WEBVTT - Goldman Sachs CEO David Solomon Talks US-China Trade Truce

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>To get us started, we have here on set exclusively

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<v Speaker 2>with US David Solomon, chairman and CEO of Goldman Sachs.

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<v Speaker 2>Good morning, very nice to see you.

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<v Speaker 3>Good morning, good to see you. I'm glad to be here.

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<v Speaker 3>It's good to be back in oncome.

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<v Speaker 4>Very good conditions.

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<v Speaker 2>We're in inequity, bool market mag seven and everything else.

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<v Speaker 2>We've had this historic meeting last week between the two

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<v Speaker 2>presidents US in China. What do you what do you

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<v Speaker 2>make of the state of player right now? Are we

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<v Speaker 2>in a much better position than we were at the

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<v Speaker 2>start of the year.

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<v Speaker 3>Well, it seems like the meeting was constructive. I'm I'm

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<v Speaker 3>watching the news the same way you're all watching the news.

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<v Speaker 3>I think at the moment, you know, a de escalation

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<v Speaker 3>is a good thing, but there's obviously a lot of

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<v Speaker 3>work to do to really arrive at a real stable

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<v Speaker 3>deal that can endure, you know, over a period of time.

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<v Speaker 3>I'm encouraged by the prospect of a potential visit from

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<v Speaker 3>the US President that was telegraphed in the fall. But

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<v Speaker 3>for the moment, you know, I did not think the

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<v Speaker 3>escalation on either side was constructive.

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<v Speaker 4>And so you know, I much prefer a de escalation.

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<v Speaker 3>I think both both sides really had a purpose in

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<v Speaker 3>that meeting to talk constructively, to have a more de

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<v Speaker 3>escalated environment, and that allows now for constructive conversations as

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<v Speaker 3>they move forward.

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<v Speaker 5>One year truth though? Is there pros and cons to that?

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<v Speaker 5>That was one year truth though? Between the two? Is

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<v Speaker 5>that a good or bad thing?

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<v Speaker 1>I mean, what did it do in terms of business

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<v Speaker 1>sentiment when there was a twelve month time frame?

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<v Speaker 3>Now it's better then, it's better than an escalation at

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<v Speaker 3>unreasonable levels, which is kind of where we were, you know,

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<v Speaker 3>over the most recent time. Trade negotiations are complicated and

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<v Speaker 3>there are a lot of issues on the table. They

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<v Speaker 3>need thoughtful responses and responses that can be durable that

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<v Speaker 3>both sides embrace and get to the right place. Yes,

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<v Speaker 3>there's some uncertainty because it's a one year you know,

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<v Speaker 3>it's a one year delay at all of this, but

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<v Speaker 3>it's also a realistic period of time to try to

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<v Speaker 3>get the right kind of deal done so both economies

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<v Speaker 3>can move forward in a constructive way. And look, these

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<v Speaker 3>are the two most important armies in the world. I

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<v Speaker 3>think it's very important that you know, we arrive in

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<v Speaker 3>a better place where we can both participate constructively with

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<v Speaker 3>each other in the global growth of the world.

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<v Speaker 2>I mean speaking of let me borrow your phrase, participate

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<v Speaker 2>the there's been a resurgence in equity capital market raising

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<v Speaker 2>here in Hong Kong. A lot of the Chinese companies,

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<v Speaker 2>tech or otherwise are raising capital for the future. I

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<v Speaker 2>want to get your sense as someone who sits in

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<v Speaker 2>New York, you travel, of course all around the world.

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<v Speaker 2>Is there a lot of appetite now from US based

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<v Speaker 2>investors to participate by giving that capital to Chinese companies

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<v Speaker 2>right now in order to do there's you know, I

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<v Speaker 2>realize their ambition.

