BONUS: JP Morgan Co-Head of Global Banking Filippo Gori

34:42Here, it's kind of from cradle to infinite at the speed of light. So it is important that the transition and the support happens within an homogeneous management and the same way of looking at the clients. So JP Morgan emphasizes technology investment and the importance of artificial intelligence. Yes. What parts of banking is AI changing? What is very much ahead of the curve? And what do you think are the areas that are most ripe for disruption? So it is very difficult to assess whether you are ahead of the curve or ahead of the pack or whether you're just doing whatever else is doing. Because things are changing so rapidly that I would not dare to say, oh, we are ahead of the curve.

35:33We are investing is a giant leap of mankind in terms of revolution that is happening under our eyes. There is clearly efficiency that can be achieved through the use of AI processes and procedure and tools so that you can provide better client service or better customer service while being more efficient. which means that you can probably cover more clients. And our ambition is to cover more clients, let's say to reach 100 ,000 clients by 2030 in a more efficient way. So technology and quote unquote AI are helping us scaling the business through much faster than before and ideally without having to increase the costs.

36:25Really interesting. Interesting. I think we all are aware that AI is changing everything so rapidly. Where do you think human judgment is irreplaceable? What part of the business is, hey, we could become more efficient with AI, but the ultimate decision maker has to be a person? It's fundamental that a human is in the loop because for a variety of different reasons, ultimately, I would simplify this way. you are dealing with clients. Clients are human beings. And at the end of the day, I think a client wants to hear, wants to be dealt with through a client, through a person. So the human in the loop remains fundamental.

37:12It can help speed up some processes, can help achieve better scale, but the individual remains fundamental in our business. So when you joined J.P. Morgan back in 1999, you mentioned was not in the top of the league tables. What was the reason that it managed to break into the top tier? Was it this emphasis on technology investment? Was it a strategy? What led the firm to becoming a global top tier bank? Okay, so I think there is an obvious answer and then there is a less obvious one. I would say the obvious answer is JPMorgan Chase went through a series of mergers, including acquiring Bank One in 2004.

38:06They brought to the firm a certain Jamie Dimon who changed the way in which the firm operated. think back then the jp morgan chase bank one merger was still a conglomerate of institutions that emerged together over the previous 20 years and many of those mergers are not actually been fully executed you had many honey merging into chemical merging into chase you have first chicago merging into bank one you had jp morgan and a variety of different things i forgot casano there was Casanova in the middle too. So you integrate, the integration of all of this was a fundamental piece that made us who we are today.

38:55And Jamie was the leader and the individual that could see, could have the vision of how to do this and create the fortress balance sheet and everything else that came with that that made us who we are today. I think the less obvious answer is we went through 2007, and I hope I'm not being controversial here, but probably we were still busy with the merger and everything else that we didn't have time to focus on some of the other stuff that then caused the problems. And Jamie's view was very clear. We do things that make sense for the customers. We do things that make sense for the firm, fortress balance sheet, and so on and so forth.

39:47If I recall correctly, I want to say it was around 05, there was a minor little subprime issue with JP Morgan long before it was a problem everywhere else. And if I remember correctly, Diamond said, get all that crap off our balance sheet. We don't play in that sort of speculative waters. So when the real trouble hit in 08, 09, they had a very clean balance sheet. So that's a factor. And then since then, investing, investing, investing, investing, and investing again through the cycle. You invest. You keep growing. You're growing not because you like it per se, but you're growing because you can provide better customer service.

40:36you work towards the betterment of the communities where you operate and you keep investing investing absolutely through the cycle so when i arrived in asia in 2013 the firm wide revenues that we made in that year are less than what we made in this quarter in in the first quarter of this year what has happened there has definitely been the growth of asia in the meantime but it's been also So us investing in the region across products, countries, and jurisdiction so that if you build the infrastructure, then you are there to serve the clients. The business will come. Interesting. What does one firm mean in practice?

41:18The big motion towards JP Morgan, one firm. At what point are you in the middle market? When does it become a global enterprise or public markets? Explain the thinking behind this. So the thinking is you want to make, the organization is huge, it's 330 ,000 people. So the idea is to make the company feel small to our clients and to a certain extent to our employees. In other words, you don't want scale to be a disadvantage. Absolutely. Because when you have 330 ,000 people, maybe the adjective that you associate with us is not nimble. But we try to make the firm feel small to our clients, to our employees, to the communities and everything else.

