Dimon’s “Hurricane” & Sheryl’s Wall Street

Jamie Dimon
Jamie Dimon, C.E.O. of JPMorgan Chase. Photo: Misha Friedman/Getty Images
William D. Cohan
June 5, 2022

Jamie Dimon, who has been at JPMorgan Chase since 2005 and led the big Wall Street firm masterfully through the great financial crisis, is normally pretty measured in his economic pronouncements, as befitting the chief executive of a nearly $400 billion company and the nation’s largest bank. But sometimes even disciplined leaders go off-script, and even get a little apocalyptic, as Dimon did this week at a research analyst conference when he was asked about the Federal Reserve’s ability to tame inflation. 

At the JPMorgan Chase investors conference the week before, Dimon had been slightly more subdued, referring to the coming economic troubles as “big storm clouds.” Somehow, in the space of a few days, the storm became a hurricane. “Everyone thinks the Fed can handle this,” Dimon said. “That hurricane is right out there down the road coming our way. We just don’t know if it’s a minor one or Superstorm Sandy, or Andrew or something like that, and you better brace yourself.” In any event, JPMorgan Chase’s crack communications team said Jamie’s comments at the investor conference were consistent with what he said at the investor day the week before. These are not the droids you’re looking for. 

But if Jamie is right, and an “economic hurricane” is on the way, that’s not going to be pleasant and will mean that the Federal Reserve failed to navigate a soft-landing after nearly 13 years of the central bank’s easy money policies that basically inflated one asset bubble after another across the economic spectrum. Even as pessimistic as I have been, I don’t think I would have described what’s in store for us as an “economic hurricane.” I hope Jamie is wrong, but if he’s right, then sheesh, the situation could be very bad, obviously. 

One theory making the rounds on the Manhattan dinner party circuit is that Jamie set up a bit of a “straw man” situation that he knows won’t be as bad as an “economic hurricane” and so he’ll come out looking good and then—wait for it—he’ll emerge as a viable candidate for president of the United States. I don’t buy this for a second (although I can certainly think of worse things than a President Dimon) but I feel duty-bound as your faithful servant to report the kinds of things that people are talking about. 

Sheryl’s Next Move

I suspect Wall Street will miss Sheryl Sandberg, who joined Facebook in 2008, when it wasn’t yet profitable, and over the next decade helped turn the company into an unstoppable profit machine, with $188 billion in revenue last year and a market value of more than $500 billion. Not for nothing is Sandberg one of the few non-founder, non-C.E.O. executives ever to become a billionaire. She would, in fact, be worth a whole lot more if she hadn’t unloaded so much of her stock. 

Her cultural influence probably peaked in 2013 with the publication of Lean In, her bestselling manifesto about the power women have to shape their lives and careers. Since then, her reputation seems to have suffered a few hits for her role in various Facebook scandals. Still, Sheryl is relatively young and plenty ambitious. I wouldn’t be surprised if she’s already been called about a few C.E.O. openings, if she even wants them. She will no doubt be much sought after, despite whatever role she may or may not have had in making Facebook/Meta a controversial social media platform. 

She is a protégé of Larry Summers when he was president of Harvard, so I could see her being heavily recruited for an important role—provost?—at an elite academic institution. She also worked for Larry when he was Treasury Secretary, so perhaps she could be recruited to work in the Biden administration, as long as it’s not for a role that requires Senate confirmation, or even to run for office herself. (Dianne Feinstein’s Senate seat will soon be open.) But this seems like a longshot since distaste for Big Tech is a rare bipartisan issue in Washington. She’s also a best-selling author and I’m sure her publishers at Penguin Random House are already thinking of a new series or topic area for her. Sheryl, after all, is a brand, and you could imagine how her voice could be stretched across memoir, how-to, childrens, and other categories. In a past media world, she’d already be inking deals with Netflix and Spotify, but I think those days are done with. 

So, if you ask me, she has quite an array of professional opportunities: corporate C.E.O., high government official, academia, best-selling author. But it looks like the first order of business will be attending to her third marriage, to Tom Bernthal, the C.E.O. of consulting company Kelton Global (and brother of actor Jon Bernthal, of Walking Dead fame). Public opinion about Facebook will not tarnish her reputation with the business community. Sheryl remains one of the most respected and accomplished corporate executives around. My guess is that she can pretty much write the next chapter of her life anyway she wants. 

