Fmr Goldman Sachs CEO: What Surviving The 2008 Financial Crisis Taught Me — Lloyd Blankfein

24:02Lloyd Blankfein:If you're a junior person in the firm, you come away with a sense of ownership. And if you're running the firm, you have to respond to people as if you're there by the consent of the other owners, which in a partnership you are. And so the firm kept that philosophy and had the discipline at the senior most level, Hank, me, my successor, David, to run the firm that way. It's a lot easier to say this is the way we're going to do it. It's a lot harder when you have to, you feel the need to build consensus with people who are entitled to question you and second guess you. But at the end of the day, you get a more stable.

24:45You know, I think it's a difference between the American military command structure and the Soviet.

24:49Lloyd Blankfein:You don't just push it. You know, people in the field are expected to think, to have ownership, to have rules of war that transcend other things that you may be told from time to time. So I think that made for a strong affirmative. It was certainly something that I appreciated. And by the way, one of the cultural things of Goldman, which you're an example of, is the firm always stayed close to its alumni, made an effort to, so that people, you're out 30 years. And if you're describing yourself to someone, at or near the top of your list is your ex-Goldman. So you're at the firm seven years, gone 30, and you still partially identify as Goldman.

25:34Lloyd Blankfein:And the firm works at that. There'll be times when great people, I'm sure people didn't want you to leave and you go, oh my God, my heart's breaking. This guy is leaving. I'm mad on this. Go into a room, count to 100, come back out and wish the person luck and say, what can we do to help you? Well, I got a tremendous amount of help from my colleagues at Goldman, some former partners, current partners, et cetera. And I always have a warm spot for Goldman. I would say this to you. When I left, my father, who was a crane operator, was very nervous for me. And he was like, you're leaving this big company and you're going to start a company based on this PowerPoint presentation.

26:13I mean, I said, well, no, Dad, I learned a lot from that firm. I'm going to use a lot of their practices, a lot of their compliance practices, all these different things, which, frankly, we still use today. But I was going with the culture for another reason, Lloyd, because, you know, we're getting up there, you and me. Process matters, doesn't it? Because I do find that the people that stick to process do better than the people that are lone wolf operators.

26:42Lloyd Blankfein:Am I wrong in saying that? You know, it's like anything else. You could find examples on both sides of the ledger. If you live in Silicon Valley and, you know, you'd rather, you know, you'd rather apologize and get approval and things don't always, you know, you may not, you know, you could see people have evolved a whole ethic and a sense of, you know, management style by eschewing process. Now, that may work. And by the way, you hear about the success stories. You don't hear about the other 99 that crash and burn. Right. But in a place like Goldman, which is very big and very consequential and a big balance sheet, where if you make a mistake – and by the way, this has come up a number of times – where your big balance sheet, which is levered, and you make wrong judgments, you can do damage to the economic system, to the markets as a whole.

27:35Lloyd Blankfein:And so we found out, and I found out, this found out in 1994 when the firm had very little process, that, you know, we're so proud of our non-bureaucracy, but I think we've taken that pride to an excess. and let's get a little bit more regular surveillance on what we're doing. Let's have a different set of people look at what risk takers are doing because you can get loopy and go off in the wrong direction and not get reeled back in. Let's have some more process. And so after the crisis of 1994, again, there's a crisis all the time. In 1994, if you recall, you won't, you know, a lot of you guys sold a piece of the business of the Committee of Trust.

28:18I was there when we went through that crisis, and I was told – I was in PCS at that time, so I was on a salary. I was on sort of a –

28:27Lloyd Blankfein:Oh, just to say what happened, that's when the Europeans raised interest rates by 6%, not 6 basis points, 600 basis points. David Aston, you remember the whole – In a few months, and everyone thought they weren't. And so guess what? When you lower interest rates, asset prices swell in value. When you raise interest rates, they contract in value. Yeah. And like physics, like relativity. Yeah, actually, Buffett said interest rates are the physical gravity of assets, right? That's what they are. And so it was a shock, and we were not in great shape. And guess what? You discovered the riskiness of what we had, which didn't feel that risky when things were going well, but when they were going poorly, it suddenly felt much a lot riskier.

