A Goldman M&A Banker Helped Bring the Olympics to Los Angeles

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1:46Hello and welcome to another episode of the Odd Thoughts Podcast. I'm Tracy Allaway.

1:50Tracy Alloway:And I'm Joe Weisenthal. Joe, we are here in lovely Huntington Beach at the Future Proof Conference. I love coming to this conference so much. You can't complain. The beach is right there. They do such a good job. Every time I'm here, the only thought I have is they have brought heaven on earth. And the only mystery I have is why there are people, you know, you think about like the Great Migration West. It's like, imagine stopping in Nebraska. You could have gone a little bit further and you could have been in California. Yeah. And it's like it was right there. And the question I have is, why doesn't everyone live here?

2:25OK, well, we made it to California. It's our fourth year at this particular event. And we do, in fact, have the perfect guest. We recorded an episode live on stage with Gene Sykes. He is the co-head of Global M &A at Goldman Sachs, a longtime partner and also the president of the U.S. Olympic Committee. So take a listen.

2:45Tracy Alloway:Gene, thank you so much for joining us. Happy to be here. Let's start really simple. We can save the tough questions for the end, but let's start really simple. You wear many hats, gold, many of the Olympics. What are you up to now? Tell us who you are, maybe. Okay, I'm still a Goldman Sachs partner after many, many years. I think I've been a partner at Goldman Sachs for half my life. And I work on technology and media, health care and other things. And because I've been around for a long time, I get to do more or less what I want, which is to give people advice who need advice and value it and work with all of our teams and spend a lot of time mentoring people.

3:25So that's the golden part of my time. Yeah. The other half of my time or more is spending time in everything related to the Olympic and Paralympic ecosystem. So I was the head of the bid when we bid for the games for Los Angeles. Originally for 2024, we were awarded the 2028 games, you know, less than two years. We'll have the Olympic and Paralympic Games right here in Southern California. But then four years ago, I became the chair of the board of the U.S. Olympic and Paralympic Committee. So I spent a lot more time now thinking about how do we create Team USA so that our athletes are always the highest performing athletes in any of these Olympic or Paralympic events.

4:07And then about two and a half years ago, I became a member of the International Olympic Committee. So I sort of see the entire Olympic, Paralympic landscape. When I think about the Olympics, I'm not big into sports, OK? Like, I'm not Sidney Sweeney, like sports, sports, sports, sports, right? I just see the Olympics. They're kind of interesting. What counts to you as a successful Olympic Games? Is it keeping the cost down as much as possible? The vibes? What does it actually look like? Successful Olympic Games has to be a game that everyone says, I'll never forget this. this is an incredible experience and i only saw it here this is the only way i can see all of these incredible athletes in these kinds of competitions and see them in one place at the same time and when you say you're not a sports fan how many people are alissa lu fans with figure skating who wouldn't call themselves sports fans the other thing about the olympics most people don't realize is the olympics are the one sports experience that skews toward women more than toward men.

5:09Tracy Alloway:Really? I would not have guessed that at all. You know, we obviously just hit the World Cup in the US, but that's like one sport. There are probably like 12 stadiums or something like that. There's one governing body. Can you give us a feel for essentially like the sprawl of the organization and how many different, maybe we call them stakeholders, have to be brought in to make an Olympics go well? Sure. So in contrast to the World Cup, we had 104 matches during the World Cup between Mexico, the U.S., and Canada. 16 different stadiums were hosts for the events. That's enough. Not that much. 600 athletes, let's say.

5:53I mean, not that many athletes. By comparison, in the Olympic and Paralympic Games, when you put the two together, we'll have 17 ,000 athletes. We'll have something like 900 separate events, medal events. It's enormous. We'll sell 15 million tickets between the Olympic and the Paralympic Games in Los Angeles. The World Cup sold six and a half million tickets. So it's a significantly bigger and more complicated experience than the World Cup. You know, it's not everything, but it's maybe 90 percent of everything you can imagine in the world of sports. So if there is one thing I know about the Olympics, it's that people like to complain about the cost, right?

