The difference between somebody who's really, really good and somebody who can't make it is not that great.
Goldman Sachs senior chairman and former CEO Lloyd Blankfein. Your portfolio as a pie chart — what does it look like right now?
I invest in risky assets. That's what's fun for me. I would say that 98% are equities.
What are some of your biggest holdings?
This is going to be controversial. I don't know who I'm going to upset, but you know, it's like...
Are you trading every day?
No, it's not. It's like taking a lot of discipline not to look at my screen while I'm talking.
So, you're bullish on big tech. Anything else?
It's been good to be bullish on big tech, and I'll stop being bullish on it when it stops going up.
What did the people who couldn't outperform — what did the bottom half have in common?
The bigger takeaway is that...
The reason why it's interesting to talk to you is because I'm pretty good at building companies. You know, I built a company that was doing almost 20 million in revenue by the time I was 31. But I'm like, I don't know anything when it comes to investing. My portfolio is basically a...
Well, that's what I've learned. But it seems like you know a lot...
Because I'm so on the inside, unlike a lot of people. I know nobody knows anything, whereas everybody else just wonders.
Well, that's cool. And so I'm going to have to ask you a ton of questions, and it's going to come from a perspective of like, I actually don't know what I'm doing. The majority of my portfolio is, which I actually think is smart, is just 90% index, 10% bonds.
Well, that's sensible. But you day trade, which I thought was hilarious.
Two things. One, I'm a pro at it. I mean, this is what I did my, you know, only for the last four or five decades. And the other thing is that nothing hugely positive or hugely negative is going to affect my life.
So to me, it's like a hobby.
What age were you when you felt that?
You know, grew up in the projects. So I always — I wouldn't say that I felt poor, but I certainly was incapable of feeling well-to-do. I can't even say the R word, rich. I can't. It's hard for me even to say it. But, you know, by any metric, I have been that way for, you know, for a long time, but I never feel that way. I mean, I'm still trapped in that mindset, you know, the kid from the projects.
So, your father was a postal worker. I think you said you were an urban hick, which I liked.
Grew up in East New York, Brooklyn. You know, at the end of two, you know, two subway lines and a bus in the eastern part of Brooklyn. You know, growing up, I think I went to — I think I went to Manhattan three times. I never left the country. Didn't fly on an airplane till after I left, you know, left school and stuff. You know, yeah, I was pretty provincial. It turns out that if you look at the list of most successful people or wealthiest people in the US, you're not seeing a lot of Morgans or Rockefellers or any of these classical family names on that list. You're seeing basically people not necessarily growing up in poverty, but they were kind of middle class people who did, you know, who did well. These are not, you know, generational wealthy people coming along. A lot of people were socially mobile in their lives and, you know, created wealth for others and, you know, and a piece of it stuck to them.
What I'm curious about is because you have this perspective of knowing world leaders, potentially the most powerful people on earth. Is there anything that would shock them about what it's like to be around some of these...
I think what's shocking — not shocking, but I think what would be good if everybody understood is that, you know, look, there are very, very few geniuses in the world. I don't know if I've ever met one.
You don't think that you've met like — when you meet Jeff Bezos, you're not like, 'This guy just has more horsepower'?
Yeah. Or most of the people I meet, I can't — I'm not saying I can do what they do, but I could see how they can do what they do. Very few people have I met in my life where I can't even see the world through their eyes or I can't even see how they do what they do. Elon Musk may be a guy like that where I don't know how.
Oh, yeah. A lot. Don't forget we underwrote his, you know, a lot of his stuff.
When you met him, did you — didn't think... when you, you know, you know him. I guess you didn't think, 'This guy's different'?
