# Risk, Culture, and AI: Blankfein's Strategic Insights

**Podcast:** a16z Podcast
**Published:** 2026-05-12

## Transcript

Anybody who's investing, you know, you're doing two things.
You're trying to make money for yourselves and your clients, and so you're trying to get out there and take risk, and you're also trying to be a risk manager, and you have to do both.
I think it was your quote that was like, if you're so good at predicting the future, tell me what's going to happen next.
Once the present turns into the past, everybody's a genius.
Most of what we do with respect to risk...
It's not so much predicting.
It's a lot of contingency plan.
We are on the precipice of some of the largest IPOs ever.
What are risks that you think are underappreciated?
Before this technological age, not just AI, but in general, could you have had a mistake that could cost billions of dollars?
Not really.
But now you can leave a piece of software, could go out and do 70,000 transactions.
The leverage in these things is themselves a pretty problem.
Not because it's smarter than us and it's going to turn us into pets.
but because we don't have the ability to test whether it's right or not.
What does it take to lead through a crisis?
Most organizations are built for normal conditions, but the real test comes when uncertainty is highest, when information is incomplete, and when decisions have to be made quickly without knowing how things will play out.
In those moments, success isn't about predicting the future.
It's about preparation, judgment, and the ability to act while others hesitate.
Few people have operated at that level as often as Lloyd Blankfein, leading Goldman Sachs through some of the most volatile periods in modern financial history.
A16Z general partner David Haber speaks with Lloyd Blankfein about risk, leadership, and building institutions that can endure through uncertainty.
Your tweet, by the way, about the White House Correspondent Center was amazing.
I think for the good of the timeline, we need you back on Twitter more often.
I know.
You know what?
It's a funny thing is you would think that you see something, and you're activated to tweet about it.
For me, I said, oh, gee, I haven't tweeted for a long time.
Let me find something to tweet about.
And also, being in the risk management business, I always know that everybody keeps doing that, and eventually you get canceled because you do something, you step over some invisible line that nobody knew about.
And so I realized that from a risk-reward point of view.
It's all ego and no real value other than that.
But that was saying when you retire, you'll grasp its draws.
Why not?
I mean, it was like 10 million views later or something.
I went to, I remember when I was doing his, what's his name from, you know, I said when I retired, I am freed from the restraints that I had because, you know, I did this at Goldman.
Yeah.
And I realized that I was playing a dangerous game because I was being snarky with the president and I had all those back and forths.
Totally.
With Sanders and Elizabeth Warren.
The other thing I was curious to ask you, you're obviously, like, famous for being calm under pressure and risk manager, but it was reported that, like, during the active shooter, like, you lean over to the person next to you, and you're like, you're going to finish that salad?
Is that a real?
No, that was, yeah, that was real, but it wasn't like I was hungry.
You know, I always used, in moments of crisis like that, I always tried to be disarming.
Sure.
And by the way, it was very sensible to duck down under the desk.
I mean, it was a line, we realized we were pretty close up, And I was just, it wasn't that thoughtful on my part.
It was just that it was like being in a movie and I was like enjoying watching it.
And you had all these guys who were in tuxillos.
Suddenly they had pistols in their hand and there were guys in full tactically and they all ran in and they all were on the stage with their guns facing outward, of course, because that's where the threat would have come from.
Then I, you know, suddenly, you know, guy tugs at my leg and he said, you really should get down.
And I said, you're really right.
I said, this is like when I get into an airplane, this is another time that I'm glad I'm short.
But I was watching it and I saw what everybody was doing and I didn't see a lot of panic.
I didn't see any panic.
The people under there, which was a sensible thing to do.
But again, to break the moment, I looked down and I said, by the way, are you going to finish your salad?
And it was amazing.
It was kind of funny at the time.
Ice in the veins.
I don't know.
Well, were you always even-keeled as a kid?
Yes.
Somebody said to Goldman, you're very good in a crisis and that's why you go out of your way to create them.
Just so you can give me an opportunity to be good in a crisis.
And I would say that my normal resting state is to not be resting.
So I tend to be a little bit wound all the time.
I don't get especially wound when there's a crisis.
In fact, things slow down for me.
I'm used to seeing things like that.
They're in slow motion.
And I become very sensitive to what the people around me are thinking and trying to get them more.
Most of the time, like at Goldman and in most of life.
In a crisis time, the really important thing is just to get people to do their jobs and just don't be frozen and don't submit to the chaos.
Do you think that was like innate or was there something from your childhood that sort of helped kind of breed that temperament?
I don't know.
I wouldn't have predicted that about myself, but I've now gone through.
We had the crisis of the century probably every four or five years.
And it's always that way.
But it doesn't mean I like crises and I wouldn't go out of my way to volunteer to be in one.
It's just that when it happens, I generally have confidence.
I'm not trying to tempt the fates.
If I'm going to get discombobulated, everyone is going to get discombobulated before me.
And so I've done that.
And by the way, that taught me a lot about the people that you need to rely on because you can't really tell.
I mean, not to clean a phrase, but you can't tell a book by its color.
And I went through, and maybe this is out of sequence, but I went through the financial crisis and we had people, I'm thinking one in particular who was, Great athlete, terrific guy, real man's man.
Did rodeos on the weekend.
He was terrible.
And here I am, the co-president of the firm, here I am trying to teach people how to, me, trying to say, you have to breathe.
And then there were people who didn't look like they could walk up a whole flight of stairs.
And they were really good.
And so just people, you just don't know.
And that's why, I mean, my advice, when you pick board members.
But this is a very, I'm turning something that's generic into a very narrow things.
I think a good place to go is find people who've already gone through a crisis.
Because to me, people who look like and sound like, they'll get through it.
I'm not sure how much of a correlation there is to the reality of it.
But when somebody's gone through a crisis, I think that's your best bet.
Totally.
I definitely want to spend some time on the financial crisis.
Obviously, it was such a defining kind of period.
But maybe to go backwards sometimes.
Obviously, you had a very modest upbringing.
I was curious, like...
What role did living near New York City or Manhattan maybe more specifically play in sort of like creating ambition?
For me, you know, I didn't grow up in the projects, but I grew up very modestly as well.
Where'd you grow up?
In South San Diego, in Chorista.
Like 10 minutes from Mexico, mom was a public school teacher, dad worked in retail in Mexico, very far from Cambridge.
And Harvard really changed my life, right?
So your dad had to get through the border to get to Mexico every day to give him a tough time at the border?
He had a motorcycle, so it was a little bit easier.
And they put shoes on the other foot.
Exactly.
Harvard definitely changed my perspective on what's possible.
And I always say I learned more from my peers than I did from my classes.
I'm just curious if you had a similar experience.
I would say that I grew up with Manhattan looming in the distance.
I think I probably, when I was, before I went to college, I probably went into Manhattan three times or something like that.
And I think twice was to the Radio City Music Hall Christmas show.
And I know once of them was an interview to go to Harvard.
And that was a big deal.
We might as well have been.
$5,000 away from it because I grew up in public housing.
It was, this won't mean anything to you.
It was a two-fair zone.
You had to take a bus to the subway to get to the city.
It probably took a long time to get there.
I grew up in public housing, NYCHA, where I think there's a gradation of incomes that you can have.
There's different levels of public housing.
And I think if you made more than $90 a week, you couldn't live in that particular building.
Since then, I've met people who've walked across deserts, people who grew up in war zones, so I don't want to compare stories because a lot of people had tougher stories than that.
But I didn't know a lot, and so I didn't have the burden of high expectations.
