265. Are we due another financial crisis?

You are running. We're like the Freemasons or something like no. Carney s you know, was Governor of the Bank of England. Your previous Prime Minister, the last Prime Minister of the United States. Which you said was Governor Australia. Goldman wasn't a revolving dwarf for government.

We didn't hire from government, government hired from us. By the way, and this was sort of an entry requirement of Goldman. One of the things that Gomez, you became a partner at Goldman to make sure we you pay your taxes, we're gonna do your tax returns for you. As somebody who spent rather too much of my early journalistic career talking to people at Goldman, mostly I found them closed, pompous, basically assholes. And so were you the exception to the rule at Goldman? Have you got the call?

Ser serving government, w what would you say? Hello and welcome to the rest is money with me, Robert Peston. And we Steph McGovern. Our guest today is a Wall Street legend. Lloyd Blankfein is a man who grew up as a working class kid. from Brooklyn and he ended up running the biggest investment bank in the world, Goldman Sachs. He's written a memoir, Streetwise, Getting To and Through Goldman Sachs, which kind of tracks his journey and it explains how the firm operated and navigated through the

two thousand and eight financial crisis with him at the helm. He's had a hell of a career, so lords to talk to him about. There is I mean, obviously we wanna talk to him, since he is somebody who is still very much in touch with markets about how what he makes of

the im the impact of Trump's Iran war, how you protect yourself, uh, you know, uh I suppose if you're running a government, but also as an investor in these incredibly difficult times. And also I just wanna know Uh, you know, given that he is one of those bankers blamed by pretty much everybody for the global financial crisis, what he feels about uh all that.

Now a few years on. So here is our interview Fascinating chat with Lloyd Blankfine. Lloyd, it's so good to have you here. I mean the book in itself just shows the great career you've had and you know we're gonna get into all of that. But I've got to ask you first of all, what you think about what's going on.'Cause I know you're a man who literally watches markets all the time, don't you? I've I've heard you say before that even in your sleep.

I think your brain knows what's happening with the markets. Sleep who sleeps. Um, you know, I do it's kind of uh background noise. I I I think there's a different uh different social standard of thing. If you do what I do It it's not impolite to always have one eye on a screen or on your phone. It's in my pocket. It's never that it's never that it's never that far away. And it's um and you just uh you know, somebody said somebody said

It would be like asking somebody, How much time do you spend listening to music? Well, you listen to music while you do other things. And so it adds up to more than twenty four hours a day, but I kind of always know what goes on. And if you're in the news business, yeah. You kind of always know the news. I mean as somebody I as I understand it you do still trade Essentially for your own account. How do you make sense?

of how things are being priced at the moment because the volatility is extraordinary. Well I'd say at this point I'm not a prof you know, it's it's more a hobby well, I did do this for a living for a living. You did do it for a living. I don't think it's unreasonable for you to ask your view, right? You know, you adjust to the market, you know.

I'm not a criticize of what it is, I just accept what's going on and I try to cope with it and at times of extreme volatility, where you're not sure where things are going, you're not really in the realm of predicting, you're more in the realm of uh contingency planning. Right. And so So how do you protect yourself in this? I think at this time you you you get closer to home.

you try to cut your risk and um and I don't necessarily do it, but I I my recommendation to other people would be this would not be a time that you take a l that you take your the most risk that you take. And so you'd opt for safety and you take stock of yourself, what are your needs? And I'd say for the general audience

Um you uh you don't take uh you don't take risk in uh with an amount of uh savings that you really might need in the near future. Aaron Powell But in terms of uncalculated risk, I was

genuinely staggered at how little the American president appears to have thought through what he's doing in Iran, which is one of the reasons it's so unbelievably volatile in in markets. Were you amazed as as as amazed as I was,'cause obviously he is a risk taker and obviously, you know, he he he does this thing of saying uh he follows his gut or whatever or ha what he feels. But even so, to inve to engage on this level of military commitment.

Um, without apparently having a plan. It's sort of your job. I think you have a plan. I think if you're gonna have a plan you know, once you launch something like that It's not just a matter of your plan, you have to take account the other person's plan. And I just think that there's you know, again, a lot of contingencies of concern, there's levels of surprise and things don't always go the way you like. But by the way, that doesn't mean

That doesn't mean you didn't think about it. Uh it may just be an unpleasant outcome and you know, you'll have to deal with it. But they're alwa th they're always sorry, what who is it? Michael Tyson said, you know, you go into a boxing match with a plan and that plan lasts until you get hit in the face.

We're delighted to say that this year the rest is money is being powered by Octopus Energy. So Greg is back with us. Greg, I've got another question for you. So in terms of energy companies, are we just back to the big city? You know what? We've only got like six or so major supermarket chains. No one worries about that because they invest ferociously in competition. You've got differentiation, you know, we thought the market was stable, then Aldian Little turned up.

Competition is not about reinventing the souk with dozens of identicate uh companies. It's about companies having different approaches to looking after customers and competing ferociously on that. Uh, energy could well be going that direction. Well cheers, Greg, and thank you for powering this episode of The Rest is Money.

But there's there's been some interesting things going on though, if you look at the markets and all of this in terms of, you know, that this fifteen minutes before uh President Trump came out and and made the announcement about his saying, Oh, and we've had talks all weekend with Iran, the war's gonna come to an end. and fifteen minutes before that, people trading in oil, predicting that the price is gonna fall.

