Former Goldman Sachs CEO Lloyd Blankfein on Why He Doesn't Tweet

9:37Tracy Alloway:And you chalk that up to your natural risk management knowledge and intuitions. You're like, you know what? I'm not going to do it until the end. You're not going to go all the way to the end.

9:49Lloyd Blankfein:I chalk it up to my normal anxiety and my not wanting to get killed. So cowardice, you might call it. You know, just sensibility. Well, sensibility. But really, most of that stuff, and, you know, because I was doing things on the line. I would fight with, you know, with Warren and, well, you know, largely because they would say something. Mostly I was responding. And I kind of liked it. And the problem is you get a good reaction, you know, good reaction, and then you start to feel clever. And when you start to feel clever, that's when you're going to get killed. Because then you think, gee, this is irresistible.

10:23Lloyd Blankfein:And then somebody might say, well, they're not going to like that. And I said, how can I resist? It's so clever. And so guess what? I found it resistible. So I stopped. It's impressive.

10:33Joe Weisenthal:Yeah, it just takes one bad tweet. That's right. So when I think about your career, and I read the whole book, so I know your career trajectory fairly well at this point, I kind of think of it as synonymous with globalization. And you wrote this sort of wave of international expansion, and then you retired in 2018. And it turned out 2018, 2020 was sort of the end of that globalization era.

10:58Lloyd Blankfein:Yeah, the world is a little less flat.

11:00Joe Weisenthal:Yeah. When you look back on that time, do you think that was a blip? Was that an unusual circumstance that's never going to be repeated? When I started, you know, when sentiment changes, it changes your memory of what you used to think.

11:13Lloyd Blankfein:It's kind of a weird thing. So nobody can remember being friends with Russia now. But we were, when I started, you couldn't think of going to Russia. I remember my early trips, I was in the commodities business also. I started in the commodities business. I used to go to Russia in the early 80s, literally like 1982, 1983, middle of the Cold War. And I remember when the plane would take off and you wouldn't go direct, you'd go to switch. The plane would go in the air and people would start applauding and the plane lifted off. You couldn't imagine Russia being normal, like a place to do business.

11:42Lloyd Blankfein:Then in the go-go years after the fall of the Iron Curtain, you'd go there and it was like the what? It was capitalism on steroids. And you thought that that was going to endure. And now, you know, it reverses again. Same thing with China. When, you know, we invested a lot of time. I personally invested a lot of time in Lafford. And by the way, we still have a big business in China. But it's, you know, as you imagine, it's strained now. It's very hard to do business. We had a lot of joint ventures that can't be done because it's Chinese, you know, too much of a Chinese association for it. But when I started, you couldn't have gone.

12:15Lloyd Blankfein:then for a long time you thought we were growing into each other and then you know now he had a speed bump the point is there are cycles to everything it's not a question of something being a blip everything is a blip and everything gets a little bit undone i think i would have said and i still believe i think the tendency is for things to improve to get better you know what happened what you know globalization it's not just the rivalries or the polarization of the east and the West, the global financial crisis contributed to that because what happened was, you know, there was these central banks of the world and the governments of the world were coordinating their policies.

12:52Lloyd Blankfein:And then when it hit the fan, in a digital world where nothing really moves except electrons and digital notations, it suddenly became important to each government where an institution's assets were. If the assets were in the United, the US central bank, the Fed, was lending money, for example, to the U.S. affiliate of Deutsche Bank. And they were lending to Deutsche Bank multiples of the assets that Deutsche Bank had subject to the U.S. because most of their assets were Germany. All of a sudden, people realized that and it became very 19th century. It became where are the assets like physically as if they were really physical assets as opposed to.

13:34Lloyd Blankfein:But assets have a location and they discover that. Similarly, I mean, you can go case by data point by data point. COVID, it made a real difference who, where they were manufacturing the vaccines for who got them first or the PPE and all this other stuff. And so now, of course, that's been, you know, emphasized now because now it's, you know, America first. And I'm sure, you know, I don't speak German, but I'm sure in Germany, it's Germany first. And it's like that, but that also will evolve. And that's, that cycle will go again because, you know, does the world, it turns out when we started to globalize, you say, does Europe need 14 battery makers?

14:14Lloyd Blankfein:Shouldn't they just have three for the whole thing? And then it became very important that you had a battery maker if it's strategic in your own country and supply chains and other things that make people less global.