And that's a funny way of putting it, but I did label the first chapter kind of advantages as opposed to burdens because I realize now, now that I'm on the other side of the ledger, I understand just what a burden high expectations can be on people.
I did not suffer from that.
But...
I also didn't know what was going on in the world.
And I'd never traveled.
I'd never been on an airplane, for sure.
So anyway, when I went up, I saw Harvard.
It was the first time I really traveled.
My sister took me up.
So it was more of a culture shock.
I went to a high school.
There was a failing high school.
I don't think I'd read a book.
My board scores, I mean, I'm a pretty verbal person.
My verbal scores were very low.
My math scores were, like, almost perfect.
I think I was got, like, a 790.
And what I was burning to do.
The extent of my ambition was to go to an out-of-town college.
And that was it.
Amazing.
To get out of Brooklyn.
Totally.
Maybe just to transition a bit to Goldman, one of the things I've always found kind of remarkable about the firm's history is that it wasn't a business built through a series of bank mergers.
Right.
Right.
Unlike many of its peers, J.P.
Morgan, B of A, et cetera.
It was really a business, at least from my vantage point, built brick by brick.
that kind of generations of entrepreneurial partners raising their hands, going off and building Europe or the merchant banking business.
Right.
Even the retail.
Yeah.
That started, that went in a different direction after I left.
Yeah, that was an outgrowth of the merchant bank.
Totally.
Nurturing a business and then somebody said, gee, we shouldn't be just a private equity firm here.
We should be a strategic.
We are on strategic.
Totally.
Yes, that's how it was done.
The one notable exception maybe from an inner Hennepro story was the acquisition of J.A.R.N.
Yeah.
And I know you have, I think, the 45th anniversary.
I guess, did people at the time think that they would have such a big impact on a firm?
Or maybe...
Well, I was an acquiree, so I don't know what they thought at the time.
I subsequently found out what they felt about it.
It was a disaster.
And it was a little bit like Columbus trying to find the Indies and instead finds America.
It turned out okay, but for different reasons.
They discovered something, but not what they intended to discover.
So they ended up getting a bit of an entrepreneurial culture that they didn't know were buying.
But certainly, at the time...
This was in the early 80s.
It was a moment of high inflation.
That inflation and the manifestation was higher commodity prices, precious metals.
Gold had only been recently freed up to be able to be owned by individuals.
We'd been on the gold standard.
That evolved.
It's hard to transport back to that time.
But the business of Jay Aaron and company was kind of a sleepy...
except it erupted in a positive way at the end of, you know, before Volcker came in and clamped down on inflation, a highly inflationary period.
And, of course, the savvy, streety guys at J.
Aaron extrapolated the value of the firm at the peaky, peaky part of its thing and sold itself to Goldman.
At the same time, DLJ, which was an investment bank at that time, bought Ackley and...
Solomon Brothers and Fibro got together.
So it was in the air that the Wall Street firms needed a commodity arm, and Goldman Sachs got J.
Aaron.
Now, J.
Aaron had a, you know, kind of a different culture.
It was, you know, to the extent that this is kind of all lost now because all these firms have kind of blended and you wouldn't know the difference.
But at the time, Goldman was kind of an our crowd kind of a firm.
It was a Jewish-y kind of firm.
So was Jay Aaron, but very different.
Interesting.
Goldman was kind of like, you know, was kind of, you know, the upper echelon, an upper echelon crowd, and Jay Aaron was more of a kind of a streety guy.
Goldman recruited from the Ivy League and, you know, people with MBAs, and Jay Aaron just recruited people.
And the first, the entry-level job for most of the life of Jay Aaron was, the best job to get was the driver for one of the, for one of the traders.
And literally, and it was kind of almost like mafia-like in a way.
And that's how you rose in the organization by that.
And I had been, I had gone through college, went to law school, took myself and my loans into a law firm.
and worked there for about four or five years and like a lot of other people at that time.
I wasn't doing, I was doing pretty, I was doing well at the law firm, but it wasn't necessarily for me in the long term like a lot of people.
And I looked for jobs I knew nothing about.
I interviewed a lot.
And being in New York, what do you go into when you're done?
Whether you go to, you become a consultant or...
You know, go to Wall Street.
I said, I'll go to Wall Street.
You know, there I go.
I will bestow myself on them.
They should be so grateful to have me.
I knew nothing about it.
And, of course, I got a job nowhere.
And the only place I got a job, including, by the way, Goldman, where I didn't get a job, and the only place that offered me a job was J.
Aaron & Company, this small commodity trading firm that I had never heard of.
And they hired me as a precious metals salesperson.
And right around that time, they were acquired.
by Goldman, which is how I got into Goldman.
Amazing.
And was that where you kind of learned to be a risk manager?
I mean, that's like one of your most famous kind of qualities, but I don't know, maybe, I don't know, I don't think much of our audience probably has a good understanding for what kind of trading in the 80s or 90s kind of looked like, either a Jaren or a...
It hasn't shifted, you know, the vehicles have changed, the thing, but the, you know, the kind of judgments and the perspective that you believe.
I think, look, you know, We were at Goldman and anybody who's doing this business and yourselves, anybody who's investing, you're doing two things.
You're trying to make money for yourselves and for your investors and your clients.
And so you're trying to get out there and take risk.
And you're also trying to be a risk manager, which is, you look, it's almost like you bifurcate yourself and say, are we too, I know we want to take risks, but let's go into risk management mode and let's consider.
Are we diversified enough?
Are we overly committed to this?
Are we managing it well?
And that's kind of a different head that you have to bring.
And you have to do both.
And by the way, we get challenged on both sides.
Sometimes things go badly and people, the pleasure-pain principles work and people don't want to take risks.
But yes, we're paid to take risks, so you have to take risks.
So what do you want to do when you have to exhort people and sometimes shame people into taking more risk?
And sometimes you have to get them.
okay, we're not talking about what risk we want to take.
Let's go over our portfolio.
I'm sure you do portfolio risk.
You're saying, where are we overly exposed?
What contingency plans would we have if X, Y, or Z, or W, or G happens?
What can we do today to mitigate the adverse consequences if any of those things happen?
And when you go around the table for those meetings, you're not so much interested in what people think about the future, where things will go.
You just want to know.
Forget about what you think the likelihood, improbability of something happening is.
What will you do if it does happen?
And what can you do today to mitigate the consequences of that in advance?
And a very low cost today.
Sure.
You know, buying insurance is very expensive.
When everybody needs it.
When everybody needs it.
And when the problem is dramatic.
When the hurricane is coming.
Yeah.
And it's on its way.
It's very expensive to buy insurance for your oceanfront property.
Totally.
But.
You know, in the middle of winter, when it's the furthest thing from your mind, it's a lot cheaper.
And so what can you do?
And so we did both those roads.
I'd say what I might have had an orientation towards was the risk management part because, you know, I could find the cloud around any silver lining.
You know, my wife, you know, yells at me, I'll walk, you know, she'll buy something new and I'll notice, isn't that a chip?
You know, on the lower part of something like that, I think my wiring was always to be a little bit fatalistic, a little bit nervous, and a little bit looking for stuff that could go wrong.
But it turns out that I had a kind of an appetite for risk.
That's a little bit different than saying I was good at risk-taking, but I could live in a risky situation.
I didn't shrivel up on that.
So I ended up having to do both things.
You know, we have a lot of risk takers.
Yep.
And I would say that the biggest challenge for management is the risk management side, which is really getting people to refrain from risk, which is about a third of the time when you're in that business.
And by the way, not the most important part, but probably the bulk of the time is getting people to take more risk when they don't want to.
Totally.
We think about that a lot here too.