So this this buying the stock market at the same time. Hundreds of millions of what look like illegal profits being made on the basis of insider trading. We don't know that. There is c you know, a lot of data In fact it was talked about even in the British Parliament today, uh Prime Minister's questions. Um, that literally fifteen minutes before he puts out that truth social post saying he's having

uh peace talks with Iran, massive bets were made on the oil price falling and stocks rising. Massive bets, right? Which just undermines the integrity of markets. Now there's either been some colossal leak Uh or something even worse than that.

Yeah. So I I'm not in a position to know but my observation and one of the criticisms and and the observation I make is that it seems to me that every ten minutes we're we're we're either about to come to reconciliation or we're about to uh we're about to continue until there's unconditional surrender. So it seems like

that kind of posture. I I think I didn't originate this thought, but I you know, there was always a saying a slogan about uh about the president. Uh, take him seriously but not literally. So I think I think uh I think if you're gonna try to pluck a qu quotes from the last even from the last hour

you could find good support for both sides. Yeah. But it but it was this issue of the integrity of markets. I mean, you know, uh sh I mean this is it looks this looks like insider trading, basically. And do you have I mean Gary Gansler is somebody used to work at

A Are you surprised by how the markets have reacted to to Trump every time he's spoken? Because we've talked about how to begin with the markets were quite slow to react to certain you know, I'm surprised how the market that the market is reacting. I I just think it'd be a good time to uh to pull in. And by the way, most of the a lot of people in the professional markets are mostly reducing their risk. Yeah. Because you really don't know. I think it's it's it's it's risky.

to bet on a s big set of problems and it's kind of risky to bet that everything gets resolved. Either way, the market could uh move a uh a lot from here and it's kind of reflected. You know, people buy insurance

you know, option premium in the markets and so those are trading at very high levels. I think are people are trying to cut back on their risk. That doesn't mean there's some people who aren't betting on one way or the other, but they're they're they have they they have more courage necessarily than I do. But on the other hand, if you're a normal person investing your savings, I wouldn't make huge adjustments at this point because generally geopolitical things like this.

Don't tend to last a long time. Although they can. We did have World War II, but most of the time these things are really bad. And in this particular case, the consequences of a long term hike in the price of oil are so severe

that it seems to me that makes it more likely that there'll be a resolution because there's almost you know, other than our other than the principle itself, there's a lot of resolution that we would like this over and done with, and I think people are gonna put in their efforts to do it one way or the other, either by Putting in troops.

or suddenly discovered that you have a basis for compromise. And so this thing will be very, very harsh if it lasts a long time. And on that basis I think it's then very unlikely to last a long time. And if you want to look at what the market thinks You could see I didn't look at it this morning, but if the price of oil today is a hundred dollars the forward price of oil is more like eighty dollars. In other words, the assumption the market is making is that this won't last a long time.

the market could be wrong. But the market is is often wrong. You've made your you've made your career out of trying to judge when it's right and when it's wrong. And I suppose what I'm interested in is if we go back to taking back to the summer of 2007 and I've heard you talk about How

Um I think you were talking about there was one particular Goldman fund where there was a movement of multiple multiples of you know, standard deviations as it were. Yeah. And and you know, the movements were way above what was normal. Um and at that point alarm bells ring in your head and and you start planning for the worst, as it were, even if you don't know that the worst is going to necessarily materialise. If you were running you know, a big investment firm at the moment.

Would you be looking at what's happening even if you think there may be a correction that takes us back to something less Toxic, would you be would you be battling down matches and trying to prevent uh protect yourself? Yes. The answer the answer is yes. And it wouldn't be that you can r look, if you ran a f a a firm like ours, yeah. You can't get out of all your risk because you stand committed to buy from everybody who wants to sell, sell to everybody who wants to buy.

that's not always evenly matched and so you have to take risks and so you scurry around and if you buy something if you can't sell the thing you've just bought, you try to sell something like it and there's risk between those two things. So basically you try to constrain your risks in a period of time. You know, the language we said, time to get closer to home. And by the way

There were two approaches that we had to risk depending on, you know, what the weather was what the weather was like that day. You know, we have conversations about what risk do we want to have. And then we would say, let's do some risk management here and say instead of predicting what's gonna happen, let's just talk about what could happen and what we what contingencies are we gonna go into depending on what happens. Assuming the worst.

N at that point, you don't even go around the table and tell peop ask people what they think about what's gonna happen. You're just gonna say what could possibly happen, even low probability things. Because at times like this where things are happening that never happened before, your sense of what's probable or improbable, throw that out the window. All correlations don't work like that anymore. We're in a new regime.

So what can you think could possibly happen and if it happens, what do you do about it? And then if and when some of those things happen, you can get off the mark faster than anybody else. So at this point we'd be going around and say, what if oil goes to one hundred and eighty dollars and stays there? What if it Guess what? What if all of a sudden it's done tomorrow? You put on those hedges?

And then you don't need them anymore. What will you do with them? And you just go on and on and on and we're now in the realm of contingency planning. That's what we'd be doing. 'Cause I've been thinking about these things. What are the secondary causes? What are the peop what if the people who lose money are the people that owe you money? Yeah. What are you gonna do about the credit worthiness of those people?

