Last Man Standing (10 page)

At first, Ed Budd, chairman of Travelers, wanted Primerica to make an investment in Travelers, rather than merely taking it over. After a Saturday of due diligence in Hartford, Weill liked what he saw, and he was seriously considering Budd’s offer of a $350 million investment for 15 percent of the company as well as two board seats.

Dimon wasn’t overly excited. His longtime colleague Charlie Scharf recalls that Dimon was concerned that the firm was diving in too quickly without entirely understanding all the risks it would be taking on. Still, Dimon shared Weill’s desire to expand, and eventually found a way to make the numbers work to Primerica’s advantage.

It took a hurricane, however, to get the deal done. On August 24, Hurricane Andrew pounded Florida and exposed the already weak Travelers to a welter of new claims. That gave Weill and Dimon the chance to put the screws to Budd, extracting more control—27 percent of the company and four, not two, board seats—for $722 million. Still stinging from his $90 million payout to Tsai’s team (the gift of the G4 notwithstanding), Weill also demanded that the executives on Budd’s team give up their golden parachutes.

On September 20, the deal was announced, along with 3,500 job cuts. In December, both Weill and Dimon were named directors at Travelers. Bob Lipp was sent to Hartford as an emissary of Primerica. Weill also picked up a valuable executive trinket. Travelers was a sponsor of the Masters Golf Tournament at Augusta National Golf Club, a connection he later exploited to become a member of Augusta itself. Dimon, no fan of golf, couldn’t have cared less about the sponsorship. (In fact, his career-long aversion to golf goes hand in hand with his lack of interest in being a member of the “club.”)

With each new company that he and Weill bought, Dimon slowly built his own circle of allies. First, there had been Charlie Scharf at Commercial Credit. Then, with the purchase of Primerica, he met Steve Black. In 1992, he hired Heidi Miller, a Princeton graduate who had been working at Chemical Bank, as his assistant. And shortly thereafter, he brought on Jay Mandelbaum, a onetime consultant at McKinsey, to join the team at Smith Barney. His colleague James Calvano later reflected that those who worked with Dimon soon became the most desirable people in the organization, as they would have been schooled in discipline and direction. “If they survived with Jamie,” he said, “they could survive with you.”

Mandelbaum’s hiring is particularly instructive about Dimon’s methods. After deciding to leave the consulting business, Mandelbaum had earned the goodwill of enough people at McKinsey that partners called up both Weill and Dimon recommending they hire him. Forty-five minutes after being told that Dimon had been called, Mandelbaum’s phone rang. “Can you meet today at 5:00 o’clock?” the typically impatient Dimon asked. Mandelbaum soon joined the team.

• • •

The purchase of Primerica and investment in Travelers brought most of the Commercial Credit team back to New York from Baltimore, but the next deal gave Sandy Weill a professional homecoming. Before that could happen, though, a few pieces of his past had to be reshuffled. In early 1993 Jim Robinson was removed as chairman of American Express. Harvey Golub, whom Weill had personally recruited to American Express to run IDS before he’d left, was made chairman and CEO of the company.

Robinson had come under fire owing to the underperformance of American Express’s brokerage and banking subsidiary, Shearson Lehman Brothers, since 1990. A slew of McKinsey consultants, including Jay Mandelbaum at one point, had been camped out at Shearson for two years trying to put its house in order, to no avail. With the executive transition, Weill had a revelation. If there’s something that almost all new CEOs like to do, it’s to dump some underperforming division right
from the get-go, allowing them to start their tenure with a clean slate and solidly performing businesses. Guessing that Golub might consider unloading Shearson, Weill called his old friend and offered to take both the Shearson brokerage team and the company’s building in Tribeca—at 388 Greenwich Street—off Golub’s hands.

Over the next few weeks, Weill and Dimon negotiated with Golub and his team to come to a mutually beneficial deal. It was their most complicated transaction to date, as Weill had no interest in the investment banking franchise at Lehman Brothers, and so they sheared Shear-son right out of Shearson Lehman. Even so, at a cost of about $1 billion, it was the largest sale of a brokerage in history. (To that point, both Weill and Dimon remained uncomfortable taking on businesses that had balance sheets too heavily exposed to the gyrations of the capital markets. Shearson, with its brokers, had very little exposure. Lehman was another matter entirely.)

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 among 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.”

• • •