David Hudson exhaled slowly and decided to take the leap. He’d just been promoted to a new job that put him in charge of spearheading disruption within JPMorgan Chase & Co.’s trading businesses. Now he stood before Chief Executive Officer Jamie Dimon in the 48th floor boardroom of the company’s Park Avenue headquarters in Manhattan to see what he could get away with. If the bank really wanted to anticipate clients’ needs and attempt risky moonshot projects, he told Dimon, his budget had to expand: “I want an extra $50 million.”
After five minutes of questioning, Dimon gave the go-ahead. Then came the hard part. For the first moonshot that Hudson, 42, had in mind—a platform to liberate asset managers and smaller banks from having to employ traders—JPMorgan had to switch into aggressive hiring mode. Recruiters would be needed, at least 10 of them, to find the coders and traders to build and operate the system. Office space had to be found to house the group and salesmen to hawk the thing once it existed.
In getting his bosses’ backing, Hudson assumed an enormous responsibility. “I only figured out later that it was a psychological game, that by them saying yes to everything I asked for, they made it my problem,” he says. “In other words, money’s not the problem. My capacity to deliver is.”
His problem is a high-class one. If you had to pick one winner among banks in the post-financial crisis era, it would be Dimon’s JPMorgan, a behemoth with $2.55 trillion in assets and operations in 60 countries around the world. Its Wall Street division is a top-three performer in most major asset classes, including government bonds, currencies, corporate credit, and equities—and last year it produced a 16 percent return on equity, among the highest of its peers. The markets businesses share a lot of resources, so keeping them all humming is key to the company’s profitability. Perversely, this means JPMorgan has the most to lose should clients suddenly decide to do business in a different way—say, if a startup creates a cheaper or easier way of matching buyers and sellers.
This is where Hudson comes in. The South African-born coder-turned-manager was named global head of markets execution last year, which essentially means he’s responsible for making sure that if new technology upends trading patterns, it’s JPMorgan that does the disrupting.
There’s a simple reason Wall Street banks are adopting the talk and practices of Silicon Valley. The barriers preventing potential usurpers from storming the gates of finance have collapsed because of a convergence of technologies from machine learning to cloud computing. For decades, it took investments of $50 million for a startup to reach breakeven, Goldman Sachs Group Inc. Chief Financial Officer Marty Chavez told a Harvard audience in January. Now that figure is $3 million. The company he most wants to emulate: Google.
Hudson, formerly finance chief of the markets business, reports to Daniel Pinto, head of the corporate and investment bank and mastermind of the division’s strategy. Both are based in London. A phrase scrawled on a whiteboard in Hudson’s Canary Wharf office encapsulates his mission: “It’s the incumbent’s job to find the innovation before the innovators find distribution.” Anyone who makes a living in the markets today should take heed.
“The fear is we’ll wake up one day and we’ll be like we were in 2003 in FX ... focusing on the things we’re good at instead of the things we’re not good at”
Hudson’s education in the vagaries of technological disruption began on a pleasant London day in May 2002, when his employer at the time, an electronic foreign exchange platform called Atriax, suddenly folded. He’d left Johannesburg in 1999 after learning Cobol, a computer language for business, in the hopes of making his fortune fixing the Y2K bug. He dabbled in mobile text messaging and later found himself a senior developer at Atriax. The startup was supposed to have an edge against rivals because it was backed by the world’s biggest players in FX, including Chase Manhattan Bank, Citigroup, and Deutsche Bank, but it was poorly run and outmaneuvered by hungrier rivals.
The day pink slips were handed out, Hudson had just bought his first home, a flat in Bedfordshire an hour’s commute from work. Suddenly he was the last man standing in an empty office, kept on for a few months to sell whatever wasn’t bolted to the floors. When it came time to unload the computers and office furniture, he piggybacked onto a public bankruptcy auction held for Enron Corp. “That really stuck in my mind,” he says during an interview in a corner office on JPMorgan’s New York trading floor. “This company should’ve won, but we didn’t because we weren’t really trying that hard. I sold most of the kit on the Enron auction, which felt somehow appropriate.”