Goldman Sachs CEO on AI, Debt, and America’s Future | Prof G Markets

Thank you for having me. The podcast finds me in Florida for the day, and then on my way to Davos, where I believe Scott is for the next few days. And so I'll be there tomorrow morning, and certainly should be an interesting week with everything going on in the world.

2025 was a pretty constructive environment for our business, and I actually think 2026 is going to be a pretty constructive environment for our business too. There obviously in 2025 there was a speed bump, you know, in April with the launch of the tariff, of the trade policy, which slowed things down and certainly sapped investor confidence for a period of time. But the macro setup's pretty good. We can certainly spend some time talking about the macro setup for Goldman Sachs and Goldman Sachs's performance. We've been executing. We did our first investor day back at the beginning of 2020 where we laid out a plan to really grow the firm, to really invest in our core business of global banking and markets. We pointed to four areas that we thought we really could grow the firm: asset management, wealth management, transaction banking, digital consumer banking. And we pledged to run the firm over time more efficiently. And really for the last five, six years, we've been executing on that aggressively and making good progress. And you go back to the end of 2019 when we laid out that plan, the firm was about a $36 billion revenue firm. The market cap was about $70 billion. And as you highlight, we're a $60 billion revenue firm. We've grown our revenues kind of 60, 65%. We've grown our earnings by over 100%. We've really grown the franchise and scaled the franchise. In 2025, we really saw that all come together. We made some pivots or changes along the way, but we really have got the firm in a powerful position with two big businesses that are well positioned to win, leaders in their space, growing nicely. And I feel quite optimistic about the prospects as we look ahead. But 2025 was a year where you could really see the progress very concretely from investments and decisions we've made over the last five, six, seven years.

I don't think the firm was ever doing so terribly. You know, the press and the media can be a powerful tool and a powerful amplifier of a small number of voices. But fundamentally, you know, the firm was a private partnership for 130 years, and it went public in 1999 because the capital markets were globalizing. From 1999 through 2007, the firm was growing close to 20% on the top line, and it really ran as a public company in that period exactly the same way that it operated as a private partnership for 130 years. The financial crisis changed everything. It created a new regulatory structure, a new operating structure. It reset the firm. It forced the firm to double its capital base. And the firm kind of came out of the financial crisis and really stuck to its knitting. And you know, chugged along through that decade, but really wasn't operating to grow. And if you look at that decade after the financial crisis, the firm's revenues were pretty steady around $34 billion. The earnings were pretty steady, the capital, the balance sheet were all pretty steady. And so we entered the end of the decade saying we really had to make some difficult changes to really take this enterprise and grow the enterprise. And whenever you change a big enterprise, you know, there's going to be resistance. People hate change. And 2022 was kind of a tough period. You had the Russian invasion of Ukraine, big markdowns in asset prices. It was a slower year for the firm. The firm did just fine. It made 10% on its equity capital in 2022, which is, you know, it's not a blowout year, but it's not poor performance. But I think we had a little bit of internal agitation given the structural changes we were making, and that created a lot of noise in the media. The media gobbled it up, and it became very noisy. We stuck to our knitting. We kept our head down. We knew the changes and the investments we were making were right. And really over the last few years, that's panned out correctly. Ultimately, performance and execution matter, but change and growth take time. You can't do it instantaneously. And I would say that was a bumpy, noisy period for the firm. But the firm's on really good forward footing at the moment.