Yeah, because you get, you know, you get singed.
Right.
And you don't want to do it, but we're paid to put out money in the right place.
And so you just can't, you know, you can't be afraid.
This was, you know, I spoke to Ashok kind of leading up to this conversation.
You said maybe a few things.
One was, from his perspective.
Ashok is the head of trading at Goldman Sachs, a long time at this point, head of it.
And I think one of your mentees, or at least that's how he.
I'm honored by that, but yes.
I always think of myself more as a tour mentor than a mentor.
He said some amazing things, which I want to come back to.
But he said one of the maybe cultural thumbprints from his perspective that maybe Jaron left on the firm was a culture mark-to-market.
One of the other things he said was you were a manager that understood losses, so you weren't afraid of them.
You would often, to your point, kind of encourage people to lean in.
The other thing was he said you were incredibly good at gathering information from the organization.
You were both...
Very approachable, so people wanted to come to you.
And then often when you were doing maybe an audit of a division, you wouldn't just speak to the head of the division, you'd speak to like the number two.
I did, but I don't want to undermine, but I always did.
On that score, I tried to make it so that everybody felt comfortable talking to me.
One thing I never did, if somebody was calling to tell me something that was bothering them, that they saw an opportunity or a challenge, I never said I already know about it.
Because I never wanted anybody to self-censor later.
and say, oh, he must have heard about it from someone else.
I want, if a junior guy was telling me something and three people up the letterhead told me the same thing, I would sit and listen.
First of all, you find out a lot about the person who's telling it to you.
Also, so you're not just learning the content of what he's saying.
You're learning a lot about the messenger.
But secondly, I didn't want anybody to have an excuse to not tell me stuff.
So I listened to a lot of redundant facts and circumstances.
So I thought about that a lot.
And about taking losses, you learn that the first day.
I mean, of course, everybody.
And I'll tell you one other thing that's very important on the loss side.
People can lose money.
You could lose money because somebody's stupid, or you could lose money because somebody's wrong.
Smart people are wrong.
Totally.
Smart people tend not to do stupid things, but they tend to be wrong.
You know, the old, you know, saw about, you know, the best hitters in baseball, you know, make out two-thirds of the time and that kind of stuff.
But it's very important not, when something goes wrong, it's just, you know, when something is not right or somebody loses, it's very important not to treat somebody who's wrong like they're stupid.
And people make a mistake because the big fault of...
risk management or bosses or managers, is they let after-acquired information seep into their judgment of what they would have done at the time.
And that's, you know, you have to be very careful about that.
When you evaluate people and you engage with people, you have to show an appreciation of what people have done in the fog, which always exists, because none of us know the future.
By the way, most of us don't even know the present.
Totally.
You know, the present is a mass of things.
Who can sort that out?
But once the present turns into the past, everybody's a genius.
Nobody voted for Nixon, and yet he won in a landslide.
It's like everybody remembers things differently.
I think it was your quote.
It's like, if you're so good at predicting the future, tell me what's going to happen next.
Yeah.
Again, when pundits come up and say, well, I know this or that.
So look, when anybody tells me, oh, I knew this, and I said, well, if you were so prescient, tell me what happens next.
Oh, well, it was easy then.
And by the way, when somebody's telling me about the certain future, I say, you know something, did you know that we would be doing this today?
If you didn't know those things, why are you so sure that you know the future?
People don't know this stuff.
I'd say most of what we do with respect to risk is not so much predicting and not so much forecasting.
It's a lot of contingency planning.
And if you're a good contingent and you go around the table, what could happen?
Don't tell me about the probabilities of the improbability.
What could happen?
And again, we said this before, what are you going to do about it?
But the act of going through that thing makes you so alert and on it when things get triggered and you so have a plan, you get off the mark so quickly.
that people think you did anticipate it, but when you really did is you heard the gun go off before anybody else.
You know, and I don't know why I use sports analogy, I'm not the best sportsman in the world, but I know that in track and field, if you, if they shoot the gun off, but you leave within a tenth of a second after it, they call a false start because your reaction time is at least a tenth, so you're not allowed to anticipate a start.
And they'll call it false.
I said, I want everybody.
to be called for a false start because they hear the gun so much quicker than anybody else they get off the mark.
And so that's the exercise you can do.
Now, some people are more intuitive.
Some people see things.
But what I really do is, what I really think for most people is that they've thought about that what we make.
I think X and Y and Z could happen if this happens.
This is what I'm going to do.
You know, we have a lot of kind of tech entrepreneurs and just tech people in general kind of in our eyes.
I'm curious, you know, How did you think about technology during your time at Goldman?
You know, what role did it play kind of in evolving the firm?
I'm sure it changed the markets business even, you know.
Oh, my God, we were always, the technology was always changing everything.
And, you know, in the, by the way, in a lot of what we, not everything, but a lot of things in finance, it's winner take all.
You know, if you put your, I mean, I'm sure the world has moved on, but even, you know, even a few years ago, if you, you know, if you had a, you know, if you had a, if you had a risk.
you know, an execution system that communicated digitally back to the floor of the exchange.
You wanted your computers a half a block closer to the exchange than everybody else's because the milliseconds mattered.
Not only mattered, it was winner-take-all.
You got everything.
You got the offer, you hit the bid, and other people were left looking at it, you know, looking at your dust for that.
So you were always, always competing for the best technology in a winner-take-all situation.
And by the way, a lot of life, whether people realize it or not, is winner-take-all.
Sure.
I can see, you know, I know, you know, the opportunity set and the challenges and the anxiety people have about the current thing.
And I think, obviously, I still, you know, invest and I still transact in the market.
I think about that too.
But I would say that no one who's a better adopter or pays more, except for obviously the hyperscalers themselves who want to be the providers of the technology.
But in terms of use of the technologies, you know, the financial area is, you know, wants to be on top of it.
And so interesting, by the way, there's a lot of, you end up in a lot of cul-de-sacs, you'll end up, you know, going down bad paths because you just don't know.
Sure.
And you have to do this.
And I know that everybody's talking about, is looking for cost savings, but, you know, we always had, we always had to do things twice.
We had to do the, we had to use the system we were confident in and then simultaneously run the new system we had high hopes for.
We didn't have a high level of confidence.
In our business, and as a regulated company that we were, we weren't allowed to have mistakes.
By the way, that's another schism between the Valley and finance.
So you could be, you know, I looked at, you know, Robin Hood, great company.
But early on, you know, they declared a kind of, they declared that they had government-insured accounts that weren't government-insured.
They had some slip-ups and a lot of apologies get made.
You could do that.
We weren't allowed to do that.
We had to be right.
We had to run things 50 times and had to be perfect the last 49 times before we could go that way.
So we would always have the plan that we, you know, the technology that we knew worked, inefficient as it was compared to the new, and simultaneously run.
And we got confidence in the new system.
We implemented that.
And then there was a newer system that we were also beta testing at the same time.
So technology in the first instance always augmented our costs, never detracted from it.
But as we went from one lily pad to another, things got better and more efficient.
But we were always, always, always testing new stuff and always geared towards it and always very anxious about what would happen if somebody trumped us on something.
By the way, In addition to execution capabilities and things that go to the efficiency, we also, you know, our risk systems, by the way, we had a huge technological advantage because of what we invested in early on.
Yeah, we did a similar podcast with Marty Chavez a couple of years ago, and he really credits you for helping kind of drive support or maybe adoption of SexDB kind of, you know, as you took over more parts of the firm, you know, getting everybody to kind of.
Yeah, I don't know if I desire, except whether or not, you know, except for blame, I accept anything that comes my way.
we did have very good early-stage risk models.
