Take the Reckless Path: Standard Chartered CEO Bill Winters

0:00A CNBC original podcast.

0:05Bill Winters planned to become a diplomat, but when he couldn't afford the master's degree, he took a job at J.P. Morgan and found himself drawn into an entirely different career. A few years later came a pivotal choice. Stick with what he knew or move into the emerging world of derivatives. I took a decision to do something I should have been quite afraid of because I was unqualified and didn't know anything about it. That choice helped shape a rule that Winters has carried through his career. When you get presented with these choices that don't come that often, from time to time, take the reckless path.

0:38For Winters, that means being willing to choose the less conventional route when it offers more to learn. Then, after 26 years at JP Morgan, Winters says Jamie Dimon fired him. Saying that you're ready to go and then being asked to leave are completely different things. Six years later, Winters made an unlikely return to banking, becoming CEO of Standard Chartered. But he knew the bank was in trouble. I figured it's a really good franchise that has fallen on some hard times. And if I can be part of resuscitating that, that'll be a good thing. These are Bill Winters' executive decisions.

1:16Tell me a little bit about where Bill Winters comes from. I grew up in a nice middle-class family in New York and then in the suburbs of New York. I think quite conventional. I liked to play a bit of sport and liked a bit of school. I would not try to distinguish myself in anything very much, but it was a good, comfortable upbringing. Tell me a little bit about your family, your parents as well. What kind of influence they were on you? Well, I think huge influences I think any parents are on any kid, but my father, who's long deceased, was born into a real working class family in Wheeling, West Virginia.

1:52and in the steel mills. And he got his big break during World War II. He was drafted, as were all young men at that time, and was on his way to Japan when the war ended and therefore was able to go back to university through the, in America, it was the GI Bill. And there was a real irony to that because his older brother, who had actually been shot in the Battle of the Bulge, had recovered back in the mills on the floor. My father, after university, went back in the mills, but upstairs. So he was in the marketing. department with a suit and tie. And he climbed his way up the greasy pole at the National Seal Corporation, which then provided us with our middle-class, comfortable life.

2:33I think I read somewhere that you didn't have a lot of money, but when you did have money as a family, you made sure you traveled and you made sure you had experiences. And for me, that really struck and it actually resonated as something that stayed with you all your life. The curiosity to try new things and to go to new places. Particularly my mother was that way. And I had never been outside of the United States other than Canada, where you didn't need a passport, until I was in university. And I went and spent a semester abroad in what was then Yugoslavia. Met my then-girlfriend, now-wife, in Croatia at the time.

3:13What are we talking here? 1980. 1980. 1980. So 46 years ago. And I got a passport, got on the plane with my classmates. kind of fell in love with the place, obviously fell in love with my wife, and then spent on and off the next four years there. This is absolutely fascinating because I also know, and I should explain to our viewers, I think you at one point wanted to be an international diplomat. Indeed. So Bill Winters, the man we know now, J.P. Morgan, Standard Chartered, very, very famous banker. Actually, you could have stayed in Yugoslavia or you could have gone down the international diplomacy route.

3:51And I also know, and I'll just quote you, you've quoted Yogi Berra about taking another fork in your life. If you'd have taken that fork, have you any idea? Would you have loved that life? I think about it from time to time. And because we all make decisions, sometimes decisions get taken for us, as we know, which are other forks in the road, but just involuntary. But I had been accepted into a program, a master's degree for international diplomacy, but I needed 40 grand, which I didn't have. So what do you do? You go work for a bank. And that bank happened to be JP Morgan or Morgan Guarantee as it was called at the time.

4:26And obviously I fell in love with it. It was an extremely interesting and diverse place, even more so today, but I'm talking back in 1983. And you take these things a year at a time. So you go in and think, okay, well, I'll make money for a couple of years. Then they'll go apply for my degree two, three years down the road. And then you get to two or three years and the boss is clever enough to say, this guy is likely to take a hike if we don't give him something interesting. So you get another chance at something interesting. Sometimes it works, sometimes it doesn't. In my case, I got super lucky and I was asked after being like a baby banker for four years covering oil and gas companies in Texas.