6:33And empty stadiums and finding uses for all this infrastructure that was built afterwards. What's the funding mix actually supposed to be for the 2028 LA games? Because I keep reading headlines saying the first privately funded games. I'm not sure that's true. Well, it's essentially privately funded in that there's no government support to put the games on, with the exception of the federal government playing a role in security and security related logistics, things of that sort. You can't do that without the federal government, with everybody in the world being here. There are 206 countries that will send teams to the Olympic Games.

7:07So it's quite a security event for sure. The idea of the privately funded games in Southern California, we have the best sports infrastructure here of any city in the world. We have more stadia and arenas and world-class places where sports already takes place. So we don't have to build anything. We're not building a village for the athletes, which is what Paris had to do, because we've got such great residences at UCLA. We're going to keep all the athletes at UCLA. And UCLA houses many more students in a regular year than we'll need to house athletes during the games. So this is the ideal setting to have a games like this.

7:47And that makes it a lot easier to plan and to execute.

7:50Tracy Alloway:I have some friends in LA and they have a house here. And they're like, by the way, we're thinking of renting out the house to people coming. But if you wanted to come, we would let you stay in the house. They would give up the money for you, Joe. They would give up the money, yeah. But to my mind, I know it's a good deal. But the flip side is like, oh my God, the traffic and the standing in lines. These are some of my least favorite things to do in the world. Make the argument to me that if I come down to LA for the Olympics, I will actually find it a smooth experience rather than an experience where I'm spending half the day in lines.

8:28Tracy Alloway:And then in the week up to it, logging into eight different sites just to be able to buy a ticket. I mean, L.A. traffic is bad at the best of times, right? Well, I don't know. At the best of times, it's not bad. Yeah, at four in the morning, the best of times is not bad. To give you some comfort, people said the same thing about the 84 games. We hosted the games in 1984. A lot of people said, I'm going to leave because the traffic is going to be so bad. And the traffic was totally manageable. The thing about L.A. and traffic is if you tell people in advance something is happening, stay off the roads.

9:04And they all know about it. They know where it's going to be and they know when it's going to happen. And they do. People behave based on what they know and what they're expecting to happen. That plus the fact that you're going to have a lot of very elaborate planning for how you get traffic moving around through what will be called Olympic lanes. Today, they're high occupancy vehicle lanes, HOV lanes.

9:27Tracy Alloway:Oh, yeah. Am I going to have to download three apps to buy a ticket or whatever? One app. You're either going to buy your tickets in advance. Literally half the tickets have already been sold. So you want to register for the tickets. The next time the tickets are available is next year. Okay. So I think tickets you'll get in advance. You don't have to go to a bunch of different apps. You'll have one app which will tell you what's happening, where to go. It'll be easy for you to see it. And I don't think you'll have many lines. I think the venues actually will be really great. Remember, all these venues already do sports.

9:58You're selling me. Well, think about it. All of these venues have enormous events all the time that people who operate them know exactly what to do. You already have accommodation, Joe. You should just do it.

10:09Tracy Alloway:I should just do it. So I know it's not a perfect apples for apples comparison, but, you know, the World Cup was this sprawling, complicated sports event. When you look back at the summer, is there anything with your Olympics board membership hat on that you would have done differently when it comes to the World Cup? Certainly, I would have been careful about calling the president for a red card violation. That probably wasn't the best thing for the World Cup's image. Having said that, the experience for Americans was awesome. I mean, the fact that people in the United States could see soccer, which everybody else calls football, it's not really our sport.

10:49They could feel like they were part of it with the very, very best athletes in the world. I think it actually really transformed Americans' view of that sport. And they'll appreciate that sport differently than they ever have before. plus the people who came and they were cheering for their teams, they found America to be incredibly welcoming and Americans to be exciting and interesting. And the image that we Americans made of ourselves to the rest of the world was incredibly positive and constructive, even when the public image of American politicians may be very mixed. So I think it was a huge positive.