By the way, SecDB, which was kind of a risk management system that we had, and it was kind of modular, whereas other things were kind of rigid, we can always change things.
It was so good and so flexible that I think it's like, the system must be between 25 and 30 years old and the core of it is still implemented.
The only thing I know like that, and I once tweeted this out, because the battery, I still have my H.
P12C calculator.
And the battery went out.
And I know that battery must have been hanging out for 22 years.
I think I own that device for like 40 years.
And I looked at that and I said, you know, I never thought of this before, but what consumer device?
It's still tracking.
After 40 years, not only are people still using, but looks like it could have been designed, you know, last year.
It's an amazing thing.
Well, RSEC-DB.
was kind of like that.
It was also, but it wasn't a consumer device, but it was good like this.
I have a lot of admiration for some, you know, for design that really, you don't expect design to stand the test of time.
Fashion doesn't.
Sure.
But this does.
I'm telling you, the original iPhone looks like an old product to me.
The A2B 12C looks pretty good.
We think a lot about like systems of record and their durability, and I think, yeah, Sektivit was sort of an example of that, certainly at Goldman.
You know, one of the things that I think was unique about your career as well is you spent half...
half of your time at the firm kind of pre-IPO in a partnership and half the time, you know, post- Sure, very relevant to your entrepreneurs.
Totally.
And I'm curious, you know, now there's an entire generation of leaders at the firm that didn't know Goldman, you know, pre-IPO.
Right, but they know the culture of Goldman Sachs, which has its roots and is committed to the principles that were involved from the partnership.
And so they may not know it's a partnership, but they know what- how we work.
Yeah.
I mean, maybe you could describe kind of like what were those principles kind of pre-IPO and people really credit you also for kind of carrying that culture forward, right?
Ashok said this as well, which is like, we don't have a partnership, but it still feels like we're...
It's a partnership.
So let me just say the difference is because people are on alert and, you know, in a partnership, now we're a big firm, you're dealing with small firms who want to become big firms and some of them have become big firms, but in...
There's a really big difference between a partnership culture and a corporate culture, sometimes by necessity.
And it was really to go public, and I'll tell you, we can go into that direction, but we had to go public.
But one of the big impediments to going public was the fear that we'd lose our partnership culture.
Now, what do I mean by partnership culture?
Partners own the firm.
The employees there, especially the senior people.
are your co-owners of the partnership.
To the extent that you're a senior partner, a lot of it is by consent of the governed.
When you're looking at your senior partner, they don't just work for you.
They're not just subordinates.
They're your co-owners of their business.
They have certain expectations that come from that.
For example, their fortunes rest on the success of the whole enterprise, not just their narrow silo.
If you work for Amazon, in the retail area.
Are you really raising your hand asking questions about AWS?
Totally.
But if you owned it, you care about the whole.
So one thing, they own the whole.
They care about the whole.
They expect as owners to have a lot of information about the whole.
They expect to have influence about the whole.
They expect that any sudden moves by the senior partner...
is we socialize them.
They expect to have input into that.
They expect the process to be slow enough for them to have that influence and input.
And you have to have a certain amount of discipline when you're managing that.
If you want to perpetuate that, I'll get to why you want to do that.
And so you have to socialize things.
And maybe your decision-making, maybe lightning bolts don't come from your fingertips.
You're trying to make suggestions.
Maybe you slow things up.
And you hear complaints, and maybe you actually don't do things that you want to do, or you table it for another time when things could be more revealed.
I spoke to Esther Stetcher also kind of leading up to this conversation.
She mentioned this.
She said one of your hallmarks of your leadership was it didn't feel like you were very hierarchical.
Like when you wanted to make a tough decision, you would at least go socialize it with a bunch of people, you know, gather input.
I'm thinking about, well, first of all, generally when you're on top.
People want to get in line with you, but sometimes they can't.
They just think you're wrong.
So socializing and talking in advance had the benefit of just enlisting support from people who otherwise might be neutral, who just, you know, just not because they're sucking up, but just naturally they want to, you know, they want to compete.
You know, they're pliable.
And then you had to honor the fact that they felt like owners.
Now, why do you care when they feel like owners?
because you get a much more stable organization.
They feel attached.
They feel committed.
Even people who've been there for a few years take that away with them.
And people who've been out of the firm for a long time still self-identify as ex-Goldman.
By the way, how we treat, you know, one of the examples of that kind of ownership, we treat our alumni very specially.
Goldman has an alumni office.
I put that in.
an alumni office.
I spoke to Allison Ness.
Yeah, Allison Ness is a partner.
She runs our alumni office.
Where we do things.
So people have been out of the firm for 20 years.
I was going to ask you about this.
Like, I was only at the firm for three years.
You know, not that long.
But I still have a lot of affection for my time at the firm.
And it's a weird thing, right?
And even people who've been out of Goldman for decades, Jim Cramer, you know, you mentioned in the book, like, they're so often defined by the firm.
Oh, no, he goes on T2.
Like, yeah, he hasn't been in Goldman for...
35 years or something like that.
Where does that come from?
Again, it's how, you know, it's a lot of times, it's crazy to expect a kind of loyalty if you don't show loyalty.
It's crazy to expect commitment if you don't show commitment.
I would say leadership, my predecessor did, my successor does.
The challenge of Goldman Sachs, we had to go.
I mean, I can get into this.
We needed to go public.
Grow the balance sheet.
When they repealed Glass-Steagall, once upon a time, the lenders were separate from the investment banks and the investors.
That got repealed, and all of a sudden, people who gave advice can now implement the advice by financing it.
So we had to, you know, if J.P.
Morgan was going to become an advisor, we had to become a good lender and a good financier.
So it meant that we had to have a bigger balance sheet.
We couldn't run that on impermanent capital of a partnership.
And so we had to go public.
But the big anxiety was we'd lose the partnership culture.
We went public, basically, in an instant, legally, but it's taken 25 years to get it done in a way that it wouldn't undermine the partnership culture.
So we do those things that make it partner-like.
We have partnership elections.
We pay people based upon how the whole firm does.
If your area does particularly well...
you'll know it in your compensation.
The most important thing in compensation is how does the whole firm do?
And so you get people who are bankers sourcing investment things for the merchant bank.
You have people who, investment bankers, who would like us to represent their client on an auction.
And there are three other investment bankers who represent three different potential buyers and you have to pick one.
And we sort it out together collectively.
What's the right place for Goldman Sachs to be?
Or maybe we should represent the seller or maybe we should.
Be a buyer ourselves.
How do you decide that?
And you explain it and you do it.
You let everybody have their say.
Now, what should we do here?
And you convince people that if they throw in with the enterprise as a whole and sacrifice in the short term, they get to use the platform and exploit it for their professional career and their personal career.
So you got to get, you know, it's like, I use it as a metaphor, you know, the metaphor of the 800-pound gorilla.
in the jungle gets his way.
I'm the 800-pound.
But what if you have 20 800-pound gorillas?
19 have to say, excuse me, after you.
And how do you get them to do that?
And that's a bit of the art.
And we did that.
The firm did that.
By the way, there were other things that we had to do in terms of reforming make a public company.
In a private company, your company, your partners presumably, you know, everybody cares about making money for their investors and their clients, but as far as you're concerned, You don't care whether you make money smoothly in 5% higher increments every year.
You can have three, in a 10-year cycle, you can have three fantastic years, make no money for five years and lose money two years.
And it could work out well.
In a private company, you care about the E, the earnings.
In a public company, you care about PE.
Sure.
And if you have volatile earnings, your shareholders don't like that.