29:10Lloyd Blankfein:And that was when we put in, after that, we put in a regular risk committee that met, that went over stuff. Again, trying to walk the line between not being an entrepreneurial risk-taking enterprise, but having some surveillance that we could rely on to let us avoid that which an extra set of eyes could prevent. Well, listen, there's so much to talk about. Unfortunately, I have a 30-minute podcast, but I want to just say a few things about the book because I read it and then I went back and I've underlined a lot of it, by the way. And I'd love to probably have lunch with you at some point and really talk about it.

29:51But the thing that I really got from the book was your self-awareness. And to me, you wrote about yourself in a very vulnerable way, not just your upbringing, sir, but your time as the manager, if you will, the CEO going through a financial crisis at a time where you and many other CEOs were the poster boy for some negativity in the press. And by the way, I have been there, Lloyd. You know, I've been I've had my face X'd out on the front of the New York Post as a member of the Trump survivor. You don't even want to get my ass fired. Oh, my God.

30:30Lloyd Blankfein:I have a whole I have a whole series. Somebody made a whole billboard for me of of my caricatures in the New York Post. And, you know, and the headline, the label of it was the Daily Tabloid. Right. Exactly. And I've had, you know, listen, I've had myself in a Bitcoin boat sinking from the New York Post. My head is seven times the size of my body. Think of all the jealous people who don't get as much attention as we did. Well, okay. Yeah, you could say that, but there's something revealing about what you write. The time that it's happening, there's some pain in it, though, isn't it? And there's some self-reflection.

31:04Well, anxiety.

31:05Lloyd Blankfein:I mean, again, this is a short talk. It's longer. But the world was so vengeful at the financial crisis. They were looking for someone to set an example, and it wasn't going to be Bear Stearns and Lehman and Merrill that didn't exist anymore. And it wasn't going to be the big banks that lost$60 billion. They didn't look like, but it was going to be Goldman that did relatively well in the thing or didn't lose money in the financial crisis, not because we knew what was going on, but because we ran a much more hedged, sensible book. But people went after us, which meant going after me. and I knew what my role was, you know, I had to play, you know, my role.

31:49Lloyd Blankfein:And I actually, and I talk about this in the book, I'm not sure how it wasn't a secret, but I don't think people were as focused on it as I was. But when I went through a long Senate hearing that lasted hours into midnight, and I was giving interviews after that till two in the morning after that and taking a car back to New York. And, you know, we that that was, you know, that certainly, you know, you know, wasn't fun. But I but again, I had the perspective. I knew at the end of the day, we did stuff right. People were clamoring for something. I didn't feel super exposed in any fairness sense.

32:30Lloyd Blankfein:But but I was tortured. You know, again, the Senate after that hearing, because they didn't get the satisfaction of showing that we were purposely trying to kill the market to make money, which of course we, you know, we weren't. And everybody really understood that. It's super hard to do that as you and I both know. Of course. And everybody understood that we were buffeted by the same forces as everybody else. They actually, the committee chairman put out a referral like to the justice department to investigate me for criminality. I didn't even know what the crime was. Potentially was, you know, giving bad testimony in a hearing.

33:05Lloyd Blankfein:But the FBI, complying as it is, did an investigation. I would get picked up and brought to the Southern District Office, interviewed with a court stenographer. That happened like three or four times. And, you know, your mind kind of says, whoa, I know I'm fine. I know there's nothing to it. But, you know, some 34-year-old assistant, you know, assistant attorney general could ask, you know, could ask for a grand jury and do It didn't happen that way, but it could have. That certainly, you know, that certainly gets you to focus. Well, listen, I have a lot of empathy for it because I've been in those situations as a public figure and in the world of politics.

33:43People probably wouldn't realize this, but, you know, in some ways, I'm your doppelganger. I took a different career path and did sort of a entrepreneur's route from Harvard Law School, and you did the corporate route. But, you know, we were all in the financial markets.

