Goldman Sachs Rejected Him. Years Later, He Ran the Place | Lloyd Blankfein

24:59I wasn't the well-adjusted person you see before you today. When did that sort of melt away for you? You know, a couple of years ago. Are you still working on it? I'm sort of in the second quartile of getting to the right place. You don't, look, these, in the long run, these are, you know, I talk sometimes about, you know, somebody, so-and-so has overcome the burden of great wealth. And it kind of sounds like, you know, when people hear that, it kind of sounds funny to them. And I mean it to be kind of funny, but it's not. It's not so funny. It's actually. It's only kind of funny. We think about that too as well.

25:38There is a burden. And that's back to the kid thing, right? The grit that, you know, all three of us or public school kids, I didn't grow up in a house like you did, but a public school kid, there is something that comes from that. There is a certain chip on your shoulder that is very valuable career, business, entrepreneurship, running a big company that our kids don't have. Yeah. Importantly, when I had my chip, when my chip was at its biggest, my brick on my shoulder, I didn't think about, gee, I have a chip on my shoulder. Right. That's the thing. That's the thing with the chip on the shoulder.

26:08Right. I'm just thinking I'm living and not. And but it's very, you know, it was it's very motivating. So it's like my first job out of out of out of law school, you know, out of school. You know, I was very attracted to firms that paid you more money because I needed the money. Yeah. I had, you know, going to repay loans. I wanted to live in a, you know, have an apartment. And I didn't have to source my motivation. I just had to be able to affect it. and to execute. If you grow up wealthier, you not only have to execute, you have to source your motivation. I'm faced with that every day. I'm a retired.

26:52Some days I get up and say, God, it's so great. There's nothing in my calendar. What should I do today? Sometimes it takes me till dinner time to figure out what I was going to do with the day that is now over. Why did you go to law school? That seems, relative to what we said about your parents and not necessarily pushing that sort of career track, why law school after college? I think it was a couple of reasons. One, it's kind of in those days, maybe even today, it felt like an extension of liberal arts. It felt like I didn't know what I wanted to do. Maybe today somebody would go, my background or my kid's background would go to business school in the same way.

27:29But then it was going to law school. And then you thought, gee, that's a useful thing for anything you might want to do in your life, ignoring for the moment that takes three years of pain to get through. And cost. And cost, instead of earning and cost, but an extension of liberal arts. And then I think there was also a suggestion that had been given to me early in school, I was pretty glib, you know, in classes. And I would, you know, argue with the teachers. And I tended to engage with the teachers more sometimes than the students. And so-and-so used to refer to, one of my teachers always called me a Philadelphia lawyer.

28:11I guess going back to the Zenger trial or something like, you know, Philadelphia lawyer had some meaning. And so it was always in my head that I might be a warrior. And I went to law school. And you had some suits also already in your closet. So law school would have been perfect for you. Yeah. Going back to this ambition and this internal motivation, having a bit of a chip by the way, you can rub the two arms of the suit together and make a fire. It was like that. But sometimes that can be off-putting, right? Like you're right that if you grow up with wealth, you have to find your ambition and you had yours.

28:42But often that, you know, you're talking about the chip on your shoulders, often that can be just too much over the top for those around you. And you're obviously a guy who's led and inspired all these people. What was the moment for you where you realized how to channel that in the appropriate way? Channel the... I just think I had embedded in me. I'm not the most ambitious. Look, even now, I'm not trying to, you know, Mac kill everything. You know, it gets, you know, we can talk about that also. What's the meaning of life? What are you supposed to do after, you know, you've accomplished certain goals and stuff?

29:16Should you keep on going till you drop dead in your chair? I didn't really, I just think I always, you know, in golf sometimes, I'm a lousy golfer and I don't know why I use metaphors from golf, but sometimes, you know. You told me you're spending more time playing golf now than ever. Yeah, but more than ever is not a lot. Okay, right. But, you know, if you're trying to putt the ball like 30 feet, you know, you look at a target five feet away because that's when you field of vision, I would say I wasn't thinking about where the hole was 30 feet away. I was just looking at a target that was three feet away or five feet away.

29:51What was that target for me when I was growing up was going to an out of town college. When I was going to law school, it was - Getting a job. Getting a job and paying off student loans and helping my family if I could, but otherwise you know, becoming a real, you know, person, you know, like a real, you know, what I thought, you know, what I thought it should be like, whatever that was. And so I've always been like that. I don't, I don't look too far ahead. I mean, that doesn't mean it doesn't occur to me, but I try to have targets that are closer in, in the general direction of too far ahead.

30:31When you, when you finished law school, you went to go work at a law firm. You didn't last that long at the law firm? I lasted four and a half years. Four and a half years, which I mean, I guess. Pretty typical. I lasted 10 years, excuse me, 10 months at the law firm until I rage quit. I was like, I went to law school to become a better entrepreneur. I actually thought law school was better finishing school for entrepreneurship than business school. I went to law school to be a lawyer. Okay. I thought I'd be, I mean, it wasn't like I was driven to be a lawyer, but I thought I'd be a lawyer. Yeah.

30:59So you last four and a half years at this firm. Are you enjoying the work? Is it gratifying or is that? No, I hated it. Okay. It's a paycheck. And also, I went into more of an esoteric tax law. So it wasn't M &A or it wasn't that type of deal making? No, that was a very narrow field in those days. And by the way, the tax lawyer would be on an M &A. There wasn't a specific M &A specialty in those days. There was corporate tax, a lot of documentary. Okay, so you lasted four and a half years. That's a real stint. You were a real lawyer. Tax law is to corporate law. We've got a golf analogy coming in here.

31:39No, like a structural engineer is to an architect. Right, okay. A tax lawyer is like a structural engineer. Yeah, got it. Make sure the building doesn't fall off. You're doing a lot of different projects, and you're not doing the whole project, but you're doing a very part to make sure the building doesn't fall on, and there's somebody else who's running that whole project for that company and that deal. That would be the corporate lawyer. And so it's very esoteric, very narrowly focused. And I did it because it was hard. And I did it because I thought it was a marketable. I'm thinking like I have to make a living after this.

32:13And I did that. And what got me to leave, and I was doing well in my firm. Are you married with kids at this point? No, I got married. I got engaged. I quit my job in the law firm, got engaged, and put a down payment on an apartment in the same week. Wow. Well, that's a big risk. Yeah. Yeah. Yeah. That was a, that was a, that was a big, and my, and I mean, that's another story about my, my, my then who became my fiance, who's now still my wife after 42 years, you know, cried when I left, when I left the law firm. Sure. Why? Well, I was doing pretty well in the firm. Yeah. I was looked like I was on track for tenure.

32:56Yeah. Yeah. And you're making money, real money at this. Yeah. I was making, you know, I was making a living. I mean, I wasn't spending any money, so things were going in. I could see where things were going to be. I just, and the thing, the real reason, I'd say the most influential thing was there were other people doing what I was doing. Now, I had a personality for it. I was good with clients, and I was good at seeing the big picture, even though it was a narrow field, and I was good at engagement. I did some litigation, tax litigation, and contested matters. I was naturally good at that. And, but the people around, there was, and there was one person in particular who was so much better at it and really liked it.

33:40In those days before the internet, you know, cases would come off and, you know, you'd know this having, you know, been through, you know, law school, but maybe you went so much later than me, you didn't even have this. You'd always have to check cases to see that something you were lying on wasn't overruled. Yeah, so it's all done by AI. Right, so now it's done, yeah. It was Lexus for us. It was all automated. Correct. It's all automated. But in those days, you literally had to go to books and look up references to this case and actually look at them and make sure it said something nice about them, not something mean about the case.

34:12And you spend a lot of law time with that kind of drudgery and doing that. And the advance case, they were called advance sheets. so the new cases would come out so that you could see what new opinions were occurring in spaces that you were working on and things like that. And I used to dread when they'd come. Because it may hurt your entire... No, I'd have to look at them. You'd have to read it. And someone inevitably the next day is like, so, did you read the new... And the guy next to me, it was like he was waiting for the Wells Fargo wagon to come in the music. Yeah, yeah, yeah. And he was jumping up and, oh my God, it's...

34:52It's coming, it's the day. Maybe it'll come tomorrow. Precedence coming. I said, he's so much better than me now. And those lines are never going to cross. They're only going to diverge more. So I said, I have to get to something that I like better. So gold trading was what you liked better? I mean, Jay Aaron and Company was the, how did that happen? Well, I selected. It's good. Tax law to trading. No, I selected Jay Aaron from the vast expanse of job. I was offered. Oh, okay. A job I was offered. Okay, who's offered me a job, I'll go there. The Harvard firms didn't come calling this time, did they?