14:39Tracy Alloway:So there's a lot of noise about AI, but time's too tight for more promises. So let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need. Now, a global workforce of 300 ,000 can use AI to fill their HR questions, resolving 94 % of common questions. Not noise. Proof of how we can help companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business. IBM. The news doesn't stop on the weekends. Context changes constantly. And now Bloomberg is the place to stay on top of it all.

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16:18Tracy Alloway:When you think about that time, the Fed opening up swap lines with central banks all around the world, banks getting support, even if they're not necessarily primarily domiciled in the U.S., Do you think that that would even be possible today in the current media environment? Because it was controversial then, but not many people were aware of what was going on.

16:38Lloyd Blankfein:First of all, you have to do what you have to do. So would you think it would be possible to, in an America first presidency, where we're not going to go into wars, is this possible? But of course, you know, he felt, you know, obviously he felt there was some compulsion to do it. People disagree, but that's certainly how he's representing it. So you do what you have to do. If we had a crisis like that, you would have to sort out the banking system. Now, you can want to bring them up in trial and kill them, do whatever you want, do it. But at the end of the day, governments don't lend money to people and central banks don't lend money to people.

17:16Lloyd Blankfein:The transmission for economic policy and for monetary policy and getting money out into the public is the banking system. And if the banks are distressed, if you gave them money, they husband that money to increase their reserves so they could be solvent. And in fact, they have to do that. The regulation requires that they do that. And so it's very, very hard to get money and resources and get people going and provide that stimulus to the general public with a distressed banking system, which is why the big recession was a big recession. Because it was very hard to get over. Today, if we had bad employment, if growth went down and we weren't particularly worried about inflation, it'd be no problem to stimulate the economy.

18:01Lloyd Blankfein:You take rates down, fiscal spending, the banks are in good shape. If the banks are in bad shape, that's very hard to do.

18:07Joe Weisenthal:I mean, since we're talking sort of hypothetical crisis scenarios, one of the things we sometimes hear from people is because the U.S. government is very polarized at the moment. Maybe some people would say it feels a little bit disorganized at times. If we had a financial crisis, the response would be a lot less direct or a lot less swift than what we saw in 2008 when we had ex-Goldmanites like Hank Paulson at the helm or Geithner, for that matter. What's your sense of how the current administration would react to something like that?

18:40Lloyd Blankfein:Look, I've said this and, you know, you don't you don't know. Nobody knows anything. But my guess is they would be fleet of foot and they would do because you have to do what you have to do. They would hate. Look, they would hate if that had to happen, hypothetically, they would hate it. They hated it in 2008, really hated it. Really, really. Fifteen more reallys hated it. But we will look, you know, staring at not so much staring at the abyss like it would have gone. but my guess and everyone's always asking i think there was like like a 15 7 15 to 20 percent chance that it could have really have gone off the rails and that we really would have had a crisis that would have taken a very long time because what happens is in a kind of crisis where there's credit a credit crisis which is what it was a credit crisis we owe each other money there's a daisy chain of money.

19:35Lloyd Blankfein:You bought something from him. He bought it from me. And that goes around in a credit where you don't know the solvency of your counterpart. You're not going to pay me until I pay you. So you're waiting. But I can't pay him unless I get my money from you. So I'm stuck and he's stuck and he's stuck and he's stuck. So the system is frozen. You need somebody with a big balance sheet. It's usually a government to say we will for the short term cover it. So all of you will get paid. Now go. And generally, you don't have to use the money. The money comes back because it's just insecurity that drives that.

20:10Lloyd Blankfein:And I think the government would have to do that. They'd hate it, but would have to do that. And by the way, is that going to happen again? You know, fortunately, you know, it was once an 80 year storm. But, you know, I'm not I don't think I'm going to see the next one. But, you know, these things, you know, when you get through a crisis like that, everyone says, let's ensure we never have another crisis again. And you know how you can do that? You can turn yourself into a treasury bill. And even a treasury bill has risk because you're taking a risk that the value of the dollar doesn't get inflated away and retains its purchasing power.

20:44Lloyd Blankfein:If you take zero out risk, you will have zero progress and zero growth. And so what happens is, and again, it's a cycle to things. You come out of that and you say, Never, never, never, never. You implement very, very tough protocols and regulations and things. And over time, you start to think, you know, it would be a lot growthier if there was more

21:10Joe Weisenthal:growthier is a good word.

