Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: We can cross over now to Turin, where, of course,
Speaker 2: are Tom McKenzie speaking to David Solomon the Interview of
Speaker 2: the Day here it.
Speaker 3: Is it's given the geopolitical strains given now as well
Speaker 3: the shutdown in the US. David, does the US economy
Speaker 3: weather the current political standoff in Washington and does that
Speaker 3: resilience that we've seen this year continue into twenty twenty six.
Speaker 4: Well, first, thank you for having me here. Delighted to
Speaker 4: be here. The US economy is in pretty good shape,
Speaker 4: and there are some very very strong tailwinds that have
Speaker 4: really had a profound effect. And there are also some
Speaker 4: things going on that are creating headwinds and are probably
Speaker 4: leading the economy to underperformance expectations this time. But I'm
Speaker 4: optimistic that we're probably going to see an acceleration as
Speaker 4: we continue to add into twenty twenty six. The big
Speaker 4: structural issue that's kept the US economy going so well
Speaker 4: as the US and by the way, other developed economies
Speaker 4: around the world are running very aggressive fiscal stimulus plays.
Speaker 4: Governments are spending enormously into economies in the developed world,
Speaker 4: and that keeps the economy going even when you have
Speaker 4: other headwinds. Second big macro phenomenon that's affecting the US
Speaker 4: economy is all of the AI infrastructure build, all the
Speaker 4: capital spending, all that's going into the ground to support
Speaker 4: the deployment, the development, the continued growth of AI infrastructure
Speaker 4: into the enterprise, and that's a big tail wind too.
Speaker 4: That's balanced on the other side by the implementation of
Speaker 4: the trade policies, which are still getting absorbed.
Speaker 5: I think we're seeing, you know, some of the.
Speaker 4: Effects from trade, but you know, there's still more to
Speaker 4: go in terms of really understanding how the trade policy
Speaker 4: is fully implemented and how it balances growth. And then
Speaker 4: obviously the world's a little bit more geopolitically fragile and
Speaker 4: that has an impact on growth and.
Speaker 5: You know, kind of confidence.
Speaker 4: But when you balance it all and you saw the
Speaker 4: third quarter reading was quite strong, but year over year
Speaker 4: from last December to this December, the overall growth trajectory
Speaker 4: it will probably be a little bit less than two percent,
Speaker 4: and so that's slightly below trend, but still in pretty
Speaker 4: good shape.
Speaker 1: And then the acceleration into twenty twenty seven.
Speaker 4: I think that as the trade policies are absorbed and
Speaker 4: you have the continued stimulus and the continued kind of
Speaker 4: tech spend, You've got a pretty good tailwind. You know,
Speaker 4: I hear as I talk to CEOs that would kind
Speaker 4: of have their finger on the pull. Certainly, the upper
Speaker 4: end of the economy is still spending quite strongly, a
Speaker 4: little bit more constraint on the downside on the you know,
Speaker 4: the lower part of the economy.
Speaker 5: But I think the things you have to watch. You
Speaker 5: have to watch labor.
Speaker 4: There's no question labor shorts is a little bit softer,
Speaker 4: and the FEDS watching labor carefully. And you know, I
Speaker 4: think you've also got to watch inflation and whether or
Speaker 4: not the impact of trade is just a one time
Speaker 4: price movement or there's something you know, more significantly comes
Speaker 4: through and it's too early to know.
Speaker 3: And you touched on labor, how would you character rise
Speaker 3: the health of the US job market right now?
Speaker 4: It's a little bit it's a little bit softer, And
Speaker 4: I think you can step back and you can understand
Speaker 4: why when you think about big enterprises and what's going
Speaker 4: on with technology, people are pausing hiring to really kind
Speaker 4: of evaluate how as they bring this technology into the
Speaker 4: enterprise they can automate, create efficiencies, reinvest and so you know,
Speaker 4: I think at the moment that slowed hiring and as
Speaker 4: a result, you know, the labor number is a little
Speaker 4: bit softer.
Speaker 3: The Federal Reserve interest rates for the first time this
Speaker 3: year in September last month. The markets are expecting another
Speaker 3: approximately four cuts between now and this time next year,
Speaker 3: another one percentage point of cuts, with inflation remaining above
Speaker 3: the target for the Fed.
Speaker 1: Does that seem reasonable to you?
Speaker 4: I think it's in the distribution of outcomes, you know.