35:32No. Yeah, I went in case or scatting. I don't think it was. No, no. I knew I wasn't going to go to another law firm because I was doing well enough at this law firm. And Goldman Sachs probably wouldn't have hired you. They didn't. You applied? I applied to, I remember interviewing, you know, through a headhunter who, you know, and headhunters are in the business of churning people. And so I liked it. It was the first, you know, say, you're really terrific. You're wonderful. You're great at everything like that. And so I said, I'm going with this guy. And so the headhunter was who was sent me on an interview.

36:03I remember he sent me to Morgan Stanley. I remember Dean Witter, separate from Morgan Stanley at that point. Because I said, I don't want to go to another law firm, but I would go into something different. So they thought finance. And naturally, that person must have been thinking about investment banking, because that's a natural nexus from law to investment banking, not trading per se. and sent me also to Goldman, where I didn't make it out of the HR department. Wow. This is unbelievable, Lloyd, that, you know, like given your career that Goldman didn't even let you out of the HR department, nevermind.

36:35Well, I wouldn't have let me out of the HR department either. So it's a feather in their cap. Okay. But I didn't know anything. And I didn't know that in that realm, people went in to apply for jobs and they studied for like weeks or months before so that there was no question about the job they didn't know already. Got it. Right. And I didn't know anything. Right. I learned about what, I remember thinking, I learned about what Goldman did. It was like an office building that you went up and, you know how you go up in Macy's and then there's a marquee on top that it lights up on the floors and it says, you know, sportswear, you know, intimate apparel, laundry, you know.

37:11This is like more M &A, like trade. This one said, you know, oil and gas and, you know, private placements. You're like, wait, I know what Goldman does. And I'm looking at these things, and I don't know what these things are. And I go in there, and obviously, I don't remember the interview per se. I just remember the ride up in the elevator and getting rejected. And then I finally— So Lloyd Blife gets rejected from Goldman Sachs. Yeah, yeah, yeah. And it's fair to see that haphazard kind of approach worked for Harvard. And then I get a—sends me to another place to interview a commodity trading firm that I'd never heard of called J.

37:47Aaron and Company. Which was not well-known or was well-known at the time? Wasn't known by me. But in that industry, was it a - Yes, in that industry, but it's a very narrow, if you're going to have a continuum of prestige in finance, commodity trading at that point would have been something between the messenger and the food server. Okay, got it. Right. It wasn't, you know, there was, you know, there would be investment banking and there would be, and then even on the trading side, it would be equity trading and fixed income trading. If you ever read Ponfire of the Vanities, you'd see that was in relatively low esteem until, of course, the 80s and 90s when, you know, that became, you know, much more lucrative and the federal, you know, the debt ballooned and that became a much bigger market than even the equities market and the opportunity.

38:39But in those days, so I got a job. I found out afterwards. Did you know what commodities were? No, but they didn't care. Okay. My interview... Yeah, why did they want you? It's charisma, of course. It turns out that they had a concept, the metaphor they used for that, and appropriately, was mud down a... For a firm that traded gold, was mud down a sluice. They would hire 20 people out of... And they liked people from law firms, younger people who'd been out for a while, could have been a consulting firm. And they'd bring them in. And after a year, two would be left. Yeah. Right. So mud down a sluice, they would be looking for nuggets.

39:22I remember my entire interview. They bought an index fund. There was a trading room and people shouted. You know, it wasn't like, you know, you're not in Kansas anymore, Dorothy. It was like a trading floor and people shouting. This was today you go into a trading room, you can hear a pin drop. Yeah, of course. It's all electronic. People are, you know, dealing with each other electronically. No one's even in the room anymore. To the person sitting next to them. And here, you're screaming at the person sitting next to you. You're having a conversation to somebody who's like an acre away. Yeah, yeah.

39:49Was that exciting to you? Yeah, it looked different. The energy's fun. In fact, the whole interview, the guy who was the partner, the head trader at that point, asked me, do you think you could work? He called me college boy. He hadn't gone to college. Okay. Because this was a commodity. You were the Harvard college boy, five-year lawyer. This was a college. He didn't even know. A good college boy. Sent him by a headhunter. I don't even know that he even read the resume. But he said, college boy, do you think you could work in this kind of place? And I said, you know, work in it. When I was growing up, I came home to it every night.

40:25Interesting. Just all the yelling and shouting. Jewish home. It's funny. The analogy between a Jewish home where everyone's yelling at each other, but we're just talking. And then obviously a trading floor. I used to go, like everyone says, get to September. They said, what are you doing for the... What are you doing for Rosh Choney Yom Kippur? And I said, oh, the holler days. My house too. When everyone would get together and holler at each other. Have a nice holler day. And you got there. Did you like it? No, I was scared to death. Okay. I've been scared to death a lot. No, it's good. It's a theme.

41:04It's a theme. Yeah, yeah. Us too, actually. Yeah, it's a toy. But you do it anyway. Yeah. Well, you know, no choice, no problem. That's right. No choice, no problem. Elaborate on that. Well, I had no choice. So, you know, you could just stand there and you can... But you did have a choice here. Like, at this point in your life, you have a choice. No, I quit my law firm. Yeah. You know, moving forward, I burnt the bridges. You got engaged? I got engaged. And, you know, I was going to make, you know, and by the way, I didn't know. Now I know where that stands and what Goldman is like and what other parts of it.

41:39That was the only, it was the, to me, that was 100 % of the financial world at that point. I didn't have any. Yeah, commodity trading gold. I had never been anywhere else. And back to your golf analogy, you're not thinking 30 feet from the hole, you're five feet. I'm trying to, I'm trying to figure out how to do it. And, you know, you had to do a lot of, you know, there's a lot of multiplication, division, adding and subtracting that you have to do in your head when you're doing this stuff. It was a trading floor. It was like a market maker. So it wasn't just people stroking their beards and investing and making a decision.

42:12And once every five days, you make a move in the market. And it's basis points. This is constant. And you're also, and it's easy to make a mistake. Yeah. It's easy when you're conveying what you did with somebody on the outside and when you want to tell and everything is nothing's being entered Electronically, it's all being written. Somebody's taking notes literally writing things down. It's easy to say Somebody sells to you and you say I sold no you didn't sell you bought and you could do get things backwards And if you enter in all the positions will be off. It's not I Just simplify it by saying the the opportunity and the likelihood of making mistakes is very high and mistakes you know could cost money you know it always costs money right and so you know you had a yeah you had a deal you know that so there was a lot of there was a lot of terror associated with it and the other part of it was boredom yeah because in that world I was used to being as a lawyer working my way up I was basically working seven days a week, 12 hours a day.

43:19And when I wasn't at the office working about it, I was taking a shower thinking about it, about what I had to do. And we're always behind and you can always make your things better. There, people worked while the exchange was open and the exchange closed to three o 'clock. After three o 'clock, people left and had nothing to do. And I didn't know what to do. I mean, I wasn't used to that. I kind of didn't like it. And I'm trying to think of ways of how I started reading books on commodity training, on how to pricing, which is ridiculous because you pick that up. Doing it. Doing it and from experience.

43:49But I was trying to make myself better at it. And over time, I got better at it. And then somehow in 1981, this commodity trading firm, J. Aaron, gets acquired by Goldman Sachs. That's about the time I joined. So when I started interviewing, I was interviewing. So you joined J. Aaron and it got acquired shortly thereafter. I think it even got acquired while I was engaged in the conversation, but they didn't move in the same building. You wouldn't have known it for several years. So pure happenstance, right? But I was going to, like, you described it as, like, you got to Goldman through the back door.

44:20Yes. That's unbelievable that you didn't know. I got hired by Jay Aaron. Jay Aaron at that point could have been, would have been for a month. Working on that deal? They've even been acquired by Goldman. It wasn't announced. There was no way for you to know. I didn't even know. And it was irrelevant. Yeah, it didn't matter. At what point do you figure that out, though? Oh, a couple of years. It took a couple of years. And then what's your feeling? Because it was a separate building. Okay. And the brand was still J.A.R.E.N. And the brand was, we answered the phone J.A.R.E.N. It was only J.A.R.E.N.

44:49And every once in a while, even like a couple of years later, somebody would say, oh, you know, a couple of guys from Goldman are coming to the floor. So pretend they, you know, look busy. I'm not kidding. So people would put phones against their ear and listen to a dial tone. Years later as a CEO, you're like, stop making that. I've seen it all. I've seen this game. I used to play this game. Your big win there, I believe, was this$100 million deal that you do, which at the time was huge. Talk to us about that. So I was always, I actually, at an earlier stage, I actually, so the old, I mean, a couple of people from Goldman sort of, Aaron did well for a while, and then stopped doing well.

