1 00:00:00,280 --> 00:00:04,000 Speaker 1: Some of the most influential leaders in finance gathered in 2 00:00:04,160 --> 00:00:08,239 Speaker 1: New York at the Bloomberg invest Conference for conversations on 3 00:00:08,280 --> 00:00:13,800 Speaker 1: a wide range of topics, including artificial intelligence, cryptocurrencies, and 4 00:00:13,920 --> 00:00:18,760 Speaker 1: global trends in wealth management. At the conference, Bloomberg Shanali 5 00:00:18,840 --> 00:00:22,440 Speaker 1: Bassic spoke with John Waldron, the president and chief operating 6 00:00:22,440 --> 00:00:25,959 Speaker 1: officer of Goldman Sachs, and got his thoughts on the 7 00:00:26,079 --> 00:00:27,840 Speaker 1: economy and inflation. 8 00:00:28,480 --> 00:00:30,520 Speaker 2: Now, you know, we can all agree that when we 9 00:00:30,560 --> 00:00:33,000 Speaker 2: talk about the economy, there really were too many weather 10 00:00:33,159 --> 00:00:34,960 Speaker 2: analogies last year being used. 11 00:00:35,479 --> 00:00:36,120 Speaker 3: And because the. 12 00:00:36,120 --> 00:00:39,240 Speaker 2: Actual weather today is really very bad over in New York, 13 00:00:39,360 --> 00:00:41,560 Speaker 2: the worst air quality in the world you've been experiencing, 14 00:00:42,280 --> 00:00:43,880 Speaker 2: we don't want to have a conversation about the weather, 15 00:00:44,040 --> 00:00:46,479 Speaker 2: So we want to talk about that economy. You told 16 00:00:46,560 --> 00:00:51,240 Speaker 2: investors a week ago that the macro backdrop is extraordinarily challenging. 17 00:00:52,040 --> 00:00:54,280 Speaker 3: What are the troubles that you see for the economy ahead? 18 00:00:54,760 --> 00:00:58,400 Speaker 4: Well, I think that what's most challenging is the cross currents. 19 00:00:58,640 --> 00:01:02,320 Speaker 4: Son and certainly identify a lot of negative impulses, and 20 00:01:02,440 --> 00:01:06,360 Speaker 4: a lot of us find ourselves talking into those negative 21 00:01:06,360 --> 00:01:10,360 Speaker 4: impulses and kind of getting more worried, but there's likewise 22 00:01:10,440 --> 00:01:12,360 Speaker 4: a lot of positive impulses. And I think the fact 23 00:01:12,400 --> 00:01:14,480 Speaker 4: that there's all this cross current this is the best 24 00:01:14,520 --> 00:01:18,399 Speaker 4: predicted recession that hasn't happened yet and may not happen. 25 00:01:18,720 --> 00:01:21,720 Speaker 4: So we're dealing with a lot of cross currents in 26 00:01:21,760 --> 00:01:24,840 Speaker 4: our business that can tend to make clients sit a 27 00:01:24,880 --> 00:01:26,800 Speaker 4: little bit more in their hands and be a little 28 00:01:26,800 --> 00:01:29,480 Speaker 4: bit more muted about their positioning and their activity levels. 29 00:01:30,040 --> 00:01:32,640 Speaker 4: We obviously have tougher capital markets environment. It hasn't been 30 00:01:32,640 --> 00:01:35,440 Speaker 4: as robust as we saw coming out of the pandemic. 31 00:01:35,000 --> 00:01:37,800 Speaker 5: Recovery period, and so what I'm. 32 00:01:37,680 --> 00:01:40,280 Speaker 4: Really reflecting in those comments is more about the activity 33 00:01:40,319 --> 00:01:44,759 Speaker 4: levels and the cross currents and the continued debate about 34 00:01:44,840 --> 00:01:47,200 Speaker 4: will we or will we not have a recession, will 35 00:01:47,240 --> 00:01:50,000 Speaker 4: we or will we not have rates that stay higher longer, 36 00:01:50,040 --> 00:01:52,440 Speaker 4: inflation that stays higher longer, And until we get more 37 00:01:52,480 --> 00:01:54,320 Speaker 4: resolution on that debate, I think we're going to be 38 00:01:54,320 --> 00:01:57,880 Speaker 4: in a much more challenging period. I can see scenarios 39 00:01:57,920 --> 00:01:59,680 Speaker 4: where the second half of the year gets a lot better. 40 00:01:59,840 --> 00:02:01,680 Speaker 5: We obviously got through the debt ceiling, so. 41 00:02:01,800 --> 00:02:03,760 Speaker 4: Last week when I was making those comments, we were 42 00:02:03,760 --> 00:02:05,560 Speaker 4: on the precipice of getting through the debt ceiling. 43 00:02:06,000 --> 00:02:06,840 Speaker 5: We've gotten through it. 44 00:02:07,040 --> 00:02:09,960 Speaker 4: That definitely created the lead up to the debt ceiling 45 00:02:09,960 --> 00:02:13,480 Speaker 4: debate created a lot of angst and caution in the 46 00:02:13,480 --> 00:02:16,280 Speaker 4: market for good reasons. We're now through that, So that's 47 00:02:16,120 --> 00:02:19,640 Speaker 4: a that's a that's an obstacle that's been moved moved aside. 48 00:02:19,760 --> 00:02:21,959 Speaker 4: Now I think really we get back to the primary debate, 49 00:02:22,000 --> 00:02:24,160 Speaker 4: which is to me is inflation. When I talk to 50 00:02:24,200 --> 00:02:27,720 Speaker 4: our clients, whether their corporate clients or investing clients, the 51 00:02:27,760 --> 00:02:31,040 Speaker 4: single biggest debate that I hear is how sticky will 52 00:02:31,080 --> 00:02:33,320 Speaker 4: it be? And how much is the FED or the 53 00:02:33,320 --> 00:02:35,360 Speaker 4: ECB going to have to do to get it down 54 00:02:35,400 --> 00:02:38,160 Speaker 4: to you know, it's two percent target in the US terms, 55 00:02:38,240 --> 00:02:40,639 Speaker 4: let's say, or or you know thereabouts. 56 00:02:40,160 --> 00:02:41,320 Speaker 5: In European terms. 57 00:02:41,919 --> 00:02:43,480 Speaker 4: And I think that's a very hard question to answer, 58 00:02:43,480 --> 00:02:44,920 Speaker 4: and I'm not even sure the FED at this point 59 00:02:44,960 --> 00:02:47,000 Speaker 4: understands where that has to be. And I think that's 60 00:02:47,080 --> 00:02:48,639 Speaker 4: that debate is going to persist, and that's going to 61 00:02:48,880 --> 00:02:50,280 Speaker 4: it's going to really weigh on sentiment. 62 00:02:50,600 --> 00:02:53,480 Speaker 2: How much is the consentensus that inflation will be higher 63 00:02:53,480 --> 00:02:56,200 Speaker 2: for longer and therefore rates will be too well. 64 00:02:56,280 --> 00:03:01,359 Speaker 4: I hear from corporate clients the persistence of in the system. 65 00:03:01,760 --> 00:03:05,359 Speaker 4: It's felt on the supply side. So whether it's commodity 66 00:03:05,400 --> 00:03:08,840 Speaker 4: inputs or other supply side inputs, you still feel the 67 00:03:08,880 --> 00:03:12,320 Speaker 4: supply chain and balance has gotten a lot better, but 68 00:03:12,360 --> 00:03:15,239 Speaker 4: they're still pretty positive upward bias on pricing in the 69 00:03:15,280 --> 00:03:19,799 Speaker 4: supply chain. Obviously, wage pressure remains. It's an extremely tight 70 00:03:19,919 --> 00:03:22,600 Speaker 4: labor market, you know. I often ask myself late at night, 71 00:03:22,639 --> 00:03:24,120 Speaker 4: can we actually have a recession with three and a 72 00:03:24,160 --> 00:03:27,840 Speaker 4: half percent unemployment? It seems unlikely. Maybe unemployment has to 73 00:03:27,880 --> 00:03:29,640 Speaker 4: go a lot higher from here. Maybe it will, maybe 74 00:03:29,639 --> 00:03:32,040 Speaker 4: it won't. But right at the moment, wage and the 75 00:03:32,160 --> 00:03:34,440 Speaker 4: recent job report was certainly stronger than many of us 76 00:03:34,480 --> 00:03:36,960 Speaker 4: would have expected. So wage pressure is still there. So 77 00:03:37,000 --> 00:03:39,680 Speaker 4: if you're running a company you've got higher wage prices, 78 00:03:39,800 --> 00:03:43,960 Speaker 4: higher supply prices, you've passed along that price pressure to 79 00:03:44,040 --> 00:03:48,200 Speaker 4: your customers. The customers have generally absorbed it. I sense 80 00:03:48,280 --> 00:03:52,920 Speaker 4: at the moment more concern and corporate offices and boardrooms 81 00:03:52,920 --> 00:03:55,960 Speaker 4: about whether you can continue to price that way and 82 00:03:56,000 --> 00:03:58,600 Speaker 4: will you have more margin pressure. So there's definitely debate 83 00:03:58,640 --> 00:04:01,320 Speaker 4: and pressure on margins, which I think is going to 84 00:04:01,360 --> 00:04:04,000 Speaker 4: be We haven't really seen that in earnings persistently yet, 85 00:04:04,000 --> 00:04:06,880 Speaker 4: but I think that's potentially a negative drag on earnings. 