JPMorgan’s Melissa Smith on Middle Market Banking
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This is Masters in Business with Barry Ritholtz on Bloomberg Radio. This week on the podcast, I have yet another extra special guest. Melissa Smith is co-head of commercial banking for J.P. Morgan. Previously, she was co-head of the bank's innovation economy group.

Really fascinating because she sees the world from a very unique perch, has incredible access to every aspect of both commercial and investing banking that a small startup or medium-sized company, and by medium I mean up to $2 billion in revenue, might need. And that gives her this really incredible set of insights into real estate

how these companies are growing, what they need, what direction various industries are moving in. It's really kind of fascinating because if you remember back 20, 25 years ago,

Wall Street and the large investment banks and brokers were kind of accused of moving up market and abandoning that whole middle section and allowing private equity to get a toehold there. To their credit, J.P. Morgan has aggressively moved back into what some people used to call, you know, middle merchant banking or middle market banking and

I thought this conversation is just a whole world that you don't know exists and is in fact robust and growing rapidly. I thought this was a fascinating conversation, and I think you will also, with no further ado, my conversation with J.P. Morgan's Melissa Smith. Thank you so much for having me. It's a pleasure to be here. Well, thank you for being here. Let's talk a little bit about your background before we work up to J.P. Morgan.

Bachelors in political science from American University, and then you get a master's in public policy from University of Chicago, not the traditional path for people in finance. What was the original plan?

So, I definitely thought that I was going to work in the public sector. When I'm recruiting at JPMorgan, I always get the question, "How did you get into investment banking?" And I would love to tell people I had a grand plan. I didn't really have a grand plan. But my policy degree was at University of Chicago, so it was very heavy econ and stats, and basically the same core curriculum as the business school.

And in my summer in between, I worked for Mayor Daley in Chicago on economic development issues. And as I was doing that, I sort of decided it would be even more interesting to come to the public sector at a more senior level. And I also wanted to make sure that I was going somewhere that would really leverage the quantitative skills that I was acquiring at Chicago. And I also thought it'd be a really good idea to be able to pay off my undergrad and grad school loans.

So that makes a lot of sense. But before you got your master's in public policy, you have a little bit of a different professional experience. You began ballet at age four and danced professionally for how many years? For three years. Tell us about that. That is not the usual path to Wall Street. Definitely not. So yes, I started taking ballet at a very early age. That was my original career aspirations.

Starting in seventh grade, my poor mother drove me 120 miles round trip every day to Washington, D.C. to go to ballet, where I was from, sort of left school early at noon, kind of got home at 9 or 10 at night every night.

And so, quite frankly, my parents were sick of driving me. So I graduated from high school a year early in order to dance and sort of continue my dance training and then dance professionally before I went to college. And again, my aspiration was to just continue dancing professionally.

as you may or may not be aware, very few people obviously sort of make it in that world. 0.00001% are ever gonna be in ABT, which is sort of the pinnacle in the US, American Ballet Theater. And so while I was good enough to be in a small company, I was not gonna be in ABT and I didn't wanna totally give up my education. And so that's why I stopped. - I know people who were pretty far along that same process

And as they've gotten older, they talk about like they sound like old football players talking about injuries, their ankles, their toes, their calves, their knees. I'm like, wait, no, no, you guys are just dancing. And they laugh when you say that. What was your experience like with that? I mean, it was an amazing experience in that it teaches you such a huge amount of discipline and, you know, takes determination, perseverance and kind of grit, right?

You know, just back to there's very few people who sort of make it. You are in a sort of a siloed world because all you do every day is dance is kind of how I would describe it. And I would also say, you know, I can have this debate with people all day long. I think there is no greater form of athlete than a dancer. To your point, they are it is grueling on one's body and really, really physical.

really, really physical in any way that any other athletics are with the added sort of thing on top, which is the whole point of ballet is to make it look effortless. There's no grunting down the basketball court or the football court, right? So it takes the same amount of strength, but you add the control of your body on top of that to make it look effortless. And that's why sort of the athleticism is very unique. But it was...

It was an incredible experience, and I felt very lucky at a young age to have something that I was so passionate about. Not everybody sort of has that in their lives at an early age. And your comment about perseverance and grit, those are personality characteristics. I don't even know whether to call them skills or not, but that will help you no matter what you do. Absolutely. Absolutely. So ballet to college to grad school, how did you stumble into J.P. Morgan?

So, again, did not have a grand plan. At the time that I was in policy school at Chicago, J.P. Morgan's public finance team recruited specifically at the policy school, just back to it was this very kind of quantitatively based.

And so kind of randomly went to the interview, to be quite honest, and did well, was offered a role, sort of back to my earlier point, kind of thought it was good to get some private sector credibility on my resume, learn something new. And I think probably as anybody coming out of either undergrad or grad school thinks, you know, oh, I'll go do this for five years and sort of see where that leads me. And lo and behold, you know, I've been at J.P. Morgan, to your point, you know, 20 plus years now.

That's amazing. So you start as an associate. You're focused on debt. Yes. Was there an interest in debt? Was that just related to public policy? So I started in public finance, which is back to that's why they were recruiting the policy. So taxes and bonds for municipalities. I did that for about a year and a half, two years. And then I moved into debt capital markets for corporates. So kind of an easy transition, taxes and bonds to corporate bonds.

And then I spent the majority of my earlier career, the first 16 years of my career, in the investment bank in debt capital markets. And just for the youngsters listening, 25 or so years ago,

High-rated municipal tax-free bonds were yielding 5%, 6%, maybe more. Maybe more, yeah. Those were the, before we start, where I guess we're only halfway through our 40-year rate cutting cycle. You could get tax-free yield at 7%, imagine, and A-rated, not junk. Imagine what that was like. Totally. All right, so you go from public finance. How did you evolve towards co-head of innovation economies?