45:35because, I mean, this is ancient history at this time, but there was a very bull market in precious metals. And that was, you know, Aarons did commodities, but their big commodity, too big, was coffee and precious metals. And those are the most important markets where they made all their money. There was in the highly inflationary late 70s, continuing to the early 80s, the gold market soared. In fact, on an inflation adjusted basis, now gold is at its highs. I don't know when people are going to be watching this, But it just on an inflation basis, after 30 years, 40 years, passed that just now.

46:12But it was a big market. And so, Aaron was making a lot of money. And then when that, and it was something where there was the Hunt family was cornering the silver market, ancient history. But you can Google it, look it up. It's very interesting. And that made for a very bull market in precious metals. And then when that collapsed, it stayed collapse for about the next 25 years. And so it got very quiet and stopped making money. And that's when Goldman got very interested in sorting out Jay Aaron and figuring out what else they could do. So what happens with you at this point? You end up. Me, I'm actually, if there was meetings to be had with Goldman people to go over and learn something, let's say trying to distribute some of Jay Aaron's products like gold investing and things like that via the Goldman network, they would send me.

47:00First of all, I was expendable. I wasn't integral to operations because I was learning my way in and I was junior. So they could spare me. And the second one I think was going on also is my background and resume made me look, at least on paper, like more of a Goldman guy. Right, same college boy. Yeah, yeah, college boy. Like more of a Goldman guy. Blank fine. Good Jewish boy. So even the guys from Aaron, you know, kind of, you know, they had a little chip on their shoulder versus Goldman. because what Goldman conveys today, it conveyed them. And this was a streety commodity trading firm. And those guys did very well and probably made a lot of money selling their interests to Goldman at that time and maybe were envied by even the Goldman time.

47:43But over time, the Goldman guys were rangier. And as the markets changed away from the narrow part of the market that Aaron was good at, those guys didn't necessarily change with it. Got it. What was the culture of Goldman this time? Was it like, you know, to the, you know, somebody that Dave and I heard about Goldman, you know, dress British, think Yiddish. Was that Goldman at that point? I couldn't have even told you. You didn't even know? I mean, to me, I was an outsider looking in. I would say - Because you admired it. You admired the firm. Yes. Admired it a lot. Very, very, very, you know, rigorous about everything.

48:20Hired from, only hired from the best schools. You know, training program, which I avoided, of course. Obviously, they came in laterally through acquisition, but people were very conscious of what class they came in and who was in the training program with them. It was really like, in some ways, like a law firm in that way. And partners were very, very exalted status. There's a partisan. Now, they did what everybody did. The partners, if you looked at what they did, they did what everybody did. They worked harder and were good at it, but everybody knew who they were and gave them a wide berth. So it was very hierarchical in that sense.

49:03But at the same time, the management was in the middle of the floor. You can engage. I'd say the other thing I learned about Goldman was that notwithstanding that, anybody with a good idea or who asked for help in doing something can get it from anybody else. so it was you knew the status was hierarchical in terms of the different categories of people but the most important hierarchy was competence like you knew who could do things and who couldn't and those people even if they weren't partners even if they weren't partners and those people had status so for example so you knew five years before a person could be a partner you knew who You knew that guy was going to be a partner.

49:51I mean, it sounds... And everybody would know it. It sounds like a meritocracy. Yes, totally. Which was not the case in the law firm, which was all about tenure. No, I think it was a meritocracy, and then you got tenure, yes. But it was how the tenure decisions were made. It was almost both. And once we see you have merit, let's see if you stick around and we'll give it, you know. No, but it was all merit. But this was really merit. And what I also learned, it wasn't a secret. It wasn't, oh, this guy has a high opinion of that guy. Everyone knew. But I don't see it. Right. Everybody saw the same stuff.

50:22There'd be people you'd go to to get the question answered. Got it. And I remember when I was sort of given more responsibilities, even at Aaron, when Aaron started to get Goldmanized because they moved a couple of Goldman people down to Aaron and who started to Goldmanize it. I remember being asked to, when I had no title,

50:49and I guess at Goldman, I would have been an analyst. Yeah. There wasn't a vice. Wasn't a thing. Or maybe an associate. Wasn't a vice president, which is also a junior. This is like McDonald's where the lowest one is, where the lowest size is a garage. I always found it fascinating where, you know, it's very different in tech. Titles are very, very different. But I always found it fascinating that like a Goldman, Yeah, like a VP was not entry level, but it was it wasn't anywhere close to a party. I say it's like McDonald's where, you know, you want to order a soda soda and the smallest one is a large.

51:17It goes up from there. That's right. Yeah. So it's like, you know, I mean, I guess it was from a recruiting perspective. That's why they did it. It made people. No, just that, you know, they held with the U.S. government. So they it's their decision to have only one vice president. Goldman decides we get a 6 ,000. Right. Yeah. That's just the way. J.R. and it's getting Goldmanized. So what I was going to say about that, the title is when I didn't have a title, but then, so I was going to run some new operation there. And there were some people there that were already in it and they were going to now report to me.

51:47And those people were vice presidents by virtue of their tenure. And I was a, I had no title. At one point I asked for a title and my then boss, the guy who hired me said, call yourself Contessa. That's a title. It's like, shut up college boy. Yes, exactly. That was the whole attitude. So I found out there that it didn't matter whether I had a title and they had a lower title. Competency. Yes. Competency. If you could did it. And remember, in this conversation, I had this conversation many times in my career where I had ambiguous roles and ambiguous titles and it was ambiguous, you know, organization chart.

52:25and I would give somebody an instruction and they would say to me, and really this literally happened more than once, a few times, do I have to, like, do I report to you? Do I have to listen to you? And I always had the same answer, which was, I'm not sure myself, but it's your risk. Wow. Brilliant. It's actually the perfect way to put it because then, like, they're not really sure. You're not really saying you must, but, you know, it's like, Don't listen to me at your peril. Yeah, it's your risk. I don't know myself, but it's your risk. If it turns out, you should have. Wow. So that's what I'd say.

53:02It's your risk. How do you become partner at Goldman? How did you become partner at Goldman? Because you became partner at Goldman, I think, in 88. Yeah. So that was also another thing that I was happily deprived of, which is the tension of making partner all those years and working towards it. You didn't care? Oh, I would have cared if I thought it was available. Aaron was really treated as a separate firm. They made five partners from the old J. Aaron company, partners of Goldman Sachs at the time. And over time, they had gotten paid out and they started leaving. And there were a couple left from old J.

53:41Aaron. But that merger happened in 1982. And as you note, I became a partner of Goldman at the end of 88 for the 89 year. That was really seven years. My first seven years there, no one made a partner, and it didn't occur to me that anybody would. And so when these processes were going on, I was kind of oblivious to it because I wasn't in that. We were living at, we were, you know, for the longest time, we were separate 160 Water Street, and Goldman was at 55 Broad Street. In 1985, I think we moved into the same building, but separate floors, separate elevator bank. we really talked about going over to Goldman.

54:21We didn't say us. Yes. And we answered the phone, Jay Aaron. Jay Aaron. And so I wasn't in the mix. And then that 1988 year, they made four of the important up-and-comers at Jay Aaron Partners at Goldman. And that was very new to me. And I was really, I didn't know the other people. Presumably, and I know it, the other people in that class. And Goldman makes partners every two years, still to this day. Every two years. Yeah, because if they did it every year, the firm would do nothing else. It would all be partner meetings all the time. How did you earn it? I mean, was it this$100 million deal that showed that you had the confidence?

54:55Well, there wasn't one thing specific, but I think I distinct, you know, in those, I did a finance. When your clients are in the gold market, you tend to dealing with, I mean, you're dealing, you know, the producers are in Russia and South Africa. And so I used to go to Russia and South Africa when you talk to the producing side. and your clients are in Riyadh or Switzerland or South America. Those are the people who are the buyers of that type or central banks in Eastern Europe. And so those were the haunts. And in having a conversation, I won't make this complicated, but in having a conversation with some of the counterparts I was dealing with in Saudi Arabia, one of their problems was to figure out how to invest money in a conservative way that we would normally associate with the interest rate markets, but they couldn't at that point, at least some of them were, you know, observed this, you know, kosher and couldn't take interest as such.

55:58So what they were trying to do is create instruments or investments that were structured in a way that would be so protected that they had fixed income characteristics, but that look, the returns could be characterized as investments. Not interest. Not for tax purposes. But for moral purposes. For moral purposes. For religious purposes. And for religious purposes. And by the way, and there was a clearing authority. Yes. There were people who would opine as to whether this made it or not. And so, again, for... Was that a religious figure who actually did that? Yeah. Oh, yeah. It's incredible. No, whether something passed, yes, everyone had to...