86 00:04:07,200 --> 00:04:08,400 Speaker 5: So that's the CEO sentiment. 87 00:04:08,440 --> 00:04:10,160 Speaker 4: When you get to the investor sentiment, it's a little 88 00:04:10,200 --> 00:04:12,960 Speaker 4: bit of a what rate assumptions that we want to make, 89 00:04:13,040 --> 00:04:15,040 Speaker 4: what inflation assumptions we want to make, and what growth 90 00:04:15,040 --> 00:04:16,560 Speaker 4: assumptions that we want to make. If you want to 91 00:04:16,600 --> 00:04:19,599 Speaker 4: paint a more cautious picture, you would say we might 92 00:04:19,640 --> 00:04:23,640 Speaker 4: have a mini stagflationary scenario. It might not be massive stagflation, 93 00:04:23,680 --> 00:04:27,680 Speaker 4: but if you have sluggish growth one percent plus minus 94 00:04:27,720 --> 00:04:30,440 Speaker 4: growth and inflation doesn't really get down below three percent 95 00:04:30,560 --> 00:04:34,159 Speaker 4: and rates have to stay three plus percent for a while, 96 00:04:34,400 --> 00:04:36,000 Speaker 4: that's not going to feel It's not going to be 97 00:04:36,000 --> 00:04:37,760 Speaker 4: called the recession, but it's not going to feel great, 98 00:04:37,800 --> 00:04:41,279 Speaker 4: and activity levels will be more challenged. That's the scenario 99 00:04:41,400 --> 00:04:44,160 Speaker 4: we kind of plan for and worry about because that's 100 00:04:44,160 --> 00:04:46,880 Speaker 4: a scenario that could persist for a while where you 101 00:04:46,960 --> 00:04:49,599 Speaker 4: just get sluggish growth. I think we need better growth, 102 00:04:49,640 --> 00:04:52,680 Speaker 4: we need more productivity, and there are impetus, there are 103 00:04:52,720 --> 00:04:54,960 Speaker 4: impulses that could provide that. I think, I'm sure you 104 00:04:55,040 --> 00:04:58,360 Speaker 4: want to talk about AI generate AI is a potential 105 00:04:58,480 --> 00:05:02,000 Speaker 4: positive productivity boom. I think a lot of what's going 106 00:05:02,080 --> 00:05:04,560 Speaker 4: on in science, life sciences and the investment in the 107 00:05:04,560 --> 00:05:07,080 Speaker 4: progress that's being made. There's plenty of innovation that we 108 00:05:07,120 --> 00:05:10,320 Speaker 4: could point to and say, there's an enormous opportunity to 109 00:05:10,360 --> 00:05:12,760 Speaker 4: have like another industrial revolution that just might be more 110 00:05:12,800 --> 00:05:15,719 Speaker 4: of a digital revolution and a science revolution that. 111 00:05:15,720 --> 00:05:17,080 Speaker 5: Could unleash a lot of productivity. 112 00:05:17,080 --> 00:05:19,000 Speaker 4: But we need something to get more growth in the 113 00:05:19,000 --> 00:05:20,520 Speaker 4: economy that will allow us to deal with some of 114 00:05:20,560 --> 00:05:21,560 Speaker 4: the challenges we're going to face. 115 00:05:21,680 --> 00:05:23,760 Speaker 2: Now, that's a very robust backdrop to look at a 116 00:05:23,760 --> 00:05:26,640 Speaker 2: different range of scenarios, both for CEOs and for investors. 117 00:05:26,720 --> 00:05:29,719 Speaker 2: What does it mean about the risk appetite that your 118 00:05:29,760 --> 00:05:31,640 Speaker 2: clients and you are taking on. 119 00:05:32,320 --> 00:05:35,240 Speaker 4: I would say for our clients, risk appetite is lower. 120 00:05:36,520 --> 00:05:38,760 Speaker 4: It was very, very low leading into the debt ceiling. 121 00:05:38,760 --> 00:05:41,080 Speaker 4: If you're talking about more investor risk appetite for a moment, 122 00:05:41,120 --> 00:05:43,120 Speaker 4: it was very low leading into the debt ceiling debate. 123 00:05:43,680 --> 00:05:46,000 Speaker 4: The last handful of days has been better. You can 124 00:05:46,000 --> 00:05:49,560 Speaker 4: see some risk appetite creeping back into the marketplace. But 125 00:05:49,600 --> 00:05:52,799 Speaker 4: I'd say generally speaking, it's still a lower risk appetite 126 00:05:52,800 --> 00:05:55,200 Speaker 4: than we would have seen, you know, certainly in twenty 127 00:05:55,240 --> 00:05:57,000 Speaker 4: one and into the first half of twenty twenty two. 128 00:05:57,360 --> 00:05:58,039 Speaker 5: For good reason. 129 00:05:58,200 --> 00:06:01,320 Speaker 4: Because these cross currents are complex. It's not clear anybody 130 00:06:01,360 --> 00:06:04,880 Speaker 4: wants to make a very declarative set of risk judgments 131 00:06:04,920 --> 00:06:07,920 Speaker 4: at this moment, So lower risk appetite, and I think 132 00:06:08,000 --> 00:06:10,719 Speaker 4: CEOs are cautious. You can see it in business spend. 133 00:06:11,320 --> 00:06:13,440 Speaker 4: You know, we're we're if we're not in a business 134 00:06:13,480 --> 00:06:15,919 Speaker 4: investment recession, we're sort of on the precipice of it. 135 00:06:15,960 --> 00:06:19,839 Speaker 4: I think you're seeing decline in business investment. But on 136 00:06:19,880 --> 00:06:23,320 Speaker 4: the consumer side, the consumer is quite resilient. So consumer demand, 137 00:06:23,320 --> 00:06:26,200 Speaker 4: which is seventy percent or so of the US economy, 138 00:06:26,240 --> 00:06:28,760 Speaker 4: remains pretty strong. So we don't have a recession because 139 00:06:28,760 --> 00:06:31,480 Speaker 4: the consumer is really maintaining that strength. So I think 140 00:06:31,520 --> 00:06:34,200 Speaker 4: risk appetite is going to maintain a more muted positioning 141 00:06:34,279 --> 00:06:36,279 Speaker 4: until there's more resolution of some of those debates. 142 00:06:36,800 --> 00:06:39,080 Speaker 3: So what does this mean for things that are under 143 00:06:39,080 --> 00:06:39,400 Speaker 3: the hood. 144 00:06:39,400 --> 00:06:40,920 Speaker 2: We have kind of a joke among my colleagues that 145 00:06:40,960 --> 00:06:42,920 Speaker 2: we're really tired of worrying. I think a lot of 146 00:06:42,960 --> 00:06:45,839 Speaker 2: investors probably feel that way. However, it's the job of 147 00:06:45,839 --> 00:06:47,880 Speaker 2: a risk manager to do it. So if you look 148 00:06:47,960 --> 00:06:49,960 Speaker 2: under the hood, what are the biggest concerns that are 149 00:06:50,080 --> 00:06:50,880 Speaker 2: under the surface. 