So, I was in debt capital markets. I like to say I grew up in debt capital markets. Which, as an aside, I think that was such a great experience because in DCM you're sitting on the trading floor. I loved being in that environment because I think it fosters learning so much more quickly. I literally sat next to the managing director that I worked for and would listen on all the client calls. You understand much more quickly how to handle specific situations.

It's sort of an interesting dynamic where you're on the private side, on the origination side, talking to corporate clients and advising them about their next debt raise or their funding needs. But you have to spend a lot of time with the traders who are trading the bonds in the public markets, and they're obviously on the public side. So you're sort of walled off, right? But then you'd have to go over to talk to the traders. And sometimes you'd walk over there and you need information from them, but they can't give you any information.

And so you'd walk over there and sometimes they sort of look at you because they're busy and you sort of get this feeling, you know, get out of my face. What do you want? So I think it was an interesting experience because you have to kind of, you know, gain some credibility with them and, you know, ask insightful questions, show that you have some sort of use on them.

So I thought it was a great way to kind of like grow up and learn about the business. But again, was in DCM for 16 years, including three years that I was in London running our European debt capital markets business. I got a lot of questions for you about Europe, but we'll circle back to that later. I'm looking at my own handwriting. 22 or 27 years? Is that 27 years you've been there? I think it's 26.

So going on 27. Going on 27. Now I feel old. So it's not, well, what's more fascinating is, and you started when you were, you know, 17. So it's not a big deal. There you go.

But, you know, that's relatively rare these days to be at any one firm for a quarter plus century. What is so special at J.P. Morgan? What's kept you there for so long? Sure. So first I would say you will actually find many senior people at J.P. Morgan who have been there for 20 years plus. And I think that is obviously a great testament to the culture that we have at the firm. Sure.

Secondly, I would say J.P. Morgan is a large place, clearly. And what that means is there are multiple lines of business with many different things that you can do over the course of your career. And generally speaking, we are sort of number one or number two in everything that we do.

which again is a great privilege to work there from that perspective. So it doesn't make a lot of sense to go necessarily to another firm when you're sort of trading down, if you will, in some instances. Maybe I shouldn't say it that way. And so I think what's kept me there is, A, just the opportunity to do many different things, learn about many other aspects of the business.

And two, you know, obviously, you know, very much appreciate kind of the culture and environment at J.P. Morgan, kind of back to that's why people stay there for so long. It's a very teamwork oriented environment. You know, we like to quote J.P. Morgan, first class business in a first class way. We take that very seriously and just appreciated that about the environment.

So let's talk about your dual role, your co-head of innovation economy and your head of specialized industries. Tell us what each of those roles encompass. Sure. So our specialized industries business sits within our middle market business. And just to define that, middle market sort of means in the commercial banking, right? So anything from kind of a very early stage startup to a company that's up to $2 billion in top line revenue. So kind of a very wide, wide remit, if you will.

about half of that business is the industry business that I run. So I have 19 different industry teams, so bankers that are experts in those specific industries to provide obviously coverage to clients in those industries. And I would just say, I mean, we are just a big believer in the better coverage and better

that we can much better serve a client when our bankers have that expertise in terms of the industry. So we're kind of very big believers in industry expertise and kind of hyper segmentation in terms of covering companies at different stages and sizes in their life cycle. So 19 different industries, innovation economy is basically a part of that. And we use that innovation economy kind of umbrella term to describe tech, early stage tech, life sciences, health tech, climate tech businesses at,

which are generally speaking high growth VC backed businesses overall. Well, let's talk a little bit about that. I'm familiar with a lot of the companies that VCs tend to back.

But one of the things that we've been noticing very obviously over the past few years is the amount of not venture income, but either private equity or private debt. How does that play out in the companies you're servicing? Absolutely. Two really important trends. So I would say...

So, within the innovation economy, to your point, a lot of the companies tend to be VC-backed, but there definitely is growing crossover into growth equity funds. I think in the middle market commercial banking business as a whole, there has been a ton of activity from the financial sponsor community. So, a ton of consolidation of those middle market businesses. And when you just look at the levels of activity, like what are sponsors buying, it is within that middle market space. So, that has definitely driven a lot of activity overall.

and something that we spend a lot of time talking about with our clients. And then secondly, to your point on the private credit direct lending side, that also has been just a massive trend impacting sort of that part of the business with these companies looking for alternative sources of capital and direct lending being a great

a great alternative. That's in fact why we as a firm sort of developed our own direct lending capability a couple years ago. And I think the great benefit of that is, again, we sort of pride ourselves on being kind of financing or product agnostic, right? We can do a traditional bank loan, we can do sort of a sort of, you know, public execution in the public debt markets, or we can do a direct lending transaction, sort of whatever best fits the company's objectives, we can sort of do it all. So let's talk about that because...

You know, part of your job description is delivering a cohesive banking experience to fast-growing companies. So the two different divisions that you're running, or head or co-head, Innovation Economy and Specialized Industries, obviously have to work together. What other divisions at J.P. Morgan are you collaborating with? Sure.

I would say just generally we collaborate across the firm in everything that we do. The commercial bank, just very broadly speaking, regardless of industry, regardless of what aspect of the commercial bank we're talking about, we're constantly working with our partners in the investment bank when companies need obviously strategic capital raising, M&A advisory, whatever the case may be. We're constantly working in conjunction with one another.