5:05The boss came and said, you got two choices. You can carry on in a related field where you know a lot about this oil and gas industry, so financial analysis or something. Or you can go into this new thing that we've got, which we call swaps or derivatives as it would be called today. And that was a decision. I took a decision to do something I should have been quite afraid of because I was unqualified and didn't know anything about it. But it was early days. And of course, there are people that will teach you and I only knew a little bit less than the people that have been there for a year. But it seems to me in 1980 and then 1987, you've already pretty much made the two biggest moves of your career.

5:41You've met your life partner. You've decided not to be an international diplomat or at least go down that route. And you decided to become a banker because you need the money and stay in banking and then thriving banking. A huge amount happened to you between the ages of 19 and 26. When you're lucky enough to find your life partner, it happens when it happens. And I know that some people are very predisposed to finding their life partner. Other people are very predisposed not to find their life partner, but nevertheless, sometimes matches are made, sometimes they're not. The choice to go to JP Morgan, I did have other banking choices.

6:16In fact, I had other, I got a job offer from what was then General Electric in the nuclear research facility in Utica, New York. And I mean, absolutely fascinating business. I said, yeah, but I'm not sure that's really taking me in the direction that I would like to go eventually, which is to get back into something that's more international. So you make some choices and sometimes you get options. The advice I give the young people that work with me right now at Senator Trotter, but anywhere is when you get presented with these choices that don't come that often, from time to time, take the reckless path.

6:50I say reckless not because you should look for reckless things, but because you're going to learn a lot more if you take the path less trodden than if you take the conventional path. By the way, if you take the conventional path, it's going to be super competitive and there's going to be lots of other people that are on the same path with you. you may feel like you're the best and it doesn't matter or you may want to just learn something new if it works super as it did for me when i went into derivatives for example uh if it doesn't work you will have learned a lot and you're probably not going to be taken out of the game somehow um was it lou preston who was inspiring you in those years because we're talking a period long before jay uh jamie diamond yeah well long before jamie diamond you know lou was the big boss and uh was he inspirational he was he was i would say more fearsome than inspiration of it yeah he was inspirational because he was super smart.

7:36I mean, I was a kid and he was the chairman. So I mean, my interaction with him was not regular. I had to present once to Lou a deal. And it was a couple of Texas oil men who had had a very checkered past. And at that point in time, they had successfully cornered the silver market, but then the cornering broke and they were pretty much bankrupt. And we had a chance to go in and help them recess today. They had some good on drawing assets. And my boss at the time, rest in peace, said, Bill, I'm going to let you make this presentation because you need to learn about this. I went in and Lou Preston sat, well, he stood actually typically because he had a bad back and he was behind JP Morgan's desk, like the original roll top desk.

8:20And he stood up and he had these half-run glasses and he looked down and he was elevated. One, he was standing and two, he was on a, it was an elevated banking platform or platform. He stood down and said, okay, that was a good, clear presentation. I'm going to let you decide about this. If you go ahead, I think the board would probably think you're crazy. I think the rest of the management would really question your reasoning. And I'm not going to say anything else. Go ahead and make your decision. Okay, that's pretty clear. So we didn't do that deal. We moved on. But Lou, I think he was fundamentally ethically grounded.

8:59He was one of that. I mean, many people are like this. Jamie is like that. Really believe that his company is special. And we must always protect that specialness of the company. I know you're a great believer in making mistakes. Can you give me an example of when you made an early mistake in your career and you learned a lot from it? Call it the tactical mistakes and the judgmental mistakes. And I know in my early days in the derivative markets, it was like pretty complicated modeling. I mean, this is going to take me back, but we were modeling this stuff on Lotus 1-2-3 spreadsheets, which some of your listeners will have some idea what that means.

9:32But it was a precursor to Excel owned by Lotus, which then was unbought by IBM. And I made two mistakes on one deal. It was a big deal. I got the buy-sell backwards. So instead of buying Canadian dollars versus Swiss franc, I sold Canadian dollars versus Swiss franc on a lot of them. and a particular day count convention I'd gotten wrong as well. I realized almost immediately that I'd made the mistake, but the deal was done. And I went up to my boss and said, I think I got this one backwards. And he said, well, has the market moved? I said, yeah, I'm afraid it has. And in your favor or against you?