150 00:06:51,760 --> 00:06:53,800 Speaker 5: Well, we worry about everything all the time. That is 151 00:06:53,839 --> 00:06:54,280 Speaker 5: our job. 152 00:06:55,279 --> 00:06:57,320 Speaker 4: And you know, as I said last week, we're running 153 00:06:57,320 --> 00:07:01,400 Speaker 4: the firm tighter. We're being more cautious if we get 154 00:07:01,400 --> 00:07:05,599 Speaker 4: that sort of more sluggish growth, higher inflation scenario. We 155 00:07:05,960 --> 00:07:08,440 Speaker 4: in studying what has happened in those types of scenarios, 156 00:07:08,480 --> 00:07:11,920 Speaker 4: you can see you generally get less economic activity and 157 00:07:12,000 --> 00:07:14,920 Speaker 4: you get a reduction and purchasing power capability for the consumer, 158 00:07:14,960 --> 00:07:17,440 Speaker 4: and so that does have flow through effects and that 159 00:07:17,480 --> 00:07:20,360 Speaker 4: will obviously impact our industry and our business. So we're 160 00:07:20,400 --> 00:07:24,360 Speaker 4: planning for that scenario to be more likely. Doesn't mean 161 00:07:24,400 --> 00:07:26,360 Speaker 4: it will happen, but we want to plan for it, 162 00:07:26,400 --> 00:07:28,600 Speaker 4: and if it breaks to the upside, we can flex 163 00:07:28,800 --> 00:07:31,120 Speaker 4: into the upside. So we've done some work on our 164 00:07:31,160 --> 00:07:34,840 Speaker 4: headcount for all the obvious reasons to right size the 165 00:07:34,880 --> 00:07:36,960 Speaker 4: firm for the opportunity that we see in front of us. 166 00:07:37,600 --> 00:07:40,600 Speaker 4: We've learned that we're pretty capable of flexing into better 167 00:07:40,800 --> 00:07:43,320 Speaker 4: upward sloping opportunities, and so we're confident that we can 168 00:07:43,360 --> 00:07:47,160 Speaker 4: do that, and I think our clients are running many 169 00:07:47,200 --> 00:07:50,320 Speaker 4: of the same place. We haven't seen mass layoffs, but 170 00:07:50,320 --> 00:07:52,760 Speaker 4: you're starting to see people reduce headcount, you know, here 171 00:07:52,800 --> 00:07:55,120 Speaker 4: and there, and you're certainly seeing reduced business investment, and 172 00:07:55,160 --> 00:07:57,679 Speaker 4: so I think that'll be that'll be the general posture. 173 00:07:57,720 --> 00:08:00,560 Speaker 4: I still come back to the combination of inflation and 174 00:08:00,640 --> 00:08:04,640 Speaker 4: geopolitics as two big areas that we have to get 175 00:08:04,680 --> 00:08:07,000 Speaker 4: a little bit of a better understanding of where where 176 00:08:07,040 --> 00:08:09,840 Speaker 4: is the real direction of travel, how persistent will the 177 00:08:09,880 --> 00:08:13,360 Speaker 4: inflation be, and what is the impact of the war 178 00:08:13,400 --> 00:08:16,880 Speaker 4: in Ukraine, the broader relationship between the US and China, 179 00:08:16,960 --> 00:08:19,240 Speaker 4: and does that have more economic there's that way more 180 00:08:19,280 --> 00:08:21,920 Speaker 4: on the economy, either by virtual of higher energy prices 181 00:08:23,320 --> 00:08:27,800 Speaker 4: or more rebalancing of global trade, rebalancing the supply chains, 182 00:08:27,840 --> 00:08:30,119 Speaker 4: and what is the ultimate impact of that on economic growth. 183 00:08:30,720 --> 00:08:32,920 Speaker 2: I'm glad you brought up Goldman's reduction in force, because 184 00:08:32,920 --> 00:08:35,360 Speaker 2: Goldman's on its third round of job cuts in less 185 00:08:35,360 --> 00:08:37,880 Speaker 2: than a year, and given the macro backdrop that you 186 00:08:38,040 --> 00:08:40,160 Speaker 2: just outlined, can you say with certainty that this would 187 00:08:40,160 --> 00:08:42,840 Speaker 2: be the last set of job cuts in the next 188 00:08:42,880 --> 00:08:43,320 Speaker 2: year or so. 189 00:08:43,720 --> 00:08:45,880 Speaker 4: I can't say anything with certainty, because I think those 190 00:08:45,920 --> 00:08:49,600 Speaker 4: cross currents are persistent, and we have to see it's 191 00:08:49,679 --> 00:08:52,640 Speaker 4: equally likely that we would flex into an upward sloping 192 00:08:53,080 --> 00:08:54,680 Speaker 4: environment as it is that we would have to flex 193 00:08:54,720 --> 00:08:56,760 Speaker 4: downward further. So I think it's hard, it's hard to 194 00:08:56,800 --> 00:08:58,719 Speaker 4: really know at this point. Our job is to right 195 00:08:58,800 --> 00:09:04,199 Speaker 4: size our firm's sources, whether it's capital or financial resources 196 00:09:04,760 --> 00:09:07,640 Speaker 4: or talent and people resources for the opportunity we see 197 00:09:07,679 --> 00:09:09,040 Speaker 4: in front of us. And we think the moves that 198 00:09:09,080 --> 00:09:10,960 Speaker 4: we're making right now are getting us to a place 199 00:09:10,960 --> 00:09:13,800 Speaker 4: where we're really better size for the opportunity we see 200 00:09:13,800 --> 00:09:14,240 Speaker 4: in from of us. 201 00:09:14,679 --> 00:09:16,320 Speaker 3: So let's talk about Goldman strategy. 202 00:09:16,480 --> 00:09:18,520 Speaker 2: I mean, it's been a very highly watched kind of 203 00:09:18,520 --> 00:09:21,800 Speaker 2: pivot here that you've been making into the consumer, then 204 00:09:21,920 --> 00:09:23,360 Speaker 2: changes in consumer, and then. 205 00:09:23,400 --> 00:09:25,000 Speaker 3: Doubling down on asset and wealth. 206 00:09:25,559 --> 00:09:28,079 Speaker 2: When do you think what will it take for investors 207 00:09:28,080 --> 00:09:30,280 Speaker 2: to start rewarding you for those changes. 208 00:09:30,880 --> 00:09:32,760 Speaker 4: So our job is to run the firm the best 209 00:09:32,760 --> 00:09:35,800 Speaker 4: we can, and the investors will decide how they want 210 00:09:35,800 --> 00:09:36,839 Speaker 4: to value what we're doing. 211 00:09:36,880 --> 00:09:38,280 Speaker 5: But I would say a couple of things. 212 00:09:38,360 --> 00:09:42,920 Speaker 4: First, we have two very big, very scaled businesses that 213 00:09:42,960 --> 00:09:46,600 Speaker 4: we feel great about. One Global Banking and Markets, which 214 00:09:46,640 --> 00:09:49,440 Speaker 4: is a thirty billion dollar plus minus revenue business that 215 00:09:49,559 --> 00:09:53,280 Speaker 4: generates mid teens returns. That is a leading client franchise 216 00:09:53,360 --> 00:09:57,040 Speaker 4: all over the world in banking type activities and in 217 00:09:57,080 --> 00:10:00,160 Speaker 4: market type activities, and we've increasingly run that business in 218 00:10:00,160 --> 00:10:04,319 Speaker 4: an integrated fashion, particularly focused on financing our clients, where 219 00:10:04,360 --> 00:10:07,520 Speaker 4: we think there's an enormous opportunity. We talked about the environment, 220 00:10:07,960 --> 00:10:09,360 Speaker 4: one of the things I didn't say that I probably 221 00:10:09,360 --> 00:10:11,959 Speaker 4: should have said, and we feel strongly the financing environment 222 00:10:12,040 --> 00:10:14,760 Speaker 4: in the economy is going to get tougher. It's going 223 00:10:14,800 --> 00:10:16,400 Speaker 4: to be higher cost to finance, it's going to be 224 00:10:16,480 --> 00:10:19,160 Speaker 4: less available than it was. Financing was quite plentiful. It's 225 00:10:19,160 --> 00:10:21,960 Speaker 4: going to get more complicated. Goldman Sachs is very well 226 00:10:22,000 --> 00:10:24,440 Speaker 4: positioned to be a more prominent financier for our clients. 227 00:10:24,440 --> 00:10:25,920 Speaker 5: And by running the Global Banking. 228 00:10:25,720 --> 00:10:28,559 Speaker 4: And Markets businesses now in an integrated fashion, we think 229 00:10:28,559 --> 00:10:31,280 Speaker 4: we're bringing all that intellectual capital and throwway together to 230 00:10:31,280 --> 00:10:32,520 Speaker 4: be more valuable to our clients. 231 00:10:32,520 --> 00:10:33,559 Speaker 5: So we love that business. 232 00:10:33,559 --> 00:10:35,360 Speaker 4: We think that business is going to continue to produce 233 00:10:36,040 --> 00:10:38,920 Speaker 4: mid teen's returns through the cycle, and there's obviously growth 234 00:10:38,920 --> 00:10:39,920 Speaker 4: and opportunity for us. 235 00:10:39,800 --> 00:10:41,720 Speaker 5: To continue to take share. We've proven we can take share. 