J.P. Morgan came through the financial crisis in very good shape. Looking back, what did you learn from that experience?
It was an amazing experience to see Jamie in action during the crisis. He was calm, disciplined and focused. He brought his people together and made clear what was going on and what decisions needed to be made to keep the company thriving. He made it clear that our mission was to continue serving our clients while protecting shareholders and the company. He’s one of the most successful CEOs in the world, and to watch him lead during that crisis was incredible.
A major reason that J.P. Morgan ended up better than most was discipline. Before the crisis, we were not really that obsessed with what everyone else was doing. We were more disciplined. That’s not to say we didn’t make mistakes; in the leveraged lending space, for example, we were a bit too aggressive, and that hurt us.
The other important decision we made was not to cut our way to profitability in the years during and after the crisis. We actually invested in the business during that time. We thought about what the client needed, what they were going to need and what services we were going to provide, taking into account the effect of new regulation. While some banks were retrenching, we remained committed to offering a complete set of products to our clients globally.
As regulation started to take shape, we knew early on that scale was going to become increasingly important. So we invested in areas and geographies that increased our scale. You’ve seen the results over time as we gained market share in equities and fixed income, in investment banking, in payments, pretty much everywhere.
How can a business as regulated and as diverse and as large as J.P. Morgan keep pace with technological change?
We have no choice but to seriously invest in technology. If you don’t, you will be priced out. Things are moving so fast that unless you are really at the forefront, you end up not being able to compete in the financial services industry. And then you are out of the game.
Hopefully, as technology evolves, regulation will continue to evolve alongside it. For instance, in the trading business, we are creating smarter and smarter algorithms for trade execution. As markets become more and more electronic, regulators are focused on regulating them without killing the innovation.
Finding that balance is important because if regulation doesn’t progress with technology, then there will be an issue. From what I see, regulators are being thoughtful about how to get there.
Do you think Wall Street is prepared for the next downturn in the market?
For the last 10 years, the market has been going in one direction, with some corrections along the way. At some point a slowdown will happen, and that is healthy. We believe that changing monetary policy will delay it for a period of time. Current thinking is that we are talking about 2021 for a slowdown.
But a slowdown is a slowdown, it’s not a crisis. It’s just the normal end of the economic cycle. The components of the previous crisis, they are not there anymore. There aren’t big imbalances in any sector in the economy. The banks are very well capitalized, with lots of liquidity, very controlled and risk is well managed. At the moment I don’t see any big components that are going to create a crisis.
As for the markets, a large number of issues—the rate of inflation in the US, the business cycle in the US, the level of interest rates, changes in Fed policy, the growth in China, Brexit, the European economies—are all going to drive what markets do or don’t do in the months to come.
What’s the biggest challenge facing J.P. Morgan in particular and Wall Street in general?
I think the industry overall needs to continue rebuilding its reputation after all that happened in the crisis. All the companies, in my view, have done a relatively good job at improving their culture. We are all becoming better at spotting issues of conduct. We are very focused on that.
For J.P. Morgan, we also need to avoid complacency and continue improving areas of our business. Overall the company looks very good. But we must continue to be honest and humble in our own assessments. We must dig down to a very granular level and really focus on improving in some of those areas where we aren’t the best. It’s also important for us to continue recruiting and retaining the best possible talent, because that’s the only way you’re going to win. Finally, we must continue to stay client-focused and provide them with great services. That’s in our DNA, but we can never lose sight of that.
If you had the opportunity to succeed Jamie Dimon as CEO of JPMorgan Chase, would that require moving to New York?
I love my job and I love living in London. Jamie is an amazing leader and the good news is, he’s not going anywhere any time soon.