42:07So we try to maintain a personal and human angle in everything that we do. And you've now been at J.P. Morgan 26, almost 27 years. Kind of unusual these days, people staying with one firm. I'm one of the new kids on the block at the firm. There are people that have been… Really? Yeah, absolutely. Doug Patton, I think, is going 37. And many of the other seniors. My co-head, John Simmons, I think is just crossing 34. And many of the other folks around me are in the same zip code, if not spend more time than me. So what keeps you and these folks at the firm for so long? I think the people and the culture.

42:51So for me, J.P. Morgan became part of me and my family. And you stay because you like the people, you like the environment, you like what you do on your day to day. But fundamentally, I think the people. And you mentioned 330 ,000 people. How big can J.P. Morgan Chase get? Is this going to be a half a million employer sometime soon? I think from a scale standpoint, we are where we need to be in terms of people. The idea is that can we use AI to grow the business without having to grow the footprint much more? So this is probably it for the next decade. I mean, I'm not Jamie, so you should ask the question to Jamie.

43:38But from a global banking standpoint, yes, I think that the headcount that we have now, we are trying to keep it stable for the next few years. Really, really interesting. Coming up, we continue our conversation with Filippo Gori, co-head of global banking at J.P. Morgan, discussing the state of capital markets today. I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio.

44:16I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My extra special guest today is Filippo Gori. He's co-head of global banking at J.P. Morgan, where he's been working since 1999 in London, Hong Kong, and now New York. So we touched on this earlier about resiliency in the face of all this macro volatility, but it's not just the economy. It's been a ton of M &A and dealmaking and this year we've seen a lot of IPOs and giant IPOs at that. Why is all this holding up so well despite all of the geopolitical turmoil we see? I think there is a variety of different things.

45:07To a certain extent, there was a little bit of a pipeline that I have built over the years that needed to find. It had slowed down post-pandemic for a while. Exactly. So IPOs, we thought 2024, they were going to come back. Then 2025, finally, we see the return of the IPOs, which is kind of, it's good. It's a component of cyclicality. It's the right time for this to happen. M &A, I think there is probably an extent of what we discussed earlier on. Boards are observing the resiliency of the economy, of the global economy. They think it's the right time to make strategic decisions. they're probably getting comfortable that the cost of capital will not go much lower than where it is now.

45:55Probably there's a sense of higher for longer to a certain extent. And the four people are getting their hands dirty in terms of dealing. And we are just witnessing what could be from a wallet standpoint in pure investment banking, if not the best ever year, which was 2021, very close to be the best ever in terms of volumes. Probably the biggest change over the past decade has been the rise of private capital, whether it's private debt, private credit, private equity. How is that changing a global bank? Do you guys look at this as competition or is it expanding the range of solutions you can offer to clients?

46:44It's a little bit of both. So private capital plays definitely a role in the everyday economy in the sense of after the GFC for traditional banks, certain sectors in certain cases became harder to deploy capital. And therefore, to a certain extent, there is a group of clients that are ripe to be the beneficiary of the private credit because simplicity of solution, the unit branch and so on and so forth. So that has caused the growth of that sector and we have been operating, we have been doing loans, a private loan is just another form for a loan for 225 years. So we launched our own initiative, our own private credit business back in a few years back but we increased it last year officially around February of last year to$50 billion of our own capital allocated to it and the idea is when you go to a client you try to offer an agnostic set of solutions we can do anything you want from the traditional private lending solutions to more innovative solutions to the traditional syndicated financing facilities, and so on and so forth.

48:13So the idea is to offer the clients all the potential tools in the J.P. Morgan Armory. So these private transactions have been rising really since after the financial crisis. What does this tell us about public market M &A? How do you look at the difference between all these public companies, or I should say these few public companies, and these rising number of private companies? Look, it's a trend that has been going on since the 1980s. The number of public companies in the U.S. or around the world has reduced substantially since then. There is a couple of – there are various reasons for that.

