Transcription
Thank you, everybody. Thank you for being here. We're going to get into some trouble, uh, with Lloyd Blankfein.
"I don't get that lightning rod part."
You don't get the lightning rod part. Um, it is a privilege to be here, uh, with Lloyd, and it really is an extraordinary book, "Streetwise: Getting to and Through Goldman." Um, we're going to spend some time talking about the book, talking about his career and life, uh, an improbable one, uh, growing up in the projects in Brooklyn and ending up running Goldman Sachs, and then the journey through that, being a lightning rod, and what that felt like. And maybe get into what you think is going on now in our country and markets and worlds, because I think we're all trying to figure it out.
"Let's do that."
You, you want to do that?
"Yes."
Let's do that. Um, let me, let me go start with this, with the lightning rod piece.
"Oh."
You wrote this, you wrote this entire book, I imagine, because you think that there was something misunderstood about your story, about the idea that people think of you as a lightning rod. And I wanted to understand, you know, writing a book is hard. I know how hard it is. Why did you even want to do this?
You know, I'm not sure. I was, I thought I was misunderstood. I think I was pretty well understood. I wrote it because it was COVID outside and, uh, and, you know, and I was used to, I was used to being busy all the time and having deadlines and pressure. So I started writing something. Um, I started something writing, write something. I thought, and then I showed it to people and they said, "This is good. What about this story? What about that story?" And I said, "You know, I'm going to keep on going and see how it goes."
But what did you want people to know about this, about you? And, and the idea, did you, did you think of yourself, and she described as a lightning rod? If you watch a lot of the newscasts and broadcasts about this book, and you, that is a word that's used often. You know, something I don't. Um, there's a lot of reasons why one can be a lightning rod, and they're not always that bad. Not all that bad. I mean, it's not that I would volunteer for it, but I, I managed to find the silver lining around, you know, inside every cloud. Here, um, the fact is, we were, you know, highly influential, not at the same time, not very well known by the general public. You know, go, go deposit, go deposit your check at, at your branch, your Goldman Sachs branch, or take a loan out of, or mortgage out of Goldman Sachs. So, we were kind of mysterious. That was the kind of the culture of the firm, to stay in the background. And guess what? That turns out to have been a big mistake in a lot of ways, because you couldn't be that influential and that significant, have that kind of a balance sheet, and not, um, and, and, and, and stay hidden. Um, and so, um, we learned, learned the hard way. But I wasn't trying to, if you, you know, I, if you read the book, I'm not trying to shirk it. I even put my review in there.
"I know. Well, should we talk about that and go right there then?"
Here it is, guys. Uh, this is in 2002. Uh, his review. Uh, this is by his colleagues. This is like a 360 review at Goldman Sachs. "Opportunities for development: better listening skills, more inclusive, less dominant in meetings, can be overly harsh, adversarial, and intimidating tendency, uh, in to micromanage." How accurate do you think?
"So, so far?"
"Indefensible. Not open to other opinions."
I could go on. Look, it's safe. It saved time.
So, what do you think of this now?
Well, I put it in there. I did it for a couple of reasons. Look, a lot of the book is showing accessibility. I mean, I've known some people in my life that were so brilliant, I couldn't figure out how they, how they saw the world, or, or, you know, what the, what the world looked like through their eyes. It was so, so different for me. I would say Warren Buffett was a guy, is a guy like that, where he would reduce things, make it so simple, and I think to myself, why couldn't I have seen that? Or an Elon Musk. Most of the people I know are very, very smart, very, very motivated. But a lot of people are very, very smart and very motivated, and some degree of luck, and that all goes in. And some people may even be smarter than, way, way smarter, first 1% smart, but it's still not un, it's still not unfathomable. It's still accessible. It's still available. And I think, um, I think that's who I was. And I try to make it that with the right institution, with the right kind of culture, and run in a kind of ownership kind of partnership culture way, you can get great things. And if you get people to subordinate their ego in favor of the platform, you can then use that platform and exploit it for other things as well. So, some of it is, some of it is, I put that in there to show, look, I've known some people in my life that look like they were voted most likely to succeed every year from kindergarten on. I wasn't that. I wasn't that person. And,
"So, where do you put yourself in that, in that stew? I mean, I, I, when I first introduced you, I said it was an improbable story. You consider it improbable?"
It was improbable for me. But then when you look at, and again, I'll say something, you know, about the country. If you look at the list of the richest people in the world, or the most successful, this or that, you know, a lot, not everybody grew up in the projects, but a lot of them are pretty self-made. In other words, if we did this 80 years ago, you'd see generations of Morgans and Rockefellers and things like that. That's not what you see today, and that's not what you see on Wall Street.
Where do you think your drive came from?
Well, I know. Look, I did grow up in a, in a pretty distressed neighborhood, uh, of East New York, Brooklyn. Went to a distressed high school that, subsequent to my leaving it, was, was shut down. Um, didn't leave the house much for, you know, for sa, for safety reasons. And I, and I wanted to get out of there. And for me, at that time, when I was a kid, getting out, the big vision that I had, I didn't know anybody that went to college. I didn't know anybody whose parents went to college. I wanted to go to an out-of-town college. That was my big burning desire. I thought if I could go to an out-of-town college,
"Harvard's calling, by the way."
