Jamie Dimon’s annual shareholder letter highlights the potential of AI

Jamie Dimon, the experienced CEO and chairman of JPMorgan Chasesaid he was convinced that artificial intelligence will have a profound impact on society.

In his annual letter To shareholders released Monday, Dimon chose AI as the first topic in its update on the issues facing the largest U.S. bank by assets – ahead of geopolitical risks, recent acquisitions and regulatory issues.

“While we don’t know the full effect or the precise speed at which AI will change our business – or how it will impact society as a whole – we are fully confident that the consequences will be extraordinary,” Dimon said.

The impact will “potentially be as transformative as some of the most important technological inventions of the past few hundred years: think the printing press, the steam engine, electricity, computers and the Internet.”

Dimon’s letter, which was widely read in the business world due to his status as one of the most successful leaders in the financial world, covered a wide range of topics. The CEO said he was constantly concerned about inflationary pressures and reiterated his warning that the world may be entering the riskiest era in geopolitics since World War II.

But his focus on AI, first mentioned in Dimon’s 2017 annual letter, stood out. The technology, which has gained prominence since OpenAI’s ChatGPT became a viral sensation in late 2022, can generate human-sounding answers to questions. Enthusiasm for AI has fueled the chipmaker’s meteoric rise Nvidia and helped tech names reach new heights. a

JPMorgan now has more than 2,000 AI and machine learning employees and data scientists working on 400 applications, including fraud detection, marketing and risk controls, Dimon said. The bank is also exploring the use of generative AI in software engineering, customer service and ways to increase employee productivity, he said.

The technology could eventually affect all of the bank’s roughly 310,000 employees, helping some workers and replacing others, and forcing the company to retrain employees for new roles.

“Over time, we expect that our use of AI will have the potential to expand virtually every job, as well as impact the makeup of our workforce,” Dimon said. “It can reduce certain job categories or roles, but it can also create others.”

Here are excerpts from Dimon’s letter:

“Many key economic indicators remain good today and may be improving, including inflation. But as we look to tomorrow, we must take into account conditions that will affect the future… All of the following factors appear inflationary: continued budget spending, remilitarization of the world, restructuring of world trade, capital needs of the new green economy and possibly higher energy costs in the future (even though there is currently an oversupply of gas and abundant spare oil capacity) due to a lack of necessary investments in energy infrastructure.”

“Equity values ​​are at the high end of the valuation range by most measures, and credit spreads are extremely tight. These markets appear to be pricing in a 70% to 80% chance of a soft landing – modest growth with falling inflation and interest rates. I think the chances are a lot smaller than that.’

“If long-term interest rates rise by more than 6% and this rise is accompanied by a recession, there will be a lot of stress – not only in the banking system, but also among indebted companies and others. Remember that a simple 2 percentage point increase in interest rates has actually reduced the value of most financial assets by 20%, and certain real estate assets, especially office real estate, may be worth even less due to the effects of the recession and higher vacancy. Also remember that credit spreads tend to widen, sometimes dramatically, in a recession.”

“There is little real cooperation between practitioners – the banks – and regulators, who have generally not been industry practitioners…. Unfortunately, without cooperation and sufficient analysis, it is difficult to have confidence that regulation will achieve the desired results without undesirable consequences. Instead of continually improving the system, we may just be making it worse.”

“The Russian invasion of Ukraine and subsequent horrific attack on Israel and the ongoing violence in the Middle East should have shattered many assumptions about the direction of future safety and security, bringing us to this pivotal moment in history. America and the free Western world cannot do that.” longer maintain a false sense of security based on the illusion that dictatorships and oppressive nations will not use their economic and military might to achieve their goals – especially against what they view as weak, incompetent and disorganized Western democracies. we are reminded that national security is and always will be of paramount importance, even if its importance seems to diminish in quiet times.”

“A sensible and modest step would be for social media companies to further strengthen platform users’ control over what they see and how it is presented, by leveraging existing tools and features – such as the alternative feed algorithm settings that some are using today offer. many users (not just parents) would appreciate if they could manage their feeds more carefully, for example by prioritizing educational content for their children.”

‘The takeover of a large company involves a lot of complexity. People tend to focus on financial and economic outcomes, which is a reasonable thing to do. And in the case of First Republic, the numbers look pretty good. profit of $3 billion on the purchase, and we told the world that we expected to add more than $500 million in profits annually, which we now believe will be closer to $2 billion.”

JPMorgan acquired most of First Republic’s assets last year for more than $10 billion after regulators seized the company during the regional banking crisis.