Last Man Standing (20 page)

On December 29, the financial website
TheStreet.com
awarded
Dimon third place in its list “Top 10 Bad Byes of 1998.” His award was called “The Son I Never Had.”

• • •

Speculation erupted all over Wall Street about just what exactly had led Weill to make such a monumental choice, one that has, over the years, come to seem ever more rash and ill-conceived.

Weill ultimately came to view the conflict in very simple terms: Dimon was ready to be CEO, and Weill wasn’t ready to retire. Weill’s wife, Joan, said much the same thing in Weill’s autobiography. “The problem was that Sandy was too young to step aside, so the mentoree couldn’t get past the mentor,” she told Weill’s collaborator, Judah Kraushaar. Unable to resist another twist of the knife, she went on to say, “There’s a reason that people like Frank Zarb and Bob Greenhill left the company. They all complained about Jamie being headstrong.” Asked whether that was a fair assessment, Zarb responds, “Not true at all.”

Dimon also saw the conflict between him and Weill in uncomplicated terms. “I stuck my finger in Sandy’s eye,” he told the
New York Times Magazine
in 2000. More than a few colleagues see the situation as resulting from an escalation of a certain pattern. Jamie did the work, Zarb got the glory; Jamie did the work, Greenhill got the glory; then along comes Deryck Maughan, and Dimon is asked to share once again, not only with Maughan but also Victor Menezes of Citicorp. “I don’t know how many times you can go to that well before the well rebels,” says one executive.

In his autobiography, Weill tries to argue that Jamie Dimon was never his heir apparent. Most knowledgeable sources consider that revisionist history. “He should have been a Soviet,” one said after reading the passage. “You sit there and go, ‘What? Are you kidding?’ But Sandy says some things enough times that he actually starts to believe them.”

Weill steadfastly maintained that the fallout over his daughter’s departure had nothing to do with Dimon’s firing. But he also suggested that Dimon had lost Joan’s backing as a result of the way Jessica had
been treated. In the end, though, Weill maintains that he simply could no longer put up with Dimon’s flagrant displays of disrespect. “Jamie had annoyed me to no end over the last three years, and our relationship had gotten so dysfunctional that it plainly was hurting others in our company,” he wrote in
The Real Deal
. “Still, I felt sick given all that we had accomplished together. Jamie had wanted me to treat him as an equal partner, a desire for recognition [that] I understood but was unwilling to satisfy. I was nearly twenty-five years his senior and … his demands for equal treatment were disproportionate with what he deserved.”

Weill went on to chide himself for nothing more than a failure to teach. “I brought Jamie along quickly and in doing so probably gave him a sense of entitlement which discouraged him from building a consensual management style,” he wrote. “My real mistake, though, was that I repeatedly missed the chance in our early years together to curtail his aggressive behavior and mentor him into becoming a team player.” Weill was not alone in that sentiment. There were many who thought that Dimon might not have what it took to be a true leader, in large part because of his temper. (Dimon would suggest that his problem was not that he was not a team player—he worked extremely well with the likes of Bob Lipp, Bob Willumstad, Marge Magner, and even Chuck Prince—but that the relationship between him and Weill was the issue.)

Eight years later, in late 2008, Weill had begun to voice regret. “I had no doubt what Jamie could achieve,” he said. “I loved working with him. I loved the relationship we had and I feel terrible that it’s not what it could’ve been. I am very proud of what he’s doing.”

Mary McDermott, Citi’s communications chief, was on vacation in Italy when she heard of the firing. Sitting in the Grand Hotel in Florence, she found herself crying her eyes out. Weill later asked her to call
Fortune
magazine’s influential columnist, Carol Loomis, to say that it was the hardest thing he’d ever done in his life. Loomis’s blunt reply: “But he did it, didn’t he?”

Both men should have faced up to their issues earlier. Weill might have stood up to Dimon more forcefully earlier than he did. Having been unclear about succession, he must have known the frustration he
was causing his protégé. It was entirely reasonable that some loyalists fed Dimon’s ego, in hopes of plum roles when the succession actually came to pass. Dimon might also have come to terms with Weill’s inability to let go and perhaps left the firm to strike out on his own before he was forced out.

