Although Zarb was technically in charge of Smith Barney, and was therefore responsible for integrating the two companies, hammering out the deal once again fell to Dimon. Zarb marveled as he watched Dimon almost single-handedly pull off the transaction. From the negotiations themselves to determining which parts of Shearson were worth keeping and which should be jettisoned, Dimon was Primerica’s point person across the board. “That was by far the most meaningful contribution he made while I was there, given what a major consolidation it was,” recalls Zarb. Dimon saw the transaction in medical terms. Severing the two companies, he told the New York Times, “was like splitting apart Siamese twins.”
(An opportunity for Weill’s two protégés—Peter Cohen and Jamie Dimon—to face each other across the negotiating table had been eliminated in early 2001, when Robinson had forced Cohen out of Shearson.)
Primerica stock surged 12 percent on news of the deal, as investors concluded that Weill would do a better job running Shearson—he’d built the company, after all—than Robinson and Cohen had done. It also made Primerica a major force to be reckoned with. Smith Barney had been small, with just 2,000 brokers. And although the combined Smith Barney Shearson still lacked a significant investment banking franchise, it now had 11,400 brokers, posing a serious threat to the industry leader, Merrill Lynch, which had 13,000. Primerica also doubled its mutual fund assets to more than $100 billion, making it the fourth-largest provider of funds in the nation.
The press once again focused on Dimon’s superiors, the titular heads of Primerica and Smith Barney Shearson—Sandy Weill and Frank Zarb. When the New York Times ran a picture of Weill and Zarb with their hands clasped, in celebration of the deal, Dimon was infuriated that they had taken full credit.
He wouldn’t have too much time to dwell on the unfairness of it all. After all, there was the business of the integration at hand. Dimon quickly went to work, overseeing the $250 million construction of five trading floors in a new building—390 Greenwich—next to the one that had been acquired. Steve Black, now head of capital markets at Smith Barney, took the responsibility of laying off a large chunk of the combined fixed-income division, impressing Dimon with his ability to make “tough decisions.” (Dimon himself received credit in the press for managing the cuts, an irony considering his anger at not getting enough credit for the deal itself.)
It was at this point that Jamie Dimon’s “list” started to become famous—or rather, infamous—around the Smith Barney offices. On a single sheet of 8½ by 11 paper, Dimon kept a number of smaller handwritten lists, including “Things I Owe People” and “Things People Owe Me.” Even as computers began to take over most parts of day-today life in the financial industry, Dimon has continued with his crinkled list to this very day, systematically attacking every single obligation on it with his ruthless efficiency.
Theresa Sweeney, his assistant from 1993 to 2000, can’t recall the number of times she was on the phone with one restaurant or another, asking someone to send the list he’d left on the table back to his office. “Poor Chip,” she recalls, speaking of Dimon’s longtime driver. “He always had to go back and pick it up somewhere. He probably still does.” (There was never any concern about confidential information, as few people can decipher Dimon’s handwriting.)
During a slow day—of which there are very few when you’re working for Jamie Dimon—Sweeney recalls Dimon asking her to go through more than a dozen boxes of materials he’d collected over his career. The two spent hours going through the stuff, and when they were finally finished, she thought she could take a break. Then she heard a noise from Dimon. “What is it?” she asked. “My to-do list is missing,” he sheepishly replied. And the process of going through every box started all over again. “I can’t remember how many times I had my head in a Dumpster looking for that thing,” she laughs.
(Dimon has kept almost all his papers since the beginning of his time with Weill, including scraps he’d scribbled on while doing deals for Commercial Credit. Clearly, this is evidence of a healthy ego—how many of us think it necessary to collect our daily notes for posterity? Yet Dimon seems to have understood that he and Weill were making history, and thus that the scrapbooks might serve as a useful historical record.)