33:58Lloyd Blankfein:We overlap. I mean, we knew what each other was doing at the whole time. No, but I mean, my point is, is that there's some vicariousness to your career that I really do enjoy. And I think you came out in the book. You know, I admire what you've done with your career, but I also admire your thought process because it comes from your life experience. And so I want to go to that because in the middle of all this, you've got to beat lymphoma. And, you know, some of my friends have had lymphoma. It's a tough, tough disease. I don't know if you remember Mort Lacker. He was actually a very close friend.

34:35Yeah, they're different kinds.

34:35Lloyd Blankfein:Like I had non-hot blah, blah, blah. Yes, it was. It's so funny because, you know, this goes back to my segment that I always had a fatalist streak. So I'm always, you know, you get your annual phys. In this particular one, it was out of cycle because, you know, I was feeling off. And then I was feeling more off. And then I'm walking, you know, and I noticed I went to the dog. was coughing, went to the doctor and he gave me, you know, throat lozenges for my cough. And I, I left and, and it was still not, and for me to go to a doctor other than for my regular schedule was a big deal. Went back in and I got a chest x-ray, which showed nothing.

35:13Lloyd Blankfein:And I'm going and I'm walking with friends. And I said, you know, similar to you guys are walking fast. They said, no, you're walking slow. And then at home I was, I lived in a split level house. And when I walked up the stairs, I was falling, walking up because I wasn't clearing the riser. And eventually I went back in, got a CAT scan. And then that lit up like a Christmas tree. And I had, you know, it's blood cancer, million tumors, but they're all blood cancer tumors in different places in your body. And I had to deal with that. And when I started, that was kind of a 50-50 outcome. So, you know, talk about risk management.

35:51Lloyd Blankfein:You're lying in bed. I had my treatment was every, you know, six three-week cycles where I had four days, 96 hours of a chemo flowing, you know, flowing, you know, flowing in. And then the balance of the three weeks, the other 17 days kind of recovering from the treatment. And, you know, it worked out, but it does make you thoughtful about certain things. I didn't quit my job right after that. I stayed another three or more years after that, but it does – that's another thing in life which has benefits. Obviously, you didn't want to volunteer for that and you didn't want to take the risk. But given how things worked out, you're an improved – you turn out to be better for the experience because – Listen, the book reads like that.

36:45This book reads like a psychologically minded, empathetic person that's been through a lot. And one of the things I wrote in the back of your book that I wanted to ask you, which I'm now going to ask you, is I have my own answer to this, by the way, and I'll share mine, but I want to hear yours first. What's the actual skill of surviving at the top that people underestimate?

37:09Lloyd Blankfein:me i think communication showing who you are you know and wrapped up in communication there's authenticity who you are not pretending that's it that was my answer i can be humble because i feel humble i said you know maybe if i were you know if i had your head of hair and i was six foot four it would be harder to be humble but it got you know being assured you know four but that's my with. That's the problem. It's on my height. Being a good communicator and certainly during the financial crisis and all the other crises, I got on a voicemail every day. By the way, voicemail, not email because I wanted people to hear my voice and know what was behind it.

37:50Lloyd Blankfein:I said, people, guys, in these difficult times, we need you to do your jobs better than you've ever done before. We don't need you wringing your hand, staring at the TV screen, worried about your share price. We need you doing your job so our reputation is enhanced during this difficult period. And in return for it, I'll keep you up to speed with what's going on in the firm. And every day I sent a voice, and it's in the, they age well. I have the voicemails. I kept coming, going on with my normal job. I traveled, you know, the problems of the firm traveled with me. If I was getting off in France or in China, I could work just as well.

38:26Lloyd Blankfein:The phones work just as easily from there. and I kept communicating with people constantly. And it turns out the quieter you are when people don't know what's going on, that's when fear takes over. And if you communicate and people are on board with you, it's just made for more resilience. So I'd say communication, resilience. I always liked, is an important character. Because over your life cycle, things are going to go wrong periodically. Everyone in poker over a lifetime of playing gets the same hand statistically. It's just who plays them better. And so I'd say that that's a very important thing.