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<v Speaker 3>Sure, there's there's there's there's more appetite for it than

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<v Speaker 3>there was twelve months ago. I remember, actually last November,

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<v Speaker 3>sitting in a dinner in the United States with a

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<v Speaker 3>group of US investors, and this topic came up, and

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<v Speaker 3>there were a couple of investors that basically said, we

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<v Speaker 3>all should be looking to China.

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<v Speaker 4>And the reason, the reason that had evolved that way

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<v Speaker 4>is if.

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<v Speaker 3>You look last fall, the prices had gotten so cheap,

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<v Speaker 3>the capital flows had moved so in the other direction

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<v Speaker 3>that you just knew that things would come more into

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<v Speaker 3>balance and there'd be a recycling.

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<v Speaker 4>And we've seen that recycling.

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<v Speaker 3>You've seen a big move and prices year over year,

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<v Speaker 3>you've seen more foreign capital come in and start to participate.

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<v Speaker 3>That's a fundamentally different question about the big capital allocators

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<v Speaker 3>really fundamentally shifting their allocations up to be higher.

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<v Speaker 4>Again.

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<v Speaker 3>So far, direct investment in China has come down, and

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<v Speaker 3>I think one of the big questions is until we

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<v Speaker 3>understand kind of the trade and the geopolitical landscape, it's

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<v Speaker 3>harder to see significant shifts back to higher levels of

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<v Speaker 3>foreign direct investment and more capital allocation.

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<v Speaker 4>But for the moment, those flows are.

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<v Speaker 3>Making for a better IPO market here and more opportunities here.

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<v Speaker 5>How do you look at that?

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<v Speaker 1>The whole competition has kind of changed into the dynamics, right,

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<v Speaker 1>You have so many of these Chinese banks now that

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<v Speaker 1>are doing some of these deals with Chinese companies. When

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<v Speaker 1>it comes to going public, how how does Golden sas compete?

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<v Speaker 3>Well, I you know, Golden Sex competes just fine, thank

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<v Speaker 3>you very much. When it comes to taking public companies

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<v Speaker 3>public on a global stage, Golden Sex is a leading position.

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<v Speaker 3>We've had a leading position for fifty years. And there's

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<v Speaker 3>always competition in the business, and you know, we'll continue

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<v Speaker 3>to compete, so we welcome competition. But we have a

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<v Speaker 3>pretty active footprint out here, as you well know, they

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<v Speaker 3>have a pretty active footprint around the world.

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<v Speaker 4>And look, one of the big advantages.

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<v Speaker 3>I just had breakfast this morning with a company here

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<v Speaker 3>that it's actually Chinese company, but the you know, the CEO,

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<v Speaker 3>the founder was here and why does he value Golden Sex.

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<v Speaker 3>He values Golden Sex because we have access to people, information,

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<v Speaker 3>capital markets all over the world, you know, not just

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<v Speaker 3>in a narrow portion of the world. And so it's

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<v Speaker 3>a competitive business that always will be. But I'm I'm

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<v Speaker 3>comfortable that we have the resources in the position to

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<v Speaker 3>compete effectively.

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<v Speaker 2>Right And you know, you know I've been reading up

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<v Speaker 2>of course, and I understand your history. You guys have

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<v Speaker 2>been doing business in China very long time. You guys

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<v Speaker 2>took the big banks public back forwenty plus years ago.

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<v Speaker 5>So I mean you're headed there.

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<v Speaker 2>My understanding. After here, you're going to China of course

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<v Speaker 2>to speak with regulators, what have you? What's your long

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<v Speaker 2>term vision for difranchise in Greater China? What do you want?

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<v Speaker 2>What do you want your franchise to become longuage.

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<v Speaker 3>I think you have to look at Gold and Zachs

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<v Speaker 3>and just think strategically that as a global firm, that

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<v Speaker 3>when you think about our businesses, what are our two

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<v Speaker 3>big businesses global banking and markets, the investment banking and

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<v Speaker 3>trading business and asset and wealth management. And so if

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<v Speaker 3>you think about how we think strategically about the firm,

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<v Speaker 3>what advantages does the firm have Besides the fact that

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<v Speaker 3>we have at scale businesses, we're very good at those activities.

