I do think we've created a regulatory structure and a market structure that really makes it unattractive to go public until you have to. The reason these companies are going public now is because they have to. They have capital needs that are so voracious that it is not prudent for them to try to do 100% of it in the private market and not have a public currency. It's just not prudent. And that's why I think you're going to see a bunch of these companies go public because they actually need the capital.
It's interesting. I've advised companies for years, and about a year and a quarter ago, I actually ran the equity capital markets business at Goldman Sachs. It was a job I had early in my career at Goldman Sachs. And I used to say to companies, you know, there are a few reasons to go public. You need the capital, you need the currency. You have to create liquidity for, you know, early investors. But all the other stuff that people talk about is really not critical. And you have to recognize that if you're running a company successfully and you don't need those things, when you take it public, you will run it differently. You will run it differently. It is different running a public company than a private company. There are different pressures. There's a different life cycle of how you have to respond. You will run it differently. And so my advice has always been wait as long as you possibly can to go public.
Hello and welcome to another episode of the Odd Lots podcast. I'm Tracy Alloway.
So Joe, when we talk about AI and its impact on jobs and businesses, one of the things we like to do, or one of the prisms through which we like to explore AI, is through banks.
Absolutely. So you think about banks. They've got big tech budgets. They're talking to AI companies all the time. They're their clients essentially. So they're deploying a lot of this technology. And then they have this whole array of jobs. Right. You have the classic sort of process workers in the back office. You've got the junior analysts who are churning out PowerPoints, but you also have bankers in IB who are doing more, I guess, relationship driven business. So you have this really good cross-section of the sort of white collar jobs that people think about when we think about AI disruption.
Do you remember in the 2010s when every bank CEO was like, you know, we actually like to think of ourselves as a tech company. I remember that was a fun bring in the ping pong tables for the engineers.
Was it right? There was a fun little era. But no, you're absolutely right. And of course, you know, AI is largely expected, at least until we have much more advanced robotics, to affect white collar labor first. You mentioned the whole range, but there are aspects of when I think about being a bank or working a bank that, to your point, really do feel like no relationships. And like there's the cliche is like, you know, go out and golf. But I think they do actually golf a lot. That is part of the business. All right. Well, we'll find out. We have spoken to Marco Argenti at Goldman Sachs before. He's the CTO about how the bank is actually deploying technology. But today we have an even more, more perfect. You have the perfect if that's possible. We're going to be speaking, of course, to David Solomon. He's the CEO and chairman of Goldman Sachs. And he just penned an op ed in The New York Times with the headline, I'm the CEO of Goldman Sachs. The AI job apocalypse is overblown. So truly the perfect guests to talk about all of this. David, thanks for coming on Odd Lots.
Thank you for having me. I'm delighted to be with you guys.
Congrats on the op ed. You're in the media industry now.
Well, I'm trying not to be in the media industry, but I'm glad. I'm glad I wrote the op ed, by the way, not my title, the New York Times, the New York Times title, but I'm glad I wrote the.
Well, I wrote the op ed. I haven't written a lot of op eds. I think in my eight years I've written two. And the last one was back in 2019 before Covid, and it was around energy. What I was trying to talk about was the fact that I thought there was going to be real change in the context of the energy supply chain. And it was very important that we made investments in things that were greener and we moved in that direction. But I also stated at the time and took a little heat for this very emphatically, that oil and gas was going to be a significant part of the energy supply chain for decades to come. Goldman Sachs would be financing, you know, fossil fuel companies for a long, long time. And, you know, looking at the lens, you know, now, I think that it is very important that we have a thoughtful and detailed discussion about the change that's going on. And let's just start if you don't mind, if I can step back, I am hugely, hugely optimistic about this technology and the impact that this technology can have on large scale enterprises like Goldman Sachs, and the productivity gains that it can create, which I do believe can increase economic growth, create more prosperity and, you know, more impact on our economic system broadly in a very, very positive way. I am hugely optimistic. And I think about things in 5 to 10 year time bites, like, what should we expect to see over the next ten years. When I make a statement like that, at the same point, I'm extraordinarily cognizant about the fact that it's not going to be a straight line, there's going to be disruption, there are going to be jobs displaced, as there have been with any other technology acceleration over the course of history. And, you know, we as an important company and governments also do play a role in, you know, thinking about what's the best way to make this go as well as possible, but with the ultimate goal of having the technology make our society more productive and therefore allow for more economic growth and more participation by everyone. And I was listening to a variety of things that were being said, and they didn't really make sense to me. And I thought it was important for Goldman Sachs to get into the discussion. And so, you know, my general, there are things that are always different. But I generally, you know, if you want to talk about kind of fundamental principles that I have after 40 some years of doing this, it's never different this time. Meaning, I don't think we're going to wake up in a world where nobody works and there has to be a universal basic income, and we have massive unemployment. I just don't think that's the way our economy works. And when people start talking about those things or postulating about those things, I don't think they're being thoughtful about really looking in a granular way at the labor force and how job creation works in our economy and how technology disruption in the past has changed and shifted the nature or the makeup of labor and the economy in the US.
