I once tried to hire Jamie Dimon.
He was—and still is—one of the brightest stars in banking. At the time I was pursuing Dimon to succeed me as CEO of SunAmerica, he was the understudy to Sandy Weil at Citi. Dimon had high ambitions, but I couldn't convince him to jump ship to head our retirement savings company. Years later, I made the right decision to appoint Jay Wintrob as my successor.
Dimon has been in the news a lot this week because of J.P. Morgan Chase's $2 billion trading loss that resulted from using credit derivatives to hedge the company's risk. Dimon is known as a skilled risk manager, meaning he keeps an eye on the downside at all times. The loss is big, and will have consequences for the company. I write in my book, “The Art of Being Unreasonable,” that risk is necessary in business, but you should never bet the farm. While J.P. Morgan’s loss is significant, it’s a fraction of the company’s earnings. They didn’t bet the farm, or even half the farm.
If a great bank with great management can lose $2 billion, despite all the regulation enacted since 2008, mistakes like this could still happen anywhere. And that would not be good. I’m generally not a proponent of increased government regulation, but I predict the federal government will likely step in to do some damage control by limiting how much risk banks can take on.
Mistakes happen in business. What counts, though, is how executives react. Dimon has done exactly the right thing. He quickly took to the airwaves and admitted the company's mistake, accepted responsibility and took swift action. Those are the keys to damage control.