Jamie Dimon and the boring secret of JPMorgan’s success

At the start of the 2008 financial crisis, the Federal Government reached out to one company they knew could handle the catastrophically managed Bear Stearns. They knew JPMorgan would be able to handle a massive administrative and financial challenge even as others faltered. JPMorgan still suffered from the 2008 crisis, but far less than most other banks. Their resilience was unique among companies in that time, and particularly among large banks. Some have criticized the bank for being too big to fail, but their unique strategies have earned them the market share that they possess. Of course they have benefitted from countless regulatory protections for the banking industry, but rather than using that as an excuse for poor management, they have clad their institution with strength instead. Jamie Dimon has worked tirelessly to structure the bank using a more rigorous set of evaluative principles than most others in the financial industry use. His long vision for management and stability differ from the competition, but have stood the test of time.

JP Morgan separated itself from the competitors first in its desire to shift away from high return,  high-risk assets. American government-enabled banking in general is rife with fundamental and  practical criticism from a true free market audience, but Jamie Dimon takes the risk of the profession with the utmost seriousness. Rather than taking bets with depositors’ money to seek short term gains, Dimon takes every pain to vet risky assets because he knows that in the banking business, even one fiasco has the power to strip credibility. Long before the 2008 crisis JPMorgan had gradually shifted away from subprime mortgage back securities. They seemed too good to be true, because they were too good to be true. However, most banks followed the examples of others and did not question their validity. JPMorgan’s low exposure to subprime mortgage back securities meant that they were compromised far less than the rest of the industry. To this day, they have continually sought to heavily vet then protect their more speculative assets with more stable items. They have recognized that long-term growth can only be pursued while protected from short term instability.

In place of playing fast and loose with depositors’ savings, JP Morgan has repeatedly diversified into stable assets and the most slow growing and stable industries. The company buys land, property, and stock in fundamentally stable companies to protect their depositors even if the market takes a dip for the worse. Precious metals and artwork also make up substantial portions of the JPMorgan hoard of assets.  While many other banks seek high returns to differentiate themselves from the market, JP Morgan understands that diversification outside of typical speculative financial markets is the most effective protection of wealth. Even beyond investments, the bank has diversified the scope of its business to seek stability as industries shift. Particularly in the banking industry, numerous situations of creating poor incentives and bailing out poorly managed banks, JP Morgan has consistently acted upon the idea that trust earned from depositors is worth more than anything else.

The final center of J.P. Morgan’s countercultural banking strategy is the prioritization of underlying organizational competency above profits. High profits often mask poor underlying company structure and Jamie Dimon consistently prioritizes business structure, both in JPMorgan itself and the businesses they choose to invest in. When Dimon speaks of profit, he almost seems disdainful as he so deeply understands that profit and loss are only a small part of a much greater financial picture. He understands a truth that many in the investment world fail to grasp: most of the time, real performance will be rewarded in the long run. Chasing gains should be secondary to whether that investment will be of real use to people in the future. 

While the average investor does not have access to Dimon’s armies of analysts, they can still pull from these insights when planning their own portfolio and managing their own business. It is difficult to access the inner workings of companies you choose to invest in, but gold can be a helpful substitute. It is an asset with a clear demand in the future, as Trump’s tariffs seem to threaten the dollar’s role as an exchange currency. Organizational incompetence is the death blow for any investment and the dollar is no exception. Gold is not subject to any shocks of poor management, and will outperform all investor hype-driven stocks if given enough time. Dimon’s prioritization of substance over flash can teach investors the value of avoiding the dollar and fan favorite stocks in favor of gold, real estate, and carefully selected stocks.