And so you get secondary order effects, third order effects. That's what we have to be concerned with. You know, we're seeing, for example, in the private ec uh private credit market a number of firms making it harder for clients to get their money out. Reminds me a bit of what we lived through two thousand and seven, run up to two thousand and eight. This c this combination of what's going on in the Middle East, oil price, with the potential fragility of a very big

Credit market. Separate events that you know But but but they can become connected and that makes me certainly pretty uneasy. Uh yeah. I would say in this environment. Here's another thing that can make which is not intuitive that can make you uh that makes me uneasy. We haven't had a crisis

the crisis of the century every four or five years. You know, from the you know, from the long term capital, the dot com bubble, the Asian financial crisis. Uh you know we had these things in the global financial crisis. And that's kind of a reckoning of sort. One of these crises comes along and everybody looks at their balance sheet and things

you suddenly discover that the things you thought were worth something or worth less, you go to the market, you sell'em. It's a reckoning. And then you take your losses and then you have discipline lasting for a time until the shock leaves. now we haven't had a reckoning in a long time. And so you think, what's been accumulating on people's balance sheets that hasn't been transparent, that they don't know the value of, the mere passage of time since the last reckoning in the market.

creates a c creates um kindling on the floor of the forest. And so some spark can cause a conflagration. Who knows what that spark could be. It could be the price of oil, it could be a credit event, it could be a fat finger, a mistake on technology, a hack. But at some point something will calm o come along and cause people to realize The stuff that I bought eight years ago that I had marked at X isn't worth that anymore.

And now we have to have a reckoning and that hasn't happened for a while. And and I mean many people say it is particularly In investments related to AI, there are bubble elements. Do you think there is a do you do is is that right? I'm tempted to say I'll let you know. No, that's not helpful. That's not helpful. But I think it's helpful in in saying that we don't look. For sure, we're pursuing parts of the technology that won't work.

And companies that are pursuing even parts of the technology that will work, it won't work for their company because you don't need ten companies doing it. You may need three and there might be twenty companies pursuing it. And so, yes, for sure. There's going to be things that are going to be written off that will turn out to have been wasted, money spent for nothing, and those will be other things, zombie elements of people's balance sheet.

We just don't know what they are yet. And and we have to have it in order for there to be progress. Yeah, exactly. In other words, I could draw once we get to the future, we can draw a straight line back to the past. We should have taken that straight line. But from here to the future

There's an infinite number of stra we just don't know what's gonna work. So I think one good thing to act one way to ask a question, and I'm not telling you you're a good interviewer, I would always ask people, not what you think or what you recommend. Ask'em what they're doing themselves.

Because very often and that's not because they're trying to be dissimilate or be distortive, that people will tell you what they think, but then what they what they're really at the core, what are you doing? Yeah. And if you ask me what I'm doing, I'm in risky assets.

I'm betting with the hyperscalers. I think the AI technology is gonna I don't know which one, not all the companies would work, but I'm trying to play around um and be in them because I do think that the AI is gonna be pr um is gonna be highly productive. The big issue is is it going to be so productive that it's going to generate revenue that's going to justify expenditures in some of these companies of over a hundred billion dollars a year. That's a real kind of opening question.

I'm ca I'm going along with that now. But with much more app with more with apprehension because the numbers are so big. And and I've heard you say that everyone now is in tech, because if you're not in tech, you're bankrupt. Well you're all in It's pretty extraordinary if you're in it for the long term success of the prior period and you instantly were out of it and right way when the market changes.

So I would say if you have done well for a long time up to this point, you're probably not doing very well recently. And if you were out of the market, you're still out of the market, now in a better position to get on this new trend. If it's a trend, I I think most of the time again, I think one of the things in credit now, in private credit, and and the uncertainty stems from the fact that it's private. It doesn't trade in the market.

it's marked these are all Esoteric credits and so when you think the value of a credit on your balance sheet You have to do you have to assess it by analogy to something else imprecise, by analogy to an algorithm imprecise. You can't sell'em in the market, so you're not really sure of the value of it.

So it's uh i it's unknown. So there's a lot of nervousness because the lack of transparency. If you ask me what I again, what I think I think it's probably the concern is overdone. About private credit. About private credit. I think There are issues, you're gonna have to write off some stuff. Because the whole point about private credit, it was supposed to be not a lending system. But banks add leverage to these funds. By the way, it's very significant com versus the financial crisis.

The banks aren't at ground zero of this crisis. In fact the banks are coming into this in very good shape. And that That's important because when you have a banking crisis in addition to a recession or a market crisis. Banks are the instrumentality through which government and central banks get to real people. Governments don't lend money to people, banks do. And if banks are in bad shape,

and they get more capital, they husband that capital to increase their reserves. There's never a good time to have a crisis, but this is a better time than most to have a crisis. Because we're starting from a higher level of interest rate so they could be taken down. the balance sheets of central banks are still too high, but lower than they had been. Yeah. The fiscal position is getting you know, certainly in the United States.

We're about to spend in a b uh stimulus is coming, interest rates are coming down, the hyperscalers are spending money which is stimulative. You don't want a crisis. This isn't the worst time to have ha to have one'cause there's ammunition. And as you say, the banks themselves also have more capital and liquidity than they have.