236 00:10:42,559 --> 00:10:45,320 Speaker 4: The second primary scale business in the firm, as you said, 237 00:10:45,400 --> 00:10:48,080 Speaker 4: is called Acid and Wealth Management. That is a business 238 00:10:48,120 --> 00:10:50,560 Speaker 4: that is an aggregation of a bunch of businesses that 239 00:10:50,600 --> 00:10:52,480 Speaker 4: we had inside the firm that we've now brought together 240 00:10:52,480 --> 00:10:56,600 Speaker 4: into an integrated platform. It's really three primary components. There's 241 00:10:56,640 --> 00:11:00,560 Speaker 4: a liquid active asset manager with two points and trillion 242 00:11:00,600 --> 00:11:04,240 Speaker 4: dollars of assets under supervision on that platform, top five 243 00:11:04,559 --> 00:11:07,920 Speaker 4: active asset manager in the world, Very Global, runs the 244 00:11:07,920 --> 00:11:10,800 Speaker 4: gamut from a product solution standpoint, from cash and money 245 00:11:10,840 --> 00:11:14,920 Speaker 4: markets through fixed income, fundamental equity, quant and all the 246 00:11:14,920 --> 00:11:17,000 Speaker 4: way through to the riskier end of the spectrum. So 247 00:11:17,040 --> 00:11:20,760 Speaker 4: it's a fully integrated, fully scaled platform. We have a 248 00:11:21,040 --> 00:11:25,160 Speaker 4: top five alternatives asset manager with four hundred and fifty 249 00:11:25,160 --> 00:11:28,240 Speaker 4: billion dollars or so of alternative assets, which also is 250 00:11:28,280 --> 00:11:32,560 Speaker 4: a hugely fully scaled platform, Very Global. And then we 251 00:11:32,600 --> 00:11:36,000 Speaker 4: have a wealth management business which focuses primarily on the 252 00:11:36,080 --> 00:11:39,480 Speaker 4: ultra high network segment, which are the wealthiest individuals and 253 00:11:39,520 --> 00:11:43,080 Speaker 4: families in the world. That business has a trillion dollars 254 00:11:43,080 --> 00:11:46,920 Speaker 4: of client assets on the platform. It focuses on as 255 00:11:46,960 --> 00:11:49,200 Speaker 4: I said the wealthier families, but we're only an eight 256 00:11:49,240 --> 00:11:52,679 Speaker 4: percent share in the Americas if you take the America's 257 00:11:52,720 --> 00:11:56,000 Speaker 4: broadly as a category, So there's a lot of fragmentation. 258 00:11:55,520 --> 00:11:57,640 Speaker 5: In that marketplace. We've been at that a long time. 259 00:11:57,679 --> 00:12:00,840 Speaker 4: We continue to grow that business mid to high single digits, 260 00:12:00,960 --> 00:12:03,000 Speaker 4: and we think there's an enormous amount of runway there. 261 00:12:03,040 --> 00:12:05,000 Speaker 4: We also think there's a lot of runway internationally in 262 00:12:05,040 --> 00:12:07,560 Speaker 4: Europe and Asia as we continue to build our platform globally. 263 00:12:08,080 --> 00:12:11,280 Speaker 4: So those three businesses now run on one integrated platform. 264 00:12:11,360 --> 00:12:13,800 Speaker 4: We're spending a lot of time in terms of tech 265 00:12:13,840 --> 00:12:17,320 Speaker 4: transformation to build a more unified chassis, as I would 266 00:12:17,360 --> 00:12:21,200 Speaker 4: call it, that underpins those three businesses. So we have 267 00:12:21,280 --> 00:12:25,960 Speaker 4: a scaled institutional client base, we have a scaled wealth 268 00:12:26,000 --> 00:12:29,840 Speaker 4: management client base, we have public market capability, we have 269 00:12:29,880 --> 00:12:32,520 Speaker 4: private market capability, and we have an integrated platform that 270 00:12:32,600 --> 00:12:36,160 Speaker 4: is increasingly tech forward and much more digital and much 271 00:12:36,200 --> 00:12:39,600 Speaker 4: more scalable. And so that business for us is under transformation. 272 00:12:40,640 --> 00:12:43,720 Speaker 4: We have historically pursued the alternative business with more of 273 00:12:43,760 --> 00:12:46,680 Speaker 4: our own capital in a more merchant banking oriented fashion. 274 00:12:46,760 --> 00:12:50,240 Speaker 4: So Goldman Sachs, unlike a Blackstone or KKR would have 275 00:12:50,280 --> 00:12:52,280 Speaker 4: had a lot more of our own balance sheet invested 276 00:12:52,320 --> 00:12:55,440 Speaker 4: in our alternative assets. We have over the last four 277 00:12:55,520 --> 00:12:59,959 Speaker 4: years transitioned that balance sheet from sixty plus billion dollars 278 00:13:00,120 --> 00:13:03,360 Speaker 4: of historical principle investments on the balance sheet to less 279 00:13:03,360 --> 00:13:04,520 Speaker 4: than thirty billion dollars in. 280 00:13:04,520 --> 00:13:05,240 Speaker 5: The balance sheet. Now. 281 00:13:05,240 --> 00:13:07,360 Speaker 4: We've stated a goal to get it down below fifteen 282 00:13:07,360 --> 00:13:09,760 Speaker 4: billion dollars by the end of twenty twenty four and 283 00:13:09,840 --> 00:13:12,400 Speaker 4: to zero in the intermediate term, and we'll end up 284 00:13:12,440 --> 00:13:14,720 Speaker 4: with twenty billion dollars or so of co investment in 285 00:13:14,720 --> 00:13:17,359 Speaker 4: our funds, So every dollar we have on the platform 286 00:13:17,679 --> 00:13:20,120 Speaker 4: from our balance sheet will be aligned one hundred percent 287 00:13:20,160 --> 00:13:22,800 Speaker 4: co invested in the funds with our clients. That is 288 00:13:22,840 --> 00:13:26,440 Speaker 4: a very unique scale platform that we have to make work, 289 00:13:26,480 --> 00:13:28,920 Speaker 4: and we have to prove the synergy in the context 290 00:13:28,960 --> 00:13:30,880 Speaker 4: of that business. But that is also a business that 291 00:13:30,920 --> 00:13:33,640 Speaker 4: we think can be a mid teens business through the cycle. 292 00:13:33,720 --> 00:13:35,880 Speaker 4: So Goldman Sachs in a handful of years is going 293 00:13:35,920 --> 00:13:37,920 Speaker 4: to have a mid teens global banking and markets business 294 00:13:37,920 --> 00:13:40,920 Speaker 4: and a mid team's asset and wealth management business at 295 00:13:40,960 --> 00:13:43,160 Speaker 4: scale with a lot of growth opportunity, where we're going 296 00:13:43,200 --> 00:13:46,120 Speaker 4: to be more management fee intensive than we have been, 297 00:13:46,360 --> 00:13:49,240 Speaker 4: much less balance sheet much more balance sheet light, with 298 00:13:49,280 --> 00:13:52,319 Speaker 4: an enormous opportunity to grow a great brand, a globally 299 00:13:52,360 --> 00:13:54,840 Speaker 4: scaled business, and a lot of talent. And so that 300 00:13:54,960 --> 00:13:56,720 Speaker 4: is the story of Goldman Sachs. And we've got to 301 00:13:56,720 --> 00:13:57,600 Speaker 4: now go execute on that. 302 00:13:58,000 --> 00:14:00,400 Speaker 2: What does this mean because you just kind of haveighlighted 303 00:14:00,440 --> 00:14:02,520 Speaker 2: one part of Goldman Sacks looks a lot like Key 304 00:14:02,559 --> 00:14:05,800 Speaker 2: Care and APOLOGI just one part, right, And so how 305 00:14:05,840 --> 00:14:10,200 Speaker 2: big does that alternative asset manager get within Goldman Sachs 306 00:14:10,480 --> 00:14:12,880 Speaker 2: And how does it fit with the other businesses, for example, 307 00:14:12,880 --> 00:14:15,520 Speaker 2: with investment banking, with those folks being. 308 00:14:15,440 --> 00:14:16,520 Speaker 3: Some of your biggest clients. 309 00:14:16,520 --> 00:14:19,520 Speaker 4: A it's a good question. I mean, I have watched 310 00:14:19,520 --> 00:14:24,880 Speaker 4: the growth of alternative assets with you know, with Awe Frankly, 311 00:14:24,960 --> 00:14:26,520 Speaker 4: and over the I've been I've spent a lot of 312 00:14:26,560 --> 00:14:28,840 Speaker 4: my career in and around alternateve assets. I was doing 313 00:14:28,840 --> 00:14:31,680 Speaker 4: private equity deals for those companies and other clients of 314 00:14:31,760 --> 00:14:35,320 Speaker 4: the firm, you know, twenty some years ago. The scale 315 00:14:35,320 --> 00:14:38,040 Speaker 4: of these firms is extraordinary and they continue to grow 316 00:14:38,080 --> 00:14:40,320 Speaker 4: and take share, if you will, of the of the 317 00:14:40,360 --> 00:14:43,320 Speaker 4: asset aggregation in the world. And I don't see why 318 00:14:43,320 --> 00:14:45,280 Speaker 4: that will change. I think that will continue. The growth 319 00:14:45,320 --> 00:14:47,240 Speaker 4: rate might moderate a little bit. It's a little tougher 320 00:14:47,240 --> 00:14:50,160 Speaker 4: for fundraising environment today than it would have been a handful. 