Lloyd Blankfein on Surviving the 2008 Crisis, Fed Independence & the Future of Finance

Good afternoon, everyone. It is, uh, it is a great pleasure to see you all here today in this fabulous space. Um, it is my honor and my pleasure, uh, to, uh, welcome you here to the first Bigs conversation of the year, and we couldn't ask for a better or more entertaining guest, uh, than my—

>> I'm sure you did ask, but this is what you got.

>> Yeah, there we are. With my friend and colleague, uh, Lloyd Blankfein. Uh, Lloyd, as I'm sure, um, you all know, served as CEO and chair of Goldman Sachs from 2006 to 2018. Um, which was a pretty interesting time in, in, in the world and in the evolution of Goldman Sachs and the financial sector more generally. He, um, and I'm sure we'll have an opportunity to talk to him about this this afternoon. He had the, um, joy of guiding Goldman Sachs through the financial crisis and and presiding over the firm as it went through not only this incredible period of of turmoil, but a period when it did incredibly well, came out of that moment, and adapted to a new world, um, of finance. And so we'll have a, we'll have a chance to get a little bit of behind the scenes on on what that felt like and and how he sees this new world of finance.

What you may not know, except for those of you who are in my my class who just heard this an hour ago, is, um, Lloyd came to Goldman, uh, a path. He actually joined the firm via J. Aron, um, in 1982, coming in as a precious metals trader, uh, despite having zero interest in precious metals. Uh, but he was a tax lawyer at the time, decided that that wasn't his, uh, preferred career route, and so he, uh, jumped over to J. Aron, and from there took a zigzag but ascending path up through the highest ranks, um, of Goldman. And he'll be able to tell you a little bit about that path. And prior, even to his time at J. J. Aron, um, Lloyd had a rather unconventional route to get to Wall Street in the first place. He grew up a working-class kid in the Bronx, was the first in his family to go to college, came to Harvard College as an undergraduate in what was a pretty, you know, strange and probably scary, uh, experience at the time. Not that Harvard is a scary place, but, you know, coming from a very different world, it can be pretty intimidating. Went from Harvard College to Harvard Law School, um, and from there into the world of law, and then, and then over to finance.

Lloyd is known for his trading acumen, for his toughness, for his philanthropy, and I can say—

>> Oh, go on.

>> No.

>> I'm gonna stop right there. Um, and also, having had the opportunity to get to know him a bit personally, he's brilliant, as you'll see. He's funny.

>> Tell him how we worked together.

>> Yeah, I was, I had the great, uh, the pleasure of serving on the Goldman board during Lloyd's tenure. Uh, luckily after the financial crisis, but in time to see part of the, uh—

>> How differential I was to my board.

>> No. Um, I was going to say, he's a down-to-earth guy who never is afraid to speak his mind. Um, and is usually right. So, um, just to wrap up, in recently, Lloyd is now a a public public citizen citizen again and a public intellectual.

>> A civilian.

>> A civilian, which means he can talk about anything, hopefully. And he's used that, uh, platform to talk about hidden stresses in the credit markets. He's expressed optimism about the transformative power of AI. He's underscored the importance of the Federal Reserve Bank's independence. And he's called for caution on tariffs and trade. Um, to pitch, just a little bit, though he doesn't really need me to do this. Um, Lloyd, in his spare time, has also written a memoir called "Streetwise." Um, which I had the great pleasure of reading very quickly this weekend. It's really good. It's fascinating. It's real. And it's coming out in, uh, in March of next year. So without further ado, it is a great pleasure you—

>> To introduce Lloyd.

>> So let's start, as these interviews often do, um, with with your journey. So, as I mentioned, um, you grew up working class in the Bronx, in a tough neighborhood with less than stellar schools. How did you get to Harvard, Harvard Law School, and Goldman Sachs? And when you look back, was there like a defining moment, a light bulb, an a role model, um, or not? How did Lloyd get to be Lloyd?

Well, I'm not suggesting that that's a path anyone would want to do, but, um, it's, um, you know, there's, look, you make the situation, has every situation has benefits and burdens. In the particular case, um, I didn't have to source my motivation. I really just wanted to get, I, I always, I, I want to get away. Look, I don't want to suggest, you know, people here, I'm sure in this room have had tougher situations they grew up in, you know, war-torn countries, distressed. They get here, broken homes. I had two parents. They were strivers. My dad worked for the post office, worked nights. I grew up in the projects, uh, public housing, but, you know, it wasn't that, you know, you survive. There, there are worse things than that. But again, two parents, they appreciated that that I valued education. You know, I went to public public high schools, but they were happy when I did well, and they wanted me to go to an out-of-town school. That was the big, that was the big goal of my early life was to go to an out-of-town college. And, um, I got lucky. I struck pay dirt. I applied, you know, it's a little bit like my getting into Goldman story, which was kind of, kind of weird. I applied to a lot of schools. I didn't get into all of them, but I got into Harvard, and Harvard accepted me, and, um, uh, it was like I had—

>> Sorry, just go back there for a second. Like, what made you apply to Harvard? Had people from your—

>> I went to college night at another, I, I went to high school in, I don't know if people know East New York, Brooklyn, like, um—

>> Everybody knows Brooklyn now, Lloyd.

>> Yeah. Um, but not that part of Brooklyn. Um, and, um, so I went to another high school in another neighborhood to go to their college night because they didn't have a college night because no one went to college from Jeff, from Jefferson. And I stopped at a booth, and it was, you know, the Harvard, and he gave me, and, um, and he gave me an application. And I didn't know, I didn't know about processes or anything like it. I filled out that application like you'd fill in a landing card when you got off a plane. Like, I didn't study, you know, I'd asked a question, "What did you think? What was something in your life?" Some, you know, some questions that you get on these applications. And I just wrote it in the box. And, um, you know, I went through the process and didn't know anybody here. Never, never met anybody that went here. And, um, they plucked me out and they took me. I remember I had to go to an interview at the Harvard Club in in New York, which was about an hour and a half train ride. I'd been in Manhattan probably three times. And I got there and I didn't want to be late. And I think I got there, you know, I switched trains and all this stuff. And I was 15 or 16 at the time. And, um, I got there, um, about two and a half hours early. And I walked around the block until I thought it was okay to go, you know, it was like close enough to go in. And I went in and I remember thinking, I didn't think it was the guy's house, but I thought he must have had a house just like it. I just had no idea. You know, you go into, and so I interviewed people after that, but I met them in coffee shops. Um, so I, I'm familiar. You know, I've got, I've gotten way past that. You know, I don't live so badly now, but I, I, I, I certainly remember that. And when I talk to people who I think are thinking like that, I know they're thinking like that. And so, you know, I'm pretty conscious of that, and that that helped me in my life. So, you know, I, I, I grew, I met all types, and I've been on the wrong side of a lot of people's, um, a lot of people's, um, kind of, I'll call prejudices of how they think certain people should be. And, you know, and, um, and so having lived through that, I try to, um, I try to put myself in their, the person's position.

>> And that's helpful. That's helpful if you're trading, too.

>> And, and, um, and just to continue with the journey for one step more. So, you landed here, or the other side of the river, somewhat by not accident, but, you know—

>> Oh, no. I, you know, it's like when you hit a shot in golf and a weird long shot goes in, you could say, "What? Luck?" No, it wasn't luck. I was aiming for it. It was just a low probability.

>> Right.

>> So, it was a low, it wasn't, I was going for it, but it was a low probability of success.

>> But after that point, you also engaged in some other low probability bets, if you will. Harvard Law School, going to J. Aron.

>> Yeah.

>> And some of those things, right?

>> So, how do you think about those things?

>> Well, Harvard Law School didn't work out. I didn't stay a lawyer. So, you know, I did that. Look, I, I don't know what people are doing now. I mean, I, I was here 50 years ago, but in those days, the, the going to law school, Harvard Law School took a hund, over took a hundred people from my class in in college. So it was just like an extension of liberal arts. I went to law school because I didn't know what I wanted to do, and whatever it was I didn't want to do, I didn't want to do anything. And so I figured, gee, another three years of college would be fun. In those days, that was what law school was. I don't think it's like that today. I think, like, as is the business school today, I think the law school expects you to go out, work, get some practical experience. Had I done that, I might not have gone to law school because I didn't stay, I, I didn't stay a lawyer. But having gone to law school and accumulating an extra three years of loans to pay back, believe me, I became a lawyer after that and worked for about five years in a law firm. And I didn't, I didn't, um, I didn't hate it. I didn't mind it. But, um, you, and I think that this is the case today. You know, your entry level, and and more so today than it even was then. In my day, people, a lot of people went to a job and they stayed in it for 40 years. Now, people go and you say, "Gee, is this a good place to train myself?" Um, and that's, and it turned out to be a good thing for me to have gone to law school and to get that, you know, to get that background. But it, but like my cohort that entered the firm at that time, after about four or five years, everybody's looking to do something different. I was too. I went out and, you know, those great churners of liquidity, um, you, these headhunters come up and call you and tell you how wonderful you are and you're just the person that someone seemed, but it's really, it's really mud down a slle, you know, people are going, you know, going to these firms. And I said, "Look, I'll go anywhere, but I don't want to go to, uh, another law firm because I'm in a law firm, I'm doing well in the law firm." And, um, they routed me. I interviewed at big Wall Street law firms, got turned down by all of them. And the only one that gave me a job was J. Aron & Company, which was a small commodity trading firm. And it just goes to show what serendipity does, because one of the firms that rejected me was Goldman, um, which is to their credit, um, but I did get a job at J. Aron, and Goldman bought J. Aron. And so I, um, which was kind of funny, because once, once it was in the same firm, I remember meeting, I, I ran into some of the people that had passed on me when I was applying to them. And so for the first several years, I used to hide from them so, you know, they wouldn't see me. And then, you know, after five or six years, they hid from me.

