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Best of Frenemies

5 January 2019

From The Wall Street Journal:

JPMorgan Chase & Co. Chief Executive James Dimon assembled a team in 2017 to answer a question that had been nagging at him for a while: “How should we think about Amazon?”

The team explored the ways Amazon.com Inc. could muscle into financial services and where JPMorgan could fit in, according to people familiar with the matter. And what if, as Wall Street has long feared, the tech company were to become a bank itself?

Industries from pharmaceuticals to logistics are grappling with the Amazon question, as the retailer relentlessly expands into new business areas. But in many ways, the online retail giant and the nation’s largest bank by assets have a special relationship.

The fortunes of the two companies have become more entwined over the years. They are closely connected through a credit-card deal struck when the retailer was still mostly selling books and CDs on the internet. JPMorgan is in talks to partner with Amazon on a number of financial ventures, and the bank lends to the tech company. With Warren Buffett’s Berkshire Hathaway Inc., the companies are working on a first-of-its kind venture to lower health-care costs for their hundreds of thousands of employees. Increasingly, JPMorgan has begun to emulate some of Amazon’s signature management practices.

Mr. Dimon and Jeff Bezos, Amazon’s founder and CEO, have also become friendly over the past two decades, even as their business interests have at times been at odds, and despite some differences in their personal styles.

. . . .

As the relationship between the men and their companies deepened, the balance of power shifted in Amazon’s favor. The retailer’s market value—at $770 billion—now dwarfs JPMorgan’s $335 billion. The bank, used to being the heavyweight in the room, is trying to figure out how Amazon fits into its world and how to avoid becoming its latest casualty.

One strategy: Be more like Amazon.

. . . .

JPMorgan’s relationship with Amazon stretches back to at least 2002, when Chase began issuing the online retailer’s co-branded card. The deal predates Mr. Dimon, who joined JPMorgan in 2004.

A few years earlier, Mr. Bezos had tried and failed to hire Mr. Dimon to be Amazon’s president. Mr. Dimon, recently fired from Citigroup Inc. by his mentor, Sanford “Sandy” Weill, flew to Seattle to have lunch with Mr. Bezos. Mr. Dimon has said it wasn’t the right time to make such a dramatic change.

“I had this vision I’d never wear a suit again, I’d live in a houseboat like Tom Hanks” in the movie “Sleepless in Seattle,” Mr. Dimon told CNBC in July.

Over the two decades that followed, Amazon’s sales exploded. So did its clout.

About two years ago, when it came time to renegotiate the card agreement, Amazon was in a position to extract painful concessions.

Link to the rest at The Wall Street Journal

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