AcquiredThe Jamie Dimon Interview: How JP Morgan Became an $800 Billion Bank
EVERY SPOKEN WORD
70 min read · 14,038 words- 0:00 – 5:24
Live at Radio City: framing the Jamie Dimon story and JPMorgan’s dominance
- BGBen Gilbert
David, we completely blew it. We went into Jamie Dimon's office, had our little meet and greet. We did not ask about the dual pistols.
- DRDavid Rosenthal
Yeah, from the duel, Alexander Hamilton and Aaron Burr, which J.P. Morgan owns and keeps in their headquarters, and we blew it. We didn't ask to see them. We'll just have to come back.
- BGBen Gilbert
When they finish the new building, I'm sure they will be in the executive floor. We can go get a viewing of the, uh, you know, piece of American history.
- DRDavid Rosenthal
All right, speaking of American history, let's do it.
- BGBen Gilbert
Let's do it. [upbeat music]
- SPSpeaker
Radio City! Are you ready? Who got the truth? Yeah. Is it you, is it you, is it you? Who got the truth now, now? Is it you, is it you, is it you? Take me down, say it straight. I want the story all the way. Who got the truth now, now? Who got the truth?
- BGBen Gilbert
Welcome to the Summer 2025 season of Acquired, the podcast about great companies and the stories and playbooks behind them. I'm Ben Gilbert.
- DRDavid Rosenthal
I'm David Rosenthal.
- BGBen Gilbert
And we are your hosts. Today's episode is the story of a rising star on Wall Street in the 1980s, who worked with his mentor to merge and acquire their way to the top of the financial world in the '90s, who then got fired unexpectedly by that same mentor, who cast about deciding what to do next, and then in 2000, accepted a job turning around a poorly run Midwestern bank. Then, over the next twenty-five years, he would orchestrate one of the most remarkable runs in banking history, and really, all of corporate history. This is the story of Jamie Dimon, and how he created the modern financial behemoth, JPMorgan Chase, out of the beleaguered component parts of Bank One, JPMorgan Chase, Bear Stearns, Washington Mutual, and First Republic. Jamie is now the longest-serving CEO of any major Wall Street bank and is viewed as kind of the great stabilizer of the American financial system, especially during the 2008 financial crisis. He now sits atop the largest bank in the US with an over eight hundred billion dollar market cap, which is more than twice their nearest competitor. They are the only bank within spitting distance of the sort of big trillion-dollar tech companies that we've covered here on Acquired. And to really put a finer point on the dominance, they are the most valuable company east of the Mississippi in the United States, and the only company east of the Mississippi worth more than half a trillion dollars.
- DRDavid Rosenthal
Incredible.
- BGBen Gilbert
So the question, of course, is: how did he do it? I mean, banks fail. Financial firms often have spectacular blowups, and large organizations, period, financial or not, can often get so bloated that they slow down to a crawl. So what did Jamie Dimon do differently? Well, today's episode, we have Jamie with us, himself, to tell the story. We recorded this live in front of six thousand Acquired fans at Radio City Music Hall in New York City. So you'll notice it's a different format than our usual episode. We're always trying to figure out what version of Acquired works live with an audience, and this is our latest iteration. The Radio City show also had a second act, a late-night talk show, where we had conversations with the CEO of The New York Times, Meredith Kobett Levien, and the chairman of IAC, Barry Diller, plus some cameos from around the Acquired cinematic universe, and we cannot wait to share all of that with you at a later date. Well, if you want to know every time an episode drops, check out our email list, acquired.fm/email. Come join the Slack and talk about this with us afterwards, acquired.fm/slack. If you want more Acquired between each monthly episode, check out ACQ2, our interview show, where we talk with founders and CEOs building businesses in areas we've covered on the show. And before we dive in, we want to briefly thank our presenting partner, J.P. Morgan. [laughing]
- DRDavid Rosenthal
[laughing] Yes, the same J.P. Morgan, which is funny, because when we started planning this show together, gosh, almost a year ago, it was immediately clear to Ben and me that the very best person who Acquired could interview in New York also happened to be their CEO.
- BGBen Gilbert
And as you all know from the episodes over the last couple years, J.P. Morgan has been a fantastic partner of ours, and their payments team demoed all kinds of cool technology at the event. Our huge thanks to the J.P. Morgan team for putting on the show with us, and if you ever want to learn more, just click the link in the show notes and tell them that Ben and David sent you. So with that, this show is not investment advice. Dave and I may have investments in the companies we discuss, and this show is for informational and entertainment purposes only. On to our conversation with Jamie Dimon. [audience cheering] Well, this feels appropriate. [laughing]
- DRDavid Rosenthal
[laughing]
- JDJamie Dimon
You guys dressed up for me. [laughing]
- BGBen Gilbert
[laughing] You dressed up for us, too. Thank you.
- DRDavid Rosenthal
Last year, we had you on the video board at, at, at Chase, and, uh, you were looking very summery there. You look great tonight.
- JDJamie Dimon
Thank you.
- BGBen Gilbert
Yes. Well, we know you're a big history buff, and we consider ourselves historians above all else. So, uh, what we'd like to do here tonight is walk through the twenty-year story with you of sort of how you turned JPMorgan Chase from a bank among of many-- a, a bank among many, to the most systemically important financial institution in the world. Are you game?
- DRDavid Rosenthal
Sound good?
- JDJamie Dimon
Sounds great.
- DRDavid Rosenthal
All right.
- JDJamie Dimon
Thank you. Yeah. [laughing]
- BGBen Gilbert
[laughing]
- 5:24 – 7:02
Citigroup’s conglomerate model—and the disagreement that mattered
- DRDavid Rosenthal
Uh, we want to start in 1998. You and your mentor, Sandy Weill, have just spent the past thirteen years building the modern financial institution conglomerate, really the, the, the blueprint for what JPMorgan Chase is today, except it's not J.P. Morgan, it's Citigroup. And everybody on Wall Street and the entire world expects that you are gonna be named CEO of Citigroup in short order.
- BGBen Gilbert
This is 1998.
- DRDavid Rosenthal
1998. This is not what happens. Instead, you get fired, and you have to restart your whole career, everything, your whole life from scratch.
- BGBen Gilbert
Sorry to start here, by the way. [laughing]
- DRDavid Rosenthal
Yeah. [laughing] But, but, but before we get into what you do next-
- DRDavid Rosenthal
... what was the model that you and Sandy built at Citigroup?
- JDJamie Dimon
Okay. First of all, I am thrilled to be here. I want to congratulate these guys for building the Acquired. [audience cheering] Uh, it's a, it, it's a great, intelligent addition to what we need to learn in society. And so I would say it wasn't quite the model, because if you look at what we did at Commercial Credit, Primerica, which then Travelers and Merge, we were a financial conglomerate. We bought lots of companies and lots of different businesses. We fixed them up, we turned around, we made money, uh, and then we merged it with Citibank, which obviously was a huge bank. And, uh, you know, my view is I was-- we should skinny it down and kind of shed the parts that aren't that important to the rest of the company and keep the things that strategically belong together, together. It was one of my small disagreements with Sandy about the future of the company. And so, um, but it was big, it was making a lot of money, it was quite successful at the time, uh, and then I got fired. [audience laughing]
- 7:02 – 9:38
1998: The firing, the aftermath, and a reset of identity
- BGBen Gilbert
So, so, so how are you feeling in that moment?
- JDJamie Dimon
When I got fired?
- BGBen Gilbert
Yeah, that moment.
- JDJamie Dimon
Well, you know, my wife is here, and I was hosting a hundred people, uh, recruiter-- recruiting kids in my apartment in New York City, same apartment I have now. And, uh, they called me. We had a management meeting Sunday at four PM that night, and Sandy and John Reed called me up and said: "Can you come a little early? We've got a bunch of stuff to talk about." I was the president and chief operating officer. I drove-- I said, "I can't." They said: "Well, it's really important." So I drove up there, uh, and I sat down in the room with Sandy and John, and they said they want to make a few changes, and there are three of them. And they said, we-- one, one, we want to make this person in charge of that. I said, "Okay," well, that didn't make sense to me. The second one, they wanted to make someone in charge of the global investment bank, which I was running. I thought it was another stupid decision. And the third is they said: "And we want you to resign." And I said: "Okay." 'Cause, you know, at that moment, I knew it was all arranged. The boards had voted, the press release was written, the management team was coming up. So I waited, uh, you know, for the management team to come up. I wished them the best. I said, "You guys have a chance to build one of the great companies." Uh, they all thanked me. Uh, they-- Sandy said, "You want to do the press with me?" I said, "Yeah, but I'll do it from home." Uh, so I went home, went to see my kids. They were like-- One of my daughters is here, too. They were, like, twelve, fourteen, twelve, and ten. And I walk in the front door, and, uh, I tell them, you know, I, I was fired. And the youngest one says, "Daddy, uh, do we have to sleep on the streets?" [audience laughing] I said, "No, no, we're, we're okay." And the middle one, who's always obsessed with college for some reason: "Can I still go to college?" I said, "Yeah." And the one who is here, who is the oldest one, said, "Great, since you don't need it, can I have your cell phone?" [audience laughing] And then that night, about fifty people came over. All the same people I just met, all the management team, bringing whiskey, and it was like having been at your own wake. And there's one really tall guy who came in, a very good friend of mine, and he looks, uh... And my, my daughter looks up and says: "Who are you?" He says, "I used-- I work for your daddy." And she says, "Not anymore you don't." [laughing]
- DRDavid Rosenthal
[laughing] Oh!