48:58Part of it could be the cost associated with being a public company. Part of it could be the fact that some of the companies have grown in size and have acquired some of the smaller companies and so on and so forth. I am absolutely in favor of unhealthy public market because it's one of the greatest strengths of the United States. The fact that there is a market out there where you can raise capital, you can finance yourself. There is a discovery price mechanism, which I enormously love. If I look at other countries where I've operated and the size of those public markets are smaller, you see that those economies struggle to gain scale, struggle to gain opportunity.

49:48So, for me, the public market in the US is a treasure that must be cherished. Fair enough. We've seen a number of mega deals happen over the past couple of quarters, including the giant SpaceX IPO. We have Anthropik coming up. There's a bunch of other AI IPOs coming up, but there's also been a lot of merger activity in that space. What's driving these big transformative deals? As I mentioned, to a certain extent is perception of stability of the cost of financing, opportunity for the regulation that will make some transaction possible, and I think the backlog that has been created over the years.

50:41But in general, the boards are very sanguine around, this is the right moment. Let's take the opportunity. Let's transform. Many boards are also looking at what's happening with AI and thinking that, okay, it's a Copernican revolution that is happening. Therefore, I better be ahead of it and take the opportunity with this and so on and so forth. Otherwise, you're behind. So your charge is global. You get to look around the world at opportunities. I'm curious, how do you measure where opportunities are greatest? Is there specific data points you're looking at, like volume of IPOs or mergers? How do you look at the world region by region and figure out, hey, we need to spend more time and capital in region X?

51:35Yeah. So what we do is this is a constant process whereby we challenge ourselves consistently as CIB, commercial investment bank management team, and we say, okay, we operate in 46 countries. Should we operate in five more? And if so, okay, which one do we look at? What is the opportunity? Why does it strategically make sense to invest more in that country versus another? Or why don't we invest more in an existing country? And so on and so forth. Bearing in mind that one of the fundamental ways in which we look at the world is the following. We have never left a single country since we entered it.

52:14So being in a country, it is not the same thing as owning a share or a stock. You don't like it anymore, you sell it. Once you make the decision to enter a country, you are there forever. Because you are there for the employees, for the clients, for the communities, the regulators, and so on and so forth. So we think about that very carefully. We look at some macro trends. We try to understand where the world is going, where the opportunities are coming. We ask our clients, some of our clients are some of the largest companies in the world, and you try to see they think how they operate. Can we support them everywhere around the world where they operate or not?

52:56Or similarly, there are companies that are developing in some of these countries. They want to go global. Can we support them in that case? So that's kind of the exercise that we do. And we look at it collectively as CIB management team across the various products, whether it's banking, whether it's payments, whether it's markets, whether it's security services. and we collectively make a decision on where to invest. And we do it on a quasi-regular basis. We discuss this. So I want to talk about the EU and Asia, but before we dive into those areas, any other areas of the world that are presenting a great number of opportunities?

53:39Well, Latin America for sure. Latin America. Yeah, we have not discussed about it, but if you think about Brazil and Mexico, for sure are super interesting markets, super important for us. And they are at the doorsteps of the United States. So it is fundamental that we have a critical presence over there and that we keep on growing it. And you mentioned earlier, you think the European area is almost overlooked, that they're on the verge of the next phase of growth. What's going on in Europe? So what I meant is there is genetically a degree of pessimism around Europe. The pessimism comes from the fact that the growth of the European Union in terms of GDP growth here and here has been anemic for now, call it 25 years.

54:31It grows 0.5, 0.7, maybe 1%, and we consider ourselves lucky. And that has been one of the challenges. because growth brings jobs, growth brings wealth, growth brings all the things that I see here in the United States. At the same time, as a European, I always want to remind folks that Europe at times is not widely understood. The European Union concept was not born out of idea of an economic union. It was born out of the dream of the founding fathers of the European Union not to have war on European soil ever again. From a securities perspective, not economic perspective. It was actually, they were visionaries.

55:24If you think about the Gasperi in Italy, Adenauer in Germany, and some of the others, the Second World War had just finished.

55:35The carbon and steel treaties of the beginning of the 1950s. The idea was, if we are intertwined from an economic standpoint, it's less likely that we go to war together. And it's mostly worked. And it's worked. And the next thing was the Treaty of Rome. And that was the beginning of the European Union, as we know, and then Maastricht and everything else. So I just want to remind people that Europe does exist. The European Union exists, first and foremost, not to have war on European soil. And we need to grow. Don't get me wrong. Less bureaucracy, more growth, but we should not lose the sight of what the founding fathers gave us.