Yeah, I don't think over the next five years that we'll fundamentally be in a big new business. We're going to continue to focus on our core business of investment banking and markets where we're a clear leader. You know, I think in investment banking the undisputed leader, and in markets, one of the clear leaders. And the combination of those two businesses, global banking and markets. I wouldn't take anybody's mix. I prefer our mix to anybody else's mix. I think one of the things that's been surprising, Scott, over the last five years is that business has grown much better than I think we or the market would have expected it to grow. I think there are things we did where we outperformed and we took share during that period, but the overall business has had better growth for a very, very large mature business than I think the market expected. I think the world's set up where that can continue. I think the more interesting thing for us is what we're doing in asset and wealth management. And I think there's very, very strong secular growth in asset and wealth management, particularly around our positioning, which on the wealth side is for the ultra-wealthy. You know, obviously as asset prices continue to appreciate, you think about the generational wealth transfer from the baby boom generation that's going to go on to the younger generation, my kids' generation. There's some powerful dynamics there, and I just think we're very well positioned in that business. So we have a wealth business that grows nicely, double digits. We have an asset and wealth management business collectively where we've said we think we can grow the fee-based durable revenue high single digits, but we're growing better than that right now. And so I really think that we're in a long secular upswing opportunity in wealth and in asset management. There'll be some bumps maybe along the way, but I just think we're very well positioned when you look at our portfolio there, and the growth dynamics for those businesses are quite attractive for us.

Technology in our business, you know, professional services, financial business, technology has been increasing productivity and allowing smart people to do more, you know, for decades and decades. And I, you know, just to be anecdotal about it for a moment, I go back to when I started and I first was doing analysis, putting two companies together. I'd go to the library and get the annual reports, and on green-lined paper I'd literally write the balance sheets and income statements down. I'd add them together. I mean, it would take me a week to 10 days to actually put two companies together and look at the combined financial results. And then in 1985 somebody put an IBM 286 desktop computer on my desk and gave me Lotus 1-2-3 software, and something that took me 10 days could be done in two hours. And so the productivity gain was massive. You obviously here have dynamics where some of the work that analysts have been doing will be automated from this, and we may have less in the short run of those people, but I think the opportunity is to have more people doing more productive things with clients that can't be done simply by the technology. And so, you know, there'll be this shifting dynamic. You know, if you look back at the firm 25 years ago when I joined, and you looked at the productivity when you look at people and revenues, the firm is much more productive today than it was 25 years ago. I bet 10 years from now it'll be much more productive than it is today. But people, relationships, connectivity, they're still hugely important in this. And the question is, how do we shift the way people work and therefore free up more capacity to touch more clients, build more relationships, broaden the footprint? It's not as black and white as people in, people out. So I do think the pace of change is quick. I think you will see some constraining of some of the entry-level jobs in these professional services platforms. It'll be more amplified in certain businesses rather than others. But I don't think it's going to be as disruptive in terms of the need for really smart people to work collaboratively to serve clients as some of the narrative around it. But we're very focused on it. We're giving our people the tools at an accelerated pace. We're reimagining processes very quickly. And the reason I'm excited about it is not because it takes people out. It frees up people to allow us to invest in other parts of the business that really do scale with people. You know, for example, ultra-high-net-worth wealth really scales with people. And so, you know, at the end of the day, we've been constrained in some of the places we can invest. We see enormous productivity opportunities. And you move people around to different places. The firm today has, you know, 12, 13,000 engineers. If you go back 20 years ago, we had a fraction of that. My guess is we're going to have more leverage for coding and engineering with fewer people, but that will free up capacity to invest in other areas where we still need people to scale some of the work that we need to do. So it's a very interesting time with change, but not as binary and linear as I think a lot of people are talking about it.

My guess is the growth trajectory of the overall headcount of the firm will flatten for a period of time. So if you want to say 36 months, you know, it'll be a flatter trajectory for the next three years than it's been for any other three-year period, you know, going back three, six, nine years, it'll be flatter. But if you want to take, you know, five, 10 years out, I think we'll have more employees.