- JDJamie Dimon
And, uh, that was it. I was okay. You know, I was like, I tell people, it's your, my net worth, not my self-worth, that was involved.
- BGBen Gilbert
And for anyone who doesn't sort of already know Jamie's story, you were the rising star. I mean, you were... Citi was the biggest bank. You were the heir apparent. I mean, this is, this was, like, unfathomable, and for you to take it this gracefully, uh, you know, it says a lot. So you're sort of wandering in the woods as I, best I can kind of reconstruct it, for about eighteen months. Is that right? Figuring out what's next.
- 9:38 – 12:07
The wilderness period: exploring paths (including Amazon) before choosing Bank One
- JDJamie Dimon
Yeah. I, you know, it took me a while to ex, exit and sign agreements and get out. They were kind of mean. Uh, but, and then I step in office, and it was late. I took-- we went for a nice, long vacation and stuff like that. Uh, when I got back in September, so that was six months later, I went to my... I started going to work. I had nothing to do, but I went from, you know, to nine to five and started calling people and thinking about what I'm gonna do. It was in the Seagram Building-
- DRDavid Rosenthal
Yeah
- JDJamie Dimon
-so I go for lunch, uh, downstairs every day. And I, I-
- DRDavid Rosenthal
At the Four Seasons.
- JDJamie Dimon
At the Four Seasons. And I explored everything. Started my own merchant bank. I could have retired, just teaching, uh, just investing, but I was forty-two.
- BGBen Gilbert
And you, you took a call about running Amazon, right?
- JDJamie Dimon
Say it again?
- BGBen Gilbert
You took a call about running Amazon, didn't you?
- JDJamie Dimon
I went to-- I loved-- I went to visit Jeff Bezos, who was looking for a president at the time. He and I hit it off. We've been friends ever since. He's an exceptional human being, uh, but it was like a bridge too far. Even though that movie had just come out, When Sally Met Harry, I was thinking-
- BGBen Gilbert
[chuckles]
- JDJamie Dimon
-,"My God, I'll never wear a suit again. I'm going to live in a houseboat."
- DRDavid Rosenthal
Yeah, yeah. [chuckles]
- BGBen Gilbert
[chuckles]
- JDJamie Dimon
"This will be really great." Uh...
- DRDavid Rosenthal
What a, what an-
- BGBen Gilbert
Slinging packages
- DRDavid Rosenthal
-alternate universe we'd be living in.
- JDJamie Dimon
It would've been an alternate universe, but I'm still good friends with Jeff, so I got at least one good thing out of it. Uh, and then I, then I got serious, you know, and I was, I was offered jobs to run, you know, big, other big global investment banks. Uh, Hank Greenberg, who ran AIG, called me up and said: "You should come join us." I was thinking, I'm gonna go from Sandy Weill to you? I mean, I'd have to have my head examined to do something like that. [laughing] Uh, and then I-
- DRDavid Rosenthal
And how did you know the AIG story?
- JDJamie Dimon
Then, yeah, well, that, that happened years later, too. And then, uh, I got a phone call from a headhunter about Bank One, and I was also-- you guys, a lot of you probably know Ken Langone and Bernie Marcus and Arthur Blank, who ran Home Depot. My wi-- I loved them, but at my first dinner with them, I went to see them in Atlanta. I said, "I have to make a confession. Until you guys called, I'd never been in a Home Depot." [audience laughing] And-
- BGBen Gilbert
We were actually wondering. David and I were dating.
- DRDavid Rosenthal
We, yeah, we were talking about it.
- JDJamie Dimon
My, my friend-
- DRDavid Rosenthal
You're a lifelong New Yorker
- JDJamie Dimon
... my friend made me go up there and get some equipment and plants and stuff like that. [laughing]
- BGBen Gilbert
[chuckles]
- JDJamie Dimon
So, but I loved their culture, their attitude. They wanted me to do it. Ken Langone says, "He still, I still should have gotten you. I wasn't gonna pay you enough." Of course, it had nothing to do with anything like that. Uh, and I had Bank One, but Bank One was my habitat. I was used to financial companies, you know, services, banking. It wasn't quite global. It was a little global at the time. Uh, and, you know, it was a troubled bank. And, you know, I decided that, you know, life is what you make it. It was hard on my family. I had to, we had to move. I think for anyone who's got to move kids that, you know, I think they were fourteen, twelve, and ten or something.
- DRDavid Rosenthal
Yeah, so-
- JDJamie Dimon
It's hard.
- 12:07 – 16:57
Bank One turnaround begins: alignment, ownership, and day-one culture signals
- DRDavid Rosenthal
Some context on Bank One for, for folks who are not familiar.
- DRDavid Rosenthal
... It's not in New York. It's a large bank, but it's a troubled bank.
- JDJamie Dimon
Yeah.
- DRDavid Rosenthal
It's based in Chicago.
- BGBen Gilbert
And when you say large, David, it's a, it's a thirty billion dollar market cap bank. Citigroup, where you just had been before, was a two hundred-
- JDJamie Dimon
Yeah
- BGBen Gilbert
- billion dollar bank.
- JDJamie Dimon
It was twenty-one billion at the time, 'cause it had-- you, you have the right numbers, but it did a split, and so if you look back, it was more like-
- BGBen Gilbert
Ah
- JDJamie Dimon
... twenty, twenty billion or something like that, yeah. And Citi was two hundred. But, you know, I, I didn't worry about that. I was like, you know, in life, you make things what they are. I don't like complaining about s-- over-spilled milk. You know, you just put on your pants, you get going, you see what you can make out of it, and, uh-
- DRDavid Rosenthal
But you, it sounds like you had opportunities to stay in New York, to run-
- JDJamie Dimon
I, I did
- DRDavid Rosenthal
... bigger, more glamorous things.
- JDJamie Dimon
This one, I was gonna run the company. The other ones would have been some investment banks, and I didn't really trust some of the people who were talking to me about that. And there was a whole bunch of other stuff that I explored. I took phone calls, some small companies, some big companies. There was a couple of subprime mortgage companies who called me, and I was like: Absolutely not. [laughing]
- BGBen Gilbert
[laughing]
- DRDavid Rosenthal
[laughing] We'll get to that. We'll get to that.
- JDJamie Dimon
We'll get to that. And, uh, so I just thought this was a chance, you know, and, uh, you know, if the family's [chuckles] willing to move, uh, and we got a nice... It took us a while. We had to live in a rental for a while, but we got a nice brownstone, and, you know, we lo- ended up loving Chicago. Chicago is a wonderful city in a lot of different ways, and, and you know, like I said, it is what you make it, you know. And I w-- I, I put half my money in the stock at the time.
- BGBen Gilbert
Yeah, you-
- JDJamie Dimon
I tied my... I was gonna be the captain of the ship. I was gonna go down with the ship. You know, I made it clear to everyone I was here permanently, and it'll be what it is, and so I got to work, like, literally the next day.
- BGBen Gilbert
Did, did we do the math right? That right before you joined Bank One, you bought sixty million dollars of stock.
- JDJamie Dimon
I did.
- BGBen Gilbert
I mean, I, I, that's-- I've never-
- JDJamie Dimon
I did
- BGBen Gilbert
... heard of someone taking a CEO job and saying, "I'm gonna invest half my net worth in this company now."
- JDJamie Dimon
Yeah. And I, I thought it was, I thought it might be overvalued a little bit because there was... people thought it might be sold or something like that, but I didn't care about that. You know, if you work at a company, and the new CEO comes in, he's from out of town, uh, and you're gonna have a lot of shareholders, and I knew, I knew a lot of the shareholders. I was going to know a lot of the shareholders. I wanted them to know I was in a hundred percent, lock, stock, and barrel. There was no question I would never sell that stock, and I'm gonna go down with the ship or go up with the ship. And they also... you, I was making decisions that I thought were right for the long-term health of the company, not, not for a short-term type of thing.