>> But I think, I think it's such a wonderful story. And, you know, I often see in in students a sense that when they look at somebody like you with their stature, they sort of imagine this straight line to the top. And yet, I'm amazed by how many people who've made it to the top who had these really beautiful zigzag paths that was serendipity.

>> I think everybody, I think frankly, everybody does. And by the way, it's not like, gee, this is so, I mean, I still look back and say, "Oh my God, if I had only zigged instead of zagged," and I look at this and would have, could have, should have. And the randomness of attaching yourself to some, some person who takes an interest in you, and that person does well, and you draft behind that person, or somebody takes an interest in somebody who's even smarter and better, but as luck would have it, she doesn't go anywhere, and so you don't draft behind her. And so there's just a lot of things. But I think you can make your own, and I'm going to use that word, luck. You can increase your odds by, um, you know, paying attention to it and move yourself. In most, in most places, in big organizations, even big organizations like Goldman, you can steer yourself to people and places, um, that you, that you want to do. And, you know, there's, and especially if you're good, because if you're good, people give you more to do. And if you have too much to do, you get to pick what you want to do. Uh, it's only if you don't have enough to do that you have to do what anybody, what everybody gives you. But if you're, if you have more to do than you can do, you get choices, and you can push yourself where you want to go. And that's, you know, that's what I, I did. I, I learned stuff that I was interested in, and I was lucky because it found, you know, I found something that suited my particular kind of add, you know, which was a trading room environment. Other people who ran Goldman Sachs over the years, most of them came through the investment banking, and I was a lawyer, so I would have died in that job because I just, I, I just, you know, I don't have the attention span. And so I found something that suited my, uh, you know, that suited my attention horizon.

>> So that's a, that's a great segue to like, talk more specifically about finance and and Wall Street. So, as you describe in in the book, when when you entered the world of trading, it was a very—

>> This book isn't out yet, so she's made a living.

>> But it's a good book. Um, the world of trading was fundamentally different than it is than it is today, you know, on the floor.

>> Well, it looked different. I don't know if there's, I, I don't know if it's, I mean, it probably was the same when the Phoenicians were doing it, you know, you're still taking risk and you're still gauging, you know.

>> Um,

>> You know,

>> But that's the question. So, what's in your mind? What's changed in the world of finance? Technology has changed. I think—

>> I think, you know, there's still judgment applied, but there's a lot of leverage that surrounds that judgment now.

>> Um, I think a lot of—

>> A lot of, you know, when I started out, I spent three hours every day writing telexes. What's a telex? You know, the tapes that go, and you know, this is, you know, this is like, this is like ancient history. This might might as well be saying a slide rule or something, how ancient it is. But this is a lot of things that had to be done that were not necessarily, in hindsight, character-building, don't have to get done now. And so what everybody is, is freer now to, you know, is more leverage in what they do. I'd say that the, whoever's at the fulcrum of all this decision-making process of all these teams is worth a lot more because it's more important because you have so much, because that person has so much leverage. There's less inert, there's less, you're surrounded by less inert ingredients and less inertia. You can, uh, decision-making is very prompt. You get a lot of information to digest, too much information. But that's part of the art of figuring out what's important and what's not important. Um, I, I think, you know, it's like going back and you read classics and you say, "Gee, has anybody had an original thought in the last 2,000 years?" Because anything you can write about today has been written about in Shakespeare or by or by, uh, or by Plato or some, you know, go further back. You know, the answer is that's right. You know, history doesn't exactly repeat, but we know it rhymes, and people rediscover certain principles. I go, I listen to your class, and it sounded great to me, and I'm thinking, you know, I think differently about things now after 40 years of trying to get things done than I did when I was a. But you couldn't tell that to people because you have to go through the 40 years of trying to make it to to understand that. And that's good in a way. If everybody came out with the scars of the financial crisis, everybody would go to work every day with a blanket over their head and a flak jacket and may not get anything done. I admire people sometimes, you know, sometimes I read, uh, you know, not only read, I invest in, you know, startups, and people are very ambitious, and, you know, caution to the wind. And regulators have, better to apologize later than to ask, better to ask for permission than forgiveness. I can't think that way. And God bless them, they didn't go through what I went through. Maybe eventually they will. But maybe that's why younger people get things done better because they, they're less, they're less cautious. And you think caution is a good thing, and sometimes it is, but not always. And so—

>> So, let's talk about the financial crisis. Um, because amazingly, it's, it's already becoming ancient history. Um, but for you, it, I'm sure it's still very, very real.

>> Well, I don't wake up with the sweats if that's what you're asking.

>> All right. Well, that's good. That's good. But, but kind of three questions, if you don't mind my mixing them together. You know,

>> By the way, we had, we used to number them. You know, World War I was originally called the Great War until you had World War II. Then they went back and called it World War I. I've had a lot of crises. We've had, you had the crisis of the century about every four years.

>> All right. So, let's talk about 2008.

>> That wasn't our worst.

>> All right. Well, let's start there. You can give us all your worst scars, but for 2008, curious like, what, what do you think caused it? What did it feel like to go through it? And, you know, of course, the popular question.

>> I'll stop there because these are long questions.

>> All right. All right. Why didn't anybody pay the price?

>> What, what caused it?

>> Yeah.

>> Well, what always causes stuff is things are too free for a long time. Low interest. What does free mean? Low interest rates, cheap money, cheap this. So, in other words, when you're allocating scarce, scarce resources, whether it's a commodity or or money, you have the discipline. But when it's too freely available and it's flowing, you tend to invest it, um, you know, which, in, in, in a way, in hindsight, that looks unintelligent, but really it's without discipline. And that's what built up. Where did it localize? The, the financial crisis was essentially real estate. It was the price of real estate. It was mortgages, which is debt on real estate. Um, and that was owned all over the world. That, that was the specifics of it. But if it wasn't that, it could have been something else. And—

>> And so why don't you think more—

>> For us, we had less, we had less mortgage risk, and we had a lot of risk in, um, at Goldman, in, um, in, not, not shockingly, given what our activity was. We, we had a lot of mortgage risk too, but we had risk in, um, um, in, um, loan commitments for merger, merger agreed-upon merger deals that had to be financed but weren't closed. That was a big, that was a big risk. So that wasn't real estate. That was, that was us. But we were unusual. Most of it was real estate, real estate risk, um, you know, chopped up pieces of real, of real estate risk, and that was the bulk of the crisis. And it was, you know, too soft money. And that's what people are looking at now. It's like, gee, interest, you know, there's been so much money, and it hasn't been washed through, and it hasn't been washed out. Where is it going to, where is it going to emerge? And usually, and by the way, you add another ingredient, usually it's leverage, you know, it's credit, you know, one form of leverage or another, credit, uh, because that gets built in, and usually credit that people don't identify as credit, leverage that people don't know that they have, that they have necessarily, but they find out afterwards.

>> Why, why don't you think it triggered more sort of risk sensors at the time?