21:11Lloyd Blankfein:It'd be a lot growthier. Or wouldn't it be great if banks did mortgages again? Or wouldn't it be great if you didn't have to put down 30 % to get them? Blah, blah, blah. And it relaxes that time. Memories start to dim. and it gets to a point and maybe it gets past the point where it should and the cycle resumes and you say, how could that have happened again so soon? It's only been 80 years.

21:32Tracy Alloway:Right. So one area, and you've commented on this a little bit in your little media tour over the last several days and weeks, but we've had a lot of stress in private assets, private credit in particular, some of the big companies having issues, all kinds of issues. It's one thing for to be bad and maybe it's one thing for people to lose money. Is there anything about the structure though that could get systemic where it becomes something beyond just investors lost money because they made bad?

22:02Lloyd Blankfein:I think, you know, talking about credit, I think the general issue is illiquid, illiquid stuff. It could be private equity. And, you know, like everything, like everything else that balloons into a crisis. Of course, I don't think it's going to be systemic. No one does. No one thought because if everyone thought it would be systemic, we would have fixed it or we would have done something about it before it got to that point. You're always surprised. Even the people who you think are in the inside who should know better, they're also surprised, too. I don't know. You know, the private credit and other private assets, I think they're generally, of course, by definition, they don't trade publicly.

22:39Lloyd Blankfein:So they're less liquid and maybe sometimes illiquid and consequently very hard to price. So when you have your asset and you look at your account and you own this and you get a mark to market, is it reliable? Is it where you can sell it? There are a lot of private assets on people's balance sheets that take private equity. We've just gone through a period of time where we've had record equity prices in a world that's awash with liquidity, the best financing market. And there's still an accumulation of assets on the balance sheet of companies that are in the business of selling the assets they invest in, yet it hasn't happened.

23:14Lloyd Blankfein:So maybe they're not marked for sale really to be done. So that could be an issue in general. I'd say one of the things now, there's nothing wrong with private credit, private asset, private equity, as long as the returns, the expected returns, compensate you for the illiquidity and the people you're communicating to understand the illiquidity and the consequence of the illiquidity to them. That has to be made clear. I'm not always sure that it is. And certainly, if it goes wrong, no one will remember having been told that. So I would say, and taking account of that, I would say a particular private asset, whether it's credit or private equity, is no different in your hand, in an individual's hands, or an institution's hands.

23:58But the consequence of it going badly is much worse.

24:03Lloyd Blankfein:If it's individual hands, why is that? because I would say the official sector can watch institutions, very high net worth individuals, lose money and not be particularly perturbed about that. But when it goes to consumers and retails, other names for which are citizens and taxpayers and voters, the official sector gets very perturbed. So one of the comments I made is without applying whether these are good or whether the marks are correct or whether the illiquidity premium you're getting is adequate or not. I just said, you know, be careful. Some of these firms, people who run these firms have fabulous lives, do very well for a long time, have boats and everything and great had multiple houses.

24:47Lloyd Blankfein:Have some trepidation about extending your business from institutions into 401ks, people, ETS, people who are less than the highest net worth individuals. And by the way, adjacent insurance companies, which is sort of one order away from individuals because insurance companies ensure real people and need to be solvent. So that's something that I'd say is happening to it's not just the nature of the assets, but where some of these assets are being put now.

25:15Joe Weisenthal:So I take the point about retail investors and private credit, but just putting your old Goldman Sachs CEO hat on again. I mean, one of the things Goldman was famous for was it's very dynamic risk management at the time. And so I'm very curious, walk us through in excruciating detail how you as CEO of Goldman Sachs would be managing private credit risk at the moment on a day-to-day basis for something that might be marked to market quarterly.

25:42Lloyd Blankfein:You mean risk that we had? Well, just hypothetically. On a balance? Yes. What would Goldman-style risk management look like for private credit? I mean, in the financial crisis, everyone's focused on mortgages. Some of the biggest risks that we had were just loan commitments to come, you know, we have a very big, we're the biggest M &A house. So we have very big M &A franchise, which means that if you do an M &A deal, you commit to the financing. So we had a lot of financing commitments outstanding. That was sort of eye opening at the time because we had commitments to make loans, which believe me at the time, you know, when things are going crazy, it's the last thing you want to do is do that.

26:18Lloyd Blankfein:And so we how to manage those risks. So, you know, what do we do? We make sure in the lead up to the press, you know, once something is happening, you know, it's pretty late to start doing stuff when everybody's trying to get out of the same stuff. We sort of always knew we had a, you know, a real abiding respect for reality. So we would always try to mark stuff to market and very assiduously. We had a separate group. Half the firm would take risk and the half would mark, would do the marks. And sometimes the risk takers would disagree and say, oh, that mark is too conservative. I think this asset's worth more.