I haven't felt this good since two thousand seven. The point being is you don't know what's gonna happen. And so But isn't part of the problem with private credit, it was kind of built off the back of coming out of the credit crunch. So this is, you know, businesses taking on credit privately because they can't get it from the banks. But then As as time goes on, the banks then have clients who have been using less murkier and murkier. And because they're private deals.

Nobody's selling bits and pieces of the market. So you don't have real pri you don't have the real price that somebody would pay in the secondary market to inform Europe of what this stuff is really worth. So it's sitting on balance sheet, marked to a model, marked to an algorithm, marked to a comparison to something else. And so there's uncertainty. How do you get certainty? You sell it. Um, I know th some people are throwing around the term these are semi-liquid.

I have to laugh when I hear that because what does semi liquid mean? Is that like semi pregnant or It's liqu it's Well it's liquid up until the moment when nobody's gonna buy it. It's liquid till you need to sell it. So I think it's a funny. So it's a funny term. So I would say that they're generally um Uh th i it's it's it has certain echoes of it because but it's smaller but I then I c then I'm reminded of what

Ben Bernanke and t you know, other the regulators said at the beginning of the global financial crisis when it was the worst of the mortgages, then it went to the next tier of mortgages, then it went beyond mortgages, it's oh it's gonna be limited and restricted to this. So when I say I don't think it'll bur go to a big problem. I'll have to throw that right Again, I would say in

In risk taking mode, I care about what I think about how big it is and whether it's gonna be a problem. In risk management mode I throw out my opinion. I just wanna know what we'll do if it gets bigger. Yeah. Because I don't really nobody really knows. But your point is if it happens now and this does become a crisis, it because the banks are stronger than they were in the last It doesn't feel like it will become it doesn't feel like it that it'll become a banking crisis.

But these things could be bigger. How about when we had discovered that there was mortgage risk in Iceland? US mortgage risk and Icelandic funds or in these other things. So sometimes you discover things. So I mean I remember at the beginning of the global financial crisis it was I was it was extraordinary the German banks

had again such extraordinary huge risk to it. And it was basically a real estate crisis that bubbled all over the world and that's the nature of a bubble. It wouldn't be a bubble if people had anticipated and planned for it and continue s you know and so

You don't know and that's what's driving people. And again I come back. We haven't won on uh uh haven't had one in a long time. So think of what risks must have accumulated over this much time. But I'm now gonna say something that is both I think probably

simultaneously flattering and quite rude, which is well let's go half let's do half of it. Which is you are, you know, uh very talkative, amusing, apparently very open person. As somebody who spent rather too much of my early journalistic career talking to people at Goldman, mostly I found them closed, pompous, basically assholes. And so were you the exception to the rule at Goldman?

I don't know. You'd have to uh if you if you saw my book I put one of my early review my reviews in it and you know and I I think uh my reviews which was a three sixty reviews, twenty different people managed to come up with synonyms for asshole. But in the country No different ones. When I first knew people at Goldman they felt they were so entitled and you know, they would talk I worked at the Financial Times at the time.

And I just you know, it was so unpleasant going to see them because the whole thing was we're doing you a A huge favour by talk I mean it was just it was awful. They were my least favorite people to talk to. That might have been you. That was been yes. Oh, I don't know. People are different. I mean I grew up in uh I grew up in public ho I I grew up in what here would be called council housing. My dad was a postman, you know, worked our way up. I I never I

I never feel I never not only didn't I feel entitled, I have to remind myself from time to time what my position was and how people regarded me because I don't I didn't think of myself in that kind of a way. And did you pinch yourself as you were making all this money and rising? I mean it was the most Meteoric. I mean but but also as a firm. I wouldn't say I mean Goma Tax was the name in in investment banking.

Forever. Right. And so you're there. Right? You're at this incredible, influential, powerful firm. How I mean, how what was it like being the boy from uh you know the the the so called Brooklyn projects as you rose up. I never had a moment where I wasn't tense or anxious that it would all blow up or something would go wrong. We were very influential. We had big balance sheet. Nothing could go wrong anywhere in the world where it didn't affect us.

Adversely, and about ninety four percent of the time they blame us for having caused the water. So I had to worry about all that stuff all the time. Can I ask you then, because I've got this um this kind of obsession with people who grow up in backgrounds where they don't have that much money, where for whatever reason things are tough.

often have a different view of risk than those who've had quite a straightforward, you know, no ymwneud â phobl sy'n ei wneud â phobl sy'n ei wneud â phobl sy'n ei wneud â phobl sy'n ei wneud â phobl sy'n ei wneud â phobl sy'n ei wneud â phobl sy'n ei wneud â phobl sy'n ei wneud â phobl sy'n ei wneud â phobl.

are better at understanding risk and better at dealing with it. My kids grew up in a in in a w in a wealthier household and I don't want to throw them under the bus because they work hard. It's just different. I don't know. I think second generation it's the the the hunger is still there. Yeah I think also People from a certain kind of way. have a certain kind of imposter syndrome in their head. You always assume you're gonna get tapped on the shoulder.

Still I went to very fancy schools, which you can do, but when I went there I was pretty awkward compared to a lot of my classmates. And you were surprised when you got into Harvard, uh uh. Oh my god. Well, first of all I I I I knew that Harvard w I I knew Harvard as a brand. Right. So I knew what it was. But I didn't know what it was. Right. You know, the first time I I I saw the place was when I went to school there.