>> Well, well, it didn't. A lot of people. I mean, we, I would say one of the things that we did a lot, almost religiously, is we marked our stuff to market. And you see a lot of institutions don't really. And you're not really, you know, in big banks, there's held to maturity, in which case you don't have to mark those, that bucket to market. Others, you do. You know, famously, you saw that, uh, you know, Bank of America, great institution, but they had, you know, over a hundred billion dollars of what would be mark-to-market losses because of government bond positions. Government bond positions, they're safe, except their term. And so when interest rates went up, their, their bonds that they bought when interest rates were, you know, one and a half percent went underwater, and they had big positions that doesn't get marked to market. So their balance sheet, you know, is worth $125 billion less than what's in there, but it's not recorded. We viewed mark-to-market not just as what you had to do to be transparent to your investors and your regulators. We viewed mark-to-market as a, um, as a risk management tool. We forced ourselves to market to market. We would sell things into the market to prove what the value of it was. And we were trying to, you know, at that period of time, we were selling AAA mortgages into the market, and they weren't selling for 100 cents on the dollar. And so when we marked those, so those, so we got th, those were our signals. Those are available to everybody, but people don't do it. If they want to bring it forward, you know, bring it forward. There's a lot of positions that exist in alternative funds and things, and, you know, just people aren't selling their, you know, aren't selling a lot of, you know, inventory of, um, of, um, older, you know, older vintage, um, investments. Well, why aren't they selling them? Well, the market's not, what does that mean? It means it's, it's not, you know, obviously there's plenty of, there's plenty of capital and plenty of money in the world. I think things can be sold at the right price, but they can't necessarily be sold at the price where people have it marked. And that's an issue that, you know, that that will, that pertains for thousands of years and thousands more. That's one, that's another thing that's going to be common to all these transactions, which is, um, not, um, not knowing, not testing the market and knowing what your positions are worth. Not so much as a transparency thing or a way to to show your investors what what are you worth, but as a risk management tool.

>> So, tell us—

>> And what you asked, you started to ask me, because this is, you know, why was nobody punished? I think, um, I would say that the firms that you would think to punish were the ones who lost all the money, which kind of means that they didn't, kind of do it on purpose, because otherwise they would have made money and other people would have lost money. I would say that everyone was drawn into and everybody was drinking the same, uh, was was you know, was you know, consuming the same drugs and missed it. You know, you had regulators, staunch, you know, you know, my fellow, my classmate Ben Bernanke, you know, this is limit, you know, this is for subprime. No. And then it extended to mortgages. No. And then it went by. People didn't know that this was because it's a bubble. And it's easy in hindsight. Everyone says, "Oh, haha, that was a bubble." But when you're living in it, it's hard to see. And I would say that not only is stupidity not a crime, it's actually a defense to a crime. Because to be a criminal, you have to have criminal intent. And if you're stupid, you can't intend it. You didn't intend it. And so I would say the reason it was people tried very, very hard. I know regulators and press and everything. And there were people sleeping in front of my apartment house, you know, for three years. Not necessarily the same people. They were in shifts, uh, with my face on a placard trying to do this. They worked very hard. But at the bottom line was, you know, they, uh, the kind of, they punished themselves, the biggest miscreants. And they, but they weren't doing it, they, they didn't commit a crime, they were stupid, which is a defense.

>> So, so take a minute or two and just talk about like, how it felt as a human being. I mean, you already mentioned like having people camped outside your apartment is not fun, but what was management of the firm like in those, those insane months of, you know, August, September 2008? I mean, it went on for a while. It was bad for a while.

>> It wasn't fun. My front of my apartment building, but I have an apartment building, they're chock-a-block full of, uh, you know, full of, uh, other people who speak here from time to time. And I will tell you, they were so jealous that they were picking me and not them, that they were missing on, they were missing the, uh, but, you know, it wasn't, you know, it wasn't fun. Um, you know, on a personal level, look, I was running a big organization, and I don't know how, I didn't know how I was going to think about it. In hindsight, it's hard to even articulate how I thought at the time. You just get up every day, you have this is your role, this is your job, you're responsible. People say, "Do you like your, do you like it?" No, I don't like it. I appreciate it. I understand what I have to do. And you get up and you fight the fight, and then you go home exhausted. I, you come home, and I would be, there'd be, I'd get through the door, and there'd be a trail of my clothes leading to the bed, and I'd be like face down. And everyone said, "Did you have trouble going to sleep?" And I said, "No, I had trouble waking up." Um, I didn't want to get up and go out there again. And then you get up there, and you go out again, and then, you know, and that goes on for a long time. And then one day you get out, and there's no one left to fight. And like, you got, you worked your way through it. And it's a big, you know, and, and you don't, I can't generalize. I didn't, but I think one doesn't think of himself or herself. You have, you're in charge. You're the leader. You have to worry about everybody else's morale, everybody else's mood. You talk to them. You're relatively upbeat. You don't dissimulate or lie or say it's great when it's not great, because then you have no credibility. You say, "This sucks." But let me tell you, it was worse then. And then, and then those people got through it. Are you lesser, you know, you, a lesser organism than those people if they got through that? I say that to this day. And everyone said, "Oh my God, it's never been this bad." Of course it has. It's been worse than this in my lifetime. In late 1960s, we had political assassinations, National Guard was shooting kids on campuses, political assassinations, and to a bigger extent, uh, you know, was the middle of the Cold War and tanks in Czechoslovakia. Say, the late '60s, Nixon impeachment, and actually, that, that was at least as bad as this moment. It was pretty polarized then. The only difference is that can't get worse because it's over. This could get worse, and so you feel it more. And we're, and it's also our problem, and not something we're reading about, although I lived in it. This is '68. I was still, I was alive and sentient in those days, but I didn't, no one loves it. But even when it was going on, I thought to myself, you know, this is, um, this is what this is your, this is your contribution, you know? I mean, when everything is going well, and everyone's telling you how great things are and how magnificent you are personally, it's fun to listen to. But what kind, what do you really, what, what have you really contributed? But when you get into a, something that's really tough, and you're shouldering it, and you're working people through it, then you can feel proud of that. And so I tell that to everybody. You know, I, I have friends from time to time that go through the, uh, you know, go through this thing and get crushed, or some people get fired, and a lot of people do. Steve Jobs got fired and came back, and other people do. And I said, you know, in the, in the American culture, people prize almost above everything else resilience. Um, people who have gotten batted down and then get up. People really like that here. They like comeback stories. They like teams that come back. They like athletes who were injured and come back. You know, people love that stuff. And, you know, times even now, I was talking to somebody yesterday who had a very disappointing thing with no end in sight. And they said, "God, you're lucky. You know, without you being crushed, you wouldn't have the predicate for a comeback." Um, so you count, count your, you know, I didn't say whether, you know, how high or low a probability of a comeback actually was, but you can't have a comeback unless you get beaten down. And so you got, at least you got the first part, the first box checked.

>> So, take a minute to tell us about the, the comeback in the sense, it wasn't really a comeback, but how was managing Goldman in, in the wake of the financial?

>> Well, this is the part you saw. So, you, you, you, you joined the board like in '11 or something like that. 2011. The crisis was '08, '09. That was, I, I would say that was the existential part, where firms were going under and, you know, you know, were there bailouts, and they were pushing mergers on companies. We were told over one weekend by the Fed to, on Saturday, they asked us to merge with Bear Stearns, and on Sunday, they realized that that wasn't going to happen. On Sunday, they wanted us to merge with Wachovia. We actually even had a memo, a press release drafted up, and then they said, "Oh no, we can't do that for you because, uh, Hank Paulson, your predecessor's Treasury Secretary, and it looks too, you know, it's too—" So, GMA, you're on your own. Which, by the way, turned out to be a blessing. Um, but so there was that existential part of it, where every, I mean, again, this is history for you, but you, you live through it, where every week we're in the Fed over the weekend trying to get the market able to open up on Sunday night, which is Monday morning in Asia. And, you know, one week, you know, AIG gets taken care of, or commercial paper gets guaranteed. I mean, these are all things that, in hindsight, you know, you just read, and it sounds kind of bland, but these were all very novel things to have done. That was the existential part, and exhausting. And, you know, we did pretty, you know, we didn't lose money, which was unbel, you know, which was really remarkable, given how leveraged we were and how risk, you know, our risk appetite going in. And other firms had lost, you know, many tens of billions of dollars each. It was, you know, quite, um, and then so we navigated that. There was about 15 minutes, 15 minutes of, "How did you do it?" with, you know, with awe and respect. And then after that, it was like, "How did you do it?" Because then, of course, the, the people came and said, "Well, what did you do? How did you get out of your positions? Had a Jew influence, blah, blah, blah." And then, so I would call that the reputational part, which was really, you know, you know, getting quite a beat. Now, it ended up nowhere because it wasn't, it, you know, there was nothing, there's no bad behavior, nothing, you know, nothing was done. We had, you know, but there were hearings and going things, and, you know, we turned over, you know, 25 million documents and papers. They went over everything with me. I had to testify over and over again. "Why did you sell those mortgages, ages to that institution?" And they said, "Well, because we were long too many of it, and we had to sell some." But, "Well, don't tell me about the ones you were long, tell me about the ones you sold." We didn't, I, I said very carefully before, we didn't lose money in the financial crisis. We also didn't make money in the financial crisis. We got through it intact. But, um, people were looking for, and I understood this, I had a role to play. This is my job is to be a, uh, you know, is to be in the, you know, to be, you know, in the dock. And, um, again, this was a long time ago, but, you know, hours, you know, a lot of, a lot of that testifying, a lot of going on TV. It was a little bit of, you know, culture shift, because up until that moment, GMAN was the culture, the culture of GMAN, certainly, and I think most firms like GMAN, although there aren't a lot of firms like GMAN, was to be private and out of the news. We had a whole PR department whose only job it was is to have us not mentioned in articles at all and not upfront. You know, you'd have these tombstones, which nobody would do today, which you'd advertise some M&A or some transaction that you do that would have your name on it very discreetly, and that was it. That was all that anybody would do. And, and that turned out to be a real problem, because nobody knew what we did. And it's not like we weren't like, um, Bank of America or City Group, where people had checking accounts or deposits. You know, what is Goldman Sachs? It was like, you know, Mediobanca or something, you know, you know, you know, just like real, um, you know, an unfortunate mystique that that went from, so it wasn't fame, it was notorious. And like that. So it was a very, very, very easy, um, uh, you know, target. And, you know, some of it we earned by not seeing the same, you know, we didn't see the same problems anymore than anybody else did. We just risk-managed it better, which is different from predicting where the market's going. We're just in risk management mode. But we had to navigate that, and that was tougher, because all of a sudden, from never having, you know, from, you know, we were very well known to our clients and very well known, obviously, our community, our people, but I went from never, you know, barely giving an interview to practically being on TV, you know, every, you know, 15 minutes. I remember after that hearing, I literally went, after a long hearing that ended after midnight, I went up in the Capitol Rotunda. There were 12, there were 12, uh, stands of news, you know, CNN and CNBC and, you know, ABC, every network had it. I did a 15-minute interview with all 12 of them before I got in a car and drove back from, uh, Washington D.C. to, God, I remember, I remember my my driver, it was like about 2:30 in the morning driving back because I had stuff to do the next day. 2:30 in the morning. I remember driving, and then I hadn't eaten, and I said, "Like, pull over." We pulled over at a rest stop in in Maryland. And, you know, those, uh, you know, you go into, I don't know, it was like, whatever their 7-Eleven, it was like a 7-Eleven. And I just remember there was like, there was one hot dog rolling around on a grill, and it had to have been there for eight months. And I ordered, and I ordered, and I said, "I'll have that one." And my driver said, "I said, if you—" He said, "If you eat that, you're going to die." And I said, "I said, yeah, I don't care."