56:14So let's talk about the perspective from the United States about Europe is lovely place to visit, but a challenging place to do business. Great place to live because much of Europe, there's guaranteed health care, there's guaranteed paid education, paid retirement, but it makes it expensive to do business there. It's very hard to fire anybody. Is that American bias accurate? So what is the capping growth there? The criticism that is laid at the steps of the European Union is perfectly valid. All of the things you just mentioned and more, the list is forever long. What I'm trying to say, though, is something different.

57:07you can't expect this year we're celebrating 250 this week 250 years of the United States of America Europe has over 3 ,000 years of history so you can't expect that 3 ,000 years of history get wiped out and everyone they all roll in the same direction we have come from having had war every 10 years to not having had war since 1945. We have strengthened that. We have culturally enormous social nets. And my concern is if the economies don't grow and we have a problem of demography, in the future we will not be able to afford those social nets. So things have to happen in Europe. I'm perfectly fine.

58:01and former President Draghi in his white paper told us what we have to do. We don't need to reinvent the wheel. We just need to go and implement what he told us. Will we do it? Yes. Will it take us a long time? Absolutely yes, because it's Europe. But Europe exists for a variety of different reasons, and we should never forget that. Really interesting. So we've talked about regions. Let's talk about sectors. uh, AI and technology, obviously a big sector, uh, manufacturing and industrial reshoring is going on, infrastructure changes, financial services, energy and, uh, renewable energy, healthcare, defense, so many different areas seem to be going through massive transitions.

58:51What do you do with such a target rich environment like that? How do you decide where to focus or Or does the market, do the companies reveal themselves and it becomes self-evident? So we have an accounting plan year by year by sector, by sector, by region, where we looked at the various sectors. And while you mentioned all of them in one go, not every sector is hot at the same time. So the focus is within all the sectors in every country and by subsector, do we have the 28 subsectors? Do we have enough bankers? Do we have enough resources allocated? Can we do more? Should we do more? If we have to prioritize, how do we prioritize those asks?

59:46And that's what we do. So there is an enormous amount of account planning, which if you do well, then the results will come. And, you know, the Draghi White Paper sort of veers into government-driven industrial policy. Obviously, that's big in China. It was big in the United States up until about 40 years ago. It seems like it's coming back. How do you think about government involvement in these private company decision-making and growth? So Europe does have already a larger component of the economy that are state-owned or partially state-owned companies. So from a European standpoint in itself, it's not so rare to have concepts like that.

1:00:40The idea to me is more, can we have pan-European champions? we have done that in the automotive sectors we have done that in the airline industry we have not really done that in other sectors so Europe has freedom of movement for people, for capital but there is no real freedom of movement for services yet so that's one of the things that we should try to implement and therefore facilitate the growth of European champions in the various sectors that some of them you mentioned so that we will be able to compete better with the US on one side or with Asia on the other side. Europe suffers, not suffers, Europe has still a little bit of a bias than small is good because small protects the consumer.

1:01:45From an economic standpoint, thinking about oligopolies and everything else, I think it's a stage where right now size matters. And therefore, we should facilitate the creation of larger European companies. Pan-Europeans, not country specific, but pan-Europeans. Like Airbus, that's the model? Airbus could be one. There are plenty of other examples in consumer. There are a few. In cars, Stellantis is an example. We should do that in financial services, for instance. I think it's fundamental that Europe does have larger financial services player and so on and so forth. What's fascinating to me about Europe – so I appreciate what you're saying about smaller companies need to get big.

1:02:43In the US, where we used to enforce antitrust rules but kind of stopped in the 1980s, not only have these companies gotten big, but they've become mega companies that dominate their space. To be clear, that's very unlikely to happen in Europe, right? You want them large and global and competitive, but not necessarily. Absolutely. At least if I'm going by. Yes, that would be a step too far from a European Union. Fundamental way in which the Europeans look at the business. But larger companies, absolutely. Right. I was curious because they seem to be very – I don't want to say hostile, but very specific about regulating the Facebooks and Apples and Googles of the world versus smaller companies that are trying to get a toehold in the global marketplace.