And at the same time, we are often working with our asset management colleagues when companies have large cash balances that they need to invest, and our private banking colleagues. And I think a good example of that is within the innovation economy ecosystem overall, where because it is so interconnected when you think about VC firms funding portfolio companies, those portfolio companies having founders, oftentimes they're repeat founders,

it's important that you can serve sort of the needs of that entire very interconnected ecosystem. So bankers on my team, on the innovation economy team, are serving those portfolio companies, right? But at the same time, we're working with our colleagues in asset management and the private bank who bank the VC firms themselves and bank the VC partners and the founders for their private wealth needs. So our objective is to deliver sort of all the needs of the ecosystem, and that's why –

sort of by definition, we're always working across lines of business. So really what you're saying is from a checking account up to a secondary financing, private debt, up to an IPO, and even beyond that, if there's an acquisition or a merger, you guys are a full service, not only commercial bank, but investment bank. There really isn't any space for

that you guys can't play in and service exactly what a fast-growing startup needs. Exactly. You said it perfectly. And as I often like to say, we serve companies from startup to IPO and beyond. And so, again, we believe we're really one of the few firms who can actually serve every need of these companies. And again, they're the founders themselves. Really, really interesting.

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So let's talk a little bit about middle market banking. You referred earlier the definition of middle market banking as up to $2 billion in revenues. Top line revenues. So that's...

This is not a little, these are not all little companies. That's a $2 billion in revenue is a pretty decent-sized company. Absolutely. And again, we have teams focused on the smaller size, what we call emerging middle markets. So think about that as kind of $20 million to $100 million in top-line revenue. Innovation economy doing the high-growth VC-backed startups. And then a bunch of different industries, obviously, within kind of that broader commercial banking universe. And bankers that are focused simply on $100 million and plus in top-line revenue.

That's really interesting. And we've talked earlier about the role of venture banking in this. Where does that fit in? Where does venture capital fit into startups? And where does...

venture banking fit in as companies get a little larger? Generally speaking, and our objective is to really become the company's primary operating bank and trusted advisor from the very beginning, right? And so as an example of that, we now have a startup banking team that actually covers companies at pre-seed and seed stage. So oftentimes could be before they've even raised an institutional round of capital.

And at that point in time, their needs are very sort of simple, if you will, right? They need a bank account. They need to pay their employees. They need a way to sort of collect funds. They may need a credit card, just very simple banking needs. And then obviously as the companies continue to grow, those needs become more complex over time, including the need to either –

raise additional capital and whether that be from a venture capital fund or whoever that may may be coming from they may need some debt financing and sort of on and on and on in terms of what what they ultimately need to achieve their objectives and kind of become the company that they want to become.

So what's the split between the companies you work with that are VC-funded, that are private equity-backed, or just bootstrapped by the founders themselves? So I would say, again, it would vary significantly depending on the industries that we're talking about. But if just we focus on the innovation economy business specifically, the vast majority of those are going to be VC-backed.

As I mentioned, of course, sort of the crossover, if you will, between growth equity and VC, the lines continue to get blurred. But I would say about 20-ish percent of the business is sort of PE-backed and the rest is VC-backed, just broad numbers. Bootstrapping still goes on? It does, again. And you see that certainly at the sort of precedence seed stage. But I would say it's still a minority of the larger companies within the innovation economy.

So I'm thinking about their balance sheet. What's the split between how much is equity, how much is debt, or do you do a combination of debt and equity? What does this look like today? Yeah, no, absolutely. So again, the whole purpose of having a partner like J.P. Morgan is that, A, we can sort of help the companies think through what the optimal capital structure is and back to sort of the point of we're sort of product agnostic depending on what the company chooses to do.

Most of these companies that are high growth VC backed in what we call the innovation economy business tend to still be pre-profit, right? They're growing really rapidly. They're throwing everything back into the business in order to achieve scale. So for the most part, their use of debt is quite small, usually some kind of small venture debt component. And we really want to work with those companies to think about when is the right time to put debt in their capital structure, depending again on where they are in sort of that life cycle and depending on sort of

what their cash burn looks like, how close they are to the next capital raise, what is the likelihood that they're actually going to be able to raise the next round of capital. So it is a combination of both, but again, the majority of their capital structure is definitively going to be equity given that they're cash burning companies, generally speaking. And I'm assuming you're not involved in angel rounds or very early seed stuff.

which kind of leads me to what sort of criteria does your team use when you're trying to figure out, hey, is this an early stage company that we want to have a banking relationship? Can we be value add to them? Are they still...

too novel, too green, no business, no revenue? What sort of criteria do you use? - Sure. So I think about it as quite as a pyramid. So there is a lot that we can do for companies across all stages of their life cycle. But when you're talking about the very early stages back to they have fairly simplistic needs, right?

And so we want to be able to bank and can bank as many of those companies as possible, assuming that we don't find anything from a reputational risk perspective or something or an industry that we think is challenging. But I think, again, becoming their primary operating bank, helping them optimize their working capital is sort of like the biggest challenge that these companies, not the biggest challenge, but one of the challenges that these companies face.

can bank in terms of providing a bank account credit card, again, sort of payables, receivables, many, many, many companies. As we think about which of the companies we're going to lend to, right, which is sort of the next round of the pyramid, if you will, and that's we obviously need to really assess

their sustainability over time, their ability to raise the next round of capital. Because when you think about venture debt, that's really one of the gating factors. Is this company going to be able to raise the next round of capital? What's the cash burn look like to obviously get them to that next capital raise? And how are they using debt to sort of extend that runway overall?