And I got in and my my my, you know, roommates came from, you know, different kinds of places. I mean at the time you were presumably just r thrilled to be there. What looking back on it, what did they I wasn't thrilled to be there. I was scared as hell to be there. I don't know. Well what did they say when I was there? What wh what did you do? What what did you do to persuade'cause it's quite it's a big thing. The more confident a school is, the more risk they'll take.

So if you're a striving university trying to impress other people that apply, you take people with the highest scores possible so that you can then tell the world that we take kids only with the highest scores possible. If you're Harvard they'll they'll take they'll find people in homeless shelters and take them. I wasn't that I wasn't that way, but my scores were

Very good in math, something that's intuitive. Yeah. And poorer. Pretty poor in verbal. I'm a pretty verbal person. Yeah. But I've never read a book through in my failing high school that I went to, you know, that was associated with my public

uh my uh public housing development and stuff like that and you know they took me and by the way I didn't get into other I didn't get into every school, but I got into the hardest school to get into. Lloyd Lords More still to talk to you about, but let's sit tight'cause we've gotta go to a quick break.

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Ja, du vet, budgeter som ska hållas, stambyten som ska planeras, energikostnader som sticker i höjden och allt däremellan. Det är lunga.

But Simon Robertson, who you hired, he was Eton, he was establishment, that was not taking a risk, right? That was later. But he's a ch he's a terrific person. Yeah, he's a very lovely person. But that was you know, that was archetypal British establishment when you was archetypal British established and by the way, one had to grow into that here because we are We are the firm that does the biggest

business with the most established companies and that's kind of what our aspiration was and guess what? We sort of we were the dog that ran after the bus and we caught the bus. So that's how the saying goes. So Simon Robertson is um

His clubs are a little bit were a little bit different than the clubs that people from early Goldman's site. Um I just wanted to add to that chat though,'cause um my best mate worked at Goldman's and my best mate's family, um to a private school and then was at Imperial College with me doing chemistry and she got hedge you know, got hedge hunted basically there'cause she's really smart and got taken on at Goldman's.

And so there I i there was there is you know, that was a big change for kind of side. But that really is like that. Like if you c if you take away the covers my number two was in a you know American university, not Princeton Univers you know, it was uh it it's a culture that's like that, but um But it was a real advantage. By the way, same thing happened in Japan for us. I mean not that you're you're necessarily i interested in that, but w it turns out

that a lot of the Japanese that we hired early were ethnically Korean. They'd been in Japan for several generations. That's interesting. We thought they were Japanese. The Japanese didn't think they were Japanese. So did that take d did that mean y for for a bit of time you were not really uh getting the business you thought you deserved? No, in a bit of time we were not getting the people.

that were the ones that were sought after by the traditional Japanese firms. It was an advantage. That somebody what somebody would have thought was a disadvantage because those People who were socially connected didn't want to work for an American firm. By the way, in the UK, the people that were socially advantaged didn't want to work for Goldman's. They wanted to work for Morgan Grenfeld or Schroeder's or

or w uh those firms and it turned out in hindsight to have been an advantage because what as an assa an insurgent you get more interesting business. We got the strivers. Yeah. And at the end of the day, the people that hire you

You know it's very nice they you know it's very nice that you'll you can meet at the same clubs. But what they really want is competence and capability and they want to be made better and they want to succeed and they want to win. Of course. And so when you think of yourself, which attorney do you want on your side? The one you know, the one that uh although there is there is a sort of paradox here because

Um I mean I'm sure it's a phrase that you detest, but you know, everybody there was this period where you were constantly referred to as a firm as the vampire squid because th they said your tentacles were everywhere. And even now if you look at the Goldman alumni and I might ask you why you have chosen Not ever to do a government job, but your predecessors, Hank Pulser, you know, Mark Carney's you know, was Governor of the Bank of England. Your previous Prime Minister, the last Prime Minister.

Canada. So people so people not unreasonably say Goldman Sachs rules the world. So government government Sachs. So so you know, on the one hand you go for these strivers, but then you end up basically

with you know running the world. It's there's a sort of contradiction there. Gosh, if we were running the world I would think that I why why did I why did I why was I made to suffer so much if we were in charge of everything? Well come on, you don't look as though you've suffered that much. Come on. Some people said I

I was so good in a crisis I would I would I would purposely cause them just so I could actually Goldman wasn't a revolving dwarf of government. We didn't hire from government, government hired from us. And the fact is when we

By the way, and this was sort of an entry requirement of Golman. One of the things at Golman, you became a partner at Goleman, a new partner, you sat down and the Minister of Interior, whatever the p that partner was called at the time, would sit you down and tell you this is what's expected of you and you go and say, you know you aren't supposed to behave that in any way that would be what w they would characterize today as me too me too behavior. You know, don't do it that

and to make sure w you pay your taxes, we're gonna do your tax returns for you. Because and that and we're gonna set up a private foundation for you because we expect you to be philanthropic

in your career. And does everybody do that? Do all the manager actors type? Oh yes. They do it for yes they did it for you. The firm part of your pay comes in You know, the firm is philanthropic, but instead of the CEO deciding where philanthropy does, we divide that the pa the pay people can designate where it goes to and you give the right to designate those philanthropic desi uh things

To hundreds of people as money. Time as well as money was supposed to be on the boards. It was good for your career, good for the firm. And the other thing they said to you was And this sounds a little dark, but it wasn't intended to be dark, that if you at the end of your life, if you if you get an obituary written about you and it's nine paragraphs long, make sure that no th no more than three of them touch on Goldman Sachs.