Oh, no. No. I'm saying he's very different. I'm giving you an extreme case where a guy — but when people toss around the word genius, there's a lot of words that get tossed around, superstar, that get diluted. The bigger takeaway is that I've known people who've done very, very well and in high office and high there, and guess what, after they finish speaking, they say, 'How did I do?' Like they want affirmation and they're insecure and their kids don't always like them. People are a lot more normal than you think they are, and people are a lot more insecure and a lot more — and sometimes the most successful people that you know are driven by insecurity and their flaws or things like that. So you also have to be lucky that the ball has to bounce. You could be the fastest runner in the world, but the Olympics are once every four years, and if you peak in the wrong year, you'll never medal in the Olympics even though you were the — you know. So I got to be CEO of Goldman Sachs because my predecessor got nominated to be Treasury Secretary. Had he not been that, maybe he would have lasted five more years in the job and maybe I would have been, you know, too old for it at that point or something. So there's a lot of fortune, there's a lot of luck, but I wouldn't exaggerate the skill set required or the degree of work required is beyond the grasp of many of your listeners. It's not.
So you've had teams of traders. You were like a commodity salesman, but you came to eventually lead traders. What did the people who couldn't outperform or who were not the best — what did they have in common?
The difference between somebody who's really, really good and somebody who can't make it is not that great. You know, when you think of a golf tournament and somebody wins a golf tournament by one stroke and there's six people tied for second, one stroke behind the winner. That's a very low margin of victory. And a lot of life is like that. And sometimes it's win or take all where somebody is just ever so slightly better, but that thing stands out. By the way, a lot of life is like that. The difference between a great actor who will get any part he or she wants in Hollywood and the second best one, you know, may have to like wait tables at night. You know, I wasn't cursed by being a great athlete. And so I didn't have — I wasn't tortured into thinking, should I go, you know, should I dedicate myself to sports and athletics or should I try, you know, strive to do well in classes and school and get another guy. I didn't have that. But imagine the unfortunate person who's the best athlete his high school ever produced gets a minor league baseball contract, and from the minor league, something like 2% eventually make a living out of, you know, enough money, you know, become professional. You know, you get into very rarified area when you're talking about the people who are the best at what they do, where the market only rewards and can only give a full-time job opportunity to people who are in, you know, 0.01% of that field.
You had this funny bit where you — I think something had happened where Goldman, you guys were like really nervous of making mistakes...
When, you know, we had, you know, the big financial crisis, the one that was like in '07-'08, when the regulators wanted to make sure that this kind of thing never happened again. Well, the only way you can make things sure that, you know, once you're in the risk-taking world, anything can happen. You know, risk is risk and you don't always know the consequences of it. And if you try to legislate risk, you know, you may think you're protecting the world from the 100-year storm, but you're also going to forego the 99 years in between when there was growth.
But you said even inside of Goldman, you were like, we were meeting with the 20 partners or something and people were throwing around ideas and some of the ideas were pretty good and you were like, 'What the hell, guys? We're talking ourselves out of everything.'
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Everyone's throwing around these ideas, and everyone around here is saying like, 'Oh, we can't do this because it's like, what the hell? Why aren't we trying some stuff? Let's get after it.' And I think you said the best traders are the ones who have resiliency. They bounce back and they look at the new information that they have, not the past, and they adapt quickly.
You know, the firm at that point had just gone through a period where it had, you know, big losses and people were gun-shy. And I, you know, you'd think a risk manager is always trying to repress people from taking risk. Sometimes a good risk manager has to promote the idea that people take risk because that's what you're there for. And if you don't take risk, you don't move forward. There's no growth. You can't be an entrepreneur. You've been an entrepreneur. You can't be an entrepreneur unless you take risk. If you take risk, there's a not insignificant chance that you'll fail and you'll lose money for all the people that backed you. That's a terrible situation.
But the alternative to never taking any risk will give you the comfort of not losing money for yourself or anybody else, but you also won't make progress.
Yeah. And as you get more successful, you — at least I have, and I think you said Goldman did — you take less risk.
Well, I think that that's what makes people more conservative. You think of the word conservative. You conserve. You become interested in not losing what you have as opposed to making more. Now, when I say making more, are people going to be repulsed by the idea of making more? Making more is another way of saying advancing, creating wealth.
Can you tell that story about Warren Buffett in the book? That was amazing. Where he loaned you a bunch of money basically over a handshake and a phone call and was like, 'All right, I'm going to go take my grandkid to Dairy Queen.'
