Lloyd Blankfein, thank you so much for joining us. You wrote a new book, Streetwise: Getting to and Through Goldman Sachs. Why?
Well, first of all, I had the time. I found myself retired and it got to be a little bit Covid outside. But, you know, there's a little bit, you don't, one day you're working full speed, the next day this kind of a tapering process. And so it gives you time to reflect, to think about things. Your friends are still your friends. You engage people. People start telling you this story and that story. I mean, I'd love to tell you I felt I was burning with wisdom to share with the world. But really, you get goaded into stuff. It doesn't start out thinking that you're going to write a book. You start writing about anecdotes. You start writing about what you think made things work. And then after a while, you start to structure and say, you know, there could be a book here.
But it's actually really difficult going from a high-powered job, one of the most powerful people on Wall Street, to retiring.
Yes. And sometimes it's not only hard at times, but sometimes you get regret. And every time I feel, gosh, I really wish I was there. You know, I can pick up one of the plastic phones of my grandkid that's connected to nothing and bark into it. But you get used to it. And also, when I start to miss it, I remind myself, you know something, I don't have to fly to Singapore tonight to pitch for something for 15 minutes, then turn around, get on the plane and fly back and go to Germany two days later. So, yes, I had to remind myself that there are reasons why it ran its course. I did that for, I was in the firm almost 37, 38 years, and I was CEO for almost 13 of those years. So it was fine. It was time.
When you look at the world today, there is, you know, a big war in the Middle East. There's disruption with, I'm not sure where that goes. And of course, there's everything going on. Private credit. Do you wish you were still in the game?
You know, I wish I was. I mostly wish I was still in the game in these kinds of crisis moments. Because when things are going well, it's kind of easy. You get home at the end of the day. Not sure what you did. I mean, it's more fun and it's not like you volunteer for the problems. The problems come to you and find you. But at least there at the end of the day, you know, you feel like you made a contribution that maybe somebody else wouldn't have done the same way. And it's more fun and you get the sense of teamwork. So it's good. And, you know, you finally look, you know, you're lucky. You live a life where the background noise of everything you do is the news of what's going on. That was my life as well. I never, you know, it's perfectly polite in my line of work, and I'm sure yours as well, where if you're having a conversation and out of the corner of your eye, you're staring at a screen and things are flashing and things are always going on. And if you have a job like mine, there's nothing that can go on anywhere in the world that doesn't affect you. Given the size of our balance sheet and our interests and, you know, in about 75% of the time, someone accuses you of causing whatever's going on in the world.
But because you've lived through the financial crisis, there's, and a lot of chief executives, I think, will feel the stress of balancing speed with accuracy because things are going very fast. What did you learn during the financial crisis that made that decision apply?
Sometimes speed is liberating because you have no choice but to keep going. And it's not always that, you know, you sit and you contemplate something and your anxiety takes over. And, you know, sometimes you do things. You need kind of courage because whenever you make a decision, it could be wrong. And so you're taking risk. But if you're under pressure and there's no time, there's a little bit of no choice, no problem. And so you go ahead. So sometimes things are unpleasant, but they're not hard because you have no choice.
Yeah, but I mean, today it feels hard because there's so much that could change. Right? It's one thing. It's three things today. You have to be today in this world. And as we sit here right at this moment, it can change on a dime. You can go from total pessimism to total optimism back to pessimism, depending on the rhetoric that's flying back and forth. And the rhetoric is flying in addition to missiles flying back and forth. So, yes, it's like, oh, so I think today what you really aren't is a forecast or a predictor. You're really a contingency planner today. And if you contingency plan very well when something happens, you can get off the mark so quickly that people think you predicted it, but you really didn't. You just made a lot of contingency plans. What if oil goes to 150? By the way, what if it goes back down to 70? Because that also can cause problems for people. And so you just have to have a plan for all these different contingencies that could happen. And then there are contingencies that you couldn't have contemplated that could happen. But so how do you describe markets today? Are they too volatile or are they volatile enough?
Well, it is what it is. It can't be too volatile. You have to cope with it. It's really difficult because there are a lot of contingencies and the possibilities are really quite wide across. But, you know, there'll be again, there are horses that do well in a race where it rains, he'll go slower, but he'll do better than the other horses because they're used to running in mud. And, you know, we were always used to working in volatile markets like this.
What are, you know, private credit? Is it the new technology like junk bonds and CDOs were back in the day?
You know, history doesn't repeat, but they rhyme. It could be kind of like that. The real, I think one of the real issues is kind of, you know, it's private, a lack of transparency and a lot of an inability to know what things are worth, because by the very nature, almost definitionally, they're illiquid, so they don't transact the real way people can market themselves. You can talk to a model and you can mark to an algorithm and you can mark to an analogous security. But is that fair? Is that going to be right? The real way, you know, the value of what you have is if you sell some in the market, then you know what a willing buyer would pay for it. So you know that that's the price of it. That doesn't happen a lot in these instruments because they don't transact. And also sometimes in private credit the limited size. So there's not enough of it to justify another buyer coming in to buy a little smidgen of it to test the price.
So what does that mean that we're going to see a similar boost and, you know, boom and bust kind of situation. But what people are worried about is are these things properly marked on the balance sheet of the holders? How do we know what they're worth? We have your word of it, and we're not necessarily saying you're fraudulent any way, but how do you know what somebody else would pay for it till you test the market?
That was the problem in the global financial crisis. Going back to the analogy of the global financial crisis, people had triple-A securities. They had the imprimatur validated by rating agencies. But if you went in to sell it, nobody wanted it, right? And so you kept going down. One of the things that was almost a religion we practiced at Goldman is that we really mark to market aggressively daily. And where we didn't know something, of course, we had to use models and had to use analogous securities, but we made people go out and sell some, and that was a discipline that gave us kind of an early warning system that something was going on here. By the way, it wasn't necessarily a prediction of which way we go, but when you have something marked X and the next high and the highest bid that will come in from what you have is 0.8 X, you know, there's something going on here. And so you better figure out what's going on or at least be cautious and not accumulate a lot of it.
But I mean, as we were reflecting on how, you know, the banks have changed since you were in charge of Goldman Sachs, I mean, banks have become more and more lenders to non-financial firms. Yes. That means a lot more risk.