I think to even begin the discussion of like, will AI cause a white collar wipe out or as you did say in the op ed, like some areas will really change and headcount will change. But to begin this conversation, you have to know, like, well, what is a job? What does someone actually do at their job? And so I don't maybe this is a chance I'll let you like butter you up, let you bring yourself for a little bit. I saw a quote. I was doing some prep and you're talking about early in your career and going from Bear Stearns to Goldman, you say, and you said I was a big producer at Bear Stearns. I built a lot of relationships there and brought a lot of relationships to the firm. There's the part you can. What made you good at your job? What was like a lot of people there at the time. You eventually became the CEO of Goldman Sachs. What was it that like, the skill that you had or that successful people in that role had that made them do their jobs?
Well, finance has evolved. You know, I started in 1984. I recently referred to that as the prehistoric days of finance, when, by the way, I had long flowing hair, and you know, it's just a very different world. And so let's just start with the fact that finance was a relatively nascent industry and also had been relatively stagnant for 15 years, because we really went through a period from the late 60s to the early 1980s where interest rates were going straight up. September 15th, 1982 is a very, very important day in the history of financial markets, because that is the day that the ten year Treasury had 15.9%. And it also happens to be a little less than two years before I landed at the Irving Trust Company at one Wall Street to start my career. And, you know, at the time, you got trained to do analysis, but the business was very entrepreneurial. There was very little structure, and there was so much open running room to go out and participate that young people, especially when you got away from the most white shoe firms, which at the time were Goldman Sachs and Morgan Stanley, were really encouraged to go make their way. And so I was working at Irving Trust, and this was a time when almost everybody in finance went to business school, and I was applying to business school in 1985. And I got a job offer to work in the junk bond business at Drexel Burnham. And I decided to take it because it appeared lucrative. And my dad, junk bonds were like the only thing taking off, basically, in finance in the early 80s. It was definitely an area of finance that was accelerating, and it was very entrepreneurial. And I said to my dad, you know, this is taking a risk because everybody else is going to business school. And my dad said, go try it for two years. If it doesn't work, you go to business school in two years. I mean, it was a pretty simple piece of advice, but I went to Drexel. Burnham was very entrepreneurial. And the culture, there were good things and bad things about the culture at Drexel. And some of the bad things are the reason why in 1990, on February 14th, 1990, Drexel Burnham went out of business. But, as many other Wall Street firms have in the history of Wall Street. But, you know, for the four and a half years that I was there, basically, I was told, go find a way to build relationships and make money, go find a way to build. You know, I was 24 years old. Go bring business into the firm.
I got out a little bit, but, you know, we sat on a desk and we called people and talked to people, and it was a time in the world when if you picked up the phone and called someone, you would get them on the phone and you would talk to them. And if you were an effective salesperson, you could do a lot of business.
To some extent. You were like, good at sales. You were good at making that call.