26:53Lloyd Blankfein:And we'd say, fine, I'm sure you're right. Go sell something and prove that your mark is better than their mark, that it's worth more. We would do that religiously. I mean, we were firm on that. And then when things started to get bad, when people couldn't sell things for where they thought it was, we started marking it lower. And when that started to happen, we didn't necessarily think, we didn't have a view what was going to happen. And we went into risk management mode. So it didn't matter whether it was bullish or bearish. Stuff is happening. And so we just put out the word, stay close to home.

27:26Lloyd Blankfein:So we have to take risk. People come to us to buy from them what they want to sell, to sell to them what they want to buy. We get caught in risk-taking situations from our general activities for our clients. But whenever we were veering too much in one direction, getting too long and getting too short, we would stop until there was another side to it and we would source the other side. So, I mean, the key for us was not reacting crazily when it started to go badly, but what we did in the lead up. The other thing we did when we couldn't get other sides to things, we bought insurance in the market.

28:01Joe Weisenthal:Famously.

28:02Lloyd Blankfein:Famously from other banks for very little, because it was worth very little. We bought insurance on AAA companies that turned out not to be AAA. We didn't do that because they thought that, aha, these really aren't AAA companies. Oh no, we thought they were AAA companies, but we just didn't want to have too much exposure to anything at that point. And the good thing about the fact that it doesn't look like you need the insurance is that the people who sell you the insurance don't charge you very much because they think it's free money. And by the way, we thought we were wasting money and it turned out not.

28:38Lloyd Blankfein:But that's just a discipline that you have to have all the time. You can't have that discipline when it looks like things are going bad. You have to have that discipline when things are looking good.

28:49Tracy Alloway:Right. That makes a lot of sense. New York City, how are you feeling? Is New York City the center of the finance world today the same way it was 15, 30 years ago? And is that at risk?

28:59Lloyd Blankfein:Look, New York City is still where people come, young people come especially, to learn from their colleagues and to get around and be surrounded by a good culture and a good place. And I think, you know, that's why I love the book. And I thought it was a brilliant book, but I thought it was wrong. The world is flat. You know, you can be stimulated by something that's not right. The fact of the matter is, you know, you could be hooked up and be living in Warsaw, which by the way, is a financial community. And there's a lot of tech people in Warsaw. But people who are smart and ambitious want to be around other people who are smart and ambitious.

29:33Lloyd Blankfein:Has that changed at all? I'd say there are more pods than there were before. So I think there's communities in San, obviously in San Francisco, which is a tech community. A sub-tech community is Boston, which has biotech. And so there are other places that grow. But I still think the highest concentration is still New York. People are promoting Miami for that. And there's a lot of reasons for it. Like you get to keep more of your money because there's no state tax. Expensive place to live, New York. By the way, very expensive place to die. I don't know why I'm thinking those dark thoughts now, but because New York has an estate tax and even California doesn't.

30:11Lloyd Blankfein:But so for tax reasons and for reasons of sunshine, people are going there. But it's not New York. It's still New York. You know, kind of sorry, you know.

30:21Tracy Alloway:On the Miami thing, I like Miami. But why aren't you there? You don't spend 183 days of the year for tax purposes?

30:31Lloyd Blankfein:I'm a New York taxpayer.

30:31Tracy Alloway:Yeah. Why?

30:33Lloyd Blankfein:stupid okay no i do it because new york city is the greatest right i have uh you know my wife you know we have kids and we have grandkids i tell my wife from time to time if you really loved your kids and your grandkids you'd move to florida and uh with i just said no yeah um but you know we like being around a family we have plenty of money you know my you know my wife uh i don't know how things run in your household, but I would say that she has full voting control.

31:04Tracy Alloway:Understood.

31:04Joe Weisenthal:I'm not going to say anything. I'm holding back comment right now. So I just want to go back to risks for a second. So, you know, in your book, you talk a little bit about private credit, but the one risk you highlight as the sort of big one that worries you the most is some sort of technological risk.

31:19Lloyd Blankfein:Like I said, yeah, you know, it has said the world is going to end in a whimper, not a bang. Everybody's talking about malevolent state agents taking it down. Every time we lost stuff and we had some wonderful problems in technology, every once in a while there was some bad behavior and somebody hid something for a while. But most of the time it was a fat finger. Like I remember one famous incident where somebody, now why anybody would do this, but they were testing some software. And in the software, they were, you know, it just said they...