- BGBen Gilbert
So, so what did you find when you got there? Day one on the job, you start investigating. Is it better or worse, the same than you thought?
- JDJamie Dimon
You know, there, there had been a, an analyst called Mike Mayo, done a report. I remember one of the great lines in the report, "Even Hercules couldn't fix it." It had been an amalgamation of Bank One, First Chicago, National Bank of Detroit. They'd never put the companies together, so they had multiple statement systems, processing systems, payment systems, you know, SAP systems. Uh, they had different brands, you know, t- services coming down. We were losing accounts. They were closing branches. It was a mess, but, you know, he, it was all of it: systems, people, ops. But again, I just, you know, I just... I met the management team. I, the-- it's hard. You know, it, I walked in, I met six of the directors. I, the tw- there were twenty-one directors. Eleven hated the other ten. [chuckles]
- DRDavid Rosenthal
Yeah, but even wait, wait, wait. There were twenty-one board members.
- JDJamie Dimon
Twenty-one board members from the merge, multiple acquisitions. They, they were tribal. They ended up hating each other. I knew that when I went in, 'cause I knew one people, and, you know, I spoke to a lot of people and did research in the bank. But again, in life, you get handed these things, and it's not perfect. You know, even today, people want to be handed something perfect, and it's not perfect, and I was... So I met six of the, uh, directors. I walked in. When I got offered the job, I shook all their hands. I told them: "I'm gonna do the best I do. I'm gonna tell you the truth, the whole truth, and nothing but the truth, the good, the bad, the ugly. We're not gonna bullshit. We're gonna try to build a great company. I'm gonna need your help." And, uh, and then [chuckles] they, they said-- They left.
- DRDavid Rosenthal
[laughing]
- 16:57 – 19:14
Building a risk culture: pricing risk, stress testing, and de-levering the balance sheet
- DRDavid Rosenthal
One of, um... As, as when we were chatting a couple weeks ago and preparing for this, um, we asked you in the context of JPMorgan, like, what, what are the critical things in your mind that has made JPMorgan what it is today? And the first thing you said was risk.
- JDJamie Dimon
It was what?
- DRDavid Rosenthal
Was risk and the culture around risk-
- BGBen Gilbert
And the fundamental-
- DRDavid Rosenthal
-and the way you treat risk
- BGBen Gilbert
... understanding by management of risk.
- JDJamie Dimon
Yeah.
- DRDavid Rosenthal
When you got to Bank One, I think this is where you first started putting into practice the culture around risk. What was the risk culture at Bank One, and how did you change it?
- JDJamie Dimon
Yeah, I, you know, I've always been very risk-conscious, and risk-conscious does not mean getting rid of risk. It means properly pricing it and understanding the potential outcomes. Uh, uh, and so when I got there, you know, I just started meeting people and going through. I quickly realized that Bank One had more US corporate credit risk than Citibank did, and they, the way they accounted for it was unbelievably aggressive. And, you know, so they had less capital, less reserves, less this. They, they were calling these things profitable. They were basically losing money, uh, and, you know, loans in lit-- a lot of business, you've got to be very careful about the credit business, and once I found out that, I kind of panicked a little bit.... and I went through every single loan in the books. I marked them all down, put up more reserves, told the board, uh, about it, and then wanted to earn more revenues per dollar of risk. So, for example, in the middle market business, we had for every loan NII, we had, like, eighty cents and twenty cents-
- BGBen Gilbert
Net, net interest income for the non-bank-
- JDJamie Dimon
Net interest income from the loan and twenty cents of other revenue, like payments. By the time we merged with JPMorgan, we had forty NII from the loan and sixty percent NII- NIR from other type of things, like payments. And one, you're being paid for the risk, and one, you're being paid little for the risk. And I always stress-tested, and I showed the board that if we have a recession, and we're about to have one, uh, how much money we'd lose in credit. So I hired a woman called Linda Bamman, who said, "Okay, if you're gonna, if you're gonna let me do credit, are you gonna let me sell loans?" I said, "Yes." "Are you gonna let me hedge loans?" "Yes." "Can I do ten billion?" I said, "Yes." She said, "Okay, I'll join." And we probably reduced the balance sheet by fifty billion because... And then we did have a recession, but we were kinda okay by then. With one big, bad one, which is United, which went bankrupt, and we basically owned it for a s- small period of time.
- 19:14 – 22:52
“Don’t blow up”: lessons from market history and the logic of fat-tail planning
- BGBen Gilbert
There seems to be kind of a fundamental Jamie Dimon- Jamie Dimonism, which is: don't blow up. I mean, a lot of other people have, have gotten decent at pricing risk, but everyone else seems to be willing to get closer to the line than you. W- where did you sort of develop this, "don't blow up at all costs" kind of idea?
- JDJamie Dimon
Yeah. So there's, you know, around risk, there's always this ecosystem. You've always heard it. Everyone's doing it. Everyone's okay. This is gonna work. This time is different. And, you know, history tells you, learn, teaches you a lot, and I always say, if you... My dad was a stockbroker, and so I bought my first stock when I was fourteen. In 1972, the stock market hit a thousand. It hit a thousand in 1968. I was already helping him a little bit with stuff. Uh, uh, by 1974, it was down forty-five percent. All the limousines in Wall Street were gone. Restaurants were being closed. You know, markets move violently. And then, you know, we had kind of a recovery. In 1980, you had a recession. '82, you had a recession. In '82, it was lower than it had been in 1968, and it, it hit eight hundred. And then in '87, the market was down twenty-five percent in one day. In 1990, all these banks, JPMorgan, Citi, Chase, Chemical, were all taken to their knees by real estate losses, and they were all worth about a billion dollars. I remember me- I think Citi was three billion at the time, and the other ones were about a billion dollars. And then you had the '90, uh, seven, uh, also a real estate-related thing. You had the 2000 internet bubble, you know, and then you had the great financial crisis. And I could-- If you go through history, there's tons of these things. Andrew Ross Sorkin is in here, and I just read his book, uh, he was nice enough to send it to me, on 1929, and man, history does rhyme. Too much leverage, too much risk. Everyone thinks it's gonna be great. No one thinks it can go down a lot. You know, and that stock market went down twenty percent one year, thirty percent next year, twenty percent the next year. At one point, it was down ninety percent. You know, shit happens. [audience laughing]
- BGBen Gilbert
It seems like your philosophy is- [audience laughing] ... that the most, the worst thing will happen. So just plan for it. Don't, don't say, "Oh, we're good as long as this crazy, insane, you know, four sigma event doesn't happen." You're like, "No, that will happen, and it happens often."
- JDJamie Dimon
Yeah. So when I got-- When I look at it, I always ask, like when I do stress testing a risk for high yield, the worst... I remember getting to JPMorgan and going through the risk books, and their, their stress test was that high yield would move forty percent, the credit spread. That's g- and at the time, it was at four hundred or whatever it was. That means five, five sixty. Okay? And I said, "No, our stress test is gonna be worst ever." Worst ever was seventeen percent, and they said, "That'll never happen again. The market's more sophisticated." Well, in '08, it hit twenty percent, and you couldn't have sold a bond. There was no market. So, you know, those things do happen, and the point isn't that you're trying to guess. The point is you, you can handle them, so you can continue to build your business. And so I always look what I call the fat tails and manage that we can handle all the, all the fat tails, and not the stress test the Fed gives us, but all the fat tails. Market's down fifty percent, interest rates up to eight percent, credit spreads back to the worst ever. Of course, your results will be worse, but you're there. And, and the thing about financial services, leverage kills you. Aggressive accounting can kill you, which a lot of companies do do. Um, and, you know, the goal should be... And also, confidence. If you lose money as a financial company, I always knew this, too, people, the headlines are, you know, people read that, and if they're relying on putting their money with you-
- SPSpeaker
Mm.
- JDJamie Dimon
-they look at that different, so I-
- SPSpeaker
They lose trust.
- JDJamie Dimon
They lose trust, and that which causes-- You've seen runs on banks, and you saw some recently, uh, because people run, take their money out.
- 22:52 – 28:37
Fortress balance sheet and conservative accounting as operating system
- BGBen Gilbert
So, so one, there's a thing that you just said, which is that you might do worse, but you're there. There, there's sort of this trade-off that you make, where you're less profitable in the short term, but at least you stick around. If, if you look back at the companies that you've run, Bank One, JPMorgan Chase, is that true in the good years, that you've actually been less profitable than those who are kind of risk on?