Yes.
"Yeah."
They, yes, they, they call often.
"The development office."
And always, and always at fairly inopportune moments like this.
Uh, so you wanted to go to college out of town. I wanted to go. To me, I didn't even know what that meant, but an out-of-town college, um, was going to be the, uh, the recipe for, you know, become, you know, being in one of those situation comedies, you know, like "Father Knows Best," or one of those things where they had a house and a lawn and, uh, you know, kids and a dog, that kind of thing. It just was a, is a vision that I had when I was very young.
"The 'Leave It to Beaver.'"
Yeah. "Leave It to Beaver." The American dream.
"Yeah. You know, like the normal, typical American that nobody was."
So, when did it go from that dream to what became the Lloyd Blankfein that ran Goldman Sachs?
You know, once, just like in writing the book, if I, if I had a vision of how much lay ahead, I probably wouldn't have undertaken it. But one step at a time, you do this thing. You want to go to an out-of-town college. You don't want to be, you don't want to be the stupidest person in your class. You want to justify somebody's confidence in you. And you just go on and on and, and one step, uh, one step after the other. I think if you, if you had set it all out, I would have taken a deep breath and gone back to sleep.
Did you ever have any conception that you'd become the CEO of this firm? And I asked, I think we met, I was trying to think back, 2005 or '06,
"Right."
Um, right before a partner meeting in Chicago. This is right when Hank Paulson was actually about to step down.
"Yep."
To go work at the Treasury Department.
"He got a call, right? He accepted a job. He got offered a job."
"That he was reluctant to take as a, uh, was offered Treasury job by, by Bush, and it was the second half of the second term of an unpopular."
What, how could that possibly be interesting? And so he, uh, wasn't going to do it, and they offered it to him, and he kept going back. And once you go back, you know, you're going to have to take it because the guy walks you through the rose garden. I guess right now, there's no rose garden anymore. In those days, they walked you through the rose garden. And, um, and I said, and, and I said, "Hank, you know, you're going to take this." And he said, "No, I'm not going to take it." And I said, "Hank, what was your first job out of school?" And he said, "Oh, I was a White House fellow." I said, "Give me a break. Of course, you're going to take it. You know, this is what you wanted to do." And guess what? He took it.
And did you know, as you were having that conversation, that if he took it, you were the next choice?
"At that point?"
Yes. I would say it had been very far-fetched for a very long time, and it wouldn't have occurred.
Had he read this, this review, the, the opportunities for development?
You know, that actually, at Goldman Sachs, is quite a positive review. Um, one, one of the things you actually talk about in the book, which I found fascinating, uh, for those folks, uh, who are in the sort of management business, you talk about managing down.
"Sure."
Actually, rather than managing up. What do you mean by that?
Well, again, I don't have like a whole section of it. I made the observation, and I guess it, I, I thought it would be obvious in a lot of ways, but if you're doing a really good job, the people over you fight for your attention and your time. A lot of people are giving you stuff to do for them, and they give you more than you can do. When you have more than you can do, you have the choice of what to do. The way I could do a good job and make a name for myself was having the people that reported to me be super enthusiastic about my success. You know, we had, you know, an unwritten kind of contract. We're going to be good for each other, and, you know, nothing, nothing set out. But if you invest in people, and they support you. Now, what is, what's the difference between doing that right or doing it wrong? You can ask somebody a question, they give you the narrowest answer. We're in a risk business. People can see stuff going on, call you up and tell you about it. They can wait till you hear. They can wait till you ask them. They could wait till you ask them the precise, narrow question. You know, there's a lot of people of, there's a lot of ways that people can passively resist, and there's a lot of ways that people can really, really help you out. And if it's the latter, it's most important. So I would say the relationships that I had with the people who reported to me were much more effective in, in, in advancing, you know, my goals.
Okay. So you get the job, you're now running the whole place. We, and by the way, we've skipped some of the most exciting parts of your younger years, um, and how you didn't really start at Goldman and obviously were acquired effectively. And what I, before we even go to what, what it meant to become the CEO culturally, what was it like being acquired into a firm like Goldman? And why do you think you weren't, uh, like an organ reject?
Well, I was an organ reject, but I persisted. Like, sort of like a, uh, I was more of a vestigial organ than a rejected organ. Um, you know, when I, um, I had applied, like, I, I was a, you know, I went through college, went through law school, had massive amounts of loans. So what do you do? You become a lawyer, and you, you know, you go to work. And I was on, I was kind of at that path. And then you get to about four or five years, and probably a lot of people here, where you have to decide whether you're going for it or not. And so I left. With, I was going to leave with a lot of people. I interviewed with a number, and you live in New York, so what do you, what do you interview at? You either go to, you interview consulting firms, I interviewed investment banks, I interviewed investment banks. I got turned down by all of them. I wasn't always the polished person you see before you here today. Um, and I, I didn't get a job anywhere there, but I got a job at this commodity trading firm called J. Aaron and Company. Uh, which had a, which had a burst, you know, during there was, you know, before this current blast of the, of the gold and silver market, they had one during the Hunts corner. This was the, the, um, Bunker Hunt. Uh, and they made a lot of money one year, and being the great traders they are, they extrapolated that into infinity and sold it to Goldman. And I was part of that. And so having been rejected by Goldman and then acquired into Goldman, um, I spent like the first several years like every time, you know, every time somebody from Go, I, I walked by someone from Goldman Sachs, I hid my face.
