This is a Guest Blog written for Bullish by Patricia Crisafulli, author of the new book, “The House of Dimon: How JPMorgan’s Jamie Dimon Rose to the Top of Wall Street”
It’s not much fun being a Wall Street executive these days, with people demanding your bonus, your job, and maybe even your head.
The list of Wall Street honchos who have been pushed out the door since the credit crisis began is long and varied: James Cayne, Stanley O’Neal, John Thain, Richard Fuld…. While each executive’s situation is unique, it’s clear that the credit market meltdown has taken a toll on several high-flying Wall Street careers, with one notable exception: JPMorgan Chase CEO Jamie Dimon.
Barron’s recently named Dimon one of the 30 most respected CEOs and CNBC hailed him as the “lion of Wall Street.” In an era that has been toxic for Wall Street executives, Dimon is golden.
So what makes Dimon different?
It’s not as if JPMorgan has been immune to the financial crisis that engulfed Wall Street and then the entire economy. Indeed, in an interview for "The House of Dimon,"Dimon acknowledged that JPMorgan failed to grasp quickly enough the enormity of the problems in the mortgage markets, a lapse that hurt bank profits. Nonetheless, JPMorgan has weathered the crisis far better than other Wall Street banks, and has even managed to grow its asset base by acquiring Bear Stearns and Washington Mutual.
If there is a secret to Dimon’s success, it may simply be this: unlike many Wall Street executives he has a capacity for continual, critical self-examination, both of himself and the organization he runs.
That self-examination leads Dimon to focus on problems, risks, and what can be made better. In so doing, Dimon infused JPMorgan with a set of values that enabled the firm to avoid taking on excessive risks – even during the good times – and prepared the firm to weather the bad times. As Dimon says, “I think you have to be self-critical.”
Focus on the Downside
In a 2006 speech to University of Chicago Graduate School of Business students, Dimon recalled that the day he went to work after graduating business school, the prime rate was at 21.5 % and inflation was at 12%. His advice based on that experience was always to identify the worst case scenario and make sure you can survive under those conditions.
Dimon has demonstrated his downside perspective throughout his career. Turning around Bank One starting in 2000, he warned of the need to shore up the balance sheet in order to buffer the impact of a looming recession. Even as he was applauded for buying Bear Stearns in March 2008 and Washington Mutual in September 2008, Dimon emphasized the risks. Bear Stearns has been very costly in terms of time and resources, and Washington Mutual’s expected profit stream could dwindle if the economy worsens, housing prices go lower, and loan defaults rise.
As Dimon explains, “Look where you could be wrong; admit when you’re wrong. To me it’s important to do that because I want everybody to do that, so that we actually make a better decision the next time.”
Group Problem Solving
When Dimon’s management team meets, the primary focus isn’t on what’s going well, but on what needs to be addressed. It’s not that victories and accomplishments go unnoticed; rather the emphasis is on what needs to be fixed. The good news for business unit leaders is that they don’t have to go it alone. The House of Dimon believes in full disclosure and group problem solving.
As one JPMorgan executive notes, “There is an amazing orientation toward full disclosure here. That ethic really encourages team problem solving rather than team problem hiding. So as a manager, I get to tap everyone’s expertise and knock out problems a lot faster.”
Do the Right Thing
Doing the right thing is a phrase that Dimon uses a lot, which applies to any number of things from improving customer service to taking write-downs to strengthening the balance sheet. “If it’s not the right thing to do, don’t do it,” Dimon says. “That goes through the whole company.”
For Dimon, the right thing before the credit crisis was to eschew risky derivatives known as structured investment vehicles (SIVs), which caused massive writedowns at other firms, and to have relatively limited exposure to collateralized debt obligations (CDOs). This foresight helped JPMorgan avoid the body blows that took down Bear Stearns and Lehman Brothers and severely weakened Merrill Lynch.
Dimon’s focus on what’s going wrong, admitting mistakes, preparing for worst case scenarios, and doing the right thing does not seem particularly revolutionary. However, the genius of it appears to be the consistency of execution.
Patricia Crisafulli is the author of the House of Dimon: How JPMorgan’s Jamie Dimon Rose to the Top of the Financial World (Wiley 2009), which recounts the events that have shaped Dimon’s career and discusses his accomplishments in the context of contemporary Wall Street.
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