WEBVTT - Gary Cohn Says Fed Should Be Done Raising Rates 0:00:02.040 --> 0:00:09.600 This is Master's in Business with Barry Ridholds on Bloomberg Radio. 0:00:09.400 --> 0:00:12.960 This week on the podcast what Can I Say? Gary 0:00:13.080 --> 0:00:17.799 Cohne with just a stellar career at Goldman Sachs, where 0:00:17.840 --> 0:00:22.600 he spent twenty five years, rising through the ranks commodities, 0:00:22.640 --> 0:00:29.000 trading fixed income currency, eventually running equity and soon after 0:00:29.200 --> 0:00:34.960 becoming president and chief operating officer at Goldman. Soon after, 0:00:35.200 --> 0:00:38.680 he's tapped by the White House to become Director of 0:00:38.800 --> 0:00:44.320 the National Economic Council and Chief Economic Advisor to President 0:00:44.360 --> 0:00:48.360 Trump starting at the beginning of the administration in twenty seventeen. 0:00:49.000 --> 0:00:53.960 Really a fascinating career, a really really interesting person. We 0:00:54.080 --> 0:00:57.520 dive deep into all sorts of things about running businesses, 0:00:58.000 --> 0:01:01.960 managing risk, and then when we began talking about his 0:01:02.400 --> 0:01:06.880 public sector service, we went deep into the Tax Cuts 0:01:06.920 --> 0:01:10.080 and Job Act of twenty seventeen. If you're at all 0:01:10.160 --> 0:01:12.760 interested in that, you will find this to be an 0:01:12.800 --> 0:01:18.760 absolutely masterclass in how legislation is assembled, how it shepherded 0:01:18.800 --> 0:01:21.479 through the House, through the Senate, through all the competing 0:01:22.160 --> 0:01:26.000 interest groups. I found this discussion just really to be 0:01:26.800 --> 0:01:31.360 absolutely fascinating, and I'm positive you will also, with no 0:01:31.480 --> 0:01:36.080 further ado from the White House and Goldman Sachs, Gary 0:01:36.160 --> 0:01:37.280 cohne Berry. 0:01:37.319 --> 0:01:39.480 It's great to be here, it's great to have you. 0:01:39.560 --> 0:01:42.200 So let's start out talking a little bit about your 0:01:42.200 --> 0:01:44.760 background in your career. I never would have guessed you 0:01:44.840 --> 0:01:48.440 began at US Steel. Tell us when was that and 0:01:48.520 --> 0:01:49.280 what'd you do there? 0:01:50.080 --> 0:01:53.240 So it was a very short career at US Steel. 0:01:54.400 --> 0:01:57.600 So you know, I graduated college in eighty two and 0:01:57.920 --> 0:02:00.400 I thought it was going to take a few months 0:02:00.400 --> 0:02:03.800 off and regroup. And my dad didn't think that was 0:02:03.880 --> 0:02:07.360 part of the agenda. So he woke me up my 0:02:07.400 --> 0:02:10.080 first Monday morning home at six am through the lights on, 0:02:10.160 --> 0:02:11.280 asked me what I was going to do with the 0:02:11.280 --> 0:02:13.600 rest of my life, and I think I made some 0:02:13.680 --> 0:02:17.400 wise crack and he's a few weeks I think I 0:02:17.440 --> 0:02:19.640 told him. I said, I think I told him, you're 0:02:19.680 --> 0:02:23.120 looking at it, and he said, yeah, not in my house. 0:02:23.840 --> 0:02:28.000 So I went out and tried to find a job locally. 0:02:28.200 --> 0:02:31.200 This is when I was still living in Cleveland, and 0:02:31.240 --> 0:02:34.960 I got a job with the home building Products division 0:02:35.200 --> 0:02:38.360 of United States Steel, which was a company the United 0:02:38.360 --> 0:02:41.480 States Steel had acquired in Cleveland called all Side. They 0:02:41.520 --> 0:02:47.919 sold replacement windows, vinyl siding, aluminum siding, gut her coil, 0:02:48.120 --> 0:02:52.560 things like that. I ended up starting there in the 0:02:52.600 --> 0:02:55.760 summer of eighty two, and by the fall of eighty 0:02:55.800 --> 0:02:58.960 two I was gone. Now, there was one really important 0:02:58.960 --> 0:03:03.320 part of that. As part of my job training, I 0:03:03.480 --> 0:03:06.359 was sent to the big sales offices to learn how 0:03:06.360 --> 0:03:09.320 the product was sold. One of the big sales offices 0:03:09.360 --> 0:03:11.960 was out in Long Island and Garden City. And so 0:03:12.160 --> 0:03:15.040 in my second week in the sales office and Garden City, 0:03:15.120 --> 0:03:17.359 I said to the gentleman I was working with, I said, 0:03:17.360 --> 0:03:19.720 you know, I think we're gonna work really hard Monday 0:03:19.760 --> 0:03:22.560 to Thursday, and I'm going to go in the city Friday. 0:03:23.000 --> 0:03:25.440 And he said, that's a really good idea. So I 0:03:25.480 --> 0:03:28.280 went in the city on Friday, and that's how I 0:03:28.320 --> 0:03:31.359 found my way down to the commodities exchange, the commodities floor, 0:03:31.880 --> 0:03:33.639 and that's where I got my job, and that's how 0:03:33.639 --> 0:03:35.880 I turned my career into a financial career. 0:03:35.920 --> 0:03:39.680 So I had a wildly incorrect assumption. I just pictured 0:03:39.720 --> 0:03:44.440 you working with the various input commodities to steal iron 0:03:44.520 --> 0:03:49.120 plus energy, plus manganese, nickel, chromium, carbon vanding, all those things, 0:03:49.160 --> 0:03:52.000 and said, hey, I could move to the commodities exchange 0:03:52.040 --> 0:03:55.880 and make a killing trading. Nothing like that, Nothing like that. 0:03:55.920 --> 0:03:57.960 How did you find your way to the comas? 0:03:58.320 --> 0:04:01.680 So two years earlier, and now we're going back in 0:04:01.760 --> 0:04:04.960 time the summer of eighty for those of you that 0:04:05.080 --> 0:04:07.960 remember the summer of eighty the Hunt brothers at that 0:04:08.040 --> 0:04:11.320 point where were exactly we're trying to corner the gold 0:04:11.320 --> 0:04:15.240 and silver market. I was doing an internship at a 0:04:15.360 --> 0:04:18.359 local brokerage office in Cleveland, Ohio, and I did the 0:04:18.360 --> 0:04:20.599 typical internship, you know, a week in the back office, 0:04:20.600 --> 0:04:22.680 a week in equities, a week in fixed income and 0:04:22.760 --> 0:04:26.320 weekend commodities, a week in bonds, and then four weeks 0:04:26.320 --> 0:04:29.800 wherever you'd like to go. And of course where I 0:04:29.800 --> 0:04:31.799 would like to go is where the guys are screaming 0:04:31.839 --> 0:04:34.760 and yelling in the back corner, which were the commodity guys. 0:04:35.240 --> 0:04:38.160 So I ended up being allowed to go sit with 0:04:38.160 --> 0:04:40.840 the commodity guys. And at the time they were doing 0:04:41.080 --> 0:04:45.919 the Chicago New York gold arbitrage, they had set up 0:04:45.920 --> 0:04:47.279 a gold arbitrage. 0:04:46.839 --> 0:04:51.120 Desk, meaning that the slight difference in prices between the 0:04:51.120 --> 0:04:54.760 two exchanges, they would help bring them into line and 0:04:54.800 --> 0:04:57.120 maybe pocket a few cents exactly. 0:04:57.440 --> 0:04:59.960 And at the time they weren't slight differences. Oh really, 0:05:00.160 --> 0:05:04.240 because the Hunt brothers when they came into the comex 0:05:04.320 --> 0:05:07.040 at the time, they were only buying one market. They 0:05:07.040 --> 0:05:09.760 were buying the Comex market. So the Comex market would move, 0:05:09.920 --> 0:05:13.200 you know, ten twenty thirty dollars, and the Chicago market 0:05:13.240 --> 0:05:17.599 would lag dramatically behind. Wow. So there were these five 0:05:17.920 --> 0:05:21.840 plus dollar disparities in the price of gold, and so 0:05:21.880 --> 0:05:24.640 they would sit there and trade. And so after a 0:05:24.680 --> 0:05:26.880 week there, I said to the guys on desk, hey, 0:05:27.000 --> 0:05:29.000 can I open an account and do this? And they said, hey, 0:05:29.040 --> 0:05:31.799 you know, how hard could it be? Yeah, You're allowed 0:05:31.800 --> 0:05:33.680 to open an account. So I opened an account and I 0:05:33.720 --> 0:05:37.680 sat there and I traded the the New York Chicago 0:05:37.760 --> 0:05:40.320 gold arbitrage for the next sort of close to month, 0:05:40.839 --> 0:05:42.760 and I said, Wow, this is the most amazing thing 0:05:42.800 --> 0:05:44.799 I've ever seen. They're just giving away free money. 0:05:45.000 --> 0:05:46.080 You were making cash in that. 0:05:46.320 --> 0:05:48.760 I was making cash while I was sitting there. So 0:05:49.360 --> 0:05:53.080 I decided a point. I said, oh, I got to 0:05:53.360 --> 0:05:56.000 go to the floor of the exchange. This is really interesting. 0:05:56.080 --> 0:05:59.800 This is a really interesting opportunity. And I really did 0:05:59.839 --> 0:06:01.720 not want to go back to college. You know. I 0:06:01.800 --> 0:06:05.240 had a long discussion with my dad. You know, I said, Dad, 0:06:05.240 --> 0:06:07.000 this is silly that I go back to college. There's 0:06:07.040 --> 0:06:09.240 this unique opportunity. I don't know how long it's going 0:06:09.320 --> 0:06:11.920 to last, and I'm going to sit here and trade 0:06:12.000 --> 0:06:14.880 this this gold arbitrage. And he said, no, no, you're 0:06:14.920 --> 0:06:17.360 going back to college. I don't care what you do. 0:06:17.480 --> 0:06:20.039 So I did the best thing I could do. I 0:06:20.120 --> 0:06:22.039 went back and did my next three years of school 0:06:22.080 --> 0:06:25.200 in two years. And then I got myself to the 0:06:25.200 --> 0:06:28.080 floor of the exchange by the end of eighty two. 0:06:28.720 --> 0:06:30.480 And then what were you doing on the What were 0:06:30.480 --> 0:06:32.760 you trading on the floor and how did you stay? Long? 0:06:32.800 --> 0:06:34.839 Did you stay as a floor trader? 0:06:35.000 --> 0:06:39.039 So in many respects, I got lucky in my first 0:06:39.160 --> 0:06:43.640 job offer because the COMEX had just started to trade 0:06:43.760 --> 0:06:47.359 options on futures. It was brand new. No one on 0:06:47.400 --> 0:06:50.760 the floor knew the options market. So one of the 0:06:50.839 --> 0:06:53.919 large firms there approached me and said, hey, do you 0:06:54.040 --> 0:06:57.839 know anything about options? Can you help us trade options? 0:06:58.480 --> 0:07:01.840 And I said, of course, even though I knew nothing about. 0:07:01.600 --> 0:07:04.719 Oppos but nobody knew anything about options on futures. They're 0:07:04.760 --> 0:07:05.800 brand spanking new. 0:07:05.800 --> 0:07:08.120 Right, no one had trade him on the floor. There 0:07:08.120 --> 0:07:11.560 were no option traders there. The big option trading firms 0:07:11.600 --> 0:07:14.120 from the other option trading exchange hadn't come down to 0:07:14.160 --> 0:07:17.239 the floor, They hadn't become members, they hadn't rented seats, 0:07:17.400 --> 0:07:21.000 so it was there was no real knowledge there. So literally, 0:07:21.040 --> 0:07:24.640 in the course of five days, I went out and 0:07:25.120 --> 0:07:29.000 tried to learn how to trade options, and I got 0:07:29.120 --> 0:07:31.560 lucky enough to get a job. I stood behind one 0:07:31.600 --> 0:07:33.920 of the brokers for one of large firms and I 0:07:34.000 --> 0:07:36.800 was literally saying, Okay, buy that call, sell that put, 0:07:36.840 --> 0:07:39.360 go sell those futures, and he goes, what I do? Well, 0:07:39.400 --> 0:07:41.800 you locked in, you know, four dollars an ounce. He goes, 0:07:42.040 --> 0:07:43.600 how'd I do that? I said, well, here's how you 0:07:43.640 --> 0:07:45.400 do that. How do I get out of it? I said, okay, 0:07:45.400 --> 0:07:46.560 we're going to work our way out of it. And 0:07:46.920 --> 0:07:50.880 I stood behind that person for the better part of 0:07:50.920 --> 0:07:54.080 a year. And then after a year, you know, I said, 0:07:54.080 --> 0:07:55.960 this is kind of silly. I'm sitting here telling this 0:07:56.040 --> 0:07:58.280 guy what to do. I got to figure out how 0:07:58.320 --> 0:08:00.840 to get my own seat and trade my own account. 0:08:00.920 --> 0:08:03.679 And so about a year into my experience on the floor, 0:08:03.720 --> 0:08:05.520 I went out and got a seat on the floor 0:08:05.520 --> 0:08:06.120 of the COMEX. 0:08:06.440 --> 0:08:08.000 Do you remember what they cost back then? 0:08:08.320 --> 0:08:09.760 About one hundred and fifty thousand. 0:08:10.760 --> 0:08:12.480 It was a real money. 0:08:12.680 --> 0:08:14.320 It was abstantial amount of mine. Now the good news 0:08:14.360 --> 0:08:15.960 is you could lease them. You could lease seats on 0:08:16.040 --> 0:08:19.480 a monthly basis. So I went and got a floor, 0:08:19.560 --> 0:08:22.600 and I opened up an account with a clearing member. 0:08:22.720 --> 0:08:25.840 When the clearing member guarantees your trades, and I started 0:08:25.840 --> 0:08:28.280 trading for my own account. And so I traded my 0:08:28.320 --> 0:08:30.680 own account from sort of the end of eighty three 0:08:31.520 --> 0:08:33.920 on till I left the floor in the exchange. 0:08:34.240 --> 0:08:35.400 And that was how much later. 0:08:36.000 --> 0:08:40.720 So I stayed on the floor till till basically nineteen ninety, 0:08:41.360 --> 0:08:44.760 and you know, ended up moving from trading options to 0:08:44.880 --> 0:08:47.880 trading more and more futures. You know, the futures markets 0:08:47.920 --> 0:08:51.679 were expanding, they were growing. It was an interesting time. 0:08:52.720 --> 0:08:54.920 But I, you know, I would trade almost anything that 0:08:55.040 --> 0:08:58.280 was bold all that day. And it was really an 0:08:58.400 --> 0:09:02.840 interesting experience learning how a fundamental terminal market works. 0:09:03.000 --> 0:09:06.160 So I'm glad you mentioned you shifted somewhat from options 0:09:06.160 --> 0:09:10.480 to futures options. Your risk is predefined. However much you're 0:09:10.480 --> 0:09:12.479 putting up, that's as much you can lose. 0:09:12.360 --> 0:09:14.600 Well unless you sell a naked call. 0:09:14.600 --> 0:09:15.760 Okay, fair enough. 0:09:15.640 --> 0:09:17.640 You sell a naked call, you right, it's no. 0:09:18.200 --> 0:09:21.559 But inherently in futures, a whole lot more leverage, a 0:09:21.600 --> 0:09:26.280 whole lot more risk. How fundamental was that to your 0:09:26.880 --> 0:09:31.200 learning about investing, trading, risk management starting with futures? 0:09:31.600 --> 0:09:36.240 So it was important where I found a real niche 0:09:36.280 --> 0:09:38.559 on the floor, and everyone finds their little niche on 0:09:38.600 --> 0:09:41.920 the floor, and being on the floor is an interesting 0:09:42.240 --> 0:09:46.400 environment because everyone's there for their own little specific reason. 0:09:49.000 --> 0:09:52.480 And where I found the niche is at that time, 0:09:52.840 --> 0:09:56.520 because things have changed dramatically. You know, the Futures Exchange 0:09:56.600 --> 0:10:01.400 is listed about twenty four months of future contracts. You know, 0:10:01.720 --> 0:10:05.720 the first and second delivery months traded ninety percent of 0:10:05.720 --> 0:10:08.680 the volume. But then you had people that wanted to 0:10:08.720 --> 0:10:10.960 trade the outdated months. You know, they wanted to trade 0:10:10.960 --> 0:10:14.920 the one year forward or the eighteen month forward. Where 0:10:15.080 --> 0:10:18.640 I really specialized, where I spent my time is figuring 0:10:18.640 --> 0:10:21.080 out how to price the one year forward or the 0:10:21.160 --> 0:10:26.679 eighteen month forward and making prices in those markets. There 0:10:26.679 --> 0:10:28.559 were only two or three of us on the floor 0:10:28.600 --> 0:10:31.800 that did that. So when any of the orders came 0:10:31.840 --> 0:10:35.360 in to buy the non active months. There were only 0:10:35.400 --> 0:10:36.760 two or three of us that would make a price, 0:10:37.240 --> 0:10:40.280 and so I carved out a unique opportunity with some 0:10:40.360 --> 0:10:42.160 other people. I wasn't the only one doing it on 0:10:42.200 --> 0:10:44.839 the floor, and it was a unique opportunity to really 0:10:45.000 --> 0:10:48.640 learn more of the fundamentals of the business. It also 0:10:48.800 --> 0:10:52.960 brought in your interest rates and interest rates expect because 0:10:53.040 --> 0:10:54.839 the forward curve is a function of interest rate. 0:10:55.120 --> 0:10:56.400 A lot of math in your head I'm doing. 0:10:56.880 --> 0:10:58.880 I'm doing an awful lot of math in my head 0:10:58.960 --> 0:11:02.760 on the fly. And to hedge your position, you know, 0:11:03.040 --> 0:11:06.120 how do you hedge you know, a long dated future 0:11:06.200 --> 0:11:08.520 versus a short data future. It's not one to one. 0:11:08.960 --> 0:11:12.120 There's mathematical formulas on how to hedge your book and 0:11:12.240 --> 0:11:15.120 count your months of exposure and look at your interest 0:11:15.160 --> 0:11:17.920 rate exposure, look at your underlying exposure, look at your 0:11:17.960 --> 0:11:21.360 present value of your future cash flows. It becomes much 0:11:21.360 --> 0:11:23.959 more interesting than just trading the spot month in and out. 0:11:24.120 --> 0:11:27.320 So that's where I really learned how to trade and 0:11:27.360 --> 0:11:30.000 how to think about cash flows and think about supply demand. 0:11:30.520 --> 0:11:34.360 It's a fairly obvious transition from the floor of the 0:11:34.400 --> 0:11:39.560 Comax to Goldman Sachs. How did you meet Goldman? How 0:11:39.600 --> 0:11:41.360 did that next step come about? 0:11:41.679 --> 0:11:43.600 So by the time I was sort of at the 0:11:43.720 --> 0:11:48.040 end of my career in eighty eighty nine ninety, you know, 0:11:48.080 --> 0:11:51.000 I'd become a fairly large trader on the floor. And 0:11:51.240 --> 0:11:53.840 when you're a fairly large trader on the floor, that 0:11:53.920 --> 0:11:58.839 means you're taking the other side of the institutional business flow. 0:12:00.000 --> 0:12:03.160 Titutional business flow at the time was probably the biggest 0:12:03.280 --> 0:12:06.760 player was Goldman, Sachs. It was Jay Aaron Goldman, Sachs, 0:12:07.720 --> 0:12:11.559 Morgan Stanley, a little bit of Aig, a little bit 0:12:11.559 --> 0:12:14.480 of JP Morgan, you know, and then a bunch of 0:12:14.520 --> 0:12:19.480 the funds. So I knew all of the Goldman traders 0:12:19.480 --> 0:12:22.480 because when they came in to move volume, I was 0:12:22.559 --> 0:12:26.280 there to make prices, and so we had a you know, 0:12:26.280 --> 0:12:28.320 we had a good relationship with each other. 0:12:28.520 --> 0:12:30.360 I'm going to assume you weren't taking the other side 0:12:30.400 --> 0:12:32.120 of the trade all that often with them, or. 0:12:32.200 --> 0:12:33.679 Oh I was taking the other side of trade all 0:12:33.679 --> 0:12:36.959 the time. Oh really, But remember we had completely different 0:12:37.040 --> 0:12:40.640 things we were trying to accomplish. Goldman had clients on 0:12:40.679 --> 0:12:43.280 the other side. They were trying to make their clients 0:12:43.880 --> 0:12:46.080 price and get hedged, and they were going to walk 0:12:46.120 --> 0:12:48.760 away from the trade. I was making a price and 0:12:48.800 --> 0:12:50.439 I may be out of it in thirty seconds or 0:12:50.480 --> 0:12:53.400 forty seconds or fifty seconds. I was trying to figure out, 0:12:53.520 --> 0:12:55.880 you know, what was the price I needed for the 0:12:55.880 --> 0:13:00.000 next five minutes to clear the volume and move it around. 0:13:00.960 --> 0:13:04.160 And if I traded something, where can I move it? 0:13:04.200 --> 0:13:07.120 What can I what can I buy or sell against it? 0:13:07.200 --> 0:13:12.040 To make myself is risk reducing as possible. So we 0:13:12.120 --> 0:13:15.120 had different motives, and so I was able to do 0:13:15.240 --> 0:13:17.679 my job. They were able to do their job. And 0:13:17.720 --> 0:13:20.640 that's what a terminal market does. It allows the different 0:13:21.960 --> 0:13:24.959 factors or the different people trying to get done what 0:13:25.000 --> 0:13:28.000 they need to get done, a place to meet. And 0:13:28.040 --> 0:13:31.840 so I had become closer and closer to the Goldman's 0:13:31.880 --> 0:13:34.439 acts people. I'd become closer to the AIG people. I'd 0:13:34.440 --> 0:13:38.760 become close to everyone. And in nineteen ninety Goldman had 0:13:38.800 --> 0:13:43.040 partner elections and the gentleman who was running the metals 0:13:43.080 --> 0:13:45.959 trading desk, you know, called me in the office one 0:13:46.000 --> 0:13:47.120 day and I just thought we were going to have 0:13:47.160 --> 0:13:49.520 a conversation about the markets. And you know what I 0:13:49.600 --> 0:13:52.240 was thinking, what he was thinking, and he said to me, 0:13:52.360 --> 0:13:54.760 he said, hey, look, you know I just became partner here. 0:13:54.880 --> 0:13:57.760 I think there's a great opportunity. I'm going to really 0:13:57.800 --> 0:14:00.360 continue to build this business. And instead of you taking 0:14:00.360 --> 0:14:02.120 the other side of our business all day long and 0:14:02.160 --> 0:14:03.920 fighting with us, why don't you come up here and 0:14:04.000 --> 0:14:07.000 join us. At the time, it was the farthest thing 0:14:07.040 --> 0:14:10.720 from my mind. But the more I thought about it, 0:14:10.760 --> 0:14:12.800 and the more I saw the trends of what was 0:14:12.840 --> 0:14:15.400 going on in the industry, and the industry had changed 0:14:15.440 --> 0:14:18.440 quite dramatically over the prior five years. It had gone 0:14:18.480 --> 0:14:24.320 from a fairly heavy retail business to a very institutional business. 