Goldman Sachs CEO David Solomon on Running a Bank in the Age of AI | Odd Lots

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.

Thank you for having me. I'm delighted to be with you guys.

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.

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.

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.

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.

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.

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.

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.

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.

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.

Well, it's an insightful question. And I'd start with the fact that one of the things I'm really proud of about Goldman Sachs is Goldman Sachs is less what you describe, I believe, than any other firm. I think that we really have for a long time, it's been part of the culture, but we really have a culture of sharing and collaboration. It is not a star system. People share, share, share. It is just such an ethos at Goldman Sachs that I think we have less of this problem than other organizations have. But what's interesting to me about your question, and it makes me really think about it, is it's something that I deeply believe that you started with, and I'd frame it in three buckets. This technology is incredibly powerful when you have a clean data set. Put these models against a clean data set. It is extraordinary. Like it is mind blowing to me. What you can do, the speed with what you can do with the information that you can accumulate, and how powerful that is when you have a clean data set, it wouldn't surprise you. Goldman Sachs has an extraordinarily amazing data set that we're working very hard on to make as clean as possible on everything we've ever done, from a trading and investment banking perspective over the last 40 plus years. We happened to build a system 40 years ago called SecDB that was a trading system. So we have data from all our trading that goes back long before most other firms kept data on this stuff. And so we're working very hard on that. But these tools are extraordinary. When you have a clean data set, when you don't have a clean data set and you send them out into the world, you get really, really cockamamie answers. So let me give you a simple example. Just tell a story from a few weeks ago. That was another one of these data points for me and really understanding how this all works. It's pretty simple. I was down at the Masters and Rory McIlroy was up by six strokes after two days. I was like, Holy cow, he's probably going to win twice in a row. How many people have won the Masters twice in a row? I know Tiger Woods has. I think Jack Nicklaus has, but I don't know if there's anybody else. So I asked one of the models, hey, how many people have won the Masters twice in a row? And the answer comes back Jack Nicklaus and Nick Faldo. Oh, yeah, Nick Faldo did it, but it didn't say Tiger Woods. So I said to the model, hey, I don't think you're right. Didn't Tiger Woods win the Masters two years in a row? Model says wait, one second. Comes back. Yes you're right, Tiger Woods did win the Masters twice in a row. Why did you get that wrong? I said to the model, well, I use this source, I did this, I did this source. The bottom line is not a clean data set. Garbage in, garbage out. Now, human judgment had to look at that and say no, no, no I don't think that's right. So are we going to get to a place where the datasets get better and better and better? Yes. But as long as one of the functions of the model is they go out into the internet and they go out into social media, and they go out into the media and they go out into the world. There's going to be a lot of garbage in, garbage out. The models can get better and better and better, but it's going to be really interesting to see over time how the models get better and better at distinguishing. And one of the things that's interesting is I then ask the model, hey, okay. Will you search this differently the next time? Because wherever you went got it wrong. And the model said, no, no, that's not the way it works. Now, one day I think it will work that way and also differently. But that's just interesting to me. What we are here is the third thing. You were talking about what's inside people's heads. I personally believe the answer to this is never. And this is one of the magic things about humanity. This is one of the magic things about creative things. And by the way, part of investment banking and client relationship is creative. It's EQ, it's emotional intelligence around spending time with people, how to connect with people, how to build trust with people. Machines can be really, really good. Tools can be really, really good. But unless you're in the camp that humanity is not going to be about trust and relationships, I think this is a never a thing. And so the bridge is how do you use the tools? And with the tools, leverage more of your humanity and your connectivity in a special way to be more impactful with people. Now here's an example I think is an easier example to kind of look at. I have a daughter who's a screenwriter. I've talked to her extensively about this because people talk when somebody writes about the voice. And one of the reasons why, if you really understand the process of writing a movie. Can AI write a script? Absolutely. But the first thing is that script is if my daughter is the screenwriter, it is not in her voice. Unless that model has access to every single thing she's ever written, every single experience she's had in her life, every single emotion she's ever felt, never going to have that. And so voice matters. When you're writing, you're doing something creative. Now here's the thing. She puts her voice on whatever she writes. Now she goes to the studio. The producer says, you know, I don't like this. I don't like that. That's a personal feeling. It's not asking the model to say whether I like it or I don't like it. He's reacting to it emotionally because it's creative. It's like relationship. I don't like this, by the way. Somebody came in and pitched an investment banking deal and the CEO said, you know, there's just something that I just didn't like the way that guy talked to me, that's a human emotion. That matters. That's not going to change. And so this concept of getting things out of people's head, what you're really talking about is human intelligence, humanity, IQ and I just think we're going to figure out how to use these models more powerfully. The data sets are going to be cleaner. Yes. Maybe we'll expand better into the second and clean up when you go out in the world. But when it comes to the way human beings interact, I actually think this is a superpower that's going to get more valuable and more valuable and more valuable, and it's something we want. I think people should think about. People should try to learn. I think public speaking still matters. I think writing is still going to matter. I think how you communicate and talk to people is no matter how you spend