>> So that was, so if you ask me how I felt, that was really, I was trying to, you know, I was trying to, um, you know, um, suicide by hot dog. They weren't, they weren't looking for pills against my bedside, but, gee, what is this half-eaten rancid hot dog doing next to the body? But that was, uh, but we, but again, we worked our way through that stuff too.

>> I think I remember was not nearly as dramatic as your hot dog moment, but—

>> But our board was very good through—

>> There you go. No, but, but I remember, cuz, and I, I see the echoes of it a little bit here at at Harvard right now, that you have a brand that's so good and so sort of pure that you, you've never had to worry about sort of selling the brand in any way, and yet the power of the brand can can flip on you.

>> Well, and also, it's not by accident. I mean, people, I, I believe me, I saw a parallel. And look, I, I identify with Harvard too. Went to, he went here for about a hundred years between college and law school. And, um, and I kind of saw it as it was evolving. Of course, you go after Harvard, of course, you go after Goldman, if you want to make a point, that's what you do. And that's what's, you know, that's certainly going on now, um, with Harvard. And you think the things that are going to protect you, you know, all your great alums and all that, you know, influence that you have, and that notoriety, or, and, um, influ, again, influence and prestige go, you know, is actually flipped. Is immediately, uh, is immediately opposite. We, all of a sudden, you know, the Treasury, the, the Secretary of the Treasury was Hank Paulson, my predecessor. It was half the government was Goldman Sachs, on Steve Mnuchin. Well, that's, that's later, but a lot of the prime, a lot of heads of state were ex-Goldman people, just like they're ex-Harvard people, you know, a lot of analogies. And that really, so all of a sudden, putting people, you know, Goldman never hired people from government. Government hired people from Goldman. So, it wasn't like we were leveraging their influence that they earned at the government, you know, in the government's expense. It was, it was the other way around. People took our loan. And by the way, people came to Goldman to work for 10 years and then go into government. So that wasn't all intentional, but that used to be a good thing. Then all of a sudden became a pejorative, "Government Sachs." Like that was such a bad thing. I, at one point, I said, "Gee, that's really, that was part of our recruiting thing." You know, people here are service-oriented. You do your career, you learn about finance, you operate at a very high level, and then, and you make a little money. And then when you feel good about all those elements, including making a little bit of money, you can go into public service. And that was, that was sort of a good thing. All of a sudden, it became, it became a pejorative to be, you know, to go, you know, to be "Government Sachs," which was never the way in the U.S. In other countries, there's a very big separation between business and, you know, people don't go back and forth between the commercial side and, in the, um, governmental side. With the U.S., it was always that, that path, and for the, I think for the benefit of both sides. But again, moment in time, and, you know, we could bring, we can, you know, we can step out of that and come to the forward, because these things, again, they don't repeat. And I know this is history, but history is important because you save yourself a lot of time and energy if you study a little history, because you know, they, you know, I'm sure we've evolved a lot over millions of years, but over the last couple of millennia, human nature hasn't evolved that much. And when you're talking about markets and ambition and motivation and how to get things done and how to influence people, you know, there's obviously there's cultural differences, and, you know, just like there's differences in DNA between humans and pigs, but 97% of it is the same. And so I would say the differences are very important among, between cultures and between eras, but 97% of it is the same.

>> So, that's, that's a good segue to the next topic. So, um, in a couple of weeks, we're having, please note this on your calendars, we're having our first Bigs debate of the year, and it's—

>> Truth, truth against, uh, you know, against lies, and justice against, it's not, it is on the benefit, it's a debate on free trade and whether free trade is the best system for the U.S. and its citizens, or whether higher tariffs will be better.

>> And the answer is somewhere in between. I know, but give us a little bit more meat on those bones, because this too, I mean, look, if you, if you think about the history, of course, there've been really smart people—

>> Free everything, and I'm against unbridled everything.

>> All right. So, say more. Free, are, are higher tariffs going to be good or bad for the U.S. economy and U.S. uh, workers? I think that part of the polarization in the country has come from, you know, the desecration of the middle class and the loss of high-paying jobs because we benefited from, um, lower labor costs in other countries. This isn't new stuff. This is, you, we worried about this in the 19th century, too. Um, and but it really happened. We thought it was a good thing. So that Walmart could sell products, you know, it probably took, you know, half a percent off of, uh, inflation every year because we, you know, we got goods at a at a much lower price. And as you know, and, and in return, we also, in addition to lower prices, we got the rust belt and a loss of jobs. And other countries, when, and I hate to sound, you know, there's some, every, everybody's right to some extent. And I think that we, in order to compete against that, and, you know, in other words, everybody reads Ricardo and all this thing, and you, relative advantage, and all that. And that's a relative advantage is low labor costs. But, you know, there's other social considerations also. We don't want our social consciousness. We don't want our workers to live like Mexican workers or Vietnamese workers. So, we're going to pay them a, going to have to pay them a lot more. And if you pay them a lot more, unless somehow there's some—

Magic, and we have machines they don't have. And we're always, you know, and we might, and we're much more productive. And we might be, but that's a hard burden to get over across the board. And so there's a role for tariffs to make their goods more expensive so that we could pay our workers more money. And people won't like that because it'll make goods more expensive. But then that's for the political class to decide. Is it worth everybody to have, you know, 30 basis points more inflation every year and have more people able to buy, more workers able to buy the stuff they're manufacturing? And I think the answer is kind of yes. And so I think tariffs are good to that extent.

Now, that's a good justification for where we're competing. Are there other kinds of tariffs that don't fit that mold that might be good? Yes. If it's, if other people, if other countries bar our goods and services, we have to hit them where it hurts and bar them from going into our country. That might even include things that we don't compete in, but just to make a point and to get, uh, and to level the playing field. Look, the playing field, in my view, wasn't leveled. I had tried to do business all over the world. I, you know, I try to get goods, you know, Goldman Sachs has, you know, was applying for a Chinese banking license, and we were told it would be approved, and it, you know, and that process has taken 17 years, and I think it might still be going on. And it's not a, it's not necessarily a level playing field. Now, from the other side, they say, well, yours isn't level. Well, this is how you work things out, and you have a confrontation on this. So I think, yes, tariffs serve a purpose.