1:03:40All right. So before I get to my favorite question, one last question. What do you think most people in investment banking and or commercial or corporate banking aren't thinking about but really should be? What's the important topic that's not getting enough focus? hmm that's a good question i i think there is a ton of focus on ai geopolitics uh inflation and other things and i think we we don't spend enough time in focusing more on the people and how we prepare the people for the future that is coming so is that education is that corporate training or everything? It's a little bit of everything.

1:04:30How do we explain to folks how we see the future? So we should do more from that point of view and prepare them for a future that is coming. But that starts with academia and how we recruit people and so on and so forth. So let's jump to our favorite questions we ask all our guests, starting with, tell us about your early mentors who helped shape your career. So I had been lucky to have many people looking after me over the years. I've been lucky to have worked for the same individual for 19 years. I joined, I was his analyst, he was the associate on the desk. And 19 years later, we were two senior managing directors, but I was still working for him.

1:05:14but there are a couple that I think three that I would like to mention one is Matteo Del Fante when I joined in London he was the most senior Italian at the firm and is now the CEO of Poste in Italy as a friend, as somebody who has looked after me and helped me, guide me he's from Tuscany too and then probably Mark Patriciani who retired in 2024 and was running the markets business and Carlos Hernandez, who was running banking before me. And I still remember when I was in Hong Kong during COVID, he used to call me twice a week, religiously every week without booking a meeting, just call him and say, how is everything going?

1:06:01All good. Tell me what's happening. So the human element was really, really, really, really important for me. Let's talk about books. What are some of your favorites? What are you reading currently? So I'm reading, I'm an avid reader. So I read lots of stuff, nothing financial driven. Right now I'm reading three Italian books at the same time, which is a little bit complicated. But one book that I read that recently, I like novels, I like fiction. But the one book that I read quite recently that impressed me was a book called The Wealth of Shadows. Wealth of Shadows. The Shadows of Wealth, sorry, by Graham Moore.

1:06:49And it explains in a fictionalized way how the U.S. during the Second World War used its economy to cripple the German economy. and you have individuals like Keynes playing to this and how ultimately this became Bretton Woods and the role of how the dollar overtook the pound and so on and so forth. That was fascinating. And I read another book called A Girl Called Samson that it's about the Revolutionary War here in the United States and a woman that it's a real history, a woman that fought in the, in the continent, I think you call it Continental Army under Washington, dressed as a boy. Oh, really?

1:07:38Yeah. Very, very interesting. Those are two. But I also use a lot Audible. So, audiobooks have been lately my, my saving grace because I can listen to them while I'm traveling on planes or, so I don't need to carry the books, the physical books with me. It's been, has been, I'm a heavy user of Audible. Besides Audible, what else are you streaming? What are you either watching or listening to? Watching, apart from your program, obviously. My wife and I loved Outlander on Netflix, which has just streamed the last season or star. I think it was stars here in the US. And then Drops of God about wine.

1:08:28It's a fascinating series and a few others. Really interesting. We watched Offlander until the previous season, kind of like, all right, we're good right here, when they were stuck in the United States. But it was really fascinating show. Final two questions. what sort of advice would you give to a recent college graduate interested in a career in either corporate, commercial, or investment banking? It's not a sprint. It's a marathon. So take your time. Understand the environment in which you operate. Try to focus on the bigger, important things. Don't be too focused just on the product, but understand the environment in which you operate.

1:09:15Remember, it's a people business. both internally and externally. So make sure that you invest in creating human relationships. And our final question, what do you know about the world of investment banking today might have been useful back in 1999 when you were first getting started? It's a marathon. It's not a sprint. So never take things for granted and above all, don't make personal sacrifices that you're going to regret later. At times, I've been not as present as I would have liked it with my family. Interesting enough. Filippo, thank you so much for being so generous with your time. We have been speaking with Filippo Gori.

1:10:04He is co-head of global banking at JPMorgan. If you enjoy this conversation, well, check out any of the 650 we've done over the past 12 years. You can find those at iTunes, Spotify, Bloomberg, Apple Podcasts, YouTube, or wherever you get your favorite podcast. I would be remiss if I didn't thank the crack team that helps us put these conversations together each week. Alexis Noriega is my video producer. Sean Russo is my researcher. Anna Luke is my podcast producer. I'm Barry Ritholtz. You've been listening to Masters in Business on Bloomberg Radio.