39:06Lloyd Blankfein:I'd say reading history teaches you resilience because, you know, we go through cycles and the highs. At the highs, you have to bring people down to reality. But by the way, at the lows, you also have upside down bubbles where people get too negative and you know it's going to sort out. and then trying to convince people that their reputations are going to be made in these difficult times so they should act well because their colleagues are going to be very important 20 years from now. Even when you're a junior person, you're the cohort that's going to run the world and your reputation with these people are going to be formed and impossible to change because of what you do today in these difficult times.

39:46So, you know, I'd say authenticity, openness, a real conviction that you're not the smartest guy in the room, especially at Goldman Sachs.

39:57Lloyd Blankfein:You know, you weren't – to be run Goldman Sachs, you have no prayer of being the best at anything. You're just a guy who's good enough to corral the people who are good to work for the platform and not kill each other. And, you know – It's so well said. I would have said the authenticity. You've fleshed it out more fully than me. But I really feel that I've survived most of my pitfalls and, frankly, a lot of my errands, you know, errors and mistakes by just being authentic and getting up in the morning and keep going. I mean, exactly. And that's something you had to do after the crisis. So I have a part of the podcast where we take five words from the book, and then we have a Rasha test with the author.

40:46Okay, I picked out five words of my producer. But before I get there, somebody told me over the weekend that one of your kids is getting married. I think you've got a kid that's just got engaged. Yeah, my second son just got engaged. Okay, good. So mazel tov on that. Thank you. But if you had a grandkid, and I'm talking 50 years from now, so it's a grandkid.

41:11Lloyd Blankfein:And I already have four for my older kid. Okay, so there you go. I only have one producing well so far, but it's a gusher. All right, all right. Well, there you go. The goal is always to get these kids off our balance sheets, although somehow I feel - No, no, no. I like them on my balance sheet where I have some influence. There you go. See, now you've spoken like an Italian grandmother. Yes, exactly. That's a, you spoke like an Italian grandmother and that's. We're all Mediterranean people. I don't think we're that different. You got that right. But the grandkid, I'm talking 50 years ago, it could be one of the four you have now or one in the future.

41:44And you said they had to read one chapter of this book. Which one would you want it to be?

41:51Lloyd Blankfein:Well, I wanted to read the early chapter because I'd want them to know where I came from at some point when they're interested and get sentimental about their past and want to know where they derive from. And I wish, you know, my dad died, my parents, both my parents died something like 35 years ago and I never really, I was not deep into adulthood when they passed away. And you know, at the time of my young adulthood, I was interested in myself. Now I wish they were around now because I'd like to talk to him now more than I wanted to talk to him then in some ways. That's what happens to us, though.

42:29Lloyd Blankfein:And that'll happen to my kids and grandkids, too. And that was what I really thought of when I when I wrote the book. I didn't know that it would get published. I was writing, you know, because it was such a formidable undertaking for me. I couldn't have conceived of it. But I incremented my way to a book by first saying, you know, I'm going to write the story that I'd like my kids to read when I'm not in a position to respond. I mean, that's why it reads so well. And that's why the book is so compelling. We both know who Sidney Weinberg was, the father of John Weinberg. Of course, he was shining shoes for people in the 1920s.

43:01He goes on to become the chairman of Goldman. So you have the quintessential American dream story, but you also have the pathos story in there where it's a very human story. And that's the chapters that I would have picked. All right. So we're down to the five words, Lloyd. I'm going to say the word. You're going to give me like a two-sentence reaction to the word. Okay. We've talked a little bit about this already, but let's go to the two words Wall Street. I say Wall Street, you say what?