Yeah. That's right. Social skill max. Well, by the way, the most successful people at Goldman Sachs have extraordinary interpersonal skills.

Yeah, he's really funny. Super fun. Fun guy too. Yes. You too. I'm not as funny. I'm really not as funny. I mean, he's much funnier than I am.

Thank you very much on that.

Well, I don't, it's not the first thing I look at when I wake up in the morning, because I looked at it when I closed the day before. Oh, I like, and it doesn't, it generally doesn't change overnight. Look, I, when, when the stocks, you know, during the week I would say I look at the stock price, you know, most days during the week. But as I'm doing, if I'm in the office, if it happens to be a day when I'm in the office going from meeting to meeting and in between meetings, you know, I jump on my desktop and I'm responding to emails or making telephone calls. The screen's up and I'm looking at our stock price, but I'm looking at a bunch. I'm trying to look at what's going on on the market, have an absorption as to what's going on in the market that day. You know, if it's a day where I'm in a bunch of meetings and I'm on the road, I might not look at the stock price at all, but probably at the end of the day I'd look and say, hey, what happened today? And by the way, it's not just our stock price. It's actually what happened in the market today. For me to be effective, I have to be super in touch with what's happening in the market. You know, every day, and I spend time on the weekend also catching up on it. You know, from my perspective about our stock price, of course, it's human nature. I'm going to look and see. But what I really care about is kind of year to year to year and what I really believe deeply. That's been one of the things that the leadership team has really been focused on for the last eight years is if you grow the earnings of the firm, if you invest in growth of the firm and you grow the earnings of the firm, the stock will do just fine. You know, the multiple will move around. But if you grow the earnings of the firm, the stock will do just fine. And so we've been focused on investing in the business and growing there and a firm. And we've grown the earnings of the firm materially. We put it, we had our first investor day in January 2020. We put out a plan and we've been executing against that plan. And since then we've grown the revenues of the firm, you know, 65-ish percent. We've grown the earnings of the firm about 140, 145%. And what do you know? The stock's reacted really well. And we've gotten a little bit of a better multiple because it's a much bigger, more diverse, durable business. The durable nature of the business is better. So we're getting a better, you know, a better multiple, you know, on, on what we're doing. But I'm super excited because I now look ahead for the next 5 to 10 years. And I look at this technology and our ability to remake operating processes and take the most productive people and have them spend more time with clients and broaden our client footprint in areas like wealth management, etc. I'm like, wow, we can really grow the firm. We can really grow the firm and grow the earnings further because we're going to have more capacity to invest in growth. And so that's super exciting. And so it's been a journey. I mean, when I started the stock was around 200. And, and, you know, now the stock's over 1,000. By the way, it could go back, you know, but it's not going back to 200. But, you know, the stock can back off, the multiple come down. Our earnings could slow if we went into a tough economic environment. But fundamentally the firm is bigger, broader, more diverse, more durable. And I think on a super course, you know, for more earnings growth and more performance for our shareholders over the next five years. So the performance is objectively strong. But, you know, no offense. You can see a lot of stocks right now in the market that are going straight up into the absolutely the, the important, the important thing. And I know you know this, Joe, the important thing is to look at the relative and the relative performance, the relative performance over the time we're talking about is top of the heap. Totally. And we're going to keep driving to try to deliver that.