0:14:24.360 --> 0:14:27.880 No individual was really trading commodity features. If you wanted 0:14:27.880 --> 0:14:30.520 that exposure, you were giving your money to a professional, 0:14:30.680 --> 0:14:34.120 a commodity trading advisor, or some hedge fund. So it 0:14:34.160 --> 0:14:36.640 was becoming very institutionalized. So it was harder and harder 0:14:36.680 --> 0:14:38.280 to make money, or I was taking more and more 0:14:38.360 --> 0:14:40.840 risk to make the same amount of money. So when 0:14:41.720 --> 0:14:44.520 this individual, Jim Riley, came to me, I said, you know, 0:14:44.640 --> 0:14:47.200 this is not the craziest thing I've ever heard of, 0:14:47.240 --> 0:14:50.560 And he and I came to an agreement that I 0:14:50.600 --> 0:14:52.960 could keep my seat. If I ever wanted to go back, 0:14:53.040 --> 0:14:55.720 I could do a few things to make sure that 0:14:55.760 --> 0:14:58.800 if the transition upstairs from the floor environment to the 0:14:58.840 --> 0:15:01.640 trading desk environment, that I felt like I had a 0:15:01.640 --> 0:15:04.320 safety net. Well, I never really needed that safety net, 0:15:04.320 --> 0:15:05.880 but it was nice to have that safety net. 0:15:05.960 --> 0:15:10.120 Huh. Really quite fascinating. You then spend what the next 0:15:10.160 --> 0:15:14.560 twenty five years at Goldman Sachs. You rose through the ranks, 0:15:14.640 --> 0:15:20.720 eventually becoming president and COO. Pretty good decision leaving the 0:15:20.720 --> 0:15:21.760 floor of the comments. 0:15:21.560 --> 0:15:24.480 I think was one of my great decisions in life, really, 0:15:24.880 --> 0:15:27.840 besides getting married and a few other things. I can't 0:15:27.840 --> 0:15:30.240 really just tell you what other better decisions. 0:15:30.320 --> 0:15:33.920 So you run commodities for a while at Goldman? What 0:15:34.040 --> 0:15:36.920 was that like? And do you still like, look at 0:15:36.920 --> 0:15:39.600 what's going on today and energy when you look around, 0:15:39.680 --> 0:15:41.800 do you get that itch? Do you feel like I 0:15:41.840 --> 0:15:43.400 want to I want to I want to do some 0:15:43.440 --> 0:15:45.200 futures trading or yeah. 0:15:45.600 --> 0:15:48.640 Look, once a commodities trader, always a commodity trader. So 0:15:48.720 --> 0:15:52.920 I look at prices and commodities every day, and I 0:15:53.040 --> 0:15:57.200 have views on the markets every day. I don't know 0:15:57.240 --> 0:16:01.040 if they're sophisticated enough that I would trade future, but 0:16:01.320 --> 0:16:05.080 you know, trading underlying equities and trading you know, equities 0:16:05.080 --> 0:16:09.680 that have high correlation to commodities is something I'm comfortable with. 0:16:11.120 --> 0:16:13.760 It was a unique opportunity at the time because if 0:16:13.800 --> 0:16:17.880 you go back to that early nineties period, you know, 0:16:17.920 --> 0:16:20.840 commodities were somewhat in a bull market. It was a 0:16:20.920 --> 0:16:23.120 it was a pretty bull market environment, and you know, 0:16:23.160 --> 0:16:25.680 there were a lot of hedge funds talking about how 0:16:25.720 --> 0:16:30.440 to how they were making twenty thirty forty returns and commodities, Well, 0:16:30.600 --> 0:16:32.520 the team at Goldman Sachs has figured out if you 0:16:32.600 --> 0:16:35.200 bought like one gold future contract for you, you would 0:16:35.200 --> 0:16:38.400 have made thirty percent. So you know, we we got 0:16:38.440 --> 0:16:42.160 involved and created a benchmark, a commodity indicy at the time. 0:16:42.880 --> 0:16:44.840 Uh so there was a way to judge yourself, did 0:16:44.840 --> 0:16:47.760 you actually outperform the market? You know, I had the 0:16:47.840 --> 0:16:50.040 interesting opportunity to be part of the team that built 0:16:50.080 --> 0:16:52.920 a commodity index. I once I got done building it, 0:16:52.920 --> 0:16:55.720 I was the one that traded that index. So I 0:16:55.760 --> 0:16:59.640 got exposure to eighteen eighteen markets, many of which I'd 0:16:59.720 --> 0:17:03.400 never traded in my life. So that was really unique. 0:17:04.320 --> 0:17:07.800 It allowed me to build some new a new business allowed. 0:17:07.840 --> 0:17:10.720 It allowed me and Goldman to expand into a lot 0:17:10.760 --> 0:17:13.760 of new markets where there was huge business opportunities for 0:17:13.800 --> 0:17:14.440 our clients. 0:17:14.840 --> 0:17:18.800 Really really intriguing. So let's talk a little bit about 0:17:19.440 --> 0:17:22.600 what makes Goldman Sachs so special. You spent most of 0:17:22.640 --> 0:17:26.200 your career there. Why is it so unique? 0:17:26.600 --> 0:17:31.600 So when I went to Goldman in nineteen ninety, it 0:17:31.680 --> 0:17:35.359 was a small private partnership. I mean, it was a 0:17:35.400 --> 0:17:39.920 really small private partnership looking back, five hundred partners oh less, 0:17:39.920 --> 0:17:43.760 substantially less. Really, Yeah. I think the most interesting document 0:17:43.840 --> 0:17:47.360 that I pull up from time to time is the 0:17:47.640 --> 0:17:51.000 s one from the public filing of Goldman Sachs, which 0:17:51.080 --> 0:17:53.920 was in the in the late nineties. If you look 0:17:53.960 --> 0:17:56.959 at the if you look at the filing and you 0:17:56.960 --> 0:17:58.880 look at the size of the company and the revenue, 0:17:59.800 --> 0:18:05.560 the entire yearly revenue numbers would be a bad quarter 0:18:05.680 --> 0:18:09.600 right now. It just tells you. And so there was 0:18:09.760 --> 0:18:13.160 so much growth going on in Goldman when I went 0:18:13.200 --> 0:18:18.720 there in the nineties, and I had a unique seat, 0:18:19.400 --> 0:18:23.440 you know, in the partners there provided me a unique seat, 0:18:24.320 --> 0:18:28.440 and they gave me enormous amount of latitude and responsibility 0:18:28.680 --> 0:18:34.119 to keep building businesses. So, as you said, I joined 0:18:34.160 --> 0:18:38.440 the firm as part of JERN. At that point, j 0:18:38.760 --> 0:18:43.800 Erin still was a quasi quasi standalone business. It was 0:18:43.840 --> 0:18:48.200 wholly owned by Goldman Sachs, but we hadn't quite integrated 0:18:48.200 --> 0:18:51.000 into the Goldman Sax culture. So the first thing that 0:18:51.080 --> 0:18:54.679 happened in my career there is, you know, JARN became 0:18:55.040 --> 0:18:59.240 part of fixed income, so we became we went from 0:18:59.280 --> 0:19:04.000 fixed income and JAR into fix fixed income currency and commodities. 0:19:04.240 --> 0:19:07.080 That was a big move, taking these you know, crazy 0:19:07.119 --> 0:19:10.520 commodity guys right and putting in with these very sophisticated 0:19:10.520 --> 0:19:15.439 fixed income guys. So part of that transition and that 0:19:15.520 --> 0:19:18.399 was that was a big move to create FICK and 0:19:18.440 --> 0:19:20.920 it didn't happen overnight. There was a lot of natural 0:19:21.000 --> 0:19:25.760 tension involved in that. And then even when we were 0:19:25.800 --> 0:19:30.760 combined by name alone, we still ran ourselves independently. So 0:19:31.119 --> 0:19:34.240 then I got the unique opportunity to be the I 0:19:34.480 --> 0:19:38.000 would call it guinea pig. I was the commodity guy 0:19:38.800 --> 0:19:44.879 they got put into running a fixed income business. I 0:19:44.920 --> 0:19:48.160 didn't lose my responsibilit running the quantity business, but we 0:19:48.280 --> 0:19:51.639 moved the emerging market business down to what used to 0:19:51.720 --> 0:19:54.359 be the jir And floor. On the jir And floor 0:19:55.000 --> 0:19:58.960 was the commodity businesses as well as the FX business. 0:19:59.600 --> 0:20:01.600 So we had the you know, the metals business, We 0:20:01.680 --> 0:20:03.760 had the oil business, we had the grain business, we 0:20:03.800 --> 0:20:05.879 had the coffee business. We had a coffee roasting room, 0:20:05.920 --> 0:20:07.760 we had a tasting room, and then we had the 0:20:07.880 --> 0:20:10.760 FX business. And in the middle we decided which made 0:20:10.760 --> 0:20:14.720 sense to put the emerging market debt business. 0:20:14.840 --> 0:20:18.160 Or related currency? Yeah, commodities and made. 0:20:17.920 --> 0:20:22.119 Sense, Yes, made sense at the time the Mexican at 0:20:22.200 --> 0:20:25.840 the Mexican restructuring they had they had Mexican bonds with 0:20:25.920 --> 0:20:29.520 an oil option embedded in them. You had a lot 0:20:29.560 --> 0:20:33.439 of currency forwards trading, which made sense. So we moved 0:20:33.520 --> 0:20:36.040 emerging markets down and I was asked to run the 0:20:36.080 --> 0:20:38.440 emerging markets business. So I was the first sort of 0:20:38.480 --> 0:20:41.879 guy that went from being a pure Jarran GUYE to 0:20:42.000 --> 0:20:45.879 making that crossover to commodities and a fixed income business. 0:20:45.920 --> 0:20:49.680 So prior to that, have you had any management experience 0:20:49.760 --> 0:20:53.600 or leadership experience. That's a big raucous floor. And I 0:20:53.600 --> 0:20:57.160 would imagine that desk was was a handful to deal with. 0:20:57.200 --> 0:20:59.760 What was it like stepping into that role? 0:21:00.080 --> 0:21:02.320 So I had been running the commodities business. So I 0:21:02.359 --> 0:21:04.719 had been managing the commodities business. We had built some 0:21:04.800 --> 0:21:08.640 new businesses. We had built our Golden Sex Commodity Index business, 0:21:09.240 --> 0:21:12.440 so I had had, you know, a lot of responsibility 0:21:12.480 --> 0:21:16.359 building a business in building it out quite well. I 0:21:16.400 --> 0:21:20.160 had spent four years in London building our commodity business there. 0:21:20.280 --> 0:21:23.359 So the management piece of it was not what was 0:21:23.359 --> 0:21:25.840 the challenge to me. The challenge to me was I 0:21:25.920 --> 0:21:30.119 had never been involved in a fixed income business, you know. 0:21:30.200 --> 0:21:34.280 To me, I remember the moment, you know where where 0:21:34.280 --> 0:21:36.080 I had to learn something new for the first time. 0:21:36.119 --> 0:21:39.399 I spent my whole life in supply demand. So this 0:21:39.480 --> 0:21:42.400 is supply, This is demand, you know, this is how 0:21:42.400 --> 0:21:44.480 you look at supply demand. And all of a sudden, 0:21:44.960 --> 0:21:49.240 I'm in this world where okay, we've got the you know, 0:21:49.359 --> 0:21:53.080 Mexico twenty three bond trading x y Z and it's 0:21:53.119 --> 0:21:55.239 one O two, one oh three, one oh four, Like 0:21:55.280 --> 0:21:57.040 this thing is undervalue. We should buy it. And the 0:21:57.040 --> 0:21:59.240 guys go, no, no, no, no, no, I go, why wouldn't we 0:21:59.240 --> 0:22:00.760 buy it? We got to own thing that go, they 0:22:00.760 --> 0:22:03.840 can turn around issue more tomorrow and like, oh man, 0:22:04.440 --> 0:22:07.960 like the whole supply demand fundamentals. I had to change 0:22:08.000 --> 0:22:08.560 my whole thinking. 0:22:09.119 --> 0:22:12.080 There's only so much gold and silver ran right, but bonds, 0:22:12.119 --> 0:22:12.560 how much. 0:22:12.520 --> 0:22:15.679 You want right bond that the Government of Mexican can 0:22:15.720 --> 0:22:18.199 turn around and reissue. You can open the issue or 0:22:18.200 --> 0:22:21.000 reissue a new bond tomorrow, so the amount of Mexican 0:22:21.200 --> 0:22:24.639 sovereign bonds can change tomorrow, which all of a sudden 0:22:24.800 --> 0:22:27.479 was a whole new way of thinking about the world. 0:22:27.600 --> 0:22:32.360 That the supply demand fundamentals of a commodities market are 0:22:32.400 --> 0:22:34.520 not the same as the supply demand fundamentals well fixed 0:22:34.560 --> 0:22:37.880 think of market. So you know, the opportunity to bring 0:22:38.119 --> 0:22:42.119 that emerging market's desk down into the jar and world 0:22:42.240 --> 0:22:45.800 worked out fairly well. I got the opportunity to go 0:22:45.880 --> 0:22:49.080 from the emerging markets world into the mortgage world. So 0:22:49.240 --> 0:22:51.480 they sent me to the next beast, which is the 0:22:51.480 --> 0:22:52.240 mortgage world. 0:22:52.480 --> 0:22:55.040 And I have to interrupt you and just point out 0:22:55.440 --> 0:22:59.120 nineteen ninety when you start think about the timing, you're 0:22:59.240 --> 0:23:02.520 halfway through an eighteen year equity bull market, which we'll 0:23:02.520 --> 0:23:05.720 talk about in a minute. You're a decade into what's 0:23:05.760 --> 0:23:09.480 going to end up being a four decade fixed income bullmarket. 0:23:10.119 --> 0:23:14.960 Mortgages are really starting to ramp up and becoming very tradable. 0:23:15.760 --> 0:23:19.520 Your timing couldn't have been been any better. When were 0:23:19.560 --> 0:23:23.880 you promoted to global cohad of equities and fixed income. 0:23:23.920 --> 0:23:27.000 So it when something like this. So I ended up 0:23:27.000 --> 0:23:30.440 going into the mortgage businesses end up building a big 0:23:30.480 --> 0:23:33.320 mortgage business. We end up becoming a very big trader 0:23:33.359 --> 0:23:36.760 and passed throughs. End up doing in mortgages what we've 0:23:36.800 --> 0:23:39.720 now done in all of our commodities business, what we've 0:23:39.720 --> 0:23:43.600 done in the emerging markets. We then really have a 0:23:43.680 --> 0:23:47.600 fixed income currency commodities business run as one business. So 0:23:47.840 --> 0:23:52.240 we managed to make that work. We managed to cross polinate, 0:23:53.320 --> 0:23:55.320 We run them as a business. We no longer have 0:23:55.400 --> 0:23:57.480 fixed income guys and commodity guys. We now have a 0:23:58.000 --> 0:24:02.119 division and it's working quite well. As you're right, we 0:24:02.480 --> 0:24:05.760 had some very good markets going on in the mortgage space. 0:24:05.840 --> 0:24:07.399 We had some very good markets going on in the 0:24:07.400 --> 0:24:11.320 commodity space, and we were able to capitalize on those things. 0:24:12.119 --> 0:24:16.960 In the early two thousands, after I would say the 0:24:17.119 --> 0:24:21.359 dot com bubble had burst, you know, I was asked 0:24:21.359 --> 0:24:24.080 to go over and run the equities business. 0:24:25.359 --> 0:24:28.239 So obviously somebody looked at you and said Hey, this 0:24:28.280 --> 0:24:30.359 guy's talented. He knows how to run a team, he 0:24:30.400 --> 0:24:33.000 knows how to manage risk, and he knows how to 0:24:33.480 --> 0:24:36.119 trade for a profit for a P and L. So 0:24:36.280 --> 0:24:38.720 clearly your background was well suited. 0:24:38.920 --> 0:24:44.320 Yeah, look, maybe lucky, maybe good. Most likely a combination 0:24:44.400 --> 0:24:44.680 of both. 0:24:45.640 --> 0:24:49.359 I always assume good is table stakes at a place 0:24:49.400 --> 0:24:51.400 like Goldman. Lucky never hurts. 0:24:51.880 --> 0:24:55.080 Look, always take I'll always accept the good luck. If 0:24:55.160 --> 0:24:57.240 you want to give me some, I'll take it. So look, 0:24:57.280 --> 0:25:00.359 I had had a very good track record of building 0:25:00.480 --> 0:25:04.879 businesses from rebuilding our commodities business, emerging markets business, mortgage business. 0:25:05.520 --> 0:25:07.840 You know, I had gone through business by business by business, 0:25:07.840 --> 0:25:11.240 and and it helped build and helped transition them into 0:25:11.359 --> 0:25:16.760 much more client facing, client friendly, bigger risk taking businesses, 0:25:16.840 --> 0:25:20.359 bigger client facilitation businesses where we had a brand and 0:25:20.440 --> 0:25:22.760 reputation on the street as the go to shop and 0:25:22.840 --> 0:25:26.720 fixing comcuracy and commodities. Our equities business was really good 0:25:26.840 --> 0:25:29.000 going into the dot com crisis, like it was a 0:25:29.040 --> 0:25:29.760 big business. 0:25:29.760 --> 0:25:32.439 We dominated, dominated, did a lot of syndicate, a lot 0:25:32.480 --> 0:25:34.200 of underwriting, a lot of IPOs we. 0:25:34.160 --> 0:25:36.200 Did, and then all of a sudden that world changed, 0:25:36.400 --> 0:25:40.679 and that world changed dramatically, and so I was asked 0:25:40.720 --> 0:25:44.280 the goer to the equities division. And you know, I 0:25:44.720 --> 0:25:47.959 went in knowing absolutely nothing about the equities world. But 0:25:48.080 --> 0:25:50.520 look I had done that. I knew nothing about emerging markets. 0:25:50.520 --> 0:25:53.960 I knew nothing about mortgages. I knew nothing about government bonds. 0:25:53.960 --> 0:25:55.919 I knew nothing about anything in that world. So I 0:25:55.960 --> 0:25:58.080 just said, look, it's another learning experience. I'm going to 0:25:58.160 --> 0:26:01.640 learn about it. And realized that like we had one 0:26:01.640 --> 0:26:07.919 of the most unbelievable capital markets syndicate shops, like we 0:26:07.960 --> 0:26:12.639 could place new issues better than anyone. The problem was 0:26:12.840 --> 0:26:16.040 the new issue market and calendar was gone, and we 0:26:16.119 --> 0:26:19.400 had to transition from a new issue capital market syndicate 0:26:19.440 --> 0:26:26.480 shop to a secondary trading facilitation one delta derivatives shop. 0:26:27.200 --> 0:26:29.720 And so I went into the equities and with some 0:26:29.800 --> 0:26:32.399 help of some some really smart people, we transitioned that 0:26:32.560 --> 0:26:36.439 business to look much more like what we had built 0:26:36.720 --> 0:26:39.800 in the fixed income, currencies and commodities business. And that 0:26:40.000 --> 0:26:43.520 was done in the early you know, the early two thousands. 0:26:44.160 --> 0:26:47.320 And then you know, as as as we had as 0:26:47.320 --> 0:26:49.680 I had done in other businesses, and we had done, 0:26:50.440 --> 0:26:54.479 you start realizing the synergies between different businesses, and all 0:26:54.520 --> 0:26:56.840 of a sudden you realize, like the one delta or 0:26:56.880 --> 0:27:02.359 the equities business their trading specific company names, but so 0:27:02.600 --> 0:27:05.800 are the corporate bond guys. The corporate bond guys are 0:27:05.840 --> 0:27:08.919 trading company names corporate names, and a lot of the 0:27:09.080 --> 0:27:13.560 underlying factors that are affecting corporate bond trading are affecting 0:27:13.640 --> 0:27:17.560 equity trading. So then we decided, look like, maybe we 0:27:17.600 --> 0:27:20.720 should put all of these businesses together and create a 0:27:20.760 --> 0:27:23.840 securities division, and the corporate bond people should sit on 0:27:23.880 --> 0:27:28.199 the same floor as the equities salespeople, and so they 0:27:28.200 --> 0:27:31.639 can talk about companies. You know, if you got something 0:27:31.640 --> 0:27:34.760 going on in company X, it's not just affecting the equity. 0:27:35.080 --> 0:27:38.480 It's affecting the converts, it's affecting the preferreds, it's affecting 0:27:38.520 --> 0:27:42.439 the corporate bonds. And those traders. When we started, they 0:27:42.440 --> 0:27:44.400 were in different buildings. They didn't even know who they were, 0:27:44.920 --> 0:27:46.840 and so should we put them all on one floor? 0:27:46.880 --> 0:27:50.199 Which we did, and that's how we created the securities division. 0:27:50.240 --> 0:27:52.560 That makes a lot of sense because you would imagine 0:27:53.160 --> 0:27:57.240 everybody is looking at the six blind men describing the elephant. 0:27:57.520 --> 0:28:00.480 Everybody's seeing a different part, and that in tell has 0:28:00.480 --> 0:28:02.640 to be useful for for the rest of the floor, 0:28:02.680 --> 0:28:06.600 whether it was preferred convertibles, corporate bonds, or equity. 0:28:06.680 --> 0:28:09.560 Absolutely. Yeah. So I remember the first time we were 0:28:09.560 --> 0:28:11.200 on the equity desk and you know, in equity is 0:28:11.200 --> 0:28:13.080 getting sold off hard, and I said, I picked up 0:28:13.119 --> 0:28:15.080 the phone and called you know, the guy over on 0:28:15.119 --> 0:28:17.760 the on the on the corporate desk desk, and said, hey, 0:28:17.800 --> 0:28:20.600 what's going on this name? And he said nothing, like 0:28:20.800 --> 0:28:22.920 you know, no, nothing. And then all of a sudden 0:28:22.920 --> 0:28:25.520 I sat there and thinking, Okay, what what we need 0:28:25.560 --> 0:28:28.199 to learn by this? We need to understand is this 0:28:28.320 --> 0:28:32.239 a liquidation of a big position, you know, should we 0:28:32.400 --> 0:28:34.359 should we be going out to the market and selling 0:28:34.359 --> 0:28:37.000 this and getting people into the name. We have to 0:28:37.119 --> 0:28:39.480 learn by the whole capital structure, because it is a 0:28:39.480 --> 0:28:40.760 capital structure. 