Strikes in Iran and Lloyd Blankfein Looks Back 3/2/26

23:11Never bet against American grit or American energy. Through innovation, Venture Global is not only building some of the largest energy facilities in the world right here in the United States, but delivering American energy at a fraction of the cost and a fraction of the time. So while others are busy talking, we're busy building. That's Venture Global. That's unstoppable energy.

23:40This NBA Playoffs with FanDuel. You're not just watching the playoffs. You're a part of them. Steve's got the phone, opens FanDuel, and he's going for threes! Be a part of the action on FanDuel. All customers get a profit boost every NBA playoff game day. 21 plus and present in select states. Opt-in required. Bonus issued is non-withdrawable profit boost tokens. Restrictions apply, including any token expiration and max wager amount. See full terms at FanDuel.com slash sportsbook. Gambling problem? Call 1-800-GAMBLER or 1-800-MY-RESET.

24:13Welcome back. This is Squawk Pod from CNBC. Stand Joe by. Three, two, his mic. Q. You're watching Squawk Box on CNBC. I'm Joe Kernan. Along with Becky Quick, Andrew's off today. The U.S., as you know, and Israel striking more targets in Iran. Iran and militias backed by the country firing missiles at Israel and across the board at Arab states. Our next guest says that the Iran conflict is the first new hot war where the White House could use AI-driven weapons in real time. Joining us right now is Alex Harstrick. He is J2 Ventures founder and managing partner. He also happens to be a veteran who focuses very closely on defense companies and technology.

24:59And Alex, let's talk a little bit about this. We'll get to Anthropic and what it said over the weekend. But first of all, what do you make of the situation right now, how prepared we are and what you expect to see? Well, Becky, I think your previous guest touched on the issue very well from a geopolitical standpoint. But in your intro, you summarized it perfectly. This is the first time that we're going to see an AI driven war, a true hot war. Previously, these were technologies that were used for a bunch of other purposes, logistics, military planning. But for the first time ever, you're going to see active munitions being used that were almost completely designed, deployed and executed by artificial intelligence.

25:41I think currently there's still a lot of human in the loop, but the technological enablement is like something we've never seen before. And how do we prepare for that first as a nation and then secondarily you're an investor to boot? how do you think about these things? The idea of drones being able to infiltrate through systems, of them being much cheaper than traditional missiles, and how we prepare ourselves for that. It's really, really hard. From a geopolitical standpoint, we just need to accept the fact that artificial intelligence in warfare is an inevitability. We've seen these types of shifts all throughout human history.

26:21Somebody was using bronze, someone else used steel. Somebody was using swords, someone else was using a gun. Someone else was using a gun, someone else was using a missile. And when you think about any sort of decisive action that happened in any type of military conflict, it was usually ended by somebody having such a decisive advantage from a weapons standpoint that fighting no longer made any sense. And so the issue that we have right now, though, is that for the first time ever, those weapons aren't being designed by the military industrial complex itself. They're being designed by Silicon Valley, by developers around the world, by people who were not raised or brought up in this industry, but they've built the technology that best enables this industry.

27:04And so while AI is an inevitability, the best AI is not being built by people who want it to be an inevitability in the same context that previous weapons were built. And so that's causing a bit of a clash that we really haven't seen for about a decade between Silicon Valley in the general sense and the military industrial complex. And so though AI will be adopted, the best AI is still kind of sitting on the sidelines because of a lot of these moral quandaries about how AI is being developed and deployed. Which sets up the Anthropic controversy perfectly. Where do you come down on that? Anthropic said, no, we will not go along with anything and everything.

27:45Daria Amodi has since come out and said that the two things that they really would not go along with would be one, mass surveillance of U.S. citizens, the second being AI weaponry that has no human interaction whatsoever. What are your thoughts on this? It's hard to comment on the specifics of the case, Becky, but it is easy to comment on the nomenclature difference between Silicon Valley and the military industrial complex. So when the Pentagon talks, the Pentagon is a command and control culture. The person at the top is at the top. The person below the person at the top does not challenge the person at the top.