Well, they're, they're, they're, they're, you know, a couple things, you know, to think about here. But, you know, first of all, I know a little bit about this. Yeah, I know some things I can talk about. Some things I can't, but I think, you know, that the firm ran this whole process, and the firm was the only bank that was involved in this for the last five months, you know, up until a couple of days ago. And other banks, you know, were brought in to participate. Okay. The firm ran this over the last five months. This was a Goldman Sachs deal on the team, you know, that led by Yasmeen Koppel and Kim Posit, and David Ludwig, you know, entire equity capital markets business did an extraordinary job. This one of the largest, if not the largest secondary follow-on equity offering ever. Yeah. And were ultimately, if the green shoe exercised, you know, were going to raise 85, you know, the 90s up. There's just morning from 80 to 84.6. Yeah. We upsized it in the green shoe. My guess is given the way the stock's trading will probably be exercised in the coming days. And so they raised $90 billion. And so it's, it's, it's, it's, it's really extraordinary. And by the way, I think one of the interesting things to think about this is the first concrete, tangible data point on investor demand at this scale. And we have some other things coming up, coming up at this kind of scale that, that. And so this is a very important, tangible investor data point. I think one of the things that's, that's very helpful to the firm is sitting in the middle of this. We got a lot of information on how investors are thinking about all this. And, and, and the others that I think is super, super interesting for us. But this is, you know, it's unprecedented scale and it's reflective of the fact that we now have some of the largest companies in the world that have capital plans. Yeah, over the next five years that are very, very significant. And they can fund a lot of it with debt. But I think you're going to see, and Alphabet is the first one to make this decision. I think you're going to see a bunch of them fund a bunch of it with debt, but also raise more equity because they're starting to think about, okay, what does this look like? It's one thing, what does it look like this year? But what does it look like over the next five years. How much capital do we need? How much debt? Equity markets are good. Our multiples are pretty high given the way the market's responding at the moment. We've got to think about our leverage going forward. The capital's available. And so the analysis is, and this is not all public but in specifics. But I'll talk. Generally a company has to look and say not just what's a one to a three year capital plan. What do we think a capital plan is over the next 5 to 10 years? How is that going to change our leverage? What if there was a change in the market multiple, okay. And our leverage is up? How are we going to feel about that? And it requires kind of a long-term conviction on what you're doing from a capital deployment standpoint and making the decision as to what makes you more comfortable. In kind of the leverage and balance between debt and equity, I think you're going to see more companies issue equity because, you know, this is not, capital is available, and you want to be cautious about this if you get it wrong, if you totally rely on debt and you get it wrong, you will really regret if, if you wind up having a downside scenario that's tougher than you expected. So I think you can see more companies, you know, think that through. And Alphabet's the first company to step forward. Our, our team, you know, spent a lot of time, you know, over the last five months really helping them think through these kinds of issues. They were, I think they were very smart to really think it all through.

I mean, our team, you know, really, really, the team on that really were extraordinary. Dan Dees, compassionate, I mean, just, just really, Susie show, really, really extraordinary partners of the firm have just, just done an extraordinary job over, over years.