0:28:40.960 --> 0:28:44.480 That's really intriguing. And you continue working your way up. 0:28:44.520 --> 0:28:47.560 You obviously did a pretty good job there. You continue 0:28:47.560 --> 0:28:51.040 working your way up, eventually in O six becoming appointed 0:28:51.600 --> 0:28:55.800 president and co chief operating officer. You end up as 0:28:55.800 --> 0:28:59.200 a member of the firm's Board of Directors, as well 0:28:59.240 --> 0:29:03.400 as chairman of the firm wide Client and Business Standards Committee. 0:29:03.440 --> 0:29:05.600 Tell us a little bit about what it was like 0:29:05.720 --> 0:29:07.760 to get kicked upstairs to the C suite. 0:29:08.760 --> 0:29:11.479 So that was two thousand and six. I you know, 0:29:12.200 --> 0:29:16.160 it had come after we'd put all the trading businesses together. 0:29:16.400 --> 0:29:19.280 We now had the securities business, so we had put 0:29:19.360 --> 0:29:21.800 everything together, which which made a lot of sense. We 0:29:22.800 --> 0:29:26.680 had done a very good job of that. Hank Paulson 0:29:26.720 --> 0:29:29.880 had left to go become Treasury Secretary, and all of 0:29:29.920 --> 0:29:33.680 a sudden, you know, I'm sitting in the executive office floor, 0:29:33.720 --> 0:29:37.880 and you go from sitting on a trading desk where 0:29:37.920 --> 0:29:40.880 you know exactly what's going on, or you think you 0:29:40.960 --> 0:29:43.520 know exactly what's going on in every market moment to moment, 0:29:43.640 --> 0:29:47.040 minute a minute, and all of a sudden, you're sitting 0:29:47.080 --> 0:29:50.560 in an isolated office trying to figure out how to 0:29:50.640 --> 0:29:56.920 run a big global firm that's not just a securities 0:29:56.920 --> 0:29:59.400 trading business. You've got a big asset management business that 0:29:59.440 --> 0:30:01.800 you care about. You've got a big banking business that 0:30:01.840 --> 0:30:04.840 you care about, and you've got a lot more aspects 0:30:04.880 --> 0:30:07.920 of the company that you care about. So you know, 0:30:08.400 --> 0:30:12.240 it became another moment in time where I sort of 0:30:12.240 --> 0:30:14.160 take a deep breath and say, Okay, how can I 0:30:14.240 --> 0:30:18.920 contribute most to Goldman Sachs. And I felt like there 0:30:18.920 --> 0:30:21.920 were a few different unique opportunities. At the time, we 0:30:22.000 --> 0:30:29.120 did not have the strongest West Coast banking presence, so 0:30:29.520 --> 0:30:31.920 you know, I saw what some of our competitors were doing. 0:30:32.040 --> 0:30:35.320 You know, be honest, Morgan Stanley had a really dominant 0:30:35.960 --> 0:30:39.280 banking presence in California and West Coast and Silicon Valley. 0:30:39.400 --> 0:30:41.480 Mary Meeker absolutely dominated. 0:30:41.680 --> 0:30:43.880 They had a dominant position. They really did, and it 0:30:43.920 --> 0:30:45.800 was hard to deny that. And you know, every time 0:30:45.800 --> 0:30:48.120 there was a big capital market steal or a big 0:30:48.280 --> 0:30:51.280 IPO coming out of there, we were, you know, begging 0:30:51.400 --> 0:30:53.480 to get to be the number three of a number four, 0:30:53.600 --> 0:30:55.720 number five, And I said, you know, to the team 0:30:55.720 --> 0:30:57.920 out there, I said, like, we've got to go build this. 0:30:57.920 --> 0:31:00.520 This is something I can take on. So, you know, 0:31:00.560 --> 0:31:04.760 I found niches where I felt like I could contribute 0:31:04.920 --> 0:31:09.440 to growing the firm, helping the people in the firm, 0:31:10.040 --> 0:31:12.960 while taking on my responsibilities to really manage the firm 0:31:13.040 --> 0:31:15.840 and operate the firm on a day to day basis. 0:31:16.240 --> 0:31:18.440 You know, my number one priority was operating the firm 0:31:18.440 --> 0:31:20.480 on a day to day basis. But I felt my 0:31:20.720 --> 0:31:24.240 my my importance to the firm and the way you 0:31:24.480 --> 0:31:27.440 create clout and the way you create the ability for 0:31:27.480 --> 0:31:30.959 people to listen to you and follow you. At Goldman, 0:31:31.120 --> 0:31:33.480 is you still have to be a revenue leader or 0:31:33.600 --> 0:31:36.480 near the revenue. I don't think you can get disconnected 0:31:36.520 --> 0:31:39.400 from revenue. You can't be a sit in your office 0:31:39.560 --> 0:31:42.720 manager at Goldman, at least in these times. So I 0:31:42.960 --> 0:31:47.320 wanted to be a valuable part of the revenue driving machine, 0:31:47.880 --> 0:31:51.120 which also made my ability to manage and drive the 0:31:51.240 --> 0:31:53.200 organization that much more impactful. 0:31:53.320 --> 0:31:56.160 So that's pretty unusual, isn't it. Typically when you're in 0:31:56.240 --> 0:32:01.960 the COO president slot, you have of subordinates reporting to 0:32:01.960 --> 0:32:05.719 you from different divisions. It's Is it unusual to roll 0:32:05.800 --> 0:32:07.320 up your sleeves and say, hey, I'm going to help 0:32:07.400 --> 0:32:11.080 build this out or did it just help you better 0:32:11.160 --> 0:32:13.560 understand what everybody else was doing in the company. 0:32:13.640 --> 0:32:16.160 I think it helped me better understand. So I spent 0:32:16.400 --> 0:32:18.320 enormous amount of time on the road. I spent an 0:32:18.360 --> 0:32:21.440 enormous amount of time with our coverage people. I was 0:32:21.760 --> 0:32:24.960 out seeing clients, you know, as many days of the 0:32:25.040 --> 0:32:28.640 year as I possibly could really without you know, without 0:32:28.840 --> 0:32:31.200 you know, sort of putting the firm in any peril 0:32:31.280 --> 0:32:33.440 or any jeopardy, making sure the firm was well run, 0:32:33.600 --> 0:32:36.000 dealing with all the bigger issues of the firm. But 0:32:36.080 --> 0:32:38.720 I felt the time I spent out of the office 0:32:39.120 --> 0:32:44.360 in other locations, in other offices, with our senior most 0:32:44.400 --> 0:32:48.280 people and with their clients was the most valuable thing 0:32:48.320 --> 0:32:49.280 I could do for the firm. 0:32:49.440 --> 0:32:52.600 You mentioned Hank Paulson, one of the few people who 0:32:52.640 --> 0:32:57.480 comes out of the financial crisis reputation intact. So you're 0:32:57.640 --> 0:33:01.120 you're president and COO and what to two and a 0:33:01.160 --> 0:33:05.480 half years later? Suddenly the world starts to unravel and 0:33:06.160 --> 0:33:09.200 everything goes to hell in the handbasket. Although I think 0:33:09.240 --> 0:33:12.200 Goldman held up better than most, What was that era 0:33:12.680 --> 0:33:13.120 like for you? 0:33:13.760 --> 0:33:16.280 You know, look, it was tough. You know, it was 0:33:16.360 --> 0:33:20.840 a tough period in time. You know, you could see 0:33:21.200 --> 0:33:24.920 to some extent what was going on. Even though you 0:33:24.920 --> 0:33:28.920 could see what was going on, there was certain things 0:33:28.960 --> 0:33:33.160 you couldn't avoid. You know. You you have certain structures, 0:33:33.200 --> 0:33:35.479 you have certain securities, you have certain assets on your 0:33:35.480 --> 0:33:39.160 balance sheet or that you've created, and you can't uncreate them. 0:33:39.560 --> 0:33:42.240 Even though you said, wow, what you know, I wish 0:33:42.360 --> 0:33:44.560 we hadn't done that well. When we did it six 0:33:44.600 --> 0:33:47.160 months or a year ago, different world, it seemed like 0:33:47.240 --> 0:33:50.880 a rational thing to do. And you're you're sitting there, 0:33:50.920 --> 0:33:55.200 You're watching you know, your your your fellow competitors, whether 0:33:55.240 --> 0:33:57.800 it be a Bear Stearns or Lehman Brothers, you know, 0:33:57.960 --> 0:34:02.320 get in trouble and you're watching what's going on, and 0:34:02.360 --> 0:34:07.520 you're understanding the fragility of an industry. You're understanding that, Look, 0:34:08.239 --> 0:34:12.359 you have a lot of the risks that they do. 0:34:12.880 --> 0:34:16.760 You know, funding a a institution or funding a bank 0:34:17.000 --> 0:34:20.480 is really important. As I always used to say to people, 0:34:20.520 --> 0:34:22.960 you know, these banks are these financial institutions. They don't 0:34:23.000 --> 0:34:26.120 run out of equity, they run out of liquidity. So 0:34:26.200 --> 0:34:30.799 liquidity becomes such a crucial part of the organization. How 0:34:30.840 --> 0:34:33.799 can you finance yourself, How can you fund yourself? How 0:34:33.800 --> 0:34:37.799 can you make sure that you have liquidity? And how 0:34:37.840 --> 0:34:41.480 can you reassure clients that you have liquidity? And so 0:34:42.000 --> 0:34:48.000 we at Goldman as a team, we spent enormous amount 0:34:48.000 --> 0:34:50.400 of time and we took our best and most important 0:34:50.400 --> 0:34:53.439 people and said, look, drop what you're doing, make sure 0:34:53.480 --> 0:34:57.239 that we are dealing with our own situation, and make 0:34:57.280 --> 0:35:00.279 sure that we are doing everything we possibly can can 0:35:00.440 --> 0:35:03.880 to make sure we have liquidity almost at any cost. 0:35:04.239 --> 0:35:07.279 What was the date on that, because for a little context, 0:35:07.719 --> 0:35:12.040 I want to say the market's peaked sometime October seven, 0:35:12.160 --> 0:35:14.759 something like that. But really it didn't feel like they 0:35:14.800 --> 0:35:19.680 were rolling over till first quarter of Wait when and 0:35:20.000 --> 0:35:23.279 lots of competitors were doing a slow bleed and not 0:35:23.440 --> 0:35:26.919 exactly publicizing it. When did you say, hey, this could 0:35:26.920 --> 0:35:29.680 get really bad. We need to we need to be proactive. 0:35:29.960 --> 0:35:34.360 Yeah, we went. I don't remember the dates exactly, but 0:35:34.480 --> 0:35:38.680 you know, we were watching the mortgage banks, the mortgage originators. 0:35:39.120 --> 0:35:41.759 You remember there were I think it's about thirty two 0:35:42.000 --> 0:35:44.680 mortgage banks, mortgage regions. They didn't make it through two 0:35:44.719 --> 0:35:48.960 thousand and eight. You know, we had done business with 0:35:49.280 --> 0:35:52.239 basically almost all of them. They originated mortgages, they sold 0:35:52.280 --> 0:35:55.400 them to us, We repackaged everybody sold them everyone Like 0:35:55.480 --> 0:35:59.400 we weren't unique, but you know, just watching what was 0:35:59.520 --> 0:36:02.759 going on on a day to day basis and having 0:36:02.880 --> 0:36:09.080 conversations with those organizations and seeing what was going on 0:36:09.280 --> 0:36:11.480 and understanding what was going on at the agencies and 0:36:11.640 --> 0:36:15.239 Fanny and Freddie and understanding what their positions were and 0:36:15.400 --> 0:36:21.000 understanding what was going on at AIG and understanding what 0:36:21.200 --> 0:36:25.360 was going on with some of our private equity credit clients. 0:36:25.920 --> 0:36:28.560 You know, I think there was a seminal moment. I 0:36:28.680 --> 0:36:34.239 think it was July fourth weekend. I remember getting a 0:36:34.400 --> 0:36:37.359 phone call at you know, like six o'clock at night 0:36:37.480 --> 0:36:42.279 from a very large private equity firm that also ran 0:36:42.360 --> 0:36:45.880 a big credit fund. And the credit fund had bought 0:36:46.280 --> 0:36:49.799 a debt security from one of their private equity's own 0:36:49.960 --> 0:36:56.120 deals and he was renegging on the deal. He was 0:36:56.200 --> 0:36:59.080 renegging on the debt deal because he couldn't get it 0:36:59.239 --> 0:37:01.800 funded in the secondary market. Wow, I said, you know, 0:37:01.880 --> 0:37:04.600 you're renegging on your own deal, like this is your 0:37:04.760 --> 0:37:08.040 paper from a company that you guys own. That was 0:37:08.120 --> 0:37:11.279 a seminal moment, right That was a moment where I said, oh, 0:37:12.160 --> 0:37:16.000 like the world is changing dramatically right now. When when 0:37:16.120 --> 0:37:19.200 when someone won't fund paper from a a an in 0:37:19.440 --> 0:37:23.160 house deal for a major private equi player. So there 0:37:23.200 --> 0:37:26.400 were there were moments along the line, you know, and 0:37:26.520 --> 0:37:29.720 then you get into disputes on what things are worth 0:37:30.000 --> 0:37:37.040 and certain you know, really major companies are disputing margin 0:37:37.200 --> 0:37:40.840 calls because they're disputing what a security is worth like, 0:37:40.960 --> 0:37:47.680 I never in my career had a major corporate disputed 0:37:47.760 --> 0:37:51.040 a margin call and what a security is worth, like 0:37:51.480 --> 0:37:55.239 it really didn't matter. It really was unprecedented. It was unprecedented. 0:37:55.480 --> 0:37:58.760 So there were there were a lot of signs along 0:37:58.840 --> 0:38:04.239 the way. The liquidity was getting tighter and tighter, and 0:38:04.480 --> 0:38:07.640 people were, you know, hoarding liquidy if they had it 0:38:08.000 --> 0:38:11.239 and protecting and if they didn't have it. And you know, 0:38:11.320 --> 0:38:14.360 we as a firm, we were conscientious of this to 0:38:14.440 --> 0:38:17.560 the point where we actually went out and issued a 0:38:17.680 --> 0:38:20.080 bunch of data inequity early on. Yeah, we went out 0:38:20.080 --> 0:38:21.359 and did that big Warren Buffet deal. 0:38:21.760 --> 0:38:25.040 So the Warren Buffet story could be my favorite story 0:38:25.080 --> 0:38:29.279 of the whole financial crisis, because as much as people said, 0:38:29.360 --> 0:38:31.720 what was it like a nine percent or eleven percent, 0:38:32.160 --> 0:38:37.000 it was a big note. Everybody kind of forgets. Buffett 0:38:37.040 --> 0:38:40.560 offered that to Dick Fold and Lehman months before, and 0:38:40.719 --> 0:38:43.440 Fold said, no, too expensive. Yeah, it could be the 0:38:43.560 --> 0:38:47.120 single biggest eerror of the entire crisis. They might still 0:38:47.160 --> 0:38:47.960 be around, who knows. 0:38:48.080 --> 0:38:51.279 Buffer offered it to us in the morning and said, 0:38:51.280 --> 0:38:53.080 you can let me know by five o'clock to night, 0:38:53.719 --> 0:38:56.359 and we and we said don't worry. We'll be back 0:38:56.400 --> 0:38:57.560 there and all we have to do is get our 0:38:57.600 --> 0:39:00.359 board together. We got our board together and we say done, 0:39:00.400 --> 0:39:03.240 and we did a big secondary equity raise. 0:39:03.120 --> 0:39:04.000 Around me following that. 0:39:04.120 --> 0:39:07.600 I remember, and the only conversation we had from people 0:39:07.640 --> 0:39:09.680 in the secondary raise is everyone said, well, I would 0:39:09.719 --> 0:39:11.120 have done the Buffett deal, and I said, the only 0:39:11.160 --> 0:39:12.440 problem is you're not Warren Buffett. 0:39:12.640 --> 0:39:15.880 That's right, That's exactly right. And it was one of 0:39:15.920 --> 0:39:20.000 those moments where God bless Warren Buffett. It really made 0:39:20.040 --> 0:39:22.759 a huge difference to everybody, even though there was more 0:39:22.880 --> 0:39:27.120 downside in the equity market. It's hey, we're not all 0:39:27.200 --> 0:39:28.040 going to go down the drums. 0:39:28.080 --> 0:39:30.080 Well, then a week or two later, I think it 0:39:30.120 --> 0:39:33.120 was within a week or two, that's when Treasury decided 0:39:33.160 --> 0:39:35.080 they were going to put tart money into all the banks, 0:39:36.120 --> 0:39:38.520 regardless of those that had raised Capper or not. But 0:39:38.640 --> 0:39:40.600 by the way, I don't disagree with the meaning. They 0:39:40.680 --> 0:39:43.880 were trying to infuse capital on the system and. 0:39:43.960 --> 0:39:47.080 Not single out any specific bank which would cause a run. Right, 0:39:47.440 --> 0:39:50.480 So yeah, really it was a it was you know, 0:39:50.760 --> 0:39:55.359 I'm always reminded of the scene from Apocalypse Now where 0:39:55.800 --> 0:39:59.520 they're surfing. Hey, one day, this war is going to end, 0:40:00.280 --> 0:40:03.320 and it's really when you were in that moment, it 0:40:03.600 --> 0:40:07.320 was really really one of a kind with all of 0:40:07.360 --> 0:40:10.880 which leads to the question, given the breath of that 0:40:11.080 --> 0:40:15.760 experience at Goldman threw everything from really the bull market 0:40:15.840 --> 0:40:18.320 and bonds and equities to the dot com implosion to 0:40:18.400 --> 0:40:21.920 the financial crisis, how did that experience set you up 0:40:22.000 --> 0:40:24.280 to become a leader in the public sector. 0:40:26.080 --> 0:40:28.960 So a lot of those skills are very transferable. You know, 0:40:30.480 --> 0:40:34.160 my job at Goldman Net when you boil it down, 0:40:35.520 --> 0:40:39.839 was dealing with crisis or opportunity every day, and by 0:40:39.840 --> 0:40:41.960 the way, most days I was dealing with both, you know, 0:40:42.120 --> 0:40:46.160 and some opportunities became crisises, and some crisises became opportunities. 0:40:46.680 --> 0:40:50.759 So I consider myself being the crisis management or opportunity 0:40:50.840 --> 0:40:54.040 management business. Because when you're running a very large balance 0:40:54.040 --> 0:40:58.600 sheet globally, with lots of people committing capital and lots 0:40:58.640 --> 0:41:03.960 of people making promises or commitments or underwritings, you're going 0:41:04.040 --> 0:41:06.760 to have problems. It's just the nature of the business. 0:41:08.360 --> 0:41:11.960 No matter how well intentioned people are, there's going to 0:41:12.000 --> 0:41:15.520 be mistakes and clients are going to get unhappy. And 0:41:16.000 --> 0:41:17.920 you just have to deal with them. So, you know, 0:41:18.320 --> 0:41:22.000 having spent the last almost eleven years of my life 0:41:22.040 --> 0:41:26.880 at Goldman and I'd done it before being a crisis manager, 0:41:27.800 --> 0:41:29.440 and that's really what I did. It was a crisis 0:41:29.520 --> 0:41:32.359 manager trying to look for opportunity. You know, I think 0:41:32.400 --> 0:41:36.040 it prepared me well to go into the government because 0:41:36.239 --> 0:41:38.120 I was always trying to figure out, how do we 0:41:38.280 --> 0:41:40.960 create a solution, how do we create something that works? 0:41:41.480 --> 0:41:43.880 What is the compromise? What is the way out of 0:41:43.960 --> 0:41:46.600 this situation? Is there? Because there's a way out of 0:41:46.640 --> 0:41:49.319 every situation. I never believed there wasn't a way out 0:41:49.320 --> 0:41:49.760 of a situation. 0:41:50.000 --> 0:41:52.160 So let's break that down before we spend a little 0:41:52.360 --> 0:41:56.400 time in the public sector. Let's stay with crisis management 0:41:56.520 --> 0:41:59.600 because I kind of get the sense reading your background 0:42:00.280 --> 0:42:03.360 you created a I don't want to say formulas is 0:42:03.480 --> 0:42:06.200 probably overstanding it, but you seem to have created a 0:42:06.280 --> 0:42:10.680 structure where every time there's a crisis, you followed a 0:42:10.760 --> 0:42:14.840 few specific steps. So crisis shows up on your desk. 0:42:15.440 --> 0:42:19.440 What is the Gary Cone three or five step response? 0:42:19.920 --> 0:42:20.800 What's the playbook? 0:42:21.600 --> 0:42:24.400 I don't know if there's a playbook, because they're all different, 0:42:24.520 --> 0:42:27.000 they're all different, but there's some themes that seem to 0:42:27.080 --> 0:42:29.880 be consistent. As I used to always say, is you know, 0:42:30.080 --> 0:42:34.200 we at Goldman, we're very creative in the problems we have. 0:42:35.320 --> 0:42:38.680 We'll never usually have the same problem twice because we're 0:42:38.680 --> 0:42:41.520 really good at fixing the last problem we had. We're 0:42:41.560 --> 0:42:43.880 not good at We're not as good as anticipating the 0:42:43.920 --> 0:42:45.960 next problem, but we're good at fixing the last problem. 0:42:46.000 --> 0:42:48.440 Okay, So in my I'm gonna interrupt you and say, 0:42:48.520 --> 0:42:52.279 in my research into you, one of the things in 0:42:52.320 --> 0:42:56.880 some of the people I spoke with Gariel owned the problem, 0:42:57.120 --> 0:43:00.520 apologize for it. Here's what we're gonna do to what 0:43:00.680 --> 0:43:02.799 took place, and here's how we're going to make sure 0:43:02.840 --> 0:43:05.279 this doesn't happen again. That's what I was referring to it. 0:43:05.520 --> 0:43:07.600 Did am I putting words in your mouth? No? 0:43:07.760 --> 0:43:09.600 No, you're not putting words in my mouth at all. 0:43:09.960 --> 0:43:12.160 So look, I always believe you have to own the problem. 