WHY IS JPMORGAN CHASE INVESTING MILLIONS IN DETROIT
In Detroit, JPMorgan Chase is working with local economic- and workforce-development organizations, small businesses, philanthropies, and the mayor.
The goal? To put in place a series of investments to help turn around the struggling city. Professor Joseph Bower and JPMorgan’s head of corporate responsibility, Peter Scher, discuss why businesses should create philanthropic programs of their own.
Brian Kenny: 9125 12th Street was the address of the Economy Printing Company, a small business in the heart of downtown Detroit. By day, it was an unassuming storefront, but at night, the second-floor rooms came alive as an unlicensed after-hours club known to locals as the Blind Pig, an unflattering reference to Detroit law enforcement. Such establishments were not uncommon in 1960s Detroit, and occasional police raids were just an ordinary part of doing business. But the raid that happened at the Blind Pig on a sultry July night in 1967 sparked a riot that lasted four days, resulting in 43 deaths, 7,200 arrests, and 2,500 businesses looted and burned. It was the catalyst that propelled the city into a downward spiral from which it still suffers 50 years later. Over the past few years, however, there are signs that Detroit may be turning around, and those leading the charge are learning that it takes a village to raise a city.
Today we'll hear from Professor Joe Bower and special guest Peter Scher about a new case study entitled JPMorgan Chase: Invested in Detroit.
I’m your host Brian Kenny, and you’re listening to Cold Call.
Professor Joe Bower is an expert on corporate strategy, organization and leadership, and he’s kind of a living legend here at Harvard Business School. Flattery there, Joe.
Peter Scher is chairman of the mid-Atlantic region and global head of corporate responsibility for JPMorgan Chase & Company. He also serves as a member of the firm’s operating committee.
Thank you, both, for joining me today.
Peter Scher: Thank you for having us.
Joe Bower: Thank you.
Kenny: You’re coming fresh from the classroom where this case was just taught, so I'll ask you a little bit about that. Joe, if you could start by setting the stage for us. Who's the protagonist, and what's on their mind?
Joe Bower: The protagonist in the case is Jamie Dimon, chairman chief executive of JPMorgan , and it's slightly contrived because he's working with a team. But we're asking the students to think through what JPMorgan has done so far in Detroit, identify the lessons, and then using those lessons somewhat as criteria to decide whether they would recommend that Dimon take the program into other cities.
Kenny: What prompted you to write about this?
Bower: I was talking with Jamie Dimon about some work on governance that he had done with Warren Buffet, and he just started talking about Detroit and, as his style, he said, "You really ought to find out what we're doing in Detroit." As I learned about it, it was just the kind of thing that we're trying to understand, which is where a company takes its skill set and applies it to a set of problems that are not normally thought of as the scope of business, and they do it as an investment. Jamie Dimon is very clear that he's investing in Detroit. He's not giving charity to Detroit.
Kenny: That comes across really clearly in the case. You kind of started with sort of the worst case scenario ... Did you look at other cities?
Scher: No, it didn't start from the idea of "Let's go fix this city." It really started with, "Is there anything we can do to help in Detroit?" As we got into it, and as we have worked through this over the last four-plus years, we realize there's a model that we think could be applied in other places.
Kenny: I was amazed when I looked at one of the exhibits that showed an aerial view of the blight in the city [when you got started]. That was an obvious place to start.
"SIMPLY SAYING WRITE A CHECK FOR MY FAVORITE PROJECT IS NOT THE WAY TO DO IT"
Scher: Jamie often gets asked, "What's the one thing we can do?" There's never one thing. You had blight, you had no real estate market, per se. The population was continuing to decline. So all of the objective criteria for urban growth was absent. Blight was both a symbolic and real sign of the deterioration, and the mayor had just set up the Detroit Land Bank, so we made a number of early investments in addressing blight particularly using technology.
