Sometimes governance failures can be triggered by opaque jargon, along with poor accountability and outright fraud. An example is the infamous failed JPMorgan hedging strategy in 2012, nicknamed “the London Whale,” which cost the bank over $6 billion in losses and another $1 billion in government fines. A transparent, candid, unusually self-critical internal investigation performed for the board and a 2013 Congressional investigation by the Homeland Security and Government Affairs Committee pinpointed the massive trading catastrophe to be the result of governance confusion over jargon rather than any intentional managerial deception.
On January 26, 2012, a disastrous set of transactions by JPMorgan trader Bruno Iksil spiraled when the losses grew because of permissions granted by the bank’s senior leadership. Probes revealed none of those with oversight were willing to admit to a lack of understanding of what the trader was asking to do. His request was an impenetrable proposal to “sell the forward spread and buy protection on the tightening move,” “use indices and add to existing position,” “go long risk on some belly tranches especially where defaults may realize” and “buy protection on HY and Xover in rallies and turn the position over to monetize volatility.”
The renowned New York Times financial reporter Floyd Norris reassured readers that “if the proposal does not make sense to you, don’t despair. It is largely gibberish.” As the Senate investigation ultimately concluded, “This proposal encompassed multiple, complex credit trading strategies, using jargon that even the relevant actors and regulators could not understand.”
If nobody on JPMorgan’s board or in management had any idea what a “belly tranch” referred to, why didn’t they ask? It is because both high-level executives and board directors are afraid to appear unsophisticated before peers. This obfuscation with jargon hides their confusion. Instead of using the JPMorgan mishap as a lesson, business executives, media commentators, research analysts, tech investors and many others continue to use and even expand upon this type of mind-boggling jargon:
COMPUTE: In the immediate aftermath of the revelation of China’s disruptive DeepSeek AI search model, one of the world’s premier chipmakers declared “next-generation AI will need 100 times more compute than older model compute than when ChatGPT appeared last year.” Analysts, commentators and competitors began an echo chamber of demands for “more compute,” yet some interpreted this as a surge in GPU needs, device limits, a jump in data centers, a lift in engineering staffing, increasing investment or energy needs. The clubby shorthand that “we need more compute” does not compute in terms of clarity about what sort of computational needs are required.
VISIBILITY: Similarly, 25 years ago, when discussing what was then emerging technology, entrepreneurs and their VC backers began to exclaim, “We have little visibility at present.” That term has been echoed more recently about the implications of the volatile Trump trade tantrums. But what is the visibility to which they refer? Is it the speed of external market changes? The array of alternative strategic scenario options? Is it evolving internal technologies or the internal business processes or type of skills needed? Despite no one knowing, the phrase gets echoed confidently by executives, analysts, commentators and directors—all of whom are secretly confused.
RISK ON/RISK OFF: The macho jargon of trader talk has infected investors, and now even executives and board directors feel compelled to mimic what they hear about managing uncertainty with terms like “risk on” and “risk off” without knowing whether people intend to suggest more risk seeking or risk aversion in decision-making or they feel the markets have recklessly assumed more dangerous or, conversely, more conservative dynamics. And who knows whether they believe that is a good thing or a bad thing?
How can you be “proactive” on this front when even that jargony term, referring to anticipatory behavior, is a nonword from the 1980s that is now commonly accepted as a genuine adjective?
The secret is you can only clarify the intentional opaqueness behind cliquish jargon by having the courage to ask the dumb-seeming question. I served sequentially on four boards with Invesco CEO and Atlanta Olympics Committee COO A.D. Frazier, who always said in meetings: “I may sound like the village idiot here, but I can’t understand what you’re talking about.” Each time he was universally met with a chorus from we cowards who thanked him for asking what we all wanted to know.