0:43:12.960 --> 0:43:17.120 I mean, ownership is ninety percent of the battle. I 0:43:17.320 --> 0:43:21.799 never had a problem right where I would say it's 0:43:21.800 --> 0:43:25.200 not my problem, because if you're the chief operating officer, 0:43:25.320 --> 0:43:28.200 the president ome Sax, every problem is your problem. Yes 0:43:28.440 --> 0:43:30.839 it is it's my problem. It's my problem, and it's 0:43:31.640 --> 0:43:35.200 my job to make sure it gets solved. So A, 0:43:36.040 --> 0:43:40.520 I would always start with ownership. B. I would always 0:43:40.600 --> 0:43:43.279 need the facts. So, you know, if you really want 0:43:43.320 --> 0:43:45.799 to go through the chronology of a problem, you know, okay, 0:43:45.920 --> 0:43:50.239 problem arises number one, get all of the facts into 0:43:50.320 --> 0:43:52.720 the room. Try and agree upon the facts. 0:43:52.840 --> 0:43:53.000 You know. 0:43:53.520 --> 0:43:56.560 One of the hardest things sometimes is agree upon the facts. 0:43:57.080 --> 0:44:00.560 You know, and in my job was to if through 0:44:00.680 --> 0:44:03.320 the facts and say not just sift through the facts 0:44:03.360 --> 0:44:07.680 from my team's perspective. I needed to talk to the 0:44:07.800 --> 0:44:10.480 other side if there was an other side, you know, 0:44:10.719 --> 0:44:13.279 I need I needed both sides of the opinion. And 0:44:14.280 --> 0:44:17.000 I always trusted, you know, in the words of Ronald Reggae, 0:44:17.040 --> 0:44:19.720 trust but verify. You've got to trust but verify everything. 0:44:20.280 --> 0:44:26.560 So go through it. Understand the facts, Understand what what happened, 0:44:27.280 --> 0:44:32.000 own the problem, try and fix the problem, and be realistic. 0:44:32.120 --> 0:44:34.920 And I always said, if I go to the people 0:44:35.000 --> 0:44:37.560 and tell them exactly what happened, tell them the truth, 0:44:38.160 --> 0:44:42.839 tell them how we're going to rectify it, nine percent 0:44:42.880 --> 0:44:45.319 of the time it's going to solve the problem. Because 0:44:45.360 --> 0:44:47.440 really people understand there's going to be problems. They just 0:44:47.520 --> 0:44:49.520 want to understand what actually really happened. 0:44:49.520 --> 0:44:50.879 And everyone walks away happy. 0:44:51.120 --> 0:44:53.600 Yeah, look they walk away as happy as they can't, right, 0:44:53.680 --> 0:44:54.960 I don't. I don't want to sit here and tell you, 0:44:55.000 --> 0:44:57.719 Oh yeah, every time people walk away happy, they walk 0:44:57.760 --> 0:44:59.880 away as happy as they walk away. How about this, 0:45:00.040 --> 0:45:01.239 they walk away satisfied. 0:45:01.440 --> 0:45:04.520 Well, these are complex problems with big money involved, and 0:45:04.680 --> 0:45:07.480 occasionally people are going to argue about hey, who has 0:45:07.560 --> 0:45:11.279 this loss or who has this profit? And sometimes that 0:45:11.440 --> 0:45:12.440 leads to disputes. 0:45:12.560 --> 0:45:15.000 Yeah, if it's just a loss, if it's just money, 0:45:15.160 --> 0:45:16.959 sometimes those are easy to cure. 0:45:17.000 --> 0:45:17.040 It. 0:45:17.239 --> 0:45:19.440 I don't want to be cavalier, but if you know, 0:45:19.440 --> 0:45:21.880 if it's just a money problem, it's it's sometimes not 0:45:22.000 --> 0:45:25.040 a big deal. It's like a deal can't get done 0:45:26.920 --> 0:45:30.440 and someone blames someone for something. Okay, now we got 0:45:30.480 --> 0:45:30.840 a problem. 0:45:30.960 --> 0:45:33.799 Now you've got personality and ego and turf war. 0:45:33.840 --> 0:45:36.799 And why can't the deal get done? And now people 0:45:36.800 --> 0:45:39.440 are pointing fingers, Well, the deal can't get done because 0:45:39.640 --> 0:45:41.880 this happened. You didn't do this, or you did do this, 0:45:42.280 --> 0:45:43.960 or you shouldn't have done this. And now all of 0:45:43.960 --> 0:45:47.000 a sudden, it's like Okay, Now, I like money's not 0:45:47.000 --> 0:45:48.919 going to solve the problem. I've got to get people 0:45:49.080 --> 0:45:52.839 back to a position understand why the deal can't get done. 0:45:53.400 --> 0:45:55.839 Maybe the deal never could have gotten done. Maybe someone 0:45:55.920 --> 0:45:59.160 just never explained to the client. Maybe they tell the 0:45:59.200 --> 0:46:02.680 client things that they just wanted to hear, which is which. Again, 0:46:02.760 --> 0:46:04.279 I have to own that and say, like, my team 0:46:04.320 --> 0:46:06.680 didn't do a good job. My team should have told 0:46:06.719 --> 0:46:10.120 you six weeks ago this couldn't get done, or this 0:46:10.239 --> 0:46:11.879 wasn't gonna get done, or for this to get done, 0:46:11.920 --> 0:46:13.920 these five things had to happen. And none of these 0:46:13.960 --> 0:46:14.720 five things happened. 0:46:14.840 --> 0:46:18.040 So I don't really think of COO as a fixer. 0:46:18.320 --> 0:46:21.600 But really what you're saying is you're a free safety 0:46:21.680 --> 0:46:24.799 and anything that could go awry, you're on top. 0:46:24.920 --> 0:46:27.400 You have to be responsible for I think it affirm 0:46:27.480 --> 0:46:29.880 like Goldman Sachs, you have to. You have to when 0:46:29.880 --> 0:46:34.400 you're in a transactionally driven business where your clients are 0:46:34.520 --> 0:46:41.040 depending upon you for advice, capital, and really the future 0:46:41.080 --> 0:46:45.279 of their company in many respects, you have to as 0:46:45.360 --> 0:46:48.120 a senior person, you have to be there as the 0:46:48.160 --> 0:46:50.439 free safety and help make sure you guide these things 0:46:50.760 --> 0:46:53.640 to the to the softest landing you can if and 0:46:53.719 --> 0:46:56.399 when there's a problem. The good news is the vast 0:46:56.480 --> 0:46:59.919 majority of the time these things just run their course, 0:47:00.120 --> 0:47:02.399 and the teams are so good that they all happen 0:47:02.480 --> 0:47:03.040 by themselves. 0:47:04.000 --> 0:47:07.200 You're there for the ones that aren't self repairing. 0:47:07.400 --> 0:47:07.800 Exactly. 0:47:08.160 --> 0:47:12.720 Really intriguing. So let's talk a little bit about that period. 0:47:13.400 --> 0:47:17.160 Your chief Economic advisor to the President. You managed the 0:47:17.520 --> 0:47:23.200 administration's economic policy agenda, and you spearhead the Wage and 0:47:23.480 --> 0:47:28.880 Tax Reform Act, which was a substantial policy success in 0:47:28.960 --> 0:47:33.800 the Trump white House and a pretty substantial rejiggering of 0:47:34.520 --> 0:47:38.520 the tax code emphasizing small businesses. LLCs tell us a 0:47:38.560 --> 0:47:41.560 little bit about what was life like in the White House. 0:47:42.440 --> 0:47:48.320 Well, life in the White House is fascinating. It was probably, 0:47:48.600 --> 0:47:50.200 of all the things I've done in my career, the 0:47:50.280 --> 0:47:53.759 most fascinating experience I've had. And I'm very thankful that 0:47:53.880 --> 0:47:56.800 I had the opportunity, very thankful that I did it. 0:47:58.560 --> 0:48:04.400 You know, Wall Street is a good preparatory class for Washington. 0:48:04.680 --> 0:48:09.800 You know, it's it's long, arduous days, which you're used to. 0:48:10.400 --> 0:48:13.799 You know, my day was was pretty simple in many 0:48:13.880 --> 0:48:17.800 respects and pretty chaotic in other respects. But no different 0:48:17.960 --> 0:48:21.040 than a day at Goldman Sachs. You know, I used 0:48:21.080 --> 0:48:23.399 to say my days at Goldman Sachs is about twenty 0:48:23.440 --> 0:48:25.239 percent of it I have an idea what's going to happen. 0:48:25.280 --> 0:48:27.640 About eighty percent I have no idea, and I just 0:48:27.680 --> 0:48:29.759 hope and pray it's not too crazy. And I would 0:48:29.760 --> 0:48:32.120 say the White House was pretty similar. About twenty percent 0:48:32.120 --> 0:48:33.560 of the day I sort of had an idea what 0:48:33.680 --> 0:48:35.319 was going to happen, and the rest of the day 0:48:36.200 --> 0:48:38.320 we were going to deal with the issues or the 0:48:38.440 --> 0:48:42.160 problems or the opportunities of the day. You know, my 0:48:42.280 --> 0:48:44.840 days would start early in the morning with the Presidential 0:48:44.920 --> 0:48:47.480 Daily Brief CEEIA would come in in brief, and you know, 0:48:47.680 --> 0:48:48.200 you'd see. 0:48:48.040 --> 0:48:51.040 What CIA comes in in brief. That So I imagine 0:48:51.080 --> 0:48:54.040 at Goldman you have great business intel. What's it like 0:48:54.160 --> 0:48:56.160 getting briefed by by the spooks. 0:48:56.680 --> 0:48:59.560 It's it's pretty interesting. I mean, look, we've got a 0:49:00.360 --> 0:49:04.720 we've got a really interesting, you know, intelligence network around 0:49:04.719 --> 0:49:08.480 the world, and it's their job to make sure those 0:49:08.560 --> 0:49:12.120 of us discussing policy in the White House have the 0:49:12.200 --> 0:49:15.360 information we need and that we're all have the same information. 0:49:16.000 --> 0:49:18.680 And so there's a group of us that get the 0:49:19.280 --> 0:49:22.719 daily brief, and you can get it, you know, I 0:49:22.800 --> 0:49:25.360 think most of us got it fairly early in the morning, 0:49:25.600 --> 0:49:27.040 and you can get it when you want. And so 0:49:27.160 --> 0:49:30.680 I used to start my day with it early in 0:49:30.719 --> 0:49:34.960 the morning, and that was how I started. Then, you know, 0:49:35.040 --> 0:49:37.880 I would go from there to the Most of the 0:49:39.160 --> 0:49:41.279 chiefs of staff would have a staff meeting in the morning, 0:49:42.640 --> 0:49:45.360 So the senior White House people would get together in 0:49:45.440 --> 0:49:48.239 the morning around eight am or so seven thirty or eight, 0:49:49.040 --> 0:49:51.840 discuss the issues for the day, Discuss the opportunities for 0:49:51.920 --> 0:49:56.160 the day, discuss the messaging for the day. You know, 0:49:56.239 --> 0:49:58.920 you get done with that. Then I'd have my staff 0:49:59.000 --> 0:50:02.000 meeting around nine o'clock or whenever the senior staff meeting 0:50:02.120 --> 0:50:04.920 was over. You know, I relate to my staff with 0:50:05.080 --> 0:50:07.279 the messages for the day that we would discuss what 0:50:07.440 --> 0:50:12.560 problems we're working on, and then we would go into 0:50:12.840 --> 0:50:16.440 our more you know, day to day agenda, depending on 0:50:16.600 --> 0:50:20.880 what we were working on from a policy standpoint, we 0:50:21.000 --> 0:50:23.920 spent a lot of time up on Capitol Hill working 0:50:24.040 --> 0:50:26.879 with various members of different committees, both in the House 0:50:26.920 --> 0:50:29.000 and the Senate, because at the end of the day, 0:50:29.840 --> 0:50:31.480 you know, a lot of what we're trying to do 0:50:31.840 --> 0:50:35.720 is get legislation done. As we know, it takes sixty 0:50:35.840 --> 0:50:37.840 and sixty in the Senate to thirty five in the 0:50:37.960 --> 0:50:42.120 House and a presidential signature. There's ways around that during 0:50:42.200 --> 0:50:44.600 reconciliation for budget bills and things like that, but the 0:50:44.760 --> 0:50:48.200 overall legislation, you know, you're you're trying to do regular 0:50:48.280 --> 0:50:51.279 way or normal way, and you're working on trying to 0:50:51.320 --> 0:50:55.480 get legislation done. And you know, I think it's the 0:50:56.160 --> 0:50:59.919 job of the White House to drive normal way prosit 0:51:00.080 --> 0:51:05.680 says legislation. Working with either majority or minority leaders in 0:51:05.800 --> 0:51:10.520 the Senate or in the House, you have a really 0:51:10.840 --> 0:51:15.920 intricate working relationship with them on their agenda, and you 0:51:16.040 --> 0:51:19.120 know they have a pretty good idea who stands where 0:51:19.200 --> 0:51:22.640 on what peaches of the legislation. So we're attacking, you know, 0:51:22.880 --> 0:51:27.120 the various constituents on who needs time, who needs effort, 0:51:27.160 --> 0:51:28.160 who needs persuasion. 0:51:28.640 --> 0:51:30.080 In the head count, you know who to go to, 0:51:30.200 --> 0:51:30.840 who needs. 0:51:30.680 --> 0:51:34.680 Hand holding, who's solidly in your camp, who's solidly against you, 0:51:34.760 --> 0:51:37.960 who's on the fence, And you know that's sort of 0:51:38.040 --> 0:51:42.279 a typical day, but intertwined in there, you're at the 0:51:42.320 --> 0:51:46.200 beck and call of the President, and the President you know, 0:51:46.440 --> 0:51:49.920 can decide at any moment of the day. Basically, he 0:51:50.120 --> 0:51:53.560 wants you here the script, and he wants you in 0:51:53.680 --> 0:51:56.160 the oval office. He wants you some meeting, he wants 0:51:56.160 --> 0:51:59.960 you involved in something, and like you know, at a Goldman's, 0:52:00.120 --> 0:52:03.600 at your entire calendar, your entire schedule can get you know, 0:52:03.760 --> 0:52:07.879 blown up in thirty seconds or less. And that's that's 0:52:07.920 --> 0:52:10.319 what that's the way it works. And you know, one 0:52:10.360 --> 0:52:14.120 of my I think one of my important attributes is, 0:52:14.440 --> 0:52:16.800 you know, I made sure that I sat down with 0:52:16.880 --> 0:52:20.359 the president every day. You know, I sort of knew 0:52:20.400 --> 0:52:23.600 the times the day to go in and see him, 0:52:23.600 --> 0:52:25.880 and I try to spend you know, an hour or 0:52:25.960 --> 0:52:28.560 so a day alone when he wasn't distracted with other 0:52:28.600 --> 0:52:30.920 people coming in and out, and say, hey, look, this 0:52:31.200 --> 0:52:34.120 is what we're trying to get done. Here's where we are. 0:52:34.800 --> 0:52:37.439 What are your thoughts? You know, you okay with where 0:52:37.840 --> 0:52:40.160 we're going, because you know, you always want to be 0:52:40.280 --> 0:52:42.680 on the same page as the ultimate decision. 0:52:42.360 --> 0:52:45.719 Making, to say the least. So let's talk about probably 0:52:45.800 --> 0:52:51.880 the biggest economic legislative success of the entire administration. The 0:52:52.360 --> 0:52:57.400 TCJA tell Us a little bit about how this came together, 0:52:57.640 --> 0:53:01.600 how the parameters were formed, who was really driving the 0:53:01.680 --> 0:53:07.560 different aspects of that. It's really a fairly comprehensive package, 0:53:07.600 --> 0:53:10.879 and very different than previous tax cuts that were just hey, 0:53:10.960 --> 0:53:12.799 we're just going to play around with the different rates. 0:53:13.680 --> 0:53:21.680 So it's very comprehensive. We started on that plan in 0:53:21.840 --> 0:53:28.920 December of sixteen, so I had agreed to join the 0:53:29.000 --> 0:53:34.160 administration sort of beginning of December of sixteen, and by 0:53:34.200 --> 0:53:39.040 the middle of December, we're already starting to talk about taxes. 0:53:39.400 --> 0:53:41.719 We know that we want to get text don and like, 0:53:41.840 --> 0:53:45.560 one of the reasons I went into this job was taxes. 0:53:46.000 --> 0:53:48.320 I felt that we had a tax policy in the 0:53:48.440 --> 0:53:56.799 United States that was hindering growth and deterring US corporations 0:53:56.840 --> 0:54:00.440 from investing in the United States and penalizing them to 0:54:00.560 --> 0:54:02.960 do things that they actually wanted to do that were 0:54:03.080 --> 0:54:06.520 positive for the US economy and positive for US jobs. 0:54:07.000 --> 0:54:10.560 And to me, I felt this was a huge opportunity 0:54:10.760 --> 0:54:12.120 and there was an opportunity to fix this. 0:54:12.680 --> 0:54:15.680 And let me just remind every one of the timelines. 0:54:15.719 --> 0:54:20.080 So the election November twenty sixteen, December of that year, 0:54:20.200 --> 0:54:23.719 you're teeing it up President sworn in January twentieth, and 0:54:23.960 --> 0:54:25.160 you're hitting the ground running. 0:54:25.320 --> 0:54:28.719 We're hitting the ground running already in December, so by 0:54:28.800 --> 0:54:35.080 December me and other members of the team. At this point, 0:54:35.160 --> 0:54:37.759 it's a large team, you know, like everything, it's a 0:54:37.800 --> 0:54:39.320 large team because everyone wants to be involved. 0:54:39.440 --> 0:54:41.800 Did you bring people over from Goldman with you or no? 0:54:41.960 --> 0:54:42.480 I didn't bring it. 0:54:42.719 --> 0:54:44.040 Stood up a brand new t I didn't. 0:54:44.080 --> 0:54:45.880 I stood up a brand new team. I look, the 0:54:46.000 --> 0:54:48.640 first thing I did. Let me back up, because this 0:54:48.760 --> 0:54:50.960 is really important. The first thing I did when I 0:54:51.040 --> 0:54:54.040 accepted that that the neec Heade job is I went 0:54:54.120 --> 0:54:57.680 out and I hired a world class and I mean 0:54:57.760 --> 0:55:01.520 a world class team of experts. And I looked at 0:55:01.560 --> 0:55:03.800 it like, this is Goldman Sax, Like I need the 0:55:04.000 --> 0:55:06.960 best people in the world in each of the roles. 0:55:07.120 --> 0:55:10.600 And the NEC job is really interesting because it touches 0:55:10.719 --> 0:55:13.360 the broadest spectrum of economic policy. 0:55:13.680 --> 0:55:16.640 And feel free to name drop who'd you stand up 0:55:16.680 --> 0:55:17.520 with that group? No? 0:55:17.840 --> 0:55:20.000 Like, I went out and hire Jeremy Katz to be 0:55:20.120 --> 0:55:23.000 my deputy. You know, Jeremy was amazing. He'd worked in 0:55:23.080 --> 0:55:27.400 the White House before. He really knew the right people 0:55:27.440 --> 0:55:29.800 to go out and hire. He understood the roles. He 0:55:29.960 --> 0:55:32.600 understood what could get done and what couldn't get done. 0:55:33.080 --> 0:55:35.759 He knew that I really wanted to get taxes done. 0:55:36.040 --> 0:55:38.120 He told me, look, there's a woman by the name 0:55:38.160 --> 0:55:40.200 of Shahera Knight. You've got to go out and hire 0:55:40.239 --> 0:55:42.719 a Shahira if you want to get taxes done, like 0:55:42.880 --> 0:55:45.160 she here is your person. We went out, we got 0:55:45.239 --> 0:55:48.480 Shahera hired. You know, but then you've got to go 0:55:48.600 --> 0:55:51.359 out and hire people in the healthcare space. You've got 0:55:51.440 --> 0:55:53.880 to go out and hire people in the energy space. 0:55:53.960 --> 0:55:57.160 You've got to go hires people in the technology space. 0:55:57.600 --> 0:55:59.520 You've got to go out and hire people in the 0:55:59.600 --> 0:56:03.520 agrig cultural space. Jeremy knew all those people to hire. 0:56:03.640 --> 0:56:06.439 He went out, he brought me in the best people ever. 0:56:07.000 --> 0:56:10.239 And it was kind of interesting to me because it 0:56:10.360 --> 0:56:13.439 was interesting in really rewarding, because you know, Jeremy would 0:56:13.440 --> 0:56:15.280 bring these people in, he'd do the first and second 0:56:15.360 --> 0:56:19.399 round interviews, and then I'd meet him and Jeremy says, look, 0:56:19.400 --> 0:56:20.719 you got to meet these people. They want to meet 0:56:20.760 --> 0:56:21.960 you before they come to work for you. And I 0:56:22.000 --> 0:56:23.360 would sit down and talk to him and they were 0:56:23.480 --> 0:56:26.200 all amazing. They were amazingly talented. And I would sit 0:56:26.280 --> 0:56:29.600 there and go, guys, look, I desperately want you to 0:56:29.680 --> 0:56:34.120 come do this job. You're leaving a big, huge, high 0:56:34.200 --> 0:56:36.680 paying job. You know I can't offer you a whole lot. 0:56:37.560 --> 0:56:39.560 They used to laugh and they go, yeah, we know 0:56:39.680 --> 0:56:42.360 you can't. But look, we believe in you, we believe 0:56:42.400 --> 0:56:44.440 in the country. We want to serve. And it's amazing 0:56:44.520 --> 0:56:46.719 how many great people were willing to serve. 0:56:47.080 --> 0:56:48.879 And let me jump in here and just point out 0:56:49.360 --> 0:56:53.920 there have been criticisms about some Trump appointees and some 0:56:54.120 --> 0:56:59.160 of the process. The neec's reputation was really quite stellar. 0:56:59.360 --> 0:57:01.960 I had, I had a world class team. I'd put 0:57:02.000 --> 0:57:04.560 that team up against anyone, you know. I also had, 0:57:04.719 --> 0:57:07.719 you know, my chiefest staff, my chief of communications, actually Hicky. 0:57:08.120 --> 0:57:11.480 She was over the top amazing. I mean, she was 0:57:11.719 --> 0:57:14.399 one of the two assistants that sat outside of George 0:57:14.440 --> 0:57:20.800 Bush's office. She left there, she became a crisis communications expert. 0:57:20.960 --> 0:57:24.360 She worked on some of the most you know, known 0:57:24.520 --> 0:57:29.360 crisis communication issues. She also knew Washington in and out. 0:57:29.520 --> 0:57:31.600 She helped me go out and get all the right people. 