"Um, and so that persisted for a while until, uh,"
So when did you get comfortable?
Well, a few years later. Well, I started doing a lot better than they hid their faces from me. So.
Okay. So, you get this job, though. Let's go, let's go to the, the being at the top because I think it's,
You get this job, and you are thrown into the deep end almost immediately. I mean, you get the job in 2006.
"Sorry about the big job."
I'm talking about the big job. 2006 is when you get the job.
And by the summer of 2007, you tell a story about what you think was the worst moment of your entire.
First, we had the crisis. We had the crisis of the century, roughly every four or five years. Um, and probably so you asked me what I, what was the worst moment, and it actually wasn't the financial. It was actually a precursor to the financial crisis. It was, if you think of the financial crisis, when some of the firms started going under in the mortgage crisis, there was actually a moment where it's like in a western movie where the horses in the corral start whinnying and neighing and kind of, kind of, there's a cloud on the horizon. And that happened to me when I was sitting in a movie theater, um, with my wife, watching, uh, watching a movie. I can't remember the movie, but I was doing what I always do when I'm in a movie theater. I was, uh, I was reading my, uh, my Blackberry and the P&L, going through the P&Ls of what happened that day. And there was a, a fund that we managed. Wasn't even our own balance sheet. Wasn't our own money, which made it worse, but it was other people's money that we were managing. Something that would move on a busy day, a wild day, it would move like five basis points, like five-hundredths of a percent. But this moved 8%. And I go, "Whoa, that's not supposed to happen." And so after that, got on the phone, and then all of a sudden, this is back in the world, and just not technical. There's a lot. This was relative value stuff where things get a little bit out of line. One asset versus another, some, but they generally stay in line with each other. If one's a little bit highly valued, you sell that one and you buy the other one, and then they converge over time. And so it's not dramatic. It has a lot of leverage, and you make little, little tiny amounts on large numbers, and that's how you get through life. Except this was moving wildly. So a lot of relationships were breaking down. By the way, that happens periodically. It's happening now, in a little, in some ways.
We'll talk about now in just a moment. But, and that was the precursor to what was then a very, uh, very rough time where we had a fund that was very highly leveraged, 20 times leverage. It was highly leveraged because these things never moved, and they were in relationship, but then they weren't, and of course, they were illiquid. I, I noticed that there's some people in the market who talk about semi-liquid investments now. That's a current term of usage in private credit land and other things. And, and to me, to me, semi-liquid is stuff that you can easily sell when you don't need to, and can't sell at all when you do need to do it. And that's a, and that's where the semi comes from. And so we had a fund that, I hadn't thought of it at the time, but was semi-liquid, and we were coming to the illiquid part of the semi, like needed to get out, and, you know, was 20 times leveraged. And if something is 20 times leveraged, and you sell a dollar's worth of stuff,
"And you lose 5% of it, 5 cents, you don't have the asset anymore, and you go to collect your money, and there is no money."
You got nothing.
"You got nothing because the whole dollar is used up because it's 20 times leveraged. And so that was bad. And we did a lot of stuff to make that work out. And what made it worse at the time is we were having a record year for Goldman Sachs on balance sheet, and we were watching a fund that we were managing with other people's money, and that couldn't happen. I mean, that couldn't happen."
And you, that was worse to you?
Tell me what, tell me what was the worst moment in September of 2008. When did you know that that that things, that the wheels were coming off the car?
Those are different things. That wasn't that. My worst moment was when I got a call from a very well-meaning alum of the firm who meant well, and said, had no idea what our position was. I said, but he, he reflected what other people must think must be going on in the firm, because at that point, he was an outsider, and he said, "You know, I really love the firm. You better do something and merge the firm into somebody, or else before it's too late." And I'm going, "Whoa, this is what he thinks. Um, we better, uh, we mustn't be communicating very well." Um, and that was the worst moment. That was way after we were dealing with crisis and crisis week. You're familiar with this, you wrote about it. You wrote the book on it. Um, where we went through all those successive weekends at the Fed with the other heads of the five families trying to open up the market on, uh, Sunday, on Sunday night in, in New York, which is Monday night in Tokyo. And everybody's biting their fingernails. And one weekend, the government has to, you know, has to guarantee money market funds. The next, next week, they have to take care of Fannie Mae and Freddie Mac. And the next weekend, it's Merrill Lynch. And the next weekend, and, you know, going through all these successive things. And so this was way after we were in, uh, you know, Defcon 1 or Defcon 2. But that was like the worst, that was the, that was, uh, that was a bad moment because, you know.