You know, Warren is one of those great men which he's brilliant in a way that I can't put myself in his shoes and see the world through his eyes. And during the financial crisis, he offered to, at a very important moment, invest money in Goldman Sachs.
So, you remember how much?
I think it was $5 billion or $10 billion.
And what did you do? You...
Billion. We had talked before that, and you know, with him, he decides to do something or he doesn't — it's all going to be with him. I didn't have to ask him. It would serve no purpose to ask him two or three times.
So what you said — you said, 'Hey, Warren, we're going to this thing. We might need a little liquid.'
I know. No. And I'd done that before. Would he be willing, you know, willing to do this? And at the time, he wasn't grabbing. And then eventually he called in and was willing to do it for his own reasons. And he thought it was a good investment to make. He wasn't doing it because he was trying to, you know, help us. Although it had the effect of helping us, but he was trying to help his own shareholders. And you know, he saw in us what I saw in us, which was a good investment that was being beaten down by, you know, circumstances that would reverse. And I think he wanted to make an investment before it got better.
Well, I think that — and the story was cool because you were like on the phone with him. You're like, 'Hey, Warren, you want to do this thing?' Or maybe he called you and he's like, 'Hey, let's — you know, I'm willing to do a $5 billion investment or a loan.' I'm not sure if it was a loan or investment.
His preferred stock. It's something between a loan and a stock.
And you were like, 'Yeah, cool. That sounds great. We would love to work with you. Do you want to do some due diligence or do you want to like sign some paperwork?' And he's like, 'No, no, no. I'll just send the money and, you know, I got to go. I'm going to take my kid to — I'm taking my grandkid to Dairy Queen. Just figure it out and let me know where you want me to send the money.'
I'll admit that yes, that was actually the flow of the conversation, but he's a pretty rigorous guy and he knows that we're pretty rigorous people. And at one point he said, you know, and I said, you know, I would feel better telling you all the things, you know, before you make this investment. I would feel better telling you all the things I'm worried about. And he said, 'You know, Lloyd, I know you well enough to know that you worry enough for the both of us.' And then I pushed a little bit and he said, 'Look, Berkshire, $5 billion. It's not even — it's, you know, again, Berkshire is an insurance company.' And so in their real business, Berkshire insures among other things property. And he said, 'Look, $5 billion, if it all goes bad, that's not even a bad hurricane on the East Coast.' So, put me in my place. So, in other words, $5 billion wasn't a big number to him. That was a joke and I took it that way. Nobody wants to lose $5 billion, not even him. But, you know, he was very good and it was a very important — it wasn't just the money. In fact, frankly, the money was irrelevant to us because we had the money. What we didn't have was we didn't have the confidence of the world because at that point, people, you know, some institutions that were similar to ours were kind of failing, others were in distress. We weren't failing and we weren't in that much distress, but people didn't know that. And if you just assert that, it scares people even more because...
I think he said something like, 'Oh, and hey, by the way, do me a favor. Don't sell any of your shares until I sell mine' or something like that. Like, let's be in lockstep.
Oh, no. It wasn't even a favor. It was — he asked for that. He asked for a commitment for that.
Didn't ask for it in writing.
And you were like, 'Yeah, I'll put that in the contract. That sounds good.' He goes, 'No, no, no, no need. It's cool. Just tell me you commit.' And that was it. And that's pretty amazing.
You know, in our world, in my world of buying and selling stuff, most of the stuff we do is not written down. Is not a written contract. People buy and sell bonds and things and they don't get delivered for two days. I suppose somebody could lie and say, 'I really didn't do that' or 'I didn't intend it' or 'I'm confused' or something, but you'll never eat lunch in this town again. You know, people rely on their reputations for probity. It doesn't mean that things don't get documented so that each side really understands what the other person's perception is. Making sure you're literally on the same page.
Have you — did you see the text between, I think it was like Ellison and Elon? Elon was like, 'Hey, I'm going to buy Twitter for, you know, whatever, I think 30 billion. Are you in?' And he was like, 'Yeah, I'm in for five.' Or like, you know, it was like a fairly casual conversation for like a pretty huge thing.