0:57:32.520 --> 0:57:35.280 And because they knew the way the system worked, and 0:57:35.400 --> 0:57:38.240 I didn't. I was an outsider. They were able to 0:57:38.400 --> 0:57:40.640 guide me on who to hire, how to hire them, 0:57:41.200 --> 0:57:45.040 and how to have impact. Because you know, it's one 0:57:45.040 --> 0:57:47.680 of the most phenomenally interesting things we go through in 0:57:47.720 --> 0:57:50.360 the country that we don't really talk about. We talk 0:57:50.400 --> 0:57:55.000 about the peaceful transition of power, the peaceful transition of power, 0:57:55.040 --> 0:57:57.360 if you think about it. We don't have time to 0:57:57.400 --> 0:58:00.640 go through this. But at eleven fifty nine fifty nine, 0:58:01.280 --> 0:58:05.360 on January twentieth, the old administration walks out of the 0:58:05.400 --> 0:58:07.040 West Wing and walks out of the White House, and 0:58:07.120 --> 0:58:10.680 at twelve, at twelve o'clock on the dot, the new 0:58:10.800 --> 0:58:15.440 team can walk in. Much of the new team has 0:58:15.520 --> 0:58:18.160 never met each other. They've never seen each other, they 0:58:18.240 --> 0:58:21.000 don't know who they are. And we all walk into 0:58:21.040 --> 0:58:22.920 the West Wing or we walk into the old Executive 0:58:22.920 --> 0:58:25.000 office beyond, depending on where your office is, and we 0:58:25.160 --> 0:58:28.880 start working together as a team, not even knowing each 0:58:28.880 --> 0:58:32.520 other's name, not knowing what we do, not knowing our background. 0:58:33.080 --> 0:58:36.840 It's phenomenally interesting. So you have to know people, or 0:58:36.960 --> 0:58:38.960 you have to bring people on your team that can 0:58:39.120 --> 0:58:42.880 help you lead and without actually when they without Jeremy, 0:58:43.400 --> 0:58:45.120 I couldn't have got any of these things done. I mean, 0:58:45.160 --> 0:58:47.160 I really couldn't have. And most of the other people 0:58:47.760 --> 0:58:52.240 that they had me hire had been in the executive 0:58:52.280 --> 0:58:55.240 branch once before in their life. So I had a 0:58:55.400 --> 0:58:58.480 huge competitive advantage over a bunch of the other people 0:58:59.080 --> 0:58:59.800 that were in there. 0:59:00.000 --> 0:59:03.000 So let's talk about that advantage, and let's use the 0:59:03.120 --> 0:59:08.200 TCJA as our example. How does that come together? How 0:59:08.240 --> 0:59:12.000 did the different major policy posts come through? Does this 0:59:12.160 --> 0:59:15.640 start at the White House? Does it start with Poetus 0:59:15.760 --> 0:59:18.200 or do you go to the President and say, here's 0:59:18.280 --> 0:59:20.600 what we think we could get through Congress? Tell us 0:59:20.640 --> 0:59:22.560 how this begins and how does it get check? 0:59:22.760 --> 0:59:27.440 So tax is really unique. So the reason I'd accepted 0:59:27.520 --> 0:59:30.760 the job is because of tax reform and the President 0:59:31.360 --> 0:59:33.080 elect at the time we were starting this, and then 0:59:33.080 --> 0:59:36.240 the President knew that that was one of my big targets. 0:59:37.200 --> 0:59:40.600 So we had talked about it. Steve Minuchen and I 0:59:40.720 --> 0:59:44.720 had talked about it. But at the time we started 0:59:44.840 --> 0:59:49.040 down tax reform, the House was starting down tax reform. 0:59:49.280 --> 0:59:54.200 Paul Ryan was a big tax guy. So Brady and 0:59:54.360 --> 0:59:57.280 Ryan they were heading down their own path on what 0:59:57.480 --> 0:59:59.240 they thought tax reform should. 0:59:58.960 --> 1:00:01.920 Look like, but different. It was really Rachel if I 1:00:02.080 --> 1:00:02.680 remember right. 1:00:02.880 --> 1:00:07.160 No, No, So Brady and Ryan weren't a completely different 1:00:07.280 --> 1:00:09.320 place than we and the They were in a border 1:00:09.360 --> 1:00:11.960 adjusted tax. I mean, they wanted to do a border 1:00:12.040 --> 1:00:16.320 adjusted tax system. We and the White House did not 1:00:17.400 --> 1:00:19.080 want to do a border adjusted tax. 1:00:19.120 --> 1:00:21.680 And define that because I know you're very much a 1:00:21.840 --> 1:00:24.760 free trade advocacy, I'm a free trade advocate. Tell us 1:00:24.800 --> 1:00:26.640 how this conflict comes into play. 1:00:26.760 --> 1:00:30.120 Well, Basically, a border adjusted taxes you tax things at 1:00:30.200 --> 1:00:35.400 the border to equalize them. We felt that border adjustment 1:00:35.520 --> 1:00:40.640 tax had a really negative impact on sort of harder 1:00:40.720 --> 1:00:46.040 working middle class Americans, people that shop at the at 1:00:46.080 --> 1:00:48.480 the big box retailers, in the Walmarts, because they import 1:00:48.560 --> 1:00:51.400 a lot of their goods. Those goods would be taxed 1:00:51.520 --> 1:00:52.240 at the border. 1:00:52.400 --> 1:00:56.960 Walmart, Costco, Target exactly. Everything would be twenty everything would 1:00:56.960 --> 1:00:57.200 be twenty. 1:00:57.280 --> 1:00:59.520 They would put a twenty five percent border adjustment tax 1:00:59.640 --> 1:00:59.920 on the. 1:01:00.200 --> 1:01:01.240 It's a giant number. 1:01:01.240 --> 1:01:03.480 It's a giant number. We felt it was. It was 1:01:03.600 --> 1:01:07.400 really a progressive, progressive tax, I'm sorry, regressive tax. It was. 1:01:07.920 --> 1:01:11.120 It was a regressive tax. We did not see that 1:01:11.560 --> 1:01:17.280 is making sense to us. So our initial meetings were 1:01:17.400 --> 1:01:22.280 between you know, those of us coming into the White 1:01:22.360 --> 1:01:26.680 House and the House, and we went down every Monday 1:01:26.760 --> 1:01:30.120 night in December and January prior to the inauguration, and 1:01:30.240 --> 1:01:33.000 Speaker Ryan held a meeting in his conference room and 1:01:33.120 --> 1:01:35.640 we had you know, buffet dinners in there, and we 1:01:35.720 --> 1:01:41.160 were hashing out these these thoughts. Now, ultimately it came 1:01:41.680 --> 1:01:44.880 that the Senate was not going to do a border 1:01:44.960 --> 1:01:48.520 adjustment tax. Not surprising, so, but we had to get 1:01:48.560 --> 1:01:51.640 to the point where you know, the House and in 1:01:51.840 --> 1:01:55.720 in in Brady and Ryan, who were who were really 1:01:55.920 --> 1:01:58.680 too good tax experts, who spend an enormous amount of 1:01:58.760 --> 1:02:02.760 time on tax, had to give up on what they 1:02:02.960 --> 1:02:07.200 thought was their primary plan. I think by the time 1:02:07.280 --> 1:02:13.000 we got into inauguration in January, it was clear that 1:02:13.200 --> 1:02:17.360 border adjustment was not going to be the overall plan. 1:02:18.040 --> 1:02:23.400 So now we start going back to what can we 1:02:23.480 --> 1:02:26.280 all agree upon? And this to me is no different 1:02:26.320 --> 1:02:29.280 than any other deal I'd ever worked upon. Okay, let's 1:02:29.320 --> 1:02:32.080 not try and solve the hard issues. Let's try and 1:02:32.160 --> 1:02:34.880 figure out what we all can agree upon. And so 1:02:35.720 --> 1:02:40.600 issue by issue, we all started deciding what we are 1:02:40.680 --> 1:02:43.560 trying to achieve and what we were deciding we could 1:02:43.600 --> 1:02:51.160 agree upon and as with everything, when we started, a 1:02:51.760 --> 1:02:54.080 was pre inauguration, so people didn't have a lot to do. 1:02:54.200 --> 1:02:56.640 So there are lots of people in the room. As 1:02:56.720 --> 1:03:00.360 we got farther down the path, people I think to do. 1:03:00.800 --> 1:03:03.200 People realize this was gonna be a longer process, This 1:03:03.440 --> 1:03:06.400 was gonna be an arduous process. You know, less people 1:03:06.520 --> 1:03:08.600 started showing up to the meetings and we started getting 1:03:08.640 --> 1:03:10.920 to the real core group of people that knew what 1:03:11.000 --> 1:03:13.480 they were doing. We ended up with what they call 1:03:13.640 --> 1:03:16.040 the Group of Six, the group of six that was 1:03:16.120 --> 1:03:17.880 you know, two from the House, two from the Senate 1:03:17.960 --> 1:03:19.880 and Minutent, and I from the from the White House. 1:03:21.960 --> 1:03:25.320 So the Big Six became the Big six of we're 1:03:25.400 --> 1:03:27.560 going to sit down and we're going to hash out 1:03:28.720 --> 1:03:32.480 what we think tax policies should look like, and then 1:03:32.520 --> 1:03:33.720 we're going to work from there. 1:03:34.080 --> 1:03:37.880 So is this very typical to have this small group 1:03:38.040 --> 1:03:41.600 representing House, Senate, and White House, Because that's a lot 1:03:41.680 --> 1:03:43.480 of firepower in one room. 1:03:43.800 --> 1:03:48.240 It's it's not typical. And and you know, I give 1:03:48.760 --> 1:03:52.480 Brady and I give Ryan an enormous amount of credit 1:03:53.400 --> 1:03:57.439 for handling the Ways and Means Committee because technically tax 1:03:57.600 --> 1:04:00.000 legislation is supposed to start in the Ways and Means Committee. 1:04:00.240 --> 1:04:02.440 The Ways and Means Committe is a very large committee. 1:04:02.520 --> 1:04:05.520 We'll start I don't know if that's the right word, 1:04:05.640 --> 1:04:08.720 or or at least they get handed the football at as. 1:04:08.880 --> 1:04:12.000 Well technically in there in the real world, if you 1:04:12.240 --> 1:04:16.360 if you read the little definition, the Ways and Means 1:04:16.440 --> 1:04:19.560 Committee is where all tax legilacation needs to start. Now, 1:04:20.720 --> 1:04:25.680 ultimately we handed them the football. They made some minor 1:04:25.840 --> 1:04:29.680 changes and it progressed. So tax legislation has to start 1:04:29.720 --> 1:04:31.400 in the House. It has to start in the Ways community, 1:04:31.400 --> 1:04:33.560 the Ways and Means Committee. The six of us got 1:04:33.680 --> 1:04:40.080 to a place where we had enough agreement unwhere to 1:04:40.160 --> 1:04:44.480 go what we thought the basic fundamentals were that we 1:04:44.720 --> 1:04:48.040 then you know that Brady and Ryan could then handle 1:04:48.440 --> 1:04:50.320 the Ways and Means Committee. We could get the Ways 1:04:50.360 --> 1:04:54.560 and Means Committee involved, We got them actively involved, and 1:04:54.760 --> 1:04:59.920 ultimately we got a piece of legislation through the House. Now, 1:05:01.000 --> 1:05:03.280 I don't want to say this in the wrong way, 1:05:03.360 --> 1:05:06.920 but the House wasn't the tougher piece. You know, the 1:05:07.160 --> 1:05:09.920 Republicans had a House majority, they had a decent majority, 1:05:11.440 --> 1:05:14.560 and we thought that we would get to the requisite 1:05:14.840 --> 1:05:17.000 to our thirty five votes to get through the House 1:05:17.120 --> 1:05:19.120 a piece of tax legislation. 1:05:19.240 --> 1:05:20.040 Like herding cats. 1:05:20.080 --> 1:05:24.760 Though right now, Look, there were some controversial things in there. 1:05:25.040 --> 1:05:30.280 As we all know, the salt deduction was a issue 1:05:30.400 --> 1:05:34.800 that people on both sides of the aisle had a 1:05:34.960 --> 1:05:39.560 difficult time dealing with. If you're a northern New Jersey Republican, 1:05:40.840 --> 1:05:43.960 you weren't happy having to vote for that, or even 1:05:43.960 --> 1:05:48.120 if you're a New York State Republican from Westchester, it's 1:05:48.160 --> 1:05:52.200 a tough vote for you to make. There were a 1:05:52.320 --> 1:05:59.160 bunch of major corporate changes, the deemed repatriation, which was 1:05:59.240 --> 1:06:02.160 one of the things that I thought was really important, 1:06:02.760 --> 1:06:04.480 like the White House steam manage and I thought was 1:06:04.560 --> 1:06:05.120 really interestant. 1:06:05.120 --> 1:06:09.120 So to find that for listeners subscribe corporate repatriation. 1:06:09.360 --> 1:06:11.280 We had a because this was a very big deal, 1:06:11.400 --> 1:06:14.040 this huge, huge deal. So we had a tax system 1:06:14.120 --> 1:06:20.080 prior to JCT's where as a US based tax payer, 1:06:21.000 --> 1:06:24.800 if you were earning money offshore, as long as you 1:06:24.960 --> 1:06:28.880 left your money offshore, you did not pay US taxes. 1:06:29.080 --> 1:06:32.120 The minute you brought it back into the US you 1:06:32.360 --> 1:06:33.200 had to pay. 1:06:33.120 --> 1:06:35.400 Taxes, which by the way, is very different from you 1:06:35.520 --> 1:06:38.240 and I as individuals. Yes, if we're US citizens and 1:06:38.280 --> 1:06:40.840 I'm earning my money overseas, I'm still. 1:06:40.680 --> 1:06:45.160 Paying You're still paying tax. So it almost forced large 1:06:45.280 --> 1:06:51.880 US companies to bring to leave their money offshore. And 1:06:52.000 --> 1:06:54.600 when you're forcing US companies to leave their money offshore, 1:06:55.680 --> 1:06:58.840 you're actually forcing them to make capital investment off shore, 1:06:59.120 --> 1:07:03.840 build factories offshore, hire people offshore, which to me was 1:07:03.960 --> 1:07:08.240 the complete wrong incentive. We wanted people to bring their 1:07:08.320 --> 1:07:09.720 money back on shore. 1:07:10.360 --> 1:07:15.040 So we said, to clarify, bring it back here, build factories, 1:07:15.120 --> 1:07:18.960 hire people, invest here in the US. Correct, And what 1:07:19.280 --> 1:07:21.920 was the change in tax rate so versus had it 1:07:22.040 --> 1:07:23.320 been earned here in the US. 1:07:23.600 --> 1:07:26.040 So it was not necessarily a tax rate issue. Was 1:07:26.120 --> 1:07:28.520 just an avoidance of tax. If I never bring it back, 1:07:29.080 --> 1:07:30.000 I don't pay the tax. 1:07:30.160 --> 1:07:31.440 So how did this change? 1:07:31.480 --> 1:07:32.000 So what we do? 1:07:32.160 --> 1:07:33.840 What was the incentive to have them bring it back? 1:07:33.920 --> 1:07:37.040 So what we did is we said, Okay, you can 1:07:37.160 --> 1:07:39.880 leave your money offshore. We're going to just deem it 1:07:40.680 --> 1:07:43.280 to have been repatriated, so we don't care where you 1:07:43.400 --> 1:07:45.560 leave your money. We're gonna We're going to give you 1:07:45.720 --> 1:07:49.400 five years to pay the taxes on the offshore money. 1:07:49.960 --> 1:07:52.280 So over the next five years, you're going to have 1:07:52.480 --> 1:07:55.800 to pay all of the taxes that you would have paid, 1:07:56.360 --> 1:07:58.520 assuming you would have brought back all your money, and 1:07:58.640 --> 1:08:00.640 all your foreign earnings are going to to be taxed 1:08:00.680 --> 1:08:02.680 as if they were earned in the United States. 1:08:02.800 --> 1:08:05.160 So that's the stick. Tell us about the carrot. 1:08:05.560 --> 1:08:08.400 Well, we gave lots of carrots. We gave lots of carrots, 1:08:08.440 --> 1:08:11.080 We gave lots of credits, we gave lots of incentives, 1:08:11.720 --> 1:08:15.080 and we gave lots of different ways for people to 1:08:16.040 --> 1:08:19.560 move their money in a way, but the ways that 1:08:19.680 --> 1:08:22.720 we gave carrots was we wanted you to invest in 1:08:22.800 --> 1:08:25.920 the United States where possible, and we wanted you and 1:08:26.040 --> 1:08:29.080 we forced you to repatriate your earnings back to the 1:08:29.160 --> 1:08:32.599 United States. So we gave you huge R and D credits. 1:08:32.640 --> 1:08:35.479 We gave you huge credits to build factories in the 1:08:35.600 --> 1:08:38.320 United States, we gave you credits to hire people, We 1:08:38.400 --> 1:08:40.920 gave you credits for everything we could. But we deemed 1:08:41.000 --> 1:08:43.560 you to have your worldwide earnings come back to the 1:08:43.680 --> 1:08:44.240 United States. 1:08:44.280 --> 1:08:48.200 And approximately how much capital would you guess return to 1:08:48.240 --> 1:08:49.840 the US, Well, lots of it. 1:08:50.040 --> 1:08:52.839 I mean it was brilliant trillions. It measured in trillions, 1:08:52.960 --> 1:08:55.120 Like I don't want to call out companies by themselves. 1:08:55.120 --> 1:08:57.360 But look, Apple was very clear. Apple was one of 1:08:57.439 --> 1:09:01.599 the largest holders of offshore capital. Into Tim Cook's credit, 1:09:01.720 --> 1:09:06.040 he brought back money almost instantly, and he said, he said, 1:09:06.080 --> 1:09:08.760 why our legislation is. Look, if this legislation passes, I 1:09:08.800 --> 1:09:11.360 will just bring back my money. I will pay the taxes. 1:09:11.439 --> 1:09:14.720 I understand what you're doing this. We had pretty good 1:09:14.760 --> 1:09:19.400 support from the corporate community on repatriation, and so we 1:09:19.640 --> 1:09:22.920 we did things like that where we said, look, you 1:09:23.000 --> 1:09:26.759 can no longer just hide your money and in foreign countries, 1:09:27.120 --> 1:09:30.559 you're a US based company, you're a US taxpayer, gonna 1:09:30.600 --> 1:09:32.599 you're gonna have deemed to have brought your money back. 1:09:32.720 --> 1:09:36.040 We don't want you to incentivize to spend your money 1:09:36.080 --> 1:09:39.240 offshore and build property, plant and equipment offshore. 1:09:39.680 --> 1:09:42.680 So let's talk about two of the other big factors 1:09:43.160 --> 1:09:47.240 in the TCGA. One was the shifting of the rates 1:09:47.400 --> 1:09:51.519 and the other was the LLC pass throughs, which really 1:09:52.160 --> 1:09:56.639 was a huge structural change. Rates are pretty easy. Rates 1:09:56.720 --> 1:09:59.439 came down, the top rates came down. Everything else kind 1:09:59.479 --> 1:10:00.640 of got rej little bit. 1:10:01.040 --> 1:10:06.320 Top rates came down, But that that that that that helped. 1:10:06.439 --> 1:10:08.559 If you looked at the disu It helped the bottom 1:10:08.680 --> 1:10:12.920 two thirds of the distribution. Top rates came down for everyone. 1:10:13.360 --> 1:10:16.040 But the the the thing that we did to correct 1:10:16.120 --> 1:10:18.800 that is we got rid of the largest loophole that 1:10:18.960 --> 1:10:22.080 exists in the tax code, which was the salt deduction. 1:10:22.600 --> 1:10:27.160 So the wealthier people and the top tax rates, they 1:10:27.280 --> 1:10:31.200 were subtracting from their income. They were subtracting their state tax, 1:10:31.360 --> 1:10:34.400 they were subtracting their state income. They were staying their 1:10:34.439 --> 1:10:37.800 mortgage deduction, they were, they were subtracting the real estate 1:10:37.920 --> 1:10:41.200 taxes they were so they were lowering the amount of 1:10:41.400 --> 1:10:45.160 income that they taxed. So my basic premise, and I 1:10:45.240 --> 1:10:48.639 think this is good tax policy, is lower the rate, 1:10:48.920 --> 1:10:52.360 broaden the base. So we were trying to broaden the base. 1:10:52.439 --> 1:10:54.759 We were trying to say, look, we're going to stop 1:10:54.880 --> 1:10:58.559 having you deduct all these things from your income. We're 1:10:58.560 --> 1:11:00.599 gonna say your income is your income, but we're going 1:11:00.640 --> 1:11:03.479 to charge you a smaller rate on your income. We 1:11:03.640 --> 1:11:06.559 tried to simplify the whole tax return. If you remember, 1:11:07.160 --> 1:11:09.559 there was times when you know, the President said, it's 1:11:09.600 --> 1:11:11.040 so simple, you can do it on the back of 1:11:11.040 --> 1:11:11.639 an envelope. 1:11:11.720 --> 1:11:14.519 We can we can have a tax return the feeling. 1:11:14.960 --> 1:11:16.800 I have a feeling you're you don't file on the 1:11:16.840 --> 1:11:17.880 back of an enveluce. 1:11:17.600 --> 1:11:20.479 I do not need to do Yeah, I don't follow on. 1:11:20.840 --> 1:11:22.120 I can't even get on a sheet of paper. 1:11:22.200 --> 1:11:24.519 So let's talk about the other one, and I will admit. 1:11:24.680 --> 1:11:28.080 So at the time of the salt deduction going away, 1:11:28.600 --> 1:11:32.120 I cursed you, I cursed the president. And then I 1:11:32.280 --> 1:11:35.360 started reading about this LLC passed through right, and my 1:11:35.520 --> 1:11:38.439 business is an LLC, And I'm like, oh, so wait 1:11:38.479 --> 1:11:42.160 a second, let's talk about this. Who created that concept. 1:11:42.640 --> 1:11:46.400 That's a giant shift is the way we tax small businesses. 1:11:46.720 --> 1:11:49.800 So here's always a big debate when you get down 1:11:49.920 --> 1:11:53.200 to doing taxes in the United States. So we have 1:11:53.280 --> 1:11:57.320 a corporate rate and then we have a rate for 1:11:58.600 --> 1:12:02.479 ll Caesar pastors. Now, l season pass throughs can be 1:12:02.840 --> 1:12:06.800 very large companies that are not corporates. We have some 1:12:07.200 --> 1:12:09.720 very very large pass through companies and. 1:12:09.800 --> 1:12:12.720 Partnership law firms, accounting firms go down the list. 1:12:13.240 --> 1:12:18.960 We have some even larger major training companies, major retail 1:12:19.080 --> 1:12:24.240 companies that are LLC's are passed through companies. So you 1:12:24.479 --> 1:12:30.320 have this debate about the fairness between the corporate tax 1:12:30.439 --> 1:12:37.040 rate and the LLC or non corporate tax rate, and 1:12:38.240 --> 1:12:41.280 how do you make sure there's not an arbitrage in there? 