There's also a revenue-generating purpose, um, which is possibly a good thing when you have an unbalanced budget. On the other hand, tariffs are, you know, a sales tax, and that's a regressive tax. And is that really how you want to raise, if you have money to raise, do you really want to raise it with a, you know, by a tax on goods that come into the country, which tends to be regressive? That wouldn't be my first pick, but it does have a salutary benefit of raising revenue. So I think some of this, and maybe a lot of it, is good. And as far as addressing the playing field, you know, you know, it's a, I think 75 years since the Marshall Plan, you know, it's time to, you know, at one point, the US was half the GDP in the world. We're not that way. Um, and, um, we may not, you know, and so I think I think some of this had to be redressed. Not, you know, not necessarily in the way it's been done, not necessarily in the kind of random and one day up, one day down kind of way, and maybe not as extensively as it's done, but directionally, I, I don't, I, I think that a lot of this stuff was, uh, is warranted and helpful for the country.

So, one of my favorite lenses that you always put on things, at least that I, I remember you putting on things, was to look at an event at the moment. And I think most people tend to overreact to what's happening at this particular moment. And you were really good in taking a long-term view and saying, "Ah, this is just cyclical. These things happen from time to time versus this is a secular shift. You know, something major is changing here." When you look at China now, and you look at, you know, history suggests that no empire lasts forever. Are we at a moment of a shift from US power hegemony to a Chinese-led global system?

>> Well, I mean, like everything else, it's something short of they, you know, you know, they win, we lose. I think, um, you know, like your, uh, you know, your colleague at the, uh, Kennedy School, you know, the rise of, you know, new, new, uh, new countries rise, all one sec, you know, sun sets and the sun rises. And sometimes it results in a big conflict, and sometimes, you know, about a third of the time, people get along, and, you know, and the world, you know, stays a better place without some kind of conflagration. I think there's an inevitability to the rise of China. I always thought it. I went there personally before, before the current leadership, before President Xi came in. I just always marveled about how, in things that mattered to me in my commercial life, those guys thought the way I did, and they were ambitious in the way, and, um, they were smart in the way. I like people being smart. Um, and, you know, wanted to get ahead. And basically, in, you know, to the core commercial and capitalistic, I won't debate whether capitalism and their style and much more government, ours has less government, theirs has more government involved as a regulator, you know, but just as a, as a core culture, and nothing is more shocking to me in my professional life of seeing how that got reversed. I mean, and to, I think to the detriment of China. But, you know, we'll see. It depends on how you prioritize things in China. Now, the thing that's most prized is, I guess, what they think of as social cohesion, but dedication to the party, and, you know, that kind of, you know, that kind of commitment, and less the, um, the kind of decentralized decision-making that capitalism does commercially, which leads to the centralized decision-making, what your opinions are about how things should work. And they didn't, and they like that less. And, you know, there was a point in time where there was not, you didn't have to worry about getting visas for Chinese students in America because everyone wanted to go back to China because that was where you could make your fortune. And that wasn't that long ago, and it doesn't feel that way now. I think that is that is a part of the political cycle. I don't think I think it's more inevitable. I think that they, you know, they may get it right or wrong. That everybody gets it wrong for a while, but if it doesn't kill you, eventually you get it right. And I think that they, again, in my opinion, what's right, if I was talking, you know, I, I understand there are people here, no doubt, are from China, think differently about things. And maybe they think that the apotheosis of what you could accomplish is that kind of, uh, uh, you know, that kind of solidarity behind, you know, a central, you know, authoritarian, you know, communist government that's committed to elevating, you know, the lives of its people. And, you know, so I won't, I'm not trying to, you know, just put my, you know, say that that's not a topic worth debating, but I do think that, you know, central, you know, centralized economic thinking isn't, you know, is, uh, you know, frankly terrible and is doomed to failure.

Um, you know, you know, they may, you, you know, they may, they may stimulate an economy quicker by deciding that they're going to build 80 airports all at once, which they kind of did, but it's going to turn out that 64 of them are in the wrong place. And because they're in the wrong place, and because the government put it there, the local province built it there, you know, if they, if it, if it was in the wrong place here, planes wouldn't land, they wouldn't pay fees, the airport wouldn't pay its debt service, and the bank would repossess the land and put up something else and get, get that airport off the balance sheet of the country. In China, you're going to have housing developments that are going to have, they're going to be dark for decades.

>> So, let me, let me just push you a little bit. Are you, cuz I, are you saying that China is going to become more of a dominant power or that the system is going to?

>> It's going to take it, it's going to rise and meet.

>> Its equivalent to the United States. Why shouldn't it be?

>> Um, you know, we had a lot of, uh, you know, they, they suff, you know, they had a lot of dis, you know, because of, you know, the impact of centuries of colonialism. You go back to that pre-period, and I guess between India and China, that was more than half the world GDP for a couple thousand years. So I would say if you take the longer view, this was a minor interruption in their, uh, in, in, in their, uh, in their, let's say, shared dominance of the world. Uh, uh, so I think they will resume. You know, they're, you know, capable, a big population. Uh, I was going to say young, but they're not young anymore because they're now aging because of the, again, that central author, you know, that dictated policy of one child, uh, policy that's going to come, is coming home to roost in a very big and dangerous way for that economy. Uh, but I think eventually, my guess is, I have no basis for saying this except I generally think that the path of, you know, the path of the universe is towards entropy, but I think most economies with sensible people eventually, after they've tried everything else, they eventually get to the right path. Uh, and they, they hold on to it for at least a bit. But I'm not saying they have to win some conflict. I think we could, I think the world is big enough for the United States. And I, I kind of like the way we were dealing with China. I mean, we had a re in the in the, uh, in the prior administrations before, uh, before the current, uh, before President Xi asserted, you know, his, you know, his, you know, those policies, and I think there had to be some adjustments, uh, you know, on both sides. I think there was unfairness in trade, which I already spoke to, but I think we were going towards the right path, and I think that that was that was beneficial for everyone.

So, let me throw out another big topic that people tend to, you know, get, uh, quite dramatic about. AI save the world, kill the world. Thank you. Uh, or somewhere in between.

>> Well, you know, I don't know. I, I, I love the Terminator new movies, and I, so I worry about it. Um, and there were articles today about, you know, AI acting up and, you know, you know, not, you know, trying to defend it, not, not letting itself be turned off. And so, you know, you get now the writer of the story also watched the Terminator movie, so who knows what's, you know, I'm not, I'm not smart enough about this to know how worried I should be, but I'm, you know, I'm pretty worried. But I worry about nuclear energy and and the Tom and bombs, but you can't do anything about it. It's cat's out of the bag. I think you can't unlearn stuff and you can't undo it. You have to cope with it. So, my intention is not to quibble about whether it's good or bad, whether I wish it didn't happen or not. Uh, you know, you know, I wish they hadn't. Should I wish they hadn't split the atom and turned it into a bomb? Once they split the atom, they were going to turn it into a bomb. And once you have AI, they're going to be bad actors, and it's going to be stuff you can't readily identify. And we're already, I, I think this hacking into SIM, the vulnerability now is huge. The world is is. Yeah, it's going to be. And by the way, I bet when something does, when something really blows up, it's going to turn out not to be a malevolent actor. It's going to be an accident. It's going to be a fat finger. I remember, you know, in, um, you know, we would have, you know, I mean, we're as good as anybody, better than most, but we would have pro, we would have mistakes a lot also. And every once in a while, you know, we'd put a piece of software in that, you know, sold every stock for $1 that we had in our, that just offered it out, you know, just because somebody was testing it and putting $1 and it actually got used or something like that. By the way, these are, this is like, uh, Law & Order, is ripped from the real pages. But, uh, but the names have changed. But really, that that kind of happened once. Um, but, um, but I remember when I, when I started on, well, he started out by asking what differences were. When I started out, people would shout across the room, "Sell so-and-so," and somebody crossed the room, "I got it." And if somebody, and it would be, and it would be, and a hundred people would be shouting at the same time. And if anybody said, and it would all be just a din, but if anybody said something wrong, like a wrong price, the room would go quiet, and everybody would look at that person. It just, it just would, because everybody heard it, because everybody had the intuition about their doing. Today, you don't have that. It's, you put, nobody can intuit it, and AI would do it. We don't know. One of the difference with AI, I think, is you don't see the steps it's taking. So, you can't go back, and you certainly can't instantly, maybe ever, audit the path it took to get to its conclusion. So, you can't, it's harder to check. It becomes more of a religion or faith, and that's a more dangerous world. So, I was going to say, in those old days that I was in a trading room, it would be very hard to have a trading, a big mist, a mistake that could cost $5 million just because you'd catch it. Today, if you had something in the systems or in the technology, you, you'd kill, you could have a, you could have a, you could have a mistake that would cost billions and billions of dollars. And, and, and by the way, the same thing is true in the physical world. Before, before the atomic, you know, before we started having reactors, the biggest, the biggest industrial accident in the world was Bhopal in, um, in India, I think, six, you know, very tragic, something between 6,000, 10,000 people died. If the wind had gone differently in Japan and Fukushima, you could have had, you know, 50 million people dying. So I would say the modern era has given us leverage.