Speaker 4: I think we'll have to watch. I know, there's a
Speaker 4: great parlor game of people kind of predicting what the
Speaker 4: world's going to look like six months, you know, twelve
Speaker 4: months out.
Speaker 5: If you think about what the world looked like.
Speaker 4: In April and where markets were in April and think
Speaker 4: about where they are today, you know.
Speaker 5: I'd just be cautious. I think that.
Speaker 4: I think that we've got competing forces between labor and
Speaker 4: inflation and how they balance, which is still a little
Speaker 4: bit uncertain. We'll have an impact on whether we get
Speaker 4: one more cut or we get, you know, two or
Speaker 4: three more cuts.
Speaker 3: Global stocks at record highs, US stocks at record hizs,
Speaker 3: the s and P five on. It is up about
Speaker 3: fifteen percent year today in Nvidia's market camp is around
Speaker 3: four and a half trillion dollars. That's more than the
Speaker 3: entire market camps of France, UK, Germany, Italy combined. Does
Speaker 3: the market rally? Does this bull market? Are you comfortable
Speaker 3: with this pool market? Given some of the concerns you flagged?
Speaker 5: Am I am I comfortable?
Speaker 1: You know? Yeah?
Speaker 5: Sleep, I sleep very well. I'm not I'm not going
Speaker 5: to bed every night and worried about what will happen next.
Speaker 4: But markets, market's running cycles, and whenever we've historically had
Speaker 4: a significant acceleration and a new technology that creates a
Speaker 4: lot of capital formation and therefore lots of interesting new
Speaker 4: companies around it, you generally see the market run ahead
Speaker 4: of the potential because they're going to be winners and losers.
Speaker 5: They're going to be winners and losers.
Speaker 4: If you go back and you think about the Internet,
Speaker 4: pick on Amazon. You know, Amazon was one of many
Speaker 4: companies that was prosecuting that kind of opportunity. Many of
Speaker 4: the companies went away. Amazon became an incredible company. You're
Speaker 4: going to see a similar phenomenon here. I wouldn't be
Speaker 4: surprised if in the next twelve to twenty four months
Speaker 4: we see a draw down with respect to you know,
Speaker 4: equity markets, but that shouldn't be surprising and given the
Speaker 4: run we've had. But generally speaking, I think what's super
Speaker 4: exciting is the technology is expanding.
Speaker 5: New companies are being formed.
Speaker 4: And the potential of this technology deployed into the enterprise
Speaker 4: can be very, very powerful, and so it's an exciting
Speaker 4: time and the market, you know, the market looks forward.
Speaker 3: What does that mean for deal making? You've seen a
Speaker 3: pickup in deal making, What is the scale of the
Speaker 3: pickup you expect to see and what are you seeing
Speaker 3: in Europe?
Speaker 4: The pickup and deal making broadly is meaningful, but it's
Speaker 4: particularly accel in the US.
Speaker 5: And what's driving the.
Speaker 4: Pickup and deal making is a changed regulatory environment. So
Speaker 4: if you were thinking strategically and you wanted to really
Speaker 4: expand your scale or your competitive position in almost any industry,
Speaker 4: for the last four years in the United States, the
Speaker 4: answer was no. From a regulatory perspective, it really wasn't.
Speaker 4: What's the question, what could the answer be? The answer
Speaker 4: is no, And I think CEOs at this point imagine
Speaker 4: they're an environment where you actually can get strategic transactions
Speaker 4: done to expand your competitive position.
Speaker 5: And so we obviously inside Gold and.
Speaker 4: Sachs, we have an early look at that activity in
Speaker 4: those dialogues, and I would say it's accelerated very significantly
Speaker 4: if you just look at the facts in terms of
Speaker 4: what's public. We've obviously had a very significant m ANDA quarter.
Speaker 4: We had a one trillion dollar m and A volume
Speaker 4: quarter this past quarter. And if you look at large
Speaker 4: cap m and A meaning m and A for companies
Speaker 4: that are ten million dollars are larger, it's up one
Speaker 4: hundred percent year over year. So there is real moment
Speaker 4: in the deal making environment. I think you're going to
Speaker 4: see an acceleration of that into twenty six for sure.
Speaker 4: And increasingly CEOs are testing what the bounds are of
Speaker 4: their ability to enhance their competitive position or improve their
Speaker 4: scale and their lead where they have a leading position
Speaker 4: in a variety of industries, and I think the regulatory
Speaker 4: environment is going to permit that at the moment.