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14:08Tracy Alloway:I don't think I've in my lifetime there has been a single sporting event that the week before, you see all these headlines, the stadiums aren't ready, the grass isn't growing, the seats are still big and tall, and then it all works out fine. And then in more recent sporting events, you're like, well, the international tourists aren't coming, they don't like the vibes in the United States, et cetera. Based on what you've seen so far, and you mentioned the first batch of ticket sales, Do you have any reason to think that the environment in the U.S., which we could talk about in a million different ways, is going to affect attendance in one way or another?

14:48No. The ticket sales, first of all, have been incredibly positive. As soon as they were offered, everything was sold. And you said they're high priced. They are high priced. But they are priced at the market. And it's going to take a lot of ticket sales to actually pay for these games. So I don't really apologize for the fact that they're high priced, except to say if you want to see the very, very best in sports, in any sport at one place, all at a very compressed period of time, it's a premium priced experience. Wait, I didn't say they're high priced. I have no concept of what a fair value is for a sports ticket.

15:26But OK, let me try to segue between the Olympics and the media landscape. But you have to raise money for this, right? Through media sponsorships and air rights and things like that. What's the demand like that you're seeing so far? Well, the demand is great. So some of this is done. It's pre-baked. The International Olympic Committee sells media rights for all the games. They do it years in advance. NBC is the media rights holder for the United States. They've got a deal that now goes through 2036. We don't even know where the games are going to be in 2036. And they're committed to be the media partner in the United States for those games.

16:03That's a significant amount of money. It's a billion and a half dollars or more per games to have the rights in the United States. Then the IOC also sells a bunch of sponsorships to people like Coca-Cola and Visa and Samsung. You've seen the names of these companies around every one of the Olympic Games. But then the domestic organizers get the opportunity to sell more rights. And so they've sold rights to Starbucks and Uber and Google. And so you get the idea. There is huge corporate interest in sponsoring these games. They want to be part of it because they know this is going to be the biggest event in the history of the world.

16:41And I mean, that sounds crazy, but I think it will be that. And if you're here for it, you're going to say, I have just been part of something which is going to be remembered forever. So I lied before when I said I don't like sports. I do like football slash soccer. But one of the criticisms of FIFA was rampant commercialization in the games, right? So, you know, 15-minute water breaks so that there are more ad sales and stuff like that. Are you thinking of additional ad or sponsorship opportunities for the Olympics? Well, definitely not like that. So the Olympics are famous for having clean venues.

17:17If you've been to an Olympic Games and you see the field of play, you'll notice there's no corporate advertising anywhere in the field of play. Anywhere you see the athletes competing, there's no corporate advertising at all. And that's kind of an Olympic rule, and everyone abides by the rule. And if there's going to be any sort of advertising, it's the brand, and the brand is offstage. It may be where the athletes are putting a helmet on or something. Yeah. But it's very, very distinctive. in that it's totally clean. And you feel like, wow, this is all about the sports and all about the athletes.

17:50Tracy Alloway:Let's talk about the media landscape, because you've been a dealmaker in that space for a long time. And I first got my interest in markets during the dot-com bubble. And the weird thing now, and we were talking about this a little bit backstage, is this dynamic where the public companies don't feel like the incumbents in some way. And the incumbents, and I'm talking about AI specifically, feel like the private companies. And I'm curious how much that changes the business of dealmaking, this very strange condition where it's not going to be the public companies making the big acquisitions, et cetera.