- JDJamie Dimon
Yeah, a little bit. He's saying that, you know, if you look at the history of banks from up until 2007, a lot of banks were earning thirty percent equity. Most of them went bankrupt. We never did that much, okay? But in '08 and '09, we were fine, and they weren't. And so, uh, but you want to build a real strong company with real margins, real clients, conservative accounting, where you're not relying on leverage, and it's very easy to use leverage to, you know, to jack up returns in any business, you know, and but in, in banking, it could be particularly dangerous.
- SPSpeaker
So it seems like a core part, if not the entirety of this, distilled into your operating strategy, is the fortress balance sheet.
- JDJamie Dimon
Yeah.
- SPSpeaker
When did you first hear about the fortress balance sheet?
- JDJamie Dimon
I, I've been talking... I go way back to Primerica. I used to talk about that. You're gonna be able to survive the tough times-
- BGBen Gilbert
Which is early '90s?
- JDJamie Dimon
Uh, uh, probably the 1990s, and like I said, I grew up with my father, and I went through those market things. I remember how h- hard it was on people on Wall Street. Uh, but, but the fortress balance sheet is, yet you run a company serving clients well, you have good margins, good liquidity, good capital. I'm as conservative an accountant as you can find.... I don't upfront profits when I can spread them over time. And accounting, you know, of course, accountants hate it when I say this: you can drive a truck through accounting rules. And accounting itself, you know, that certain things are considered expenses, but they're good. They're an investment for the future, but they're called an expense. And then revenues, you know, if I make bad loans, they are bad revenues. They will kill you, but for a while, they look pretty good. So I-- it's all those things: margins, clients. You know, in the banking business, the character of the clients you have will reflect on your bank. So the first thing is, who are you doing business with? How are you doing business? And, uh, you know, and also making sure your compensation plans aren't paying people for stuff which is stupid or unethical. And, you know, uh, and you always have to review these things to make sure you have them right, 'cause they, they change all the time.
- BGBen Gilbert
All right, listeners, now is a great time to thank one of our favorite companies, Vercel.
- DRDavid Rosenthal
Yes, Vercel is an awesome company. Over the past few years, they've become the infrastructure backbone that powers modern web development and now the AI wave. If you've visited a fast, responsive, modern website lately, or used a slick AI-native app with agents and hyper-personalized interfaces, there's a good chance it was built and deployed on Vercel.
- BGBen Gilbert
So for the past decade, they've been on a mission to democratize the lessons of the giants, companies like Google and Amazon and Meta. And the idea is, developers shouldn't have to spend weeks and engineering resources to stitch together dozens of services just to launch a web app.
- DRDavid Rosenthal
Vercel made it simple. You write code, you ship it, fast, globally distributed, and without developing a second skill set in the nuances of deployment. That's the magic of their framework-defined infrastructure, which basically lets developers and large teams go from idea to production without any friction.
- BGBen Gilbert
So as you may know, Vercel has been synonymous with front-end development, but now they do back-end and agentic workloads as well. Vercel calls this the AI Cloud, purpose-built for the next era of apps and already in production across companies like Under Armour, PayPal, Notion, and AI startups like Runway, Decagon, and BrowserBase.
- DRDavid Rosenthal
Yep, the AI Cloud takes removing deployment friction even one more step. In some cases, developers don't even need to push code anymore. Agents can release features continuously, infrastructure configures itself, and interfaces adapt to how you work.
- BGBen Gilbert
If you want to build the future of software, head to vercel.com/acquired. That's V-E-R-C-E-L dot com slash acquired, and just tell them that Ben and David sent you. Now is also a great time to thank another of our favorite companies, Anthropic, and their AI assistant, Claude.
- DRDavid Rosenthal
Claude has really transformed our workflow here at Acquired. Preparing to interview Jamie Dimon requires serious research, obviously. Decades of banking history, regulatory changes, three financial crises, building the fortress balance sheet. This is exactly the kind of complex analysis that Claude is excellent at. Ben and I have never had assistants here because we think it's important for us to do the research ourselves, but Claude now gives us the best of both worlds. It's an extra set of hands that we have full control and visibility into what it's doing and how.
- BGBen Gilbert
So where Claude is especially great for me is extended thinking mode. When I asked it to analyze J.P. Morgan's strategy through multiple financial crises, I could watch Claude's reasoning through each decision point step by step.
- DRDavid Rosenthal
And it has full context by connecting to our entire ten-year base of knowledge here at Acquired through something called MCP, which you might have heard about, the Model Context Protocol. They have pre-built integrations with Gmail and Google Docs, and also services like Jira, Asana, Linear, Square, PayPal, as well as custom integrations for any internal tool that you have.
- BGBen Gilbert
And Claude is built by Anthropic with a laser focus on accuracy and trustworthiness, which is exactly what we need.
- DRDavid Rosenthal
Yep. If you want to start using Claude yourself or for your organization, go to claude.ai/acquired, and they've got a special offer for Acquired listeners, half-price Claude Pro for three months, which gets you access to all the features mentioned above.
- BGBen Gilbert
So whether you're preparing for your own high-stakes meetings, interviews, or conversations, or you just need an AI you can trust with serious work, Claude thinks with you, not for you. That's claude.ai/acquired. All right, David-
- 28:37 – 32:29
2004 merger with JPMorgan Chase: strategic fit, governance mechanics, and execution focus
- DRDavid Rosenthal
So you run-
- BGBen Gilbert
Catch us up to the merger.
- DRDavid Rosenthal
Yeah. So you run Bank One for four years from Chicago, and then in 2004, you merge with JPMorgan Chase-
- JDJamie Dimon
Yep
- DRDavid Rosenthal
... in what is termed at the time a merger of equals. I think JPMorgan Chase referred to it as that. Bank One shareholders get forty-two percent of the combined company. I mean, I think people don't realize how much of JPMorgan Chase-
- JDJamie Dimon
Yeah
- DRDavid Rosenthal
- is Bank One today.
- JDJamie Dimon
That's why it's a little irritating to me when they say, "You've been running it since..." So I was running JP Morgan. I was running forty percent of the company for the whole time. [laughing] And, uh, when, when, when I got to J-- Bank One, and I'm now working around the clock, I ha-- I already knew that a logical, strategic merger might be J.P. Morgan. Okay, I know all these companies, and that's the other thing about fortress balance sheet, is you also have real strategies that survive the test of time, and, you know, you're not flipping and flopping. Um, and then I'm sitting there, and then, of course, the tape comes, J.P. Morgan Chase to merge. So we're worth, like, twenty-five billion. They're now worth, like, eighty billion or ninety or whatever the number was. I'm like, "Well, there goes that dream." But four years later, our stock was up to, you know, doubled or something like that. Theirs actually come in, and it was in the target range, and I had been meeting with Bill Harrison, the current, uh, chairman of, of J.P. Morgan at the time. We were talking about it. We both knew it made business sense. They were kind of looking for a CEO, uh, so we were-- we had been talking probably for a year and a half before that.
- BGBen Gilbert
They're looking for a CEO. Did, did they give Bank One shareholders forty-two percent 'cause they were looking for a CEO?
- JDJamie Dimon
There were two lawsuits, okay? Uh, so we got the premium. They got the name and the location, and I, uh, I, I effectively had kind of control from day one because inside the merge agreement, and this is almost unheard of, when we get the premium, is that to not have me become CEO eighteen months later, seventy-five percent of the board would have to vote me out.... and the board-
- DRDavid Rosenthal
Right, the default was-
- JDJamie Dimon
Yeah
- DRDavid Rosenthal
-you were going to become CEO.
- JDJamie Dimon
And the, and the board was eight Bank One people and eight J.P. Morgan people. I knew a lot of the J.P. Morgan board members, too, who had, who respected me, and Bill Harris and I were very close. But that was the agreement. They got sued for paying too much to buy me. I got sued for not taking enough. [laughing]
- DRDavid Rosenthal
[laughing] You can't win.
- JDJamie Dimon
You know, if you get sued, you can't win in these kind of things.
- DRDavid Rosenthal
I, I think every shareholder is probably-
- JDJamie Dimon
But it worked
- DRDavid Rosenthal
-happy today.
- JDJamie Dimon
It worked out.
- DRDavid Rosenthal
Yeah. Uh-
- BGBen Gilbert
All right, 2006?