56:35Whether or not it's interest or it's capital appreciation. look you can go to crown heights and people will ask for opinions right on whether this is you know yes yeah i guess the jews are doing it also yes of course everybody's whether this is compliant or not a new technology comes out you know so what does she do i mean it doesn't say in the by you know where in the bible does it say you can't turn on electric lights that's right on shabbos yeah that's right so somebody somewhere someone said that yeah analogize that to fire yeah wait till they figured out the shabbos goy thing or the or the shabbat elevator thing which to me is still a whole episode of like all the hacks that we've created.

57:08We're not turning on the lights, but if I say the lights are off and someone turns it on for me, no problem. I remember being in a Hebrew school and, you know, the teacher lecturing us, you know, on, you know, going, you know, it was going to be, you know, Hanukkah and she didn't want anybody using electric lights. You know, there's electric Hanukkah, which is what my parents and everybody did because we didn't exactly, We, you know, we're going to have fire in our apartment. And I remember saying, well, why can't you use electricity? If electricity is enough like fire so that you can't turn on a light bulb on Saturday, why isn't enough like fire so that you can light your Shabbos candles?

57:48You broke their brain, I'm sure. Yeah, broke their brain. And then they said, shut up. And they're just like, we don't know. Stop being so disruptive. Shut up and repeat the, you know. That's right. Say the Shema. And say the Shema, yes. So the Saudis need fixed income, but they can't call it that. Like, how do you... Something like that. By the way, it was 100 % analogous to what investors in the U.S. would do to try to turn what otherwise would be interest into capital gain, a long-term capital gain. For tax purposes, though. For tax purposes. Yes. And this was done for halacha purposes. Okay.

58:21So you're like, okay, I can connect these dots. And so I did it. And so we did... And it's a cash and carry. I could explain it. with either cash and carriers, but it's basically a financing transaction, but it has characteristics and it had enough characteristics of investment and it had to have some elements of risk in it. And risk was, and so we bought for the people who want to invest the money, all of, let's say the S &P 500, which was a new contract at the time where you could do size. And so to buy that, they put in cash to buy all the stocks. And then, so they buy that and then they sell the futures forward.

59:00In effect, by buying the cash and selling the futures forward, so in a year, you'll get the cash back when you go and do that. And presumably, having all 500 stocks is a good hedge for the S &P 500 futures contract. That was in effect lending money to the exchange. And then they got a very high rate of return. And in those highly speculative times, it would be like, you know, five or seven percent off of the interest rate, you know, the risk-free interest rate, maybe even more. So, man, it's ridiculous. Did you think that up in the shower? Like, this is incredibly creative. And most people think of finances as much more.

59:39I think cash and carry I didn't invent. But what happened was there was a new contract at that time called the S &P, you know, the SPYs, which now people take for granted. But that was new. And that was finally being done in a size and with inefficiencies that allowed this. So you could do a large amount and there was a lot of you'd have to buy the whole S &P 500, sell the S &P 500 forward in the form of a future. Don't forget when you're buying it up front, you're giving the cash. When the contract settles on the back end, you get an effect. You're getting stock, but it gets delivered in cash.

1:00:17And so you get it back. So it's in effect lending it to the market. Now, who's on the other side of that transaction? Who's borrowing it? You don't know. Therefore, you don't know who they are, but they're speculators. And in those days, people were speculating because with those contracts, you've got a lot of leverage on the market. So people were insensitive to what embedded interest rate was. And they were just taking speculative positions on the S &P by putting down 5 % margin. And you can control 20 times the position. So they were paying relatively high interest rates to the counterparts on the other side who were supplying it.

1:00:50And this is a little bit complicated. but if you set it over five times, you'd get it. And that was a lending transaction. And they wanted to do, the amounts that were relevant to them were in$100 million increments. That was a huge transaction in the equity markets in those days, especially for that contract. And I brought in an order to do that. Now, in order to do that, you had to work through certain things. So under their ruling that they had that would permit this kind of transaction to be compliant, It was an Islamic, you know, to make it Islamically correct, they couldn't invest in stocks that were too associated with gold mining or with interest lending.

1:01:33So they decided they couldn't have banks and you couldn't have spirits companies. So Anheuser-Busch didn't work. Wow. And so that left like 15 companies out of the S &P 500, which created some tracking risk, which created some risk, but not too much. Wow. Because it was still largely a big enough pool. So those things got worked out. And Goldman saw that as being incredibly creative. Yeah, I went to the big boss. And I said, I have this transaction. And this is a credit to the firm. He said, oh, go work with this guy, who was a very senior guy in the equity division who knew about how to do these.

1:02:09And I worked with that guy. And the guy not only gave me the time of day, gave me all his time. And we worked through it together. And it got done. So when I said before it was hierarchical, it was hierarchical in that you knew who was who. who, but it was very, those membranes were very permeable based upon capability and success. But just a sec, you're, I mean, beyond the complexities and the brilliance and creativity around how you actually structured this, you're a Jewish kid in Riyadh trying to convince these, build trust with these people to be able to work this in a way that's acceptable to them.

1:02:42And that's somewhat subjective. How did you build that trust across cultures like that? You know, first of all, and, you know, this is, you know, we can have a whole sociological conversation about what these things are. I would say that the, when you travel, and again, it's hard for me to distinguish back then. Things were a little, you know, 40 years ago. It wasn't as developed as it is today. The tectonic plates had moved as close together as they are today. Right. But, you know, the powerful merchant families in all these countries... Their kids went to Colorado State and Boston College. And, you know, a lot of these went to school in America.

1:03:25So, you know, the top level of these are, you know, are us. And, you know, and you could have good conversations. And later on, I would. I'd go there and we'd talk about the crazies in their area. And they're like us and they have, you know, our interests are pretty aligned. Is that worldwide? I would say, you know, there's a lot of, you know, there's differences. But in those countries which are, let's say, where their interest in them is based upon the accumulate, you know, on their trade and, you know, have a merchant caste. Yeah. That family group. Yeah. The older parents, you know, like in the case of Saudi, the older people, they grew up without shoes and everything, you know, and after 1974.

1:04:16Yeah. and the boycott and everything. And when they arrested Aramco and made it, people got very well. So there was a real break for them where it went from being, I mean, if you look at, you know what Dubai looks like today. Yeah. If you go back 30 years or 40 years. But if you go back to the 60s, that waterfront is not there. It's not there. I know, it's unbelievable. They were, you know, pearl divers, you know, They called pearl divers and smugglers and smugglers of silver into India. You know, it was a gateway. And the wealth that was spawned, but also they got lucky. The vision of those people, they laid, I mean, we're jumping around here, but they laid the steel and the foundations for a great city when most people didn't think there was any prayer to have anything there.

1:05:11There was some thoughtfulness. There was some vision to that thing. Huge. Yeah. Huge. And so then working with someone from Wall Street was actually very appealing to them because... Appealing and easy to do. And they thought the way you did. And they went to school across the river from where you went to school very often. And so that wasn't his problem. But there was always, you know, it was mixed and their people weren't. The tougher place. So those are the places where you had a stratified, you know, you went there based upon a merchant class that, you know, really could concentrate the wealth of the country in one place.

1:05:40and those are people you can do business with. And then there was a whole mass of people that you never engaged with that were there and you saw them on your way in from the airport and back out to the airport. That was that. The more complex places that you went to were the places where you engaged with them because of the government and the sovereign wealth where the people of the upper echelons and others were the same. And so if you went to Russia, those guys you dealt with were Russians. They didn't go, you know, they went their way. They weren't going to Colorado States. No, they went up to the, same thing in China.

1:06:15They weren't there because their families sent, you know, packed them off for their education. They went to, you know, they went to, they didn't go to Eaton. Yeah, right. There's no how about those Red Sox. What? No how about those Red Sox. And so those, so it's very interesting. When you went to the government's ones and the ones where they were, you know, and I guess they wouldn't even regard that as a meritocracy of a kind. those people tended to stay more foreign, whereas the one that you think are the most foreign people had an echelon at a tier that you could very well bond with who acted and thought like you did.

1:06:50I want to go back to, so you make partner here. You did this amazing deal. This is in 88. Well, I didn't, but that deal happened in a lot of other things. You basically, based again back to that sort of meritocracy point about Goldman, Goldman obviously saw something in you. and that particular cohort in 88, you became partner. Was it like pre-partner, post-partner? Did your life change entirely at that point or was it subtle? It had to have. I mean,

1:07:21it was like that. Did you believe, like, you probably called your mom and said, Mom, I just became, if your mother was around at this point, and said, Mom, I just became partner. No, of course. But look, when I got to Harvard, I was very happy to tell people that I went to Harvard. I was dying for them to ask me. And if they didn't ask me, I'd find ways of getting to Harvard. By the way, everybody who goes to Harvard does the same thing. Of course. David's wife went to Harvard. If she was here, you know by the second step. I said that to her. I met somebody the other day. And I didn't realize it, but the guy was a Rhodes Scholar.