28:24Vice versa. Everybody has had some experience with the military to understand this cultural dynamic. The way Silicon Valley expresses that same cultural dynamic is through their terms of use, because that's how they recruit their engineers. Their engineers are equally mission driven to those in the Pentagon, albeit they speak in a different way. And so what we're seeing right now is exactly that clash playing out, which is the terms of use that Anthropic approached the Pentagon with originally are being changed. And so just as the Pentagon is having a disagreement with how that terms of use needs to adjust, so too, does Anthropic believe the terms of use should not be adjusted?

29:03And so the impasse is really difficult, largely because I believe both sides are speaking past each other. In the case of the Pentagon, it was never a stick that helps them incentivize proper military technology. When we think about the best tech that's created in America, everything from GPS, LiDAR, the inputs for computers, computer chips, all of these different pieces were created because the military made an incentive around creating those products and making them in America and then adopting them for fundamentally dual-use purposes. You begin to enter into unprecedented and potentially dangerous territory in interaction with Silicon Valley when you begin to have sticks around working with the military.

29:48Said differently, compelling people who otherwise would not want to work with the military to bring their products forward. I understand where the Pentagon is coming from. China is developing all of these tools internally. Iran is developing these tools internally. Russia is developing these tools internally. If America doesn't compete, America risks potentially catastrophic losses by not having AI enabled weapons, but we need to make sure that we're talking to each other in the way that we want to be spoken to. And I think that rip is something we're only just beginning to see. We're out of time, but Sam Altman from OpenAI, which immediately cut a deal with the Pentagon and said that they would be, the Pentagon said they be using open AI's, AI measurements and tools as a result.

30:35Sam Altman said that there's more debate than he thought there would be on this, at least on Twitter, about whether we should prefer a democratically elected government or unelected private companies to have more power. Whose side do you come down on, Sam Altman's or Daria Modi's? Ultimately, America is governed by laws. Those laws are created and governed by those at the consent of the governed. This is why we have a republic. Technology is amazing. I absolutely love it. But we do need to put all of our decision making into lawmakers and into those who are democratically elected. Technology should never supersede those in power.

31:14So you think the Defense Department was right to say, you're going to go along with us or else should should anthropic be put on a supply chain risk list the actual legality becky is is really tough but what i would say is i think both sides are talking past each other and it's disappointing that there isn't more of a conversation between the two and how best resolve this issue because we need the best and brightest on how we think about the future of artificial intelligence and torture nobody should be sitting out of that conversation. Alex Harstrick, Alex, thank you for joining us this morning.

31:51SquawkPod will be right back with former Goldman Sachs CEO Lloyd Blankfein, looking back on his unique Wall Street life.

31:59Lloyd Blankfein:Usually I have to respond to people. Here I could write something down, go back and make it better and change it. I'm going to go become a screenwriter now. I didn't realize you could do that sort of thing. Stay with us.

32:16At Venture Global, we think about what can be done, not what's usually done. Through innovation, Venture Global is not only building some of the largest energy facilities in the world right here in the United States, but delivering American energy at a fraction of the cost and a fraction of the time. So while others are busy talking, we're busy building. That's Venture Global. That's unstoppable energy. I'm Hannah. I've lost 75 pounds in 20 months with GLP-1s, plus diet and exercise. On Rho, I've gone from struggling to run a mile to running farther every day. You can access FDA-approved GLP-1s online.

32:59Get the support you need to reach your weight loss goals.

33:02Lloyd Blankfein:Go to roe.co slash weight to see if you qualify. I'm a paid Rho partner. 20 % average weight loss in one year in non-diabetics with obesity or overweight with a weight-related medical condition versus 3.1 % in placebo arm. Rx only. To stay informed about serious side effects, go to row.co.safety. Hi, I'm Angie Hicks, co-founder of Angie. One thing I've learned is that you buy a house, but you make it a home. For decades, Angie's helped millions of homeowners hire skilled pros for the projects that matter. Angie, the one you trust to find the ones you trust. Find a pro for your project at Angie.com.

