An interview with Jay Fishman, W’74, WG’74, Chairman and CEO of The Travelers Companies, Inc.
To lead your Dow Jones 30 company unscathed through a major financial crisis and recession, a CEO must converse. You may have the “best management team in the industry,” but you must be able to engage them, advance ideas, listen, and learn.
You can have a conversation with Jay Fishman. It helps that, while he takes his responsibilities seriously, he tries not to take himself too seriously. In his too short acceptance speech at the 2011 Joseph Wharton Awards Dinner, Jay regaled us with a vivid memory from his undergraduate days at Wharton. “Where they cut the men from the boys in those days was cost accounting. I was struggling with the course tremendously and had been studying for the final for weeks. I went in and sat down, and read the first question on the exam, then quickly went to the second because I had no idea what the first was talking about. I rapidly came to the conclusion that I must have the wrong exam, because none of it made any sense to me. I kept that bluebook as a reminder of that wonderful class, and that it’s been a wonderful struggle.”
It also helps that Jay possesses an unguarded sense of wonder, often chuckling at something he just realized, peppering his conversation with “gosh” and “oh boy!” These attributes complement the thoughtful business approach that has been the hallmark of Jay Fishman’s leadership at Travelers, as well as his participation on the Board of Trustees of the University of Pennsylvania.
At the Joseph Wharton Awards ceremony, you announced that Travelers would make a $100,000 contribution to the Wharton Club of New York, beyond its co-sponsorship of the Joseph Wharton Awards Dinner. What was behind that? It is certainly a first in the club’s history.
I wanted to acknowledge Ken Beck and the rest of the group for their remarkable success in reinvigorating the club. Ken, in particular, has invested so much time and so much energy. What an organization needs to thrive is someone who is truly interested in both the organization and its members. Ken is an unabashed advocate. The funny thing was, I was being recognized for leadership, and that was very nice and gracious, but events like this are always interesting. Someone is being honored, but 100% of the time, if you peel the onion, you’ll find there is someone else at the center who is also deserving of the recognition and the honor. In this situation, that person was clearly Ken.
In your acceptance speech, the word “gratitude” comes up again and again, in such a way that it seemed to characterize your approach to life. When you’re leading an organization the size of Travelers, does that quality come into play?
You bet. There is a personal and a professional aspect for its relevance. First, I come from an extraordinarily modest background. My father was a small-business owner; he ran a tiny printing business, and I was part of the first generation in my family to have the opportunity to go to college. So, I do have a deep sense of gratitude and appreciation. Professionally, that emotion and dynamic translate perfectly into the corporate realm. You asked how one manages such a large firm. Never alone! This is a place that requires a group of people, each of whom is really talented and capable, and you’ve got to invest in them, trust them, partner with them, listen to them and do all of the things that good partners do. I refer to the people who I work with on the senior team as “partners.” Some may think that is a little hokey, but that’s how I feel. I may be the titular leader, and it’s a function, so I get a lot of the credit. But publicly, I try to share the credit with all of them. I do very much stand on their shoulders.
Travelers is well-known for having averted the 2008 financial crisis.
We did. The decisions at the root of it occurred in 2004. None of us were prescient enough to see the real estate crisis. But what we do think about all the time is the relationship of risk and reward. There was a remarkably narrow gap in the reward produced by less risky assets versus more risky investment options. In many cases, that spread had never been narrower, so you really weren’t being paid to hold more risky financial assets. For example, by the end of 2004, we had a total of just about $200 million in subprime, residential mortgage-backed securities, which was small compared to our entire investment portfolio of about $70 billion. And we stopped buying them. The dynamic that made that decision such an easy one for us was that the difference in yield that you were paid for owning a Fannie Mae mortgage-backed security versus a residential mortgage-backed security, of equal rating and tenor, was 25 basis points. Institutionally, we’re pretty good at thinking about risk and reward, and the trade-off between them. The decision to step back from real estate was driven by the environment that existed then, and you had to have the courage of your convictions. For a couple of years, people thought we were not aggressive enough. But our analysis turned out to be pretty good.
Was your approach to investing informed by your approach to providing insurance? Would you have approached those risky investments differently if you had not been in the insurance business?
That’s a very substantive and sophisticated question. Some insurance companies think of themselves as asset management firms that generate their cash by selling insurance. Some are very successful at that, and they tend to have more aggressive investment profiles. Then you’ve got us and others like us. We are an insurance company first, and an asset management company second. We take only the amount of risk on the asset side that will allow us to be a successful insurance company. That’s a very important risk-and-reward discipline, and the right one for us.
From the perspective of risk management, what are your thoughts on our national debt?
Actually, we have been vocal on this topic. If you spend time with the numbers — not the stories but the numbers themselves — the picture is deeply concerning. For instance, total federal revenues for the fiscal year just ended were $2.3 trillion. In 2020, only eight years from now, Social Security, Medicare and Medicaid alone will exceed $2.7 trillion, according to the Congressional Budget Office. When you recognize the stress that alone will put on the economy, you understand that time is of the essence. The longer we kick this down the road, the harder and more painful the resolution will be.