18:31Tracy Alloway:It's like something is completely flipped. Well, on the one hand, this is the biggest M &A year in the history of the world. Really? Biggest year by far. We expect the M &A market to be much bigger than it was at the peak. The last peak was 2021, inflated by COVID. Sure. So just keep that in mind. And it's deep. And for the past several years, 40 % of the M &A market has been selling companies that were owned by private equity sponsors. 40%. This year, that's 30%. And the reason is there's so much more substantive demand with things that are happening around the technology impact of the economy in every possible way.

19:15And you think about it, every industry, natural resources or power generation, they're experiencing the same thing, again, because they're building the infrastructure for AI. We've seen an enormous boom in semiconductor technology, semiconductor equities, and semiconductor M &A, when everybody wants to have proprietary semiconductor technology. So what's driving the M &A market is the same phenomenon that we see driving interest in almost everything. And it's actually incredibly strong. Can companies buy their way into, I guess, like AI fluency or nativity? Because you see, I was reading the Goldman Sachs M &A Outlook on the beach, which is the best place to read it.

19:58And you were talking about DNA deals and this idea. Don't get sand on our stuff. Sorry. And you were talking about this idea that like a lot of the M &A activity is being driven by companies that want more of a foothold in AI. But then when I look at larger companies, it really does feel like it's a challenge for big incumbent companies to integrate AI into their existing organization. And sometimes it feels a lot easier for the startups to just start from scratch and say, we're an AI company, we're building this from the ground up. Well, every startup, even in AI, has to think to themselves, what's the end game?

20:33And for 80 % of the startups, the end game is selling themselves to somebody else. So if you think that's in the mind of the entrepreneur who is the founder and the venture capitalists who are financing the entrepreneur, that's sort of the economic payoff of actually building something innovative. You have to think, how does what I'm building help somebody else who has some other part of the puzzle? And so I think that's actually present in every kind of entrepreneurial investment, every entrepreneurial venture, that the 20 % that actually become sustained companies, they have something totally differentiated, or frankly, they would never be able to find somebody who could buy them.

21:13And you think about SpaceX. SpaceX did something different, and they did something different in a market where there were lots of incumbents, but the incumbents played in a regulatory environment that SpaceX decided to defy. And it's that kind of differentiation that leads to a company that becomes an independent company. I think we'll see, obviously, Anthropic and OpenAI be independent companies. They're almost too big for anybody to buy. And so that's the other part of this. If the companies do become too big, they've succeeded very, very well. But you just have to have a lot of confidence that they're going to have a durable platform.

21:50Tracy Alloway:Am I going to read an S1 one day and when you list through the risk factors that one of the risks is we believe there is a non-trivial chance that our technology wipes out the entirety of humanity? Is that the type of thing the lawyers are going to make them put in? I think the lawyers will probably say you better protect yourself and make sure that the disclosure is complete. So imagine the crazy, scary things like that will be present in S1 language for sure. I've always thought if people only read the S1s, they would never invest in another company because they're always so frightening. Maybe that's a sad comment about what people read.

22:29Tracy Alloway:That's probably the case. Wait, when I read an S1, I always flip straight to the risk factors. Is that bad? We always do. That's what we always do. We always want to see that. It's our natural draw. It's a risk. No, no, that's the journalist prerogative. That's the journalist prerogative. Very true. Given your TMT experience, you know, a lot of people have been drawing parallels between what's going on in AI right now with the TMT build out and everyone was excited about the web. And so we laid loads and loads of cable and directionally we were kind of right. The Internet did, in fact, become a thing.

23:01Tracy Alloway:It all got used eventually. It all got used eventually. But in the meantime, there was a big bubble. Do you see parallels between what's happening now? Well, certainly there's no way to know for sure how big is this market going to be? And are we committing to build too much infrastructure relative to the real demand that we're going to see five or six years from now? I think the answer is we just don't know. I will say the people financing the investments are not just venture capitalists who are the principal investors in the first buildout of the TMT internet phase in sort of 2000, 2001. Now, the investors in this build-out are the most successful big technology platforms anywhere in the world who had hundreds of billions of dollars of free cash flow until this year.