They reward you with a lower multiple or they punish you with a lower multiple.
And we've seen that even more recently with shifting off balance sheet into funds.
And so you could see over time, Goldman Sachs, and we didn't want to lose the risk-taking culture at Goldman, which is very important.
I'll say why in a second.
Beyond the fact that it makes money, it's very important.
But we shifted a lot of that to off balance sheet vehicles.
And by the way, it means you have to do more of it.
Sure.
Because instead of earning $100, you're earning $20 with lower risk.
Yep.
and a higher PE and a higher R return on equity as a result.
But that took some time because you didn't want to lose the people who do that.
Now, one of the reasons why it was very important and apparently less important for other firms who don't have those big investing arms is that we were able to approach our clients as partners and not just as supplicants trying to get good brokerage business.
So we spoke the same language.
We were good.
We did put our clients first.
We would forbear if our clients wanted to do something or we'd partner them and bring them in.
If we sourced opportunities that they wanted, we'd work that out.
And it's not always easy to work that out.
But we were able to engage with our clients as peers and not merely as supplicants looking for business.
And so a little more swagger, a little more understanding of what our clients are going through because we're principals also.
We didn't want to lose that culture.
which, by the way, is not evident in our peers.
And there are other reasons for that.
If you're going to be in an investing business, you know, it's a more volatile P&L.
And, you know, going back to the beginning of the conversation where people get, managers get confused between being wrong and being stooping.
At times when the people on the investing side made a lot of money, they wanted to fire the firm and go off and do their own thing.
And at times when they lost a lot of money, the firm wanted to disconnect from them because they couldn't bear the losses that they had been.
Goldman Sachs, in its view and its partnership culture, was able to look through those short-term things and say, look, over-psycho, great business.
And the people who ran those businesses stuck it out.
Maybe they could have done better here or there, but there were other reasons why they stuck it out, and they did.
You know, I think a lot about kind of firm, a lot of the alignment that you described.
You know, even in the shape of our firm, obviously, we're much smaller than Goldman Sachs.
But I wrote this piece where I sort of drew a distinction between firm over fund.
You know, the objective function of a fund is how do I generate the most carry with the fewest people in the shortest amount of time possible?
And a firm, you know, you have to deliver exceptional returns, which is sort of a prerequisite for doing that well.
But I think the second variable is like, how do you build sources of compounding competitive advantage?
Like, what are your modes?
Again, orienting around not just your individual fund, but around...
The cold pants except for the firm.
Again, you have to put your money where your mouth is sometimes.
How you compensate people.
Totally.
And by the way, people will try to pick off your best people because if you're paying the people who are going through the doldrums better because other people are earning more money, it could be coming at the expense of the people who made more money and someone will come in and take those.
So there's a practicality to this thing, so you can't pay everybody the same through good times and bad times.
You have to do it, but you have to.
You have to mute the effects of the cycle.
It doesn't mean people won't leave and some people are just entrepreneurial and they can't, they don't want to be partners and they don't want to subordinate their own interests.
And there's a certain kind of person, by the way, there are people who do spectacular in the world, have great relationships with Goldman Sachs, but we improve their lives and Goldman Sachs by them separating.
Because they just weren't going to be that kind of people.
They weren't going to be, you know, the...
You know, the platform was subordinate.
Again, we weren't asking people to subordinate their egos forever or not, you know, hide themselves or not be, you know, famous or wealthy.
We just said that if you subordinate it in the short term or during, at key times, in favor of a platform, you can exploit that platform, again, professionally, because the firm would have much more heft and power and authority.
Nobody, people take Goldman's calls, even for a most junior person.
And also, it's good for your personal life, too, because away from Goldman, you know, saying that, you know, look, I was a partner at Goldman, I'm not saying this is exclusive to Goldman, but saying your partner, at least people will...
the presumption has shifted that you're not a dummy unless you prove you're a dummy, as opposed to other people out of the presumption you're a dummy unless you tell me why you're smart.
And so we made that, you know, I tried, you know, that that's a positive thing.
I mean, you definitely inspired a lot of loyalty during your time, you know, as CEO, I'm sure, even before that.
I mean, back to the, one of the quotes that I heard from Ashok was that, you know, he said you often believed in him more than he believed in himself.
And that's been the main driver.
for why he stayed at the firm so long, despite other more lucrative opportunities along the way.
It was sort of instilling a confidence in your, in your, I'm just curious how you thought about sort of inspiring.
Well, I think, you know, lucrative, but, you know, there's a lot, people make a lot of money.
I'm sorry, I'm pretty kind of like, no, yeah, he's done it.
Yeah, he's done okay.
And the increment, but he has a big, you know, he's a substantial guy as opposed to being a bigger fish in a smaller pond.
So, you know, found that, you know, it's attractive.
Look, you have to, I think, you know, I think, I think I'm a good judge, you know, of people.
I like people.
I care about them.
I empathize with them.
I want to be, you know, not so much liked as appreciated.
I wasn't always liked.
If you read my reviews, but I was always appreciated.
I wanted to make people better.
I didn't want to juggle for them or tell jokes or be, you know.
I wanted them to think that I made them better than they otherwise would have been, that they got a lot out of it.
And I really, to the core, care about them.
I think I can read people.
But I identified Ashok.
By the way, it's not my brilliance for sourcing him.
It's his brilliance for being brilliant.
I don't want to get confused, but I knew it early.
I think one of the things that I had in my time and I tried is that I wasn't a victim of the organization chart.
You know, these firms could be very, Goldman Sachs is not very bureaucratic and not very.
I remember when I was very, very early in my career, I remember I came from left field to J.
Aaron.
J.
Aaron was acquired by Goldman.
Aaron wasn't doing very well.
But I had this idea.
I was in the precious metals business.
And that made me have to deal with people from the Mideast who were investors in gold and that I'm chatting with people on the other side.
And what are you doing?
What do you need?
And, you know, it turns out.
that even though they were speculating in precious metals, what they really, really wanted to do was they wanted to be able to invest money and get an interest rate-like predictable return.
But under their rules of engagement, you know, their law, they weren't allowed in those days.
The real strictly religious crowd wasn't allowed to take interest.
It was usurious.
And what they were looking for ways of...
making kinds of investments that would read like an investment.
They were allowed to make investment returns.
They just weren't allowed to collect interest, but had the stability and predictability of an interest.
And what they were doing, and we can go into details or not.
I don't want to be complicated here.
Cash and carriers, what people were doing, arbitrages between a spot market and a commodity and the forward market that effectively, if you buy, if you are, If you are selling somebody, you know, buying the cash product and selling somebody a forward, in effect, you're lending that person money because you're giving him the risk of the investment, but he doesn't have to put out that much cash.
You're the one who's hedging it by buying the commodity and giving him a forward in it.
And that has an embedded interest rate to it, but it looks a lot like an investment return.
And so in chatting with them, but...
the markets weren't big enough to do the scale they wanted to do.
And that was a few years earlier was when they came out with the S&P 500 financial commodities in effect.
And those were big.
And so in talking to them, they said, well, Holly, I'm at Goldman Sachs, biggest equity trader, blah, blah, blah.
What if we did this in the equity market in Manhattan?
We went out and they bought 500 of the S&P 500 and, you know.
put out the money in the market and hedged it by selling it in the forward market, would that give them, what was the embedded rate of return?
And it was very high because they were the other side of speculators who didn't have the capital.
I know this is a little bit complicated, but the short story was I had the idea, I went to the then, like, number two guy in the firm, Bob Ruiz, the treasury secretary, who I never spoke to.