So those are sort of the types of things that we're thinking about when we think about which of those companies that are sort of credit worthy for us to be lending to and obviously support them to, again, get to the next round of capital. Huh.

Really interesting. So I have a recollection of the era following the dot-com ramp up and then the crash in 2000. And it felt like a lot of the major banks had moved up market, like the middle market was kind of abandoned. And lots of private equity came.

seem to have filled that gap. So I'm kind of fascinated that a giant bank like JP Morgan is addressing that same market segment that generally people seem to feel like the bigger Wall Street banks have abandoned.

You're telling me you're focusing in that space. Absolutely, because I think, and I'll again kind of focus on two segments, if you will, kind of just the broader commercial banking business and then the innovation economy business specifically. When you think about the broader commercial banking business, right, so not just high growth VC backed companies, but small businesses overall, right, there are...

300,000 small businesses across the country that represent $13 trillion in revenues and employ 40 million people. It is a massive part of the economy overall that we very much want to serve. We've been expanding that business quite substantially, mainly through geographic expansion over the course of the last several years.

We serve 32,000 middle market companies today across our commercial banks. So certainly, again, there's back to a lot that we want to do and can do to support small business as kind of an engine of the economy overall that we very much think there's an opportunity there for us, but it's also sort of a responsibility for us to serve those businesses.

I think on the innovation economy side, when you look at the disruption going on across every industry today and the innovation, JPMorgan clearly wants to be there to support those founders with the next innovative idea. I always like to point to the fact that we've been serving innovative companies literally for over 200 years. When you look back at our history, we supported Thomas Edison and the invention of the light bulb, the railroads, the automobile. Those were disruptors.

at that time. But I think on the innovation economy business specifically, when we first started, I'll give you a little history of the business. When we first sort of started a dedicated focus, so we had always served early stage tech companies in the commercial bank, but just by sort of a local banker that didn't have any expertise in tech, right? They covered all industries. So back in 2016, 2017, we put in place sort of a dedicated team of bankers.

At that point in time, I would say we primarily did – we were very good in terms of our capabilities at serving, let's call it kind of Series C and beyond, right? And when I came into this role, we very much noticed that a founder, right, for their company would walk into a Chase branch. They'd open a bank account.

And then they would quickly leave that Chase branch and move to one of our competitors who were very good at serving early-stage, high-growth, early-stage VC-backed companies. And then they'd come back to us at sort of Series C, right? Generalization. So when I came into this role, sort of said, what are we missing, right, in that very early stage in terms of our capabilities? Like, let's skip that part where they leave the J.P. Morgan sort of franchise, right? And really what we were missing was sort of a very –

a simplified treasury, what we call treasury payments bundle for companies to manage working capital, a simple digital platform for earlier stage companies, and a venture debt capability. That's what we really built out from 2017-2018 over the course of the past several years so that we had best-in-class capabilities both for early stage companies as well as late stage companies where everybody thinks about JPMorgan as serving later stage.

So you mentioned earlier that you're expanding geographically. We'll talk about international in a few minutes, but let's stay in the United States for a bit. I think of J.P. Morgan down on Wall Street, very New York-based.

What geographies have you been expanding to? What parts of the country seem to be very fast growing these days? Sure. Well, so I would just say today our commercial banking business is in the 85 fastest growing top MSAs across the country. We have 125 offices across the country, 2,000 plus bankers across the country. A big part of that expansion over really the last decade has been sort of California and the West Coast overall.

where we, prior to the Wamuu acquisition, didn't have a ton of sort of like retail presence and or sort of boots on the ground there. So that's accounted for a lot of that geographic expansion, as well as, you know, expansion into the southeast and sort of other states in the west. Obviously, sort of moving from what historically, you know, decades and decades ago was more of an East Coast dominated business. And that's what's accounted for a lot of the growth within the business as a whole.

What about down south, places like Charlotte or Nashville or Texas or Florida? Absolutely. I mean, when you look at, again, kind of depends on the industry, but when you look at the innovation economy business and kind of where some of the newer markets are from a VC funding perspective, you are seeing a lot of growth in the Phillies of the world, the DCs of the world.

San Diego. I mean, certainly there's still like a huge concentration in kind of the Bay Area and then kind of New York, Boston area. But there are cities, Miami is a good example. For our healthcare business, Nashville has exploded over the past several years. So again, depending on the industry, it depends on sort of where our concentration of bankers are. But back to that's why we are in 125 cities across the country.

So let's talk international. You spent, was it a year in London? Three years. Three years. Oh, so you're an old hand at dealing with Europe. So let's talk a little bit about what's happening in the UK and what's going on in Europe. How do you look at those markets now?

Can you play in those spaces? Tell us a little bit about what the work is like there. Sure. So I would say from a commercial banking perspective, we definitely support companies globally. And I do think that's, again, one of J.P. Morgan's competitive advantages. As earlier stage companies are looking to expand internationally, we can support them across, you know, basically...

basically any market they're going to across both EMEA and APAC. So yes, we support companies there. And then we have teams on the ground in Europe and Asia, et cetera, that are supporting early stage companies that are headquarters in Europe and APAC and then their expansion into the U.S. So kind of doing it both ways, inbound and outbound.

