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Dec
15
“Buy straw hats in winter.” —Bernard Baruch
Following up my earlier post, here are some lessons I learned while reading Duff McDonald’s, Last Man Standing: The Ascent of Jamie Dimon and JPMorgan Chase.
Self-Starters Have an Advantage
In college, during his final year at Browning, Dimon’s calculus teacher had a heart attack and the replacement didn’t know calculus. If Dimon and his handful of fellow classmates were going to learn, they’d have to teach themselves. “Three of the students decided to throw in the towel, but Dimon and the remaining two—one of whom was Jeremy Paul—spent a challenging year of self-instruction. ‘As far as working experiences go, that was pretty intense,’ recalls Paul. ‘Each day we’d go into the classroom and there was no teacher, just us. And we’d sit there, trying to work our way through the problems.’”
Mentoring Relationships Are Huge
In 1985, banking giant Sandy Weill left a top job at American Express. A year later, Weill took over a small company named Commercial Credit Corporation, that would eventually become Citigroup (after almost 20 years of mergers and acquisitions). Jamie Dimon was the guy Weill brought on from the beginning. “So began one of the greatest mentor-protégé relationships in the history of American business. Sandy Weill saw Jamie Dimon for what he was: an ambitious young man with an enormous capacity for hard work.” One of the more practical lessons that Weill would impart to Dimon was that “You can’t control income. It varies based on conditions outside of our control. But you can control expenses.” “And,” says Dimon, “he taught me one of the most important things in my career, which is not to rest on your laurels.”
Know What You’re Doing, Make Things Happen
One of the lessons McDonald distills from Dimon is to make sure you actually know what it is you’re doing. A novel concept in the banking industry! “Don’t go chasing the flavor of 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.”
“Dimon was widely regarded as the man who made things happen when they needed to happen. If there were costs that had to be cut, Dimon was the man for the job. The company needed higher credit ratings? Dimon figured out how to get them. What he brought to the table was the basic ability to understand the underlying drivers of any business—the two or three things that really mattered—far more quickly than his peers.”
Ethical Leadership Must Be A Value
One day during a class in American history–history is one of Dimon’s favorite subjects–the only African-American student in his class was dismissed after the teacher decided she had had enough of the student’s acting out. “Once the door closed behind him, the teacher turned toward the class and muttered, ‘Six hundred thousand died to free the slaves, and this is the gratitude we get.’ Dimon stood up, grabbed his things, and walked out the door. ‘He blasted me for not going with him,’ recalls Paul. ‘And he was right.’” Decades later, in 2008, Dimon’s job was effectively “to clean up the entire financial system. And in so doing, he proved a point he’s been focused on his entire life: that you can still win while doing the right thing.
Saying ‘No’ Allows You to Say ‘Yes’ Later
“It’s a well-known maxim that one of the hardest things about running a business is to maintain the ability to say no and thereby save limited resources for the best opportunities. Over time, most companies simply lose their discipline.” This discipline to save resources for prime opportunities was what ultimately made Dimon the last man standing on Wall Street during the collapse of 2008. “Don’t do anything stupid. And don’t waste any money. Let everybody else waste money and do stupid things; then we’ll buy them.”
“Know when to be capital rich. Both the economy and Wall Street have cycles, and he who is capital rich when the competition stumbles will see opportunities abound.
“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.”
“We think [the business] should be prepared for adverse times,” Dimon told analysts in a conference call. “In fact, we think if you’re strong in adverse times that 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.”
I’ll post my final thoughts tomorrow.
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