43:31Lloyd Blankfein:Well, I don't have a great connotation about – when I think about finance and what we do, I think about being the invisible hand that matches people who have capital with the people who need capital. But I've absorbed the pejorative that, oh, gosh, Wall Street is kind of menacing. On the other hand, when I think of what Wall Street does, people get a butterfly net if I think there's some nobility to it. But I really do think it's hugely valuable because Wall Street creates the efficient markets that allows capital to find a good home, which is why U.S. leads in innovation. And it's also ruthless in the way that mistakes get corrected quicker here.

44:15Lloyd Blankfein:In China, you build a building or an airport in the wrong place, it will stay there forever. Who the heck is going to say you made a mistake? But here, you build an airport in the wrong place, the bank repossesses it, fees is they'll get paid, they pave it over and they build a Walmart. Next. And so that's why our economy does well. And I think the crux of it, the fulcrum of the lever is what Wall Street does. That's interesting. I took it more personally. When I hear the word Wall Street, I think it was my yellow brick road. It was my real aspirational opportunity. But you're right. It is ultimately the arterial flow of the Capitol, and it can be ruthless in terms of the way it gets.

44:57Lloyd Blankfein:It's the invisible hand that people talk about, the capture of the animal spirit. Frankly, I think it plays a big role in being for America to be able to afford its greatness. I'm not going to say it's the source of greatness. But without the wealth creation, without the innovation, the jobs, the growth, really how great would we be? We agree. And it's very well connected in the mainstream, more so than the average American thinks. The second word, Lloyd, I say the word risk. You say what? Well, in a word I should say anxiety. But I think for me, risk, the sense that merely follows, what do you want to do?

45:41Lloyd Blankfein:So in other words, to me, risk in of itself is not something to eschew. It's just, are you coping with it better than others? Are you getting compensated well for taking it? Are you helping people by allowing them to shed their risk? Ford wants to make cars. It doesn't want to speculate in aluminum or currency, but it has to get rid of those risks if it wants to really focus on making cars. will take on that risk and manage that risk. So to me, risk is almost like a law of conservation of risk. The world is a risky place. It's just a question of who is taking it on? Would we be able to ship things if there wasn't marine insurance?

46:27Lloyd Blankfein:Would we be able to build things if there wasn't homeowner? Would people be able to walk? How much extra savings would people have to have if they couldn't buy life insurance? In a way, we are in the insurance business because we take on other people's risk. And that, I think, is also a very, very important purpose. Aside from capital formation, it's we are the responsible party that can manage and take on other people's risk. Okay. I love it. The title of the book, which I love the title of this book, by the way, Streetwise. So I guess the question, how did you come up with that title? well it was you know wisdom and streety and kind of merging it so it's a little bit of a play on the wall street smarter than street smart if you're street wise you're smarter than just street smart wise has a different wise has a kind of a knowing kind of you know stroking your chin kind of a con you know that you know it's more of an embedded thing um and wisdom notes for the title.

47:31Lloyd Blankfein:I love the title. Maybe wisdom is smart tempered by time and experience. All right. So I love the title. Okay. I'm going to say 2008 and you're going to say what? 2008, huge crisis. The best part of my career in a lot of ways, because it was the time when you could have risen to the occasion, you could rise to the occasion or you could have not. and I feel like I left it on the field. I did the best I could. It happened, you know, if it had worked out badly, I wouldn't feel as sunny about it even if I had tried my best, but we got through it. So that was the existential part of the crisis that we did better than anybody else.

48:17Lloyd Blankfein:And in fact, we did well. And it was an inspiration to a lot of people in the firm for a long time that we managed that because we went into 2008 as the big risk takers that you know we are, and yet we managed to get ourselves to, you know, we didn't recognize what would happen, but we recognized that stuff was happening. And so we did what a good risk taker will take when you don't really understand what's happening and you can't relate to it. We got closer to home and brought our risk down very aggressively, almost like a plane that's flying at 30 ,000 feet, develops a pressure issue, and does a crash dive down to 10 ,000 That's kind of what we did.