321 00:14:49,880 --> 00:14:51,040 Speaker 5: Of years ago. 322 00:14:51,120 --> 00:14:56,040 Speaker 4: But I think more clients want access to the aggregate 323 00:14:56,080 --> 00:14:59,200 Speaker 4: return and the alpha opportunity in private assets and private 324 00:14:59,200 --> 00:15:01,360 Speaker 4: assets obviously run is the gamut from private equity to 325 00:15:01,400 --> 00:15:01,760 Speaker 4: credit to. 326 00:15:01,720 --> 00:15:02,800 Speaker 5: Infrastructure growth, etc. 327 00:15:03,680 --> 00:15:07,000 Speaker 4: And so Goldman Sachs for thirty years has been a 328 00:15:07,040 --> 00:15:08,840 Speaker 4: leader in this business. We have just done it a 329 00:15:08,840 --> 00:15:12,880 Speaker 4: little differently than would be the traditional private equity firms 330 00:15:12,880 --> 00:15:14,680 Speaker 4: that have done it mostly with third party funds. We've 331 00:15:14,680 --> 00:15:17,200 Speaker 4: done it with our own capital. As I said, we're 332 00:15:17,200 --> 00:15:20,200 Speaker 4: transitioning that. But we've got a few unique attributes. As 333 00:15:20,240 --> 00:15:22,640 Speaker 4: you said, we have the largest investment bank and I 334 00:15:22,680 --> 00:15:25,280 Speaker 4: think the leading investment bank in the world that provides 335 00:15:25,320 --> 00:15:29,800 Speaker 4: an enormous sourcing engine. We're sourcing transactions and ideas and 336 00:15:29,840 --> 00:15:33,280 Speaker 4: introductions to CEOs and so forth for our clients and 337 00:15:33,320 --> 00:15:34,920 Speaker 4: for our own team, and we're doing I think a 338 00:15:35,040 --> 00:15:37,080 Speaker 4: very good job partnering with our clients. So the firms 339 00:15:37,120 --> 00:15:39,840 Speaker 4: you mentioned in other firms, I could run off a 340 00:15:39,880 --> 00:15:41,960 Speaker 4: litany of transactions where we've partnered with them, or we 341 00:15:42,000 --> 00:15:43,520 Speaker 4: have an idea, we bring it to them and say, 342 00:15:43,520 --> 00:15:46,000 Speaker 4: why don't you guys invest with us and we'll prosecute 343 00:15:46,040 --> 00:15:49,440 Speaker 4: the idea together. So we've found a symbiotic relationship in 344 00:15:49,480 --> 00:15:53,200 Speaker 4: the context of running this strategy. Our business with those 345 00:15:53,240 --> 00:15:56,360 Speaker 4: firms I think has gotten better as we've pursued the strategy. 346 00:15:56,400 --> 00:15:59,840 Speaker 4: But it takes a focus on partnering, doing what's right 347 00:15:59,880 --> 00:16:02,920 Speaker 4: for our clients, and we can benefit along along the 348 00:16:02,920 --> 00:16:04,760 Speaker 4: way and that context, but it's got to come from 349 00:16:04,760 --> 00:16:05,480 Speaker 4: the clients first. 350 00:16:06,000 --> 00:16:08,200 Speaker 2: Let's talk about talent for a moment here, because with 351 00:16:08,320 --> 00:16:10,560 Speaker 2: James Gorman and Morgan Stanley saying he'll step down in 352 00:16:10,600 --> 00:16:12,400 Speaker 2: a year, there's been a lot of focus on succession 353 00:16:12,400 --> 00:16:15,200 Speaker 2: at Wall Street. David Solomon has been in the position 354 00:16:15,240 --> 00:16:19,040 Speaker 2: for five years now. The question here and frankly, you're 355 00:16:19,120 --> 00:16:22,040 Speaker 2: the most clear successor, and so how long is David's 356 00:16:22,040 --> 00:16:24,520 Speaker 2: tenure expected to be and how are you thinking about 357 00:16:24,520 --> 00:16:27,200 Speaker 2: building the bench even deeper at Goldman, especially with such 358 00:16:27,280 --> 00:16:30,000 Speaker 2: high profile turnover, not just that Goldman but in all 359 00:16:30,040 --> 00:16:30,600 Speaker 2: of Wall Street. 360 00:16:30,680 --> 00:16:33,360 Speaker 4: Well, I'd say the following CEO succession is not something 361 00:16:33,440 --> 00:16:34,840 Speaker 4: I spend a lot of time on I have a 362 00:16:34,880 --> 00:16:37,080 Speaker 4: lot to do. I just outlined all the things. 363 00:16:36,840 --> 00:16:39,120 Speaker 5: We have, we have we we have to do. 364 00:16:39,880 --> 00:16:43,040 Speaker 4: My job is to execute, with our team, execute that strategy. 365 00:16:43,080 --> 00:16:45,680 Speaker 4: So so my days are full executing that strategy. 366 00:16:46,160 --> 00:16:47,000 Speaker 5: We do spend a. 367 00:16:46,920 --> 00:16:50,640 Speaker 4: Lot of time on succession below let's say the CEO 368 00:16:50,760 --> 00:16:52,760 Speaker 4: or president or CFO level. I spend a lot of 369 00:16:52,840 --> 00:16:56,680 Speaker 4: time running succession processes for our for our people below 370 00:16:56,720 --> 00:16:58,720 Speaker 4: that level. And I think we've done a better job 371 00:16:58,760 --> 00:17:00,640 Speaker 4: in the last four or five years trying to build 372 00:17:00,640 --> 00:17:04,840 Speaker 4: a deeper succession pipeline and giving our talent, which I 373 00:17:04,840 --> 00:17:07,960 Speaker 4: think is extraordinary, more opportunities to grow and develop, to 374 00:17:08,000 --> 00:17:11,919 Speaker 4: move around, to get new job opportunities, new stretch assignments, 375 00:17:11,960 --> 00:17:13,960 Speaker 4: and to continue to position them to be able to 376 00:17:14,000 --> 00:17:16,720 Speaker 4: ascend to the kind of jobs that that David and 377 00:17:16,760 --> 00:17:19,199 Speaker 4: I sit in. And we have an extraordinary bench. But 378 00:17:19,280 --> 00:17:21,120 Speaker 4: our job is to not just look at the bench 379 00:17:21,119 --> 00:17:22,840 Speaker 4: and say, Wow, it's really great. Our job is to 380 00:17:22,880 --> 00:17:25,919 Speaker 4: work on that bench and that talent and that strength 381 00:17:25,960 --> 00:17:27,680 Speaker 4: and do the right things to develop them. So that's 382 00:17:27,760 --> 00:17:30,119 Speaker 4: that's what occupies my time and attention as it relates 383 00:17:30,119 --> 00:17:30,720 Speaker 4: a succession. 384 00:17:30,920 --> 00:17:32,879 Speaker 2: Earlier in the conversation, you've kind of talked about the 385 00:17:32,880 --> 00:17:36,280 Speaker 2: potential for investment in AI and technology. Goolman was really 386 00:17:36,280 --> 00:17:39,080 Speaker 2: at the forefront of really automating a lot of businesses. 387 00:17:39,119 --> 00:17:41,159 Speaker 2: I remember Louis blank Fine one speaking at a conference 388 00:17:41,200 --> 00:17:43,920 Speaker 2: about automating equities to the point of bringing a five 389 00:17:44,000 --> 00:17:47,720 Speaker 2: hundred trading one hundred person trading us to one. Are 390 00:17:47,720 --> 00:17:51,119 Speaker 2: you working on using AI to further automate some of 391 00:17:51,119 --> 00:17:54,760 Speaker 2: the more difficult areas like fixed income trading or investment banking. 392 00:17:55,480 --> 00:17:58,040 Speaker 5: So we've been using AI for a while. 393 00:17:58,200 --> 00:18:00,000 Speaker 4: And as you as you as you rally point out 394 00:18:00,200 --> 00:18:02,520 Speaker 4: to Lloyd's comments, our firm I think has been very 395 00:18:02,520 --> 00:18:04,840 Speaker 4: forward leaning on technology for a long time, and there's 396 00:18:04,880 --> 00:18:07,760 Speaker 4: been lots of different developments and innovations that we've tried to, 397 00:18:08,640 --> 00:18:10,720 Speaker 4: you know, be adaptive to. And I think we're generally 398 00:18:10,760 --> 00:18:12,840 Speaker 4: speaking a leader in technology. We're not the only one, 399 00:18:12,840 --> 00:18:14,520 Speaker 4: but we generally try to be pretty front footed. I 400 00:18:14,560 --> 00:18:16,879 Speaker 4: think it's been very important for Gold and Sachs to 401 00:18:17,000 --> 00:18:21,040 Speaker 4: continually find ways to use technology to advance our ability 402 00:18:21,080 --> 00:18:22,840 Speaker 4: to serve our clients and also to make our firm 403 00:18:22,920 --> 00:18:24,320 Speaker 4: more efficient and generative. 