33:34You're listening to Squawk Pod from CNBC on this Newsy Monday with Joe Kernan and Becky Quick. Here's Joe. We have a true genius. I've known you for a long time, Lloyd Blankfeiners. You're so fast, so quick-witted, such a worldly guy. You got a book out.

33:53Lloyd Blankfein:Let's stop right there. Yeah. We got a book out there, and you're so funny. But I think wit and intelligence are correlated. I've learned that over the years. But streetwise, getting to and through Goldman Sachs, Jack Welch was getting ready to come on on September 11th and talk about his book. Sometimes things happen which preempt what you're here to talk about. We're going to get to the book as quickly because I want to hear about it, especially when I realize that you call it really catharsis because you're trying to explain to your kids why you were away so much but doing great things. But just how do you stand on what's transpired since Friday night?

34:34Lloyd Blankfein:A couple of things. The guys with the guns win, which is very logical in history. That bears it out. But let's take a specific example from the past. How about when the Ayatollah came back? The Shah's troops all had the guns, and they were loyal, loyal, loyal, until guess what? They decided they weren't going to fire on their own countrymen for whom they developed certain kind of sympathy as that regime was falling, of those falling. So it's not unprecedented, and it's not unprecedented even with respect to Iran. So just note that it's conceivable. The converse could happen where the revolutionary types don't fire on the pre-revolutionaries.

35:15Lloyd Blankfein:Well, that's happened before, exactly. And so, you know, I would say, you know, I'd be always prepared for the worst. I'm in the risk management business and one has to do that. But I would say every once in a while, things can work out. And maybe this will also work out. When you heard about it on Saturday or whenever you heard about it, did you say LFG? I'm thinking I don't know what's LFG. Don't ask. Were you thinking were you in favor? You're thinking let's go let's go. You know here's what I was thinking of and I made you know I just made an analogy in my head. The biggest after Iran the biggest troublemaker in the world is North Korea.

35:55Lloyd Blankfein:Not much we could do about that today because they have nuclear weapons and you think who let that opportunity go by where we could have gone in intervened and eliminated them as a threat. By the way they still might. be the scourge of the world. I mean, we haven't heard from them in a while, but they'll be back. They haven't left and they'll be back. And I'm thinking, don't we wish we had intervened in that when we still had time? And now people are saying, well, it wasn't proximate yet. We weren't close enough with Iran. But you know, something my algorithm is, how close is it? But also, what's the opportunity set?

36:33Lloyd Blankfein:And will it ever be repeated? So we have a moment in time, no air defenses, you know, the civilian, the civil population is up, the country and the economy is in disarray. You know, the combination of opportunity and proximity to the bad outcome. I'm not regretting that this happened. All right. So you thought you've heard of LNG. Yes. But you had. That's what I thought. That's what I thought. You thought I was talking about it. I don't believe you. I know how I know how traders like you speak in time or traders talk. You speak in typos. Bow mouth. Yes, exactly. Investment bank. I was like one of those guys.

37:07Yeah, you would tell. Let's let's let's do delve into. I want to read it because, you know, as I said, knowing what I know about you, it must be hilarious reading through it, but also heartfelt.

37:18Lloyd Blankfein:Well, I think it's funny. You know, first time in my life, usually I have to respond to people here. I could write something down, go back and make it better and change it. I've never I'm going to go become a screenwriter now. I didn't realize you could do that sort of thing. You can. Yeah. What was the thrust, though? Is it telling how... No, the thrust, look. I mean, you grew up with absolutely nothing. I know that. What'd your dad do? He was like... A mail sorter in the post office. A mail sorter. And, you know, now you're a fat cat, and you've got to listen to Elizabeth Warren, but... You're right.