He was a Goldman of the whole firm, and I was tucked away in the jet, which was in a separate building at the time.
We never moved.
And he said, That could be interesting.
He called up somebody on the equity desk, said, work with Lloyd.
I didn't even have a title at that point.
I love that.
So I remember I asked when they merged into Goma, I said, what's my title?
And the guy said, call yourself Contessa if you want.
So no title.
And he said, so did somebody work with me?
And they did.
And the first order that came in, and this was like back when this was real money, was for $100 million worth of this.
That was by far the biggest trade ever.
And then they was doing, anyway, so that's how, and you want to be that way in your organization.
And by the way, that's an easier thing in your line of work.
Yep.
Where the entrepreneurs are advantaged by their lack of attachment to history and tradition and the old way of doing things.
Where the iconoclast is the, in your business, the iconoclast and the young guy.
or celebrate, not only celebrate, they're the, you know, they're the focus.
Sure.
And not so much in bigger organizations.
And so we always wanted to achieve, you know, that's another thing, to try to be an entrepreneur in an institution.
Totally.
Maybe I'll transition because I want to get to the financial crisis and a few other questions maybe more present day.
You know, Goldman fared obviously incredibly well during the financial crisis, you know, and obviously earned public backlash, I would argue unfairly, you know, as a result.
Yeah, that's what I agree with that.
Yeah, yeah, I figured.
What do you think helped the firm navigate that period so well?
You know, was it risk management, technology, the fact you didn't have a big consumer business?
Risk management, the lack of a big consumer business hurt us in the back end on the reputational side because people didn't know us.
Right.
We were a big, influential government sack.
So I have, you know, people who left Goldman became very big officials, prime ministers, and by the way, not just in the U.S., overseas as well.
Totally.
And so, but in the beginning, you know, risk management culture, and maybe that stemmed from the fact that we were a partnership.
We had unlimited liability.
There's nothing that focuses your attention better than being a, you know, you're a partnership.
You're investing client money and you're not leveraging your own money.
You know, the partners not only had their capital accounts at risk, they had their homes at risk.
I remember when I became a partner, I said, should I be putting, you know, should I be putting my house in my wife's name?
And it was very funny because then the minister of the interior, this was back when we were partnership, said, you know, Lloyd, no partner at Goldman Sachs has ever lost money because the firm, you know, because of losses at the firm.
But plenty of Goldman Sachs.
partners have lost money because they put assets in their spouses.
So that was it.
And it was a funny line, but by the way, like a lot of funny lines.
True, true.
And so, but it did focus your attention and it made us very, very totally on it and risk managers are very attentive to risk.
And now one of the consequences of that concern, we marked things to market rigorously, religiously, and other people didn't.
They didn't have, you know.
Do you think if the crisis had stemmed in like the private equity?
which I imagine the firm had a lot more kind of notional exposure to, it would have navigated as well?
It would have been tougher because it's hard to mark-to-mark.
Now, what we did, we also had instruments that were one-off.
We had a lot of loan commitments related to our M&A.
We were the biggest M&A franchise, and so we made commitments.
Those were outstanding.
Those were commitments that were, you know, had to be, but we marked them down and made analogies.
And we also had a very separate.
I'm going to say this word, I hate to say it, bureaucracy in the firm, away from the investors and the traders, they were partners, they got paid a lot of money, to mark those things.
And when there was a dispute, we always sided with that side of the house.
And we said to the traders and investors, very easy way for you to challenge the marks that you're being given.
Go out and sell something.
Sell a fraction.
Totally.
And guess what?
And that's what got it.
That was mark to market.
is not just a P&L system.
It's a risk management system.
Because we, that was our early warning that something was amiss here.
We had things that were marked, things that were AAA.
When you went, when we made people sell them, the bids vanished.
And they weren't there.
And the bids were much lower and then much lower and then much lower.
By the way, I didn't think it was, the market was right.
I thought there was a big opportunity to accumulate it.
But that would be like fighting with the tides or gravity.
It is, that's the market.
So guess what?
We're going to keep marking it down until you find, until we mark it to a price where you could sell it.
And by the way, and therefore it became easier to sell.
Sure.
Because it wasn't like they had big losses.
The losses were already embedded in their books.
Totally, because we marked it to mark.
And to your point earlier, if you're testing the market early, it's cheaper to buy, you know, insurance.
Exactly.
And what we did.
Right.
So one of the things, you know, one of the things, and there were a lot of things, you know, we had a lot of exposure on paper to AIG.
But we also had fully hedged because we had bought credit protection.
But we also had a collateral.
So we, a single A credit, got a collateral agreement with AIG AAA.
Wow.
I think we may have been the only ones to do that because we insisted on it.
We wouldn't have otherwise transacted with them.
I think you said in the book, it was like one of only like five or seven companies in the country that had AAA rates.
So who would have to marry to ask them for a margin agreement?
But we had the margin agreement, so we had their collateral.
And so that was, you know, because again, it was our money.
Right, totally.
And so it wasn't like other people's money, it wasn't speculative.
But what was interesting also, like I heard this from Allison, which is it was your money, but you also cared about relationships.
You know, she said...
I'll forget the cast of characters that were in this meeting, but I think it was about your kind of LBO financing exposure at the time.
And you said, look, like commitments are in the past and relationships are in the future.
Like go out and make sure that our clients know we're still good.
Oh, I have to do it in the financial crisis.
I'll get to that.
Let me get to that in a second.
But we, yes, I mean, there was a time we had this loan outstanding, you know, to Chrysler.
I remember the CEO then at Chrysler calls me up.
And are you going to honor that commitment?
And I said, yes.
And I think it was due at a certain, and he said, can you do that now?
I said, no.
I said, I'm going to honor it.
It's not going to be for more than we committed to, and it's not going to be sooner than we committed.
I promise you we will honor our commitment, but in this market we're not going to do more and we're not going to do it earlier.
And we did all of that stuff in the high integrity.
Here's another thing that's in your head in an ownership culture.
It's your reputation.
It's your firm.
You're going to own that.
It's open-ended.
And so we're going to be there when this crisis is over.
So I worry sometimes about in the alternative space when it's maybe a 15-year-old firm, but I joined Goldman and Sachs when Goldman and Sachs were already dead.
It's an institution.
By the time I got 150 years old, we're going to be there for another 150 years.
So we're not going to honor.
all our commitments because we have to be in business on the other side of this.
By the way, I think about that when I'm dealing with someone else.
Are you going to stand by this?
Are you going to shut down and open up a firm with a different name with three different partners later?
I think Goldman coined the phrase long-term greedy.
But you're right.
It's about relationships not being transactional.
And also, you're going to go through life, and I would say this to new people in the firm.
You know, the dopey people that's even for the most junior person, the dopey analyst in your class.
Roll the clock.
You know, you can't imagine this.
And believe me, looking at you, I can't imagine it either.
But your cohort is going to run for all the important institutions 35 years from now or 30 years from now or 20 years from now.
And you're going to make your reputation with those people 30 years from now.
believe it or not, are going to be how they remember you act today in this crisis or regularly.
And you must see that yourself.
You came up, we were talking about before, people you knew at Goldman, and they could become fixed in your mind at certain things.
So I said, remember, keep in mind that, again, this cohort, that you're a cohort going through this.
And I thought about that in our business.
The financial crisis now is old.
But let me tell you.
There are grudges and memories and good feelings and hard feelings that come out of that that are sticky.
And, you know, the important thing is to get people, people will learn that through experience.
But one of the things you could do as a leader, mentor, advisor to people is get people to appreciate that without having them go through the experience of it.
So you tell them that.