404 00:18:24,320 --> 00:18:26,439 Speaker 5: AI. When I think you know you say AI, we've 405 00:18:26,480 --> 00:18:27,200 Speaker 5: been using AI. 406 00:18:27,280 --> 00:18:30,280 Speaker 4: The real new development here are these large language models, 407 00:18:30,800 --> 00:18:33,679 Speaker 4: the power and strength of these large language models and 408 00:18:33,720 --> 00:18:35,880 Speaker 4: what they can do. And so when we think about 409 00:18:35,920 --> 00:18:38,520 Speaker 4: generative AI, we really start first of all with let's 410 00:18:38,520 --> 00:18:42,800 Speaker 4: build a governance standard and capability inside the firm so 411 00:18:42,840 --> 00:18:44,880 Speaker 4: that when we do things with respect to genera of AI, 412 00:18:44,880 --> 00:18:46,720 Speaker 4: they're done in a way that we're very very comfortable with, 413 00:18:46,800 --> 00:18:48,440 Speaker 4: because I think governance is going to be critical. 414 00:18:49,119 --> 00:18:50,880 Speaker 5: And then the second thing is to develop. 415 00:18:50,600 --> 00:18:53,560 Speaker 4: Use cases that are valuable, interesting use cases for us 416 00:18:53,560 --> 00:18:55,760 Speaker 4: to start to explore how we can use the generative 417 00:18:55,760 --> 00:18:59,280 Speaker 4: AI to suit an objective. And I would put the 418 00:18:59,359 --> 00:19:04,200 Speaker 4: use cases into two buckets. One is more efficiency, automation, 419 00:19:04,480 --> 00:19:07,639 Speaker 4: process re engineering inside the firm to make us more 420 00:19:07,680 --> 00:19:12,040 Speaker 4: efficient to do things that are very human centric, to 421 00:19:12,160 --> 00:19:14,040 Speaker 4: take things that are very human centric and make them 422 00:19:14,080 --> 00:19:16,600 Speaker 4: more automated, and use some of the capability and power 423 00:19:16,640 --> 00:19:21,240 Speaker 4: of the computing to simplify and make the processes more durable, 424 00:19:21,280 --> 00:19:24,800 Speaker 4: more resilient, and better. The second bucket is really how 425 00:19:24,800 --> 00:19:28,120 Speaker 4: can we serve our clients better and develop intellectual content 426 00:19:28,240 --> 00:19:30,719 Speaker 4: and judgment on top of the intellectual content that can 427 00:19:30,760 --> 00:19:33,440 Speaker 4: be more powerful and more valuable and so we're looking 428 00:19:33,520 --> 00:19:36,359 Speaker 4: at both and we're starting to really test in a 429 00:19:36,480 --> 00:19:39,920 Speaker 4: very safe, governed way some of these use cases and 430 00:19:40,000 --> 00:19:44,360 Speaker 4: developing our strategy forward. It's very early. We're i'd say 431 00:19:44,480 --> 00:19:48,000 Speaker 4: quite early in the testing process. I don't exactly know 432 00:19:48,040 --> 00:19:49,439 Speaker 4: where this is going to go. I don't know how 433 00:19:49,520 --> 00:19:51,199 Speaker 4: much money we're all going to spend. I don't know 434 00:19:51,240 --> 00:19:53,760 Speaker 4: who the leaders are going to be. But we're spending 435 00:19:53,760 --> 00:19:56,359 Speaker 4: an enormous amount of time talking to the obvious players 436 00:19:56,400 --> 00:19:59,239 Speaker 4: out there to find ways to partner, to be a 437 00:19:59,280 --> 00:20:01,720 Speaker 4: thought leader and to start to figure this out. But 438 00:20:01,760 --> 00:20:04,480 Speaker 4: I can't stress enough how early it is and how 439 00:20:04,480 --> 00:20:06,720 Speaker 4: important the governance standards are. I think those two, those 440 00:20:06,720 --> 00:20:09,600 Speaker 4: two things sometimes get lost in the in the debate 441 00:20:09,680 --> 00:20:11,200 Speaker 4: about how fast this is going to move. 442 00:20:11,359 --> 00:20:13,400 Speaker 2: Well, that implies that there's something you're also worried about 443 00:20:13,400 --> 00:20:15,800 Speaker 2: when it comes to AI. It sounds like there are 444 00:20:15,880 --> 00:20:17,920 Speaker 2: real risks as you're trying to integrate it. 445 00:20:17,960 --> 00:20:20,040 Speaker 5: What is the big conception, Well, you have to control 446 00:20:20,080 --> 00:20:21,119 Speaker 5: your data, you know. 447 00:20:21,160 --> 00:20:23,080 Speaker 4: I think what's really important to think about Goldman Sachs. 448 00:20:23,080 --> 00:20:26,879 Speaker 4: We're an intellectual capital company. That's the We are an 449 00:20:26,880 --> 00:20:29,800 Speaker 4: intellectual capital lead company. That's that's our that's part of 450 00:20:29,800 --> 00:20:33,160 Speaker 4: our raison deetra and we produce a lot of content 451 00:20:33,320 --> 00:20:35,000 Speaker 4: and a lot of data, and so you want to 452 00:20:35,000 --> 00:20:38,000 Speaker 4: make sure that you have that data under your jurisdiction 453 00:20:38,240 --> 00:20:40,320 Speaker 4: and that you understand how it's being used and how 454 00:20:40,320 --> 00:20:42,680 Speaker 4: it's being governed and where it's going. And I think 455 00:20:42,720 --> 00:20:44,639 Speaker 4: just broadly governance standards, you know, I think when you 456 00:20:44,760 --> 00:20:47,119 Speaker 4: when you listen to the power of these large language 457 00:20:47,160 --> 00:20:49,600 Speaker 4: models and what they can do, making sure that you 458 00:20:49,680 --> 00:20:52,040 Speaker 4: have standards where you're really governing the use of them, 459 00:20:52,080 --> 00:20:54,280 Speaker 4: I think is quite important. And I think before people 460 00:20:54,400 --> 00:20:56,600 Speaker 4: run too fast, we just have to make sure that 461 00:20:56,640 --> 00:20:58,320 Speaker 4: we've got the right governance standards around that. 462 00:20:59,480 --> 00:21:02,280 Speaker 2: It would be a mistake to not ask you about 463 00:21:02,320 --> 00:21:05,040 Speaker 2: whether and this is back to the macro environment now, 464 00:21:05,119 --> 00:21:07,600 Speaker 2: because we have just got out of You can call 465 00:21:07,600 --> 00:21:09,600 Speaker 2: it a banking crisis, you can call it whenever you want. 466 00:21:09,640 --> 00:21:12,679 Speaker 2: I mean, but the reality as is it's been a 467 00:21:12,720 --> 00:21:16,439 Speaker 2: string of bank failures in the United States. Do you 468 00:21:16,560 --> 00:21:20,000 Speaker 2: think that there is more trouble ahead for the financial system. 469 00:21:20,400 --> 00:21:22,280 Speaker 4: I think the financial system of the United States is 470 00:21:22,359 --> 00:21:25,280 Speaker 4: very strong and I and very resilient, and I think 471 00:21:25,320 --> 00:21:28,200 Speaker 4: you have to separate. You know, a handful of bank 472 00:21:28,240 --> 00:21:32,680 Speaker 4: failures on the back of a significant shift in interest 473 00:21:32,760 --> 00:21:36,200 Speaker 4: rate policy and a shift in the you know, dynamic 474 00:21:36,240 --> 00:21:38,720 Speaker 4: between deposits and assets and the kind of net interest 475 00:21:38,760 --> 00:21:42,359 Speaker 4: margin you know that lives between deposits and assets and 476 00:21:42,400 --> 00:21:45,720 Speaker 4: the overall banking system. So I think part of the 477 00:21:45,760 --> 00:21:48,959 Speaker 4: problem of raising rates that fast, that that quickly, and 478 00:21:49,000 --> 00:21:53,200 Speaker 4: that and that far is you do risk impacting elements 479 00:21:53,200 --> 00:21:54,639 Speaker 4: of the financial system. And I think we've seen that 480 00:21:54,640 --> 00:21:57,280 Speaker 4: there are things that can that can stress. But that 481 00:21:57,320 --> 00:21:59,280 Speaker 4: doesn't mean that the banking system and the financial system 482 00:21:59,280 --> 00:21:59,880 Speaker 4: aren't really strong. 