Diana Farrell is the founding President, and Chief Executive Officer of the JPMorgan Chase Institute, a global think tank that helps advise leaders in a variety of professions in making economic decisions for both the good of the company and the public. She was an economic adviser in President Obama’s cabinet from 2009 to 2011, an experience that Ms. Farrell draws on in sorting relevant data at JPMorgan, and then dispersing it to those seeking the organization’s help. Ms. Farrell has a B.A. from Wesleyan University, and earned her M.B.A. at Harvard Business School. She has been in constant contact with the Island over the past few years, most recently delivering the commencement address for the Class of 2014.
Could you give us a brief description of what you do as a chief executive officer of the JPMorgan Chase Institute?
A: Well, JPMorgan Chase Institute is a global think tank dedicated to delivering data [and] expert analysis [of that data] into the public domain, for the public good. Like many economic think tanks, its [goal is] to get a pulse on the economy. What we aspire to create is the next generation of economic research. We’re taking big data, and very modern technology platforms, and applying [a growing knowledge bank of] behavioral economics to JPMorgan Chase’s day to day activity in the economy. [The institute] is trying to get away from the traditional economic models that assume the behavior of rational people, but rather ones that reflect what we actually observe people doing. If we really want to understand what individual spending patterns are, instead of trying to aggregate surveys as many traditional data sources do, we analyze anonymized, depersonalized transactions. We [ask ourselves], what do people actually spend their money on? We build spending models based on credit card and debit card transactions, and then we offer our findings to individuals, businesses, and whole sectors of the market. My role as the present CEO of the think tank on any given project is first to decide what research we’re going to do, then to build a team with a wide range of [skillsets], and finally to be a spokesperson for the team’s findings, and subsequently get the information out to our clients.
So with the surge in new technology over the past decade or two, would I be correct in assuming the data you collect has become progressively more current?
DF: Exactly. Real time live transactions that I characterize as naturally occurring phenomenon. A lot of traditional data sources, you go out and ask people or you estimate what’s happening as opposed to just observing real-time transactions you can track consistent basis over time.
Do you work a lot in policy after gathering all this data?
DF: We’re trying to create data that provides a good pulse on the economy and we’re trying to translate the analysis and insight we can derive from that data to be relevant to policymakers, to business leaders, even to individuals, so they can make more informed and better choices. And clearly one of biggest opportunities is for policy. As you may know I spent a little over two years in the White House as the economics policy adviser to the president. It was so clear during my time there how poor and how lagged the data were, as we were trying to make decisions for real policy intervention. We would’ve been so eager to have more of this kind of data to say how do we respond to the housing crisis, how to respond to the job loss crisis, how to respond to the pockets of really hard-hit areas. But that data didn’t really exist. So we’re trying to build a real contribution in that regard.
How would you determine kind of information to provide to certain policy makers, how to filter out necessary information from those of lesser value to a company, how would you personalize these information?
A: There are couple different portions. First is how we decide which research we’re going to do and therefore determining what kind of data we’re going to bring in. We’re trying to find areas where the window that JPMorgan has on the world is particularly interesting. So, if you think about the U.S. household sector, individuals in the US, the Chase service set of activities touches 50% of US households, so that’s a pretty unique window. We’re having our day in which we can offer credibility to make contributions. It’s an important mission, that better insight we have leads to better decisions we make. That’s art, not a science, but ultimately that’s one of the exciting aspects of the role I have is trying to really ascertain what the opportunity set is.
In terms of to whom we reach out, we have a very broad range of stakeholders, everything from the media (who obviously influence the topics getting discussed) to direct discussions with economic policy makers and sometimes beyond economic policy, with leaders governors, and mayors. In some sense, it depends on what the subject matter is. For instance, for our recent report on gas prices, we pick our audiences very much based on who we think the information is going to be important. And for the additional question of how we identify these data from person to person: It’s very important to protect privacy and confidentiality. There are very strict protocols (all of them in detail, available on our website) and it’s something we take very seriously.
As you’ve mentioned earlier, the data collection gives us a pulse on our economy. What do you see in the future for economic recovery in our country?
A: Well I think that we are fortunate in the U.S., relative to many countries around the world, that despite having gone through a very very onerous depression and a devastating economy for a while, we see many positive signs, and we have now unemployment rates hitting decades, multi-decades, historical lows, but we have an underemployment picture. So actively unemployed people is down to pretty historic lows but we have a lot of people who are only part-time employed or people who are idle under the labor force. I would say that’s one indicator we are in good shape, and could do better. We’ve seen many aspects of production would be good. We’ve had positive GDP for the last thirteen and fourteen quarters, but frankly following recession, it could’ve been a little bit stronger. There are many of these ways you can tell, relative to other countries, the U.S. is a very strong engine of innovation and productivity and I’m ultimately pretty optimistic about it, but are certainly many areas the economy can improve a lot. We wouldn’t be satisfied just comparing our economy to other economies because we want to do well in our own right; we’re still growing in population. I think it’s a mixed story. I ultimately think that the U.S. is very resilient in many dimensions, but we haven’t quite gained full momentum relative to peers before the recession.
What do you think the situation looks like for students who are just graduating from college and are looking for jobs?
A: Well I think that it’s much better than it was until several years ago so that’s good news, and it is getting stronger. Particularly students coming out of college with the kind of training from Loomis and colleges Loomis sends its kids to, there are a lot of opportunities but it’s pretty clear that they require a college degree, that’s a very significant protection against unemployment. It requires a broad set of skills beyond the schooling skills, which are often called leadership skills, just having experience and knowing what it’s like to wake up in the morning and be committed to something and deliver results. Many of you all are very diligent about doing great school work, but also finding opportunities either at school or during summers to experience a little bit of what’s it’s like to be on the ground and be responsible for certain things. I think that the world is full of knowledge and we live in an age where what we’re doing is just blossoming for economics, for biology, for computer science, for almost any field. Between the opportunities for people who are willing to stay engaged and stay learning are extraordinary, I think most students at Loomis Chaffee would really fit that mold.
Could you tell us about some fond memories you have of being a student at Loomis and how that connects to who you are today?
A: A good Loomis Chaffee experience…there are many! I’ll tell you one, which was that I went to a good school before I got to Loomis (I started here as a 10th grader), and frankly I would have said at the time I showed up, that I knew how to write. I was quite taken aback. (laughter) I turned in my first English paper as a sophomore and got a grade I’ve never actually seen on any paper that I’ve written before. And then my English teacher sat me down and showed me, this is just a bunch of sentences strung together, but this, this is what a good paper looks like. It was really transformative because then I got three years of Loomis to improve on it, but it’s been such an extraordinary part of everything I’ve done in life, having good writing and communication skills. But still, I remember the day with this paper…I couldn’t believe he didn’t think I could write because I thought I knew how to write, but in fact I didn’t! So that’s one very good experience.
I have so many good ones I have later come to realize with certain connections I made back then. I had a fabulous philosophy class that really opened up my eyes to how important it is to think about issues, not just from your own perspective, but constantly putting yourself in the shoes of other people to understand the situation. That was a pretty mind-awakening thing as a junior in high school. I’ve walked that with my whole life. It’s made me a better manager, a better policy maker, and a leader in general, and a better parent, frankly. (laughter) Lastly, at Loomis I had a lot of great friends who taught me their values of friendship.