- DRDavid Rosenthal
How much-- uh, w-- before we get to two thousand and six, when you were going through that process, and even maybe the couple years before, you and Bill were talking, you're starting to think about J.P. Morgan as a partner. I'm curious, did the brand, did the name J.P. Morgan factor into your thinking at all? Did you view that-
- JDJamie Dimon
I, I-
- DRDavid Rosenthal
-as an asset?
- JDJamie Dimon
I mean, J.P. Morgan brand is a Tiffany name. I didn't value it in the deal. And what we-- what I looked at, I had given my board... I think it's, I think the first thing is run your company well. And people thought I was going to start doing deals immediately. I was like: "No, we suck. We don't-- we haven't earned the right to run someone else's company yet. When we're running a good company, we can merge with somebody, and..." But I, the, but the first thing I looked at was business logic, and that every business, we had a consumer business, they had a consumer business, we had a credit card business. They were both terrible. They had a credit card business. They had a big investment bank. We had a big US corporate bank that needed some of those investment banking services. We both had a wealth management business. I w-- I knew we could save a lot of cost saves, so the business logic was pretty impeccable. Then there's the ability to execute. Like, can you actually get it done? Because you've all seen a lot of deals where they fall apart. They don't have management, they don't consolidate their systems, uh, they have infighting. It ki- kind of happened at Citi, uh, and so you don't effectuate, and then there's the price. So I knew we had a Tiffany brand, uh, but it d- it didn't value, because if everything else didn't work out, I don't think it would've mattered that much.
- DRDavid Rosenthal
Mm.
- BGBen Gilbert
Mm.
- DRDavid Rosenthal
Interesting. Okay.
- BGBen Gilbert
All right, so-
- 32:29 – 36:24
2006–2007: pulling back from the frenzy by changing incentives and reducing hidden leverage
- BGBen Gilbert
It's two thousand and six. You're officially chairman and CEO of the combined JPMorgan Chase entity now.
- DRDavid Rosenthal
And, and two thousand and six on Wall Street is like-
- BGBen Gilbert
Go, go, go.
- DRDavid Rosenthal
Go, go, go, baby. It's like, you know, nineteen eighties all over again.
- JDJamie Dimon
Yeah. It was.
- BGBen Gilbert
Uh, I think you had the same incentives as everyone else, but you behaved very differently. Am I missing something? Did you have the same incentives, or did you-
- DRDavid Rosenthal
Yeah, you pulled J.P. Morgan back hard-
- JDJamie Dimon
I did
- DRDavid Rosenthal
-on the risk side in two thousand and six.
- JDJamie Dimon
I did. So there, there were cracks out there in two thousand and six. You may remember the quants. There started to be a quant problem. In late two thousand and six, we definitely saw subprime get in bed, and that's-- I pulled back on subprime. I, I wish I had done more, because if you look what I did, you say: "Okay, well, you saved half the money, but you would have saved more if you lost- [chuckles]
- DRDavid Rosenthal
Yeah, you still, you still had some losses.
- BGBen Gilbert
About five billion dollars?
- JDJamie Dimon
Yeah, but, but, but we also had, I'm gonna say less, maybe a third of the leverage of the big investment banks and a lot more liquidity. So in two thousand and six, I started to stockpile liquidity, and, you know, looking at the situation, I was quite worried. The leverage, if you... You may not remember this, but the leverage, because of accounting rules and Basel III, Basel I, investment banks, particularly the banks, the big investment banks, went from twelve times leverage to thirty-five times leverage. And, and it was go, go.
- BGBen Gilbert
So for every one dollar I'm putting in, I can-
- JDJamie Dimon
You know, CMOs, you know, bridge loans, the whole thing. Like, in '０7, the bridge book of Wall Street was four hundred and fifty billion dollars. Today, it's forty billion. J.P. Morgan can handle the whole forty billion today, though we're not the forty billion today, uh, and they were much more leveraged deals, and a lot of them fell apart, collapsed, and, uh, and then, of course... And that was before you had the collapse in the mortgage markets, which really took down a lot of these banks.
- BGBen Gilbert
But, but you did have the same incentives, and you had the same access to information that a lot of these other folks did, but you didn't blow up. Uh, w- what explains this? 'Cause usually, behavior follows incentives.
- JDJamie Dimon
Yeah, uh, well, first of all, if you worked for me, I would tell you: "I don't care what the incentive is, don't do the wrong thing, and, and don't do the wrong thing to the client. If you treat yourself-- If you're the client, how would you want to be treated?" And I, I'd gotten rid of-- I mentioned that one risk thing. There were multiple risk things like that. They were being paid to take the risk. So you sell-
- DRDavid Rosenthal
Oh, you were, you were telling us about the, uh, the auto loan business.
- JDJamie Dimon
Yeah, but all-- but they were being paid, but the second I put in all these new risk controls, all of a sudden, you weren't making money by taking that leverage. Because I was looking at how much capital could actually be deployed if things get bad, and so I was looking at earnings through the cycle. Uh, and then, but very importantly, all of these investment banks were doing side deals, private deals, three-year deals, five-year deals. I got rid of almost all of them.
- DRDavid Rosenthal
Mm. This is for comp with-
- JDJamie Dimon
Al- almost all of them
- DRDavid Rosenthal
... with senior bankers.
- JDJamie Dimon
And so today, at JPMorgan Chase, there are no... You know, we do do things, but, and I know some of my partner's in the room here, but we all know about it. There are no winks, there are no nods, there are no side deals. There's almost no one paid on a particular thing, because if you're paid on a particular thing, you can do the wrong thing, and meanwhile, you're not helping the company, you know, manage its risk or something like that. So we changed the incentive programs, and I'm quite conscious about incentive programs, that they don't create mis, you know, mis, uh, behavior. But it's also very important, if you're in a company and you see the incentive pr- programs doing that, you should tell the company: "This incentive plan is not incenting the right behavior versus either the customer." And a lot of it was leverage. So you, if you look at the leverage in some of these securitization books and mortgage books, if you have th- thirty times leverage and you're getting twenty percent of the profits, you'll go to forty times leverage. It's just gonna-- it's literally add, you know, twenty-five percent to your bonus. And so I got rid of the profit pool of twenty percent and the leverage.
- DRDavid Rosenthal
So, yeah.
- JDJamie Dimon
And I lost some people, too, in the meantime.
- DRDavid Rosenthal
It's funny, yeah, you know, JPMorgan, as part of the system, had the same incentives, but you changed the incentives for-
- JDJamie Dimon
Yeah, pretty much
- DRDavid Rosenthal
... the team within the company. Okay. All right, we gotta go to two thousand and eight.
- 36:24 – 43:44
March 2008: Bear Stearns weekend—emergency engineering, due diligence, and the true cost
- JDJamie Dimon
March.
- DRDavid Rosenthal
March 13th?
- JDJamie Dimon
Two, two thousand and eight.
- DRDavid Rosenthal
Thursday, two thousand and eight.
- JDJamie Dimon
Yeah.
- DRDavid Rosenthal
It's Thursday night. You get a call from Bear Stearns' CEO. The stock closed that day at fifty-seven dollars a share. It's like a hundred and fifty a couple months before. Three days later-... God, I remember it like yesterday. I was working-
- JDJamie Dimon
Yeah
- DRDavid Rosenthal
-on Park Avenue on Wall Street. I remember that night, two dollars a share, you're buying Bear Stearns.
- JDJamie Dimon
Right.
- DRDavid Rosenthal
Tell us the story.
- JDJamie Dimon
So I was at Avra on 47th Street, my parents, and my parents' favorite restaurant. My whole family was there. It happened to be my birthday. Uh, I, I, I don't normally get emergency phone-
- DRDavid Rosenthal
[chuckles] Happy birthday!
- JDJamie Dimon
Yeah. [laughing] And Alan Schwartz, who was the current CEO, we'd seen their stock go down. I knew they had some real problems 'cause we saw the hedge funds and some of the things that were taking place there. And he said, "Jamie, I need thirty billion dollars tonight before Asia opens." To which I said, "I don't know how to get thirty billion dollars [chuckles] for you. Uh, and have you ho-- called Paulson or you called Tim Geithner?" Uh, so we all called. I called up the management team. I went back in. I probably had a bite and said goodbye and went back to the office. Probably had a hundred people come in that day, that night. They all got dressed. They went back to work. It's emergency. We now rang all the, uh, bells for emergency. Bear Stearns went bankrupt. Spoke to the Fed about, "Let's just get them to the weekend." We had one day, and we needed a Saturday and Sunday, and we concocted this loan, so we couldn't lend the thirty billion, and f- the Fed technically couldn't lend the thirty billion, but the Fed can lend to us technically, and I can technically use the collateral of Bear Stearns so that, uh... So we got the literally one-day loan. Uh, and then the next day, I had-- we had thousands of people come in due diligence, and we went through every loan, every asset, every balance sheet, all the derivatives, all the lawsuits, all the HR policies, like real due diligence, a two- or three-day period, and bought the company at that night, two dollars a share. Hank Paulson was saying, "Why are you paying anything for it?" I said, "Well, I do have to get shareholder votes," and, uh, which became-
- DRDavid Rosenthal
Right, 'cause you need Bear's shareholders to approve the deal, yeah.