1:07:53I said, you're the first Rhodes Scholar I met that didn't tell me. How we were. Back when I was a Rhodes Scholar. So, of course. And becoming a partner was just like that. Yeah. But when I got to Harvard, I felt that way. But of course, my overriding thing was, oh, my God. Am I going to get thrown out of Harvard? Am I going to get there? When I made Harvard a partner at Goldman, the first thing I said is, what is the average tenure of a partner? Will I make it that long as a partner here? So I was trying to make them not fire me as a partner and not regret that they made me partner. her. And that's what I thought about.

1:08:33And that's always what, by the way, that's always what I thought about my whole life. And I'm telling you, you're destined for, you know, you'd be happy. You know, I'm happy with that. It's not like I'm sad, but I never was rapturous about my position. I always worried that, you know, A, I got it by mistake. I may not have deserved it. And B, I didn't want to lose it. And C, I wanted to justify them having given it. And that's always That's always what I thought about. Well, I'll give you a little dirty secret, which is that the people that have sat where you're sitting for Big Shot, we ask all of them, when did you know that you made it?

1:09:08And they all kind of say, I'm not really sure I've made it yet. These are people that have all, in our eyes, I think in a global macro sense, have made it. There is this sort of scarcity kind of mentality that we all have, whether it's the Jewish issue or it's the multi-generational trauma that we all, my grandfather, Holocaust survivors, that I'm still worried. Do I have enough? Am I doing enough? Am I going to lose this thing? There's often not a sense of abundance that comes with success. And then what is making it and what is success also? Does it make a difference when they have, I'll let your imagination decide what X is, whether you have 5X or 50X, when 5X is more than you could have spent in your entire life anyway.

1:09:53Yeah, I mean, we joke with that all the time. The magic number thing is such a stupid thing. Or success having children that still talk to you. Right. Yeah. Or having your health. Or having your, well, having your health could often be out of your control. Yeah. But whether your kids talk to you, you might even, you might think at the end of your life wasn't your control. That's right. Or whether you, you know, you know, you know, whether your third wife talks to you and your second wife, you know. Luckily for you. We're still on our first wives. But as you're kind of going through this sort of.

1:10:21And so that comes, and what is, what is it all about anyway? Are you supposed to? I remember when I stopped working at Goldman, I started, I said, oh, well, I should teach. And I had like whatever the lowest rank of instructor is at the Harvard Business School. I settled on that title because it came with the least responsibility. And it was a little COVID-y outside. Associate professor or visiting professor or something like that. It was not even like that. It didn't have the word professor. Oh, no. Okay. I feel like we're going to have you back in 10 years and be dean. No, they often. Would you like to teach a course?

1:10:52No. Would you like to co-teach a course? No. Okay. Would you like to have fixed appearances? Keep going. You're going in the right direction. Guest lecturer. Yes. Would you like to be a lecturer so somebody could call up? Yes. Okay. Good. And you could decide at the last minute whether you do it or not. Like a CNBC contributor. Yes. Yes, exactly. That sounds right. That sounds like the one. And so that's the one I took. And I remember the few times I did that, I said, why am I doing this? Teaching them what I already know. I want to go out and learn stuff. Yeah. And so for me, you know, so I want to learn about, I want to learn physics.

1:11:25I want to learn cosmology. I want to learn the physics of large things, the physics of small things. So, and now you could do this stuff. You can listen to lectures on Audible. Sure. And tape. And that's, I do a lot of that. And I'm saying, so what's it about? Now you should give back. And some people could do, you know, I retired seven years. That's a long time. And I was 64. and I'm still pretty peppy. I feel pretty peppy now. And I just really, I was CEO for almost 13 years at that point. And it was good. And I loved my job and I loved engaging with the people and I loved it. But I'd gone through cycles, financial, all this.

1:12:07You went through 2008. Yeah, we're going to get to that. We had to talk about that. Yada, yada, yada. The whole US economy almost collapsed. But we had the crisis of the century every four or five years. So we weren't going to run out. We got used to them. But it's like, what is, you know, what's the meaning? What's it all about? Do I want to really go and take one more trip to Singapore or to Australia so that we would have instead of a 68.7 % chance of getting this piece of business, I can raise it to 74 .9 % by virtue of showing up and showing my commitment by taking that long flight and going back and making and being part of the business.

1:12:47the pitch and going out and learning the detail, you know, and things like that. Was I, you know, was that satisfying at that point? In other words, just sustaining. And by the way, I have some admiration for people who do that to the end of their days. You did that. I mean, the irony is that had you had that attitude 20 years prior, you wouldn't be Lloyd Byfield. Well, I did it for a very long time. But then it got to a point where I had to think, you know, what I really want to do is I really want to learn about this and I want to learn, you know, that. Is that how you knew when it was the right time to retire?

1:13:17Is that when you sort of felt, okay, I'm 64. I'm interested in other things now. I would say the last seven or eight years of my tenure was dealing with the existential part of the financial crisis, like surviving and making sure you risk managed it. And the prior, you know, and for several years, we had to deal with the reputational part of it for having survived it too well. That's right. Yeah. And, you know, why did you do it? And then all the pressure put on banks and Goldman in particular for doing this and dealing with regulators and kind of working through the aftermath of the financial crisis and the law that would change, the regulations that were behind the laws and the application of the regulations, you know, very complicated and difficult.

1:14:04And when that had abated finally was I thought, gee, most of the people who leave these jobs get carried out on a gurney. I don't want that. and I'd done this for a very long time. I was a very long, for that industry, I was a very long-serving CEO. There are times, you know, a quarter of the time, I miss it a lot, and 75 % of the time, I'm just relieved I'm not getting, you know, when I finish this meeting, I'm not getting on a plane and flying to Frankfurt. So let's go backwards, though. So you were one of the longest-serving CEOs of Golden, but also, frankly, on Wall Street. And I assure you, it seemed longer.

1:14:40I'm certain of that. Can you explain how you go from making partner in 1988 to becoming the CEO of Goldman Sachs? Because I think that, you know, it's one thing to become part of. There are lots, not lots, but there are number four. Yeah, I would say it would not. But what was the thing? What was that journey? I mean, Hank Colson was the CEO before you. It would not have been predicted, and it was twists and turns. Look, any time you get to a place, you can look back to where you started and see a straight line. The question is, if you just look from where you're starting and looking out, there's an infinite number of possibilities.

1:15:13It could have been infinite. A lot of odd things. Look, in the last step, if Hank Paulson hadn't been elected Treasury Secretary. He would still be CEO. He would have been CEO for eight more years and they would have gone. You would have missed your window. I would have missed the window for that. So there's a lot of stuff like that. But basically, a lot of things happened that resulted in this outcome. It wouldn't have been foreseeable. It wasn't even foreseeable at the end. For my last 25 years at the firm, I was always in the last job I could have until they created another job that hadn't existed before.

1:15:53One of the many crises of the century happened in 1994. and that was the year, that was actually the worst, probably, possibly the worst time for Goldman. Worse than 2008. 2008, we were already much bigger, bigger balance sheet. Yeah, tell us about 94. It was a crisis that we shared with everyone in banking and we were better than all of them. Yeah. So if they, if the federal government ended up having to do things and we got swept along with it, but we probably were, we were much better positioned than anybody. So it wasn't like we were the last, we weren't the slow hiker. Right, if the bear's chasing you, just make sure you're not - We were the fastest hacker in the forest.

1:16:29In 94 was a year in which the Europeans raised interest rates, something like 600 basis points in the US eventually followed in a very, very short amount of time. It discombobulated markets and people were overextended and it was highly leveraged. and the same conditions that persist, but it didn't really affect everybody evenly. It was very disproportionately a Goldman problem and a couple of others, but it was mostly a Goldman problem. Whenever you are alone in a problem, it's much worse than if you have company. That's not hard to appreciate. And so, 94 was a year. Also, other things were different.

1:17:12Goldman Sachs was a general partnership, which meant all the partners had unlimited liability. So when you they were looking at losses not just of their income and not just of their capital, but their homes Yeah, well homes Arizona and so it was a you know in those days that was you know that can sort of kept you very focused Yeah, and some miss those days, but you don't like that today people are focused. No, it's not that good No, it's not a partnership. It's a company. Yeah, and in between it became a limited partner where your capital is at risk But not your homes, right? So they try to do it You can't run a firm that way.