One of the things I used to do with people, I said, how many of you go home and...
to your spouse, to your wife or your boyfriend or your girlfriend and talk about your boss.
And everybody twitters and says, I do.
Well, guess what?
And they would do this to the people who just got newly promoted.
Guess what?
The people who report to you are going home to their spouse and every night they're talking about you.
Totally.
Do you realize that?
Totally.
They don't realize that.
You have to think of who you become and you have to have that sense of yourself before you can have an impact on others.
You have to realize that.
And so at the end of them, then I would say, what do you want them saying about you?
You're not there to be, you can be their friend, but you're not there to be their friend.
You could also be their friend.
You're there, it's like, if you're a military leader, you don't want your commanding officer to be a good juggler or tell you good jokes.
You want them to lead you well, worry about your safety, and not make you take risks, stupid risks for no purpose.
And that's what you want.
And if they like you, that's good, but you want them to appreciate you.
You want them to feel they're going to be better by following your flag and not someone else's.
I think it's great advice.
You know, maybe to transition more to present day, for better or for worse, I think, or maybe for worse, I would argue, but I think a lot of the technology companies are going to inherit a lot of the public flack that affirms.
Oh, guaranteed.
Right.
Once upon a time, we were you.
We were the...
investment bank and all these other commercial banks, and then it evolves, and now, you know, you're an institution now, and there's people who market themselves as a more flexible, current, now version, you know, version of what you used to be.
But even beyond, like, our firm, because, you know, but I think, like, a lot of the AI labs are, you know.
They're going to create a lot of change in the world, in our economy.
Sure.
And I think there'll be a lot of negative backlash, you know, to them.
I guess, what advice do you have for the leaders of an open AI or Anthropic or maybe Elon, you know, for how to navigate, you know, through that, even from a communications perspective?
Well, I think one of the things, and I learned this the hard way, one of the things that we didn't do is we were a wholesale firm.
We didn't have, you know, go get a mortgage from Goldman Sachs, go open a checking account of Goldman Sachs, go out of your local Goldman Sachs branch.
It doesn't exist.
So people didn't know us.
Institutions knew us, companies knew us, governments knew us.
We were the biggest in that world.
We didn't advertise ourselves.
We had a whole PR department to get up our name out of the paper.
It turns out we were too important, too influential, too big to be anonymous.
Especially in a crisis.
And especially to do, to come out of a crisis as well as we did.
And...
So nature pours a vacuum and the official sector pours us.
What are we going to do?
Kick the shit out of Lehman Brothers, which didn't exist anymore, Mayor Stearns?
Or how about the big commercials banks that lost $50 billion, literally, those amounts in the crisis?
We were there.
And also, my predecessor at that point was Secretary of Treasury and a lot of the government officials there, by the way, doing a great job.
We're going, so we were that kind of target, and we had no anchor in the world.
They didn't know who we were.
And so we were very easy, no reputation.
My advice is, and then, of course, I wasn't necessarily picked for my being so photogenic and being such an outward person.
I was an inside guy, that okay.
And then I had to make up for it by getting out.
And when you're...
being defensive and people are trying to kill you, it's not the best time to try to make friends with the public.
So I would say before then, and I know that people will think this is ego-driven, you don't want to do it, people are embarrassed to be out.
Go out and let people know who you are, know the value of what we do.
Businesses wouldn't exist today, important business, but for Goldman Sachs taking a risk.
In some ways, the invisible hand that licks people with capital, with people who need capital.
We were early financiers at dark moments.
You know, we took, you mentioned Elon, we took Tesla public at a time when, and this sounds like a quaint time, when companies didn't go public until they made money.
Sure.
And that was a big deal at Goldman at that time, to go out and do that and do things like that.
Microsoft too and other companies like that.
That's a very important function in the world.
Guess what?
It's time to explain that.
And, you know, you perform a super important function.
You're taking risk on entrepreneurs and companies, you know, and risks that your predecessors took 15 years ago are manifesting today and decisions you're making are going to manifest in the future.
I think there's no, you know, being modest and understated carries a lot of disadvantages.
And I think you have to explain the role you are in the market so that there's some appreciation of what you do.
one day if people decide that you misstepped, whether you misstepped or not, they may decide that you did.
And you want to have a counter argument to that.
And it's very, you don't want to be fumfering for one at the event.
So I'd love to hear maybe your just broader perspective on AI, you know, you know, and you're a student of history.
Like, does this strike you as sort of?
A similar technology to past, you know, product cycles?
Is this time different?
Like, where are you on the spectrum of excited, scared?
No, generally things don't, never repeat, but often they rhyme.
Sure.
Is this like electricity, you know, the electrification of the country?
Those are very big deals.
Internet, very big deals.
Could this be a bigger deal?
I don't know.
I don't think anybody knows.
I don't think the people who are driving it, they have opinions that they express, but I don't know that they don't think they know.
So we're in the realm of contingency planning.
It might be.
And, you know, one of the observations I'll make is that the people who are, you know, the big hyperscalers are firms that are dominated by founding shareholders who are putting their own money where their mouth is.
These aren't professional managers making bets on the future with other people's money.
This is their own money.
This is their own ego.
I, you know, I'm not saying that that necessarily makes them right.
But it certainly makes it seem to me that their convictions are very deeply held.
And so that's another thing.
Will all these technologies, and you could say, talk about AI or anything else, will all these technologies work?
No.
Will the people who have technologies that work all succeed?
No, the world may not need 10 large language models.
Maybe it needs...
Four will be winners, and two will be very big winners, and the other two will get by, and maybe it'll get reduced over time to two.
Who knows?
And so there's forks in the road where people are taking the wrong fork.
We don't know.
So I would bet, and I think you do too, and obviously you want to have an idea, but there's going to have to be a lot of forgiveness down the road where people are going to come and say, how could you be so stupid?
You weren't stupid.
With the information available today, you place your stack of chips on more than one possible technology and within the technologies on more than one place.
Maybe you can't because maybe you have to show commitment to one and can't do the, you know, there's different considerations that leach into this.
But the answer is this is going to be very, very important.
Will we go through a tech bubble kind of situation where we'll weed out?
the stuff that should never have been invested in, never been made, you know, again, in hindsight, you shouldn't have done it, but at the time, in prospect, you didn't know, what looked more speculative than Amazon?
Sure.
You know?
Yeah, forever.
Forever.
I mean, at the beginning, reinvesting all the money, you know, and that's so, there'll be things, there'll be genius pundits, and, you know, professors will talk about how stupid somebody was, because he won't be able to put himself in the shoes.
without the after-acquired information.
And I'm sure there's some stupid stuff being done, too.
I'm sure you have better visibility on that than things that you pass that you see other people doing.
But I have more forgiveness for that because I know that I don't know.
But I would be making those bets today, and I know that the people who are making the biggest bets and putting their money where their mouth and their corporate money are themselves principals and not just professional managers.
You know, again, I know you don't want to predict the future, but, you know, we are on the precipice of, I don't know, some of the largest IPOs ever, you know, with SpaceX, with, you know, likely opening I, Anthropic, you know, others coming.
I don't know, where do you think we are kind of in this cycle?
Or maybe what are risks that you think are underappreciated?
you know, kind of in the markets today?
Oh, my gosh.
You know, things will work.
Things will look different.
You know, somebody else in a basement is, you know, is doing OpenAI 7 that everybody else knows about.
Just the same way nobody, you know, all the stuff that's coming out today, things that happen, I'm reading with interest.
I never knew this stuff.
And nobody else, you know, 10 people knew all that stuff.
And so there's always, you know, there's always upside surprise.