>> Okay.

>> And leverage is good if you're right, and really bad if you're wrong.

>> So, I'm going to try and turn that one around for the last question, and then those of you who want to ask questions of Lloyd, you can start convening around, uh, the, the microphones here. But despite what you've just said, um,

>> You can't reverse it.

>> No, that's fine. No, but you end your book, and you alluded to this already, on on a note of optimism, and you say, you know, we've been through worse times. We'll get through this. But you're an evidence-backed guy. So where is your evidence that we are actually going into a future that's?

>> 10,000 years of recorded history, and we haven't annihilated ourselves. So I would say, I'd say that, you know, I would say it's a good pattern to fall. Uh, uh.

>> But annihilation's a pretty low bar.

>> It is. Right.

>> By the way, if anybody wants to, if anybody wants to buy calls against the world ending, I'll write as many as you want. So, yeah, if the world ends, I'll end with it. I'm not.

>> But forget the world ending. I mean, you, you, you actually say we're going, you're quite optimistic about the the near term future.

>> Things tend to. Yeah. Yes. Well, look, things tend to work. Things find their place, and people adjust. It doesn't mean there won't be tragedies. We've had, we've had wars, and, you know, 100 million people died in world, you know, more in world, you know, World War, you know, World War II. You know, terrible things can happen. Um, and again, prior to the atomic age, but the world wasn't. We weren't going to end the world with it. I am generally optimistic about, but optimism is the wrong word. You, you, I don't think I use the word optimism. I would say that things.

>> You do say, sorry, there's no reason to be pessimistic about our ability.

>> No, I didn't use the word optimism.

>> All right. But that's pretty close.

>> No. Well, to you, it's close. I, I deal, I deal in smaller numbers. I deal, I deal in more decimal places than you.

>> Um, I think you have to. Here's another thing about, and this is like a leadership point. It always marveled to me, like I would watch somebody, and you know, like somebody in leadership, you're getting interviewed on this topic today, you have a tough to, you know, you know, I was thinking back in Clinton, you're getting impeached in the morning, you have to decide whether to drop a bomb on Syria in the afternoon, and you're making a speech to the to the convention that, you know, you have to, you have to do a lot of things at the same time. I could be worried about the fate of the world, but I have, but life goes on. I have responsibilities. I have things I want to get done. So, I am not going to sit in a corner with a blanket over my head in a fetal position because I'm worried that there's going to be a nuclear war and we're all going to go to hell. If there's a nuclear war, I was, I was once asked by a regulator who asked me questions, "What will you do if this happens? What would you do if this happens? And what would you do that?" And they said, "What if you do, what would you do if a, if a bomb go, if a nuclear bomb, if a dirty bomb goes off in Lower Manhattan?" I said, "I'm going to stick my head out the window, take a deep breath, and let you deal with it." You know, I am not going to, I am not going to be the last guy dealing with a zombie apocalypse. So, I am not spending a lot of time.

>> You're not wor, you're not losing sleep.

>> I'm not losing sleep over that. I am going on. And the fact of the matter is, it's pretty good because there's a lot of things I've worried about over the years, and, and I'm still here, and the world is still going on. So, I'm glad I didn't shrivel up in a bowl and a fetal position. We are very glad as well. Um, I'm going to turn to our part that.

>> A gentleman over here.

>> Hi. Um, thank you for coming. I was a mortgage trader at Goldman, and I always, uh, was so jealous of the MDs and partners that were there during the crisis.

>> Um, my question is.

>> I didn't hear it.

>> I'm sorry. Can you just, just repeat that? What were you jealous of?

>> I was jealous of hearing the stories. I mean, you didn't know if the firm was going to be around in a week. Um, so that's a lot more stress than I was under. I would say that veers into pessimism, but go on.

>> Fair. Um, my question is around Fed independence. Um, what do you think are the worst-case scenarios if we see a complete political kind of takeover of the Federal Reserve's decision-making process?

>> It's terrible on every level that what's going on on that. It just makes the world more expensive for everyone. If you think of, I mean, would you, if you were, would you lend to somebody where the risks were keep increasing, they're not going to pay you back? Of course you wouldn't, or if you did, you'd charge a higher price for the loan. Well, how does the US default on its credit? We print dollars. We borrow in dollars and print dollars. We could, we'll always pay back the dollars that we borrow. But what are those dollars going to be worth? Are we going to inflate the way the US defaults is the value of the dollar goes down, or the same thing, similar concept, we inflate the currency, the dollars buy fewer things in the future. The Fed is the bulwark against that happening. If you're a creditor of the United States, you look at that independent Fed who's keeping rates higher today because they want, because they're afraid of inflation, like, you'd look at a CFO of a company that had a conservative, that had a conservative balance sheet. So you, as a creditor, had more confidence and would lend to them at a lower, at a tighter spread. That's how I would make the analogy. So calling into doubt, let's say taking away the Fed's independence and making it another tool of, of the, you know, fiscal policy, you know, more coordinated so that it wasn't independently defending the, you know, our currency against inflation and other, uh, and other, you know, and other things that would diminish its value, um, is just making it, uh, more, is just making it more expensive for the US to function in the world. Now, I'm giving you a very mathy, you know, not, not numbers thing, but a very analytic way of thinking about it, aside from, you know, the checks and balances and the constitution and stuff, but this is the Harvard Business School, not a con law class. So, but I'm just saying it, it just is bad. It just makes the bid lower and the offer higher on everything you want to do. It makes it more expensive for everything. Um, and it's bad. And it's not just the accomplishment of the, of, of taking away its independence. The suggestion of it is m is rattling, you know, markets. Look, interest rates went down and the 10-year went up. Not a lot, but it went up. But if you know, who knows if it goes down a little bit more. Maybe people don't see this as the whole curve going down in tandem. They think of it as, you know, as, gee, I'm, if I'm going to lend for 10 years, I, I'm going to get a higher price, not a lower price as a result of what you're doing on the short end because you're, you're showing your hand that you're going to, you're going to tolerate a higher rate of inflation. So, I don't like it. I don't like the attack on the, the assault on Fed independence.

>> Tom.

>> Uh, thank you for being here, Lloyd. Uh, pulling a little bit on what Professor Spar laid out in terms of the questions on the great financial crisis and a little bit on.

>> Socialism and collectivism. Can you hear me?

>> Slow down a little.

>> You know what it is, a little bit because there's an echo.

>> Okay, sorry, I talk fast. My question is, the Wall Street Journal did a piece last week that millennials are increasingly like socialism and communism, collectivism. And the single unifying principle, why, according to the Wall Street Journal, is the great financial crisis. It is one of the driving forces pushing people towards those ideologies. Given that consequence, what would you reflect on in terms of how the US reacted to the great financial crisis, and how we should react to the next one?

>> Yeah, I would say again, I didn't read, I don't, not familiar with the piece, but I would look, I'm trading one harm for another harm. I would say the, it's not, I don't think that that should have caused people. I think it causes the polarization and the anti-system, you know, the, uh, you know, you know, being against, uh, the status quo, which I guess we're not a communist country, so I guess it's consistent with being anti, anti-status quo. And, um, it looked like that the government was behaving, and it did, in a way of of the people who were, you know, the people who were doing well came out of that better than they should have, with more, with and with, you know, with help from the government. Who didn't help those people because it wanted to help those people, it just needed to keep the system intact. And when you keep the system intact, you keep the beneficiaries of that system intact to a greater extent. And that's the source of a lot of polarization, uh, that we feel in the country today. Whether it pulls people towards communism, I don't think people really understand what that means. Does that mean that the state should operate all industry? In other words, if I tell you what I think communism is, and I had a conversation with them, they just don't like, they don't like the system is what I was, what I take away. Not that they want state ownership of the means of production, um, necessarily, or, uh, common ownership of, you know, of the commons, uh, of that. So, I, I don't find it, I don't, I don't take it as an intellectual. Maybe I should, and maybe that's my bad, and they really do like communism. Um, but, uh, but I just take it as part of the polarization and the attack on the system that we have today, which they would, the critics would characterize as something that was had a set of rules that were breached in favor of the, and, and to make it even iron, even worse, in favor of the people that designed the rules for their own benefit in the first place. And that generated a lot of, not surprising and appropriate hostility, which, uh, echoes to the, to this day. Um, and then I think to make this real is you have to get to, all right, let's go policy by policy. What do you want to do differently? And then, then you have a sensible conversation. But I, I know from where it comes. I'm not surprised that it persists. Uh, and I think, you know, it has, you know, there's a, it's legitimate in the way for the reasons I just, just described.

>> Thanks. Um, over here.

>> Perfect. Hello. Uh, going back to China for a moment. What are your thoughts on the large amounts of US debt held by countries like China, and the leverage that creates in trade negotiations?