1:17:46Also, capital is impermanent. You know, if a partner retires, they came in. Well, in 1994 was a big crisis at Goldman because of those big losses. And the only way a partner can immunize themselves against further losses is by stepping out of the general partnership. So something leaving, like a third of the partners left. So business is hard and you have mass exodus, including the head of the firm that year, left. and so there was a lot of battlefield promotions, including the person that ran my division. So when he left, myself and this other person got elevated to be battlefield promotions.

1:18:23We weren't well known to the Goldman people. I still call them the Goldman people. Weren't well known to the Goldman people, but we got elevated as division heads earlier. And then that started work. And then the Aaron division, in an effort to find new business enterprises, started to do more than just commodities. Was doing foreign exchange, which had commodity-like elements to it. It was traded on an exchange. There was arbitrages between the exchange and the cash market. When you're trading foreign exchange and long-dated foreign exchange, it starts to look like non-dollar bonds. So we started doing that.

1:18:57Non-dollar bonds start to look like US bonds. So we started dabbling with that because there was interest rate risk to hedge. And we started doing it. And all of a sudden, the JRN divisions, businesses, started to grow into the fixed income divisions businesses. And there were border skirmishes, which at Goldman, it's very genteel in that way. And you sort things out. And we're all one firm. We eat off the same plate. A lot of metaphors for the collegiality of Goldman, which is generally. But sometimes that collegiality is forced by people with automatic rifles that stand over and keep guard to make sure that you naturally competitive people get along.

1:19:34at the edge of a bayonet if you have to, but you guys are going to get along. And that was the position that we were in, the fixed income. And in that 1994, people, and in the immediate aftermath of that, became the head of Jay Aaron. Jay Aaron started to overlap in the fixed income. And so by the middle, late 90s, merged the Jay Aaron and the fixed income divisions into something called FIC, fixed income currency and commodities. Also, finally, Jay Aaron is now really part of Goldman Sachs. And that becomes really part of the firm because the fixed income division is real Goldman Sachs. Right.

1:20:10And so I think at that time, Goldman had five partners. Aaron had five partners. The fixed income division probably had 35 and something, you know, merger of equals. And so we went in. And so I became the co-head with the then head of fixed income. And again, we got along so well that it was decided I should move to London and separate us. because, you know, it was different philosophies and different risk profiles, different feeling about how to do things. Were you not worried about, I mean, you just described a scenario where half these partners are running from the hills. The way you say a boot, you think you're a Canadian.

1:20:48So these partners are like, they're running away from the firm. They don't want the personal liability. You're a partner at this point. Yeah, I'm kind of a nerve by it myself. Yeah, so like what, you go home and you're like, what do you tell your wife? Yeah, exactly. You know, to me, it was never money. To me, that money was my capital account. You couldn't touch it. It was in there. I wouldn't have wanted to touch it. I didn't want anything I would use it for. I was a worker. I mean, I just cared about my job. Was that the dynamic you always had with your wife? Which is like, she was ride or die.

1:21:21She knows what she signed up for. My wife went to - Married for what, 45 years, you said? Yeah. She went to Georgetown Law. She was an associate in a law firm, worked her way up. but then went to the Corporation Council in New York City. She was sort of saying we were professional types. Yeah, we were professional types. We cared, we had an apartment, we kept getting bigger apartments. We got in 1988, we bought off a starter house in the Hamptons. And so we had the bourgeois life. Oh yeah, the year he makes partner, he buys a starter house in the Hamptons. It's actually before. Yeah, of course.

1:21:54Poetic, it's perfect. I mean, there's something I'm dying to know. You're CEO. You talk about 2008 as a common problem and you kind of minimize the impact. But I mean, we were alive for this. This is a big deal. You have 40 ,000 people work for you are glued to CNN right now. You're talking about the. Now I'm on 2008. I'm jumping ahead. But like, you know, probably CNBC, but I guess CNBC, whatever. But they're there. I mean, I remember that time. Yeah, I do too. I'm sure you do. So you have these 40 ,000 people who are and your customers are pulling money out like it is a free for all. Like, what do you do?

1:22:25I mean, this is an immense moment of leadership, which you clearly, you know, rose to the occasion. Like, what are you thinking?

1:22:34Well, you're thinking at all times, you know, this is my, you know, this is my responsibility. You know, I own this. And I did. I owned it. And I felt like I owned it. And guess what? The entire world thought I owned it. So you're just living. You're not going to the index of some book on management and figuring out what to do. And you've already been through a couple of these, maybe as large as that, but 94 was hard. 94 was that, 98 was long-term capital. 2001. The collapse of the tech market. I don't want to deflate you, but that was a little thing at the time. Yeah, yeah, yeah. Okay, well, I was - 2008 was 16.

1:23:11Okay, great. 2008 had a different feel to it. It wasn't to your - Did it? Did it have a different feel? Yeah. Yeah, 2008, what took on, and again, it was slow, you know, just like the 1929 was, it took, it happened in increments. It was only this part of the market, you know, it was only the subprime market, then it was subprime all day, then it was just the mortgage market, then it was mortgage and credit, then it was every asset in the world, you know, went down in value and then nobody knew what anything was worth. So everything was paralyzed. Nobody knew the credit worthiness of anybody else.

1:23:45So, you know, if there are normal financial flows, you know, you buy something from me, you give me the cash, I owe that cash from someone else, he owes that cash to someone else, and there's a whole chain of payments that get made. But if you didn't know who was solvent, you wanted to get paid before you let your money release. If everybody is waiting to get paid before anybody releases money, no money fails. Nothing happens. And the only balance sheet big enough in the world to get things to unclog that is for the government to stay in and said, I will make sure for the next three days all payments get.

1:24:15And then everything just goes. And it turns out that everybody can make payment. But nobody knows that for sure because it's just, and that's what happened. It was a real seizure. And that's when it's called systemic. That's what systemic risk is, is when the whole system gets completely frozen. And that happened then. And then there's bankruptcy, which means that your liabilities are greater than your assets, but there's insolvency, which means you can't meet your obligations as they arise. So you could have wealth and assets that are worth something, but if you owe$5 million on this day - No liquidity.

1:24:52And you have no liquidity, and no one will lend against your asset - You're up the creek. You're insolvent. Yeah. And so you're similarly filing. And so that's what happens. So that's why sometimes you have these insolvencies, and yet the trustee in bankruptcy manages to pay everybody out in hold. because they were insolvent. By the way, that's in financial institutions. That's always the case. You go out of business because you're insolvent. And then, of course, as soon as they sort out the financial crisis, all those assets spring back to value. And that's why people who do distressed debt trading make money because as soon as the distress goes away, usually those assets are worth more.

1:25:28What do you tell the team, though? Well, I was telling the team, you know, we're going to get through this. By the way, large, you mostly do get through things. And even if I thought at moments that we might not get through it, I... You believed it. I believed it. Yeah. And I communicated like crazy. I was on iDave almost every day, certainly three times a week. I would send blast voicemails out to the entire firm. That's what you did? You did a voicemail? Yeah. You wanted them to hear your tone? Yeah. I guess. Yeah. And I wanted them to, I wanted to, and my voicemails would always start out with, you know, I'm in, you know, Paris and I've just been taken on tour, you know, met with 30 clients.

1:26:16And all are, you know, I have nothing but admiration for the firm and it's how it's dealing with this, you know, with the crisis. And I know that, you know, they're going, you know, it's not, life is not easy for them. And then I would go into kind of where we, you know, where we were, you know, at 30, at the level at which you can give a message to the whole firm. And but you know the important thing that you're conveying is I'm out and about doing your job Yeah, and you should be too and you should be too and I would say to people you know I know everyone's nervous and you know people were glued and wanted to watch the the screen and they have little boxes in the corner of CNBC with our stock price and other people of other firms and I just said look You're all You know obviously everybody is concerned, but let's make a deal if you want to help the firm do your jobs do it better than you've ever done it before call your clients if we're in distress they're in more distress and I will tell you I only need 1 % of the firm or less to work on Goldman Sachs as a client of itself and our own situation I need 99 % of you to go out and show we're not being hurt we're doing our job we're keeping our commitments to our clients and we're effective and we're not discombobulated by this.

1:27:33If you want to show, that would be a very good thing to demonstrate and it would be a very good thing for your future with your clients if you show up now for them in their moment of need. Will you please do that for me? You'll build loyalty for life in those moments. And I don't need you in this other thing. And in return for that, I'll let you know what's going on. You won't be in any less of a doubt. you won't be more of a deficit of information as a result of you doing your real jobs. And in turn, I'm going to be doing my real job too. And I'm going to be out and about. And I never, you know, and I kept my schedule, kept, you know, if it was the time I was supposed to fly to Tokyo, I flew to Tokyo, if I was supposed to.