37:47Lloyd Blankfein:Tell me what a fat cat I am. Yeah, exactly. But it was... You ended up at Harvard, didn't you? Look, there's a lot of... It's memoirish, so there's a lot of, you know, a lot of biographical stuff, you know, with perspective going from the projects in East New York, public housing in East New York to Harvard and getting tortured a little bit while there. Of course only having good memories about it now, but not necessarily while I was living it. False start in a law firm. But a lot of it is getting to and through Goldman Sachs, which is the subtitle. Heroes of mine who didn't always act in a great way because they're human, but they still remain heroes.

38:25Lloyd Blankfein:A lot of it is the financial history of the period. You know, for crying out loud, we had the financial, you know, we had the crisis of the century about every four and a half years during my tenure. And very often, and nothing can go wrong in the world without Goldman Sachs being affected by it, given the size and scale of our balance sheet and our influence. And, of course, they would accuse us of, you know, of starting, most of the time they'd accuse us of starting it. So there's that perspective on things. And so, again, it's the mystique of Goldman Sachs going through it behind the scenes.

38:59Lloyd Blankfein:A lot of financial history, a lot of focus on the financial crisis and how people, you know, how people behave and how an organization, which I think still has a spectacular culture. Look at the people that Goldman Sachs attracts, recruited. Look at what they do with their subsequent careers. People performed really terrifically in the lead up, which is why we weren't that affected. commercially. We were quite affected reputationally. And, you know, largely because, you know, we did okay in the crisis. And, you know, the aftermath. So a lot of it is, I hate to say, you know, people have pointed it out.

39:36Lloyd Blankfein:I'm not embarrassed to say it. It's a bit of, it's a bit of an ode to my old firm and what it has accomplished and really how it happens. What, you know, how does that secret sauce get, get created and maintained? What is the answer to that question? Well, I would say it's a kind of a, it's always been a partnership culture, an ownership culture. We have people, nobody, people in the firm, their compensation comes from the success of the whole firm. People are taught to have big ears. People are treated like owners, which means there's, look, there's a big difference between being a senior partner and a CEO.

40:12Lloyd Blankfein:I was kind of, even as a CEO, I was kind of a senior partner, which means engaging, listening, socializing changes, having to go a little bit slower, having to change your mind, which not a lot, you know, which nobody really liked. Well, sometimes it changed my mind and I wanted to change my mind in response to what I've been told. But creating an expectation that people are owed information, are owed influence in the country, creates kind of an ownership. And so people in the firm have big ears. There are people who are bond traders in Japan whose reputations and what they do for a living is affected by what happens to investment bankers in New York, and they feel ownership of it.

40:53Lloyd Blankfein:They get mad as heck if something goes wrong, and they go out and send congratulations if everything goes right. And even in a large firm that has grown over the years in population, also in footprint around the world, that's not, you know, 26 years after becoming a public company, the firm still thinks of itself as a partnership or senior people call partners. You know, that process of going public happened with my predecessor, Hank, continued with me. You know, when Hank was there, the firm, even as a public company, was dominated by Goldman Sachs partners, who were the owners, continued into my world where it was sort of.

41:36Lloyd Blankfein:And, you know, the transition towards a public company has continued under David Solomon. What does that mean? It means more emphasis on smoother earnings, let's say, which is what the new owners of the company want, namely the shareholders. And he's accomplished that. And I think that's a good thing. I was sort of in the middle of that, which was, you know, still had a lot of stuff on balance sheets, still had a high tolerance for volatility. In a private partnership, you care about your capital account. You don't care about the smoothness of earnings or price earnings. And I think that that has continued to this day.