48:59Lloyd Blankfein:And so, you know, I feel looking back at it, I felt that that's the time when I made the biggest difference. We firm made no money. We were flat in that year. And it was the best year I had. You know, we made lots of record revenue years and earnings years. But I but that but but I felt the best about a year that we were flat. I have to insert some of my editorial commentary here, if you don't mind. When I wrote to you, I wrote to you halfway through the book. I sent you an email. I said, I'm loving your book. I got to get to the back half of the book. And I said to myself, the best part of this book is over.

49:35Because to me, it was your rite of passage story. You're getting to Harvard and doing all the different things you did to get to Donovan Leisure, getting to Goldman Sachs and trying to find your way through J. Aaron, et cetera. The work ethic, the relationship you have with your wife, which was well rendered in the first couple of chapters. Yeah, she was tough. tougher than me she she made me i've only met your wife why i met your wife in the lobby once at like the peninsula hotel no once i was going into the building there was a crowd

50:03Lloyd Blankfein:protesting from the building the driver said should we go in through the garage and skip the front and i said yes let's do that which turned around she turned to me we sit in the back of the car with me she said we are not going in through the garage man up all right all right well there you go see that so uh well yeah well i her first impression i met her in the lobby at the peninsula hotel in LA, uh, one Oscar weekend. Okay. I liked her then. I like her more now, but, but, but that was a great part of the book, but it's a very close tie. The 2008 stuff, Lloyd, because it is a crisis management manual.

50:37The reason why I tell people, you know, it's only April, but in this book was written and launched in March. I go, what's the best business book of the year? I say it's blank fine streetwise because in here is the manual for crisis management. And you said it better than I could say it. Crisis management, you don't know what the F is going to happen. Okay. And you write about it in that way. And I give you a lot of credit for it. Okay. So you're going to get the last word and I'm going to give you the last word. And the last word is blank fine. So when I say the word blank fine, you say, wow.

51:12Lloyd Blankfein:you know, I still, Blank Fine still has to work some things out. I still don't always know the effect of, I'm getting a lot of, I feel the validation of people liking the book and everything. And it was a mystery to me. Believe me, it was like nervous hitting send. And I got to, you know, you don't shake yourself. I'm still that 16 year old kid going to meet his roommates. Amen. Yeah. His prep school roommates when he came from a, you know, high school and he got, you know, low boards, you know, low verbal scores because he never read a book in New York City schools. So, you know, still, you know, still, uh, still working through, still working through stuff, just like, just like everybody else.

51:53Lloyd Blankfein:And I don't feel bad about it. Trust me. I'm, trust me. I'm still working through stuff too, as it should be. You know, I admire the people. I've met people who seem to me to have been voted most likely, most likely to succeed in every class they were in starting in kindergarten. I wasn't that guy. I bet you weren't that guy. We came to it late. I wasn't that guy. It wasn't until I got, you know, I had high test scores. I got myself into Tufts and my parents didn't have the money for it. My guidance counselor insisted that I go. I owe him a great debt because it was the right decision. You know, it ultimately led me into Harvard Law School and my career arc.

52:33But I had to get my, you know, what together in high school once I realized how daunting it would be to go to that college. But you've written an awesome book. I congratulate you on it. The title of the book is Streetwise, Getting to and Through Goldman Sachs by Lloyd Blankbein. It'll be one of the industry classics, Lloyd. And I really commend you for writing it. And I hope that you'll consider writing a corollary or second passage.

53:00Lloyd Blankfein:Well, that's another problem. I better do something so I can write about it because Nobody's going to want to write. I'm not going to write about my experience chatting all day. Well, there's a lot for you to write about, sir. But thank you, Anthony. You've been a good – we've been friends for a very long time. Watched it, and you're self-deprecating a lot when, in fact, you've been quite accomplished. So anyway, I appreciate you, and I appreciate the friendship. Well, me too. Honestly, giving you a hug through the TV here. But thank you. and guys thank you for joining us and uh ladies and gentlemen lori blank ever spend all day fishing and catch nothing that's what happens to hackers when cisco duo is on watch.

53:57Lloyd Blankfein:Every login, every device, every user protected. Cisco Duo. Fishing season is over. Learn more