Among the many things that Jamie Dimon and Jonathan Tisch have in common are their highly successful careers and accomplishments in business and finance.
Both are charismatic and engaging men – not to mention benevolent – with a distinct interest in sharing their experiences and wisdom.
Their successes and willingness to share knowledge are what brought them together on April 28, 2016, under the auspices of yet another of their similarities.
Both visionaries graduated from Tufts University in the 1970s. This resulted in an intelligent and enlightening conversation in front of an audience of Tufts graduates – myself included – held at the bank’s headquarters.
Throughout the exchange, Dimon was open and earnest in his responses to Tisch. They discussed everything from Dimon’s upbringing, to the birth of JP Morgan, the Chinese markets, that 85-page shareholders letter, banking culture, and more.
And the deeper they dug into dialogue, the more they revealed about the markets, and the man himself: Jamie Dimon.
Growing Up Jamie
Banking was practically in Dimon’s blood – as both his father and grandfather were stockbrokers with investment firm Shearson Lehman. But, he jokingly admits that his “father was more like a socialist,” and his “mother was a complete Freudian.”
While neither of his parents went to college, they made education a priority in their household.
After graduating from Tufts, Dimon worked for what he humorously refers to as a “third-rate consulting firm.”
He then earned his MBA from Harvard while his two brothers earned their doctorates – one in physics and the other in education.
Changing the Game
Tisch asked Dimon to reflect on the changes he has witnessed in the world of financial services in the 35 years he’s been in the business. Needless to say, in over three decades, Dimon has watched the market go through many dramatic highs and lows.
For comparison sake, when Dimon graduated Harvard, Exxon’s dividend yield was a whopping 10% as compared to today’s modest 3.4%.
Dimon assured the audience, however, that there will always be smart people in finance – an increasingly complex industry – and that there will always been innovations coming to market.
Wall Street was a relatively small realm when Dimon started out – each of the businesses that would eventually merge to become JPMorgan Chase were only worth about $1 billion in market cap (as opposed to the value of JMP today, which stands at over $229.69 billion).
JPMorgan is, now, made up of companies such as Chase Manhattan Bank, JPMorgan & Co., Bank One, Bear Stearns, and Washington Mutual. Going back even further, Chemical Bank and Manufacturers Hanover, among others, also made up the list.
As a masterpiece conglomerate, JPMorgan is the model of successful merging.
Consolidation and China
But, Dimon expects further consolidation in the sector.
He believes that while there are over 7,000 brokerage houses today, “there are going to be a lot less” in the future. He detailed the nostalgia of a time when a banker would go to a vault, retrieve a bank note, and hand the certificate over to a messenger on a bike who then delivered it to another bank in exchange for cash.
Today, customers do their banking remotely. And, while the bank has 22 million retail customers and 18 thousand ATMs, Dimon says the difference in services is that “the branches of yesterday were operational whereas today they are all about advice.”
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There have been huge economies of scale in everything from systems and technology, to trading, legal and compliance. “Fin tech is not new but just more developed. Now 98% of FX trades are electronic as are 50% of swaps,” Dimon explained.
And, “everyone is doing business with China,” and the nation’s entrance into the global world, according to Dimon, has been a “huge benefit.”
But the road to China’s success is rocky as Dimon emphasized that approximately 600 million people in China continue to live in poverty.
Regardless, “China beat the hell out of our politicians,” Dimon exclaimed.
Case in point: the Syngenta acquisition. China “picked 60 of its best companies and told them to buy everything they could overseas.”
Dimon identified China’s need for market reform as a major area of contention.
“People cannot buy and sell things freely as the government continues to control everything,” Dimon said, adding that “there were two times the Chinese kicked the white man out – now and in the 1300s.”
Dimon induced chuckles when he addressed regulatory reform.
“It’s beyond imaginable what they are inventing in Washington… We have to satisfy them so we’ll bitch and moan and move on,” Dimon stated. He then affirmed that, “You can’t walk into my office and say ‘I’m not making money because of compliance.’”
Dimon believes most of the current regulations won’t be around in 10 years, though he acknowledges that “the system is safer as there is both more liquidity and capital.”
The banks, he says, continue to work through the regulations and remain profitable.
Today, JPMorgan is the biggest bank for banks, extending $4.5 billion in intraday lines of credit and moving $6 trillion per day, overall.
Dimon was recently quoted as saying that regional and community banks taking swipes at big banks are a “kind of bank-on-bank violence.”
He then wondered: “We do M&A, equity, debt, mortgages, swaps, securitizations, and more for you… What part of that was involuntary?”
Inside the Shareholder’s Letter
Dimon justified JPMorgan’s voluminous 85-page shareholders’ letter by quantifying that the bank’s 235,000 employees do business in over 100 countries, worldwide. How else were they going to cover the breadth of JPMorgan’s activities?
“I am f***ing relentless” he said, agreeing that while there are polluted firms on Wall Street doing side deals, “There are no special deals at JPMorgan… We are ethical and good and on the ball. We don’t have a bad culture but that doesn’t mean we can’t get better.”
What he means in terms of JPMorgan “getting better” is that there is always room for improvement, even with a view from the top.
Dimon contends that the internet and mobile retail banking offer the next realm for JPMorgan’s advancement. He sees cyber security as a major threat and stressed that he’s prepared to “spend whatever it takes to kick butt and I don’t care about the budget.”
The Ethics of Banking
Extending his apologies to any Catholics in attendance, Dimon referenced an encounter with a nun, with whom he claimed he “hit it off.”
The nun, who wanted to discuss derivatives, felt that the banking industry could improve its culture in order to restore the public’s faith in the system. Dimon, providing his own salutary advice said, “You could do a better job in improving your culture, too!”
On a serious note, however, Dimon emphasized that employees should treat every client like they would treat their own mother, and all other employees with respect – be it the doorman to their Manhattan headquarters or Dimon himself. When an employee asks if something should be disclosed to the client, he responds with, “If you have to ask, then the answer is a likely ‘yes.’”
The Bottom Line
Interest rates were, no doubt, on many minds of the audience.
The bottom line, according to Dimon, is that rates will go up.
He emphasized that a quarter of a percent move by the Fed means nothing in the grand scheme, and reminded us that Paul Volker raised rates 2% on a Sunday night.
“Expect a rate hike after the Brexit vote or after the U.S. presidential elections of possibly ½ percent,” Dimon warned, adding that “Stagflation is the worst thing for everyone… and the 10-year bond will go up even faster.”
With so much ground covered during their conversation, Dimon closed by addressing the question of what keeps him up at night. Dimon paused before responding: bad policy and the inability to enact change and positive reform.
Overall, Dimon concluded: “I’m an optimist… The U.S. has the best rule of law, universities, financial markets, small, medium, and large businesses, democracy, innovation, and work ethic and we have it better today than ever; but that’s not a divine right to success.”
When asked if he would ever serve in government, Dimon provided a flat out “no.”
Perhaps one day he’ll change his mind. With such a down-to-earth quality, and the sheer magnetism of his presence, Jamie Dimon would not only have a chance at a position in office, but he could really change the economy of the world as we know it.
Wishful thinking… for now.