We may be overenthusiastic about the changes.
The reliability function, you know, if it's unreliable and, you know, if you're in a business of horseshoes or throwing hand grenades, you don't have to be precise.
But if you're, you know, if you're running a big institution and you can't make mistakes and numbers really matter, you know, maybe you have to run things in parallel for a lot longer.
And, you know, one of the things that Google gave you was a bibliography.
You could check.
You know, when you go into some of these large language models, you don't know the thought process.
You lose intuition in these things.
It used to be when I started out in the business, you know, people would be shrieking each other, noisy trading rooms, blah, blah, blah.
People would be fighting with their wives or their husbands.
You know, they were sitting at the desk.
At the same time, people were transacting.
But if somebody said the wrong price or did a trade backwards, bought something when you should have said sold, the whole room would come to a dead stop and you'd hear it.
And today, You don't have that intuition because everything is whirring behind the scenes and you don't get the trail or the thought process of these things.
That's a problem.
The leverage in these things is themselves a big problem.
So before this technological age, not just AI, but in general, could you have had a mistake that could cost billions of dollars?
Not really, because your intuition, you wouldn't.
But now you can leave a piece of software, could go out and do 70,000 transactions, or even industrially.
I think the biggest industrial accident that we ever had was in Bhopal.
You know, terrible, single-digit thousands of people died, horrible.
But in the atomic age of Fukushima, if the wind had blown in a different direction, it could have been tens of millions of people.
So these are risks.
These are consequences.
People may be loath.
One of the big risks are governmental and regulatory.
And they'd be right.
We may want to have to regulatory slow some of these things up, not because it's smarter than us and it's going to turn us into pets, but because we don't have the ability to test whether it's right or not.
And so how do you build reliance on things that fundamentally you can't test?
And then these things will test each other.
Well, what if they're coordinating with, you know, the tests themselves are flawed.
You will think of more of this stuff than I do because you're a technologist.
I'm a user.
But I have, you know, again, there's a right to be anxious of it, but you might as well be turning back the tides.
I'm going to waste no time.
in thinking about whether it's good or bad.
It's happening.
Totally.
And you're not going to unlearn stuff.
Totally.
And I remember when we spoke the other day, you said, you know, I mean, it's also, it is scary in many ways, but it's also an enabler, you know, in many positive ways.
Oh, positives are evident.
I'm not talking, you know, I don't have to identify those.
We do it.
Anything, by the way, I'm not against anything that makes us everybody more leveraged.
Yep.
We'll find more goods or services to provide.
Maybe we'll have more massage therapists.
I don't know.
Turn back the clock at the beginning of the 20th century.
More than half the country was in agriculture.
Exactly.
Guess what?
A single-digit percentage is today.
People found stuff to do.
We'll find stuff to do.
And by the way, if we're generating all this wealth because of the leverage, maybe we'll have a three-day work week, six hours a day, and we can all be poets in the afternoon or hunters or fishermen.
Read some more history.
Well, that's the Marxist ideology.
That's what he was striving for.
It's funny to quote Marx.
But anyway, the...
I am not mournful of the opportunities.
I'm apprehensive about it, and I think it should get a lot of focus.
But I'm not for, I was listening to Bernie Sanders wring his hands over there.
Oh, my God.
You know something?
I'm for all this stuff.
Let's let the official sector get on there, catch up to it.
I'm not slowing down.
Well, first of all, you can't.
You're not going to get people to be stupider than they are or unlearn things they've already learned.
You can wish.
that atomic, that the atom had never been split because maybe the adverse consequences of atomic bombs are worse than the benefits of nuclear power.
But guess what?
You're not going to unlearn it, so don't waste any time thinking about it.
Totally.
You know, we have a lot of, again, young people just kind of starting out in their careers, likely listening.
I guess, what advice do you have for young people that want to have a fulfilling career?
You know, beyond working hard and maybe becoming good at whatever you choose to do, anything else you'd...
Here's one thing I would say to the youngish, young, young people, and with all deference to the success of Peter Thiel, I think people should make themselves complete people.
I think you should get a, you know, your early life is for becoming a complete person, a range of activities for your own sake, to make you appreciative of things, and also for your commercial life, because in the long run, you're going to get by.
and be good and get investors and have the goodwill of your colleagues and your subordinates because you're an interesting person.
You're the kind of person that other people want to deal with.
And if you make yourself so narrow and exalt, you know, your narrow silo, even if you make a lot of money in the first game, your life will be better and your commercial life will be better if you're more and your resilience will be higher.
Totally.
Learning history.
You know, it's a good thing to know that we've lived through times like this before.
You know, everybody talks about, oh, my God, we've never been this bad, never more polarized in politics.
You know, you say, well, we did have a civil war.
Well, that was a long time ago.
Well, guess what?
I was a sentient human being in the late 60s, young but still aware, when the National Guard was shooting.
people on campuses.
It was successful political assassinations.
And, you know, the college-age kids were leaving the country and going to Canada to avoid the drought.
I would say those were pretty...
And by the way, internationally, Russian tanks in 1968 went into Czechoslovakia.
I would say that was a bit more dangerous.
The country during the Cuban Missile Crisis was at DEFCON 2.
You know, by the way, the lower numbers are the more severe.
DEFCON 1 is nuclear war.
And we were at DEFCON 2.
So it's very bad that we're fighting a regional war in Iran.
We were at DEFCON 2 with the then Soviet Union stopping their ships in international waters on their way because of a blockade of Cuba.
I would say that was a more polarized time and more dangerous.
If our parents could get through that, we should get through this.
And I think knowing that, to me, and I think it should be everybody else, is knowing that something has been done.
should give people comfort that it could be done again.
And so every time is different, but this is not more extreme.
I totally agree.
I think range is going to be even more important now than ever.
And, you know, one of my, I've written about this, but it's sort of a, I don't know, life and maybe business philosophy too, is that opportunities live between fields of expertise.
Yeah.
You know, I like living at- And over the edge of cliffs.
Totally.
And over your horizon of what you could see about the future.
Totally.
And so learning, you know, look, when I was growing up, everybody wanted to learn.
You know, my predecessor, Hank Paulson, spent so much of his time, as did I, in going to China.
Well, at least temporarily.
We're not going to be making as many investments in China as we once did.
There's not none, but there's not going to be as much.
Or when I was growing up, everybody wanted to learn Japanese because those were the winners in the tech.
And I remember a time when Silicon Valley was Route 128 in Boston.
And there was no Silicon Valley.
It was around Harvard and MIT, not around Stanford.
So I would say things change.
And in order to be resilient, a better person.
And also, I hate to minimize this, for your own sake.
Learn humanities, learn history, learn those things.
And that's what you're...
You know, we're at a point now where most people who are young are going to live to be a high, you know, they're going to actually live longer and they seem to be in much more of a rush to be a, you know, to be, you know, a success in your kinds of enterprises.
And, you know, I don't, you know, some people will encourage it.
I don't think that your only productive years are when you're 18 through 24.
I totally agree.
And everyone will learn what you need for your career afterwards.
And I think it'd be, you know, my humble opinion, but again, this is way interesting.
You know, I'm an older guy.
No, I mean, it's back to kind of where we started the conversation.
You know, I don't personally believe people should drop out of school.
I learned so much from my peers.
It changed my life.
It changed my perspective of what's possible.
And yeah, I think it makes you a more well-rounded person too.
Look, here you are interviewing people from all different walks of life and not just, you know, not just, you know, not just tallying, you know, ones and zeros.
This was awesome.
Lloyd, thank you so much for joining.
I really appreciate it.
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