10:04Well, you know the answer to that one. And I thought I was going to get fired, right? I'd never make that mistake again. In fact, I adopted a whole regime of sort of quality control is the terms that we would use today to make sure I didn't make that kind of mistake again. But no, I made lots and lots of mistakes. My first trading job was setting up a commodity trading business. We traded gold and silver, but we didn't have oil and gas and copper or aluminum, all that. We had a lot of demand from airlines to hedge their jet fuel exposure, but the only available hedging contract was a futures contract that was heating oil or diesel.

10:41Chemically very similar. A theorist hedge. Chemically similar, but not quite the same. And they behaved very well. Then the first Gulf War happened in 1990, the price of Jet Jule went crazy. And heating oil did not move as much. And heating oil did not move as much. That was a serious hit. And I got sent up to the big boss, a guy named Kurt Viermitz, who was kind of a legendary trader, who was a vice chairman. And he said, okay, I see. My recommendation was that we ride it out rather than that we give it to Lloyd Blankbein at Goldman and let him, uh, you know, eliminate my job and, uh, which they would have happily done and successfully.

11:17But, uh, yeah, he said, yeah, I'll, I'll, I'll go with your recommendation. And by the way, you know, once you're done with this, I'm going to increase your trading limits by a hundred percent. How does that work? He said, you know, I never give anybody real, any real risk capital until they've made a big mistake and I see how they deal with it. And if you deal with it with humility, but soundness, like if you panic, I'm not going to get it. Because it's going to happen to every single trader. It has to happen. And ideally it happens early rather than late. So early when you can't do job. I was super impressed by Kurt Vermith, rest in peace, and his approach.

11:52But I was also kind of reassured that what I demonstrated was, I think, humility. I was very, very humble when I went into his office. Own the mistake. Own the mistake. But I tried to remain level-headed and just like analytically parse through, what are my options here? There were no good options, just to be clear. But of course we got through it. What I say to young people all the time is find a way to put yourself in harm's way. And not because you want to be harmed. Get into the arena. Because if you're not in harm's way, you're not going to be able to demonstrate that you can deal with harm or that you can deal with danger.

12:26And it builds resilience. It builds resilience. Not only professionally, but in life more generally. Personally, yeah. I don't want to skirt over your entire JP Morgan career, but you were there 26 years. Why did you say that 26 years? Well, every day was a new adventure. I mean, I really, and I will say, I didn't love everything in every day, but I loved every day because I joined a company called Morgan Guaranty Trust Company, which was a U S commercial bank, quite white shoe and pristine. It evolved over 16, 17 years to be a, I'd say we were second tier investment bank. We definitely weren't Goldman Sachs or Morgan Stanley.

13:00Uh, but we had some other things where we were best in class, like derivatives. Then we sold the company to Chase. That was a huge learning experience because it turned out Chase had some real problems that we hadn't discovered during the due diligence. And you have to think back, you have to look into the history books. But in 2001 and 2002, JPMorgan Chase went through a very, very, very hard time and financially disastrous time. And then I got to execute a turnaround. And because Chase had, or JP Morgan Chase at that point, had these big problems. I got my old job back running the investment, co-running the investment bank.

13:31And between 2002 and 2010, when I left, we turned that into a really, really good investment bank, which was just fantastic. Obviously, the financial crisis was a lesson I don't ever want to repeat. The value of that for me personally was just understanding how bad things can get and how people behave when things get really bad. there was some really bad behavior leading up to the crisis during. There was also some heroic behavior. Think about Hank Paulson and Tim Geithner and the kind of leadership that they, or I'll say Jamie Dimon, who was my boss at that time. The leadership of these guys through that crisis was just outstanding.