We created with a local firm an app that people could use to take pictures of blight, of properties, and feed that information back into the Detroit Land Bank, so they could make better decisions. We called it Motor City Mapping. It was so successful that we have now taken that technology to three cities in Ohio: Cleveland, Columbus, and Cincinnati. Again, part of the theory was if you can resolve blight in Detroit, you can resolve it anywhere, so blight was a big early focus. Residential development was a big early focus. Commercial developments, skills, small business. We were really focused, as the study lays out, on areas where we have unique skills and expertise and resources that we can bring to bear.
Kenny: Who else has been involved with you as you've gone down this path?
Scher: There were a huge number of anchor institutions, nonprofit and for profit, in the city. They were all talking with each other, working together, and they were focused on specific outcomes. We said, "We want to be a part of it, and we think there's certain things we can do to help accelerate the growth and the revitalization of the city."
Kenny: So you didn't come in like, "Hey we're JPMorgan. Let us tell you how to fix this problem."
Scher: If you think about our big big hurdles, [one was] we had never done this before. Internally at JPMorgan there was a little skepticism, because we knew that if we were going to succeed we had to put people on the ground. Not just philanthropic people; we had to put business people who knew how to put together loan funds, who knew HR and finance and strategy. You're taking people out of revenue-generating roles for weeks at a time... Everyone was enthusiastic at first, but you worry that after a while people will be like, "That whole Detroit thing is great, but we’ve got a P&L to meet."
Just the opposite happened. The other thing, to your point, was would we be accepted? Is this a bunch of Wall Street bankers coming in to tell Detroit what to do? We were very intentional to not come in with New York answers to Detroit problems. We had to listen. We had to understand. Because frankly, if they didn't have the ideas on the ground, and the buy in on the ground, there's not a lot we can do to substitute. It's been an extraordinary collaboration. From a business perspective, it's always good to remind people that listening is a very important quality to the development of a successful business.
Kenny: Joe, in your work with so many corporations over the years, corporate social responsibility is something that's talked about a lot, and I think it's something that people are fairly cynical about. Particularly, we think a lot of companies are saying that they're doing the right thing, but they're doing it for the wrong reasons. This seems like a different model. Is this approach, in your mind, sort of a turning point in the way companies are thinking about that?
Bower: There are companies that really think quite seriously about how they can use some of their profitability to do good in various ways, and that's fine. The more seriously they think about it, the better, but what (HBS Professor) Lynn Paine and I have been very interested in are the companies who, as part of their strategy for doing their core business, think about how they can use their skillset to mitigate fundamental problems, and at the same time build their business so that it's sustainable. It's not a question of, "Do we have surplus for charity?" It's: "This is a way by which we will invest. We'll make the city better, and that's going to help us because we're a bank in that city."
Kenny: They're not doing it just to be altruistic. It's good for business. Peter, is that how you guys look at it?
Scher: Absolutely. It's good for business, specifically, but I also want to make a broader point. If you think about this, the period post-financial crisis, we have a lot of strains in divisions in society, particularly among the lower class and the middle class. The economic inequality is real, and not to make this political, but you look at the elements that led to President Trump's election, you look at the elements that led to the UK's decision to exit the European Union. In our view ... all of these things are being driven by these social and economic divisions within society. Those divisions are bad for us.
Underlying the challenge we have in the political and policy world is this economic division, so we have a lot to lose by not trying to address those. And if we can begin to bring more people into the economy, to create more opportunity, to make people feel like the system is not stacked against them, and make sure the system is not stacked against them, then we think long term for both society and business, that's a really important thing we should be doing. The professor made this point in the class: Business people like to complain about the inability of government to get things done. Well, get in the game and be part of fixing those problems, because your company and your future is dependent on a more stable society and more stable economy.
Kenny: That's certainly what we've been looking at here at the business school with our US Competitiveness Project over the last five, six years, a lot of deep dive on that. I'm also curious about what is this.
Scher: Even before Detroit, ... we made a decision either to be seen as part of the problem or part of the solution. Even if we weren't solving all of the world's problems, which we don't, as a business you not only want to be seen as part of the solution, you actually want to be part of the solution.