And again, I think that that's something that with our long history of operating in these various jurisdictions, helping to advise companies on sort of the right strategy as they think about those international expansions. Really, really interesting. What percentage of your business is international? I can't imagine. J.P. Morgan feels like it's so dominant in the U.S.,

What's the perception like overseas? How is it? So I would say for our commercial banking business, so let me separate this out a moment. So again, the commercial banking business in the U.S. is serving U.S. headquartered companies, but when they have a European sub or an Asian sub, that clearly is a smaller percentage of the company's overall revenue. So a smaller percentage of like the revenue that we would earn as well, but we're supporting them globally. The commercial banking sort of build out in Europe

Europe and Asia for bankers on the ground supporting European and Asian headquarter companies is a newer effort, newer over the past seven or eight years. So it's not as robust in terms of our – robust is the wrong word. It's not as far along.

Right. As I mean, it's clearly, clearly well established here for hundreds of years, hundreds of years. And we've been in Europe and Asia for hundreds of years. Investment banking, hundreds of years is maybe a strong word, but for many, many, many decades from an investment banking perspective. But the build out of the commercial banks supporting smaller sized companies in those markets is is newer. Seven or seven or eight years ago.

And that's a white space. That's got to be wide open now, right? Absolutely. Absolutely. And again, we're finding great traction because there is so much, obviously, as we all are well aware, economies and companies operate in such a global fashion today that a company sitting in Europe obviously has, generally speaking, plans to expand in other parts of the globe, the U.S. being a huge market, particularly across tech and consumer-facing businesses, et cetera. So that connectivity is important. And you said earlier from checking to IPO, right?

How do you think about the IPO market, which has been so quiet the past few years? We really haven't seen a lot of companies coming public. How do you view this?

When might that change and how does this impact your business? Sure. So we are definitely optimistic on the IPO market this year. And I think even, you know, in 2024, I saw a significant uptick in issuance versus 2023. Obviously, we were coming off a low base, but we saw about $33 billion in IPO volume in 2024. We think that that could double this year, you know, just given, I think, a stable backdrop, more confidence.

kind of confidence all around the markets. We've also just seen a more stable U.S. economy. Obviously, so far, knock on wood, feels like we sort of took a soft landing right in the U.S. We now have rates on the decline, which is supportive of the IPO market. We'll sort of see how that

kind of plays out over the course of the year. And then I think, you know, the expectation of sort of double-digit earnings growth in the coming year is also very supportive of the equity market. So we do think you're going to see a lot more activity in the IPO market this year. And obviously, there's just a ton of supply that's built up over the past couple of years of

as companies have stayed private longer and waiting for a better window to access that IPO market. So we're recording this at the end of January. I don't recall seeing anybody's forecast for the year ahead.

saying, hey, really inexpensive AI from China, DeepSeek, is going to completely disrupt everything. How do you look at not just the technological disruption that we're all experiencing, but the incredible pace as to how rapid everything is advancing? How do you think about this and how does that impact you?

the day job, how does it impact the work? Sure. So clearly, you know, just talking about deep seek specifically, obviously just a huge impact on the equity markets. You know, as you saw a lot of, a lot of some of the larger names trading down significantly, we did see a rebound sort of the following day, which was, which was beneficial. I do think, you know, AI is obviously going to be continued to be a big story over the course of 2025.

There's also just a tremendous amount of capital that needs to be raised to kind of support that industry overall. And so I do think, like back to sort of the comments about sort of stable macroeconomic backdrop, rates declining, all of that will be supportive of the broader economy.

IPO market and the ability to access those markets, yes, we're going to kind of continue to see volatility with some of these surprises, like the deep stake example. But it hasn't really changed our view, our very constructive view on the market going forward. This is a message from sponsor Intuit TurboTax. Taxes was dealing with piles of paperwork and frustrating forms, and then waiting and wondering and worrying if you were going to get any money back.

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Let's talk a little bit about some of your thoughts on leadership at the bank and long-term strategy. If we go back five or six years, you're a managing director and head of specialized industries. What types of firms were you working with then? And are you still working with the same firms or has your portfolio widened since then? Well,

Well, I would say the portfolio has widened in the sense that we've continued to add various industries. So specialized industries, I think I mentioned before, it's 19 different industries that we cover. Give us some examples. Yeah. So that spans a very wide remit. So some of our very mature businesses, for instance, our government business, supporting states and municipalities and school districts across the country. We've been doing that since J.P. Morgan sort of

was founded. So the government business, our not-for-profit healthcare, higher ed and nonprofit business, again, two very mature businesses. We also have beverage, food and ag, our M&C business supporting some of the subsidiaries, media, communications and digital infrastructure,

very hot sector right now in terms of the huge need for data centers and capital for data centers overall. The innovation economy business, again, as I mentioned, is sort of part of all that. So those are some examples of the industries that fall within that remit. So again, when we first started specialized industries,

I'm not gonna remember the exact number but we probably had five industries with it within that right and so we've just continued to build out that dedicated expertise over the course of the past several years which we've just found great success in so how do you assess risk when you're rolling into a new sector or specialized industry when you're working in a space for a while you kind of learn what what the you know where the mines are laid when you move into a new space

How do you approach that? Well, I would just say it's not as if we weren't banking companies in each of those industries before. It's simply that we did not have dedicated bankers that only did that, right? So back to this is why we very much believe, and it's been proven out in terms of the growth that we've seen in sort of the specialized industries business. So we sort of...

focus in on the sectors where we think it makes a difference for the banker to have that industry expertise. Keep in mind, we partner with the investment bank on the M&A advisory and strategic capital raising, and they are all industry focused, right? But does the commercial banker need that industry expertise?