483 00:22:00,000 --> 00:22:00,840 Speaker 5: I think they're really strong. 484 00:22:01,440 --> 00:22:03,639 Speaker 4: I think right at the moment we're seeing in the 485 00:22:03,680 --> 00:22:06,000 Speaker 4: regional banking model, it's it's going to be harder to 486 00:22:06,040 --> 00:22:09,920 Speaker 4: generate that same NIM with a new interest rate paradigm. 487 00:22:10,240 --> 00:22:12,439 Speaker 4: And if we have a harder, a tougher economy, if 488 00:22:12,440 --> 00:22:14,280 Speaker 4: we have a harder landing in the economy, then you 489 00:22:14,320 --> 00:22:16,440 Speaker 4: might see some challenges on the asset side. We haven't 490 00:22:16,440 --> 00:22:18,960 Speaker 4: seen that yet. I hope we don't see that, but 491 00:22:18,960 --> 00:22:20,800 Speaker 4: I think we have to worry about that and prepare 492 00:22:20,840 --> 00:22:23,080 Speaker 4: for that. But that's different than saying we have a 493 00:22:23,080 --> 00:22:25,320 Speaker 4: financial crisis. Or we have we have challenges in the 494 00:22:25,320 --> 00:22:27,800 Speaker 4: financial system. I think the financial system extraordinarily strong. It's 495 00:22:27,840 --> 00:22:30,719 Speaker 4: well capitalized. There certainly can be places where you can 496 00:22:30,760 --> 00:22:32,679 Speaker 4: put more capital in the system and be more measured 497 00:22:32,680 --> 00:22:35,119 Speaker 4: on the regulatory side. But as it relates to the 498 00:22:35,200 --> 00:22:37,639 Speaker 4: larger banks, certainly coming out of the Financial Crisis of 499 00:22:38,200 --> 00:22:41,920 Speaker 4: eight and the Dot Frank legislation and the new capitalization 500 00:22:42,119 --> 00:22:44,080 Speaker 4: of art of Art of the g cifies in the 501 00:22:44,200 --> 00:22:47,000 Speaker 4: in the world very very strong, very very resilient. 502 00:22:47,040 --> 00:22:49,880 Speaker 3: Well more banks fail, though on the smaller end, I. 503 00:22:49,800 --> 00:22:52,479 Speaker 4: Don't I don't expect to see significant failures. I think 504 00:22:52,520 --> 00:22:56,520 Speaker 4: you're going to just see more regulation, probably more capital 505 00:22:56,600 --> 00:22:59,479 Speaker 4: needed needed in the system, more capital ask get raised 506 00:22:59,520 --> 00:23:02,480 Speaker 4: in the system them and for a period of time 507 00:23:02,640 --> 00:23:05,280 Speaker 4: tough a tougher earnings environment until we get more resolution 508 00:23:05,359 --> 00:23:07,320 Speaker 4: on where rates settle out, where economic growth is and 509 00:23:07,320 --> 00:23:08,399 Speaker 4: wre economic activity is. 510 00:23:08,520 --> 00:23:10,680 Speaker 2: And besides even the banking crisis you saw on the 511 00:23:10,760 --> 00:23:13,080 Speaker 2: United States, you also just recently also had the LDI 512 00:23:13,240 --> 00:23:15,840 Speaker 2: crisis in the UK as well. When you think about 513 00:23:15,960 --> 00:23:19,360 Speaker 2: kind of the overall markets across the globe, are there 514 00:23:19,440 --> 00:23:21,919 Speaker 2: kind of pockets of leverage that you still worry about 515 00:23:22,160 --> 00:23:23,600 Speaker 2: given this prolonged rise. 516 00:23:24,000 --> 00:23:26,440 Speaker 4: Well, I think to the point of the LDI crisis. 517 00:23:27,520 --> 00:23:31,199 Speaker 4: You know, government debt broadly is a concern because if 518 00:23:31,240 --> 00:23:32,960 Speaker 4: you think, what did we just We just had a pandemic. 519 00:23:33,600 --> 00:23:35,879 Speaker 4: It was one hundred year event, and how did we 520 00:23:35,920 --> 00:23:38,280 Speaker 4: get out of the pandemic. The governments had to stimulate 521 00:23:38,440 --> 00:23:41,080 Speaker 4: demand out of the pandemic, which means the governments had 522 00:23:41,080 --> 00:23:44,520 Speaker 4: to spend and borrow and put debt on the government 523 00:23:44,560 --> 00:23:46,879 Speaker 4: balance sheets to try to bring the patient back to life. 524 00:23:46,960 --> 00:23:49,439 Speaker 4: And generally speaking, that worked. We could debate whether there 525 00:23:49,480 --> 00:23:53,479 Speaker 4: was too much stimulus, too much spend, but what happened 526 00:23:53,520 --> 00:23:55,600 Speaker 4: is a lot of that debt transferred onto government ballant 527 00:23:55,640 --> 00:23:58,280 Speaker 4: sheets and so and now because we have higher interest rates, 528 00:23:58,280 --> 00:24:00,560 Speaker 4: the cost and the burden of that debt is more expensive. 529 00:24:01,119 --> 00:24:03,879 Speaker 4: It could crowd out other investing. So one of the 530 00:24:03,920 --> 00:24:07,840 Speaker 4: things we worry about is just the fiscal picture around 531 00:24:07,880 --> 00:24:10,000 Speaker 4: the world in terms of the amount of government debt 532 00:24:10,040 --> 00:24:12,960 Speaker 4: and the burden of the interest now on that debt 533 00:24:13,000 --> 00:24:14,840 Speaker 4: and the other areas of spend. 534 00:24:14,480 --> 00:24:15,680 Speaker 5: That we need in the world. 535 00:24:15,680 --> 00:24:18,680 Speaker 4: You can imagine more military spend, you could imagine more 536 00:24:18,720 --> 00:24:21,639 Speaker 4: spend on climate and you can imagine more spend in 537 00:24:21,760 --> 00:24:25,919 Speaker 4: terms of industrialized policy to build more competitiveness and to 538 00:24:25,960 --> 00:24:29,280 Speaker 4: deal with supply chain rebalancing. And obviously there's an enormous 539 00:24:29,320 --> 00:24:31,840 Speaker 4: amount of social spend, so there's a lot of pressure 540 00:24:31,880 --> 00:24:35,520 Speaker 4: on fiscal spend I think everywhere in the world, and 541 00:24:35,800 --> 00:24:37,960 Speaker 4: it's less helpful when you've got a four or five 542 00:24:37,960 --> 00:24:40,359 Speaker 4: percent interest rate than when you have a zero, one 543 00:24:40,400 --> 00:24:42,639 Speaker 4: or two percent interest rate. And so those burdens and 544 00:24:42,680 --> 00:24:44,399 Speaker 4: that crowding out effect I think is going to be 545 00:24:44,440 --> 00:24:47,280 Speaker 4: more more in the frame as we as we turn. 546 00:24:47,160 --> 00:24:47,800 Speaker 5: The clock forward. 547 00:24:47,920 --> 00:24:50,520 Speaker 2: I remember you in a conversation with Ken Griffin a 548 00:24:50,520 --> 00:24:53,359 Speaker 2: couple of years ago before COVID even hit that you 549 00:24:53,400 --> 00:24:55,760 Speaker 2: said this was one of your biggest concerns, and the 550 00:24:55,800 --> 00:24:58,439 Speaker 2: concern is now amplified because of COVID. 551 00:24:58,600 --> 00:25:00,960 Speaker 3: As you were saying, what's the investry implication? 552 00:25:01,000 --> 00:25:04,000 Speaker 2: I think the problem with this conversation typically, and we 553 00:25:04,040 --> 00:25:06,359 Speaker 2: started this way with stand Ruck and Miller yesterday as well, 554 00:25:06,680 --> 00:25:08,880 Speaker 2: is that it feels so far out on the horizon 555 00:25:08,880 --> 00:25:10,360 Speaker 2: that people don't pay attention to it. 556 00:25:11,359 --> 00:25:14,280 Speaker 4: Well, I think the crisis could be fraud on the horizon, 557 00:25:14,400 --> 00:25:17,560 Speaker 4: but the challenges are here and now, and I think 558 00:25:17,560 --> 00:25:19,960 Speaker 4: the big challenges are going to be debates, and this 559 00:25:20,080 --> 00:25:22,480 Speaker 4: was the death Sealing debate. It might not have been 560 00:25:22,520 --> 00:25:24,680 Speaker 4: fully framed this way, but the death sealing debate is 561 00:25:24,720 --> 00:25:28,800 Speaker 4: a spending debate, and obviously there was a contingency that 562 00:25:28,840 --> 00:25:31,920 Speaker 4: wanted less spending and a contingency that wanted, you know, 563 00:25:32,600 --> 00:25:35,159 Speaker 4: more spending or neutral spending, and we ended up with 564 00:25:35,240 --> 00:25:36,119 Speaker 4: kind of neutral spending. 