42:10Lloyd Blankfein:The big achievement, I think, that has occurred is that becoming a public company, a real public company, with all the things that shareholders want to see in the management and still maintaining that partnership ethic. And I talk a lot about how that's done. And the way it's done is you do things you might not want to do. You take time you might not have. But you walk the walk, not just talk the talk. When did David take over for you? About the end of 2018. You send him a nice Christmas gift every year? Yeah, and I also vote with management every year. I mean, he, I don't know, there was some, I guess, a little bit of rockiness in his tenure.

42:53But now, I mean, Jesus, you got a lot of stock left. I still, yeah, I do. It's worth a lot. It's worth a lot more. Oh, I'll have to go check. Can we talk and everybody I'll never forget your quote from the financial crisis that calm down. Wuss, you're not in a in a boat over a storm in the shores.

43:17Lloyd Blankfein:You're not getting out of a Higgins boat. You're going into the New York Fed to have you get out of a Mercedes in the New York Fed. Right. Get a grip. Could be worse. But but is there. And by the way, it got worse. not quite but the bullets were were figurative not literal exactly and and when i when i said lfg i i'm not doing squat i'm just i admire our guys so much i don't think i i really don't think i could be uh could have been one of those guys i mean that actually do walk you know it turns out it turns out that you don't know till you know maybe you don't know till you know i think i'm I'm not talking about the physical.

43:56I'm going to ask, what if you cry in basic training, like with the Marines? You go home if you...

44:01Lloyd Blankfein:I go through this, and I'm not talking about physical courage, which is, of course, a different order of magnitude and a deep respect, and I realize the times that we're in, but even the courage that people showed in the financial crisis, and I'm not conflating the two or equilibrating the two, but I would say there were people who were spectacular guys, athletes, Olympians, and blah, blah, blah, And, you know, when it hit the fan, there was some hyperventilation in the corner. And there were some people who didn't look like they could walk up a whole flight of stairs who were just magnificent.

44:34What happened to the people who didn't pass that test?

44:37Lloyd Blankfein:Well, they kind of flaked off. They did. And also they lost a lot of prestige. A lot of time during these things, I pointed out to people that your reputations are going to be made during this period of high pressure. So act well, not just because it's in your economic interest and because I'm requiring it. Act well because the people around you, and look at the people who leave Goldman Sachs, all the cabinet officers, all the prime ministers and everything, that even you guys who are young in the firm, your reputations with each other, even the dopey guy sitting next to you, roll the clock forward 25 years, and these are going to be the most influential people in the world, whether they stay at Goldman or go somewhere else, go into government or just another firm or create a private equity shop, whatever.

45:22Lloyd Blankfein:These are going to be the most influential people, and their impression of you is going to be fixed based upon how you act today. So guess what? Act well. Are we going to need the same type of people anytime in the near future to face the same type of things? In other words, how do you feel about the market right now? AI, private credit? It was kind of a bit fragile before all this started, and so we're coming into it. I think this macro kind of event will, you know, look, things can go off the rail. A lot of stuff could go wrong and get worse. You know, oil could become a bigger deal, longer, straights closed.

45:56Lloyd Blankfein:You know, my base case is that this will sort out on a macro basis, and then we'll have to deal with some of the stuff. You know, there's always anxiety. We look for, you know, wall of worry. I'm basically very, very positive. You are? Oh, on the market, sure. But the one thing that you have to realize is, you know, you need a kind of a cleaning out. It's like the godfather, you know, you have to have a war every 10 years to clean out the grudges. I think in markets, there hasn't been a problem or a reckoning in a long time. So, you know, people had to have lost discipline since the last time that there was one of these things.

46:32Lloyd Blankfein:Usually it happens every five or six years. It hasn't happened for more than 15 years. And so you think about the lack of discipline, money going in the wrong place. No one's had to really mark to market stuff. Look, we've just had one of the best, we're still near the highs of the equity market. It's been the best financing market and inventory is still, liquids are still building up on balance sheets and supposedly can't be. So at some point, there'll have to be a forced reckoning. Hopefully it won't happen later this afternoon or tomorrow. But that's a real cause of worry. But having said that, it seems like a lot of tailwinds.