Kenny: There are issues and challenges you have faced along the way. What would you advise somebody who's thinking about doing this in another city?
"JAMIE DIMON IS VERY CLEAR THAT HE'S INVESTING IN DETROIT. HE'S NOT GIVING CHARITY TO DETROIT."
Scher: You need to make sure there's the right kind of collaboration. Particularly when you think about Detroit, you have just the sheer size of the city. You could fit Boston and San Francisco into Detroit and still have plenty of room to spare. So there are a lot of neighborhoods that need attention. You can't fix them all. Do you have strong political leadership? Do you have the business community, the nonprofit community? Do you have community buy-in? Do you have this sense of collaboration? It wasn't like JPMorgan Chase showed up in Detroit and the skies parted and everything was fine. There was a lot of work that went on beforehand, and we said, "We want to be part of it. We want to join your efforts." Are there cities that are willing to do that hard work, make those tough choices? If they are willing, there's a whole lot you can do.
Kenny: Its sounds from the case that Mayor Duggan has been a great partner.
Scher: Extraordinary. Because this is not your typical political conversation. There's a lot of back and forth. He'll say, "Here's a problem I have. How do we actually work together to solve it?" There's a big difference between that and, "Hey, can you write a check to fund this next project?" We were talking about in the class that if society and the political leadership expect business to play a bigger role, which they should, then they also have to adapt how they work with business. Simply saying write a check for my favorite project is not the way to do it. Bring them to the table. Let them be a part of the conversation.
Bower: When we were writing the case, we heard from both sides. Guys in the mayor's office saying that what's really interesting now is I can pick up the phone and call someone at JPMorgan about a problem, about specifics, because they know they've got knowledge that can really help me. The reverse was also true. People in the bank were kind of thrilled that someone from the mayor's office was calling and asking what they knew. It was really powerful.
Scher: One of our rules of thumb now is that if the only thing we're doing is writing a check, that's considered a failure. When you take this business-like approach to solving these problems, the scale that you can get to is enormous.
Kenny: Back to your point about the excitement within JPMorgan about this. I would imagine that this is helping you rebrand JPMorgan to the millennial generation who are going to be so important to the future of your company, right? They want to be involved in an important way in these kind of things.
Scher: It's interesting. I didn't think of this certainly when we started, but it is a big part of how we recruit on campuses. Look, millennials want to be part of firms like ours. They may want to make a lot of money, but they also want to feel like they're having an impact. When you tell them you can join a firm in which you have an opportunity to be a part of this program and go help a community, it's a very powerful thing. We do a debrief with everyone who's been on the service core, and they will tell us it's been the most impactful and meaningful professional experience. Our odds of retaining that talent will pay for itself beyond anything else in terms of the cost to a company, in terms of lost talent. I think the benefits to the firm across so many criteria are just enormous.
Kenny: Great hidden benefit. Joe, you just taught the class for the first time. Were there any surprises, unexpected things that happened?
Bower: I was really pushing them very hard that this was unique. It turned out that this was an Advanced Management Program class. One of the [participants] had a small mortgage bank in California, and they'd done the same thing, so that was fun. That's what's so great about our classes is that somebody in the class really knows a lot.
Kenny: Peter, how about you? What were your [experiences]?
Scher: For me, it's been a great day. It's great to talk to people from other companies because part of what we think about now is how do we scale what we're doing. There's only so much we can do on our own, but can we partner?
Kenny: Peter, Joe, thank you so much for joining us today.
Scher: Thank you, guys.
Kenny: If you enjoyed hearing about this case, subscribe to Cold Call on Apple Podcasts or wherever you listen. We post new episodes twice a month. And we'd love to hear your thoughts, so please post a review.
I'm Brian Kenny, and you've been listening to Cold Call, an official podcast of Harvard Business School.
This interview was recorded April 11, 2018. The transcript has been edited for length and clarity.
SOURCE : HARVARD BUSINESS SCHOOL .