1:28:13You didn't miss any of it. No, no, I didn't. If the government made me go in. Yeah, that's a different story. Can you talk, just on the government side, I mean, obviously now the very famous phone call that you made to Warren Buffett, who's, I believe, is a friend of yours now. Can you talk a bit about, like, what that was like you to call Warren and ask him to take a stake in Goldman Sachs? At that point... Why Warren? Why was he... I mean, obviously, he had had money, but you could have called other people with money. Actually, at that point, he called me because we were looking for... Well, first of all, let me just get to the Warren Buffett point.

1:28:48After we did a transaction with Warren on his terms, which were very... At the time he did it, they were very good terms for us and very generous to himself, But very generous to us too. It was totally appropriate at that time. It was better than fair. We would have done it for better terms for him. And then right after that, when he did it, and all of a sudden with his, in addition to him, other people, it's just money. He's money plus validation. And other people came up to, gee, I would have done that trade. Why didn't you offer it to me? I said, well, with you, it's just money. Yeah. You wanted validation too.

1:29:24With him, And by the way, the money he - You're calling it validation, but what you're really saying is credibility. Yeah. Credibility. He has a brand that has a signal. Imprimator. Yeah, yeah, yeah, okay. And if you want to say, it's the same thing. It was, he wouldn't do this and he's wise and he doesn't do this for fun. And he must have looked and had good, warm feelings for us. And he was right. By the way, the money he invested in us was a preferred stock issue that I don't think was good regulatory capital. It wasn't. It wasn't equity. We never had the equity markets closed to us. We went to the equity market to raise$5 billion, and we were offered$20 billion.

1:30:10We ended up taking$6 billion just to do it. But we had a problem because banks, including some of the banks that went under, investment banks that went under, were standing on tables telling everybody how solvent and firm they were and they weren't. We were. And it occurred to me that if I jumped on a table like they did and asserted it, it would look very weak. But if it would buff it, it would change the dynamic. It would change the dynamic. The other thing we did is we started with people who we worried that they were worried about our credit. We put money in their banks. Yeah. So I called up a couple of them and I said, you know, we're going to need you to make payments.

1:30:48I'm going to send over a couple of billion dollars and just keep it with you. Because, you know, it's one thing to say you have liquidity. But you actually show it. But we actually had it. It's incredible. And so we did that. By the way, that's not to say that it wouldn't have gone downhill. No, no, that's right. Everyone would have gone. In other words, everyone would have. It was just a question of when. If it comes up and nobody's paying you and you have obligations to be paid that you were waiting to get paid on, obligations from A so that you B could pay C and A never pays you, you're going to default to C.

1:31:20Everybody would. Every industrial company would have. And that's why the government ultimately came in and needed to scotch it and made everybody do it. But it was a dangerous situation. We had to work ourselves. And the fact that we were better than most at the end of the day, no, it wouldn't have mattered. I said to, at the time, if you're sitting on the beach and you have an Olympic swimmer sitting on the beach and a six-year-old girl with water wings sitting on the beach and the tsunami hits, they're both going to drown. Didn't matter if anyone was an Olympic swimmer. That's right. You're both going to drown.

1:31:56That's right. At water that's moving 500 miles an hour with debris. And so that's where it was. So I could expound how terrifically positioned we were, and that's honest. And I can also honestly say that it was too big a risk of a bad outcome than I would have wanted to go to sleep with at night. And so it was for the government. And so something had to be done. And like in those James Bond movies where he diffuses the bomb when it has seven seconds. When it goes down. When he snips the wire. When he can't decide between the red and the blue one, and he snips the wire with 007 left on the countdown clock in every James Bond movie that you saw, nobody will know that he saved the world.

1:32:45Right. And so the people in the government now that are getting exoriated for having intervened in the market and done that stuff and getting killed for it have said, of course they're going to get killed for it, because the contrapositive is never known. That's right. No one will ever know what would have happened. Luckily. What's ever known. Luckily, and so those poor people who may have saved, you know, the person who saves the world never gets credit for saving the world. Why? Because the world's saved. So Warren calls you. Like, that's, most people think. No, no, no. He, we were engaged, we had engaged with him.

1:33:14We had called around, called him. He declined, partly because, you know, he has his own reasons. I don't, you know, my good relationship is such, you know, I don't ask him to explain himself to me. Right. But I kind of knew. You know, he had bad brush with Solomon Brothers once upon a time. He never liked those and he said that he's quite public about that He was very close. He had a very good relationship with Goldman I'm not running any risk in saying that he was out in his book he visited you know in the in the biographies written about him has You know his father was a small-town broker and actually served in Congress, but was a small-town broker you know went and visited see you know his big firm broker, Sidney Weinberg, the head of Goldman Sachs in 1930, brought little nine-year-old Warren with him because he was going to see the 1939 world deal.

1:34:03And so Sidney Weinberg and Warren Buffett spent 45 minutes together. And that was a big deal for Warren. It's amazing what Sidney's in their 30s. And I'm sure it was a big deal for Sidney Weinberg too. That's right. Who probably got as much out of nine-year-old. But anyway, so at that point, he knew we would, you know, he had to have known that we would have had interest. But at that point, he reconnected with our person who was very engaged with him also. And that person called me, said, Warren, just fall back there. He's willing to do it. This was after a stop. And could you call? Warren was looking for you when you land.

1:34:39And I was on my way. I flew. I remember flying to Washington for something. Always flying to Washington in handcuffs and, you know. Whenever you get called. But you had moved on from this. Like the Warren idea was out of your mind. It was out of my mind. He said no. It was out of my mind. And he called up and said, no, we could do this and blah, blah, blah. And you're going through this. And I remember the whole conversation. I said, that's terrific. And he said, we should price this, the warrants at the end of the day, based upon the close of the market. And I said, that's fine. And I said, I remember the whole conversation.

1:35:12It was like, from his point of view, he was done. And from my point of view, and I said, Warren, we'll just do this at the end of the day. And I said, well, Warren, why don't I go through with you all the things I'm nervous about with respect to the firm? Just tell you all my concerns. Was that you being transparent? Yeah. Okay. And he said, you don't have to do that. And I said, Warren, maybe it's the old securities lawyer in me that makes me want to tell you all these things so I can remember having said it to you. And he said - They're the risk factors. Yes. So he said, you know, I'm actually going to take my kid to Dairy Queen out now.

1:36:01So he said, why don't you worry enough for the both of us? I love it. And then I think I had one more round where I was trying to convince him. To let you tell him the reason. To let him tell him the stuff. And I think eventually I had my CFO call up his CFO and have a conversation. But he said, you know, Lloyd, when you get right down to it, we're buying these preferred shares. It's$5 billion. That's not even, you know, and he's Berkshire. That's not even a hurricane on the East Coast. It reminds me of that. It's a Berkshire. Yeah, of course, because a hurricane on the East Coast actually hurts the insurance business.

1:36:37No, it's like, you know, he probably has$5 billion in payouts to me. So it's like an extra hurricane on the East Coast if we lose all the money. And the fact is, it wasn't a lot of money. Yeah. I mean, you know, I mean, our balance sheet at that point is, you know, is a trillion dollars. It was a signal and it was the perfect signal at the perfect time. No, it was good to have done. And we ended up doing an equity raise, which went better. And it was a, you know, it was a validation. And yes, it was, you know, it was a big, yes, it was a big positive. But we were braced, prepared, braced to go on without it.

1:37:12And we and, you know, and we did. So anyway, it's like your Goldman saying where you're like, don't tell me what you think is going to happen. Tell me what could go wrong. Right. Well, it's like I said, I, you know, wax about, you know, risk management. And, you know, generally we're big risk takers in the firm and we, you know, often intentionally, often when somebody gives us a risk that we, you know, we're like Berkshire. They price. You know, Warren said the best the best thing he can have is when he has to insure a cargo and the plane's already in the air. What do you want to do? And so for me, we're risk takers and risk managers, and they're different things.

1:37:56Risk is sit around a table, what do you think is going to happen? This is a good deal. I think this is that. These are the odds. These are the probabilities. This is what could go wrong. When we get into risk management mode, I don't want to hear what people think are going to happen. I want to know what could possibly happen, because people are always wrong in their assessment. And by the way, if something happens, it doesn't matter if it was a one in a thousand chance or ten. It happens. It makes no difference. How much do you think your ability to assess risk at a very quick velocity has to do with actually your background, almost to what you said to Warren, as being an ex-securities lawyer?