1:12:42.040 --> 1:12:46.599 So you're an LLC. But if I lower the corporate 1:12:46.720 --> 1:12:51.040 tax rate low enough, you'll just become a corporation and 1:12:51.160 --> 1:12:54.840 you'll pay your corporate tax rate, and then you'll find 1:12:54.880 --> 1:12:59.080 that you'll find ways ultimately to run your business through 1:12:59.120 --> 1:13:02.400 a corporation because you'll tax and centivize. So we were 1:13:02.560 --> 1:13:09.600 trying to create a level playing field for LLC's or 1:13:10.600 --> 1:13:13.839 look it still is this day. The vast, vast majority 1:13:13.920 --> 1:13:18.599 of LLCs in this country are small, small family businesses 1:13:18.800 --> 1:13:22.600 and small businesses. So we wanted small businesses to be 1:13:22.760 --> 1:13:26.679 taxed at a favorable rate. We want to incentivized small businesses. 1:13:27.040 --> 1:13:29.320 We wanted small businesses to grow, We want them to 1:13:29.400 --> 1:13:35.080 hire more people. So we created ways for LLC income 1:13:35.520 --> 1:13:38.959 and different amounts of income and income below certain threshold 1:13:39.439 --> 1:13:44.560 to be taxed at a preferential rate to allow LLC's 1:13:45.160 --> 1:13:49.000 to be very competitive and more competitive than corporations if 1:13:49.040 --> 1:13:52.160 you were a small LLC. So we're telling you, if 1:13:52.200 --> 1:13:56.519 you're a small business person today, your LLC structure should 1:13:56.560 --> 1:13:59.639 be incentivizing for you to grow your business and stay 1:13:59.640 --> 1:14:01.760 in an l We'll see you don't need to become 1:14:01.840 --> 1:14:04.759 a corporation to take advantage of a tax code. 1:14:04.960 --> 1:14:08.960 And I have a vivid recollection of New York State 1:14:09.680 --> 1:14:12.479 reaching out to the IRS and saying, we want to 1:14:12.560 --> 1:14:16.200 clarify what our rules can be with LLC, and the 1:14:16.280 --> 1:14:18.320 IRS said, yes, you can do this, you can do that. 1:14:18.560 --> 1:14:22.160 And then New York State disseminated new information, and then 1:14:22.240 --> 1:14:26.320 California and then Illinois, and then it just cascaded and 1:14:26.640 --> 1:14:29.960 suddenly a lot of Blue states, or at least small 1:14:30.000 --> 1:14:33.200 business owners in Blue states that were complaining about the 1:14:33.320 --> 1:14:36.400 salt deduction the oly Way, suddenly like, hey, this is 1:14:36.720 --> 1:14:40.240 not the worst thing that happened here with this tax code. 1:14:40.600 --> 1:14:43.560 How long did it take before people realized this is 1:14:43.960 --> 1:14:47.680 a really substantial change to small business because the pushback 1:14:47.760 --> 1:14:49.400 on salt was pretty fierce. 1:14:50.080 --> 1:14:56.120 Yeah. Look, I don't know. The political rhetoric today is 1:14:56.320 --> 1:15:01.240 still pretty high on the jac that it was a 1:15:01.360 --> 1:15:04.320 tax cut for the rich. I think the data does 1:15:04.400 --> 1:15:07.640 not tell you that. And if you look at the 1:15:08.200 --> 1:15:12.240 tax revenues collected in absolute dollars, and you look at 1:15:12.280 --> 1:15:16.360 tax collected as a percentage of GDP, it would tell 1:15:16.439 --> 1:15:21.720 you that the code actually worked pretty well and has 1:15:21.800 --> 1:15:25.320 done well to incentivize people to grow businesses, hire people, 1:15:25.840 --> 1:15:30.599 and pay taxes. I don't see it as a tax 1:15:30.680 --> 1:15:33.439 cut on the rich. You and I were talking before. 1:15:34.200 --> 1:15:37.759 Most of our friends are probably paying more taxes today 1:15:37.960 --> 1:15:41.080 than they were because they lost their large deductions by 1:15:41.160 --> 1:15:43.599 living in New York City, New York State, by living 1:15:43.640 --> 1:15:47.360 in New Jersey. Anyone lives in California, it's clearly not 1:15:47.520 --> 1:15:48.760 a tax cut for them. 1:15:49.600 --> 1:15:54.599 It really changes from industry to industry. The biggest issue 1:15:54.840 --> 1:15:57.680 is normally, so you pass something in twenty seventeen, it 1:15:57.760 --> 1:16:00.240 goes into effect twenty eighteen, and then you get five 1:16:00.320 --> 1:16:03.120 years of data and say, let's look at how this worked. 1:16:03.760 --> 1:16:07.080 We had that little snaff, we have SATA, we have 1:16:07.200 --> 1:16:11.360 screw so it's still a little difficult to conclusively say 1:16:12.000 --> 1:16:15.080 where this was. But there's some sense of the trend 1:16:15.560 --> 1:16:16.280 this was moving in. 1:16:16.520 --> 1:16:19.719 We have some screwy data, But even with the screwy data, 1:16:21.320 --> 1:16:25.200 I would agree with you the trend is the tax 1:16:25.439 --> 1:16:30.560 receipts and tax revenue have far exceeded all of the 1:16:30.800 --> 1:16:37.720 forecasted assumptions and all of the the the views that 1:16:37.840 --> 1:16:42.360 were stated when we were passing the legislation. All of 1:16:42.439 --> 1:16:45.000 the scare mongering that went on when we were passing 1:16:45.040 --> 1:16:47.720 the legislation, how this was a tax cut for the 1:16:47.880 --> 1:16:52.400 rich and tax receipts are going down dramatically has been unfounded. 1:16:52.920 --> 1:16:57.760 And many states that follow the federal government and get 1:16:57.880 --> 1:17:00.880 rid of the assault tax deduction, many of those states 1:17:00.960 --> 1:17:04.920 have found themselves in a huge surplus situation and they 1:17:04.960 --> 1:17:08.759 have lowered their tax rates because they have ample supply 1:17:08.840 --> 1:17:11.040 of tax revenue coming in by getting rid of the deduction. 1:17:11.520 --> 1:17:14.480 So I think, you know, it's going to be impossible 1:17:14.600 --> 1:17:16.920 to say for sure because of what happened in COVID, 1:17:17.400 --> 1:17:20.920 but I think the overwhelming data has been that the JCTA, 1:17:21.120 --> 1:17:23.679 THEA has done exactly what we said it would. 1:17:23.520 --> 1:17:26.040 Do, and this is going to come up for renewal 1:17:26.920 --> 1:17:28.960 in a couple of years, the end. 1:17:28.880 --> 1:17:33.160 Of twenty five. So now not the corporate side, the 1:17:33.280 --> 1:17:35.479 personal side comes up at the end of twenty fus. 1:17:35.720 --> 1:17:39.240 So here's the question. I mean, it's impossible to forecast 1:17:39.320 --> 1:17:42.640 this sort of thing. Do we think that this is 1:17:43.000 --> 1:17:46.800 likely to be renewed or is there something else coming? 1:17:46.880 --> 1:17:49.519 And really the answer to that question is what happens 1:17:49.600 --> 1:17:50.479 in twenty twenty four. 1:17:52.120 --> 1:17:56.720 I think it's a bit what happens in twenty twenty four. 1:17:58.040 --> 1:17:59.960 But if you put a gun to my head today, 1:18:00.280 --> 1:18:02.680 I would think that ninety five percent of that tax 1:18:02.760 --> 1:18:03.679 code is getting renewed. 1:18:04.120 --> 1:18:07.680 Really, yeah, that's quite fascinating. So we've spent a lot 1:18:07.720 --> 1:18:07.960 of time. 1:18:08.200 --> 1:18:10.639 It's actually worked too large. 1:18:11.160 --> 1:18:13.080 Unfortunately, by the way, I know, I'm going to get 1:18:13.080 --> 1:18:16.280 pushed back on the data. Well, the tax code showed this, 1:18:16.439 --> 1:18:17.760 and if you look at it this way, then the 1:18:17.880 --> 1:18:21.200 master that. So there's still some debate on the numbers, 1:18:21.320 --> 1:18:25.120 but by and large, you're satisfied with the results of it. 1:18:25.240 --> 1:18:27.120 I'm satisfied with this, And you think it had a 1:18:27.160 --> 1:18:28.679 positive impact on the economy. 1:18:28.760 --> 1:18:30.639 I think it's had a positive impact on the economy. 1:18:31.120 --> 1:18:34.080 I think has a positive impact on having the money repatriated. 1:18:34.479 --> 1:18:38.559 When you talk about people are talking about people building 1:18:39.160 --> 1:18:41.880 plants in the United States, people are talking about US 1:18:41.960 --> 1:18:45.760 redomiciling our supply chain and doctors. A lot of this 1:18:45.960 --> 1:18:49.640 is happening because companies were they weren't forced, but they 1:18:49.720 --> 1:18:51.840 got taxed on the money off shore anyways, so when 1:18:51.840 --> 1:18:54.560 they brought it back, it was easy for them to 1:18:54.680 --> 1:18:56.680 spend it back in the United States. So a lot 1:18:56.760 --> 1:19:00.000 of the effect people are seeing they have to understand 1:19:00.160 --> 1:19:02.800 the cause. The cause was okay, that money had to 1:19:02.880 --> 1:19:04.479 come back. It didn't have to come back. That money 1:19:04.560 --> 1:19:06.960 was being taxed anyways. So once it's being taxed and 1:19:07.000 --> 1:19:09.880 I'm bringing it back on shore, well, I can't spend 1:19:09.960 --> 1:19:11.680 it to build a factory in the United States. I 1:19:11.800 --> 1:19:15.519 can't spend it to modernize these things. So I think 1:19:15.600 --> 1:19:18.880 when we look back at this with enough years of data, 1:19:19.000 --> 1:19:21.840 with the COVID blip being a blip, not that it's 1:19:21.880 --> 1:19:22.920 a blitz a blip, and. 1:19:22.960 --> 1:19:25.920 Tax a couple of years in tax time, Yeah, for sure. 1:19:26.040 --> 1:19:29.960 I think that we'll say, hey, this tax plan worked 1:19:30.240 --> 1:19:30.880 pretty well. 1:19:31.479 --> 1:19:36.200 Safe to say this is your most satisfying accomplishment in 1:19:36.560 --> 1:19:38.120 the public servants space. 1:19:38.320 --> 1:19:44.600 Absolutely absolutely, it was one hundred. It basically occupied I 1:19:44.640 --> 1:19:47.560 would say, the vast, vast majority of my time for 1:19:47.720 --> 1:19:51.599 about three hundred and sixty five days, so really two thirds. 1:19:51.680 --> 1:19:56.320 We signed it December twenty second at twelve noon and 1:19:56.760 --> 1:20:00.320 seventeen and I started working on it in December sixth team, 1:20:00.520 --> 1:20:03.559 so literally for about three hundred and sixty five days straight, 1:20:05.240 --> 1:20:08.760 my mind was thinking tax code, tax code, tax code, 1:20:08.760 --> 1:20:09.280 tax code. 1:20:10.040 --> 1:20:12.240 Let's talk a little bit about what's going on in 1:20:12.320 --> 1:20:15.120 the world today. I want to talk about technology, but 1:20:15.200 --> 1:20:18.960 first we have to talk about what's arguably the most 1:20:19.000 --> 1:20:23.240 aggressive tightening cycle in Federal Reserve history. What's going on 1:20:23.520 --> 1:20:26.280 in the world of interest rates and FED funds. 1:20:27.560 --> 1:20:29.760 Well, I think you just said it. We're going to 1:20:29.880 --> 1:20:34.400 the most aggressive tightening cycle we've seen, you know. I 1:20:34.520 --> 1:20:37.519 think unfortunately the FED was late to the game. But 1:20:37.920 --> 1:20:40.960 aren't they always Yeah, and they're going to stay too long. 1:20:41.160 --> 1:20:43.080 You know, it's always they come late to the party, 1:20:43.120 --> 1:20:45.320 and they the last ones to come in, the first 1:20:45.439 --> 1:20:47.240 and the last ones to leave. I guess that's what 1:20:47.360 --> 1:20:52.800 they are. But the question to me is it's more 1:20:52.840 --> 1:20:55.640 broad than that. Right now, you know, the FED is 1:20:55.720 --> 1:20:59.599 tightened in gustrates quite considerably, and we all know there's 1:20:59.600 --> 1:21:05.040 a lag effector you know, and so the first raises 1:21:05.120 --> 1:21:07.760 they have, now we're a year or so into that 1:21:07.920 --> 1:21:08.640 cycle in. 1:21:08.720 --> 1:21:11.280 March twenty twenty two, we're eighteen months out. 1:21:11.439 --> 1:21:15.240 We're a year plus the into that cycle. We don't 1:21:15.320 --> 1:21:19.160 know what the full impact of these raises is. So 1:21:19.280 --> 1:21:22.320 that's number one. So for the FED to keep going 1:21:23.520 --> 1:21:27.400 I would be concerned. Now, I think we all believe 1:21:28.200 --> 1:21:31.479 that the FED maybe has one more twenty five. I 1:21:31.560 --> 1:21:35.160 would potentially hope they'd have no more twenty fives, because 1:21:35.600 --> 1:21:38.880 with you, I'm not even sure what the effect is 1:21:39.760 --> 1:21:43.599 of the raising the rates and a longer discussion about 1:21:43.720 --> 1:21:46.760 FED policy and how effective it's been over the last 1:21:46.800 --> 1:21:49.599 two decades, but I'm not going to go there right now. 1:21:51.960 --> 1:21:58.200 What's more interesting, in my opinion, is what the FED 1:21:58.400 --> 1:22:01.479 been trying to do by raising rates and slowing down 1:22:01.520 --> 1:22:05.920 the economy, slowing down employment growth. So far, we have 1:22:06.080 --> 1:22:09.080 not seen that. We really have seen. We've seen a 1:22:09.200 --> 1:22:12.680 little bit of job creations slow down if you look 1:22:12.720 --> 1:22:16.040 at the Jolts data, but we really we've seen a 1:22:16.160 --> 1:22:19.640 little bit of a tiny, minuscule pickup in unemployment, but 1:22:19.720 --> 1:22:21.840 that seems more like it's people coming back to the 1:22:21.960 --> 1:22:26.240 job market because savings is starting to dry. 1:22:26.120 --> 1:22:30.280 Up, wage gains are slowing, real estate still still having 1:22:30.280 --> 1:22:31.759 a little issue, still having. 1:22:31.600 --> 1:22:35.680 A little issue, but we're still pretty much at full employment. 1:22:36.479 --> 1:22:44.600 We're still having wage gains overall. And I think what 1:22:44.760 --> 1:22:48.360 we're seeing in I think what we all have to 1:22:48.400 --> 1:22:51.960 figure in here is we've never gone through a cycle 1:22:52.720 --> 1:22:57.320 where the federal reserve is tightening with one hand and 1:22:57.439 --> 1:23:01.760 the federal government is spending with the other hand. And 1:23:02.000 --> 1:23:04.560 so as much as the federal reserve is tiding, the 1:23:04.680 --> 1:23:08.160 federal government continues to spend. They continue to have money 1:23:08.240 --> 1:23:10.519 to spend on infrastructure, They continue to have money to 1:23:10.600 --> 1:23:13.200 spend on the Inflation Reduction Act, they continue to have 1:23:13.320 --> 1:23:17.480 money to spend on chips. They keep rewarding big contracts. 1:23:18.080 --> 1:23:21.560 These big contracts are going to continue to put demands 1:23:21.600 --> 1:23:24.759 into the labor market. So I'm not sure we're slowing 1:23:24.840 --> 1:23:29.599 the labor market down anytime soon. What we're probably slowing 1:23:29.680 --> 1:23:33.400 down is a housing market. So if we slow down 1:23:33.479 --> 1:23:36.800 housing market because it becomes expensive to borrow money, are 1:23:36.880 --> 1:23:41.000 we just keeping housing inflation high. I don't really know. 1:23:41.200 --> 1:23:44.320 But we're at a different time in our history where 1:23:44.920 --> 1:23:48.599 the real impacts, even if they're lagged, I'm not sure 1:23:48.720 --> 1:23:50.920 they're as meaningful as they once were. 1:23:51.640 --> 1:23:55.160 And to put a little flesh on the environment that 1:23:55.400 --> 1:23:59.120 the Chips Act, the Inflation Act, and the Infrastructure Act 1:23:59.160 --> 1:24:02.679 came into the first CARES Act two point two trillion, 1:24:03.120 --> 1:24:06.479 the Second Cares Act eight hundred or nine hundred billion, 1:24:06.560 --> 1:24:09.600 the third CARES Act, this one under Biden another eight 1:24:09.720 --> 1:24:13.080 or nine hundred billion, so that pig is barely through 1:24:13.120 --> 1:24:17.759 the python before all of these ten year programs really 1:24:17.960 --> 1:24:20.120 hit the ground. So there's going to be an ongoing 1:24:20.200 --> 1:24:23.519 fiscal stimulus even as the monetary stimulus comes off. Yeah. 1:24:23.720 --> 1:24:25.720 Look, the most obvious way to look at this is 1:24:26.040 --> 1:24:27.800 we're coming up on the end of the fiscal year. 1:24:28.320 --> 1:24:31.080 We're going to have a two trillion dollar deficit for 1:24:31.160 --> 1:24:34.680 the year, you know, And it wasn't that receipts were 1:24:34.720 --> 1:24:36.679 that much lower this year. Now they were a little 1:24:36.680 --> 1:24:39.960 bit lower. Stock market performed poorly last year, so you 1:24:40.000 --> 1:24:44.200 didn't see the capital gains. But the government just continues 1:24:44.240 --> 1:24:46.519 to spend. It continues to spend on all these programs. 1:24:46.680 --> 1:24:51.000 The government's continuing to spend, and the government's continuing to 1:24:51.240 --> 1:24:56.040 spend on things that need human capital. It doesn't matter 1:24:56.360 --> 1:25:00.760 in many respects how tight monetary policy becomes. We're going 1:25:00.840 --> 1:25:02.680 to continue to hire people. We're just gonna continue to 1:25:02.680 --> 1:25:06.000 pay more to get the people. And so I would 1:25:06.120 --> 1:25:07.960 like the federal reserve to stop. I would like the 1:25:08.040 --> 1:25:11.120 Federal Reserve to take a deep breath. You know. Right 1:25:11.240 --> 1:25:15.719 now in the tightening cycle, we've almost seen more damage 1:25:15.720 --> 1:25:18.120 in the regional banks than we have seen help for 1:25:18.200 --> 1:25:19.080 the US economy. 1:25:20.640 --> 1:25:23.800 To say the very least, we saw a huge disruption, 1:25:24.000 --> 1:25:27.000 whether it was Silver Lake or Silicon Valley Bank, or 1:25:27.120 --> 1:25:30.320 going down the list of regional banks that got disrupted, 1:25:30.840 --> 1:25:33.479 to say nothing of the healthy banks that people got 1:25:33.600 --> 1:25:35.880 nervous and moved to big money centers. 1:25:36.479 --> 1:25:38.360 And not only that, because of what happened in the 1:25:38.400 --> 1:25:41.360 regional banks, we now have a federal reserve that thinks 1:25:41.400 --> 1:25:44.400 that banks need more capital. So we're gonna put more 1:25:44.479 --> 1:25:48.839 capital into the biggest banks. The g cifies and the cities. 1:25:49.600 --> 1:25:52.920 They don't need more capital. But the knee jerk reaction 1:25:53.080 --> 1:25:55.799 to anything negative that ever happens in the banking sectors, 1:25:55.840 --> 1:25:59.320 Oh we need more capital. But by the way, capital 1:25:59.439 --> 1:26:02.439 doesn't prevent a bank run. You can have all the 1:26:02.520 --> 1:26:05.720 capital in the world, you can have it all. If 1:26:05.760 --> 1:26:09.400 there's a bank run. Capital doesn't provide your depositors liquidity. 1:26:09.920 --> 1:26:12.080 Does it do anything to raise rates on the one 1:26:12.160 --> 1:26:15.519 hand and then flood the system with capital on the 1:26:15.640 --> 1:26:20.400 other Are aren't these sort of competing monetary functions? 1:26:20.840 --> 1:26:24.040 Well, it competes because as banks have to raise more capital, 1:26:24.720 --> 1:26:27.160 it just means they're gonna lend out less money. They're 1:26:27.160 --> 1:26:30.040 gonna take the balance sheet they have right now, and 1:26:30.120 --> 1:26:34.080 they're gonna hold more capital and they're gonna lend out less. 1:26:34.880 --> 1:26:38.800 So they're not gonna go raise additional capital per se. 1:26:39.200 --> 1:26:42.120 They're gonna take the money that they have on their 1:26:42.120 --> 1:26:44.559 accounts and they're gonna say, Okay, this is now capital 1:26:44.640 --> 1:26:47.000 sitting in my capitol account. I'm no longer going to 1:26:47.160 --> 1:26:50.880 use it as as a way to fund growth to 1:26:51.080 --> 1:26:52.320 my to my clients where they do. 1:26:52.439 --> 1:26:55.760 So that will slow that'll slow the economy. Even so, 1:26:55.840 --> 1:26:59.200 if you are gonna have lunch with Jerome Powell, what 1:26:59.280 --> 1:26:59.920 would you say. 1:26:59.800 --> 1:27:03.160 To I would say, I think you've done enough. I 1:27:03.320 --> 1:27:08.360 think we've got a set of unique circumstances that your 1:27:08.680 --> 1:27:13.280 historical economists and your historical textbooks don't really account for. 1:27:14.120 --> 1:27:16.920 I think you need to let this work through the system. 1:27:17.439 --> 1:27:22.799 The federal government has already more or less appropriated these funds. 1:27:23.000 --> 1:27:24.800 They need to go out and spend them. They're going 1:27:24.880 --> 1:27:27.440 to go out and spend them. They're going to continue 1:27:27.560 --> 1:27:32.080 to keep demanding labor, whether it's labored to be bridges 1:27:32.160 --> 1:27:36.800 and tunnels or power grids or charging stations. There's so 1:27:36.880 --> 1:27:40.360 many things where we're gonna need labor to build that. 1:27:40.640 --> 1:27:43.560 No matter how high you take interest rates, it's not 1:27:43.720 --> 1:27:47.720 going to stop that infrastructure build. It's just going to 1:27:47.760 --> 1:27:52.280 make it more expensive. Let the system normalize and see 1:27:52.320 --> 1:27:54.920 where we end up. Now, your higher rates are going 1:27:54.960 --> 1:27:57.440 to have some effect. They're going to have some unintended consequences. 