14:08How do you personally cope with stress? I'm not sure. I think I absorb a lot without it showing. I do break a little bit from time to time, but I don't, I definitely have a temper. Uh, it doesn't manifest itself often, but when it does, I'm always sorry that it does. Uh, when I reflect back on, on my behavior, I'm gonna, I'll shout or use bad language or something, uh, infrequently, but it happens. But in, in that kind of financial crisis type environment where actually you're all in it together, I can think of no incident. I have to think more carefully, but I can think no incident where, where anybody actually lost their temper or where there were really substantial interpersonal personal tensions because we had a common mission.

14:52I know you learned enormous amounts from Jamie Diamond. You've already referred to him as well. It was an up and down relationship in many ways as well. Just tell me a little bit about how you and he interacted and what you learned from him as well. Well, I mean, it was up until it was down. It wasn't too volatile along the way. But Jamie came in at a super interesting time. So the bank had had some real big problems in 2001 and too. Uh, I would say that there was some reorganization done. I got put back into co-running the investment bank, having been demoted into running fixed income, which is kind of part of the merger deal.

15:24If you get the control premium, you don't get the big job. And I was, I was fine with that. Uh, but that, you know, that got undone in 2002, but you know, a few years before Jamie, and we were on the road to recovery. Uh, but the, I think the, the leadership equation needed firming up. And I mean, the board just did a brilliant job of, of course, buying bank one. I mean, actually bank one fought JP Morgan, but we, you know, we pretend it was the other way around. You know, Jamie brought a really good team. He was kind enough to allow me to carry on in my role, which I obviously appreciated at the time and still do.

15:56He brought a discipline to kind of financial review, financial planning. He, in my experience, and I hear that he may changed a little bit, but he never got involved in the running of the investment bank, but he knew everything that was going on. And because he expected you, anything material that happens, you're going to let me know about it. And he had very rigorous review processes. So that financial discipline - That start with you at Standard Chartered, I think. That was, I mean, the first thing I did when I got to Standard Chartered was say, I'm going to take a page straight out of Jamie's book and then just pick up with the kind of stuff that we did at JP Morgan.

16:30And I think we did that at the old JP Morgan as well, but nowhere near as consistently and rigorously. In fact, that you can get away with something in a 20 ,000 person company that you can't get away with in 150 ,000 person company, which is what Jamie inherited, which is now a 350 ,000 person company. It's a behemoth. You have to be disciplined. Jamie was excellent at that. He's super smart. So I mean, he could absorb a lot of knowledge. He insisted on a level of transparency. So he expected challenge within the team. And And I would say 90 % of the time in my experience, Jamie handled challenge to him exceptionally well.

17:0710 % he didn't like it so much. But he was very transparent about it. Was that 10 % when you finally butted heads? And just explain to me a little bit about why you left J.P. Morgan. Well, I left J.P. Morgan because he fired me. But what was the buildup? I'm not aware of any particular buildup. I mean, I'm not sure I've ever shared this before, but I had a job offer to be the CEO of a different bank. Uh, in 2007, it was a bank that was, was going to go into a lot of trouble, although it wasn't obvious and the trouble had begun. Is it a very big British bank by any chance? I don't know. You know, I couldn't possibly comment.

17:41Uh, but, uh, but I, I, I went to Jamie and said, look, I've, I've, you know, I've like, I've been, I'm, I've been offered this job. I'm not particularly inclined to do it, but like, if you tell me you want me out, then I'll engage. If you tell me it would be disruptive to the bank to go, then I'll, then I'll stay. And if there's something, if you tell me that it would be disruptive to the bank, not good for me, I wasn't asking about myself. you tell me you don't care one way or the other, I'll, you know, I'll play it out, but I'll keep you posted. And, uh, and he said, yeah, like, I don't care.

18:07He basically said, I don't care. Uh, he didn't say that. He said, nobody's indispensable. If you go, you go, you know, but if you want to stay, you're most welcome, which is, I played it out. I mean, I played it out like with one discussion and said, this is not something that I want to do, uh, which I obviously informed Jamie of. But I think, uh, what I did talk to him about at that time was, but he asked me a question. He said, do you want to be a CEO? Because, you know, you shouldn't do this unless you want to be a CEO because it's different than running a division. And I said, that's a really good question.