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<v Speaker 3>We're leaders in those activities, and we have a right

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<v Speaker 3>to compete and win, you know, in those activities. Another

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<v Speaker 3>big advantage for the firm is we're truly global, and

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<v Speaker 3>in fact, we're more global and have a capacity to

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<v Speaker 3>communicate and interact globally for our clients in a way

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<v Speaker 3>that not.

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<v Speaker 4>Many firms can.

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<v Speaker 3>And so if you think about where GDP is in

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<v Speaker 3>the world, where big economies are in the world, you know,

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<v Speaker 3>China is always going to fit that bill. And barring

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<v Speaker 3>a much more significant shift in geopolitics and the relationship

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<v Speaker 3>between the US and China, they're definitely issues.

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<v Speaker 4>They are definitely things that need to be sorted.

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<v Speaker 3>But China's going to continue to be one of the

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<v Speaker 3>most important economies in the world. The US is going

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<v Speaker 3>to continue to be the most important economy in the world.

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<v Speaker 4>And we're linked.

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<v Speaker 3>And so as a big global firm that does what

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<v Speaker 3>we do, we have to be long term committed to

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<v Speaker 3>serving our clients that need access to advice, capital and resources,

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<v Speaker 3>you know, in China and.

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<v Speaker 4>Around the world.

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<v Speaker 3>And of course we've got to do that in whatever environment,

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<v Speaker 3>the regulatory structure or the geopolitics play up.

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<v Speaker 4>But we're long term committed. We've been long term committed.

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<v Speaker 3>And will remain long term committed unless there was something

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<v Speaker 3>that significantly changed that.

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<v Speaker 1>I'm glad you mentioned that because we've seen governments being

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<v Speaker 1>I guess more involved in some of these business deals.

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<v Speaker 1>I take a look at Intel, for example, I look

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<v Speaker 1>at Nippon Steel, even seek Hutch, which a missas was

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<v Speaker 1>a sole advisor to. What's the advice now to clients

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<v Speaker 1>now in terms of that intervention risk, Well, you just.

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<v Speaker 4>Mentioned three different deals and they're completely different, right, I

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<v Speaker 4>mean they're completely completely different.

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<v Speaker 3>Governments are always going to apply in and weigh in

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<v Speaker 3>on different transactions. There are regulatory approvals in the United

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<v Speaker 3>States arecifius there. I mean, there are all sorts of

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<v Speaker 3>issues where government's weigh in. That is a very different thing,

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<v Speaker 3>very different thing than a government taking an investment, you know,

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<v Speaker 3>in a specific company. Sure it wouldn't surprise you. I'm

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<v Speaker 3>not a big fan of that as a general practice.

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<v Speaker 3>That doesn't mean there aren't exceptions, because I believe that

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<v Speaker 3>the markets should allow capital formation and competition, you know,

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<v Speaker 3>around companies, and you know this administration is is in

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<v Speaker 3>one or two situations they're taking actions like that. You know,

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<v Speaker 3>as I said, I'm not black and white and dogmatic.

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<v Speaker 3>There can be exceptional circumstances, but I don't think as

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<v Speaker 3>a general practice having governments take stakes and companies is

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<v Speaker 3>the direction to travel.

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<v Speaker 4>We want our free market system to go right.

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<v Speaker 2>You mentioned how would you describe the current environment for

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<v Speaker 2>deals going into next year? Because I remember just sitting

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<v Speaker 2>here this time last year and we were going into

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<v Speaker 2>twenty twenty five with it was a US election. We

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<v Speaker 2>weren't sure what were the guard rails were going to

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<v Speaker 2>be looking at next year. As a speaking with Van,

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<v Speaker 2>I can't seem to think about think of a major

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<v Speaker 2>risk apart from against Froth evaluation. We can talk about

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<v Speaker 2>that later, but what's your sense of the environment right

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<v Speaker 2>now and what risks we have to consider what's not

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<v Speaker 2>obvious well in.