- JDJamie Dimon
We, we-- It, it was a public deal, and the worst part of it is I was going to get the lawsuits from the Bear holders, and I knew that.
- BGBen Gilbert
That you didn't pay enough for the-
- JDJamie Dimon
But, but we couldn't let it go bankrupt. It wasn't like an industrial company you can buy in bankruptcy. It would've been gone, and the crisis would've just unfolded. So, um-
- DRDavid Rosenthal
What... Okay, two questions. O- One, what would've happened if it, if it, if it went down? Uh, two, afterwards, did you think it was over?
- JDJamie Dimon
No. Uh, we, so we, we already had-- So that was March. Uh, you know, what happened with Lehman, it was an uncontrolled failure. There was money locked up everywhere. People panicked. They started pulling money out of everything. That would have happened with Bear. So it did stop that, and I would have thought that it gave other people other time to clean up their act. So literally, six months later, I would have thought some of the other firms were much-- had more liquidity, more capital, and were a little bit more prepared for what might be happening. We already had the stress in the system was-- you saw it already. It was going to mount. It wasn't going to go away. There were tremendous losses coming. Uh, uh, so we bought it, and, you know, it probably did help. In hindsight, it didn't stop, you know, it didn't stop the crisis from unfolding. [clears throat] We bought it, and then, the, like, a coup-- like, a week later, we changed to ten dollars a share. It had been at one twenty. And the way to think of it is, it was three hundred billion of assets and a twelve billion dollar book, tangible book value. We wrote off the whole tangible book value in the pur-- when we bought the company to pay-- we had to liquidate the loans. We had to hedge stuff. We had severance costs, lawsuit costs, and we basically used all that. So we paid, we paid a billion dollars for a company that had been worth, uh, twenty billion dollars recently. The building we're in now was worth a billion dollars on the balance sheet for zero, and we got-- the, the fact, we got some very good people, and we got some good businesses, but it was a extremely painful process.
- BGBen Gilbert
I, I've seen estimates that in the fullness of time, after really dealing with unwinding all the stuff there, it cost you fifteen to twenty billion dollars. You, you bought it cheap.
- DRDavid Rosenthal
So it cost you twenty anyway. Yeah, but-
- JDJamie Dimon
It was the, it was the twelve billion we wrote off. That didn't cost us. We didn't really pay for it.
- DRDavid Rosenthal
Mm.
- JDJamie Dimon
And then the government sued us on the mortgages, which I was quite offended by. [laughing] Uh...
- DRDavid Rosenthal
[laughing]
- JDJamie Dimon
And I really was. I thought it was a, I thought it was-
- DRDavid Rosenthal
Take this problem, and then we'll sue you.
- JDJamie Dimon
But this is, this is the government. When you, you know, the, the-- whatever government you, you did a deal with, that's not the government down the road who decides, "I don't care. We're going to come after you anyway." So while we kind of saved the system a lot, we bailed a lot of people out, they made us pay five billion dollars on the mort- the bad mortgages that Bear Stearns had done, and that's what made me make the statement, "I wouldn't do it again." I wouldn't-- Put it this way, and I, I don't know how to say this: I wouldn't really trust the government again. [laughing] Okay?
- DRDavid Rosenthal
[laughing] [clapping] Would, um-
- BGBen Gilbert
It, it... I gotta, I gotta ask a follow-up question to that. Um... [laughing]
- 43:44 – 46:16
September 2008: Washington Mutual—how to do crisis M&A ‘clean’ and raise capital anyway
- BGBen Gilbert
So Bear Stearns happens six months later, you get another phone call. WaMu is going under. You do buy WaMu. Contrary to everything we're talking about with Bearer, WaMu is actually a great acquisition, right?
- JDJamie Dimon
Yeah. So this is a lesson about acquisitions. It's very hard... Remember, we bought WaMu a week after Lehman went bankrupt, and, and most boards wouldn't have touched that at all.
- BGBen Gilbert
'Cause the whole system feels like it could-
- JDJamie Dimon
But, but the whole system was in trouble. But WaMu put us in California, uh, uh, parts of Nevada, Arizona, not Arizona, uh, Georgia, Florida, which we weren't in. So think of these really healthy states, uh, and they had, you know, uh, twenty-three hundred branches. They were-- and they had, they had huge mortgage problems, but we had looked at it over and over and over, so we knew their mortgage books cold, and we wrote off, we bought it for-
- BGBen Gilbert
And this was all before-
- JDJamie Dimon
We, we bought it for a thirty billion dollar discount to tangible book value because they had debt, and we left the debt behind. And so, and that thirty billion was approximately what the mortgage loss was gonna be. So we bought the company. Think if we bought a company clean, we wrote off all that stuff, the books were clean, and then we did something unheard of, too. The next day or two days later, I went in the market and raised another eleven billion dollars of equity, which I didn't really need, but again, this is my conservatism. Uh, I was like: You know what? This could get even worse, and, and I don't want to be short capital liquidity. So we, you know, we raised that to make sure our balance sheet was just as strong as it was after WaMu than it was before WaMu.
- BGBen Gilbert
And you already had the reputation to pull this off, right? Uh, uh, I'm imagining i- in the worst month of the financial crisis, who can go out and raise eleven billion dollars of equity?
- JDJamie Dimon
Yeah. It was-
- BGBen Gilbert
Yeah.
- JDJamie Dimon
People, people trust you. But yeah, we knew a lot of the shareholders, and, you know, you earn your trust over time with shareholders, and, you know, we explained... We, we gave them a, a quick little presentation over the, you know, uh, uh... Yeah, and a lot of them stepped up and said, "This is great." Um, they also know we can execute it because behind the Bear Stearns, people forget the work is the next day, you got fifty thousand people consolidating, you know, five thousand applications, branches, compensation programs, uh, you know, settlement programs, you know, payment systems. It's a lot of work, but we obviously have the capability to do that, and we had the capability to do WaMu. I think we finished the WaMu consolidations in nine months, all of them. So that within nine months, they were all on the same systems, which allows you to start doing a better job in customer service, uh, and things like that.
- 46:16 – 49:46
Post-crisis lessons and today’s risk map: private credit, valuations, and cyber
- BGBen Gilbert
So this fortress balance sheet strategy and raising this equity capital and, you know, having additional margin of safety and conservative accounting, in retrospect, it seems like the obvious right strategy for running a large financial institution. Why wasn't everyone else copying it? Ha- have people changed, and does everyone else run their banks like this now?
- JDJamie Dimon
I think people, the people are more conservative today. I think regulators are more conservative today. But again, I go back to people get involved in aggressive accounting. Uh, they don't look at stressing their own bank i- in a real way. Uh, you know, you saw people take too much interest rate risk, too much credit exposure, too much optionality risk, and, and or, or sometimes it's new products. So if you look at the financial services, very often it's the new products that blow up. It takes a while. They haven't been through a cycle, and you, you had that with equities way back in nineteen twenty-nine. You had it with options, you had it with equity derivatives, you had it with mortgages, you had it with Ginnie. Even Ginnie Mae's at one point blew up, even though they're government guaranteed.
- DRDavid Rosenthal
You arguably had it with quant and with LTCM.
- JDJamie Dimon
It happened with quant, it happened with leveraged lending.
- BGBen Gilbert
It-
- JDJamie Dimon
And then people then become more rational in how they run these balance sheets and how they think through the risk.
- BGBen Gilbert
All right, so, so I have to ask you, is this private credit today?
- JDJamie Dimon
Say it again. [laughing]
- BGBen Gilbert
Is this private credit today?
- JDJamie Dimon
I, I don't really think so. I, I don't think... It's two trillion dollars. It's grown rapidly, that's an issue. But what happens-- the other thing about market is there's some very good actors in it who know what they're doing. Customers like the product, so I always say, "Well, the customers like it," and but there are also people who don't know what they're doing, and it's grown rapidly. So there, it may, there may be something in there that would become a problem one day. I don't think it's systemic. So that two trillion, the mortgage market, when the time it blew up, was, I'm gonna say nine trillion, and a trillion dollars was lost. This is, you know, and it was-
- DRDavid Rosenthal
A trillion dollars was also-
- JDJamie Dimon
In a highly levered system
- DRDavid Rosenthal
-more than a trillion dollars back then.