We expect you to do other things while you're here. What a way to think. Right. While you're here and we expect you to leave the firm, there's still gas in your tank, you're supposed to do things. Right, there's also a contradiction because another thing that you talk about which I think is true, is the with your alumni, even if they've spent twenty five years doing something else, they think of themselves as Goldman people, which is

Which is partly why there are conspiracy theorists who say you are this awful Masonic network and you are running the world. But but you can see why people are slightly Oh my God, it's this sort of secret network of people who except it's not secret. And people were supposed to. We hired people.

that were supposed to be philanthropic and ideals. They may not have had the money to do it, but they were supposed to think more broadly. They were aspirational. We hire people who think like that. And so when they get out, you know, at the end of their career, they've made money. How many how many decades?

Can you go and pitch an IPO or, you know, get a call and there's something, you know, somebody wants a consult with you in Beijing. So you get on a plane and you fly to Beijing on a Saturday so you can be there first thing Monday morning.

it gets a little bit stale after a while. That's what you know, even I felt that way after a while, even though I stayed there much longer. And so you say, What am I gonna do next in my life? And you know, it's very appealing to be in government service and do that or philanthropic.

I you know, I might do it. I would yeah, I would think I'd be wired doing it depends what. You know, I left the firm in the second you know, second part of President Trump's first term, by which time he had dispensed with globalists. my n my president at the time, a number two guy who might have otherwise succeeded me.

got the call and and he took the job and lasted, you know, more than a year, but not much more longer than a year and several other people in the administration and I don't you know and I'm not I didn't get another call and so I didn't do it and so it depends on Would you have worked for Trump? You're a Democrat, I thought.

So were some of the people who went into the first term. Okay. Including I believe I didn't ever I never asked him to testify to this, but I believe my Gary was also a Democrat and it was much more open time. It's gotten a lot more The country's gotten a lot l lot more polarized. The right you know, the co the Republican has the energy in the Republican is much more from the right, the Democrat

energy from the democratic pr uh uh side is much more from the left left of the democratic party. And unfortunately we're in a polarized world and I do it I would not get an opportunity to do that. And I also stayed a long time. I'm older. You know, I didn't leave I stayed almost forty years in the firm and other people leave after twenty years. And normally they leave in distress, whereas you left and deal.

uh in that position. And I'll tell you why. When things are going well, you don't wanna leave. And when things are going badly, you can't leave unless they make you leave. And that's why a lot of people go and again, but I was a risk manager and I looked at it and I said, I waited, you know, we went through the tough times of the financial crisis. And again, the financial crisis. for us came in two parts, which is the first one being the existential part where you had a manager thing and

you know, make sure everything was on the up and up and we did pretty well on that. We didn't lose a lot of money unlike everybody else. And then came, you know, of course, the re the reputational part. of it which was, you know, you had it the you know, and all of a sudden, you know, I was like the focus to defend, you know, Wall Street and that and oh that and that that was, you know, qua you know, quite intense for years after that.

And when that was all over and said and done and the t the pendulum shifted again and everything was fine, I said, you know, this might I don't wanna leave because I just went through all this You know, the painfulness of the crisis and its aftermath, but Gosh, if I stay longer.

in time for the next crisis. I'll be lo I'll be you know, I'll be in this sec I'll be yeah, I'll be here for another ten years and I didn't want to do that and then the next level of succession would have been lost. You mentioned being a globalist and obviously, you know, throughout your career That was a big part of it, wasn't it? I know, it's kind of reversed. Yes.

But when I uh you know, in g most of my career, you know, it was concerted central bank intervention. Why do we need a battery maker in every country. We should have three for all of Europe. And countries were joining the EU, not Brexiting from the EU. You know, everything was getting

easy and there were a lot of things that happened, a lot of data points that affected that calculation. The financial crisis was one of them because suddenly, you know, everybody was coordinating their activities, all these government central banks But when it all hit the fan, it became very important where which in where your the institutions had their assets. Like location based. Location based. Now all of a sudden no matter what geography. Yeah.

Deutsche Bank was borrowing money from the Federal Reserve. The assets that the Federal Reserve could look to were in Germany. And that was a big difference. And guess what? The Germans weren't releasing them. And we had another set of data we had another set of data during COVID. It mattered where the vaccines were manufactured as to who got them and all of a sudden Territory mattered again. It matters who has the rare earth. Yes.

And so all of a sudden now that the supply chains are being drawn in, it matters where things are being produced. Hang on, but that is a sort of rational explanation for why some of globalisation has been rolled back. But there is another Uh big political driver which is related to the conduct of financial institutions like Goldman, which is we've seen the rise of these populist parties on left and right, the And a lot of that has been driven by hatred of bankers i in their terms.

and investors who they say responsible for the global financial crisis but kept all their wealth. And so do you not ever sort of wake up and say, My God, this mad political world is is connected to the perception that we caused the problem but we kept the money.