31:54Joe Weisenthal:I remember this.

31:55Lloyd Blankfein:Like somehow they were selling, somehow it got turned on and it sold all stocks that started with an L, M, N, O, or P for a dollar. Now, if you want to test something, why wouldn't you sell it for a million dollars so nothing ever gets done? But they had to sell it for a dollar. And that thing was working for about 15 seconds and did about$2 billion, you know, billion dollars and a half dollars worth of transactions, which we managed to get undone mostly. Yes, you know, fat finger. What's a fat finger? That's when you hit the wrong key. And somebody who's like stupid, somebody put in and do it.

32:29Lloyd Blankfein:The problem with technology is you want to check things over and over again, but if you build in nine checks, nobody takes it seriously because they know eight other people are going to check it. It doesn't even solve the problem to build in more layers of checking because it's mind-numbing to check something where there's not a problem, except once every two years. Who's going to sleep through that? No, I've said the world is getting dangerous in a way. When I started out in a trading room, everyone was said out loud. Somebody would say, buy, and people, and it was all annoyed. Today, you go into a trading room and you're communicating digitally with the person sitting next to you.

33:05Lloyd Blankfein:In the old days, you'd shout across the room. And if somebody said something wrong, a buy instead of a sell or the wrong number or the wrong price, the whole room would stop and everybody would look at that person you would hear it now nobody hears anything and if they did they wouldn't know because no one could intuit anything because it's all a lot of algorithms and a lot of technology trading so i would say with technology technology is leverage and leverage is good when it's going the right way and leverage is bad when it's going the wrong way and by the way that's in life and you know if you had an industrial Prior to the age we're in today, the nuclear age, where we're proliferating and more atomic power and things like that, even for good uses, what could an industrial accident be?

33:51Lloyd Blankfein:Do you think the biggest industrial accident was Bhopal, Union Carbide, 8 ,000 or 9 ,000? Very tragic, horrible situation, liability for Union Carbide destroyed the company. But I think 8 ,000 or 9 ,000 people died. But in Fukushima, the Japanese, when they had the tsunami and infected the planet, if the wind had been going in a different direction, you would have had millions of people die. That's technology in progress for you. So not only is there leverage, the ability to intuit and see what the problem is, is less. So I just postulated that, you know, we have all these safeguards, all these things, all these state actors malevolently trying to cause.

34:29Lloyd Blankfein:Yes, but you know something? I'm also worried about the mistake, the fat finger, the unintentional thing. Because how do you build it? It's hard to build in safeguards. Because the more safeguards that you build, the more repose and relaxed you get about each one of them. And you find out that no one's doing their job.

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36:32Joe Weisenthal:I mean, it seems inevitable to me now that AI is going to become more and more of banks risk management or back office systems. Like what parts of a bank would you feel comfortable outsourcing?

36:45Lloyd Blankfein:Everything shy of the job I had.

36:47Joe Weisenthal:OK, go on.

36:48Lloyd Blankfein:You know, we don't know. I mean, the greatest technologists today aren't sure themselves where it'll go. But you're going to look, if you think about it, our brains, we're just wiring. We're just code. We're a lot of lines of code, but we're just code. And at some point you cross into judgment and reasoning. And I'm sure it will happen. I'm sure it's a lot. I'm sure the people who, at least until they start to walk better than they walk today, the people who garden for me and the massage therapists and the personal trainers are safe. Well, maybe not even personal trainers. But everything shy of that is just some, you know, and then we're going to just have to and then there'll be more jobs that leverage whatever stage of progress we're at.

37:35Lloyd Blankfein:You know, once upon a time, not that long ago, beginning of the 20th century, more than half the country was involved in agriculture. Guess what? We absorb those people. But it's not without stresses and strains. Not everybody who's not everybody who's a software programmer is going to be a Pilates teacher. right and so there'll be some stress and dislocation but who knows the way society's going to evolve maybe you know remember you know from school you read the marxist ideal where everybody's gonna only have to work four days a week marxist ideology and who knows maybe there'll be once upon a time there was a six-day work week uh even on wall street people came and said that's when they did all the back office stuff and maybe we go to a three-day work week maybe we work once upon a time it was a 10-hour workday.