Let me ask you, Goldman emerged among all of the firms, uh, the most unscathed,
"Right?"
If you will. But there is a debate even to this day. I felt kind of scathed, by the way. But, uh, but there's a debate to this day that if the government hadn't come and opened the Federal Reserve hadn't come and opened the window, and there wasn't additional money that was provided to some of the other banks and things like that, that Goldman too would have been taken down. What do you make of that? And because that is the ultimate critique.
Well, you can critique, but I, I'll tell you, I don't know that that wouldn't look the way I put it. And I wrote about this, and you wrote about this, and you know a lot of background information because I was even talking, communicating with you at the time, because a lot of stuff was being written, and I had the most confidence in you, and I had you come in and audit our books, in effect. Um, that, um, it was, um, say, say it again.
"Well, I think the question is,"
Well, we all look at Goldman, and I think people give, give Goldman credit on one side, but the, but those who have the critique would say, "Yes, they might have been the best among a bad bunch. They would not have existed here if not for the Federal Reserve and other measures."
It was a freezing of the markets. It was a credit thing. If you, if you, nobody was paying anybody for fear that if I gave you value and you owed something to me, I didn't know your solvency. So guess what I'm going to do? I'm going to hold on to my money and wait till you pay me. But you can't pay me because you're waiting to get paid by someone else. There's a whole daisy chain. Not that make it sound illegitimate, but it's a legitimate thing. Everyone owes money to everybody else. That's how the financial system works. But if everybody becomes suspicious and is only going to pay out what they owe when they receive what they owed from someone else, guess what happens? Nothing. It's frozen. There's only one balance sheet at the, uh, that's big enough to reassure the markets and say, "I can see through you. We're the regulator. We know what people's assets are. Don't take anybody's word for it, but we're going to make sure that if you pay, you'll get paid." And that's really what happened. And it unfroze. And by the way, that's all they really had to do was to just get that going. And by the way, that's going to h, that, that will happen. That's why you have the lender, so-called lender of, uh, of last resort.
But what would be the odds that Goldman Sachs in particular, you know, we were, we were, we had access to the market. We, we bought, we, we did a, we did a capital markets transaction. Warren Buffett invested in us. We did, so we could have raised.
"At that point, we were raising money."
Were we safe?
Nobody was. In a situation that I described to you, it was only a question. The whole system would have gone down. Everybody would have, anybody who owed money to someone else who needed to be paid in order to pay out, would have, in effect, defaulted on that. And we went through that. In fact, we did this exercise where if nobody paid us, and we paid out what we had, and we had a balance, you know, we still had cash reserves of many tens of billions of dollars, or should I say, like a 19-day supply of money or something like that. It wasn't infinite, and it was better than anybody else. But I think anybody, now, what would the chances of that have been of that being so system, and that would be, that's the so-called systemic risk, and it would have affected financial institutions, but everybody else who could have, who needed to get money at that point. And I'd say, I don't think it was likely one in five. You know, one in five, one in six, one in. And I say, what, what's a turn at Russian roulette? That's like one in six. Who wants to go to bed at night with that kind of risk? Which is why I think the official sector did smart stuff because they did it. We'll never know what happens if they didn't do it. And they probably did more than they needed to do because nobody needs to. Nobody really knows what was needed. What they needed to do is reassure the market.
We mentioned lightning rod at the beginning. Um, I'm going to raise a phrase that I'm sure you don't love, but I just love your, your emotional reaction to it. Uh, Matt Taibbi and the famous vampire squid. What, what did you, how did you feel? There was a year or two or three period where that phrase was used repeatedly in the context of the firm, of you, of the whole thing.
"In my household."
In your, I think your wife.
"Yes, I know she'll know."
So, what would give me the just gut reaction to hearing that?
"At that time?"
Well, first, I, I kind of thought it was kind of funny. And I, because it like picked up. It was like it was, you know, I said that was a, that was a good part.
It was a good, you know, I had a, I, I had some sort of, I had some kind of respect for for him hitting the button. And it was, that's not to say saying I appreciate it, doesn't say I liked it. I didn't like it. But I wasn't mournful about it. At look, at that time, I don't know. Maybe I should be a professional lightning rod. It's not that I liked it. I kind of took it as my responsibility. I will say, and this is a bit of a, I, I hate to do this. This is maybe a little bit of a brag, but in a weird one, you never heard the name of another person at Goldman Sachs. I assure you, Goldman Sachs didn't originate any mortgages. Go get a mortgage from Goldman Sachs. We bought other people's mortgages, which then gave them the ability to recycle that money and do other, originate other bad mortgages. But we were hardly ground zero for the mortgage crisis. We were picked on because you're not going to pick on Lehman Brothers or Bear Stearns or any of the banks that lost tens of billions of dollars, because they were already, you know, they, look, you know, they were pretty, um, weak as it was. And I just thought, you know, kind of, it was my job to take it and to go there. And by the way, I'm, I'm a, you're a writer of history. I'm a reader of history. And I know that we go through these cycles, and the kind of the democracy required it. You know, I understood that that people had lost a lot of stuff. You know, at the end of the day, it was a bubble. I can argue, and I will argue, that the people who ran these big institutions who lost $50 billion, $60 billion, they were dumb. They weren't, they weren't saying, "I'm going to inflict this on an unsuspecting public." They kept the securities on their balance sheet. They killed themselves. So, I would say at this point, you know, stupid isn't a crime. Sometimes it's a defense, because if you're stupid, you can't have an evil intent. You can't form an intent. I don't think they were, they didn't know the gun was loaded.
