Transcription
Let's get more on that warning now from David Solomon, who said that the best talent could choose now to work in other cities around the world, and specifically in Europe, and that London needs to compete to make itself attractive. Here is, uh, the contents of his, uh, comments on the UK to me yesterday on the Master Investor podcast.
"What does London still offer the world as a financial center, and what have, what have we lost in London?"
"Well, London, like New York, London has some deep structural advantages in the investment that the most significant financial firms in the world have made over a long period of time. But the financial industry is still driven by talent and capital formation."
"And those things are much more mobile than they were 25 years ago. So when we were talking in the back a few minutes ago, I was, uh, I was commenting to you because you were asking me about my travel schedule. I was talking about how much I move around to see our people because our workforce is much more dispersed than it used to be. I, I commented to you that 25 years ago, 93 or 95, 94% of all of our employees were in four places: New York, London, Tokyo, and Hong Kong. And today, it's much, much more dispersed."
"I, I think that if you look and you step back, London continues to be an important financial center, but because of Brexit, because of the way the world's evolving, um, the talent that was more centered here is more mobile. We, as a firm, have many more people on the continent in the last five years than we did, you know, five to 10 years ago. And I think that, you know, policy matters, incentives matter, and it's important that you get that balance right if you want to protect and retain, you know, the leadership position that the UK and London has in participating in the broad global financial system. And so I think it's fragile."
"Um, I'm encouraged by some of what the current government is talking about in terms of supporting business and trying to support a more growth-oriented agenda. But if you don't set up policy that keeps talent here, that encourages capital formation here, um, I think over time you risk, uh, frame that."
"Do, it's interesting you said you, you're encouraged by what the government is talking about. We're a year in. Um, is it kind of time for, for rubber to meet the road? Do they need to get on with their act because of the fragile situation, I think was the word you used?"
"I, I, um, I, I think this is something that's going on, you know, everywhere. And we're talking about it before we were talking about, you know, debt and deficits in the US and growth. Governments have to put policy in place that drives growth and investment. And that's certainly the case here. I think it is, I think it's important that that we get on with it. And so, you know, policy matters, but politics are hard."
"And so, you know, I'm encouraged, for example, when, uh, the Chancellor spoke here about regulation. She's talking about regulation not just for safety and soundness, but also for growth. And now we have to see the action steps that actually follow through and encourage that."
"It's, it's really interesting hearing you saying that, and obviously Rachel Reeves gave her very high-profile Mansion House speech last week, and, and you touched on the tone of it overall, and you mentioned as well that ring fencing is seemingly might be on the chopping block going, going forward. So we'll see if that materializes. It's also true she had a, you know, tough economic inheritance. The tax burden she inherited was at a post-1951 high. The debt level is at an all-time high."
"Um, do you have sympathy for the job that she has to, to do at the moment? I guess it's, it's not easy. And I'm not sure if you've seen this from afar, but, you know, of late, she was reduced to tears at one point in parliament because of the pressure. Do, do you have sympathy for the Chancellor, the tough job that she has?"
"I, I, I have, I have sympathy. I have empathy, not just for the Chancellor, but for anyone who's serving in one of these governments and one of these administrations. These are hard jobs. These are people that, that, that I think want to do well and advance the nation, the economic prospects of the nation, but the politics are hard, and the policy decisions and getting policy implemented is very difficult."
"You brought up ring fencing. You know, ring fencing's, you know, a very small, minute example that probably to most of the listeners, they don't even know what the specific issue is."
"I don't know. We have some geeky listeners."
"Okay, maybe you have some geeky listeners. But at the end of the day, it's a place where the UK is an outlier. And by being an outlier, it prevents capital formation and growth. What's the justification for being an outlier? Why is this so difficult to change?"
"Mhm."
"Okay. And, you know, that's politics. That's not, you know, substantive policy because it's hard to make a substantive policy argument that this is like a great policy for the UK. So why is it so hard to change?"
"So I'm, I've got a lot of sympathy and empathy for her. You know, I've met with her a handful of times. Um, I think she's smart. I think she's engaged. I enjoy talking to her, and I'm hopeful she's gonna make real progress."
"That's really interesting. Let's just talk about one other policy because a little bit of headlines that your former head of Goldman Sachs International, Richard Naughty, moved to Milan, uh, and it was cited that that the non-dom rule change, uh, played a role in that. Is that another policy that will drive people away, more Goldman Sachs employees away? You said the situation was fragile. Is, is that something that should be revisited?"
"I, I think when you look at any jurisdiction, tax policy has to make sense. Incentives matter. If you create tax policy or incentives that push people away, you harm your economy."
"Um, and you don't, you don't drive revenue increases. You know, at the end of the day, most economies have a barbell, you know, in terms of tax receipts. And that end of the barbell where you have very affluent people that have been successful, that pay a significant share of tax. If you push them away, and you push those smart, talented people that are much more mobile away, I think you hurt your prospects for growth."
"Do you think more Goldman Sachs headcount and, and other US investment bank headcount will, will shift in time to the continent?"
"I think there are, there are, you know, there are different conflicting issues there. Um, you know, because of Brexit, okay, there are requirements around certain job functions and certain things that we do in our business that used to be done in London that now, regulatory, are required to be done on the continent, and that's created a shift."
"What's interesting, and, and this is the, this is the point I want to make about talent mobility, Wolf, and it's a, it's a subtle point. Um, and I'm seeing this here in Europe, and I'm seeing it also in the United States. For example, we now have very large offices with significant collections of interesting, talented people in a variety of places across the continent."
"So, if you go back, if you go back, uh, you know, 10 years ago, I think we probably had 80 people in Paris. You know, we have 400 people in Paris now. And so, it's a real Goldman Sachs office with a lot of interesting Goldman Sachs people and partners and junior people. There's a real ecosystem of Goldman Sachs in Paris. That makes Paris a more interesting place for somebody who wants to work at Goldman Sachs to live."
"And so in Goldman Sachs today, if you're in Europe, you can live in London, you can live in Paris, you can live in Germany, in Frankfurt or Munich, you can live in Italy, you can live in Switzerland. And we've got, you know, we've got, you know, real offices. We've got a big, big, you know, what I'd call kind of a tech office in Warsaw. So we've got, you know, we've got lots going on."
"By the way, here in the UK, we've got a very, very interesting office up in Birmingham that's growing very nicely because we're finding very, very good talent, um, you know, up in, up in Birmingham. But the same thing in the United States. If you go back to Goldman Sachs in the United States 25 years ago, we had 10,000 people. 9,500 of them were in New York. Today, we have 25,000 people. 9,500 are in New York. But we've got 4,000 people in Dallas. We've got 3,500 people in Salt Lake City. We've got 400 people in Southern Florida. We have a thousand people in Chicago. We've got 800 people in Atlanta."
"People can choose to live where they want to live. For us as a talent organization and the mobility of talent, you know, we can give people more choices, and so people choose because the critical mass develops."
"You know, I think for places like New York and London, you just have to recognize talent is more mobile. Talent organizations like Goldman Sachs are giving their employees more choices because we want to attract that talent. And so you've got to make sure that you've got a very, very positive, you know, stake in the ecosystem, you know, in your, in your location to retain talent and attract talent."