1:38:29I don't know if it was securities lawyer helped. Look, it helps that I'm a generally anxious person. Yeah. Actually, in my mind, Warren hung up the phone and was like, Jews. Yeah. Jews are so anxious. I'm so worried about everything. But that, you know, if you kind of think back about this whole story, we talked about, like, your father's night shift and that hard work that you saw there. You talked about the culture shock that you saw at places like Harvard, for example, and actually Golden initially. One of the themes that keeps coming up, Lloyd, is that, like, there is sort of this, I don't know if anxious is the right word, but there is a certain level of uncertainty.

1:39:03and not like almost, it isn't ignorance is bliss, but it's like you didn't actually know exactly what was going to happen, but you were kind of prepared for it in your own way. I mean, how much of this - Look, I envy people. Our president can go to sleep at night with X number of cases against him. 15 people want to, you know, you can run through the - Totally agree with you. I could never sleep away, never. And if you look at his life before, He had to do politics. You know, he was near bankruptcy. I have a meeting tomorrow with the creditors. If they push the wrong button, you know, if they push this button, I'm okay.

1:39:39If they push that button, I'm bankrupt. I envy those people, too. That's not us. And I'm saying, it's not me. Yeah. It's not me. Maybe it's genetic. Maybe it's like— Is it genetic? Maybe it's like Tay-Sachs. Yeah, what is it? You know, it's like— The Ashkenazi Jews were just like— Yeah, maybe it's like Tay-Sachs. Or is it, frankly, you know, multi-generations of trauma? Well, maybe it's multi-generation of waiting for the Cossacks to knock on the door or their equivalents in Persia to knock on the door. So in any case, it's like that. Maybe I'm not too many generations with people like stuffing, you know, stuffing, you know, stuffing liquid assets in their coat pockets and getting on a ship.

1:40:19My father still keeps cash around. When I ask him why, he doesn't always tell me, but I know exactly why. Oh, I mean, only the paranoid survive in my mind. And actually, all of us here sitting in this room, we were the ones that survived all these things. My wife also. That's right. Exactly. We keep cashing. I said, at the point at which you're that desperate, do you realize that that's not going to be worth it? It's not that much. I said, get a fishing rod. It's going to be like that last scene of the Titanic. Yeah. You're just throwing money at the guy. What good is that? It's useless to me.

1:40:47Yeah. What good is that going to do? Yeah. But, yeah. And paranoia. I mean, it's almost a cliche. hey, paranoia is healthy and that. But I was in a risk business. I was a good guy. Look, horses for courses. I would love to have been CEO in a much more serene time and enjoyed the benefit of that. I was actually, for the sake of the firm, I was probably well-suited for the risk environment and the work out of the risk environment. Paranoid CEO with volatile markets. I mean, once you always be, when you have, again, the balance sheet of Goldman must be twice as big even now. and there's nothing that could go wrong anywhere in the world that doesn't affect you when you have that when you are that that involved in all those businesses and then when you have the influence of a Goldman yeah there's nothing that could go wrong where someone isn't accusing you of doing it of being responsible for the thing that go wrong because either either you were had an influence on the process leading up to or you could have and why didn't you intervene And so one way or another, you get caught up in a lot of stuff.

1:41:56And so when the phone would ring at a time of the day when it shouldn't have rung, like sleep rings at 5 o 'clock in the morning, I know it's not going to be good news. David Rubenstein was a guest on this podcast as well. And I read a quote where you and him are talking and you're like, look, if you're not the founder, you got to leave. You're like, I didn't start this thing. I got to leave it better than when I showed up. So as you're now at a point in your life where you can reflect back on this, what do you think the biggest mark you made on Goldman was? Well, I think it was I never would have picked it to be there during that period.

1:42:35But in hindsight, given that the firm got it through it, that's certainly the proudest I could be of what I'm the most proud of, is having got it through that period and coming out as Goldman. In other words, it's not, we weren't Merrill Lynch becoming part of Bank of America. We didn't have to subordinate the organization. We didn't become, we didn't abandon our risk taking and become like a, let's say a Lazard who's just in this activity. In other words, we came out of it as Goldman Sachs. We kept our, you know, we kept our people intact. We kept our culture intact through a period. People, it's 25 years since the, it's 25 years when the firm went public in like 81.

1:43:20So it's almost 40 years now. It was then 20, you know, now it's almost 40 years. And we still have partnership elections. That hasn't been a partnership for 40 years. And people call themselves partners. The external world thinks of them as partners. The process is partner-like. It's still done collegially. We pay people in the firm. People get paid based upon how the firm as a whole does with how their individual contribution matters, but also how the whole firm as a whole does. I would say the cultural elements of Goldman, a lot of information about the firm is shared with the 400 and something partners, which wouldn't happen in a normal company.

1:43:55Information gets shared. You call on people to make contributions, to subordinate their short term interest, to make the platform greater, which they can then exploit for their individual. All the things that are characteristics of the Goldman culture, which were premised on a partnership ideal, sharing the outcomes, sharing information, being socializing changes in the firm instead of dictating it from on top, engaging with people. And where people you're engaging with feel empowered to go back at you seven times and argue with you and maybe influence you in a different direction and put that off.

1:44:30All these different things that you associate with partnership as opposed to a hierarchical corporate form have been preserved almost 40 years after Goldman stopped being a partnership. Well, not almost 40 years. I guess it's a little over 25 years. It's an incredible thing. And not just that, but I think actually from a reputational perspective, it's probably stronger than ever. The legacy that you sort of left there has sort of continued. We can all sit here and decide because the thing about reputation is reputation isn't engaged by the people in the firm. It's gauged by the people who respond to the firm.

1:45:09So you're in a better position to define the reputation of the firm than I have. I'm prejudiced. But the answer is I think that's true. I think that's true. Goldman still recruits and retains. People still want to start. Even people who have no intention of being on Wall Street for more than a few years start their experience. And even if you want to go to an alternative firm or private equity, people start at Goldman Sachs or get training. That still persists. I would say that's what I'm proudest of. And that was no foregone conclusion. And that was certainly challenged during the global financial crisis.

1:45:46And the official sector worked very hard to do what it thought was the right thing to do, rein in risk taking, Reign in all the things that made Goldman a special place. You need risk takers like Goldman to be in the market. And we managed to preserve that. And that was challenging. Is that our thought? We got to let you go, as we promised. We would. Last question we have, though, for you is this. You talked about paranoia. We talked a little bit about the Jewish anxiety. One thing that I want to know is, you know, at this stage of your career, you've been retired now for seven years, approximately.

1:46:21Can David and I hope that one day that gets toned down? for our own careers? I mean, you've had this story. I mean, you're Lloyd Blankfein. Like, you've done it better than anyone. And Dave and I, you look at your career with great admiration. You know, I don't know. I remember once being on stage, following as a speaker, you know, one of our great presidents who is famous for great speaking style. And he got, and as he's going down and I'm going up, he goes to me and goes, how was that? Wow. And I'm thinking, wow. Yeah, he's asking, like, he doesn't know? He's unsure? Or he wanted the ratification.

1:47:07Or he still needs recognition. He wanted me, he, he, he, he, his mood was gonna be improved by the way what person's saying. Oh no, but Lloyd, what you're insinuating then is, we're screwed. The answer is no, that we're always like this. In fact, the more success you have, it doesn't go well. As always, my general response to a yes or no question is to demonstrate the answer as opposed to dictate it. So my answer to you is you're pretty baked at this point. And you'll have it. Doesn't mean you can't steer yourself towards a different direction, but you'll never shed yourself. He's not telling us what he thinks.

1:47:45He's telling us what can go wrong. Mindfulness for Jews is not really a popular question. And I would say, you know, you have to look at it and get comfortable. You know, you're not going to change yourself. You're going to get comfortable with yourself. And so you're going to look back and said, those things, you know, something, the things that may be blocking me. Yeah. To really enjoy that Ferrari I bought instead of worrying that it's going to get scratched. Yeah. And those things. Why doesn't that guy worry about it? I don't know. I don't know. I wish he, I wish he, I envy that guy. I envy that guy too.

1:48:18and then your comfort has to come from saying, you know, not to quote that great philosopher Popeye, but I am what I am what I am, boop boop. Yeah. I am what I am what I am and that's who you are and that's what you got here and it's not so bad and even if you don't like it, the hell with you. Too bad, it doesn't matter anyway. You're stuck with it anyway. Lloyd, thank you for this. This is awesome. I really appreciate your time today. Thank you so much. Hope this is fun for you as well. Yes. And I promise I get you out by 2.30. It was the 17th best I ever had.