>> Yeah. Which way do you think the leverage goes?

>> I just, I don't want to know what you meant. Uh, I'm just like their, like ability to interfere in the US economy, like via these holdings.

>> In other words, they're leveraged to us because they're our creditor.

>> Yeah. Exactly.

>> You know, it's like that old bank, you know, if, if they, people lend you a lot of money, you know, if you, if you lend a little money, you own them. If you lend a lot of money, they owe you. They own you. Um, I, I think if China could put its reserves in something else that would preserve value, they would do it in a heartbeat. I think one of the problems that exist persists in the world for people that are not the United States is the dominance, not a monopoly, but the dominant position of the United States in providing assets that offer security, that people think are secure. And that's really what we're relying on this point. And by the way, that's why we, that's why we put that in jeopardy with policies that make people insecure about the United, you know, about the dollar and US assets and debt and other assets as a store of value. But we're not in danger of losing that soon, although we're trying, it seems, we're trying very hard to. Uh, and it's hugely valuable to us because it's allowed us to finance our deficit because people hold those assets. Uh, um, but ch, but where, you know, I hate to say this, but, uh, you know, it's the no other alter, you know, where would you put your money? You're going to put it in Bitcoin? You're going to put it in Yen assets? You're going to put it in Euro and Dada? You're going to put it in RMB? Uh, and, and rely, and rely on China to preserve the value. And so guess what? The world's reserve currency is still the United States. And in some ways, if we had a competitor on the horizon, maybe we'd be better, maybe we would, we would, um, value that position more than we do. But with that position comes a lot of responsibility, and also self-interest to preserve it. And I don't think we, uh, I don't think we value that enough. For, and that goes back into the conversation we had about the Fed. But China has no place to go. They were trying to create special drawing rights, baskets of currencies, it, you know, it's still the forward.

>> Thanks, Allison.

>> Hi, Lloyd. Um, thank you so much for being here. Um, I have a question that comes from a place of genuine curiosity and also points.

>> The reason why you have to speak slower is because the echo merges your words. So, thank you.

>> I can speak slower. Um, thank you so much for being here. Um, I have a question that comes from a place of genuine curiosity and also has to do with the rising inequality and polarization that you pointed out during your talk.

>> Okay, slower. Go ahead.

>> Okay.

>> Um, got it.

>> So, rising inequality is a known fact and is often talked about. Um, the top 1% in the US own 35% of the wealth, and the bottom 50% own less than 2%. And that's a gap that's doubled since the 1960s. Um, I also know that you're publicly against the wealth tax. And so I was curious to hear, in the absence of that policy, what other policies would you have in mind that might reduce and prevent the level of inequality and polarization that we're seeing?

>> I, I, I don't like the wealth tax because it would turn, it's, it's very hard. I was going to say impossible to administer. I mean, it's like settling your estate every year. Takes 12 years to settle an estate, but you're going to do that every year because you have to figure out what the value of assets are that have no market. I mean, I just think it's too cumbersome and hard, and countries that have tried to do it have abandoned it. I, I admire the concept and the push behind it and what it's trying to achieve. But I just think, I just think, you know, progress, progressivity and tax rate is obviously we've been going the other way on that, um, uh, as an advantage. But, you know, the economic system has two, you know, you can divide it into two parts: one is to generate wealth, and the other one is to distribute it. And the problem, you know, the fairest, best, most wonderful Sermon on the Mount kind of distribution mechanism would be pure socialism. Every, you know, take what you, but it doesn't do a good job at generating wealth because people aren't incentivized to generate wealth in the first place if they don't own it. If they don't own the fruits of their labor afterwards. And of course, if you have unbridled people winning their competition and generating wealth with no stop, um, then all the eggs will be in one basket, and we'll have, we'll have the work, bad distribution. We have to, I would say we have to do a better job at re, at distributing the wealth without putting too much of a burden on what we do to generate the wealth. And so what you have to do, I think, at, at the start, and this is not, you know, original thought, is you work, have to work with the progressivity of the system to get as high a tax rate as you can on the people who have the most, but not to be such, so burdensome at the end that they stop producing, i.e., it puts a burden on the creation of wealth. And I think we've been going by reducing the highest wages. We have a lot of room to go there. And I don't know that that will fix everything. I'm sure there's also regulatory things and other kinds of distribution aspects that would do. But things that serve the process of redistributing wealth or even income, which is what taxation system does, provides a disincentive. How much higher can you go without overburdening the wealth creation half of what the economic system is supposed to do? So the way I would answer it, you know, I'm no expert on this. There's a Kennedy School over there with a lot of policymakers. But one obvious thing to do is to bring back more of the progressivity that we had and a higher tax rate that we had for the, you know, highest income earners. I don't mind the concept of, and, uh, behind a wealth tax anymore. I don't mind the concept behind communism and socialism, it just doesn't work.

>> What are, what are your thoughts on inheritance taxes? Because one of the things you talk in, in the book about is how coming from a tough.

>> It's not a policy book. It's an adequate. She just read the policy part. But you, you talk about this double, this interesting advantage you have from being a stver. So in some ways, inherited wealth, you know, leads into the inequities that Allison was talking about, but also may not necessarily be that much of a blessing for the kids who inherit it. And again, sometimes the wealth, which is the wealth tax, also the, the end of life wealth tax has almost become not quite voluntary, but you can do a lot to avoid it. I, I would say that you have it or you don't have it, and you should have it, and so it should be real, and we should get rid of a lot of the stuff that people can do. Very interesting. You know, confess, when I had negative wealth, I, I wanted the estate tax to be 104%. And now that I have wealth to pass on, I say, who, who thought that? Who ever thought that? You know, it's very, what does the, when I thought of the wealth tax originally, I thought of it something that benefited the recipient of the of the inheritance. As I age, I think the wealth tax is something that benefits the person who earned the money because that's what you want to do. You want to pass it down for your satisfaction.

>> Right?

>> But, you know, so that, that just does a little parenthetical on the side. Um, so I think you have to think, you know, if, when I was your age, I thought of it only in terms of what the people who are getting it. Now I'm thinking it in terms of the people who are giving it. Shouldn't they be allowed to do that? It's already money that's been taxed. It's gone through your income statement. You paid an income tax on it. Now you're taxing that, you know, again, and is that fair? Because I consider it really giving money to my kids. I consider that a form of consumption in a way. That's what I want to do. That's how I want to spend my money. So I think of it in those terms. So I just, that's just a, a highlight. But I'd say the social contract that we're in, and getting to your point, is that, you know, we should have, uh, we should have such a tax, and we should try to make it a, um, you know, not an optional tax, and have it, uh, you know, real. But the tax on paper, the federal tax is, I think, the top bracket is 55%. And if you, if you're blessed as I am with living in New York, add another 16%, of which is deductible against the 55. So it comes out to 60s something. And you start to think, well, gee, why don't I just light a bonfire? Because at the point at which the government's going to take 70% away. And if you want to raise it from there, why am I, and then you get back into, am I burdening the part of the economic system that's supposed to keep, I, I want Bill Gates to keep trying to create wealth, and Mark Zuckerberg. So, uh, it, you know, these things, you know, most of these policy things, it's not right against wrong or good against evil. It's right against right. What do you want to do? They're both right. They're equal. What do you want to do? If it was, if it was all, if it was good against bad, it would be easy. Uh, these are tough, these are tougher choices. But if you want to know where I am, I would not make a higher wealth tax. I would probably bring to bear the one that exists on paper, but in practice doesn't get paid.

>> Gentleman over here.

>> Yes. Um, the governments in the developed world are drowning.

>> Am I say that the governments in.

>> In a developed world.

>> Developed world, yeah.

>> Are drowning in in increasing and dangerously increasing levels of debt. Now, when a country gets a lot of debt, normally the currency is devalued. So, but here you're going to devalue all the currencies. So what do you think will happen as a result of this excessive mounting of debt?