38:20Lloyd Blankfein:Now it's an eight-hour workday. Maybe it goes to five. Maybe everybody just works less and moans to high heaven that they have to work four hours that day. So by the way, it doesn't matter whether we like it or not. It's going to happen. So we could spend a lot of time mourning for it and regretting it, but it's going to happen. But the idea that machines are going to do a lot of stuff that we do. When I started on Wall Street, you know the tape? People don't know, you know, ticker tape. What is that, ticker tape? Those were the threads that came out. Well, once upon a time, that's how you communicated.

38:52Lloyd Blankfein:You communicated tickers and you couldn't get it back. So you had to proofread it very carefully. And you had to make sure that the confirmation you were sending to the central bank of China, Beijing, didn't go to the central bank of China, Taiwan. And you'd kill yourself. So I spent three hours a day doing that. Nobody spends any time doing that. When I practice law, you used to have to go and look at every case that ever mentioned a case you relied on, lest it be have been overruled or criticized. I spent days doing that. No one spends minutes doing that today. That's progress. It's going to happen.

39:25Lloyd Blankfein:And I welcome it, particularly since I've already made my money and I'm unemployed.

39:30Joe Weisenthal:Must be nice. Joe, when I first joined Bloomberg, one of my key duties was to monitor the fax machine just in case the Bank of Japan sent a fax overnight.

39:39Tracy Alloway:Do they still communicate?

39:41Joe Weisenthal:I believe it's been automated now.

39:43Tracy Alloway:One of the versions of the future that people talk about is that, okay, AI is going to come, a bunch of white collar jobs are going to be eliminated, and there's going to be some sort of like universal basic income redistribution so that people can survive. But in theory, like that would require some taxation and the handful of winners of the AI world, like they'd have to find some way to tax their wealth perhaps. But this gets I'm really interested in taxation because like I pay a good chunk of my salary disappears in taxes. We had a good year last year. So we got bonuses recently. Good chunk immediately disappeared.

40:20Tracy Alloway:I'm not going to like. So now you're not a social Democrat. No, no, I'm just saying it's fine. It's like not the end of the world. I don't love it, but it's not the end of the world. It's hard for me to wrap my head around people who have all the money in the world and still optimize their lives about going to the lowest marginal tax jurisdiction. can you help no it's crazy you haven't done no i haven't but you're still in europe but it's crazy

40:40Lloyd Blankfein:but i'll just say that's why they have a lot of money to begin with because that's how i guess that's how because that's how they think and also they're competitive fiercely competitive and they just want to win i mean actually it's good in a way i'm glad that the mark zuckerbergs and he may like or dislike these names of people but the fact is or elon must they're on the cutting edge and they're still motivated to work thank goodness i'm glad they want i'm glad they're ours I'm glad they work. But to just extrapolate the point you're making, an economic system has to do a couple of things. I mean, it has to do a lot of things, but two major things.

41:13Lloyd Blankfein:It has to create wealth, and then it has to allocate that wealth thus created according to the values of society. I think our system has done a pretty good job in creating wealth. Nobody can get out there and figure out what the new thing is. And nobody's more ruthless about taking things that fail, getting rid of them and repurposing them and getting them off the balance sheet and building, you know, plowing over that airport that no one lands at and making it turn it into a Walmart. Nobody's better at doing that. But where we have done poorly is the allocation of it, the allocation of the proceeds.

41:53Lloyd Blankfein:And that's, of course, where a lot of the polarization that we're living through now. and you know so a variety of things you know you have to you know obviously progressive taxation is one of them just building the safety net so things are free and available to everything that previously you would have had to pay for so public housing has air conditioning now public housing when i grew up didn't have air conditioning so making life better at a base minimum but that's the task and that's the challenge that we have to do to allocate based upon values in a way that doesn't disincentivize people from working.

42:28Lloyd Blankfein:So at some level of taxation, you may be disincentivized from working. Poor Elon Musk went back to the shareholders and said, you know, I'm only worth $500 billion because you took away my options from the Tesla thing. Give them back or else I'm not going to work for Tesla anymore. So there. And so he got it back. And so now he's got that extra stimulus of billions, 501 to 749. So people do what they do. But by the way, I'm glad he's working and I'm glad he's one of mine. And I still can't believe those rocket ships can land in tandem so beautifully. And nobody else seems to be able to do it. So bravo, keep on going.

43:05Lloyd Blankfein:I'll give you an extra couple of dollars if it'll help you.

