The Primacy of Judgment on Wall Street

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Photo: Courtesy of Ira Drew

Susan Dominus's long, sad New York Times Magazine story on Ina Drew, the JPMorgan Chase chief investment officer who was taken down by the London Whale, is first and foremost a sprawling meditation about gender on Wall Street, and the absurd difficulties associated with making it to the C-suite as a woman in finance. For that alone, it's worth reading.

Secondarily, though, the profile functions as an examination of the various forms of competence that exist at big banks — and, more to the point, which kinds Drew was missing when she allowed one of her traders to amass massive position in a pair of obscure credit indices that resulted in a $5 billion loss.

Dominus seems to be saying two seemingly contradictory things about Drew's competence: First, that Drew had good basic instincts about the direction of the markets, and was good at managing people, but that her technical skills lagged her traders' when it came to the more esoteric and hard-to-grasp parts of the CIO's trading positions:

Drew’s deals essentially turned on one key question she seemed to answer correctly more often than most (or at least when it mattered most): Would interest rates go up or down? That insight seemed valuable but hardly cutting edge to her new colleagues.

Second, Dominus seems to believe that Drew's flaw, in not keeping the London Whale fiasco from erupting, was that she was too technical, too focused on the CIO's specific positions and risk profile, and short-sighted when it came to the broader implications of her unit's role within JPMorgan Chase and the financial sector in general:

Drew was someone known for her grasp of the big picture, for internalizing historical trends and economic cycles to the point where her gut instincts were almost always right. She was also someone known for having a personal touch. But in this instance, she seemed incapable of grasping the complicated, interlocking human dynamics that can’t be measured by reassuring models — the idea that a position could be leaked, that the press might bear down, that the regulatory environment could compound all those problems.

Both of these portrayals can be true; in Drew's case, they likely were. A senior bank executive who knows every CUSIP code for every security in her division's portfolio can still be ignorant to the overall risk profile of the unit, and a CIO who takes a mostly hands-off approach to market technicals can still be an amazing risk manager. Drew's management style seems to have resembled that of many Wall Street executives — she knew enough about the investments the CIO was making to be able to ask questions, but not enough to be able to sense when things were souring.

Ina Drew was clearly a talent, despite her lack of zoomed-out vision. What's much, much harder to find is someone who has both kinds of judgment — a technical genius who can talk shop with the quants on the credit desk and see risks as they arise, but also is good at managing people and analyzing the many non-financial vectors involved in being a Wall Street bank.

Drew's former boss, Jamie Dimon, was once thought to be one of these CEOs; now, his omnipotence is suspect. There may be others hidden in upper management at big banks.

But there also may not be. If Drew is any indication, it's quite possible to succeed wildly on Wall Street without quite having it all.