1:27:57.479 --> 1:28:01.080 We've seen them already. I would say, look, it's time 1:28:01.120 --> 1:28:03.599 to take a deep breath. You know, inflation is going 1:28:03.720 --> 1:28:07.400 to be where it is. When inflation was zero and 1:28:07.640 --> 1:28:10.679 you went to zero interest rates and you went to QE, 1:28:11.240 --> 1:28:13.360 you couldn't affect it there either't. 1:28:13.400 --> 1:28:15.520 So this idea target, this idea. 1:28:15.320 --> 1:28:18.080 That you're gonna zero it in on your two percent target, 1:28:19.000 --> 1:28:20.960 I just don't think you can do it. I think 1:28:20.960 --> 1:28:24.360 you're gonna have to take much longer looks and you're 1:28:24.360 --> 1:28:27.880 gonna have to look at wider windows of evaluation. So 1:28:28.640 --> 1:28:30.559 and Jerome pal said this, like I give him credit. 1:28:30.560 --> 1:28:33.240 He said, we're gonna try and get two percent through 1:28:33.320 --> 1:28:35.880 the cycle. Well, maybe the cycle has to be a 1:28:36.040 --> 1:28:39.400 much longer cycle. So if we're if we're six percent 1:28:39.560 --> 1:28:42.240 for a while and we're zero percent for a while, 1:28:42.720 --> 1:28:44.040 you know, maybe we're averaging three. 1:28:45.160 --> 1:28:48.439 Hum. Really interesting. You mentioned something that really struck a 1:28:48.560 --> 1:28:51.960 chord with me, and I have to ask about it. Uh. 1:28:52.200 --> 1:28:57.120 The cost of financing everything now, whether it's corporate projects 1:28:57.600 --> 1:29:01.679 or the federal debt is much higher. Did we miss 1:29:01.920 --> 1:29:05.519 a once in a lifetime opportunity to refinance federal debt 1:29:06.040 --> 1:29:09.479 with long term bonds in the mid twenty tens? I mean, 1:29:09.520 --> 1:29:12.160 when rates were nothing, there was a lot of appetite 1:29:12.240 --> 1:29:16.240 for thirty or even fifty year treasuries. How and I 1:29:16.439 --> 1:29:19.479 was told at the time that'll just encourage more spending. 1:29:19.680 --> 1:29:22.599 But was the trader in you was that a great 1:29:22.680 --> 1:29:24.080 opportunity or what? 1:29:24.400 --> 1:29:26.960 In the first conversation I already had with then president 1:29:27.120 --> 1:29:31.560 like Trump, when I was going through my views of 1:29:31.640 --> 1:29:34.360 the economy, I said, look, my number one concern would 1:29:34.360 --> 1:29:38.200 be the dollar and the debt. And if I were you, 1:29:38.479 --> 1:29:40.400 I would go out and replace all of our debt 1:29:40.439 --> 1:29:43.040 with fifteen hundred yeard debt, fifteen hundred fifty and one 1:29:43.080 --> 1:29:45.519 hundred years fifty fifty one hundred year debt. 1:29:45.720 --> 1:29:47.360 Uh huh. And what was the response to that? 1:29:47.560 --> 1:29:50.880 He said, that's a great idea. Can we do that? Why? 1:29:51.280 --> 1:29:53.840 I said, sure, I said, treasure can. I said, treasure 1:29:53.840 --> 1:29:55.880 can issue whatever they want to issue. I said, I 1:29:56.360 --> 1:29:59.559 would extend maturities on forever. I said the same thing 1:29:59.560 --> 1:30:01.200 I would tell a corporate client if they could do it, 1:30:01.280 --> 1:30:03.519 go go, go issue fifteen hundred your debt now. 1:30:03.720 --> 1:30:06.960 And by the way, most of the American corporations did 1:30:07.040 --> 1:30:08.960 exactly that. Well, they went as long as they could 1:30:09.120 --> 1:30:10.040 extend maturities. 1:30:10.120 --> 1:30:12.000 When you're in when you're in a very low interest 1:30:12.080 --> 1:30:13.760 rate cycle and you know you're going to need it. 1:30:14.040 --> 1:30:16.360 Why did that not get off the ground. It's such 1:30:16.400 --> 1:30:18.400 a brilliant thing to do. 1:30:20.000 --> 1:30:22.800 And today we're thirty three trillion dollars of debt as 1:30:22.840 --> 1:30:23.880 of I think Monday. 1:30:24.479 --> 1:30:26.479 So so why did that go nowhere? 1:30:28.200 --> 1:30:28.560 I don't know. 1:30:28.960 --> 1:30:30.200 All right, that's that's unfair. 1:30:30.360 --> 1:30:32.240 You just you push these things as far as you 1:30:32.280 --> 1:30:35.080 can push them, and you just go. 1:30:35.640 --> 1:30:38.320 I mean, to me, as a trader, it's the obvious 1:30:38.400 --> 1:30:41.960 thing to do, But Washington doesn't necessarily think like traders. 1:30:42.080 --> 1:30:44.800 Look, I'm not blaming anyone for this, Like these things 1:30:44.920 --> 1:30:46.439 just happened. But at the end of the day, the 1:30:46.520 --> 1:30:49.680 White House doesn't borrow the money, right, it's delegated out 1:30:49.800 --> 1:30:54.599 to Treasury and Congress Treasury Borrowing Committee. You had lots 1:30:54.640 --> 1:30:58.280 of people smarter than me putting an inputs on how 1:30:58.320 --> 1:31:00.560 to do it, and you know, they they decide what 1:31:00.720 --> 1:31:04.080 maturities to go to and they tend to do what 1:31:04.160 --> 1:31:05.960 they've been doing for the last two hundred years. 1:31:06.439 --> 1:31:08.800 All right, So let's talk a little bit about technology. 1:31:09.920 --> 1:31:16.040 You've become a fairly big investor across things like cybersecurity, blockchain, 1:31:16.240 --> 1:31:20.120 infrastructure AI. Tell us what you're seeing in the world 1:31:20.240 --> 1:31:23.639 of technology and what it's going to mean to both 1:31:23.720 --> 1:31:26.000 the government and big companies like Goldman. 1:31:26.840 --> 1:31:33.160 Look, I think we're on another technological wave. And with 1:31:33.320 --> 1:31:36.479 every technological wave, there's really good parts of it and 1:31:36.520 --> 1:31:39.040 there's bad parts of it. So when I look at 1:31:39.080 --> 1:31:43.880 the whole AI wave that we're going through, which has 1:31:44.240 --> 1:31:47.320 been going on for a lot longer than people understand, 1:31:47.880 --> 1:31:51.320 I think it's just become in forefront of people's minds 1:31:51.320 --> 1:31:54.040 since we've seen retail products this year. So we've seen 1:31:54.160 --> 1:31:56.840 the chat gbts and we've seen the bar and everyone 1:31:56.960 --> 1:32:00.479 understands what AI is on the retail basis. On the 1:32:00.960 --> 1:32:04.320 enterprise basis, there's been there's been AI products for a 1:32:04.479 --> 1:32:09.720 longer period of time. But with those products, you see 1:32:09.760 --> 1:32:14.080 the vulnerabilities. You have to understand the cybersecurity and and 1:32:14.280 --> 1:32:18.120 how vulnerable we are. You know, you've seen what happened 1:32:18.120 --> 1:32:22.360 to some casinos recently. You see all the vulnerabilities we have. 1:32:23.160 --> 1:32:26.640 So as we continue to grow out our infrastructure, we 1:32:26.720 --> 1:32:29.479 continue to grow out data centers, and we continue to 1:32:29.600 --> 1:32:32.919 grow out you know, access to data, access to computing. 1:32:33.520 --> 1:32:37.320 I think we equally have to build out you know, protection, 1:32:37.800 --> 1:32:41.760 cybersecurity make our infrastructure harder and harder. You know, the 1:32:41.840 --> 1:32:43.800 White House saw this earlier in the year they put 1:32:43.800 --> 1:32:49.439 out zero Trust Zone executive orders. So there's things that 1:32:49.640 --> 1:32:51.920 we need to do in this country. We need to 1:32:52.080 --> 1:32:55.240 harden our borders, we need to harden our edges, We 1:32:55.320 --> 1:32:56.880 need to harden our technology. 1:32:56.920 --> 1:32:58.360 Electrical grid is very vola. 1:32:59.200 --> 1:33:02.599 Everything is vulner what we look. We've seen pipelines, We've 1:33:02.680 --> 1:33:06.280 seen lots of cyber attacks on lots of infrastructure that 1:33:06.479 --> 1:33:10.439 none of us think is really infrastructure, whether it's hotel keys, 1:33:11.080 --> 1:33:14.320 or whether it's pipelines, whether it's slot machines. You know, 1:33:14.520 --> 1:33:17.120 we can go through all the different cyber attacks. Those 1:33:17.160 --> 1:33:19.240 are ones we know about. There's plenty more going on. 1:33:19.479 --> 1:33:23.800 That we don't know about. So I think we're underinvested 1:33:23.880 --> 1:33:27.519 as a country on cyber I think we're underinvested in 1:33:27.640 --> 1:33:32.120 protecting ourselves. I think AI is a whole nother leg 1:33:32.880 --> 1:33:37.280 of huge opportunity, but another leg of huge vulnerabilities. As 1:33:37.320 --> 1:33:40.240 we put more and more data, you know, the system, 1:33:40.400 --> 1:33:42.680 we create more and more data, we've got more and 1:33:42.760 --> 1:33:45.720 more vulnerabilities, and we have to understand how AI can 1:33:45.800 --> 1:33:47.680 help us, how it can be useful to us. I 1:33:47.720 --> 1:33:50.640 think that's really important to us and the blockchain. To me, 1:33:51.240 --> 1:33:56.080 it's the future of settlement, it's the future of doing business. 1:33:56.479 --> 1:34:00.760 You know, we still have many many arcane processes. Now 1:34:00.800 --> 1:34:05.080 we've quase modernized them. If you think of something as 1:34:05.120 --> 1:34:08.080 simple as stock settlement, you know, we've gone from you know, 1:34:08.200 --> 1:34:13.839 moving physical certificates to now digitally trans transacting and settling. 1:34:14.400 --> 1:34:17.839 But why are we having T plus two or settlement? 1:34:17.920 --> 1:34:20.679 Why aren't we Why are we Like we have commodity 1:34:20.760 --> 1:34:24.680 markets that that they cleared real time. We need to 1:34:24.920 --> 1:34:28.760 modernize all of this infrastructure so we can get all 1:34:28.840 --> 1:34:31.360 of the vulnerabilities and all of the risks out of 1:34:31.400 --> 1:34:33.800 the system. We have the technology, we just have to 1:34:33.880 --> 1:34:36.920 adapt this technology but when you adapt the technology, you 1:34:37.040 --> 1:34:39.240 have to put the profile eactics around it and make 1:34:39.280 --> 1:34:40.000 sure it's secure. 1:34:40.280 --> 1:34:42.960 You know, we talk about blockchain and so many people 1:34:43.439 --> 1:34:45.760 I hear saying, what what are we going to do 1:34:45.880 --> 1:34:48.560 with it? What purpose does it serve? Go back to 1:34:48.640 --> 1:34:52.000 the financial crisis. If we had those mortgages on something 1:34:52.120 --> 1:34:56.320 like a blockchain, who owned what house? All all that confusion, 1:34:57.160 --> 1:35:00.519 it all tracks and settles automatically, and there's a permanent 1:35:00.640 --> 1:35:02.000 public register of that. 1:35:02.240 --> 1:35:05.960 Well even simpler, if you had the mortgages on a blockchain, 1:35:06.040 --> 1:35:09.280 you had house titles on a blockchain, we could transact 1:35:09.320 --> 1:35:13.560 houses daily. You know the idea that you buy a 1:35:13.680 --> 1:35:17.280 house on Monday and you do a title search, and 1:35:17.360 --> 1:35:19.479 then you go get a mortgage, and then you sell 1:35:19.520 --> 1:35:21.880 it to me on Tuesday, and I have to do 1:35:21.960 --> 1:35:23.880 it and I can't close for thirty days because I 1:35:23.920 --> 1:35:25.960 have to go do another title search and I have 1:35:26.080 --> 1:35:28.760 to do all the same work. If it was done once, 1:35:29.080 --> 1:35:31.600 put it in the blockchain and we transfer it with 1:35:31.800 --> 1:35:36.040 all the all the documentation, these things become the fungibility 1:35:36.080 --> 1:35:39.479 of them becomes much greater. It's a win for everyone. 1:35:40.080 --> 1:35:43.400 You have much better collaterally, you've got much better ability 1:35:43.479 --> 1:35:47.040 to securitize, you've got much better ability to close and transact. 1:35:47.560 --> 1:35:50.120 You know, we are going to get there. You know, 1:35:50.360 --> 1:35:54.040 there's lots of natural antibodies to get there. There's lots 1:35:54.080 --> 1:35:59.600 of natural businesses that gets disintermediated. But we've been disintermediating 1:35:59.600 --> 1:36:02.599 business is for the last two hundred years, and every 1:36:02.720 --> 1:36:05.599 time we do it, we become a stronger and bigger, 1:36:05.720 --> 1:36:07.479 most importantly, a bigger economy. 1:36:07.720 --> 1:36:10.760 So let's talk about AI a minute. And I use 1:36:11.560 --> 1:36:16.320 a really fascinating app called Perplexity, And I know you're 1:36:16.320 --> 1:36:22.400 an investor in various AI companies, so I ask Perplexity, 1:36:22.680 --> 1:36:26.439 tell me about Gary Cones's history at Golmen Sachs. And 1:36:26.520 --> 1:36:29.000 then I did the same thing, tell me about Gary 1:36:29.080 --> 1:36:31.479 cones history at the White House, and I sent it 1:36:31.560 --> 1:36:35.519 to your assistant and the Goldman stuff perfect, The White 1:36:35.560 --> 1:36:40.040 House stuff just a run of correction crossthroughs. And it 1:36:40.240 --> 1:36:44.200 kind of is fascinating. And by the way, this aspect 1:36:44.439 --> 1:36:47.840 of AI two months ago couldn't have done any of this. 1:36:48.240 --> 1:36:51.120 It's amazing how it just gets better and better and 1:36:51.200 --> 1:36:54.720 better over time. What do you see AI doing? Is 1:36:54.760 --> 1:36:57.880 this going to disintermediate a lot of people. The fear 1:36:57.960 --> 1:37:00.720 is people can be thrown out of or is this 1:37:00.880 --> 1:37:04.200 something that's gonna, like the internet, create a whole bunch 1:37:04.240 --> 1:37:04.880 of new jobs. 1:37:05.320 --> 1:37:08.880 I think it's the latter. So we've lived through these 1:37:08.960 --> 1:37:14.120 seismic revolutions, right from the cotton gin to the combustion 1:37:14.320 --> 1:37:18.519 engine to the personal computer. When we lived through each 1:37:18.600 --> 1:37:21.880 of these, we've always worried about the jobs we're going 1:37:21.960 --> 1:37:25.439 to lose, Like, oh my god, the person that prints 1:37:25.520 --> 1:37:28.160 the memo and delivers the memo to everyone in the 1:37:28.320 --> 1:37:33.519 office when we have email, what's that person going to do? Well? 1:37:33.640 --> 1:37:37.200 All those companies put that person to work doing something 1:37:37.800 --> 1:37:41.479 much more productive and much more profitable and actually much 1:37:41.560 --> 1:37:45.240 more fulfilling for the individual. So as I look at 1:37:45.400 --> 1:37:49.640 each of these seismic evolutions and companies, every company I 1:37:49.760 --> 1:37:53.000 know has gotten bigger and dramatically bigger. Whether it's the 1:37:53.080 --> 1:37:56.559 personal computer, the cell phone, the internet. You look at these, 1:37:57.040 --> 1:38:01.000 every company has gotten dramatically bigger. Like, AIS displace some people, 1:38:01.400 --> 1:38:03.160 but I think you're going to take those people that 1:38:03.280 --> 1:38:08.280 are probably the least satisfying jobs and be able to 1:38:08.479 --> 1:38:12.840 retrain them into much more satisfying, much more fulfilling jobs. 1:38:12.960 --> 1:38:17.080 And allow these companies to become much bigger and more 1:38:17.120 --> 1:38:21.840 efficient and cover clients more effectively, and they will grow 1:38:21.920 --> 1:38:24.360 into those jobs. Just like the person that used to 1:38:24.439 --> 1:38:27.519 print the memo and deliver the memo to everyone's mailbox 1:38:27.640 --> 1:38:29.320 in the office. Remember when we used to have little 1:38:29.320 --> 1:38:31.200 cubbies in the office. I'm old enough to remember that, 1:38:31.520 --> 1:38:33.559 pick up your mail in the morning. Like no one 1:38:33.640 --> 1:38:36.960 has a mailbox in an office anymore. That person is 1:38:37.320 --> 1:38:40.640 now doing something much more productive and the AI is 1:38:40.680 --> 1:38:43.080 going to help that. And on the flip side, think 1:38:43.160 --> 1:38:46.840 of the productivity gains or think of the things we're 1:38:46.880 --> 1:38:50.040 going to be able to change in the regulatory environment 1:38:50.160 --> 1:38:53.120 where you're gonna be able to really monitor things that 1:38:53.240 --> 1:38:55.960 you've never been able to monitor. The regulatory environment's always 1:38:56.000 --> 1:39:00.600 been after the fact? Can AI now monitor human behavior 1:39:00.760 --> 1:39:02.400 real time? Now? 1:39:02.439 --> 1:39:08.280 When you say regulatory from our perspective in this business securities, trading, crypto, 1:39:08.800 --> 1:39:11.840 what what is potential in the space? 1:39:12.160 --> 1:39:15.280 So look at human behavior? You know, human behavior to 1:39:15.360 --> 1:39:18.479 me is regulatory behavior. You know in a bank, are 1:39:18.560 --> 1:39:22.280 you are your employees doing the right thing? You know? 1:39:22.479 --> 1:39:27.679 Can can you create AI? An AI overface and over 1:39:28.280 --> 1:39:31.240 something that sits on top of your organization that makes 1:39:31.320 --> 1:39:34.080 sure your employees are doing the right things or are 1:39:34.120 --> 1:39:36.960 they doing something wrong. Like it's not going to be 1:39:37.080 --> 1:39:39.920 full proof, but it's going to help you manage your 1:39:40.160 --> 1:39:45.360 organization in a way that makes management teams smarter and say, hey, 1:39:45.960 --> 1:39:48.120 look here, there might be something bad going on. 1:39:48.400 --> 1:39:51.560 No more bearings bank sort of hidden lawsuit. 1:39:51.880 --> 1:39:54.840 Exactly, you know. So it's it's the old adage. And 1:39:55.240 --> 1:39:57.400 I was pretty good at this, but I wasn't full proof. 1:39:57.760 --> 1:40:00.400 Like every day at five o'clock I got an email. 1:40:00.560 --> 1:40:02.479 I was supposed to get it by five o'clock from 1:40:02.720 --> 1:40:07.720 every risk based desk. And if I didn't get it 1:40:07.800 --> 1:40:10.800 by five o'clock, you know, I didn't think about it. 1:40:10.880 --> 1:40:14.120 By five fifteen, something's wrong. By five point thirty there 1:40:14.240 --> 1:40:17.679 was a problem, like because I didn't get it because 1:40:17.720 --> 1:40:19.960 something really good happened. Because if something really good happened, 1:40:19.960 --> 1:40:22.639 they'd called me already. So I didn't get it because 1:40:22.640 --> 1:40:26.960 something bad had happened. So I'd stay with almost one 1:40:27.040 --> 1:40:29.880 hundred percent accuracy unless literally it was oh I forgot 1:40:29.960 --> 1:40:32.960 to hit send. If I would call that desk and say, hey, 1:40:33.000 --> 1:40:36.000 I didn't get your end of day email, it's like, oh, 1:40:37.120 --> 1:40:41.240 I need to tell you something, but I would remember 1:40:41.320 --> 1:40:43.080 to do that. Now, there are certain days I probably 1:40:43.120 --> 1:40:46.760 forget if I had an AI machine that said, hey, 1:40:47.240 --> 1:40:49.519 you didn't get all your end of day emails or 1:40:49.560 --> 1:40:51.800 you didn't get an end of day email from this desk. 1:40:53.520 --> 1:40:56.000 And an alert it's an alert, and you can even 1:40:56.040 --> 1:40:58.360 have it reach out and tag the person. Hey, give 1:40:58.439 --> 1:41:01.200 Gary a call, right, and there's your you know exactly 1:41:01.280 --> 1:41:02.639 who's on the game. 1:41:02.720 --> 1:41:05.680 All I'm doing is monitoring human behavior, you know. And look, 1:41:05.720 --> 1:41:07.560 I'm investing in a company that monitors is going to 1:41:07.640 --> 1:41:10.360 monitor human behavior and tell you employees are acting, you know, 1:41:10.400 --> 1:41:12.840 they're doing stuff they're supposed to do, they're doing stuff 1:41:12.840 --> 1:41:14.280 they're not supposed to do. And by the way, it 1:41:14.400 --> 1:41:17.200 may be fine, or they're doing something today that they've 1:41:17.240 --> 1:41:19.200 always done, or they're doing something that they've never done. 1:41:19.960 --> 1:41:21.400 And it's just going to alert you to things that 1:41:21.439 --> 1:41:22.439 you're not going to see on your. 1:41:22.520 --> 1:41:24.840 Like it's a look over here. It may not be 1:41:24.920 --> 1:41:26.960 a problem. It's like, hey, this is different today. 1:41:27.479 --> 1:41:30.400 So let's talk a little bit about IBM. You were 1:41:30.600 --> 1:41:33.519 vice chairman there. I kind of think of IBM and 1:41:33.960 --> 1:41:39.519 AI with them playing Jeopardy and participating there. What's the 1:41:39.600 --> 1:41:41.599 future of AI at IBM? 1:41:41.720 --> 1:41:44.479 Now, well, I'm glad you asked the question that way. 1:41:45.320 --> 1:41:48.439 So IBM has been involved in AI for fifty years. 1:41:48.680 --> 1:41:49.360 That's amazing. 