Speaker 3: Okay, so it sounds like you're going to be very
Speaker 3: busy you in the team on deal making in twenty
Speaker 3: twenty six. What are your priorities David for Goldman and
Speaker 3: the franchise.
Speaker 1: Next year, well, we.
Speaker 4: Don't really think about it, you know, next year ach
Speaker 4: Our priorities always start with the way we face and
Speaker 4: serve our clients. But in twenty nineteen, twenty twenty, we
Speaker 4: late a strategic plan out for the firm and we've
Speaker 4: been executing against it for the last six or seven years.
Speaker 4: And as you highlighted earlier in the discussion, we've created
Speaker 4: a lot of value because we've grown the firm. At
Speaker 4: the end of the day, as a public company, we
Speaker 4: have to grow. We might be a big, mature public company,
Speaker 4: but we have to grow.
Speaker 5: We have to grow. We have to grow our earnings.
Speaker 4: And to do that, you know, you have to have
Speaker 4: a coaching plan where you're investing in different parts of
Speaker 4: the business. We have two big principal businesses, our investment
Speaker 4: banking and trading business. Who I think there's a little
Speaker 4: debate about our leadership position. It's an extraordinary business, very
Speaker 4: big business. We've been investing and adding more resources to
Speaker 4: that business over the last five six years. We've increased
Speaker 4: our market shares very meaningfully in that business. Our market
Speaker 4: shares are up about three hundred and fifty basis points
Speaker 4: over the last five years in that business, and then
Speaker 4: separately we have the fifth or sixth seventh, depending on
Speaker 4: how you look at it, largest active asset manager in
Speaker 4: the world. We manage about three point three three point
Speaker 4: four trillion dollars through our asset wealth management platform. That
Speaker 4: business is growing high single digits, is what we've put
Speaker 4: out publicly. It's actually been growing faster than that, and
Speaker 4: we continue to invest in a variety of aspects of
Speaker 4: that business where we see real growth. We can grow
Speaker 4: our wealth business, which is an ultra high net worth
Speaker 4: wealth business. We can continue to grow our alternatives platforms,
Speaker 4: private capital formation, and we have a very flexible solutions
Speaker 4: business where really for big institutional capital allocators, we have
Speaker 4: an ability to really create and customize what they need
Speaker 4: from an investment perspective.
Speaker 3: There's been a lot of discussion here at it Onian
Speaker 3: Tech Week about how to get globally significant generational businesses.
Speaker 3: Tech business is built out of Europe one hundred billion
Speaker 3: dollar plus.
Speaker 1: What is your prescription for that?
Speaker 4: I mean my prescription for that is savings in Europe
Speaker 4: and capital in Europe needs to come into the risk
Speaker 4: economy in Europe. You just don't have the scale and
Speaker 4: scope of the available savings here are getting deployed into
Speaker 4: the tech risk ecosystem at the pace that it should
Speaker 4: when you compare and you look to the way things
Speaker 4: are deployed in the United States, and in fact, one
Speaker 4: of the things that happens here is capital from here
Speaker 4: looks over there, and so there are enormously smart, talented people. Here,
Speaker 4: are lots of great ideas, capital formation, and a real
Speaker 4: focus on risk taking.
Speaker 5: Stuff's going to.
Speaker 4: Go right, Stuff's going to go wrong, but you've got
Speaker 4: to take risk, You've got to deploy capital. This really
Speaker 4: has to become a bigger center of capital deploy And also,
Speaker 4: the more we can get the European Union to be
Speaker 4: operating as an economic union and taking advantage of the
Speaker 4: four hundred plus million people that are here as opposed
Speaker 4: to the individual states, for lack of a better term,
Speaker 4: the more we can get the tech economy working that way,
Speaker 4: I think, the better chance we have of reaching your goal,
Speaker 4: which I think would be a very noble goal for
Speaker 4: the world. So I mean, the more the more innovation
Speaker 4: over here, the better for the world.
Speaker 1: So us to live on the line will be here.
Speaker 3: So your one message to the European Commission president would
Speaker 3: be centralizing or capital most certainly the urgency.
Speaker 4: I you know, I'm feeling more urgency when I'm over here.
Speaker 4: But still, you know, the regulatory process in Europe is slow.
Speaker 4: Capital markets Union for sure, you know, more encouragement of
Speaker 4: risk taking in capital markets, trying to bring it all together.