>> Well, it's risky, but certainly the United States, in the big economy that it is, can support it, which it will, up until the day it doesn't, and you won't know the night before. So, I would say the risks of it are high, are higher and higher. And, but it's like a cliff. Now, personally, I was in the risk management business, and when I know there's a cliff, I worry immediately and I try to do something about it. And, um, I would say the government seems to, this government, for all its, you know, you know, stuff, is worried about the size of. I mean, we don't like, you know, we may not like it, but they're trying to cut the federal payroll, and they're trying to, you know, they're raising tariffs. And whereas I was talking about is raising the cost of labor so we could pay people in the United States more, you know, the president's talking about it as a form of, uh, deficit reduction. Uh, and it's at levels where it actually can accomplish that, or at least not slowing the level of advancement. So, we're not going to like the steps that are taking, that are going to have to be taken. We don't like what little has been done so far, and a lot more has to be done. So this is going to be a wild political ride because everyone agrees that our level of spending, you know, when I was running a company, every time we started to spend more and hired more people, it's so easy to add, and so hard to take it away because all of a sudden you suddenly think you're totally dependent on that. You couldn't live life. And I had to point out to people that the last 4,000 people that we hired didn't even start yet. How could you be dependent on those 4,000 people? And yet people get that way. And that's going to be that, that's going to be the problem around the world. And, you know, it's worse in Europe, which can't sustain that kind of, uh, that, that kind of debt. That, you know, they don't have the, they don't have the balance sheet to do it. The United States is really not in danger because our, because the numbers, because our balance sheet is so, you know, big, but it's in a d, but it's dangerous, and it should be contracted. And how is that going to get done? I mean, you're going to shrink the size of the federal payroll. Look at what, look at what's happened so far. Now, you could say, well, the way it's being done and Doge and all the things, but really, do you think if it was done better with music in the background and, you know, and, you know, and served cocktails while it was getting done, do you think people would like those people being laid off, or the Medicaid budget being reduced, or, you know, so much of the spending is entitlement spending that people have gotten used to. They don't think of it as entitlement. They think of it as essentials and, uh, God-given rights. And so that's, that's going to be a problem for the political sector. And I'm glad they're trying to take it on, but it's just, you're just getting a flavor because they, they, they barely started. Then somebody, and then of course, somebody will say, yes, well, I don't want you to cut that, but cut these other stupid things you're doing that I don't want you to do, but are the, you know, it's, it's, you know, you want to gore somebody else's ax. Um, it's going to be a tough, it's going to be tough to do. I would try to do, I would love that job.

>> Duly noted. We'll pass that on.

>> No, there'd be people in front of my building again every night.

>> Yeah.

>> No, let me, let's, uh, let's go over to the gentleman over here. Thanks.

>> Thanks. Can you hear me?

>> Yes. No, it's the hearing, it's not a volume thing.

>> It's the echo merges words. Um, I'd be curious your view, both as a lifelong New Yorker, but also as former CEO of one of the city's largest and most prominent employers, on just the future of the city. The likely future mayor is running a critical of capitalism.

>> No, I know what you're asking.

>> Yeah. Does it impact? I'm just curious. Does that impact firms like Goldman Sachs and the big landlords, or do you think that's all just noise and it doesn't actually.

>> No, no, it's going to go. Look,

>> Every generation has to rediscover certain things. You know, war is bad, peace is good, you know. Um, here's what I, here's what I think. Um, I'm, I'm not getting hysterical about this. I just, you know, you know, I just redid my apartment. You know, it's going to be, you know, I'm going to live there. I'm going to stay there for a while. Um, the, and again, it emerges with the question, there's been a lot of polarization, part, you know, part a lot of it, not all of it, as a result of income distribution, things getting more expensive for some people, and other people who couldn't flippantly, you know, you know, afford it, and don't, don't get, you know, bat an eyelish and, and, you know, um, Mani has struck a chord, as he should have, and is putting issues that need to be dealt with, and it would need to be dealt with by anybody. And he's made, regardless of what happens, he's made a big contribution if he refocuses everybody's attention on the affordability and sustainability in the city. People who have support functions in the city used to, you know, lived in neighborhoods of Brooklyn. Now you have to, you know, I don't know, you know, where people can even, you know, can live. When I got out of, and it's not, it's all levels. When I got out of college, and I had student loans and no money, but, uh, based upon my first salary at my law firm, you know, as an associate in the law firm, I could have a one-bedroom apartment off, you know, on, you know, between Park and Madison in the 30s, in a beautiful Murray Hill neighborhood, a one-bedroom apartment. Kids that are getting jobs, their first job at Goldman Sachs, you know, are sharing studios. So, I mean, you know, part of it is there was 7 million people living in New York then, now there's 8 and a half million people. The country, you know, it's gotten more crowded, competition for resources. And, but the, you know, but the, you know, the wealth and the contraction of that, you know, first time people are polling, and they don't think they're going to make as much. Parents or have as good kids aren't going to have as good a life as their parents had. And I could see that. Um, so I think he's made, you know, the contribution is made in that debate. What am I worried as a practical matter? New York has survived so much stuff and mismanagement through the ages, and it's just a place where young people want to go. And, you know, Tom Friedman was wrong, the world isn't flat, where, you know, he said, you know, because of computers and everything, you can live in Afghanistan where it's cheaper and just zoom into. They didn't have zoom in those days, just phone it in. No, people want to get together and live in a place and aggregate together. And that place has been New York. There are other places that are rising, but it's not at the expense of New York. They're rising also. And people still want to come to New York and have their job. And Goldman has moved a lot of jobs out there, but there's a core of, but Goldman has to be in New York, and its big jobs are still in New York. And that's where still things are happening. Does it have to be like that forever? No. Uh, but it's like that now, and for the foreseeable future. The other thing I would say about the next mayor, if it's Mandani, that people are worried about, if you're a legislator, you could say whatever dopey things you want to say. You.

Know, I think like this and I like that. Nothing happens. And you know something? If you say nothing, nothing's going to happen either. You know, nobody's going to ask you that you need to do something. But if you're an executive, if you're the mayor of a city or the governor of a city, you know, especially in New York, you're mayor, you know, the snow has to be pushed aside, the garbage has to be picked up, you, you know, cops have to be on the streets and and the crime rate can't go up. Things have to happen. You have to be effective as a manager. He will have to be effective as a manager. If he could honor the principles he's reciting, free buses, free, you know, this, let you know, more social workers, fewer, you know, some of those things. If he's saying those and can achieve those goals, terrific. If he's not achieving those goals and he seems like an awfully sensible guy, then I'm telling you, he's going to backtrack and and make himself do whatever he needs to do to make himself effective so he can get a second term. Because you have to really execute in those jobs. That's why they call them executive jobs.

>> I think we have time for one last question. Uh over here, please.

>> Hi, can you hear me?

>> Yep.

>> Okay, I'll talk very slow. Um hi, Lloyd. Uh I was actually an intern in 2019 in the New York office um on the Apple Card. And I feel like at that time,

>> I'm sorry, intern on what?

>> The Apple Card. The Apple Card. And I feel like at that time there was so much excitement about entering the consumer space, consumer fintech innovation. And I'm curious and obviously, you know, Goldman has scaled back since then on the consumer business. And so I'm curious, you know, reflecting on that and this might be after your time as well, but

>> Well, I, I, I, I was there pushing um, you know, the bank, which we, you know, which was very important to in order to get deposits, which you know, the world wanted us to have as a funding source. And with deposits comes the, you know, respon, you know, you have to be able to deploy them. And so in my tenure, there was Marcus and the Apple card and that was that was the extent. It went beyond that and then it contracted because the um some of the things happened didn't work well and with the and with the bath water I think some of the baby got thrown out um but you know it's I, I, I was I don't know how I would have responded in those situations. So that was after you know I'm a good lever and so I, you know, uh I don't know a lot I don't, you know, I don't go in with a white glove and see if there's dust on the corners or anything like that. Um, but my successor is a sensible guy. The stock is doing well. He had different priorities. The firm is, you know, is doing great. Um, and I used to say this to people used to comment on my tenure. Not only don't you know what you do if you were me, you don't know what you would do if you were you because you weren't operating in this time period. And you're bringing something, you know, you're bringing your state of mind from 10 years earlier into the present saying what you do now, but you don't know what you would do now with the same kind of impulses and data uh and you know, signs I'm getting. And so I always knew that then and I know it now when I go in the other direction. So I don't know, you know, how I would have done, but if I look at the state of the firm, you know, I'm not objecting to whatever, you know, that was less of a priority. It became less of a priority and and the other priorities, you know, are going just fine. So, um, that was then, you know, that that was that was then, this is now. Um, but I liked the principle of it. What I liked of it was we're never going to be a consumer house but there but in the fintech world there were we, you know, we were never going to be uh, you know, from uh, it's a wonderful life Bailey savings and loan I look into somebody's heart and I could see there were good credit no we we ended, you know, the fintech world it's gone to the age of algorithms and stats and risk management and technology and those are skill sets of Goldman. We were never good consumer people but we were great at risk, risk management, technology systems. Um, and I thought that in that world that world led itself to the skills that we had developed and nurtured and we could make that kind of a consumer business, not the kind of consumer business that's more conventional one, but we could have taken a leadership on more of the fintech side uh and um and but, you know, so those those have back burnered and other priorities taken their place and and the firm's doing fine.

>> Well, on behalf Alf of all of us here in Harvard Business School. Thank you so much for your honesty, for your humor, as always, for answering everybody's questions. Thank you all for great questions, for being here, and uh stay tuned for the next time. We hope to have you back. Be well.