47:11Lloyd Blankfein:The economy is doing well. Inflation is kind of tamer. We're going to lower rates into a pretty good GDP. I realize that there's a lot of polarization because the economy isn't doing a very good job. It's doing a good job creating wealth, not necessarily allocating that wealth according to the values. And so you're getting a polarized society, and that's bad. But overall, a lot of tailwinds and a lot of, you know, we're just about to come up to more fiscal stimulus. And by the way, fiscal stimulus coming from hyperscalers who are going to, you know, who are investing hundreds of billions of dollars, which is also kind of going to be a stimulus to the market.

47:52What do you do with your own money? You're a risk manager. You think of these things from all these perspectives. Do you position your own? I do. You worry that this is long in the tooth. That's a good way of doing it.

48:03Lloyd Blankfein:always ask people, what do you think? And then following up with, what are you doing? Because people sometimes say, not because they're lying, but because they get confused themselves, because I'm a worrier. And so if you ask me, what do I think? I'll give you all my worries. But if you ask me what I'm doing, I'm all in equities. I'm in risky assets. And of course, very, very responsive. If I hear a twig crackle in the background, I jump five feet into the air and I want to do something. And I think that that's a way to be positioned. It seems to me we're overdue for something. I'm not sure the direction, but inevitably it will come.

48:38Lloyd Blankfein:But I don't see it happening tomorrow or the day after tomorrow. Next week is another thing. What about the Federal Reserve with the changes that have taken place there? Is this something you pay much attention to in terms of what they're doing or the assault on the Federal Reserve? Assault on the Federal Reserve, what comes next? I think it's crazy. I think the Federal Reserve is, look, we're a debtor nation. We need creditors to lend us money all the time. U.S. can't default by not paying. We'll never default specifically because we print dollars. We can always return all the dollars we printed.

49:11Lloyd Blankfein:The question for our creditors is, what is that dollar going to be worth? And if they think that the dollar is going to be inflated or diminished in terms of its purchasing power, They'll either require a much higher interest rate or they won't lend to us at all. The guardian of the integrity of the dollar is the Fed. And so if I'm a creditor, I want a Fed that's independent, high integrity, that honors its mandate to not allow the currency to be inflated, i.e. to default through inflation. And so to undermine the importance of the Fed is sending the wrong message to our creditors. So I wouldn't be doing that.

49:52Lloyd Blankfein:And that's crazy for the people who are managing our debt to be undermining the importance and the influence of the Federal Reserve on policy. Because the creditors look to the Fed as the guardian of their interests. One of your predecessors, John Whitehead, was at Normandy. Not only was he at Normandy, he was one of the first people to get there to organize things so he had no cover. So you come from good stock. He was a junior officer on one of the landing craft. And when I sent that, when I made that comment at the time. You were thinking about him. No, I was thinking about him. He sent me a very nice note that was terrific.

50:30Lloyd Blankfein:You know, when you talk to people and you know what they live through. Yep. That informed the way you are, which I appreciate. Well. Thank you. And thank you. I'd like to talk more about this. And you're always welcome. You know that. Is that right? Always. Fantastic. All right. Thank you. And that is Squawk Pod for today. Thanks for listening. Thanks for starting your week with us. Squawk Box is hosted by Joe Kernan, Becky Quick, and Andrew Ross Sorkin. Please tune in weekday mornings on CNBC at 6 Eastern to get the smartest takes and analysis from our TV show right into your ears. Follow Squawk Pod wherever you get your podcasts and listen anytime you want.

51:14Have a great Monday. We'll meet you right back here tomorrow. We are clear. Thanks, guys.

51:31Hi, I'm Angie Hicks, co-founder of Angie. From roof repair to emergency plumbing and more, when you use Angie for your home projects, you know all your jobs will be done well. Angie, the one you trust to find the ones you trust. Find a pro for your project at Angie.com.