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<v Speaker 3>The you know, in the US, the US is a

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<v Speaker 3>huge part of the global M and A market, either

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<v Speaker 3>for target or acquire right. You know, I would say

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<v Speaker 3>it's extremely constructive and we see it. You know, in

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<v Speaker 3>our advisory business. You could take a look at our

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<v Speaker 3>you know, M and A revenues last quarter, what's your

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<v Speaker 3>reflection of deals closing.

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<v Speaker 4>But if you also go through our earnings.

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<v Speaker 3>Call, you know, we made a comment about the level

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<v Speaker 3>of our M and A backlaw.

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<v Speaker 4>It's a very high level of our MNA backlaw.

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<v Speaker 3>And that's just an indication of the fact that there's

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<v Speaker 3>a lot of activity inside the firm. I say this

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<v Speaker 3>is really rooted from the fact that we went through

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<v Speaker 3>a period for four years during the Biden administration where

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<v Speaker 3>if you wanted to do something strategically, if you wanted

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<v Speaker 3>to do something significant from an M and A perspective,

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<v Speaker 3>whatever the question was.

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<v Speaker 4>The answer was no.

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<v Speaker 3>We're now an environment where whatever the question is, the

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<v Speaker 3>answer is maybe. And I think CEOs are unleashed in

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<v Speaker 3>believing that they have a chance of doing strategic things

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<v Speaker 3>to advance their position, to advance their scale, to advance

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<v Speaker 3>how they sit competitively. And so we see a tremendous

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<v Speaker 3>backlog of significant consolidating situations, what i'll call large cap

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<v Speaker 3>M and A. Large cap M and A in the

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<v Speaker 3>United States is up very very meaningfully deals over ten

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<v Speaker 3>billion dollars, very very meaningfully year of a year. And

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<v Speaker 3>so I think we're in a pretty constructive environment. And

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<v Speaker 3>my expectation is is twenty six and twenty seven will

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<v Speaker 3>be quite constructive in terms of large cap M and A,

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<v Speaker 3>particularly in the United States.

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<v Speaker 5>Obviously, we've been talking about AI.

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<v Speaker 1>That's a big thing in terms of how does it

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<v Speaker 1>work for Golden assass in terms of operational efficiencies, how

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<v Speaker 1>does the onslought of AI really going to impact how

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<v Speaker 1>you hire or even just headcount in this part of

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<v Speaker 1>the world.

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<v Speaker 3>Down to it, Well, it's you know, it's it's interesting

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<v Speaker 3>to me that you go right to headcount and and

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<v Speaker 3>I actually think that you know that that that's a

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<v Speaker 3>different lens than the lens that we would look at.

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<v Speaker 3>And I don't know if you saw, but when we

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<v Speaker 3>reported earnings two weeks ago, we put out a memo

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<v Speaker 3>that we called Goldman Sachs one Goldman Sachs three point

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<v Speaker 3>zero where we highlighted the approach that we were taking

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<v Speaker 3>to integrating AI and we talked about a handful of

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<v Speaker 3>things that were goals, including you know, operating efficiency, automation,

0:10:34.840 --> 0:10:39.440
<v Speaker 3>better sales management, and then we identified six processes that

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<v Speaker 3>we were going to look at from a very fresh

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<v Speaker 3>perspective to see if we could automate them and build

0:10:44.360 --> 0:10:48.160
<v Speaker 3>better efficiency so that we would have more capacity to

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<v Speaker 3>invest in areas in the business where we see growth opportunities.