It got to the point that when Sweeney emerged from Dimon’s office with a certain look on her face, the assistants who helped Sandy Weill and Bob Lipp all knew what had happened. “Everybody would say, ‘Theresa, I’m so sorry,’” Sweeney says. “Because he couldn’t get any work done until the list was found.” To this day, Jay Mandelbaum tries to steal the list from Dimon and hide it—or add something to it—just to see his laser-focused boss momentarily lose his bearings.
Dimon made one more critical addition to the team in 1993, adding Michael Cavanagh, a mild-mannered middle-class Catholic from Long Island who’d been to Yale and gone on to Shearson Lehman and then to law school at the University of Chicago. Cavanagh had experienced the same kind of revelation as Dimon had a decade previously. He appreciated the thrill of investment banking, but he also saw that the job was essentially that of an agent, helping others figure out what to do with their money. His brief experience at Lehman had been in the principal investing group, and he sought a similar opportunity, to be a “principal,” working with the house’s money and not someone else’s. Having known Jay Fishman from Shearson, Cavanagh secured an interview with Dimon and soon landed a job reporting to Mandelbaum.
Dimon also did an old friend a big favor at the time. He had kept in touch with Jeremy Paul since their days at Browning and saw his friend once or twice a year. With two young children, Paul had landed a gig as a law professor at the University of Connecticut Law School, and his wife was taking courses at Yale. Strapped for cash on his professor’s salary, Paul was concerned about paying the bills if his wife didn’t land a job once she finished up at Yale. There had been discussions at Primer-ica about Dimon himself moving to Hartford to get more involved at Travelers, and he concocted the idea that Paul take a sabbatical and join the company as his assistant. The purchase of Shearson made that idea unfeasible, however, as everyone understood that Dimon would be better utilized in New York. But they found a solution. Bob Lipp agreed to hire Paul as his assistant in Hartford.
Before he reported to Lipp, however, Paul did get to shadow Dimon at Smith Barney for two weeks. He was shocked by the capabilities of his longtime friend. If Dimon had 10 meetings a day with six people at each meeting coming in to brief him on topics x, y, or z, Paul watched in awe as it became painfully clear that Dimon invariably knew more about every topic than anyone else in the room, including those presenting.
Dimon also gave Paul a piece of advice he didn’t quite understand at the time but has since come to appreciate. “This might be counterintuitive for you,” Dimon said. “But it’s more important to do 10 things and get eight of them right than to do five and get them all right.”
Even as he was building his own team from the ground up, Dimon was confronted with a serious culture clash between the merged companies. Although many Smith Barney and Shearson people knew one another, Wall Street’s tribal attitudes made the integration a difficult one. During a gathering of senior Smith Barney executives, Dimon cracked a joke. “I’m tired of all the moaning and complaining,” he said to the room. “I am going to let each and every one of you fire one Shearson person, and then I don’t want to hear any more.” The entire room snapped to attention, salivating at the prospect of such a bloodletting. Dimon was amazed that they thought he’d been serious.
• • •
Even though Primerica was now one of Wall Street’s largest companies, the executive team maintained an informal approach to planning and strategy. Weill held monthly meetings in an old stone mansion on 100 acres of wooded property outside Greenwich. The standard routine was a long day of presentations and discussion, followed by long dinners. After a few drinks, Dimon invariably made fun of Sandy in front of the assembled group, prompting a few laughs am
ong the old guard and a nervous quiet among others.
Joseph Plumeri, the president of Smith Barney Shearson who had come over to Primerica as part of the Shearson deal, was amazed by the lack of structure at the very top of the firm. The first time he joined in an executive retreat, he asked Dimon if he needed to bring a presentation to make to the group. “No, just write it on a board,” was the response. “Write some numbers, whatever you want to do.” Although he was shocked by the informality, Plumeri nevertheless did as he was told, and no one gave him a sideways glance.
Plumeri marveled at Dimon’s ability to seemingly be everywhere at once. Primerica’s president did have a title, and some specific responsibilities, Plumeri noticed, but what he really seemed to do was watch everything. And “everything” especially meant costs. The operating model of Primerica was one in which managers were encouraged to get expenses as low as possible, while guarding revenues in the process. “Don’t do anything stupid,” Dimon told him. “And don’t waste any money. Let everybody else waste money and do stupid things; then we’ll buy them.”