Okay. Well, let me ask you about that, because I think there's still, even today, there are people who come up to me and say, you know what, nobody went to jail after the financial crisis.
"Well, 'cause stupid isn't a crime."
Seriously. You have to, um.
And so I'm, but I'm curious, as somebody who is a reader of history and, and a student of history, what you think of that emotional?
It wasn't for a lack of trying. It wasn't. People were going. So you go into these things, and they had tons of mortgages, and you can go there today. They were AAA-rated, AAA by other dumb people, um, who were rating AAA. But, but there was enough of that going around, and I didn't know, you know, it wasn't like I was looking at this, you know, 'cause my job was really, I started to say before that it was bad. I'm not saying that people were faultless. The, the financial crisis was exacerbated because it became a banking crisis also. You can deal with a recession. We would have had a finan, we would have had a recession. But a recession that's also a banking crisis is very bad, because the instrumentally by which the government gets money out to be money, the government doesn't lend money to people, the central bank doesn't lend money to people, lends money to banks. But if banks are weak and have to replenish their reserves, they get the money and they don't lend it out. They can't, regulatory, they're prohibited, they have to rebuild their capital. That's why that lasted so long. But anyway, as between allocating fault and this or that, I'm not going to say, you know, I say glibly, stupidity was a defense. It was exacerbated, but everyone was caught up in a bubble. But as between the secretary and the banker, who should the government most want to help? Of course, you'd want to help, uh, real people, um, retail, consumer, other names for which are citizens and taxpayers and voters. Um, but they weren't trying to help the banks or bankers. In fact, go, you know, all those people that got liquidated there, they all went to zero. But they, the reason why the banking system was helped was it was the only way to fix the system so that they could go out and, and, and stimulate the economy to get out of the recession that was caused by it.
So, you just talked about, uh, being caught up in a bubble. And I think one of the big questions that we're all asking these days is, are we caught up in a bubble now?
"Yeah, I'll let, put your risk hat on."
I'll let you know.
"Try to let me know now if you could."
Okay.
Well, again, maybe, um, it's very hard to see. So, for example, we're talking about the bubble. Is AI, is it going to work as well as people think? Is it going to make money that's going to justify what the hyperscalers, some to the tune of a hundred billion dollars or more? Hope countries don't spend that on R&D. We have companies that are each spending that kind of amount. Uh, by the way, these are companies run by founders who own, you know, who are effectively controlling shareholders in their own company, and it's their money. So I'm saying these are not people doing it with other people's money. If they're wrong, it won't be because they're evil, and it's certainly not because they're stupid. They'll just be wrong. But after the fact, people will say, "Aha, I knew it. I said this. Of course, they were wrong. They brought down the whole world." The answer is, "We don't. We don't know." Because it's unknowable. I would bet with them. I, I went, I had this conversation with somebody, and I said, "Don't ever ask people what they think. Ask them what they're doing."
Okay. So, what do you, what is, what is the Blankfein family doing with their money?
Well, the Blankfein family is fully invested in risky assets, because I think that, I mean, I don't certainly don't like the short-term this, which I hope is short-term, the stuff that's going on now, and it's a big macro event, and it's, it's roiling the oil market, and of course, you know, if it pushes into recession, that'll be bad for growth, and if it pushes up the prices of energy, that'll be bad for inflation, and the Fed has two mandates, and this is both go, potential to go wrong, and the dreaded stagflation, blah, blah, blah. A lot of stuff can happen. But by and large, when things like this happen, they don't last long. Now, this could be the one that lasts a long time.
You're talking about the, what's happening in Iran and in the Middle East right now. And in a way, because it's so bad, and because no, because it's so impossible to live with, and it, and it's bad for everyone, for the US, for all our allies, for allies, and the ones who are worse affected by it are our enemies, because a lot of this stuff goes to Asia and the Far East and,
"And so my best guess is that this won't last very long because it can't."
Because the market is going to be a governor on our president, because the market, because the, the president's going to look at what's happening, the price of oil, and say, "We can't have this."
"Because the effect of it is so severe."
That all the countries that surround the Gulf and everybody else in the world are, it, this is going to be the unifying factor for the world. I mean, who knew that Iran would have this, would play this role?
"Is that what you think is going to happen?"