Is there something very different about the credit risk associated with those industries that banker expertise helps and that we need sort of dedicated credit teams, again, with the focus on those specific industries? Is there something different about the product and solution set for those companies that would require us to have that dedicated focus?

back to kind of the innovation economy business as I was saying earlier we didn't have the early stage capabilities that we needed you know seven eight years ago and that's what we and it was a very kind of bespoke to those high growth companies and the challenges that that we faith that they face

that led us to kind of build out those digital capabilities and bundled solutions. So that's a good example of why we felt like we needed to build that as an industry. So it's kind of fascinating that you're serving clients who are rapidly innovating, expanding into spaces that wholly unforeseen

How do you keep up with that? How do you make sure that you're innovative and cutting edge? And how do you build this when it's almost as if your clients are outpacing the rest of the market? Absolutely. And I would say that is one of the best parts of my job is meeting with founders all day long. Mm-hmm.

And really, obviously, hearing about their businesses and what they are doing to kind of disrupt industries, new technologies. And that is extraordinarily rewarding in terms of hearing about that and how we can help support that growth overall. It is very different meeting with, again, kind of back to my earlier background, entrepreneurs.

spending time in debt capital markets, you're basically covering Fortune 500 companies. It's varied, which is its own unique circumstances and those companies have their own challenges. But it's very different speaking to the treasurer, CFO or CEO of a Fortune 500 company than a founder.

It's a very different... Different focus, different priorities, different experience and skill sets. So that, again, is sort of the most fun part of my job is being able to interact with all those founders and hear about sort of the technology to come. So I'm intrigued about the work you did in debt capital markets, especially...

When you were in Europe for three years, what are the major differences between the way we manage debt capital markets and the way they do? Is it structural? Tell us about, you know, why is it that? Are they very similar or are they different?

Well, so a couple of things I would say that just one in terms of how we think about covering companies and Dacron markets. In the U.S., we're organized by industry team. In Europe, for obvious reasons, we're organized by country team, given language differences. So that, again, was something that I very much enjoyed was sitting...

back to NDCM, you're in the trading floor environment. I would have my UK team over here, my Germany team, my Italy team. Everyone's speaking different languages. I kept thinking I was going to learn five languages by osmosis. That did not work. Unfortunately, that's not the case. But that was a great experience overall. The European debt capital markets are

tend to be a little bit more volatile than the U.S. It's also because they are a lot smaller, right, in terms of just the total volume, the investor base that sort of supports those markets all around. And so that's one of the major differences. What I would say is for larger global companies, having access to that European market has been quite advantageous, both from a capacity perspective, if they were running up against capacity constraints for a very frequent issuer, obviously, in the U.S.,

And two, just from a cost of funding perspective. So over the last several years, given the divergence in interest rates between the U.S. and Europe, for many companies, it's actually been cheaper to issue bonds or access the debt markets in Europe than it has been in the U.S., right? U.S. interest rates were higher. So that's obviously just a great...

alternative, right, for companies when they need to access enormous amounts of capital and are obviously very focused on sort of what the most advantageous cost is. So I know you're not an economist, so I'm not going to ask you that question, but it just feels like Europe cannot get out of its own way for, I don't know, past five years, 10 years? Go back to Brexit and nearly Grexit.

What's going on that Europe seems to be almost structurally lagging the U.S. and having such difficulty finding its footing?

Well, I'm also not an expert on politics, so I'm not going to comment on that because I think there's something to be said there. But what I would say from sort of a structural perspective is I think probably one of the bigger differences today is demographics, where kind of working age population in Europe is declining. I think it's still growing modestly in the U.S., and obviously that will turn in the U.S. at some point in time. But so that has been sort of one issue in Europe. I think the post-COVID...

COVID recovery in Europe was a lot more challenging primarily because of the Russia-Ukraine war and the energy crisis that they faced given a lot of their energy was coming from, or energy supply was coming from Russia. That had a very different impact in Europe than it did in the U.S. overall. If you look at Germany, obviously the largest economy in Europe, it's very still heavily manufacturing based.

higher interest rates have really had hurt manufacturing global manufacturing and so that's had a bigger impact i think on on germany with those manufacturers operating globally um so those are some of the things that i would point to and you know there's just never been the same labor productivity across europe as there has been in the us and quite frankly just the support for innovation and tech right and new technology and i think that's just had a big impact back to the

Germany's heavily manufacturing based, right? The U.S. probably less so. Because we're more service oriented? Is that the thinking? More service oriented. And I think, again, you don't have the same. I think a lot of countries in Europe are looking to put in place policies to better incentivize some of the technological development. But I mean, you don't have a Bay Area type

Right. Right. I mean, you have little pockets of that kind of concept, right, where you have sort of this ecosystem coming together to disrupt and innovate and support new technology. But there's nothing as sort of big as the Bay Area and Europe.

But you do have world-class manufacturing throughout Europe. And I think of Mercedes, Porsche, BMW in Germany. You think of all the, I guess it really doesn't scale watchmaking and things like that. But there are some really high-end companies that are incredibly successful, are

Are they just the exceptions? What is it? I'm trying to conceptualize. Sure, but I also think it's much more fragmented, obviously, than the U.S. market with each different country with its own rules and regulations and some sort of more nationalist policies than others. And I think that just has an impact on their ability to kind of dominate. And we're talking about Europe as if it's one thing. But it's not. It's not. So you're saying really it is structural. It's not. So the combination of these structural...

structural challenges, relatively high interest rate, less productivity gains, and a focus that's less service-oriented, more manufacturing-oriented. Demographics. And demographics. So the people who have been waiting for, hey, you know, Europe is going to catch up, it's going to mean revert any second, that doesn't seem to be in the imminent cards anytime soon.