Speaker 4: Consolidation in the banking system instead of national champions in
Speaker 4: every market, consolidation and the exchange system instead of champions
Speaker 4: in every market. You know, those are all things that
Speaker 4: will make capital formation easier, risk capital formation better, and
Speaker 4: will allow the acceleration of great companies here in these markets.
Speaker 1: You have lennin to tech and into AI.
Speaker 3: Your team at tell them you have twelve thousand engineers
Speaker 3: across Goldman Sachs. You have an AI the Golden SACS
Speaker 3: AI assistant, you have an AI developer. What parts of
Speaker 3: the business, and you've talked about some of them, whether
Speaker 3: it's well for asset management or trading or the consumer.
Speaker 3: What parts of the business at Goldman are going to
Speaker 3: be most transformed by AI?
Speaker 4: Well, I think you know the business of work is
Speaker 4: getting transformed by AI broadly.
Speaker 5: And you know we are at our HeartWare professional services firm.
Speaker 4: If you think about Goldman Sachs and the value it
Speaker 4: brings to its clients, its value is deployed really among
Speaker 4: three different things. People, capital, technology, and so if you
Speaker 4: think about AI, you know, AI really allows smart, talented, driven,
Speaker 4: sophisticated people to be more productive, to touch more people
Speaker 4: that have better information. Is they're dismall better analysis. I mean,
Speaker 4: this is a journey we've been on. You know, this
Speaker 4: technology accelerates it. But when I started forty two years
Speaker 4: ago and I wanted to look at five different companies
Speaker 4: and think about how to compare the trading in five
Speaker 4: different companies, I had to go to the library, I
Speaker 4: had to go.
Speaker 5: To the microfiche.
Speaker 4: I'd spend hours really thinking about how to put that
Speaker 4: comparison together. Obviously, today you can do it in a
Speaker 4: fraction of a second speaking into your phone. So this
Speaker 4: journey and providing tools to super super productive people and
Speaker 4: giving them more capacity to serve their clients and to
Speaker 4: be more productive is obvious. And we've been working on
Speaker 4: all those tools as most enterprises have. I think the
Speaker 4: more interesting thing for enterprises broadly, and this isn't unique
Speaker 4: to gold and Sachs, because the world is underpinned by technology.
Speaker 4: Coding is time consuming, but this technology allows you to
Speaker 4: code with greater productivity and efficiency. So one great coder
Speaker 4: now with a tool such as cognition labs Denim Devin
Speaker 4: for example, you know, really creates massive coding capacity for
Speaker 4: one coder as opposed to you know, having ten twenty
Speaker 4: people sit around for a few days. So big productivity there.
Speaker 4: And then, of course, when you think about operational systems
Speaker 4: in any business, the ability to accelerate automation and therefore
Speaker 4: drive more productivity, it's not just a cost exercise. It's
Speaker 4: actually about taking that productivity and having more capacity to
Speaker 4: reinvest in growth in your business. We'll spend you know,
Speaker 4: six million dollars on technology this year. I would have
Speaker 4: liked to spend eight, but I can't afford it because
Speaker 4: I've got to deliver returns. But with this technology, my
Speaker 4: ability to spend more and invest more in growth and
Speaker 4: accelerate things that can grow our enterprise, it's more available.
Speaker 1: To us five ten years time. Fewer jobs in banking
Speaker 1: as a result of ailing.
Speaker 5: I don't think that's the right lens.
Speaker 4: I think there are places where the number of jobs,
Speaker 4: the actual jobs will come down.
Speaker 5: But the way the lens. I look at it is.
Speaker 4: You know, I think we can continue to grow Goldman Sachs,
Speaker 4: I think we can continue to serve a wider slice
Speaker 4: of clients with these tools and these capabilities being integrated
Speaker 4: into the firm, changing our processes the question, you know,
Speaker 4: the way I would answer the question. If the firm
Speaker 4: was the same size and it didn't grow, we would
Speaker 4: certainly be operating with fewer people. But if the firm
Speaker 4: grows and you expand and you can invest in other
Speaker 4: areas for growth, we'll wind up with more jobs ten
Speaker 4: years from now than we have today, just as by
Speaker 4: the way we have in every step along the journey
Speaker 4: for the last forty years, as technology has made us
Speaker 4: more productive, I don't think it's different this time.
Speaker 1: So you thought, just be clear. You foresee more headcount
Speaker 1: at five ten times.