43:08Joe Weisenthal:You know, we started this conversation talking about how your career trajectory kind of mirrored the rise of globalization. But the other thing that mirrored was the rise of trading and fic on wall street i'm curious if you have any sense nowadays what the next sort of booming business is going to be among the investment banks because everything kind of feels the same everything kind of feels flat like is there something that's going to take off it's not the same but it rhymes you know it doesn't repeat but

43:37Lloyd Blankfein:it rhymes you know really the last generation the you know the cool kids in town were you know private equity and alternatives feels a little less cool the last couple of days, you know, you know, shifts. But there's always, you know, we're always wringing out efficiencies for things. And we're always figuring out, you know, risk versus reward. And so illiquid stuff look better than public market stuff. Then you have a liquidity event where people try to sell and they get gated and that's not working out so well. And so that goes, I don't know, I think, You know, one of the things that AI can't really do is they can't take risk.

44:13Lloyd Blankfein:They could tell you, in my opinion, based upon my, you know, working this algorithm against this huge database, how those dice would have rolled and what, you know, what percentages when you will do these simulations and stuff. But at the end of the day, you have to still apply judgment. and if we were sitting there having a conversation 100 years ago by the way people 100 years from now are going to be around i don't know if they'll be sitting on this chair or floating above ground but they're going to be talking about how primitive we were thinking that we're you know we're thinking sitting here thinking how cool we are today and how everything's up to date in kansas city and everything is good and and and novel but all this is going to look stupid could you imagine they carry their cell phones ha ha ha ha or could you imagine yeah i mean but they'll But some things as general principles are going to persist.

45:03Lloyd Blankfein:I think they'll be create, create, you know, still people are going to still write music and natural, you know. People will fill in the gaps. If you plug in a song, it'll publish another song like that. But will it do something radically innovative? I don't know. It's possible. Again, brains are lines of code. Maybe they'll just have more lines of code and eventually do it. But I do think certain things like willingness to take risk, judgment. I've known so many brilliant people and I've known so many people with good judgment. It's amazing how infrequently those those come together at the same person at the same time.

45:40Tracy Alloway:Within a given bank, you know, the the push pull or the tug between, OK, now banking and deal making is hot or trading is hot. And it seems to go back and forth. Like, is there a direction at Goldman or any other bank with the where the next leader is going to come from? Could it come from the technology side of the thing?

45:59Lloyd Blankfein:Yes. Well, first of all, it already has. In a firm like Goldman, I bet over a third of the population of the firm are engineers. It was when I was there. It wouldn't have gotten less in this period of time. If anything, it would have gone more in that direction. So it already is engineering and efficiency. Look, we're in a world now where in trading and market making, a lot of which is done algorithmically by machines. it's a millisecond game. If you have your computers a half a block closer to the main computers of the platform, you win everything. Because even moving at the speed of like getting there ahead is, so that's already been done.

46:44But in a firm answer,

46:47Lloyd Blankfein:maybe I'm interpreting your question a little bit differently. These things happen at different times. So sometimes it's the people who put deals together. Sometimes it's the people who finance deals. Sometimes the biggest, coolest kids on the block are the risk managers who prevent the firm from discombobulation and manage risk so successfully so the other people can do their jobs. In our organization, one of the things that I think has helped Goldman Sachs with the agent is that we still – the firm is still run like a – it's 26 years since it was a private partnership. Half of my tenure was in a private partnership.

47:23Lloyd Blankfein:half was in a company, but we ran the firm as a partnership. Everybody in the firm got paid largely based on how the firm as a whole did, not just their narrow area. People who did a good job and it wasn't their turn or the market was working in a way that they couldn't make money, got compensated well for doing a good job, even if the opportunity wasn't there. And if it was an easy market to make money in and they weren't doing a good job and didn't do well, Didn't matter that they did well. You know, in other words, we looked at the firm as a whole. People had to look out for each other. The place was run as a partnership.

47:58Lloyd Blankfein:That's very helpful. If you have a firm full of people who are owners, everyone is looking around what the people next to them are doing. And if they see bad behavior or something's not right, they demand information about the whole firm, not just their narrow area. And they give you opinions even when you don't want to hear it. And guess what? It's a little bit slower and harder to run that organization. but I think you get a better outcome.

48:23Joe Weisenthal:Now that the book is officially published, it's been a whole 18 hours, I suppose, since it's been published. But is there anything with the benefit of that 18 hours of daylight and reminiscence that you wish you had included in the book and that you left out? I want the really good gossip.