I don't think that's in the 2025 cards. Let's put it that way. Hey, that's fair. That's a perfectly fair thing. I want to talk a little bit about some of the work you've done on women in banking. You were on the Women on the Move podcast. And one of the things you said that struck me was women don't have as robust of a network as men do. Explain. Yeah.

So that was a little bit of a generalization probably. But I think what I meant by that was if women tend to stick to, because I think often earlier in their career, and probably I did the same thing early on, that you stick to sort of the women's network that you develop, right? And there's a lot of sort of women's networking events. I'll speak for financial services specifically. If you only stick to that network, there's still a lot fewer women in sort of banking or

pick many industries, right, then there are men. And so that limits kind of that network overall. And so I think like important that you're spending time with people across the organization, picking mentors across the organization, networking across the organization to make sure that you're developing the same robust network that sort of some of your male colleagues would already be doing. So I also read you published

Value and prioritize mentorship. How do you approach this at your job? We'll get to questions about who your mentors were, but do you have mentees? Are you practicing what you preach?

Yes. And I very much take that as a serious responsibility and sort of part of my day job. You know, we have various, I would say, organized programs and then there's more informal, you know, mentorship programs. And I think both are important. But I think over the years, you know,

making sure that all of the senior individuals are sort of participating in those mentorship sponsorship programs, giving younger people sort of the opportunity to learn from someone else about their career. And again, sort of doing the informal mentoring. I think

Back to the JP Morgan culture, I think it's just very endemic there. Someone reaches out to have a cup of coffee with you, you go do that, right? And it's just sort of something that's expected and something that sort of I grew up with, if you will. And so certainly something that I, again, take very seriously. So when I first started this podcast, I want to say almost 11 years ago, it was very hard finding women in senior leadership roles.

and having them come on as guests. That has become much easier. I'm curious how you see the industry as once male dominated,

It's still mostly male-dominated, but it feels like it's improving somewhat. What's your perspective? I do think that a lot of progress has been made overall. I think J.P. Morgan, not to toot our own horn, but I think is a great example for the industry where you look at our operations.

operating committee, which are the individuals that report directly to Jamie. It is heavily female. Jamie, I'm sorry, I'm not familiar. Who is that? There are many, many females on the operating committee, so we've done a great job there. And I think that that's kind of filtered down throughout the organization. So yes, I do think it has improved substantially.

I do still think there's a lot of challenges, particularly at that sort of VP, late VP, early ED level, early executive director level, a lot of times when people are having sort of their first children and sort of making sure that we're providing a supportive environment that they're able to obviously come back to work as they would like to. But yes, I think significant progress has been made. But I think that is a very intentional effort.

back to kind of understanding why if we are losing female employees or diverse employees, why that is in the same way that we want to understand why we're losing any employee, right? Any talented employee, we don't want to lose. But I think you have to be just very intentional about

measuring progress and understanding what the challenges are and if there's anything that you can do or should be doing to have a more sort of accommodative environment and inclusive environment. So I have a question later about advice to recent college grads, but as long as we're talking about women in banking, let's stay focused on that here. What advice do you have for any young woman who wants to become part of the financial sector or banking industry?

I would just say really taking advantage of friends, colleagues, your network, peers to understand all aspects of the industry. That's hard to do sometimes when you're in college and you're not sitting in the organization. But I do think, and this is not a commentary on females versus males, but just back to the networking point.

you have kind of a natural advantage if your parent was an investment banker or a lawyer or, right, that dealt with sort of the banking industry or, you know, pick another sort of adjacent profession. And so, you know, those individuals are,

know the right questions to ask, are more aware of the opportunities across the firm. It's not just investment banking. There's lots of other things we do at J.P. Morgan or any firm. So I think just making sure that you're figuring out how to kind of gather that information and ask all of those questions so that you're a little more educated coming in about sort of what the opportunities are overall. Huh. Really interesting. So let me throw you a curveball question. We talked earlier about

not only about your ballet at age four, but dancing professionally for three years. You're a member of the Board of Trustees for American Ballet Theater.

That's the pinnacle of dance in America. Tell us a little bit about the organization, how you found your way to it. What are you doing with them? Sure. So I have been on the board since 2009. Oh, wow. That's 15 plus years. Yes, so a long time. So again, American Ballet Theater, one of the greatest ballet companies in the world, based here in New York. Yes.

officially designated by Congress as America's National Ballet Company. And actually, as of January of this year, I'm the new chair of the board of ABT, which is super exciting. But the board obviously has its basic sort of governance functions. But we spend a lot of time helping with fundraising for the organization and helping provide expertise where

Each individual has it. Any nonprofit obviously has a much more limited sort of staff overall. So if there's people on the board that have real estate expertise or finance expertise or HR expertise, that is very valuable to the organization as a whole. So there's always sort of special projects that we sort of participate in from that perspective. But a big chunk of what the board does is really...

Making sure people are aware of ABT, helping with fundraising, helping attract new donors, helping attract and develop new audience members. Really, really interesting. Have past board members and or chair people been former members?

professional ballet dancers or is this unusual? There's always a few, but certainly the majority of people on the board don't have a background in dance. And as I always remind everybody, I call it the separation between church and state. The board is there to sort of help with the business of running the ballet company. They have no input whatsoever to anything artistic, which is why it's not required that you have any sort of background. But I'm curious if there have been previous chairpeople who were professional ballet dancers.

That I would have, I don't think so, but I'm not 100% positive, but I don't think so. Our previous chair, who retired at the end of last year, his sister danced with the company for many years, and that's really how he became involved and obviously, you know, very passionate about the ballet.