One of the great experiences I have, this is an experience I've talked about a little bit, but I haven't talked about a lot. But a seminal experience in my personal development was the summer after my freshman year in college. I got an internship in a Merrill Lynch office. It happened to be the office that was at, I think it was like ten Penn Plaza. It was by Madison Square Garden. And I got the internship because my high school girlfriend's father ran that Merrill Lynch office. That always helped. And he said, why don't you come and do an internship for the summer? And I said, what would you do? And he said, you know, you'd call on clients. I really had no idea what he was talking about. So I show up at this Merrill Lynch office and they plop me down and they give me a zip code list. Okay. Basically. And it was the zip code was 10028 and 10128, basically the Upper East Side of Manhattan. This is 1981. They give me a zip code list and they say, make 100 phone calls a day and ask people if they're interested in talking to a Merrill Lynch broker. And during the course of the summer, for eight weeks, I made 100 phone calls a day. I got five people to talk to a Merrill Lynch broker, and we went and had one meeting and opened one account.
It was brutal, brutal, and after the first week, I said to my dad, I was like, I don't know if I can do this for the whole summer. He said, yes, you can. You took it on. You got to finish it. And I started thinking about it. And this is the seminal thing that I'm trying to point to. I started to think about how am I going to make this more fun? Because it is very difficult to cold call now. This was a time when people would answer the telephone, but I just started making it a game. And what did it teach me? It taught me to pick up the phone and talk to anybody. And when I got to Drexel Burnham and here, there were real financial incentives for picking up the phone and talking to people. I mean, there they weren't paying me anything. And they just wanted me to do this, and I was doing it to learn. You put financial incentives in place. I found I could call anybody. I could get people on the phone. I could keep people on the phone. I could go see people. I could relate to people, even though I was very young and I could bring business into the firm. And very quickly I became good at that. And when I arrived at Bear Stearns, after Drexel Burnham went out of business, I very quickly became a very significant producer in a culture that was kind of what you kill. And it was a great experience. I don't think it was the perfect culture. And, you know, cultures evolved. But I do think there's something here. And one of the things we're talking about a lot at Goldman, I think it's really important. I still think human to human contact matters a lot. And I think one of the great opportunities we have with this technology expansion is to get our young people out with clients, talking to clients, broadening our client footprint. They're incredibly capable. This shifted over the last 30 or 40 years, and it really I don't think it's shifted for the better. And now we're going to shift it back. And I think it's a real opportunity.
We say more about this because in your op ed, you talk about the Stanford data showing like a 16% decline in entry level hiring. So this is something that's happening right now. And presumably a lot of the work that, you know, younger analysts at Goldman Sachs do right now could be commoditized through AI. Right? If I'm building a PowerPoint presentation, I no longer need like ten analysts to stay up all night to do that. I can just generate it through a platform. So how do you see the role of junior analysts? And then how do you, I guess, train the next generation of banking talent?
I think that's a really, really good question and I want to get to that, but I just want to comment on one of the things that you said that I think is a really interesting thing for us to think about, because I did quote that statistic. But I think it's important for us to think about and see that statistic for what it is. Because when I graduated from college, it was very, very hard to get a job. But not everybody wanted to get a job. In the white collar professions that are defined by the 16%. But I'd also argue even today, if you graduate from a liberal arts college and you want to go be a schoolteacher, that's not counted in the 16%. There's not a decline. What they've done is they've taken a handful of industries that they're looking at that fit this kind of social narrative of what the right kind of job is when you're coming out of college. Which, by the way, I think is a very faulty lens to look through. And that group is declining by 16%. But if you want to go by what if you graduate from college and you say, you know what, I really think I can do something really cool and entrepreneurial by making the world's best sub sandwich. I'm going to go open a store and start a sub business and try to grow a sub business. And over the next however many decades you grow a huge sub business.
Joe used to be in the sandwich business. Do you want a sandwich business after college?
That's a nice way of saying I had a job at a deli. There are so many, but there's so many different things you can do. I've got great friends I went to college with. I have one friend that I went to college with that basically graduated from college. He had studied physical sciences, and he decided he wanted to be an electrician. And he had his own electrical business in upstate New York, where I went to college. But then ultimately he got pulled into other kinds of businesses where the skills he had developed over 10 or 20 years building his electrician business could be put into other things. And his career evolved. And so, you know, there's a narrative about jobs and entry level jobs and what I mean, I don't even know what it all means. What I know is you want to be a learner through life. You go to school to get educated and to broaden yourself and to meet people. Not everybody should go to a traditional school. There should be lots of different paths, but the goal is to start on the journey of figuring out what you're passionate about, what you enjoy. How are you going to make money? How are you going to support yourself? How are you going to support hopefully the family that you have and there are lots of different paths. So lots and lots of different paths.