To some colleagues, it seemed as if to Dimon it was all about Dimon, and nothing more. “When we got to the point of how Citigroup was going to be organized, the whole process was put on hold for three weeks because of Jamie,” said one Travelers executive. “He wanted to be president. He wanted to run the corporate investment bank. He could be one or the other, but not both. And he held out for both. It had a lot to do with his ego, and his relationship with Deryck. ‘I want this job! I want that job!’ Everybody was thinking, ‘Jesus Christ, man, we have just done this huge merger and all you are focused on is you?’ It ground on him so much because he thought
he’d
made Sandy, so he didn’t understand how this was happening to him.” (Dimon categorically denies this account, and insists that he didn’t even want the title of president of the parent; he thought it a dumb title, especially when he had a real one running Salomon Smith Barney.)

In retrospect, what happened is simple enough. Dimon was endangering Weill’s ability to successfully integrate the two companies and to add to his ever-growing reputation. And when it came to the short strokes, Sandy Weill was always about himself—all the way back to Cogan, Berlind, Weill & Levitt—and no one, not even Jamie Dimon, was going to stand in his way. Dimon was only the latest, and most prominent, in a long line of Sandy Weill casualties. The only differences were that Dimon had more talent and capability than anyone Sandy had ever roughed up before, and that they had shared the longest and deepest relationship. In the process, Weill lost the last person who worked for him who stood up to him, costs be damned. “I always think of Jamie at Citigroup,” recalls Bob Willumstad, “as being the guy who would say what everyone else was thinking.”

From Dimon’s perspective, it’s important to understand that his confidence in his own instincts made it nearly a given that he wasn’t going to be satisfied with being a great assistant coach. Yes, Sandy Weill
did have the vision. And yes, Jamie Dimon was the operations guy. After the Citicorp merger, though, there was nothing left to do but integrate the two companies. Dimon could be forgiven for coming to the conclusion that the company was no longer in need of Weill’s particular skills but desperately in need of his own. And if that had been the case, why shouldn’t the title have come along with the job?

Richard Bookstaber, author of
A Demon of Our Own Design
, considers the move one for the history books. “If somebody were to list the most costly single business decisions in the history of time, one would be the purchase of AOL by Time Warner,” he says. “That destroyed more value than anything else. Another thing was Sandy firing Jamie. I can’t envision that Citi would be in the problem it was in right now if Jamie had stayed there. That probably cost $200 to $300 billion. It’s pretty amazing.”

• • •

What lessons Jamie Dimon took from Sandy Weill is a question that has preoccupied a lot of market commentators since Dimon’s exit from Citigroup. Even though more than a decade has passed since they worked together, the business press never tires of rehashing the issue. It’s an obsession best characterized by a post on the website Marketwatch.com in 2006: “Before Brad and Jen, there was Sandy and Jamie.”

There has never been much debate as to whether Weill or Dimon possesses more raw intellectual firepower; it is Dimon, no question. Sandy Weill, on the other hand, is proof that you should never underestimate the man who overestimates himself—at least not when all the stars are aligned in his favor: cheap financing, a rising market, and a fawning business press.

That said, Weill surely passed on a number of crucial rules of running a business. The first: when you’re doing M&A, do it quickly and efficiently, with no uncertainty. Weill could be ruthless in starting to clean house virtually the instant a deal was done, but it was an effective way to get everyone moving forward at once. “That’s Sandy’s drill,” says Marge Magner, who stayed on at Citigroup until 2005. “It comes out almost automatically.”

Weill also showed Dimon the benefits of taking the long view. As Weill showed in both phases of his career, when you worked with him it was almost impossible to view something as a stopping point. He was always thinking about what things
could
be. “Sandy gave him that whole concept of looking out and being opportunistic and knowing where you’re going,” recalls Joe Wright. Dimon, too, remains in awe of Weill’s audacity. “To do the deals that we did?” he recalls. “I look back at those and think, ‘God, Sandy, you had guts.’”