Really, it's one of those fascinating things that just I don't see on people's resumes all that often. And I had no idea you were chairman, but it's really fascinating. All right. So while I still have you, let's jump to our favorite questions that we ask all of our guests. Speaking of entertainment, let's start with what are you streaming these days? What's keeping you entertained? It could be Netflix, podcasts, whatever. What what what are you enjoying these days?

So first I would say I am sort of an avid reader. I was talking with a colleague on my way over here. Everybody consumes information differently. I consume it better reading, I think, than always listening. Right, I'm the same way. So I'm sort of very religious about getting through The Economist and The New Yorker every week. And I won't let myself read the next issue of The Economist until I finish the first one. So even if I'm behind, I –

I do that. I'm in 1986 if I follow that rule. Okay, there you go. I might have to get that up at some point. I am currently streaming, I guess, the second season of The Diplomat, which I'm very much enjoying. So good. I love the political action thrillers, but I think I'm running out of them because I've watched all of them at this point. Lioness, have you seen that? Oh, no, I haven't seen that. Okay. So a little more intelligence community slash...

Tip of the spear. Okay, okay. But, you know, the same sort of back and forth layers of intrigue. But I really enjoyed the diplomat. I thought that was fascinating. And then what was it? Secretary of State was the other one? Madam Secretary. Madam Secretary. That same concept. I will admit I've watched it a couple of times. Oh, really? I thought it was great. Yes, exactly. I think it's a good pick-me-up, particularly when partisan politics are, you know,

depressing everyone. It's good. It's just a happy, there's always a happy ending. I appreciate that. Anytime there's, you have an ability to go to a space you're wholly unfamiliar with and be challenged. It's not just entertaining, but it, you know, clears the cobwebs out a little bit. Exactly. Really interesting. So we talked about you as a mentor. Who were your mentors who helped shape your career?

So I would say I feel very lucky when I was most of my career when I was in debt capital markets, I worked for a woman who ran DCM at the time and then she went on to do different things at the firm who was very much a sponsor mentor for me overall. And it's just, you know, over time, she's retired now from JP Morgan, but sort of, you know, become a friend. But I think that's where I really

I think learned and embraced kind of just this concept of attracting talent, retaining talent, helping to kind of bring up the next generation of women is a responsibility of senior people. And she really demonstrated that. And certainly I took that to heart. So since you are a reader, let's talk about books. What are your favorites and what are you reading right now?

So favorites are hard, but what I'm reading right now, so I actually just finished over the holidays. I tend to alternate between fiction and nonfiction. Okay, I get that. Because I think both are important. I finished Chasing Hope, the Nicholas Kristof book. He's a foreign correspondent for The Times, which is interesting. I finished a biography of Alexei Ratmansky, who's a choreographer. I don't think many listening to this podcast may find that book interesting, but I did. Okay.

new fiction by Michael Cunningham called Day. So those were all really good. Some of my favorite authors: Isabella Ending, Dave Edgars,

That's what I would say. Eggers is kind of funny if we're talking about the same guy, right? And he has funny titles, which I love. Heartbreaking Worker, Staggering Genius, one of his first books. Love that book. Yeah. So we're down to our last two questions. And this is a broader question than I asked earlier. What sort of advice would you give to a recent college grad interested in a career in either banking or finance?

I think to make sure that they embrace risk-taking. And I say that because maybe just because I myself maybe am a little bit risk averse, but I think over the course of your career you have the opportunity often to do many different things and a lot of times people are afraid to sort of leave their current group and do something different and it just opens up a whole world of possibilities. So I think sort of

taking a little bit more risk than you might naturally do is always good advice. And when you have no spouse, no mortgage, no kids, that's the time to fall on your face because you get up, dust yourself off and start over again. It's funny how when you're...

a few years past being young, that's obvious. But at the time, it doesn't feel that way. Well, and it feels like such a big risk. Oh my God, it's so risky. Right, exactly. And our final question, what do you know about the world of banking and investment and growth companies today that would have been really helpful 25 or so years ago?

That's a really good question. And it's not, I should have bought Nvidia when it was 50 cents. It's like what philosophically would have been useful to know that you eventually figured out? I think because I started in the investment bank and then by definition was really working with primarily larger size companies, I think I, you know, as I kind of mentioned earlier,

understanding how different it is and the fact that you have the ability to make an even bigger difference for a smaller size company that needs that sort of trusted advisor even more, I think it would be sort of good to know, right?

because it is, I think financial services overall, you have the ability to take on a lot more responsibility at an early age than other industries. But I think, again, the ability to kind of influence and advise an early stage company is just incredibly rewarding given the limited resources staff that they have.

Melissa, this has been absolutely fascinating. Thank you for being so generous with your time. We have been speaking with Melissa Smith. She is co-head of commercial banking for J.P. Morgan. If you enjoy this conversation, well, be sure and check out any of the past 500 or so we've done over the previous 10 years. You can find those at iTunes, Spotify, Bloomberg, YouTube, wherever you find your favorite podcasts.

And be sure to check out my new book, How Not to Invest, coming March 17th, wherever you get your favorite books from. I would be remiss if I did not thank the crack team that helps put these conversations together each week. Sarah Livesey is my audio engineer. Anna Luke is my producer. Sean Russo is my researcher. Sage Bauman is the head of podcasts at Bloomberg.

I'm Barry Ritholtz. You've been listening to Masters in Business on Bloomberg Radio.

Movers who have a track record of being both early and right, like Apple co-founder Steve Wozniak or co-founders Marc Andreessen and Ben Horowitz. Not to mention folks you typically don't get to hear from, like the very first chief technology officer of the CIA.

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