48:41Lloyd Blankfein:People are always telling me, I told, you know, we had, you know, Bloomberg was very nice enough. Mike, Bloomberg, the man, not necessarily the company hosted an event last night and i thought of a bloomberg there was a story that i told that at the end of it i could tell you the story but please okay a million years ago when the first bloomberg terminals came out and i was a fairly junior person and there was they put a bloomberg turbo in front of me that about 900 people were supposed to share but it was right in front of me and everybody was walking by it like they were walking remember the movie 2001 A Space Odyssey.

49:15Lloyd Blankfein:Remember the obelisk? The obelisk, and everyone's doing this. Everybody was doing that. And I finally figured out how to use it. I put yellow pastings on it with my schedule and numbers that I had to look out for. In other words, I couldn't turn. I didn't know how to turn on the machine, but I was using it as a bulletin board. And then somebody calls up and said, Lloyd, following line so-and-so, who is it? Bloomberg. So I said, I'll call him back. He said, No, no, it's Bloomberg the person, not Bloomberg the company. And it was Michael Bloomberg. And he calls me and he called up. And I get on the phone and he said, I noticed you had, we noticed you haven't turned on your machine.

49:52Lloyd Blankfein:And I said, oh, my God, where's the camera? And I said, well, we could tell.

49:56Tracy Alloway:Digital surveillance. Yeah, we started to get.

49:58Lloyd Blankfein:And I said, and I said, well, and so you're calling me. And he goes, oh, no, we do the way here. And I don't know if they do it today, but an early Bloomberg. he had all the senior people in the organization every day they had to call five customers each one and call them and discuss and i said i said you know wow i promise i'll turn on machine and probably about two years later i figured out how to do it but i'll turn on the machine but i said isn't that a very um inefficient use of your time because here you are calling me and i wasn't a senior guys and he goes no no we learn a lot about the business i realize now that was a very stupid comment.

50:36Lloyd Blankfein:Because here I am, first of all, everybody on our floor knew that Mike had called and that he cared. The guy whose name was on the door cared about whether we're using or not. And not only laterally across that dimension, everybody knew, but here I am 35 years later telling the story. And so now you're hearing about it. That was a very good use of three minutes of Michael Bloomberg that I'm telling that story about his care. And so to me, I know how Bloomberg got built. And so that was a lesson I learned. So I told that story and then I said, you know, Mike, this book is so good and has so many good stories that that one didn't even make it in the book.

51:15Lloyd Blankfein:It's on the cutting room floor. If it sells well, maybe volume two or volume three.

51:22Tracy Alloway:Well, we went a couple minutes over, but that was a good story. That was a good ad for both the book and for Bloomberg.

51:28Joe Weisenthal:So thank you.

51:29Tracy Alloway:I know my audience. Lloyd Blankfein, thank you so much. Thank you very much.

51:47Joe Weisenthal:That was our conversation with former Goldman Sachs CEO Lloyd Blankfein, recorded live on March 3rd at Bloomberg Invest. I'm Tracy Alloway. You can follow me at Tracy Alloway.

51:58Tracy Alloway:And I'm Jill Weisenthal. You can follow me at The Stalwart. Follow Lloyd Blankfein. He's at Lloyd Blankfein. Follow our producers, Carmen Rodriguez at CarmenArmond, Dash O 'Bennett at Dashbot, and Kale Brooks at Kale Brooks. And for more OddLots content, go to Bloomberg.com slash OddLots. We have a daily newsletter on all of our episodes. And you can chat about all of these topics 24-7 in our Discord, Discord.gg slash OddLots.

52:20Joe Weisenthal:And if you enjoy OddLots, if you like it when we ask Lloyd Blankfein why he doesn't tweet more, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad-free. All you need to do is find the Bloomberg channel on Apple Podcasts and follow the instructions there. Thanks for listening.

53:12Tracy Alloway:I'm Barry Ritholtz, inviting you to join me for the Masters in Business podcast. Every week, we bring you fascinating conversations with the people who shape markets, investing, and business. CEOs, fund managers, billionaires, Nobel laureates, traders, analysts, economists, everybody that affects what's going on in the market, whether you own stocks, bonds, real estate, commodities, crypto, you really need to hear these conversations. Sometimes it's behaviorists like Dick Thaler or Bob Schiller. Sometimes it's fund managers like Peter Lynch, Bill Miller, Ray Dalio. Sometimes it's authors, Michael Lewis, author of The Big Short and Moneyball.

53:57Tracy Alloway:Regardless of the conversation, these are the folks that move markets each week. That's the Masters in Business podcast with me, Barry Ritholtz. Listen on Apple, Spotify, or wherever you get your podcasts.