Speaker 5: That's because I think we're going to be running a
Speaker 5: much bigger enterprise.
Speaker 3: Gay, do you worry about that there'd been something There's
Speaker 3: been some hand ringing in terms of the investment we'
Speaker 3: seen the hyperscoale. There's three hundred and fifty billion dollars
Speaker 3: in terms of capex and data centres and infrastructure, and
Speaker 3: the concern that the returnal investment isn't being matched, that's
Speaker 3: not matching the revenue on the other side. Does that
Speaker 3: concern you, that mismatch or sure it.
Speaker 4: You know it serve it concerns anybody that's deploying capital.
Speaker 4: But I think I think the journey is pretty clear,
Speaker 4: even though you know, we're at the beginning of the movie,
Speaker 4: at the end of the movie, I guarantee you at
Speaker 4: the end of the movie, there'll be a bunch of
Speaker 4: winners and there'll be a bunch of losers.
Speaker 5: There'll be a bunch of capital that was.
Speaker 4: Deployed that ultimately delivered very attractive returns, and there'll be
Speaker 4: a lot of capital that was deployed that did not
Speaker 4: deliver returns. And you can go back in any super
Speaker 4: tech cycle or any big investment cycle, and that is
Speaker 4: the pattern you'll see. It's not again, it's not different
Speaker 4: this time. We just don't know how that will play out.
Speaker 4: But it's very exciting to see these technologies get deployed
Speaker 4: and the impact that's going to have. It just allows
Speaker 4: productive people and productive businesses to be even more productive.
Speaker 4: And so people get very caught in this question of
Speaker 4: more or less. And you know, I prefer.
Speaker 5: A lensis is. There are obviously things where we're gonna have.
Speaker 4: A lot fewer people, but I'd love to have the
Speaker 4: capacity to go get more people to spend time with clients.
Speaker 4: I've loved to have the capacity to invest in new
Speaker 4: businesses where I think we can affect clients, and we
Speaker 4: need people to do those things. So it's it's a
Speaker 4: give and take, and nobody stands still.
Speaker 1: To be clear, you're not worried about an AI bubble.
Speaker 5: You know an AI bubble.
Speaker 4: I I think that there will be a lot of
Speaker 4: capital that's deployed that will turn out to not deliver returns.
Speaker 4: And when that happens, okay, people won't feel good. Okay
Speaker 4: if if you know, I don't, I'm not gonna use
Speaker 4: the word bubble because I don't know.
Speaker 5: I don't know what the path will be.
Speaker 4: But I do know people are out on the risk
Speaker 4: curve because they're excited, and when they're excited, they tend
Speaker 4: to think about the good things that can go right,
Speaker 4: and they diminish the things you should be skeptical about
Speaker 4: that can go wrong. We're in one of those environments
Speaker 4: where people out on the risk curve and they'll be
Speaker 4: a there'll be a reset, they'll be a they'll be
Speaker 4: a there'll be a check.
Speaker 5: At some point, there'll be a draw down.
Speaker 4: The extent to that will depend on how long this goes.
Speaker 4: By the way, if you were if we were having
Speaker 4: this conversation in nineteen eighty eight, you would have been
Speaker 4: asking the same nineteen ninety eight, you would have been.
Speaker 5: Asking the same question.
Speaker 4: Yet the environment went on for another three years until
Speaker 4: there was not a significant check in two thousand and
Speaker 4: one and two thousand and two. So I'm not smart
Speaker 4: enough to know. I think it's going to go on
Speaker 4: for a while. I think the opportunities are great. I
Speaker 4: think they're very exciting, but I also see complacency.
Speaker 5: Around risk take.
Speaker 4: Even when that happens, ultimately there'll be some speed bumpser
Speaker 4: some drawdowns.
Speaker 3: David Solomon, chairman and CEO of Goldman Sachs, thank you
Speaker 3: so much.
Speaker 5: Thank you.
Speaker 1: I'm texting.
Speaker 5: Appreciate it.
Speaker 1: Thank you, Davis, thank you, appreciate it.
Speaker 5: See you looking.
Speaker 2: What a wonderful conversation. Also with I have to say
Speaker 2: a spitting sets not something that you see every day,
Speaker 2: Tommy Kenzie. They're speaking with our golden well, the golden Sacks,
Speaker 2: chief executive of Solomon at Time Tech Week. They talked
Speaker 2: about the FED, they talked about tech and some of
Speaker 2: of course, the things that we should be watching out for.