• • •
For a time, the executive team held an annual end-of-year retreat at The Point resort on Saranac Lake, a lush “camp” not far from Lake Placid. With below-freezing temperatures, there was invariably a roaring fire. One year, when Dimon threw an empty FedEx shipping box into the fire, it was sucked up into the chimney, which became blocked. Soot spewed all over the room. It took the staff about three days to clean out the room, during which time Lipp teased Dimon relentlessly about the stupidity of the move.
Following in the path of other legendary financiers, Weill eventually bought his own camp—Green Bay—on Upper Saranac Lake in 1990. Like the most famous Wall Streeter turned Adirondack outdoors-man, John Pierpont “Jack” Morgan Jr., Weill spared little expense on the property. With a sizable main lodge surrounded by green-and-white guest cabins, the camp included a winterized boat dock, a fitness room for Sandy, and a two-lane indoor swimming pool for Joan. Unlike Morgan’s, however, it did not have two Steinway pianos on the premises.
Despite his devotion to cost-cutting at work, Dimon later would not deny himself some of the trappings of an oligarch at home. In November 2006, he paid $17.05 million for a weekend house in Bedford Corners in Westchester County, the highest sale price in Westchester for the year. Nestled on a 34-acre estate on the small Howlands Lake, the 1930s mansion has a guesthouse, tennis courts, and apple orchards. When asked why he didn’t buy a house in Greenwich alongside his fellow titans of finance, he replied, “I don’t want the same scene on weekends that I have when I’m here. The weekend house is for family. It’s for us to hang out together, to go to the local restaurants—and not even the nicest ones at that. I want to go to the local Indian or Italian place. That’s what I like.”
5. HIS OWN MAN
By 1993, Dimon effectively had day-to-day control over Smith Barney Shearson, whereas Frank Zarb approached his role more from a 30,000-foot perspective. The arrangement worked for a while. But running an important business without explicit acknowledgment of his role soon began to grate on Dimon.
Weill later wrote that Dimon began pestering him about what he saw as Zarb’s managerial weaknesses, and that Dimon soon began working hard to “annihilate Zarb.” Others, including Steve Black, now head of capital markets at Smith Barney Shearson, also began telling Weill that it was time to make a change.
Movement at rival firms offered Weill a radical solution to the problem, albeit one in contrast to his well-honed reputation for fiscal prudence. Morgan Stanley’s chairman, Richard Fisher, had recently embarrassed Weill’s old pal, the investment banker Bob Greenhill, by demoting him from president to “senior adviser.” Greenhill had an enviable roster of corporate relationships, but Wall Street gossip was that he couldn’t stay focused on the more mundane issues of running an entire company.
Weill and Greenhill had been close for years. In Weill’s darkest days after getting thrown out of American Express, Greenhill had stuck by him, even helping to try to orchestrate the Fireman’s Fund buyout. More recently, Greenhill had worked with Weill and Dimon on the Primerica transaction, and Weill’s instinctive loyalty kicked in. That, and his ambition. Seeing an opportunity to buy a one-man investment banking franchise, Weill floated the idea of bringing in Greenhill as Zarb’s replacement.
Greenhill, known as “Greenie” on the Street, was respected for all-night negotiations and his almost total lack of human emotion in the thick of business combat. A Yale graduate who had served in the navy in 1960, he once kept an Al Capp cartoon on the wall of his office in which Fearless Fosdick was riddled with bullets. The caption: “Mere Flesh Wounds.”
Some say Dimon was excited to have a first-class banker on the company’s starting line. Others say he was lukewarm about the idea. Why, he mused, was Weill proposing to replace one ineffective manager with another? “The entire world knows the reason he was demoted was because he couldn’t manage a lemonade stand,” said one senior official at Smith Barney. “And we want to hire him to be CEO of our company?”
