff other people are doing and to not do them. Maybe you’re the stupid one.
All the great CEOs that I’ve seen have this characteristic. They spend a lot of time at 50,000 feet, they send significant time — although hopefully not too much — on the ground, and not much time in between.
The company’s investment bank reported a 0.1% decline in profits in 2006, a year in which the likes of Goldman Sachs, Morgan Stanley, and Merrill Lynch reporte 76%, 61%, and 44% increases in profit, respectively. “We entered 2007 thinking we were slipping.”
Jamie Dimon, it almost goes without saying, is not the kind of man who finds all babies cute. “I never noticed babies until I had my own, and then I suddenly realized they were all around me. But once mine weren’t babies anymore, I stopped noticing everybody else’s.” Nor are all companies — or countries — created equal. He has a special spot in his heart for his own family, his own company, and his own country. He doesn’t wish harm on anyone, but supplicants without a direct connection to hims are best served by looking elsewhere for help.
Friends and colleagues noticed that Dimon basically stopped making an effort to remain friendly with Weill after the book’s release. While always respectful, he just doesn’t go out of his way anymore.
Although a few dozen people spoke in tribute to Weill’s lengthy career, Dimon was not among them. “You know what they say about cars that have been in a wreck?” muses one executive about the relationship between two men. “You can send them to the body shop, but they’re never going to be the same.”
Bear was full of what its former CEO Alan Greenberg called PSDs — those who were poor, were smart, and had a desire to get rich. Forget appearances; making money for the firm was all that mattered. Do that, and you were handed the keys to the kingdom.
This is the lesson of leverage. If you pay only $1 for $100 worth of securities while borrowing the other $99, and those securities lose $5 in value, you’re not only out of your original $1. You now owe $4 just to get back to breakeven. Multiply those numbers by several hundred million, and you can appreciate the pickle Cioffi found himself in.
The name of the company — “Everquest” — was classic Wall Street, both portentous and meaningless.
The Latin root of “credit” is credere, “to believe.” Belief had bene obliterated.
What comes next is common to all historical financial panics. Individuals who act rationally (i.e., they try to sell, in order to protect their own interests) have an aggregate effect that is ultimately irrational (i.e., with all sellers and no buyers, assets that do have an inherent value are nevertheless deemed worthless). In other words, if there’s no price at which someone will take something off your hands, its value is necessarily zero. And if you’re a borrower who needs to sell something to pay back your debts, you’re in deep trouble.
Credit is the air that financial markets breathe, and when the air is poisoned, there’s no place to hide.
Citigroup’s former CEO Chuck Prince will go down in the annals of business as the guy who drove the once proud bank straight into a wall.
He’s smart enough to know that Citigroup has embarrassed themselves enough and he doesn’t need to gloat.
I advise other companies’ CEOs, don’t fall into the trap where you go, “Where’s the growth? Where’s the growth?” They feel a tremendous pressure to grow. Well, sometimes you can’t grow. Sometimes you don’t want to grow. In certain businesses, growth means you either take on bad clients, excess risk, or too much leverage. Wall Street firms felt this pressure to grow, and they succumbed to it.
Warren Buffett thinks Dimon separated himself from the pack by relying on his own judgment and not becoming slave to the software that tried to simplify all of banking into a mathematical equation. “Too many people overemphasize the power of these statistical models. But not Jamie. The CEO of any of these firms has to be the chief risk officer. Any big institution has a lot of risks that can be modeled reasonably well. Somebody at the top has to be thinking about that stuff every day. You have to have somebody that’s got a real fear in them of what can happen in markets. They have to know financial history. You can’t evaluate risk in sigmas.”
Instead of presenting a crisp request — “Here’s what we need, JP Morgan: x billion dollars” — Bear’s executive tossed out numbers ranging anywhere from $5B to $20B in the span of a single conversation. “The mere fact that it was that wide of a range left us thinking that they really didn’t know how bad it was going to be.”
This approach was Dimonology: dwell on the downside of a potential deal before entertaining the upside. “What we read in the papers was old news to us. He raised every problem that could occur.”
Whatever Black and Dimon said, it certainly seemed like a tactical move at the time. And when Geithner called back a few minutes later and urged Dimon to keep trying to get a deal done, he was essentially signaling to Dimon that he now had negotiating leverage over both Bear Stearns and the Fed, which both had their backs to the wall.
The (optimistic) view is that this was JP’s plan all along: bid, pull the bid, string it out to the last minute to force the Fed to take all the risk and then steal us cheap and risk free.