18:34So, uh, no, it's not my ambition to be a CEO. My ambition is to do something that's interesting where I can affect change. That's my ambition, which I have felt I can do at JP Morgan. And which is why I'm asking you, do I have that opportunity here? Uh, but, uh, no, I'm, it's not my, it's not my unabiding ambition. And he said, yeah, that's be clear about that because this is not something to go into to act it generally. Super advice. Did you want to be the CEO of JP Morgan? Were you without realizing setting yourself up as a rival to Jamie Diner? No, no, I really didn't. That really was not my objective.

19:07And, uh, you know, Jamie is a better leader of JP Morgan than I was ever going to be. And, uh, I also, I saw what Jamie did and, and the way he ran it in those days. I think he's, I actually think he's gotten more involved in some of the operations in the investment banking business than he was then. Uh, he was quite involved in the, operations of the retail banking business at that point. And that was my perception in any case. But I didn't love the sit on top of things, gather information, be the outside face. That's it wasn't me. So that was 2009. How did it feel being sacked? I was ready to go because, well, I didn't butt heads with Jamie.

19:50I mean, we had a little bit a bit of budding from time to time, but that's also Jamie's nature. But I didn't feel like I was likely to learn a whole lot more. But saying that you're ready to go and then being asked to leave are completely different things. And of course, in the moment, I was like, hmm, well, that sucks. That's not very nice. But what I think got me out of a funk, really after a couple of days, was talking to a lot of the people that I had dealt with for years, clients, friends, partners, and realizing that at that moment, they were no longer talking to Bill Winters from JP Morgan.

20:25They were talking to Bill Winters, who's nothing. He's just Bill Winters. And a third of them probably wanted to get the dirt. What really happened to JP Morgan, had no interest in engaging with me. A third had a very specific job in mind. I got a job offer the day that I was fired to run some other investment bank. I said I got a little bit fresh for that one. And a third didn't know what they wanted to do with me, but they thought they might want to do something. That was fascinating because the nature of my interaction with those people was fundamentally different than what it had been before.

20:57But you're 48 years of age. You're out of a job. You're getting loads of job offers coming in. It's a great moment to reflect on what you want and what you and Ander want to do as well. Did you think about doing something completely different or did you know you want to still be a banker? I felt that I had some unfinished business. I mean, keeping in mind, the event was September of 2009. So it was really only a year after the drama of the financial crisis. And in fact, we were still in the throes of it. So it felt that there was more to be done in that space. Then what I ultimately ended up doing was setting up a small asset management company that would help the financial system recover from those throes and position the financial system for the next chapter.

21:45I should have called it a private credit company. I'd be a gajillionaire today. But, uh, private credit dot AI. Yeah. Any of that stuff. I didn't have that foresight, but, uh, but I, I got a bit lucky at that, at that time as well, which is that the, the then chancellor George Osborne who had, who just fought an election that ended with the coalition government, uh, recognized together with his, his counterpart in the liberal democratic party, that they, there were a couple of issues that they haven't had nailed in terms of their joint platform, which they had to arrive at over a weekend. One was, what do we do with the banks?

22:14and they set up this this independent commission independent commission on banking chaired by john vickers and he asked me to be a member of that and uh having gotten advice from other you know previous government ministers who happen to have run banks which was that's the last thing you should do uh i i didn't take the advice i did it anyway it was fantastic for me uh why because you were outside looking in rather than being amidst the maelstrom for once you could you could take a holistic view on things? I got the perspective of government. I was forced, not forced to, I mean, we chose to take the perspective of society.

22:49Like what is a healthy financial system? Because we obviously just experienced an unhealthy financial system. And you have a chance, we have a chance now to establish a healthy financial system, which with a whole body of work that was done by regulators and civil society around the world and banks, we have a healthy financial system today. Some people will want to quibble on the margin of that, but I will tell you, I think we have a very healthy financial system today. Starting with the globally systemically important banks. Yeah. So starting with a huge recapitalization of the banks and banks are, it's taken a while, but banks are profitable and growing and relevant.