Well, I think the macro setup is very, very constructive. And I think the things that keep me up or keep me worrying that could kind of set us off what's a pretty constructive environment are exogenous things that we don't see. I mean, they can center around things like geopolitics and events in the political realm or the policy realm that really change confidence in the short term. You know, an example of it last year was Liberation Day and the way the trade policy was rolled out that certainly sapped confidence for a period of time. Cyber is a big risk that we don't talk about a lot, but a big cyber event in some way, shape, or form can sap confidence. But generally, if you step back, the macro setup is very strong. We have enormous fiscal stimulus. The big bill last year, a bunch of which comes into impact in '26, puts more fiscal stimulus into the economy. We've got big capital investment around AI infrastructure, which is also very stimulative for growth in the economy. We've had monetary easing, about 100 basis points in the policy rate in the last year, with an expectation of another cut or two in 2026. That's stimulative. On top of that, we have a more deregulatory agenda which also is stimulative for capital investment. Plus, you know, we have midterm elections coming up with a lot of focus on affordability, which leads to some what I'll call idiosyncratic actions that are also stimulative. So, from an economic growth perspective in the United States, it's a pretty constructive environment. That doesn't mean that there aren't big broad policy issues that have to be wrestled with. But the kinds of things that'll change that economic growth trajectory or sentiment are really more in the short-run exogenous events that we can't anticipate or we don't see. I mean, you've seen it a little bit this morning after some of the noise over the weekend. You know, the markets opened with a little bit more uncertainty this morning, but you know, that's not the kind of thing that really derails us.

First of all, I don't think two, three, four years is long term. I think two, three, four years is a very short period of time. Yeah. Ten years, we're starting to talk about the medium term and, you know, the long term. You know, the next 10, 20, 25 years, we're talking more about the long term. I've said repeatedly in public settings, and I'll say it again here on your podcast, I am very concerned about the debt and deficit and our inability on either side of the aisle to control our spending. And I think we've kind of gotten to a point where until we have some sort of a crisis or an event that kind of reframes us, we've really put ourselves on very, very difficult fiscal footing. Now, we have a lot of latitude because of the US economy, the breadth of the US economy, the US dollar, the role of the US dollar in the world. We've got a lot of breadth and we've got headroom around that. But ultimately, there will be a significant price to pay if we either don't get the spending and the debt under control in the medium term, or we don't create an economy that's got a higher growth trajectory than the kind of 2% trend we've had. And so, you know, it's very — you cannot, given the spending levels and the debt levels, you can't simply cut spending or drive more revenue. You have to have higher growth to make sense of where we are. When you start thinking about, you know, five, 10, 15, 20 years from now based on the trajectory we're on, we have entitlement programs that don't work structurally. You know, we have more headroom to let them run, but ultimately, you know, there will be a point at which we have to wrestle with that. So those are things that with a longer-term lens I'm very concerned about. I think from a policy perspective, they're hard things to get at without some sort of — I don't want to be overly dramatic, but some sort of a crisis or speed bump or something that resets the mindset, creates more of a need for, you know, kind of bipartisan approach to correct. And we're just not in that place at the moment. And so, you know, that allows us to continue to put ourselves in a position where ultimately the correct — unless we generate higher growth, you know, is more difficult. Now, in the short term, I actually think this year, you know, I'm on the over on the growth forecast. I do think inflation will be stickier this year than the consensus, but I think we could see, you know, nominal growth that's higher than what the expectation is given the confluence of kind of stimulative events I talked about. So even if you wound up with, you know, closer to 3% inflation, you know, you could have, you know, real growth of three or over 3% this year because you could have higher nominal growth than where I think the expectation currently is. So I'm one that's in the camp that that's a possibility. But unless you create that on a sustained basis where you have higher real growth and you control inflation, you know, we're setting ourselves up at some point for some big speed bumps.

I'm not surprised on either side of the aisle. Both sides have been poor fiscal stewards. And it continues because the politics, you know, play well until there's real pressure that forces, you know, a different kind of political discipline. So I'm not surprised. Now, if this administration can marry it with better growth for a period of time, we might wind up in a place where the overall debt to GDP looks better and more attractive. But the long-term trajectory is both sides of the aisle are not showing an ability to show fiscal discipline, and we haven't yet been able to crack the code of higher growth to justify the spending levels and the debt levels. And so, you know, these are things that we have to wrestle with.