- JDJamie Dimon
Yeah, a lot of these private, a lot of these private credits are not leveraged like that. But that doesn't, doesn't mean there won't be problems, but it's, it's slightly different. But we-- you got, but you look at the whole system, there are other things out there that, you know, are leveraged, that, you know, can cause problems. And of course, people take secret leverage in ways you don't necessarily see it.
- BGBen Gilbert
What, what are some of these in your mind that are potentially problematic today?
- JDJamie Dimon
Well, I... Look, I, I look at-- when you look at asset prices, they're rather high. Now, I'm not saying that's bad, but if we, if, if today PEs were fifteen as opposed to twenty-three, I'd say that's a lot less risk, a lot less to fall, and you have some upside. I would say at [chuckles] twenty-three, there's not a lot of upside, and there's a long way to fall, and that's true with credit spreads. So and we, and we look at-... we stress test everything. We do, like, a hundred stress tests a week, you know, and to make sure we can handle a wide variety of things. And then the other thing, and the biggest risk to me, is cyber. I mean, I, I think this cyber stuff is-- You know, we, we're very good at it. We work with all the government agencies. They would say that Jamie and what's up, we spend eight hundred million dollars a year or something on it. We educate people on it. We just do... But it is, you're talking about grids, and communications companies, and water, uh, uh, and even part of the military establishment. The, the protections are not what you need, uh, if we ever get in any kind of war where cyber is involved, and China is very good at it, and so is Russia, but Russia is mostly criminal, which is slightly different.
- BGBen Gilbert
All right-
- DRDavid Rosenthal
What-
- BGBen Gilbert
I'm going to pull us back to the story.
- DRDavid Rosenthal
[laughing]
- BGBen Gilbert
We're going to fast forward to twenty twenty-three.
- DRDavid Rosenthal
We're not really equipped to talk about, yeah, Russia, so. [laughing]
- BGBen Gilbert
Uh-
- DRDavid Rosenthal
[laughing] It's not what we do on Acquired, but, but thank, um-
- 49:46 – 54:45
2023 bank failures and First Republic: concentrated deposits, rate risk, and product learning
- BGBen Gilbert
Silicon Valley Bank-
- DRDavid Rosenthal
[chuckles] Yeah.
- BGBen Gilbert
And First Republic both fail. You're there again. Did you see it coming? What lessons did you learn from how two thousand and eight went that you could apply in twenty twenty-three? Obviously, you bought First Republic.
- JDJamie Dimon
Yeah. It's the Silicon Valley Bank. You know, they-- both Silicon Valley Bank and First did some very good stuff, but they, the, they both had something, something unique that we didn't know at the time. I'm gonna call them concentrated deposits. Not uninsured, because people are mistaken, that concentrated, and so a lot of venture capital. What happened with Silicon Valley Bank and kind of First Republic is some of these large venture capital companies, call them, there are hundreds of them, maybe a thousand, told their constituent clients that they invested in, who all banked at Silicon Valley and First Republic, "The banks aren't safe, get out," and they all removed their deposits. And Silicon Valley Bank, I think they had two hundred billion deposits, or three hundred billion, a hundred billion in one day, and that caused the problem, but they also had other problems. They didn't have proper liquidity, uh, they didn't have their collateral posted at the Fed, and they had taken too much interest rate exposure, and the interest rate exposure was hidden by accounting. It was called held to maturity, where you don't have to mark even treasuries to market, and I always hated held to maturity because, uh... But it gives you better regulatory returns and stuff like that. But when that held to maturity, the tan-- If you said, "What's the tangible book value of one of these banks?" You said it was a hundred. Well, all of a sudden, it was fifty if you just marked that one thing to market. And, a- and there's-- Now, here, now you're into judgment land. At what point, if you saw a bank where just that one mark had the tangible book value drop to forty or thirty cents to the dollar, would you panic? I would have said, "That's too much risk." And, you know, the regulators helped this because they said r- rates are going to stay low forever. So these banks bought a lot of three percent mortgages, and when, you know, three percent mortgages, when rates went up to five percent, you know, worth sixty cents on the dollar or fifty cents, and [chuckles] that was it. And so both those had, they took too much interest rate exposure, known to management, and it was known to the regulators, and you know, uh, and fixable. So, you know, we, we knew about, a little bit about Silicon Valley Bank. We were trying to compete in that area, so we learned a lot afterwards about how to do a better job for that ecosystem of venture capital. We have a whole campus in Palo Alto now. We've hired five hundred innovation bankers. We cover, uh, venture capital companies. We're not as good as they are yet. We're, we're going to get there because we're, we're organized slightly differently. And we knew First Republic. We were watching it. I had called Janet Yellen that, I said, "That, c- that company's in trouble, and one or two others. If you want to, we'll take a look. We could probably buy it and eliminate the problem." They waited a little bit too long. It was kind of a little melting ice cube. Uh, but you can imagine, the day we bought it, you never heard about it again. We hedged all their exposures in a couple of days, and, you know, we merged everything in, we wrote everything down, and... But we did get some good stuff from them. We, we actually got some good people. You know, the, the normal thing in acquisition is they're terrible, get rid of them, or they failed, but we also looked at what they did, how they dealt with clients. Some of them may be clients here. They did a great job with high-net-worth clients. Single point of contact, you know, concierge services. So now, if you go down Madison Avenue, you see things called J.P. Morgan Financial Center.
- BGBen Gilbert
That's your first J.P. Morgan-branded consumer effort, right?
- JDJamie Dimon
Yes, because it's, it's kind of based on that. When you walk in there, we know your small business, we know your mortgage, we know your consumer banking, uh, we can get you travel, we can do a whole bunch of different stuff, so very high-level s- uh, services. We- I think we have twenty of them now, but I love it, and if it works, you know, in twenty years, we'll have three hundred. And so these things are opportunities, and I hope it works. You know, you don't always know they're gonna work for a fact, but, but so far, so good.
- BGBen Gilbert
All right, listeners, now it is time to talk about one of our favorite companies, Statsig.
- DRDavid Rosenthal
Statsig is the tool of choice for product development teams at hundreds of great companies, including OpenAI, Notion, Rippling, Brex, Atlassian, and more. So why are all of these hyper-growth companies using Statsig?
- BGBen Gilbert
Well, in the past, every major tech company spent years rebuilding the same internal data tools, like feature flags, product A/B testing, logging services, product analytics, dashboards, you name it. But the latest generation of great companies are just using Statsig.
- DRDavid Rosenthal
Yep, Statsig has rebuilt the entire suite of data tools that previously was only in use at the biggest tech giants as a standalone product. This includes cutting-edge product experimentation, feature flags for safe deployments, session replays, analytics, and more, all backed by a single set of product data. It's a holistic suite to build better products.
- BGBen Gilbert
Statsig is also warehouse native, so it can plug directly into your existing data in Snowflake, BigQuery, whatever you're using. That means way more privacy and security, great for any finance listeners out there, plus no sending your data to yet another tool.
- DRDavid Rosenthal
So if you're ready to give your product and engineering teams access to great data tools, go to statsig.com/acquired to get started. That's S-T-A-T-S-I-G dot com slash acquired. They have a generous free tier and a fifty-thousand-dollar startup program. Just remember to tell them that Ben and David sent you.
- 54:45 – 1:06:01
Why JPMorgan separated from the pack: coherent strategy, compounding investment, and team culture
- BGBen Gilbert
All right, so we're, we're effectively caught up to today, and if we're trying to-- and now we've got the whole story, we've got a lot of context. Obviously, let-- didn't go into every detail, but if we're now trying to answer-
- DRDavid Rosenthal
This is a live show.
- BGBen Gilbert
Yes. If we're now trying to answer the question: How did you separate from the pack? Why did you become a completely different animal than your whole competitive set?... What are the things in your mind that led to this success?