No, but that sounds right. Just because something is big doesn't mean it's tricky or complicated. Some, you know, there are big things that are simple and little things that are complicated. I think all things considered, it's always good to document stuff, but in a trading room, you never do — you don't document stuff when people buy and sell stuff. Also, sometimes the execution of what you've agreed to is so near in time that it's pointless to document it because in two days you're going to perform. And so there's no reason why you have to document something that will be accomplished before you could ever dot the i's and cross the t's in a document. But it's always, you know, all things equal, it's good to have a document, but it's largely not necessary and most of the transactional world works without documentation.
So you're no longer the CEO, but in the book you're like, I now like to trade on my own. If your portfolio as a pie chart, what does it look like right now?
I invest in risky assets. That's what's fun for me. And that was what I did my whole career in my...
1% is in just index funds or boring stuff.
Well, index funds are risky. They're just diversified across different things. But if you're in a diversified equity ETF, you're in equities.
And equities is a lot different than being in debt. And it's a lot different than being in short-term money markets, which is more safe. And so it's still risky. I would say that I am 98% in risky assets, of which, you know, 95 of the 98 are equities. Probably a third, a quarter is in ETFs and 75% is in single stock. And if I'm wrong, it's 10% are in ETFs and 90% are in single stocks because that's what I like to do.
What? Okay. Of that — I'm so curious by this. So I'm in 90% just a Vanguard fund and then 10%...
Well, that's sensible because this is what you — you're not doing this. You're not doing investing for a living.
Of course, and I'm probably not going to change that, but I'm always interested in seeing how other people like to invest. So, of the 75%, what are some of your biggest holdings?
Well, I would say that right now I'm very heavily focused in tech and have been for a long time for good reason.
All the big, you know, all the big hyperscalers and second-tier ones.
What's a second-tier one? What's an example of a second-tier one? Let me know.
You know, if there — you have a big hyperscaler like, you know, like the Googles of the world and the Microsofts of the world and Nvidia of the world, maybe a second-tier version down the — slightly down the — no insult intended to Larry Ellison — maybe Oracle. I don't have to — I change my things all the time so it doesn't matter, you know, specific names. I'm just giving you — I'm speaking in terms of category. That's how I think of it is, you know, not necessarily the best of the blue chip.
Ones that are a little bit riskier. And by the way, they're companies that are probably going to be gigantic companies that some people know about today and are investing and I never heard of them because I'm just not always, you know, I'm not walking around the corridors of Silicon Valley shops and I don't know the new new thing. And it might be commonplace knowledge over there, but it's not with, you know, everybody knows the world's a big place and everybody always knows their corner of it.
So, you're bullish on big tech. Anything else?
I'm generally bullish, and by the way, it's been good to be bullish on big tech, and I'll stop being bullish on it when it stops going up.
For the foreseeable future, that's what you're thinking.
Yeah. My foreseeable future is when I finish this conversation with you, and then I'll check it again.
Are you trading every day?
No, it's not. It's like, you know...
I don't think it's really crazy. It's just crazy for me to... Yeah.
Oh, no. No. I multiple times. It's taking a lot of discipline not to look at my screen while I'm talking to you right now. It's like — it's background noise. It's like, you know, some people like to listen to music. You'd say, 'How much time do you spend listening to music?' Well, they're not sitting at a desk slumped, hunched over, just listening to music and doing nothing else. Maybe if you're a record producer, you do that. But normal people are listening to music while they're doing other stuff. To me, the market is like music. It's out there. It's going on.
What trades did you make today?
I think today I may have, you know, I'm not sure what I did because I put in orders because knowing that you were going to tie me up and I wasn't going to be able to look at stuff. I told people what to do, you know, to sell, you know, maybe sell some, you know, energy is rising. You know, I've been — I buy and sell a lot of stuff. I don't want to talk about specific things because people listen to these things on different days and they'll start, you know, sound smart or stupid depending on your day.
Interesting. Do you have a team?
And so you're at your computer doing it on your own?
No, no, I'm not at a computer. I don't have a computer. I have an iPad.
So you're on your iPad doing it...