As as an observer in my early life, an observ as an observer of the money class, I hate them too. You know, I mean this is a you know just as a as a member. As a m as a member of it, I think I understand the nuances a little bit better. Um look. The countries, I should say, are quite polarized and there's a and you know, you could say, Oh, it's the bank it's but really we've come through. Technology contributed to this.

And also monetary policy, zero low interest rates for a long time. Asset prices have gone up a lot. Wealth has been created. Um, financial system has to do at least two things. It has to create wealth And then it has to distribute wealth according to the values of the society. We've all done a much better job of creating the wealth and a much poorer job of distributing it.

And so the rich have gotten richer because they have the assets that have accreted in value. And the people without assets haven't gotten richer. And the gap between rich and poor has widened and the and the resentments have widened and the polarizations have widened.

Now I'll say now people will fight with me, I'd say The financial system creates wealth and I think it's really the political system that has to allocate the wealth and figure that out through progressive taxes, the social network, making healthcare free and better. The political sector has to do that job. I think in a lot of ways the financial sector

And the economic sa has done a better job than the political sector. The political sector is a very important thing. But undoubtedly that's true. And if you know and this problem that you've highlighted is only go if AI Is what it seems to be. which is essentially a technology that's gonna replace a lot of low skilled Uh and not only just low skill, a lot of jobs. Right.

You know, we are gonna get a a greater accretion of wealth for the people who know. And but no government is currently looking at how do you get some of that wealth back to the people who are gonna lose their jobs. anything that makes us more productive. Cool. And so

But in the short so in in it's gonna make us all rich we we have to allocate it either through progressive taxes, safety. Exactly. Whose job is it to do that? Whose job is it to term sure whose job is it to make the taxation system more progressive? Whose job is it to raise the

Safety net for people so that the things that rich people can easily pay for are more accessible by poorer people. I don't think it's the bank's jobs to do that. So there's one story um that I'd like to ask you about which you Which is

Towards the end of your time, you get this awful cancer lymphona. You know, my late wife had cancer, so I know how unbelievably grueling um having chemotherapy is. But apparently you were unable to talk about this with even with your friends. Because it was a price it was price sensitive, right? And and I I mean, is it really true that until Goldman had put out a press release you had to pretend that everything was okay. You started this conversation when we first started with

Was there insider trading? Did somebody have information? Uh it is a material bit of information if the CEO of the company might be, you know, might there might be a change of leadership in a company and so you couldn't And my poor you know, it fell on my poor wife. Yeah. How did she feel, for God's sake? I mean that she couldn't talk to people. You know, when I got the uh you know, I was gonna say verdict. It wasn't a verdict, when I got the diagnosis.

Um, you know, is it all a distraction and you know, people are doing all these tests on you while this is going on. I'm having a board meeting with my board and g uh you know, my phone and doing this thing. So I I I I How did you manage the anxiety? You know.

I don't understand. Like I was never in the armed service. I was never in combat. When things are going off and things you wonder how you respond to it and I'm not make it's an analogy and it's a very poor analogy and I shouldn't have gone down this road because

physical courage is maybe different from it. But I just found that the only thing that I was th thinking about in times like that, where there was the financial crisis, where there was nine eleven when our building is a block away and you know I had to be the last one to leave the building. I didn't want it to be like the among the last to leave the building. I I had a sense of responsibility. You know, this is your duty, this is what you have to do. And it kind of displaces

You know, the kind of thing like what do I do about myself? It doesn't it it doesn't it doesn't come up. And I'm not thinking I'm not an extraordinarily I'm not a Uh you know, it sounds funny my saying to me, listening to myself say this, but I didn't give that much of a thought. I said you know, what do I do to protect the company? What do I do about this?'Cause you were in it. Who do I get?'cause I'm in it. Yeah. And who do I call?

uh to get this done. Um so look, I I made a lot of observations, you know, when you're getting chemo And I had something like 600 hours of it, you know, for the particular kind of lymphoma I had. And, you know, nurses coming in and changing the uh infusion bag that you're getting this stuff and she's coming in wearing a hazmat suit.

lest a drop of this get on her skin while they're pumping down and but I would say and this comes up a lot when you're thinking whenever I'm doing something that's unplayed like this, no choice, no problem. You know, I didn't have a choice. So it wasn't hard. It was unpleasant, but it wasn't hard.

For me hard is when my wife shows me two to my eye identical colors of blue, shades of blue and says, Which which one should we use as which one should we use on this fabric? This color blue or that color blue and they both look the same to me. That to me is a hard choice. Whether or not to get chemo when it's the only thing that's gonna save your life is it's an unpleasant prospect, but it's not a hard choice. Yeah. And so that's how I think about it.

So you put out the press release saying that you're ill, share price goes up or down? Oh that's interesting. Um I don't think I don't think anyone cared. I think we Oh it really it was it was not a price. It wasn't I couldn't have inside a traded on it. it was a distraction. As a as a committed person who cares about my company, I would hope it would go up, but secretly No down, you down. As a secretly as a self involved person, I would like it to have gone down. But the answer is I don't know.

the sort of the nature of a firm like Goldman Sachs. So one of the things that has happened and sort of accelerated, I think, a bit since you left, is there are all these other financial firms that have just got absolutely enormous. Like JP Morgan, enormous balance sheet. Um Black rock, blackstone. These are enormous. When you're talking about JP Morty highly regulated.