565 00:25:36,240 --> 00:25:38,440 Speaker 5: Ish. That's a mini. 566 00:25:38,160 --> 00:25:41,080 Speaker 4: Debate on what's going to be a much longer discussion 567 00:25:41,119 --> 00:25:43,080 Speaker 4: I think, And maybe the twenty twenty four election in 568 00:25:43,119 --> 00:25:45,000 Speaker 4: the US will bring that more into the frame. Maybe 569 00:25:45,040 --> 00:25:47,879 Speaker 4: that will be a debate in the European circles. But 570 00:25:47,920 --> 00:25:50,879 Speaker 4: the pressure on spending in the in the economy I 571 00:25:50,880 --> 00:25:52,640 Speaker 4: think is going to be significant. I mean, we talked 572 00:25:52,680 --> 00:25:55,159 Speaker 4: about sluggish growth. One way to create more growth is 573 00:25:55,200 --> 00:25:58,400 Speaker 4: to find ways to stimulate. There will be political pressure, 574 00:25:58,480 --> 00:26:00,840 Speaker 4: I think to stimulate because if we end up with 575 00:26:01,160 --> 00:26:03,320 Speaker 4: whether we have a recession or we just have sluggish growth, 576 00:26:03,359 --> 00:26:06,960 Speaker 4: it's going to be slower growth than everybody wants visa 577 00:26:07,040 --> 00:26:08,840 Speaker 4: via the spending pressures and the things we have to 578 00:26:08,880 --> 00:26:11,399 Speaker 4: achieve to deal with some of these challenges. So I 579 00:26:11,760 --> 00:26:14,320 Speaker 4: just I don't know that I'm not predicting a crisis, 580 00:26:15,000 --> 00:26:16,240 Speaker 4: and I don't think that we're going to have a 581 00:26:16,280 --> 00:26:18,840 Speaker 4: government funding crisis anytime soon, but I think that there's 582 00:26:18,840 --> 00:26:20,240 Speaker 4: going to be a lot of pressure. And I think 583 00:26:20,240 --> 00:26:23,360 Speaker 4: that unfortunately, because now we're living in a different interest 584 00:26:23,440 --> 00:26:24,800 Speaker 4: rate regime, and I think we're going to be living 585 00:26:24,800 --> 00:26:28,000 Speaker 4: there for a while. The interest part of the conversation 586 00:26:28,119 --> 00:26:30,800 Speaker 4: is more complex. It was much easier to finance this, 587 00:26:31,359 --> 00:26:33,320 Speaker 4: you know, kind of government spending initiative when you were 588 00:26:33,320 --> 00:26:34,560 Speaker 4: doing it with very very low rates. 589 00:26:34,560 --> 00:26:36,440 Speaker 5: Now it's a little bit more challenging. 590 00:26:36,080 --> 00:26:38,560 Speaker 4: And that that's going to create more of a debate. 591 00:26:38,600 --> 00:26:41,520 Speaker 2: I think in the dialogue interest spending alone being almost 592 00:26:41,600 --> 00:26:44,560 Speaker 2: higher than defense spending very soon from now. So one 593 00:26:44,560 --> 00:26:46,400 Speaker 2: more question before I let you go, because you've hinted 594 00:26:46,440 --> 00:26:49,880 Speaker 2: at it. The attention moving very quickly from the monetary 595 00:26:49,880 --> 00:26:53,160 Speaker 2: to the fiscal, especially as we head into twenty twenty four. 596 00:26:53,920 --> 00:26:56,520 Speaker 2: There are a lot of candidates kind of putting their 597 00:26:56,520 --> 00:26:59,000 Speaker 2: hand up when you look at the Republican Party in particular, 598 00:27:00,080 --> 00:27:04,199 Speaker 2: and I'm wondering, how does Goldman prepare for potential changes 599 00:27:04,240 --> 00:27:07,080 Speaker 2: in twenty twenty four of a potential change in guard 600 00:27:07,280 --> 00:27:11,320 Speaker 2: or even you know, a stark shift in kind of forces, 601 00:27:11,359 --> 00:27:12,840 Speaker 2: even in the Republican Party alone. 602 00:27:12,880 --> 00:27:16,840 Speaker 4: Well, we tend to focus on policy and policy implications, 603 00:27:16,880 --> 00:27:20,720 Speaker 4: and obviously elections have consequences, and whoever, whichever party is 604 00:27:20,760 --> 00:27:24,360 Speaker 4: in the executive branch, you know, get gets to set 605 00:27:24,359 --> 00:27:27,560 Speaker 4: an agenda and pursue an agenda, and so we tend 606 00:27:27,600 --> 00:27:30,920 Speaker 4: to focus on what would the policy differentials be depending 607 00:27:30,960 --> 00:27:34,080 Speaker 4: on which party you think will will reside, we tend 608 00:27:34,080 --> 00:27:35,760 Speaker 4: not to focus as much on the individuals. 609 00:27:35,920 --> 00:27:38,080 Speaker 5: You know, we support both parties. We're very active and. 610 00:27:38,760 --> 00:27:40,840 Speaker 4: On both sides of the aisle and believe that it's 611 00:27:40,880 --> 00:27:44,360 Speaker 4: important that both parties are successful and I frankly think 612 00:27:44,400 --> 00:27:46,440 Speaker 4: important that they work together. And you know, I think 613 00:27:46,480 --> 00:27:49,680 Speaker 4: it was great that we got the debt selling resolve. 614 00:27:50,080 --> 00:27:52,119 Speaker 4: It's a good example of where you can get a 615 00:27:52,160 --> 00:27:54,320 Speaker 4: deal done between the two parties. I think there are examples. 616 00:27:54,359 --> 00:27:56,520 Speaker 4: There was an infrastructure built done, the IRA was done. 617 00:27:56,520 --> 00:27:58,160 Speaker 4: There are things that can be done between the two 618 00:27:58,200 --> 00:28:01,320 Speaker 4: parties that are that are important for the country, but 619 00:28:01,560 --> 00:28:04,840 Speaker 4: policy implications will be significant. So you know, whether it's 620 00:28:05,000 --> 00:28:11,560 Speaker 4: tax policy, regulatory policy, fiscal policy, foreign policy, industrialized policy, 621 00:28:11,600 --> 00:28:12,520 Speaker 4: how we deal with China. 622 00:28:12,560 --> 00:28:13,440 Speaker 5: There's plenty that you. 623 00:28:13,400 --> 00:28:16,440 Speaker 4: Could debate as between the two parties, and I think 624 00:28:16,440 --> 00:28:19,040 Speaker 4: that the twenty four election will crystallize a lot of 625 00:28:19,040 --> 00:28:22,000 Speaker 4: those debates and we will be working on our side, 626 00:28:22,720 --> 00:28:24,399 Speaker 4: you know, to be engaged in that discussion, because I 627 00:28:24,400 --> 00:28:26,639 Speaker 4: think it's important for us to be engaged, but also 628 00:28:26,680 --> 00:28:28,639 Speaker 4: to be planning. You know, if you go a certain direction, 629 00:28:28,720 --> 00:28:30,719 Speaker 4: that might set a certain course visa VI the economy, 630 00:28:30,760 --> 00:28:33,280 Speaker 4: a different direction might set another course. And so we're 631 00:28:33,359 --> 00:28:36,560 Speaker 4: pretty obsessive planners about looking at scenarios and trying to 632 00:28:36,560 --> 00:28:39,240 Speaker 4: make sure that we're prepared for all possible conditions. 633 00:28:39,400 --> 00:28:42,840 Speaker 1: That's John Waldron, the President and chief operating officer of 634 00:28:42,920 --> 00:28:47,160 Speaker 1: Goldman Sachs, speaking at the Bloomberg invest Conference with our 635 00:28:47,400 --> 00:28:51,160 Speaker 1: Shinali Basic. For more interviews like this, subscribe to the 636 00:28:51,200 --> 00:28:56,680 Speaker 1: Bloomberg Talks podcast, available on Apple, Spotify, and anywhere else 637 00:28:56,800 --> 00:28:58,080 Speaker 1: you get your podcasts.