In accepting the Joseph Wharton Award for Leadership, you spoke only about the leadership of others, Sandy Weill and Jamie Dimon. Could you share some of your personal insights on leadership?
First, one’s own view of leadership changes with time; you learn more, you see more, and you grow and understand more. A few things are important. Great leaders create an environment where a lot of people can succeed, as opposed to business environments that are highly competitive internally. The natural human instinct to compete should be outwardly focused, not inwardly. That’s a big deal.
Then, I think really good leaders periodically ask themselves if they are doing things that matter. I sit down with my calendar, and I look at what I’ve done over the past three months, as a self-imposed, mid-course correction. I read something just this morning, something by LarryLindsay, that sometimes we respond to the urgent, not the important. I love that expression.
I also think the more you lead, the more you have to listen. Listening doesn’t mean agreeing; it just means listening. If you surround yourself with the best and brightest people you can find but don’t listen to them, you’re just wasting their talents. The best leaders I know, including Sandy and Jamie, were terrific at listening to people around them. It doesn’t mean they abdicate decisions or that they have to find consensus. Quite the contrary. Decisions by consensus are often the worst. The more you listen, the more you know, and the better decisions you will make.
Then lastly, in business, analytics will point you in the right way. Jamie would often say, “If we analyze problems correctly, the answer will be self-evident.” It’s not always true, because there are circumstances where you must decide with less-than-perfect information. I find that this perception that we have instinctive knowledge is an illusion. We read; we listen; we incorporate; we think; and we get smarter. When an issue arises where we have to make a decision, then we analyze.
Robert Kapito, W’79, the 2009 recipient of the Joseph Wharton Leadership Award, in introducing you, said that you have “a very special ability to listen, to counsel, to read a situation and adjust quickly and appropriately, while making every person feel comfortable and welcome.” How do you promote that quality throughout the upper management of a large company?
It’s a great question. It’s certainly an important cultural value at Travelers. It’s an element that I look for in the people around me, and my presumption and expectation is that they look for it in the people around them. I do think that our leadership team can set a tone. You may say we’re big, but we’re only 30,000 people. We’re big, but we’re not so big that we can’t make human connections.
When one thinks of the number of variables to be considered in creating and pricing insurance products, it seems that insurance must be one of the most intellectually stimulating and mentally demanding businesses.
You’re exactly right. I do think that it is a remarkably intellectual challenge, because it is all about the future. We’re trying to sell an insurance policy and make estimates of losses so that we can price the product correctly. We’re trying to see the future, or a better way to say it, to produce insurance outcomes. It’s not gambling. In gambling, it’s, “I win, and you lose.” With insurance, we should both win. We strive really hard not to be in the gambling business so we can produce insurance-type outcomes. It is demanding.
What’s the best metaphor for Travelers Companies?
I can think of a sports metaphor that might come close. We’re not swinging for the fences. While other businesses do, and perhaps it’s appropriate for them, I think a well-run insurance business is comfortable with lots of singles and doubles. We look to be successful a little bit at a time with lots of transactions, as opposed to being successful with a few very big ones that have a high risk of loss associated with them.
That’s not to say that’s the only way to be successful in the insurance business. It’s a matter of figuring out what your organization is capable of doing: What is the richness? What’s the content? What does it understand? What risks can it evaluate? What is beyond its expertise?
This brings up another item of leadership, which is “know your organization.” The metaphor for that is, “You can’t get blood from a stone.” We try to be aware of our company’s limitations. What can it do? What can’t it do? Where does it go beyond its skill base? It’s so important. I think so much of what happened to many companies in 2008 is a reflection of businesses that got beyond their real expertise and limitations.
Does Travelers only identify, assess and price risk, or do you try to help clients manage risk?
We are committed to helping our clients manage risk. Travelers has a significant risk management organization of 700 engineers and other professionals who actually go into our clients’ factories, offices and stores, and we help customers with fire systems, ergonomic layouts of office environments and a wide range of other risks.
You started a scholarship fund for UPenn with $250, when you didn’t have much money. What gave you the confidence to do so?
From the earliest days, I felt an enormous sense of gratitude. I was so appreciative that many opportunities that I had early in my career were because of my Wharton degree. After graduating, I recognized that I was interviewing for jobs and being considered for jobs that were far beyond what I previously felt I would achieve in my professional life, and I was so thankful and appreciative. I just felt a real responsibility to begin to give back so that others might have the same opportunities.
You’re known as someone who loves music. What kind of music do you enjoy?
I love classical music, and at the other extreme, I also love jazz, traditional jazz. I’m on the board of the Philharmonic here in New York. One of the things I tell people when they go to see performances is to watch the orchestra. There is joy in just watching the music at a live performance, the movement, a pattern that evidences itself. As for jazz, I was born into it.
Can you offer some advice to Wharton students?
Keep in mind that it is all a journey. Sometimes, in the push of business, you think there is a destination. You lose the opportunity to grow, to develop, to bloom. Your first job won’t be your last; there will be success and less than success. If you see it as a journey, it can be a lot of fun, especially with that wonderful Wharton name behind you.