I think there's going to be, I, I think it's unifying already. You have, look at the countries that are consulting on their common air defense around, around that. I mean, who would have, who could have imagined that? Look, I know that's Pollyanna-ish. I tend to be, I tend to be optimistic, and by, by the way, statistically, it's justified to be optimistic. Most of the time, things work out. I was talking to people, and I'm watching TV, and this is going, and I said, you know, there is at least a possibility that things might work out. And by the way, what are you worried? Are you worried that they're going to, you know, that they're going to get mad at us because we're bombing them? I think they were mad at us before this whole thing started. I think what we've done now is we've taken away their capacity to do the kind of damage they always intend to do. So, I'm not saying, so you don't worry about sleeper cells or, or, or this instigating more violence in other parts of the world?
I'm, I'm worried. I'm worried about lack of sleep. I, I'm worried about sleeping cells. What, you know, I would be worried if I, I would be worried all the time. The point of sleeper cells, I suppose, is to deploy them at some point. I don't know if they exist. If they exist, the point is to deploy them. So I guess one should always be worried about this. But I would say at this point, could it be worse? Yes. You can get people who intend even more damage than the recent crop of leaders there. But I would say the next crop of leaders don't have the capacity to inflict as much damage as the past one did. And that's already an improvement in fortune.
Um, you have famously, uh, somewhat trolled, if you will, our president on Twitter and the like. Sh.
"And given that you are not, uh, the CEO of a publicly traded company in this moment."
I, I, there's no way I want to spend my vacation in El Salvador. What, what do you think of the way, uh, the president is, um, interacting with the business community? How, how do you think about the relationship between the president today and what's happening in business? Um, and which aspect of it?
Well, there's everything from, uh, tariffs to taking stakes in businesses to,
"This situation that happened last week with Anthropic and OpenAI and the Pentagon. I mean, this has been a very active, uh,"
And also, and, and a bit unpredictable, which is bad. And some of the outcomes have been, uh, kind of positive. I think if you ask me about how the overall economy is doing, and why I'd be in risky assets, and have been in risky assets, and realize this is a moment in time where it feels riskier. And if you ever had to get out of stuff, this would might be a good time to get closer to home. But on that stuff, but, um, I think that the president has, um, you know, some of this stuff has been, you know, we could tick through it on tariffs. Tariffs are a legitimate, you know, serve a very useful purpose. I mean, I'd rather have it be predictable. I'd like not to change all the time. I'd like not have to punish our good friends and things, but certainly there are certain uses where it's important. We don't want, historically, by the way, the Democrats were for tariffs, and the Republicans were free traders.
"Um, why is that?"
Because we don't want our workers to live like Mexican or Vietnamese workers. We want them to have a higher standard of living. So we price labor high. And if you want to sell goods competitively, you have to make imported goods that use lower-cost labor more expensive. So that's a good use. We also discovered during COVID and other things that, and supply chain matters, where you're getting the material. So now for national security reasons and for safety, you have to have, uh, you have to manufacture things here. And so you have to make other people's cheaper goods more expensive just to force people to make things within your own country because you need it. And then there's a third use, which is the use as a cudgel, a weapon, if you will, to combat other people's bad, your perception of their bad behavior, and make it expensive for them to act badly towards you, and to bring them to the table. That's like, that's like a union strike. When a union strikes, and they strike for three months, is anybody better off? The unions don't get paid. The, the, the management loses profits, but it's the only way you can make some people come to terms. And tariffs is a, is a weapon like a strike, uh, to do that. Those are three good uses. And then we're doing other things. You know, if you tariff bananas that we can't grow here, that are not strategic, and we don't worry about the banana supply chain, maybe that's bad. But, um, and, you know, to, to have it fluctuate. I liked, you didn't ask it this specifically, but I like the Supreme Court decision that that canceled, uh, at least that portion of, you know, the statute under question. Why did I like that? Because one of my, you know, 'cause I like America. I like the republic. I like checks and balances in the Constitution, especially things written in black letter, you know, text in the Constitution. And so I'm glad that the Supreme Court put a limit on president on that particular power.
So when somebody said, "Did you like the decision?" I said, "I could be for the use of the tariffs and like the decision that blocked the way in which that was used and the exercise of that power, which I'm not sure existed at that time, and the Supreme Court thought that too."
What do you make, though, of the, the power that the president's used against companies? I'm thinking of law firms, universities, the, the Anthropic scenario.
I don't, I don't like that.
You don't like that?
No, not at all. I think that's terrible. I think that, I think using those tactics against, uh, against speech, um, is, um, is, you know, everybody who's litigated this has won. And I don't like, I don't like the fact that the government takes actions where it's expected that they'll lose a case, but they dare you to try them, and they, and they implement them for a while, and they make it burdensome for you, like they did for some of the law firms, and, you know, who would eventually win, but eventually could be a while, and it would hurt their business, and it became very, it became much easier to settle those. I think that's bad.
I think we're going to be getting some of these index cards, which are coming out as we speak. I'll ask you a different one. I, we talked about this in the New York Times, but, uh, some people here might not have read it, so I'll ask you. Um, uh, Jeffrey Epstein's assistant, or Jeffrey Epstein tried to get a meeting with you, and your assistant did a magnificent job of keeping him from you. Do you know how that happened?