And the unregulated side. But they're still huge, right? And but Goldman hasn't gone for size in the same way, has it? He'll not, you know and similarly we've got institutions like Jane Street, which are all about Technology. I just really wondered how do you see the future? Oh, challenge. We're very, very, very big. We're the biggest investment bank. We're big in what we do.

But you know, you think about the culture of the farm. Uh for every part of Goldman'cause historically it was about brains, right? That's what it was about. But it still is. We don't have branches, we don't have tellers. in, you know, taking deposits. Everything we do is still along those lines. Right. So we're a big investment bank or one of the biggest asset managers in the world. Um but do human brains still count in the way that they did when you started? Yes, yes, yes.

You and you think of all the technology, it leverages someone. But if you're at the fulcrum of that lever, which is still a person exercising judgment, the lever has gotten bigger. You can't delegate it to a computer. Again the fulcrum is the same. The the the board that's on the fulcrum is bigger and bigger and longer and longer and the leverage pulls more.

But if anything, it made the person at the center, the exerciser of judgment, much more important than that that person ever was. And all the businesses of the firm stayed along those lines. And that's that's fine. And the institutions that you mentioned are all Fabulous. The firm that I left was not a consumer oriented firm. And so we were and by the way, by the way, that c that was part, you know, going back to an earlier part of the concert, that created problems for us.

because we were influential, very important, very big, but had no relationship with the general public. Yeah. Because we weren't a consumer firm. Nobody banked with us. Nobody borrowed. Individuals didn't borrow. We we were Associate with the mortgage crisis, go get a mortgage from Goldman Sachs. We weren't in that business even and we get so we were very, very easy to characterize. And so before the financial crisis

I never would have been doing this, what I'm doing today with you, never would have appeared on television. We didn't market ourselves to the general public because the general public Shame on us. We didn't think it was that relevant to us. But another name for consumers. are citizens, taxpayers and we had no relationship with them. And we found out the hard way that it would have been better if we if they had an understanding of who we were, what we did, how important we were.

and what a constructive role we played in the economic system. But guess what? We hadn't have that relationship.

Nature pours a vacuum and other pe and that got filled in in a very disadvantageous way for us. As we talked about. And that we talked about. And so guess what? We got on our horses and suddenly We introduced ourselves in a way and when you're doing that in a stressful time

It's suddenly it's a bad time to do it because it looks very expensive. Defensive. Very defensive. And it looked defensive because it was defensive. And so you know, so we we learned the hard way. So if somebody said, What's the biggest mistake you made? It was making a virtue. out of a lack of transparency.

We we t we had that that was earlier in a virtue with Goldman Sachs and it's not a virtue anymore. Well, that's why people didn't trust you. Yes, that's why. Now though, so you know, with with the book you've written I I understand that you you started writing this as kind of memories for your kids and things to you know, stuff and it's obviously turned into something much bigger that everyone can read. What do you want to demystify then? What's the kind of take home you want for people?

You know, because nobody nobody who writes a memoir can feign indifference as to whether they get attention or not. So I must be greedy for attention. I must miss it in some way. Yeah, we all laugh. Yeah, we all laugh because here we are talking to the public. Uh obviously part of that is ego. And people would come to me, a lot of friends, relationships. I missed some of that engagement.

And also people coming to me, there were a lot of stories. So it started out writing stories, then I would be asked to speak about the you know, to the firm and to others about the culture of the firm. What was the difference between a partnership, ownership culture? versus the big company and then it started to be a little bit book like. And I think I said in the book, you know, I s it took a long time

because I put the pen down for a couple of years. But it's a funny book though as well in all of this which you wouldn't expect. You know, the way you kind of describe people and characterize things. It's funny to you know the you know, the hip hop, you know. The firm so proud of its, you know, partnership culture and the debates about going public and in all the public debates, you know, because

We had to go the firm had to go public. So the only thing I would say about you have to go public, okay,'cause and this is not just a point about Goldman, you know,'cause I'd lived through all of this with, you know, the you know, the British stockbrokers and banks and all the rest of it is There is something weird about the generation that happens to be the owners at the time you go public getting and that you know, it it's uh everybody was always very conscious, upset by what the firm did.

unbelievable distributed money out the limited partners, retired partners got big pieces. But the f it was still an embarrassment to the firm that they were voting they might vote themselves rich to get rich. But we were a firm that gave advice in a world that had switched. In the US the regulation divided Commercial banks that lent money from the advice givers investment banks, when they took down that barrier, in order to be a good advice giver, you had to ha be able to finance the advice.

You had to have a big balance sheet. So you had to be a c public company that could raise money in the public markets. But everybody was so embarrassed about it that in every debate that the firm had, everyone was against going public. and then somebody had the bright but it was inevitable, yet had to be done. So then when they had an anonymous ballot, all of a sudden it went from overwhelmingly against to overwhelmingly for. And that's how it happens.

apologizing for being incredibly rich and b embarrassed by and this point I think people are throwing their speakers out the window. We probably should wrap it up. I am I am willing to suffer the consequences of that fateful decision. Thank you. Lloyd, so nice to meet you. That was enormous fun. Thank you for joining us. Thanks very much guys. I really appreciate it. Thank you. That's all from us. Bye bye. Bye bye.