Weill ignored such concerns and forged ahead. He and Dimon negotiated with Greenhill, eventually agreeing on a $20 million yearly salary plus 2 percent of Smith Barney’s profits over $50 million. In late June, they sealed the deal, and Weill “promoted” Frank Zarb to the role of vice chairman of Primerica. Weill seemed to try to camouflage the true intent of the move by also promoting Bob Lipp—whose talents were never in doubt—but few failed to understand what Weill was up to. The press soon called such a move “being Zarbed”—the Sandy Weill equivalent of being kicked upstairs.
Greenhill instantly got off on the wrong foot. Before meeting a single person at Smith Barney Shearson, he lined up a few dozen Morgan Stanley bankers to bring along with him—he ultimately hired 32, including his own trusted sidekick, Bob Lessin, who was tasked with running corporate finance, along with another young gun, Mike Leavitt.
The message to the Smith Barney team: you people are not top-tier, even though I’ve never even met any of you, and my people are. To the Morgan Stanley crowd, Smith Barney, for all its efforts, remained a mediocre outfit. But they were going to change all that. Mergers and acquisitions bankers were the studs of Wall Street, and brokers were just its rank and file. Greenhill and Lessin did big, exciting deals, and they promised to do more of the same at Smith Barney.
For a time, it was a believable proposition. Morgan Stanley’s chairman, Dick Fisher, at least, must have had reason to second-guess Green-hill’s demotion in the months ahead. On one occasion, when the CEO of one of Morgan Stanley’s clients was leaving Fisher’s office, Fisher asked where he was headed. “To Smith Barney,” was the response. Fisher asked if he knew how to get there. The CEO’s deadpan reply: “I presume I go down the elevator and follow the groove.”
And at first, Dimon tried to be as accommodating as he could be. Whereas Smith Barney had become accustomed to operating on a tighter budget than most investment banks—its people flew coach—the Morgan Stanley people demanded the same perquisites they had received in their old jobs: personal refrigerators, orthopedic chairs, town cars to take them home at 7:00 P.M. instead of at Smith Barney’s 10:00 P.M. cutoff. “Don’t worry about it,” Dimon told those who were wondering about the double standard, even though he was worrying about it himself.
In a serious miscalculation, however, Greenhill lost the support of one potential ally from the get-go: the head of capital markets, Steve Black. Concerned about his friend Black’s reaction to Greenhill’s hiring, Dimon had personally assured Black that his position at the firm was safe: he was going to be made a vice chairman of Smith Barney Shearson along with Lessin. Black would run all of Smith Barney’s capital markets businesses, and report to Greenhill.
Just a few days later, however, Greenhill informed Black that he planned to have him oversee only the equity side of the business, and that he was bringing in another Morgan Stanley veteran, Jack Lyness, to run fixed income c
apital markets. Also, Lyness was going to report straight to Greenhill, not to Black. Insulted, Black called Dimon and threatened to quit, along with his deputy Jim Boshart.
Completing the circle, Dimon then called Greenhill and read him the riot act. Greenhill still got his way about hiring Lyness, but it was an inauspicious start. Before he’d even begun working, he’d run up against the phenomenon known as Jamie Dimon. It was the first time, but it would not be the last.
Greenhill had demanded, in his negotiations with Weill and Dimon, that he be given the entirety of Smith Barney Shearson to run, not just the investment banking division. Weill agreed, but as an insurance policy encouraged Dimon to spend as much time as possible keeping an eye on operations.
It wasn’t long before Dimon concluded that Greenhill was spending excessive sums on people who weren’t worth the price—he regularly doubled Morgan Stanley bankers’ pay in order to lure them to the firm, in addition to giving them substantial signing bonuses. More worrisome, though, was the growing anger among the unit’s gigantic brokerage force about the new crowd’s diverting a disproportionate amount of the company’s profits. Greenhill, a career investment banker, was focused merely on the top line—bringing in revenues—while Dimon was, as usual, focused on the bottom line, the return on shareholders’ equity; and thus the two men were on an inevitable collision course.
Last Man Standing Page 8