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<v Speaker 3>And so, you know, I think for a firm like

0:10:53.520 --> 0:10:55.600
<v Speaker 3>Goldman Sachs, there are two avenues here. One, we have

0:10:55.679 --> 0:10:58.520
<v Speaker 3>very smart people, right and we can put these tools

0:10:58.559 --> 0:11:01.280
<v Speaker 3>in their hands and that makes them more productive. And

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<v Speaker 3>by the way, that's no different than forty years ago

0:11:04.000 --> 0:11:06.720
<v Speaker 3>when I was starting and somebody gave me a desktop

0:11:06.760 --> 0:11:10.040
<v Speaker 3>computer and load US one two three software and I

0:11:10.080 --> 0:11:12.640
<v Speaker 3>have the ability to do a spreadsheet and a fraction

0:11:12.760 --> 0:11:14.600
<v Speaker 3>of the time that it took me before that tool

0:11:14.679 --> 0:11:17.640
<v Speaker 3>was put into my hand. That just continues. That's been

0:11:17.640 --> 0:11:20.120
<v Speaker 3>going on for forty years. It doesn't mean we have

0:11:20.280 --> 0:11:23.240
<v Speaker 3>less smart people inside gold and secks. You look at

0:11:23.240 --> 0:11:28.920
<v Speaker 3>Goldman Sachs productivity per person it's much higher today than

0:11:28.920 --> 0:11:31.400
<v Speaker 3>it was twenty five years ago, and my guess is

0:11:31.880 --> 0:11:33.600
<v Speaker 3>twenty five years from now it will be much.

0:11:33.559 --> 0:11:34.520
<v Speaker 4>Higher than it is today.

0:11:35.200 --> 0:11:38.520
<v Speaker 3>But our goal is to figure out ways that we

0:11:38.559 --> 0:11:40.600
<v Speaker 3>can invest in growth because we see lots.

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<v Speaker 4>Of growth in our franchise.

0:11:42.200 --> 0:11:46.240
<v Speaker 3>By using AI technology to reimagine processes, we can create

0:11:46.280 --> 0:11:48.760
<v Speaker 3>operating efficiencies and it gives us more of a scaled

0:11:48.760 --> 0:11:51.800
<v Speaker 3>opportunity to reinvest in growth in the business. And look,

0:11:51.840 --> 0:11:54.120
<v Speaker 3>of course, over the way, they are going to be

0:11:54.200 --> 0:11:58.080
<v Speaker 3>shifts in jobs and job functions as there always have been.

0:11:58.720 --> 0:12:00.360
<v Speaker 3>I think one of the things you've got to wrestle

0:12:00.440 --> 0:12:03.880
<v Speaker 3>with today is the pace of this is quicker, and

0:12:03.920 --> 0:12:06.320
<v Speaker 3>so since the pace is quicker, there's a chance that

0:12:06.360 --> 0:12:08.480
<v Speaker 3>it might be a little bit more disruptive, you.

0:12:08.440 --> 0:12:09.320
<v Speaker 4>Know, in the short term.

0:12:09.320 --> 0:12:12.640
<v Speaker 3>But at the end of the day, technology changes jobs

0:12:12.880 --> 0:12:15.160
<v Speaker 3>changes the way people work. This has been going on

0:12:15.240 --> 0:12:18.120
<v Speaker 3>for a long long time. It is continuing. I don't

0:12:18.160 --> 0:12:19.280
<v Speaker 3>think it's different this time.

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<v Speaker 2>David, thank you so much for a time. I know

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<v Speaker 2>you have to go and enjoy the conference. We'll see

0:12:23.840 --> 0:12:24.360
<v Speaker 2>you again next time.

0:12:24.360 --> 0:12:25.280
<v Speaker 4>You're inswer I appreciate it.

0:12:25.280 --> 0:12:26.920
<v Speaker 2>Thank you very much for having me appreciate Thank you,

0:12:27.080 --> 0:12:29.960
<v Speaker 2>David Solomon, there Guys Terman and CEO of Goldman Sachs