Dimon gave a polished performance in front of the Senate, without a hint of the cockiness that he usually can’t hide when he is asked obvious questions. Watching the testimony on TV, Mike Ingrisani, his high school English teacher, thought to himself, “No question that’s the Jamie I knew, albeit refined to the nth degree.”
It is his most valuable possession; it is the result of years of faith and honorable dealing and, while it may be quickly lost, once lost cannot be restored for a long time, if ever.
Dick, no one is going to help you keep Lehman Brothers in business just to be good guys. They’re going to help you because it’s in their own self-interest. For that to happen, your shareholders are going to have to pay the ultimate price.
Shortly after midnight, the 158-year-old Lehman — which had been founded as a dry goods store and cotton trader in Alabama — filed for bankruptcy.
They didn’t go bankrupt because of us. They went bankrupt because they did nothing for six months, and then did a fucked-up conference call. And then they try to blame David Einhorn, the Fed, and us. It’s pathetic.
We’re going to succeed because over an extended period of time, we built a good company, and not because one of our many competitors runs into a lamppost and is critically insured.
It is not the critic who counts: not the man who points out how the strong man stumbles or where the doer of deeds could have done better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes up short again and again, because there is no effort without error or shortcoming, but who knows the great enthusiasms, the great devotions, who spends himself for a worthy cause; who, at the best, knows, in the end, the triumph of high achievement, and who, at the worst, if he fails, at least he fails while daring greatly, so that his place shall never be with those cold and timid souls who knew neither victory nor defeat.
Jamie learned that from Sandy. When you decide you want to raise money, you don’t wait; you get it done. Jamie will think and think and think and make sure he’s doing the right thing, but once he wants to do it, he wants it done yesterday.
I’m making a bet that we won’t have a depression in this country. If we do have one, the deal will have been a mistake. But that’s our job: to make those determinations and figure out what we think is right. It’s just like buying a new house. You may be wrong with your timing, and the price might go down. But what are you going to do? Spend your whole life worrying about being wrong? The price had a huge margin for error in it, but that doesn’t mean we won’t be wrong. I don’t know what’s going to happen to this economy.
JPMorgan Chase has a significant security apparatus, including former Secret Service professionals, CIA veterans, and all manner of hacker types, to help protect its $2T in assets.
Jamie Dimon learned from Sandy Weill that although playing people off against each other might actually work to your own advantage, what it also does is create a dysfunctional environment that can destroy a company. He often talks of “mature” companies — the likes of Wal-Mart and Johnson & Johnson — and how it is no surprise that a lack of corporate intrigue tends to go hand in hand with long-term success.
Wall Street is a pressure cooker, and when the pressure started to get intense in 2007, the more insecure of its chief executives started firing everybody around them to make sure outsiders knew where they should place the blame. Such a strategy does enhance one’s short-term job security, but the problem with it is that when turnover gets too high, no one really knows what’s going on anymore.
Shame on us. This is our third energy crisis. And we still don’t have the fortitude as a nation to do anything about it. We are going to earn a fourth. This is not just a financial issue. This is a geopolitical issue. We are arming people who want to kill us. That’s what we’re doing. What the hell is wrong with us? I find that offensive, because our kids are going to pay for that.
When talking of the most important things in his life, he once said, “My family, humanity, my country, and the world. And way down here is JP Morgan.”
Even though Dimon, as a college student, wrote that admiring letter to Milton Friedman, the king of the laissez-faire economists, he also values the lessons of John Maynard Keynes and Keynes’s argument in favor of adult supervision in the markets.
But I also think talent will always be well paid, and I don’t think it’s fair to lump us all together. I’m also philosophically opposed to the government being involved in compensation. I think it’s ridiculous. Why don’t they regulate actors and sports stars and small businesses and doctors and entrepreneurs? Why don’t they just tell everyone what we can pay people?
Jamie has outgrown the comparisons with Sandy Weill. As we look back, Sandy Weill apparently cut more corners than people appreciated. But Jamie goes out of his way to ensure that the foundation and plumbing are strong.
I don’t write a lot. So it’s very hard for me. It was cathartic. I’d given some talks about what had happened and about what should be done about it, but I’d never really organized those thoughts. That’s what I set out to do.
He has an amazing sense of risk. He understands it intuitively better than anyone alive, so he doesn’t do stupid things. The industry has a recent history of dramatically mis-pricing risk relative to return. Jamie never fell for that. If you want one phrase to describe him, that’s it.