Okay, but assume that we're talking about someone who wants to get into Goldman out of college.
Yeah, and I don't mean to, but no no no it's fine. So really important. You know, think because this goes to the op ed and kind of the labor force, there's a lot of the labor force that has nothing to do with what we're talking about. I think that's something that we've got to keep coming back to in the discussion. So, you know, coming to Goldman at this point in time. We just have 2500. It might be 2400 interns starting now. And in July we have approximately the same number of permanent new hires that are starting. The first thing is there are a bunch of them are in client facing jobs and roles. There are a bunch of them that are in operational roles. There are a bunch of them that are in technology and engineering roles. I mean, there's a wide, wide range of jobs. Yeah, there are a couple of them that are working in marketing and advertising, I mean, there's a wide, wide range of jobs. All the experiences are different. All the opportunity sets are different. When I was talking to you about out with clients, I was talking about the people that are in the client facing roles. And, you know, one of the things I truly believe and look, I see this I sat with a group of venture backed founders at dinner in my apartment the other night. The average age was like 28. So impressive. So smart. By the way, the people we're hiring at Goldman Sachs are so impressive, so smart. Their peers with these people that are going and starting businesses, they can't go out and talk to clients and have an impact. And so with the technology, it makes it more leveraging. And I think you guys saw it, because I've used this example of when I started doing a common stock comparison. Took six hours, microfiche. Wall Street Journal, the only source of historical stock prices. Put it on graph paper. Take a picture of it. If you really think about that example. What that example is actually saying is, if you were a company and you wanted to know where your stock was trading during the day, you had three choices. I guess technically you could call your investment banker and say, hey, where is my stock trading right now? And the fact that we had a run in our office, we could tell them they didn't have a run. Or you could call your stockbroker if you had one or go outside your office and find a Merrill Lynch or an E.F. Hutton or a Dean Witter office on the street. And look at the ticker tape and wait until your stock would buy in the ticker tape. Or you could wait until the next day and open up the Wall Street Journal and see where your stock traded that day. So we were offering a huge value service by simply having this technological machine that allowed us to tell them where the stock was trading. So if you think about what young people were doing when I started, a lot of what we were doing was taking very primitive technology and giving information to people that were trying to run their businesses, and the pace of everything was very, very slow. We've now over 40 some years accelerated that enormously. And so the productivity level of all these people is going up, up and up and up. We haven't had fewer people. Now, maybe this technology is accelerating or way we're over time, we will actually fundamentally have fewer people. But what I would argue is the real challenge for us is we've got to find ways to apprentice them and teach them a variety of things that they're not going to intuitively learn, because they don't actually have to work as hard to get the answer. When I had to go to the microfiche and look at the different stocks and see how they were trading, actually put it on graph paper and absorb the differences and do the math to explain what the percentage compounding differences were. I was learning something. Now if you ask for it, you get it instantaneously. Has your brain really absorbed what's actually happening. And so the challenge is how do we apprentice and give people the base of knowledge, but how do we also allow these tools to allow them to get out into the world so that they can really have a bigger impact faster? And we don't have the answers to this yet, but we're really thinking about that.
So just two sort of short job related questions. First one was yes or no. It's like those skills that you had, you were very comfortable picking up the phone and so forth and getting people to answer just today, if someone is there a role for that person still that that same.
Definitely. That's a by the way I don't think that's going to change. I just you guys can go look, I gave a commencement speech at Wharton last month. And one of the lines of the commencement speech was the phone. The telephone is one of the greatest pieces of technology in the world. Use it. A telephone call to someone is ten times more valuable than a text or an email. My daughter says that's an unverified statistic. I know that's true. And it is if I call you personally on the phone, it's going to have a completely different impact than if I sent you a text.