I would say it was standard procedure. If someone I didn't know was trying to get a meeting or invite me to something, never knew who they were, you know, they could be, you know, the most important in the world, or, you know, some parasitic person that you're just happy not to ever engage with. And I had no idea, and she had no idea. So, I think our procedure was, uh, never say no, but never say yes. So, she kept putting it off. He's traveling. I was traveling a lot. Um, and, you know, why don't you tell us something else about you? Blah, blah, blah. But he's busy that day. And that happened about 10 or 12 times. And I, I, I thought the last email that my name, by the way, I never got an email to me, my name popped up in other people's email, the last one of which, "Should we give up on Blankfein?" And I said, and I go, "Oh my God, so, uh, uh, yes." So that was, uh, you know, that was very commendable on that part.
Uh, do you want to weigh in, by the way, on the, the general counsel at Goldman Sachs who's just stepped down, who apparently had this interesting email relationship, or more than that?
You know, in all honesty, I don't know her. She came aboard after I left. So, no, I don't think that would be, I don't think that would be fair.
Um, let me ask you a different question. What do you make of your successor, David Solomon?
You know, I think he's doing, I, I said, you know, these things get plucked out. I said, "He's doing things I wouldn't do, but I think those are things that needed to be done that I wouldn't have done." I, I, I looked at it this way. I was thinking about it. You know, Hank, my pred, my immediate predecessor led the firm's IPO. Um, and then after that became Secretary of the Treasury. I was there, and I'm sort of a kind of a bridge. I, my career exact was exactly half in the partnership, half in a public company. I operated the company. I was born, and my zeitgeist was always in the private partnership. It's very different being a partnership versus a company. People may not realize it, but in a partnership, people are mutual agents for each other. The, the employees, the senior employees own the business with you. They expect, like owners, to be getting information. They expect to be giving you advice. They expect if you don't like, you have to convince them and cajol them. In a CEO, lightning bolts come out of the fingertips. In a partnership, there's an expectation that they will be engaged like an owner would be, but in return for that, you get people who feel like owners, and they love the company, and they care about the whole enterprise, and it's a very valuable thing. And I was kind of that bridge, and I wanted to, my job, in part, was to keep that kind of partnership culture, even though we were now a public company, and different people owned it. But I would say my successor has done the job. I think he's kept the culture at the same time has more completed the movement towards, after 25 years, it's about time.
"Public company."
I know. What does that mean? In a private partnership, you get wealthy if you work there by your capital count rising. You don't care whether you make it all, if on a 10-year cycle, whether you make it all in three years and tread water for the other seven, or you make it evenly, or you make money one year, lose money the next, long as after the 10 years, you got it there. In a public company, it's about your stock price, and your stock price is a function of your earnings times a multiple, times a multiple. And that multiple is predicated, in part, of the reliability of your earnings. And so there's a lot of stuff that I did in a
private partnership that the new owners of the company, i.e., public shareholders, really don't value that much, like bigger bets or having a lot of your equity investments or your private equity investments on your balance sheet instead of in funds. And I'd say that David has done a good job of again walking that tightrope, keeping the partnership culture of people feeling like owners and at the same time succeeding to the interests of the new owners, the public shareholders. So, he's moved a lot of stuff off balance sheet that I had on balance sheet and done that way, and I'd say it's reflected in the share price, which has been pretty good.
So, >> Okay, we've got 10 minutes. We're going to go rapid fire. We've got some great questions. >> Lightning, lightning round for the lightning round. >> Lightning round for the lightning round. Here we go. Yeah. Lightning round for the lightning rod. Exactly.
Um, anything you wish you had done differently? >> Yes. So, asked that question. I wish I'd gone short every instrument in the world at the start of the financial crisis. No one could have paid you back.
Um, what do you think of crypto? Um, I have yet to find, I I yet to find a real purpose for it that really makes that justifies its existence to me. I know this is terrible and makes me like an old >> like a lightning rod. >> Like a lightning rod, but I'm going to get cards and letters. You know, Mike, you can email me through CNBC. The um, I would say that it is not a medium of exchange. Go buy something with crypto. It's not a good store of value because it fluctuates like crazy. It's not an asset that you go, you retreat to when you need safety because gold has soared in this stressful time and crypto has gone down like other risk assets. And the dollar works pretty well. And if you're the US government and the dollar, in part, is one of the instruments and cudgels that you use to enforce certain policy things, why do you want crypto to be successful? So I have not gotten it for a long time. It could go to a million dollars for Bitcoin, but it's going to get there without me.
>> Okay. Will Trump's erratic behavior eventually undermine the US economy? >> It's possible. I'm worried that a lot of the things he wants to do, there's an 80% chance of things going better than they might have with someone who was less interventionist and less aggressive, but a 20% chance I think could go really off the rails. Like, for example, what I was worried about in the checks and balances conversation. I'd say he's a, you know, he's a riskier guy and and I I I understand that people, the people who kind of like the outcome, some of the outcomes he's delivering and I understand people who think what he's doing may be helpful to them, but it's too much risk to take with something as important as the republic.
