'The Internet Is Going to Change Wall Street as We Know it.'

Maillet, 40, and Miller, 48, had already been working together for more than a year to commercialize some of the software packages that Morgan's IT department had developed for internal use, such as a secure messaging system and a self-assessment tool for risk management. Maillet and Miller became two of the core members of LabMorgan. Nick Rohatyn, 40, a member of the CEO's "house-arrest group" of top managers (so called because they're required to spend roughly two days a month holed up together at headquarters, helping Warner craft strategy and review performance), was picked to head LabMorgan.

"The feeling was, Don't bother doing this unless one of the top-10 people in the company will be running it," says Maillet. Altogether, including Maillet, Miller, and Rohatyn, LabMorgan's initial incarnation included seven of the firm's managing directors.

Over 10 days, at the cusp of February and March, LabMorgan took shape. It would encompass the IT-commercialization work that Maillet and Miller had been doing, as well as Lab60, an incubator that had been started in the markets division by Thorkild Juncker, who joined LabMorgan as its European chief.

Miller says that those 10 days were among the most intense of his 25 years at J.P. Morgan. "We figured out the roles, the work we'd do, and we identified some of the earliest opportunities," he says. "It got approved by the chairman and the board, we built a Web site -- which included a system to submit résumés and business plans -- we got the press release ready, and we launched. The history of this place is to be cautious and careful. We never want to get something wrong. LabMorgan has shifted that mind-set to 'We'll do it as great as we can in 10 days. We'll evolve the model as we go.' "

The March 9 announcement generated a wave of stories in the press. Chase Manhattan and Citigroup had formed internal Web ventures, but Morgan's pledge to commit up to $1 billion to e-finance measures, including LabMorgan, in 2000, along with its dedication of impressive managerial horsepower to the group, set it apart. "It's easy to write a check," says Miller. "We spent serious people. That's the most important capital you have."

Sourcing and Screening

Twice a week, the sourcing-and-screening team that Peter Maillet leads with Jeff Saltz gathers at a conference table to review the business plans in LabMorgan's pipeline. Juncker, formerly Morgan's global head of foreign exchange and commodities, and now a full-time member of LabMorgan, checks in from London on a speakerphone.

A packet of business-plan summaries is handed around. On the front page is a chart titled "Idea Screening Status," which lists the number of ideas examined by LabMorgan in New York, Europe, and Asia so far this month and so far this year. Maillet explains that 100 or so new proposals come to LabMorgan each week. It had received nearly 1,500 new proposals as of the end of July -- its fifth month of operation. So far, there are 29 nascent businesses and joint ventures under LabMorgan's umbrella.

Incoming plans get an initial hour or two of attention before they are either rejected, accepted for an in-depth due-diligence process, or referred to another venture-capital group, such as J.P. Morgan Capital Corp. or New York-based Iron Street Labs, an independently owned incubator that the House of Morgan has a stake in and that shares prospective deals with LabMorgan. Maillet stresses that it's important to commit to deals quickly, so he has become a stickler for response time. The chart shows that LabMorgan screens ideas in just 3 days in New York and Europe; in Asia, the process takes 15 days. Maillet and Juncker spend a few minutes discussing ways to help Asia catch up. By the end of the year, they hope to have additional LabMorgan outposts in Israel, Madrid, São Paulo, Singapore, Sydney, and Tokyo.

Maillet runs the meeting with crisp precision, giving ideas roughly equal time and then sending them along one of three paths: rejected, accepted, or referred. "They've got a very solid focus on e-finance, nothing else," says Richard Thompson, 47, cofounder and managing partner at Iron Street Labs. "They don't get wowed by a proven entrepreneur with a bad idea, as some venture firms do. And they're faster than a traditional venture firm. They don't drag things out." After exactly one hour, Maillet ends the meeting and heads downstairs, where he's scheduled to brief an auditorium full of 150 Morgan investment-banking analysts-in-training.

The auditorium is located at 23 Wall Street, a building built in 1914 by J.P. Morgan Jr. just after the death of J.P. Morgan Sr. The cornerstone contains a copy of the elder Morgan's will, as well as the firm's original articles of partnership. More recently, the building was converted into a conference center, and inside the auditorium there are laptops and microphones in front of every seat. There are also tented name cards in front of every trainee -- the majority of whom seem to be from outside the United States.