Jamie Dimon’s book-length annual report letters are the closest thing the industry has to a State of the Union, with the exception, arguably, of a couple of fat regulatory reports. But the annual letters from the chairman and chief executive of JPMorgan Chase have the distinction of definite viewpoints, sometimes opinionated, on a multitude of issues. They’re also a good deal more interesting and readable.
In the 2023 annual report’s 61-page letter, Dimon covers a slew of issues, from the outlook for the economy (he has concerns, see the gray box below) to the aftermath of his bank’s takeover of First Republic Bank (going well, but not as juicy a deal as some think) to the problems caused by the state of corporate governance (too many to list here) to Dimon’s dislike of much of the current regulatory agenda (Basel III Endgame is just for starters). He spends a good deal of time on the state of the world and why America must reassert its leadership, while also talking about performance trends and strategy for JPMorgan Chase.
He goes so far as to suggest that it may be time for a new Bretton Woods conference, to review and reset the world economy and so much else, adding that “any new system has to take into account and properly address the needs of all nations, including areas of concentrated poverty.” (The Bretton Woods Agreement, which has it roots in the midst of World War II, set up much of the skeleton of the world’s monetary systems.)
Jamie Dimon’s gloomy economic forecast
The head of JPMorgan Chase has “ongoing concerns about persistent inflationary pressures” and warns that interest rates could rise to 8%, rather than falling, during 2024.
A worst-case scenario Jamie Dimon considers possible: a return to stagflation, a mixture of recession and inflation. He says in his annual shareholder letter that this “would not only come with higher interest rates but also with higher credit losses, lower business volumes and more difficult markets.”
Dimon warns that many factors — all beyond direct control of the Federal Reserve — are still stoking inflation. Among them: ongoing deficit fiscal spending in boom times, remilitarization of the world, restructuring of global trade, capital needs of the “green economy,” and the possibility of higher energy prices.
Another worry: the Fed’s overall policies: “I remain more concerned about quantitative easing than most, and its reversal [quantitative tightening], which has never been done before at this scale.”
What about that “soft landing”? Dimon says the securities markets’ consensus seems to be a 70%-80% shot at a soft landing.
Says Dimon: “I believe the odds are a lot lower than that.”
There’s even a section that could be called “Chairman Dimon’s Guide to Running a Bank.” This includes a warning to “shed sacred cows, seek out blind spots and challenge the status quo.” He gives several examples, such as “Stripe, Inc. built a payments business by working with developers — something we never would have imagined but might have figured out if we had tried to seek out what others were doing in this area.”
Three technological topics stood out for us: his views on social media, Chase’s ongoing and growing adoption of artificial intelligence, and the company’s hopes and early successes as it shifts to cloud computing.
Social Media: It’s Time to Clean Things Up
Why is the head of the nation’s largest bank talking about social media? Says Dimon: “The current state of the online information landscape has wide-ranging implications on trust in institutions, information integrity and more — and it bears on institutions like ours, where platform policy has increasingly widespread implications for concerns about fraud, security and other issue spaces.”
Dimon worries about the negative effects of social media, “from the manipulation of elections to the increasingly documented negative effects on the mental health of children.”
He says social media companies should address such matters — “and swiftly.”
Among Dimon’s suggestions is giving people more control over what pops up in their feed and granting parents’ more control over what their kids see.
Dimon also thinks authentication of social media accounts should be strengthened. “This would have the virtue of increasing individual accountability and reducing imposters, bots and possibly foreign actors on platforms.” He also believes this would help people who want to see content posted by sources that take responsibility for what they publish.
Why such effort? Dimon says it would be “all in service of significantly enhancing the well-being, quality, and civility of our experiences online and in the world around us.”
See all of our latest coverage on social media.
Artificial Intelligence: We’re All Going to be in the Game
Dimon says that the bank employs over 2,000 AI and machine learning experts and data scientists and continues to recruit more. Last year, Chase created a new post called the Chief Data & Analytics Officer who sits on the operating committee and reports to Dimon and Daniel Pinto, president and COO. Chase veteran Teresa Heitsenrether was appointed to the position.
The company has over 400 use cases where AI is being used in some form and Dimon says that many of the applications are already paying for themselves. A key part of the attraction is refining the mountain of data that Chase represents into knowledge that can be used.
In his letter, Dimon acknowledges, “We do not know the full effect or the precise rate at which AI will change our business — or how it will affect society at large …” However, he thinks AI technology, in all of its forms, will be a force for change as significant as such tech as the printing press, computing and the Internet. He foresees it augmenting every job in the bank, and likely eliminating some positions while creating others.
Generative artificial intelligence is under review. Dimon thinks it will be of the most help in software engineering, customer service and operations.
“In the future, we envision GenAI helping us reimagine entire business workflows,” says Dimon. “We will continue to experiment with these AI and machine learning capabilities and implement solutions in a safe, responsible way.”
See all of our latest coverage on artificial intelligence in banking.
Cloud Computing: We’re Going for it, but with Hands on the Wheel
Linked to AI is the need for speed and computing power, both of which cloud computing promises.
“To date, about 50% of our applications run a large part of their processing in the public or private cloud,” says Dimon. “Approximately 70% of our data is now running in the public or private cloud.” By the end of 2024, he says, Chase will have increased those figures to 70% of applications and 75% of data.
Dimon notes that Chase has invested roughly $2 billion to build four new private cloud data centers of its own in the U.S.
“We intend to maintain our own expertise so that we’re never reliant on the expertise of others even if that requires additional money,” says Dimon.
Read past coverage of Jamie Dimon’s annual shareholder letters: