Thread by @NeckarValue

Buffett once called Jamie Dimon's 2000 shareholder letter "just about the best I've ever witnessed."

Dimon had just become Bank One's CEO after a falling out with his mentor Sandy Weill at Citi.

https://twitter.com/NeckarValue/status/1412474829886873601

Bank One was being hit by the recession and loan losses were exploding.

"I was slow waking up to the problems" Dimon admitted.

"They said we'd peak losing 70 basis points. History told me it would be around 100," says Dimon. "The losses hit 180!"
money.cnn.com/magazines/fort…

In his annual letter, Dimon starts with the bad news:

"Bank One had an extremely difficult year in 2000. We lost $511 million. ... These results are absolutely un acceptable — to you and to Bank One’s management."

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Followed by his pitch to 'believe': "After you read this letter, I hope you’ll see concrete reasons for optimism. The most important are: This company has strong franchises and a solid core; we’ve got good market positions; fine businesses; and excellent products and services."

He promises:

1) We will share with you the truth, and offer honest assessments of our businesses and our prospects.
2) We will relentlessly follow our business principles.
3) We will act with integrity and honor.

4) We will always try to do the right thing, not the easy or expedient thing.
5) We will work hard and with fierce resolve to make this a company of which our shareholders, employees, customers and communities can be proud.

Before outlining his business priorities, often with examples of progress.

-Be field and client driven: new 'Internet-enabled' PCs and a suggestion box.

-Set the highest standards of performance: smaller board for more effective governance

-Set the highest standards of integrity

-Build for good and bad times: fortress balance sheet and financial discipline (more granular P&Ls, reduced credit risk)

"Together, these actions should lead to high-quality earnings that: are increasing, recurring and predictable in nature, yield high returns on capital, produce good margins, and have reason able risk relative to the capital deployed."

-Build out a solid infrastructure:
"Great companies consistently build their infrastructures. They strive for the best systems and operations. They are highly efficient, cut waste constantly, they invest continuously. Bank One must be a low-cost producer..."

-Execute superbly: acting with urgency, speed, discipline, ... communicating effectively and often

-Create a great team and winning culture
"One of our biggest priorities of 2000 was to assemble an exception ally capable group of leaders."

"You have to get incentives right. We want employees to think and act as owners by offering them an appropriate stake in Bank One’s financial performance."

cc @jposhaughnessy

"Your senior management received no bonuses for the year just ended. All of the Planning Group members, including those with guarantees, decided it was appropriate to give them up. This company cannot and will not pay the senior people more when the company does worse."

In a challenging year, Dimon:
-Led with bad news
-Pitched "concrete reasons for optimism"
-Promised integrity and "fierce resolve"
-Outlined priorities and tangible examples of progress
-Defined his vision of a great company
-Highlighted that management shared in the pain

It's an excellent reference for anyone writing their first letter as leader of an organization - and for anyone who has to break bad news to their board, shareholders, and employees.

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