Weill also impressed upon Dimon the importance of getting your
entire
house in order, not just the shopwindow that customers see. When you’re in a commodity business, the only way to thrive is to be a low-cost producer. And when you’re selling money, you’re in a commodity business.

Another long held Weill principle: know when to be capital rich. Both the economy and Wall Street have cycles, and he who is capital rich when the competition stumbles will see opportunities abound. Weill used this strategy to great effect in both stages of his career, and it allowed him to take over much larger companies with his smaller but more financially secure organizations. Too many discussions of both Weill and Dimon paint the two as risk averse. Neither is anything of the sort; rather, they have eschewed financial risks so that they might embrace strategic ones.

It’s reductive, but the secret to Sandy Weill’s success was no secret. As Dick Bove, at that time an analyst with the securities firm Laden-burg Thalmann, put it, “Buy businesses with significant cash flow, preferably at a discount, prune their expenses without sacrificing revenues, and then use that additional cash flow from those cuts to buy more companies until you end up owning Citigroup.”

Dimon later said that he “learned a lot from Sandy Weill—including what not to do.” Among the things not to do: hogging the spotlight so much that your senior team feels underappreciated. Heidi Miller told
Business Week
in 2005, “The Sandy mythology is so large that it often obscures the contributions that other people made.”

“Sandy wasn’t a mentor in the traditional sense,” Dimon recalls. “In the sense of people giving you advice and sitting you down. That’s what
most people mean. I got none of that. Sandy was much more sink or swim and he just shed people left and right who didn’t meet his standards, but it wasn’t really a mentoring thing. He had a tremendous work ethic, and he was always thinking about how the world was going to change. He was brave and bold. I learned a tremendous amount from him.”

“Jamie is the smartest man I ever worked with,” recalls Dimon’s former colleague Mary McDermott. “But Sandy had the best instincts. I guess that’s why they worked so well together.” Brian Posner echoed that sentiment. “Jamie is really about precision and knowing everything about everything,” he says. “Sandy is much more conceptual, about the big picture.”

Even if your business is your life, it’s important to keep some distance between your work life and your home life. For Sandy Weill, there was no distinction, and that lack of clarity clouded important issues in the office, particularly when it came to his children. Although Dimon is both friends and friendly with his subordinates, he does maintain more distance than Weill ever did. And therein lies a profound difference between the two men. Sandy Weill
needs
to be liked. Jamie Dimon doesn’t really care if you like him or not. Dimon will ask one or two employees to join him for drinks. Weill asks 300 people to his farm to pick apples.

“Throughout his career, Sandy could engage people in a way that was unique and made them feel good about themselves and what they were doing,” recalls Jay Mandelbaum. “But Jamie has a different leadership approach, which is based more on his abilities, fairness, and directness. Sandy’s a smart guy, but his success was often based more on how he related to people.” Weill, was, and remains, a bit of a goofball. At a birthday party planned for him at The Four Seasons, the crowd listened to “I Heard It through the Grapevine” sung by a bunch of people dressed as grapes. That is not Dimon’s style.

Asked in late 2008 what other rules of thumb he practiced in his career, Weill responded succinctly: “Don’t fuck up.” But that’s precisely what he did in the fall of 1998.

• • •

Dimon wasn’t exactly forced into penury when he was fired. He eventually reached a $30 million severance agreement, which included a three-year, three-phase noncompete that went far above and beyond the norm. (Black received $20 million.) Dimon was rich enough never to work another day in his life, but at 42, he was certainly not contemplating retirement. This was a man who, over the course of his 16 years following business school, had spent about 75 hours a week at work.

He was, however, completely demoralized by the turn of events. The weekend after his firing, Dimon and Judy attended a party at the home of their college pals Peter and Laurie Maglathlin in Darien, Connecticut. “He was devastated,” recalls Laurie Maglathlin. “And totally blindsided. I really do believe that when he walked into that office he had no idea he was going to walk out without a job. And it wasn’t about being humiliated, even though he had been. It was more about him being hurt and betrayed and saddened by it all.” Jamie Dimon, friends say, is a man who
engages
in the project at hand, with all the focus he can muster. Tear anything away from him, and you’ll throw him for a loop. Tear his life’s work away, and you have done much more.