I don't know your number. I would also accept a text from David Solomon just as the follow up, and this is more of a sort of specific thing that's not going away. I mean, I really believe Joe, that's not going to go away of that mix of new hires. You know, the range of jobs, including engineering jobs, including wood, has that do you can you identify is there a change different between today and 2026 versus, say, the pre ChatGPT era 2021, in terms like have you seen a difference yet just in terms of like the allocations of anything with any hiring decisions, subtle subtle changes.
But you can't look at it in a vacuum. So you said to me, I can be very detailed. Please. I think, you know, I think with all this stuff, it's nuance. Details matter. If you look over the last ten years, I'd say what's happened is the amount of engineering talent we had at the firm grew materially on a relative basis to operational talent or client talent. There are a variety of things that happened because of the pandemic, that bloated or inflated hiring across all large enterprises. And so if you say, you know, since ChatGPT. Like if you take 2022 is that was like the high watermark of the bloat. This is the problem. High watermark carries the high watermark of the story. Historians will be vexed by the confounding variables of 2022. Absolutely. So if you ask me a question, I'm like, okay, 2022. Yes. But that's the wrong starting point. Because if you look at 2022, a bunch of what we've done from 2022 to 2025 and now in 2026 was correcting the stupid things that we did in 2020 and 2021. And so I think you've got to look at it through a ten year lens. And what I would say is at this point, if you look at a ten year lens, it shifted to more heavily weighted engineering. My guess is that's going to shift differently going forward given the power of these tools and our ability to code. And you're going to see nuanced changes that probably to some degree reduce the number of people that we start with over the next few years, but probably not what you and I would call dramatically. So I don't want to be predictive because if I throw out a number, everybody's going to start holding me to the number. But, you know, I just told you we were running it at 2500, which, by the way, looks similar to what we were running at pre-COVID. But lower than the 3000 plus we were running in 2021. My guess is it's going to be in the next three years that will contract a little, but not in a way when you and I would say, wow, this is a huge, huge change. We're still going to hire a lot of people out of school.
I mean, aside from potential headcount reductions and like cost savings, how do you actually measure productivity gains at Goldman?
That is a great question, Tracy. You know, we're... I can tell you some examples of things we're doing where I know we'll be able to quantify some significant productivity gains, but they're more in the category of remaking operating processes. So what we're doing under what I know you guys have read about one GHz 3.0. So if we redo our client onboarding, anti-money laundering, KYC processes, and we had a process that had 3800 people touching it, not 100% of the job, but touching it, and now we'll have a process with a few hundred people touching it. That's a productivity. When it's done, we can measure the productivity gain of that process. That's different than saying to me, okay, you've got a bunch of people who work in investment banking. How much more productive are they now? One measure is I can look at the revenues. We have an investment banking, earnings and investment banking and the number of investment bankers we have and the amount of capital we allocate to that business over the last ten years. And you know what? Our people are more productive because we're making, on a per person basis, more revenue, more profit. On a per person basis. But we definitely allocating more capital to the business. And the capital is helping and creating leverage. But there's no question they have better tools. They can do more. We've found ways for them to do more. We also have collaborative power going on inside the firm in the context of one GTS 1.0 and 2.0 that are adding to revenue growth. It's very hard to pull it apart, but I think every five years we can directionally say, is it more productive? Yes, it is, because our, you know, you go back when the firm was public, the firm had $6 billion of capital, I believe, and we had 16,000 people, something like that order of magnitude. Today we have 45,000 people, $110 billion of capital. The firm is much more productive against producing reasonable returns on that capital than it was 27 years ago. I mean, that's clear, but that's a 27 year look, not a year to year look.
Look, it works when there's access, when there's a lot of data pooling together, a lot of unstructured data. When I think of a firm like a Goldman Sachs or maybe a law firm, etc., there's always a little bit of an alignment problem where maybe the big producer doesn't want to share all their data with the rest of the firm, doesn't want everything in their head just to be in some big knowledge pool that everyone has access to. You might want to be able to take your book of business to a rival shop every once in a while. That's probably always been the case, but I think it's probably a bigger deal with AI because I could, in theory, really leverage all of that latent knowledge that exists in a lot of people's heads. How do you think about getting a firm wide understanding of what's truly known and understood within many people's heads, so that you can really maximize this technology at a time when, again, it might make sense for at least some relationship players to keep a little bit of knowledge inside their own head?