Are you — and you're mostly — what's your source of information to make decisions?
Yeah. Usually I call. Somebody will text me. I'll text them and then I'll get tired of tapping things out and I'll be tired of fixing the typos because of my fat fingers. So I just call people up.
And you're doing that all day.
Some people follow — I follow the news, but I also follow business news. And I like, you know, companies are like little stories and it's like gossip.
I read, you know, all the newspapers. Of course, I start with the New York Post, the paper of record.
And you know, when I read papers like, you know, like the Journal, the Times, the FT, you know, Bloomberg, I look at, you know, very financially or, you know, finance descriptions to all of them.
Yeah. No, I don't steal them. Yeah.
Well, you know, how many paywalls do you hit and you're like, 'Ah, fuck, I'm not going to read that. I got to go find a different article.'
Well, that happens every once in a while. There's something esoteric where I, you know, I click on something and it turns me down. So, I don't read it. There's a million other things, but I do this and I have to think of, gee, why am I quibbling about this? You know, I will tell you, I am still watching commercials on Netflix.
That's hilarious. Have you outperformed the market significantly?
Uh, yes, I have for a while. And I'm not — that's not because of — it's because of where I focused. So, I started to say I'm mostly and have been in tech, energy. Don't forget I have a background in trading energy.
And I'm also in financial services because I know a lot about financial services having been in the financial services. So, those are the three areas that I've been focused on. I haven't...
Well, I'm sure you still own a bunch of Goldman.
I do. I tend to have some affection for the organization that I spent almost 40 years in. So, yeah, I kind of like that company.
Do you — so like I said, I'm boring and it's 90-10. It's the most simple stuff.
It's the advice I would give to people. I think at your age it pays to be in riskier assets like equities as opposed to, you know, fixed income. But if I were in equities — and by the way, this is the same advice that a Warren Buffett would give — I would be in a diversified portfolio of equities like the S&P 500s, which is SPYs or VOOs. And I do VOO. Then I would also, because of the importance of tech and being on the threshold of great changes in technology, I might be mostly in those generic diversified things, but I might also have ETFs that were focused on, you know, on more tech-oriented ones that, you know, so that would give me disproportionate — although the general ones, the ones that the broadest index are very heavily in tech because just tech are such a — the market cap of tech companies are so heavily weighted in those that you do get a fair share of tech even in a very broad index. And you know, frankly, that has gone well for a long time and every once in a while something doesn't work, it goes down a lot and you have to be able to do that. That's why I say at your age, the older you get, the more conservative — the older you get, the more concerned you should be about not losing money as opposed to maximizing the money you make. But as a young person, you have time to — you have time, you'll outlive your mistakes.
What's your opinion on what's going on with, like, the Robin Hoods of the world and all these, like, the WallStreetBets and things that promote, like, day trading but also betting and things like that?
I think those things that kind of democratize investing and make it very, very accessible to people is in its own terms a very good thing. So people should be aware of assets they could buy and make it easier to do so and maybe, you know, receive advertising promotion so that they focus on it more than they would. Maybe they would never focus on it. But for those companies, you know, at the same time, if you make it too much like a video game, you can mask the fact that there's danger associated with it and you can lose and that people who don't have a lot of money can lose more than they can afford to lose.
So that's the risky thing. So, you know, when you have some of these sites and they show confetti dropping because you did a trade and, you know, have boy and high five and, you know, you should gamble and make that look too attractive. You know, for some people that's a disservice, and for other people it's exactly what they need. They won't go overboard, but it needed to be more attractive for them to develop an interest in it.
Are there any interesting things that you didn't invest in that ended up turning out right and it was because you had poor input like you or you had a — you just let emotion control you or...
No, a million things I didn't want.
That's an interesting one. Yeah.
Well, I thought, you know, SpaceX was overpriced at a hundred billion market cap.
What's it going to go for now? Like...
I don't know. It's in the market. People are discussing that now. I think they're proposing something that would make it worth, you know, a trillion and three-quarters. I'm not involved — obviously I'm not involved in any of...
And what did you say what you thought was expensive? 100 billion.