Uh, you had mentioned uh semi-liquid instruments earlier, and there's a big question about private credit right now and how much that presents a risk to the economy or not. Where, where do you land? >> You know, I I've read all sorts of material that put out by a lot of people who purveyors of private credit investments. And, you know, historically, you you got a premium for the margin that you got uh for the il for accepting the burden of illiquidity. But that burden of liquid illiquidity, I don't know if people evaluate that correctly because let's say we go into a period where you really have to, you need liquidity in some of your investments and you can't get it. People may, in retrospect, wish they hadn't, and they're going to try to get their money back, and it's not going to be forthcoming as was told to them in advance, but it may have been told it, but it hasn't registered. And I think one of the things that's happening now, which I think is a march of folly by some of the people who are doing this business, and by the way, there are very good firms who are doing this who analyze things and report the risk correctly and has disclosed everything, and I I don't mean to catch everybody into this dragnet, but one of the things that's happening at this very late stage of this cycle, we haven't had a reckoning for a long time, which means a lot of kindling has built up on the floor of the fire uh forest so that a match could set off a lot of stuff and release a a lot of energy. They've gotten the idea that, you know, they have to bestow this opportunity on a new category of people, retail people, consumers, 401ks, affiliated insurance companies that ensure real people. And I'm not sure that that's that these are the kinds of instruments and investments that should be pushed into that direction willy-nilly through ETFs and 401k plans and that. And it's kind of late in the cycle uh to be doing this as firms are looking for new outlets to raise capital because they haven't returned enough of the capital they've already invested. So I'd urge kind of caution in this that space. And before I get all the letters and phone calls, obviously there's a whole gradient of people in this business, some of whom are really terrific and some of them are are less terrific.
>> Of the ones that are less terrific, I mean, or or ones that are terrific, do you believe that this sort of private credit shadow banking system, which really emerged in the aftermath of the financial crisis >> cuz it's a regulatory arbitrage >> is regulatory arbitrage is ultimately a good and safer thing for the system. >> No, it's bad for the system. In other words, you had a system in the backlash and aftermath of the financial crisis, people said, never happen again. Make sure this never happens again. How could you make sure? We're risk-takers as a country. It's been good. We build things, you know, General Motors industries, you know, they build plants to build cars that won't be available for three years or four years. They have to guess what people want. They're risk-takers. How do you make sure that stuff like never happens again? And um and um and you can't do that.
>> Um, how do you want people to perceive you after reading your story? You know, that's a good, that's an interesting question because it weirds me out sometimes to know, you know, I did this and then I'm thinking, do I like what does this say about me? I mean, in other words, you can't feign. It'd be tough to feign like total humility and nobody should be interested. I wrote a book for crying out loud. So, it's hard to go out and take an attitude that you're put upon because people know a lot about you when you put it all out there. And by the way, you proofread the damn thing 800 times. You must have cared about it. So, it kind of is strange to me when I'm talking to people and they know the name of my sister and they know that I, you know, shared a room with my grandmother and all this kind of stuff. And it's kind of like a uh it kind of is is kind of a weird thing, but but I did it. And I've had some qualms after. And uh, you know, I mentioned that to my wife, Laura, like, is, you know, every day as recently as yesterday, and she said, you know, I think uh, I think that train has left the station at this point, so I wouldn't obsess about it.
Okay, this one's, I think this is a great question to end on. Uh, in your journey from public housing uh to the top of Wall Street, you obviously encountered adversity and had to struggle sometimes. How do you think you imbue that same spirit or grit in children, or do you not even try? What do you think? You know, >> especially given that you grew up in public housing and your own kids, >> You know, my my kids, I I think are terrific and they've overcome a lot of adversity, which I managed to give to them um in other ways other than economic. Um, look, there's a lot of burdens and benefits to every situation. My kids, you know, grew up in a household where they met a lot of famous and interesting and high-powered people. And that part of life is just never going to be a mystery for them. And they went to a fan, you know, they went to great Ivy League school. So, they're not going to have to wonder what the kids who went to Ivy League schools know more than they do because they know now that they don't know anything more than they do. Um, and so, but those are benefits that attach to it, and they don't have to worry, you know, where their next meal is coming from, but they do have to worry what people think of them and whether people think that they got this position or that position because they're, you know, because of their name, or and those those are burdens. And it means that and I I'm not living in their shoes all the time, but I know them and they're strivers and they work very hard at what they do, and they have to get in earlier and stay later so that people know that they're not an entitled kid. And so there's benefits and burdens. You know, you look at how kids and you know, famous, you know, kids of famous kids turn out, it's not all a bed of roses. It's not all easy. And just because you're not stressed out about paying your rent doesn't mean you don't have other problems. And look at look at all the people who are very well-to-do who have gigantic problems and their kids. But, you know, my kids went through a lot because, you know, I was in the paper every day and I'm a grownup and I can take it and had a thick skin, and they they had to uh, you know, they had a you know, my my kids went to the most progressive school in the universe and had to go in every day during the financial crisis, and that wasn't, you know, that wasn't always so easy.
Lloyd Blankfein, everybody. Thank you very, very much for the conversation.