- JDJamie Dimon
Well, I, look, I, I mean, I don't, I don't know totally. First of all, y- 'cause we skipped over strategy a little bit, and this is important for you all that we, we, we have-- what we do is the same thing that a community bank does other than investment bank, global investment banking, okay? So if you walk into a small community bank, they know your business account, they know your consumer account, and they usually have a trust company. They used to ma-- they used to call it trust. They'd manage your private affairs, they'd set up a trust for you, and they'd do stuff like that. And their CRM is up here. They don't need a Salesforce CRM because they know everyone in town. And they didn't do big-time global investment banking, but the strategy, those businesses fit together, they feed each other, and so does investment banking. A lot of our middle-market clients use investment banking products. A lot of our consumer clients use some FX. So all of our businesses feed each other. There's no extraneous. We got rid of everything that didn't fit a strategy, and then you start building client businesses and client services, fortress balance sheet, fortress accounting, all those various things. And, and, you know, I, I, and I've always talked about-
- BGBen Gilbert
So it's, it's, it's holding a portfolio of things that actually feed each other.
- JDJamie Dimon
They actually fit. Whereas, you know, Citi had consu- commer- consumer finance, that didn't fit. Life insurance, that didn't fit. Property casualty, that didn't... They eventually got rid of them all. Sandy just wanted to do more of them. You know, he bought American General, which did, uh, truck leasing, for God's sake. I mean, and, you know, once [chuckles] you get involved in these things, it's hard for people to understand the risk in each one of these businesses when... But all of ours fit. I don't like hobbies, I don't like things. You know, we made-- and we've made plenty of mistakes because you ha- you have to try and test things, and then you're always investing for the future. That investment is always people, branches, and technology. And that's true whether they're investment banking people or consumer bank people or opening consumer branches or... I think Doug, Doug Pettam is here and Troy Rohrbach, who run the global investment bank, but they've opened, you know, co- commercial banking branches all over Europe. And I think you were telling me, I mean, it's, it's, it's going great, you know, and it's feeding all other parts of the company. So just sticking to your knitting, constantly investing, you know, not overreacting to the market. You know, markets are like accordions. Uh, and then sometimes, you know, it's a, if you're strong when others aren't, you have a chance to buy things you want to buy. And then always look at the world from the point of view of the consumer. What do you want? How do you want it? How do you want to get it? Can we provide it to you, uh, uh, in a way that makes sense for us, too? You know, not going for the last dollar and not... Nothing like that, and so, uh, and building teams of people. You know, our people are curious and smart. They have heart, they have soul, they give a damn about, uh, you know, the guards in the company and the receptionists, and, uh, you know, it's not just about the big-time bankers and people pounding their chest. You know, we don't- try not to put up with that. And we have big-time bankers. They are exceptional, you know, and, uh, but the company, pff, you know, serves the clients, and we have, uh... And I think the clients know that.
- BGBen Gilbert
When, when you really dig in to start analyzing JPMorgan's financials, you kind of see this one thing that jumps right out at you, which is the efficiency ratio. For every dollar that you make compared to your competitors, you get to keep fifteen cents more of that dollar as profit. It's not hard to see how that compounds and how that allows reinvestments, and why is your efficiency ratio so much better than competitors?
- JDJamie Dimon
It's, it is literally continuously investing and g- gaining business at the margin and not stopping and not stop, starting. And, and the thing is, the thing about margins, too, is that we, we have that margin while investing a lot. It's much easier to have that margin and just, you know, we can cut billions of dollars of marketing out tomorrow. We can stop opening branches and save a billion dollars next year. We could do a lot of things. Your margins will go up, your growth will go down, your long-term margins will probably get worse. Uh, so we kind of look right through the cycle, and we look at the actual economics of what we do, not the accounting of what we do. Uh, and, you know, we have, you know, we've built it over time. You know, we have great people and great products, and there, there's some secret sauce I'm not going to tell you about. We do Investor Day, and we tell everyone everything, and I'm sitting there watching my p- I never do presentations. I'm watching them do the presentations, and I'm saying: "Oh, God, we're just giving away too many secrets here." [laughing] But, but-
- BGBen Gilbert
So there are secrets as to why the efficiency ratio is so good.
- JDJamie Dimon
Well, you know, I saw Howard Schultz here before, you know, and... Ooh, I'm not supposed to say that, probably. [laughing]
- DRDavid Rosenthal
It's okay. It's okay.
- JDJamie Dimon
But... No, but-
- DRDavid Rosenthal
We're glad you invited your friends
- JDJamie Dimon
... look what he, look what he built over the years. You know, the consistency, the curiosity, the heart, the, you know, branch-by-branch products. It's just always doing that, knowing you're going to make mistakes-
- DRDavid Rosenthal
[chuckles]
- JDJamie Dimon
- but building the culture that just kind of plows through that. And you all know, I, I do use sports. Sports is a great analogy. If you have a, a sports team with a bunch of real jerks on it, are they going to be a great team? Almost never. You know, if, uh, i- if, if the team members aren't giving it their, their best every day during practice... You look at Tom Brady, every day at practice, he worked hard. You know, if people are not giving their best, how are you going to have a great team? And it's not that different in business. The difference in business, you can BS about it all the time. You can make up stories, but in sports, you see it, you know, on the playing field. The, do they have the team? Do they play together? They don't even have to be friends. They have to practice, know their teams, and so I do think companies have that. It's like a sauce that works, and you've seen it in lots of different companies, you know, not just JPMorgan Chase.
- DRDavid Rosenthal
Yep. So all right, we've got one last question for you. Uh, if you look back to 2008, which was a long time ago now-
- JDJamie Dimon
To two thousand when?
- DRDavid Rosenthal
To 2008, which was a long time ago now. All of the other leaders that were involved in that era have long since retired. I mean, I think m- many folks within JPMorgan Chase have long since retired since then. It seems like you're working as hard as ever-
- JDJamie Dimon
Yeah
- DRDavid Rosenthal
... and in it as much as ever. Why are you still here? What keeps you going?
- JDJamie Dimon
Yeah. Uh, so I want to thank my wife, who's here, too, who suffered through all this with me all these years and-
- SPSpeaker
[applauding]
- JDJamie Dimon
- probably couldn't have done it-... couldn't have done it without her. [audience cheering] Uh, I don't-- look, I, I, I don't know, but I do believe- [laughing] ... my, my grandparents, all Greek immigrants-
- BGBen Gilbert
The truth.
- DRDavid Rosenthal
There we go. [chuckles]
- JDJamie Dimon
My grandparents, all Greek immigrants who didn't finish high school, uh, but there's a Greek ethic, you know, which I-- and you only realize you're learning from your parents, you know, from the ground up. And Judy's parents, my wife's parents, were the same, which is, you know, have a purpose. You know, have-- and that, it could be art, it could be science, it could be military, it could be business, it could be, it could, it could be just being a great parent, a great teacher, you know. But have a purpose, and then do the best you can. You know, give it, give it your all. Don't, like, be one of those people who's complaining all the time. You know, you give it your best, and, uh, and then treat everyone properly. Everyone. You know, like I, if I, and, you know, including, like, if there's a bully beating up on someone, you had to stand up for the someone. You were not allowed to allow a bully to do it. So y- how you treat people, what you do, and so in, in my hierarchy of life, the most important thing is my family. Uh, still is. The second thing is my country, 'cause I think this country is the indispensable nation that brought freedom of speech, freedom of religion, freedom of enterprise- [audience cheering] uh, which we have to teach everywhere we go about how important it is. I don't think people fully understand it sometimes. And then my purpose, 'cause, you know, they-- my family doesn't want me home every day, and this is, this is my contribution. Through this company, I can help cities, states, schools, companies, employees, and I, I get the biggest kick out of that, and so, uh, that's what I do. And as long as I have the energy, I'm gonna do it. I can't imag-- I'm not-- I don't play golf, you know? [laughing]
- DRDavid Rosenthal
[laughing]
- JDJamie Dimon
My daughter, one of my daughters, said, "Dad, you need some hobbies," and I said, "I do." We-- uh, hanging out with you, family travel, barbecuing, wine. We now like whiskeys, and, uh, I love re- I love history. I think history is the greatest teacher of all time. Hiking. I can't play tennis anymore 'cause of my back, but those are my hobbies. I don't buy fancy cars and stuff like that, but this gives me purpose in life beyond family and beyond country. Plus, I think this helps the country. You know, I get to do a lot of things for our country, uh, that I just think are quite meaningful from this job. And so ev-- when I'm done with this, I don't know, I'll teach and write. I may write a book like Andrew Ross Sorkin did. Uh, I'll do something, but I gotta do something. You know, I'm not gonna twiddle my thumbs and smell the flowers. [audience laughing]
- BGBen Gilbert
Um, there are a lot of people who have floated your name for, uh, political or policy roles over the years. It is har-- there is only one job that could possibly impact the country in a bigger scale than you're currently doing. Do you agree?
Episode duration: 1:06:01
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Transcript of episode AR_1IPhzAtU