Elon’s Foot-in-Mouth Disease

Elon Musk announced in a three-sentence company-wide email on Friday that Tesla will be laying off 10 percent of salaried employees, because, as he later explained, he has a “super bad feeling” about the U.S. economy. Fair enough, although perhaps hard to square with the news, also on Friday, that payrolls surged by 390,000 in May. Yes, the Fed is hiking interest rates, and there’s a potential hurricane on the horizon, to quote Dimon, but the labor market is still red hot and demand for electric vehicles is high. Ford, as President Biden noted when asked about Elon’s announcement, is currently increasing its investments in building new electric vehicles, and is hiring thousands of employees to meet the task. Rivian can’t keep up with demand for its vehicles, to the frustration of customers (including me).

Tesla, as I have been arguing for years, is irrationally overvalued, and arguably remains somewhat overvalued, even after its stock has dropped more than 40 percent this year. Could it be that Elon, watching his Silicon Valley peers get clobbered by the market correction, is simply being prudent by suggesting that some belt-tightening is in order?

It’s probably safe to say at this point that Elon does not operate by the normal rules of behavior, especially as they pertain to the C.E.O.s of public companies. But having a “super bad feeling” about the economy does not justify his impolitic pronouncement that he wants to lay off 10 percent of Tesla’s 110,000 employees, or 11,000 people. That’s a lot of people to lay off on what seems like a whim. On Friday, as often happens with Elon’s stray commentary, he clarified what apparently he meant by writing in a company-wide memo that “salaried” headcount would be reduced by 10 percent as it had become “overstaffed” in many areas, but that “hourly headcount” would increase and that the layoffs would not apply to anyone building cars, battery packs or solar panels. (Thank you for clarifying, Tesla lawyers!) 

Regardless of the clarification, this is yet another example of Elon shooting himself in the foot with an off-the-cuff remark. The Tesla stock was down around 9 percent on Friday; a pretty sizable one-day loss of around $75 billion of market value for the company. Why Elon, why, do you need to think out loud? 

In theory, culling the workforce of unproductive or unmotivated employees can be a valuable, if painful step, even for a growing company. Goldman Sachs does it. GE did it once upon a time. It’s a way to keep the workforce sharp and focused and motivated. No one wants to be in the bottom 10 percent. If handled with more aplomb, the idea of culling the workforce can be met with enthusiastic support by shareholders, who can envision a more productive workforce coupled with a reduction of costs. But Elon did not handle this situation with anything like aplomb. Needless to say, this will not be the approach to layoffs that will be found in textbooks. 

Corporate Referen-duh

Finally, a few stray observations about the latest activist push in the E.S.G. realm. As the Journal reports, activist shareholders have put abortion right on the proxies of a few enormous retailers, including Walmart, Lowe’s, and TJ Maxx, which has in turn applied pressure on their biggest institutional investors—BlackRock, Vanguard, and so on—to also take a stance on this issue, perhaps opening the floodgates. These giant funds, after all, now hold stakes worth trillions of dollars on behalf of investors, as well as many of the associated voting rights. Not for nothing did Sam Zell sarcastically compare Larry Fink to God.

I hate to be a cynic, but the truth is these shareholder referenda, even when they are about substantive issues such as abortion or gun control, have little impact on the ongoing political debate. Part of the reason is that such shareholder referenda rarely pass (the activist-led proposal that Walmart produce a report detailing the impact of looming abortion restrictions on its employees was swiftly voted down). And then even when they do—such as the recent majority vote that Jamie Dimon didn’t need another $52.6 million option award to feel motivated to do his job—they are often non-binding and serve only to garner a little press attention and perhaps make the board of directors feel guilty enough to actually do something. (Dimon responded to the aforementioned wrist-slapping by promising, “The board takes it very seriously” but my bet is that he will still get his money or most of it.) But on issues such as abortion or gun control, which are typically well beyond the purview of a corporation or a corporate board, then we are really just talking about window dressing here. 

It is worth noting that a number of Fortune 100 companies, including Goldman Sachs, Starbucks, Microsoft, and Amazon, have announced that they will pay for their employees to travel to states where abortion is legal, should the Supreme Court strike down Roe v. Wade. But this has little to do with corporate referenda and more to do with companies wanting to do the right thing for their employees if the law gets reversed, as is expected. Corporate referenda make for slightly amusing reading in an otherwise bland proxy statement but there’s no real substance behind the voting, whether shareholders vote for them or not. Sorry to burst any bubbles.