1:41:49.640 --> 1:41:51.720 Yeah, and you sort of said it, you know, in 1:41:51.800 --> 1:41:56.599 twenty eleven Watson won a Jeopardy twenty twelve Watson Big 1:41:56.680 --> 1:42:00.800 Cast Profit Chess. So IBM has been involved in the 1:42:00.920 --> 1:42:06.120 machine learning, the AI business now for decades. We've been 1:42:06.360 --> 1:42:10.720 serving our enterprise clients and building AI products for them 1:42:11.080 --> 1:42:15.200 for the last years. What's become really prevalent recently, and 1:42:15.240 --> 1:42:18.080 the reason we're all talking about AI today is there's 1:42:18.200 --> 1:42:22.479 finally retail products out. IBM does not have a retail product, 1:42:22.560 --> 1:42:24.840 and we're not going to have a retail product. It's 1:42:24.960 --> 1:42:28.320 not our business. Our business is to be the AI 1:42:28.880 --> 1:42:33.719 inside of companies that you may face on the retail side. 1:42:34.400 --> 1:42:40.080 So a good example is a CVS during COVID, IBM 1:42:40.200 --> 1:42:45.080 was operating the CVS call center for the millions of 1:42:45.160 --> 1:42:47.720 calls a day for COVID. How do I get my 1:42:47.840 --> 1:42:51.280 COVID vaccine? Where do I go? How do I schedule appointment? 1:42:51.560 --> 1:42:58.040 That was all IBMAI managing that, and so we are involved. 1:42:58.240 --> 1:43:00.160 We are doing a lot, but we're doing it on 1:43:00.200 --> 1:43:04.519 an enterprise solution basis. For our clients, We've got AI 1:43:04.680 --> 1:43:07.799 and software that allows people to manage their physical building, 1:43:08.240 --> 1:43:11.800 allows them to manage what their carbon footprint, allows them 1:43:11.880 --> 1:43:16.240 to manage, you know, how efficiently their buildings running. You 1:43:16.280 --> 1:43:19.559 know what what compressors should be running, what motors should 1:43:19.560 --> 1:43:21.320 be running, what light should be turned off? How do 1:43:21.400 --> 1:43:23.240 I turn them on? When do we replace them? There's 1:43:23.240 --> 1:43:25.559 an enormous amount of technology going on in the space, 1:43:25.840 --> 1:43:29.240 but it's done on an enterprise level. So IBM is 1:43:29.280 --> 1:43:33.000 a big AI player and we continue to build out 1:43:33.400 --> 1:43:37.479 more and more opportunities for our clients to use our 1:43:38.000 --> 1:43:42.280 enterprise AI. So it's a really interesting crossroads in the 1:43:42.360 --> 1:43:42.840 companies here. 1:43:42.920 --> 1:43:46.440 So let's tie that together with our prior discussion on cybercrime. 1:43:46.960 --> 1:43:51.040 Can we use AI to monitor systems and alert us 1:43:51.160 --> 1:43:56.000 when their intrusions or hacks or other cyber problem? 1:43:56.479 --> 1:44:00.360 Absolutely? Absolutely. So. You know, IBM has a a big 1:44:00.439 --> 1:44:02.439 presence at the US Open a couple weeks ago, and 1:44:02.680 --> 1:44:05.360 we did this big presentation on everything we were doing there, 1:44:05.880 --> 1:44:08.559 and we've got software and AI that was talking about 1:44:08.640 --> 1:44:10.880 all the cyber hacks going on in the US Open 1:44:11.400 --> 1:44:14.320 and how you prioritize the hacks like this is an 1:44:14.320 --> 1:44:17.000 irrelevant hack, this is an important hack. We're going to 1:44:17.040 --> 1:44:20.280 be able to use AI to monitor the bad and 1:44:20.400 --> 1:44:23.320 the good, and it's going to be equally effective to 1:44:23.439 --> 1:44:25.559 make sure we're using it both in monitoring what's going 1:44:25.600 --> 1:44:27.479 on and well in the world and where we need 1:44:27.600 --> 1:44:29.960 to watch things and where we need to prioritize. If 1:44:30.000 --> 1:44:33.519 you're getting hacked millions of times a day, you've got 1:44:33.600 --> 1:44:35.720 to figure out what are the important hacks like You 1:44:35.800 --> 1:44:38.200 can't get distracted by the ones that don't matter. You've 1:44:38.240 --> 1:44:39.960 got to spend your time on the hacks that are 1:44:40.040 --> 1:44:43.320 really relevant, and AI can be helpful in allowing you 1:44:43.439 --> 1:44:43.800 to do that. 1:44:44.800 --> 1:44:48.280 Let me throw you a curveball question. When I was 1:44:48.320 --> 1:44:52.840 a kid, I had before we were diagnosing everybody with ADHD, 1:44:53.880 --> 1:44:57.560 I had ADHD with just a little bit of dyslexia 1:44:57.680 --> 1:45:01.439 thrown in, and with me it was spelling and I 1:45:01.920 --> 1:45:03.400 you know, before I had a wedding ring on, I 1:45:03.439 --> 1:45:05.920 didn't know left from right. I could tell you a 1:45:06.000 --> 1:45:10.160 story about taking my driver's test, and every time the 1:45:10.439 --> 1:45:12.400 guy says make a left, make a right, I would 1:45:12.840 --> 1:45:16.360 flash my index and thumb because I could recognize the 1:45:16.640 --> 1:45:19.120 L and what the hell are you doing? I don't 1:45:19.120 --> 1:45:22.280 know left from right. You've been very public about having 1:45:23.200 --> 1:45:27.040 pretty severe dyslexia growing up and said it taught you. 1:45:27.840 --> 1:45:30.720 I'm gonna put quote you back to you. Hey, I 1:45:30.880 --> 1:45:34.439 learned about failure and thought of the world as that's 1:45:34.560 --> 1:45:37.840 the default and it's all upside from there. Tell us 1:45:37.920 --> 1:45:42.519 how your dyslexia affected you personally and your career. 1:45:43.120 --> 1:45:46.160 Well, you said it, so I characterized myself as one 1:45:46.200 --> 1:45:48.880 of the world's greatest failures. You know, I knew how 1:45:48.880 --> 1:45:51.120 to fail at everything at a young age. You know, 1:45:51.360 --> 1:45:57.439 school to me was impossible. I never thought I could 1:45:57.479 --> 1:45:59.280 get out of elementary school. 1:45:59.720 --> 1:46:02.519 There was a story about a meeting with your parents 1:46:03.000 --> 1:46:05.600 where they got some vocational advice. Would you would you 1:46:05.720 --> 1:46:06.080 share that? 1:46:06.479 --> 1:46:09.400 Well, I you know I was in the I wasn't 1:46:09.400 --> 1:46:12.800 supposed to hear it, but I remember very clearly one 1:46:12.840 --> 1:46:16.439 of the teachers pulling my mom aside and saying, no, 1:46:16.560 --> 1:46:19.559 my mom, look, you'll be lucky if your son grows 1:46:19.640 --> 1:46:20.559 up and you can drive a truck. 1:46:21.040 --> 1:46:22.880 That's just what a kid wants to hear. Well. 1:46:22.920 --> 1:46:25.800 No, by the way, it was motivational. Yeah, it was motivational. 1:46:26.240 --> 1:46:27.920 Like I heard it and I said to my mom, 1:46:28.000 --> 1:46:30.000 I said, well, it's gonna be a nice truck, you 1:46:30.080 --> 1:46:35.200 know when I drive it. But in my mind, though 1:46:36.560 --> 1:46:40.000 I knew I wasn't going to drive a truck, Like 1:46:40.520 --> 1:46:43.640 I knew that I could figure certain things out that 1:46:44.760 --> 1:46:47.760 other people couldn't figure out. So you could talk to 1:46:47.880 --> 1:46:51.080 me and explain to me something, I could come up 1:46:51.120 --> 1:46:55.479 with the answer. So I was smart enough to understand 1:46:55.640 --> 1:46:58.640 that I just couldn't sit there when they handed me 1:46:58.640 --> 1:47:00.679 a piece of paper and you know, I'll say, read 1:47:00.760 --> 1:47:03.559 this and like, okay, who won the race? When it said, 1:47:04.040 --> 1:47:06.200 you know, two people raced and so and so on 1:47:06.479 --> 1:47:08.120 in first grade, I, you know, to see if you 1:47:08.160 --> 1:47:09.800 had basic reading skills, I go, I don't know. It 1:47:09.920 --> 1:47:13.280 was there race? Like my answer to what race? My 1:47:13.360 --> 1:47:14.400 answer would have been what race? 1:47:15.000 --> 1:47:18.560 So, given your career, both on the corporate side and 1:47:18.640 --> 1:47:22.760 the public service side, are there any residual effects from this? 1:47:22.960 --> 1:47:26.639 I'm assuming your reading skills have improved since then? 1:47:27.240 --> 1:47:34.519 Yeah, yes, so I have become a decent technical reader. 1:47:35.200 --> 1:47:38.080 If you give me a contract, I'll be I'm pretty 1:47:38.120 --> 1:47:41.400 damn good at reading contract. So but a contract to 1:47:41.439 --> 1:47:44.599 me has total logical. You know, I know section one, 1:47:44.720 --> 1:47:46.120 what's gonna bean section one. I know it's gonna be 1:47:46.120 --> 1:47:47.640 in section two. I know it's gonna be in section three. 1:47:47.680 --> 1:47:49.080 I know it's gonna be in section four. I'm really 1:47:49.080 --> 1:47:54.080 good at reading contract. If you give me something that 1:47:54.160 --> 1:47:56.880 I don't know what the order of it is, it's 1:47:56.920 --> 1:47:59.400 going to be difficult for me because I'm working so 1:47:59.560 --> 1:48:03.799 hard at words that it's hard for me to process 1:48:03.840 --> 1:48:04.800 where it's growing. 1:48:04.840 --> 1:48:08.439 So technical reading much easier than books and things like that. 1:48:08.640 --> 1:48:11.479 I don't read a lot of books, like a lot 1:48:11.520 --> 1:48:12.880 would maybe round up to zero. 1:48:13.640 --> 1:48:14.599 Wow, that's fascinating. 1:48:15.200 --> 1:48:17.720 I get to listen to books on tape, right, So 1:48:18.080 --> 1:48:22.400 do you enjoy that experience? Yeah, a little bit. It's 1:48:22.439 --> 1:48:24.280 still hard for me. You know, I didn't grow up 1:48:24.320 --> 1:48:30.320 as a reader, so my brain's not that condition to that, 1:48:31.920 --> 1:48:34.160 so you know, it's it's not a natural for me. 1:48:34.240 --> 1:48:36.679 But look, do I read? Do I try and read 1:48:36.680 --> 1:48:38.680 the newspapers every day? Do I try and you know, 1:48:38.760 --> 1:48:41.040 read the editor Do I read a lot of editorial pages? 1:48:41.080 --> 1:48:44.040 Do I read a lot of news? I do read 1:48:44.040 --> 1:48:45.920 a lot of news and editorial page But you know, 1:48:46.040 --> 1:48:48.840 like there're hundreds of they're measuring hundreds. 1:48:48.520 --> 1:48:51.479 Of right, all right, so let's jump to our favorite questions, 1:48:51.479 --> 1:48:54.519 starting with what are you streaming? If you're not reading, 1:48:54.680 --> 1:48:55.679 what do you what are you watching? 1:48:56.040 --> 1:48:59.040 So again, I watch a lot of sort of factual stuff, 1:48:59.680 --> 1:49:03.480 and lately I've been going through sort of the Netflix 1:49:03.960 --> 1:49:11.719 library of Sports Actuals shows Full Swing, Breakpoint, the Swamp, 1:49:12.760 --> 1:49:15.560 Drive to Survive. I've been going through all the Sports. 1:49:15.760 --> 1:49:19.479 To Survive was great. The did you see I haven't 1:49:19.479 --> 1:49:21.160 seen the one. I'm assuming you saw the one on 1:49:21.200 --> 1:49:23.440 the Chicago Bulls of Michael Jordan's. 1:49:23.120 --> 1:49:26.599 I actually haven't. Oh oh no, I saw that one 1:49:26.840 --> 1:49:30.360 during COVID, right, but I haven't seen the Nike one yet. 1:49:31.840 --> 1:49:35.080 It's an interesting movie. There's also one about Steph Curry. 1:49:35.640 --> 1:49:37.880 I think that's on Apple TV. And then there's another 1:49:37.920 --> 1:49:42.599 one about Magic Johnson and the LA Lakers. But that's interesting. 1:49:42.680 --> 1:49:48.160 That that that's what gets you interested, very competitive, very 1:49:48.240 --> 1:49:48.960 interesting things. 1:49:49.240 --> 1:49:51.320 It's look, it's a it's a little bit about wedding, right, 1:49:51.479 --> 1:49:54.040 maybe tells you something about me, but it's about winning. 1:49:54.479 --> 1:49:57.400 I picked that up. How about mentors who helped shape 1:49:57.439 --> 1:49:58.000 your career? 1:49:58.439 --> 1:50:02.360 I think there's two big matches my grandfather for one, Oh, 1:50:02.439 --> 1:50:05.240 really what was wrong big time. So you know, as 1:50:05.280 --> 1:50:07.920 we discussed, I was highly dislikes it going up, and 1:50:08.320 --> 1:50:11.280 you know, my parents didn't know what to do with me. So, 1:50:11.600 --> 1:50:15.320 like I don't blame they were young parents, and my 1:50:15.479 --> 1:50:19.320 grandfather was convinced, like, there's nothing wrong with my grandson. 1:50:19.400 --> 1:50:23.000 He's really smart. He's gonna be fine. You don't need 1:50:23.080 --> 1:50:25.320 to send him off, you don't need to panic. And 1:50:25.439 --> 1:50:27.640 so my grandfather really sort of put me under his 1:50:27.720 --> 1:50:29.519 wing and said, like you're gonna be fine, just just 1:50:29.800 --> 1:50:32.800 do what you need to do. And so we had 1:50:32.880 --> 1:50:39.599 a very very close relationship, and so he really got 1:50:39.680 --> 1:50:43.000 me through sort of my early childhood years all the 1:50:43.040 --> 1:50:44.880 way through high school, like he was there for me. 1:50:45.640 --> 1:50:48.800 And then you know the guy by the name of 1:50:48.840 --> 1:50:51.200 it and I mentioned before Jim Riley, who when I 1:50:51.280 --> 1:50:55.400 went to Goldman, he was he became partner in nineteen 1:50:55.479 --> 1:50:57.479 ninety He was the one that hired me into Goldman. 1:50:58.360 --> 1:51:02.120 And you know, I became partner ninety four. And I'd 1:51:02.160 --> 1:51:07.639 become partner by sort of doing everything, sort of being 1:51:07.720 --> 1:51:10.040 the guy that everyone could go to, being the guy 1:51:10.160 --> 1:51:14.120 could fix everything. And when I became partner. I was 1:51:14.479 --> 1:51:17.320 trying to do everything, and you know, it was one 1:51:17.320 --> 1:51:20.560 of those stories where I was trying to manage a 1:51:20.600 --> 1:51:23.280 big business. I was trying to trade a big book. 1:51:23.920 --> 1:51:26.640 I was trying to deal with clients, and I was 1:51:26.680 --> 1:51:30.320 doing a really bad job of it, like and my 1:51:30.479 --> 1:51:33.880 trading book showed it, like I was having problem in 1:51:33.880 --> 1:51:35.599 the worst trading streak of my life. 1:51:35.640 --> 1:51:35.840 I was. 1:51:36.000 --> 1:51:38.040 I was losing money every day, and I didn't know 1:51:38.040 --> 1:51:41.559 how to lose money every day. And I was living 1:51:41.600 --> 1:51:43.640 at London at the time, and you know, after like 1:51:43.840 --> 1:51:47.080 a week of not sleeping, you know, I waited till 1:51:47.120 --> 1:51:49.479 like seven o'clock in the morning, New York time, because 1:51:49.680 --> 1:51:51.920 I knew he'd be driving in he lived in the Island, 1:51:52.280 --> 1:51:54.320 be driving in the office, or be in the office. 1:51:54.360 --> 1:51:56.720 I called Jimmy up and I sort of gave him 1:51:56.760 --> 1:52:01.920 the woe is Me story, like me, I'm working so hard. 1:52:02.040 --> 1:52:04.720 I've never worked this hard in my life. Like I'm 1:52:04.960 --> 1:52:08.120 I'm seeing ten clients a day, I'm dealing with the 1:52:08.240 --> 1:52:11.920 sales desk, I'm dealing with this, I'm trying to trade. 1:52:12.080 --> 1:52:15.120 My trading's horrible. I can't make money. What should I do? 1:52:16.320 --> 1:52:18.400 And he basically said, figure it out and hung up 1:52:18.439 --> 1:52:18.760 the phone. 1:52:20.040 --> 1:52:21.360 Not even prioritized. 1:52:21.720 --> 1:52:23.840 Just figure it figured it out, figure it out. 1:52:24.040 --> 1:52:26.519 Click, wow, And how'd you figure it out? 1:52:26.640 --> 1:52:30.120 No, he basically said, I got the message like, you're idiot, 1:52:30.160 --> 1:52:34.160 you can't do everything right. Like So literally five minutes later, 1:52:34.280 --> 1:52:38.280 I am call over to my office. I said, guys, 1:52:38.360 --> 1:52:41.719 I'm done trading, and I gave my trading book away 1:52:42.840 --> 1:52:44.960 and I said I'm here to see clients. I'm here 1:52:44.960 --> 1:52:47.519 to deal with problems. Come see me. And the guy 1:52:47.560 --> 1:52:50.519 took her on my trading book and said thank you 1:52:50.640 --> 1:52:54.160 very much. And the salespeople said, oh my god, you're 1:52:54.280 --> 1:52:56.800 human again. And everything was fine. 1:52:57.560 --> 1:53:01.160 Really good decision. Our final two questions, what sort of 1:53:01.240 --> 1:53:04.160 advice would you give to a recent college grad who 1:53:04.280 --> 1:53:07.000 is interested in a career in the world of investing 1:53:07.080 --> 1:53:07.679 in finance? 1:53:08.760 --> 1:53:11.920 So, look, a, I think it's a great place to 1:53:12.080 --> 1:53:14.920 start your career in your life, no matter where you 1:53:15.080 --> 1:53:20.480 end up, because the fundamentals of understanding finance and understanding 1:53:20.640 --> 1:53:25.080 markets and understanding a balance sheet is really important skill 1:53:25.320 --> 1:53:26.800 and it doesn't matter what you do with your life. 1:53:27.000 --> 1:53:30.200 So I'd encourage anyone who's got an interest to go 1:53:30.320 --> 1:53:33.439 into the to go into the industry. It's a tough 1:53:33.520 --> 1:53:35.400 way you to go. It's like the first couple of 1:53:35.479 --> 1:53:39.400 years of going into financial services, it's boot camp. You know, 1:53:39.520 --> 1:53:41.960 you're working twenty four hours a day, seven days a week, 1:53:42.000 --> 1:53:44.760 you're on call. It's not fun. So I'll warn you 1:53:44.800 --> 1:53:48.120 of that. But you should do it. You should get 1:53:48.160 --> 1:53:51.000 the experience, and then you should take some risk in 1:53:51.080 --> 1:53:53.800 your career. You know, after you've learned the fundamentals. You know, 1:53:53.840 --> 1:53:56.519 after a couple of years, just because you went into 1:53:56.600 --> 1:53:58.560 sales and trading program or just because you went in 1:53:58.600 --> 1:54:02.000 an investment banking program doesn't mean that's what you should do. 1:54:02.520 --> 1:54:05.880 And what I see so many young kids do is 1:54:05.960 --> 1:54:09.120 they get hired into X job and they stay an 1:54:09.200 --> 1:54:13.360 ex job for the next twenty or thirty years. Figure 1:54:13.400 --> 1:54:15.920 out what you really like, and then go figure out 1:54:15.960 --> 1:54:17.720 how to get there. So, if you're hired as an 1:54:17.720 --> 1:54:20.080 investment banker, but you really want to be on a trader, 1:54:20.160 --> 1:54:21.800 go try and figure how to be a trader. You're 1:54:21.880 --> 1:54:23.280 hired as a trader and you really want to be 1:54:23.360 --> 1:54:25.960 a salesperson, go be a salesperson. You hire a salesperson, 1:54:26.000 --> 1:54:27.400 want to go be a vague baker? Figure how to 1:54:27.400 --> 1:54:31.240 be a banker. Don't just get stuck where you got hired. 1:54:31.120 --> 1:54:34.840 Into really good advice. And our final question, what do 1:54:34.880 --> 1:54:38.520 you know about the world of investing or public service 1:54:38.600 --> 1:54:41.400 today that would have been useful to know forty or 1:54:41.480 --> 1:54:45.200 so years ago when you first landed at US Steel. 1:54:45.720 --> 1:54:50.320 I knew nothing forty years ago, honestly so. And by 1:54:50.360 --> 1:54:53.920 the way, I learn new things every day. If you 1:54:54.120 --> 1:54:57.360 don't think you're going to learn something new in the 1:54:57.600 --> 1:55:02.600 corporate world or the investing world, you're wrong, because every 1:55:02.680 --> 1:55:03.400 day is a new day. 1:55:03.600 --> 1:55:03.760 You know. 1:55:04.360 --> 1:55:06.720 It's like we were talking about what the Fed's going 1:55:06.760 --> 1:55:10.760 through now, this whole set of circumstances with FED tightening 1:55:10.840 --> 1:55:13.640 and government spending. It's a whole set of new circumstances 1:55:13.720 --> 1:55:17.440 that has to be reevaluated. You know. I learned new 1:55:17.520 --> 1:55:19.280 things every day, and I think it's important that you 1:55:19.480 --> 1:55:24.600 just understand that what was true last year may not 1:55:24.840 --> 1:55:27.240 be true this year, and what you believe to be 1:55:27.360 --> 1:55:29.720 true may not be true tomorrow. And I think that's 1:55:29.800 --> 1:55:30.680 really important. 1:55:30.440 --> 1:55:33.680 Really amazing stuff. Gary, thank you for being so generous 1:55:33.720 --> 1:55:37.000 with your time. We have been speaking with Gary Cohne, 1:55:37.280 --> 1:55:41.240 former director of the National Economic Council in the White 1:55:41.280 --> 1:55:45.360 House under President Trump. Prior to that, he was president 1:55:45.480 --> 1:55:49.400 and chief operating officer at Goldman Sachs, where he spent 1:55:49.560 --> 1:55:53.640 most of his career. If you enjoyed this conversation, well 1:55:53.800 --> 1:55:56.320 be sure and check out any of the previous five 1:55:56.480 --> 1:55:59.560 hundred or so we've done over the past nine years. 1:56:00.000 --> 1:56:04.400 Can find those at iTunes, Spotify, YouTube, wherever you find 1:56:04.480 --> 1:56:08.160 your favorite podcasts. Sign up for my daily reading list 1:56:08.360 --> 1:56:12.160 at rit Holts dot com. Follow me on Twitter at 1:56:12.520 --> 1:56:16.400 Barry Underscore Ritolts. Follow all of the Bloomberg family of 1:56:16.520 --> 1:56:20.760 podcasts on Twitter at podcast I would be remiss if 1:56:20.800 --> 1:56:23.840 I did not thank the crack team of experts who 1:56:23.920 --> 1:56:28.560 helped me put these conversations together each week. My producer 1:56:28.760 --> 1:56:33.000 for this episode was Rob Bragg, my audio engineer with 1:56:33.080 --> 1:56:38.760 Sarah Livesey. Attika of albron is our project manager. Sean 1:56:38.920 --> 1:56:43.880 Russo is my researcher. I'm Barry Ridholts. You've been listening 1:56:43.960 --> 1:57:00.240 to Masters and Business on Bloomberg Radio. Yeah,