Well, I mean, there are things that I'm willing to say and try to give you some perspective on it, but the most important point that I could amplify about this is we didn't win this in the last six months. We won this over the last 20 years. Well, the decision wasn't made, the decision wasn't made until the last six months. And there's a lot of things that the team did over the last six months that contributed to the ultimate result, which, by the way, now we have to execute. But, but this is a cumulative effort of lots and lots of people over 20 years. And we first, as a firm, we first met Elon Musk. And the person that first was responsible for covering it was a guy named Stuart Bernstein, who was doing a bunch of stuff around, you know, kind of green energy and he was. Yeah, he and his brother had SolarCity. And that's, that's where, that's where we first connected with Elon. And then, you know, we took Tesla public, when Tesla went public, you know, some time around SolarCity and Tesla. I first met Elon. And so I've known Elon, you know, for more than, more than 15 years. Dan Dees, you know, Stuart Bernstein kind of semi-retired from the firm in, the early part of the last decade. So let's say 2012, 2013. And Dan Dees, who now runs our global banking and markets business, was an investment banker, who was just coming back to the US after having been in Asia for a long time, and he was based out of the West Coast and running our TMT banking business, and he started building a personal relationship with Elon. And Dan has built a really, you know, wonderful dialog with Elon over a long time. But it's not a straight line. And there are times, you know, there are times where we're doing things and we're not completely in sync. But at the end of the day, as a firm, we've been long-term committed to Elon. His companies, his teams, by the way, you know, in this situation, you know, Brett Johnson, the CEO is a hugely, hugely important guy. And we've had people spending time with him for years and years and years. And, you know, that's what, that's what our business is. Our business is building trusting relationships over time with people, giving the right advice, taking a long-term view, not being transactional and trying to earn trust. So when the biggest, most important things happen in the world, we have a better chance of being asked to provide services. And that's kind of what we do.

So with respect to the DM, it is, it is, unfortunately, it's untrue that I pitched Elon via DM about the deal. Okay. What is, what is true? And this is the way facts get confused. Elon, some point in the last year stopped taking texts on his phone or emails and started telling people that he knew that if you wanted to get in touch with him, direct message him on X. And so because I have a relationship where I reach out to Elon and we exchange messages about a whole variety of different things, I stopped sending him texts on his phone and started direct messaging him when I wanted to. When I was, how Joe communicates with Jason and I want to, I want to communicate, I started communicating. So I actually, I went back actually, and looked at the chain. Yeah. You know, in my account, you know, over the last six months, just to make sure I wasn't wrong about this when I saw it in the press. And I said to Tony, I don't think this is true, and I never, I never, I never asked Elon in a text message about, about, about the IPO. We focused on his team. We focused on the work that we had to do. And we're really proud and pleased to be leading this. And we're going to do everything we can working with the other banks to get the best result that we can for SpaceX.

Well, I'm going to give you a conclusion first. Okay. We can try to dig in a little bit to the details, which I know you guys love to do. But I just start, I don't think this is going to break capitalism, okay. And I think it's, and I think it's good for the U.S. Yes. There goes your headline. I think it's good. I think it's good for the, for the U.S. that we have the biggest, you know, by the way, breaking hot, hot headline just moved on the terminal, Anthropic set to tap Morgan Stanley, Goldman Sachs to lead IPO. This just came out, okay. So there you go, okay. Anyway, keep going. So I, I think this is good for the United States to have the biggest, most important companies in the world. When you, when you talk about, you know, what's happening, you know, there are a lot of complex things happening about why we have fewer public companies today than we had 25 years ago. Yeah. And, you know, this is a long-term journey around policy decisions and market structure over a very long period of time. The reason that companies like Microsoft went public when they did it, the size that they did was there was no capital available to them other than going into the public market. Right. But it's not fair to say that, you know, that investors got to participate, you know, in everything, because it's not like there's more access for investors. We're talking about the 900 companies that went to zero, that went public at the same years. I mean, that's, I mean, that's, so, and by the way, that's another thing. Most companies don't survive. So it's, you know, it's, it's just, it's just not, you know, that simple. 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, 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 at 1.25 years 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, 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, okay. If you're giving advice to companies. And I think companies have recognized the capital has been available privately at most scale, but liquidity has been available in a variety of different ways at most scale. The currency thing is tricky, but generally speaking, with these growth companies, they don't need the currency because they're growing, they're not doing M&A. And so I, I think you're going to see a bunch of these companies go public because they need the capital, because they've reached the scale. And they have, they have a demand for capital where they need the, they need the capital. I think the current SEC chairman is working on a variety of things that hopefully will take some of the friction, you know, out of going, you know, out of going public, which will help a little bit. But at the end of the day, given the way markets work and indexation and passive funds and ETFs, you know, a $5 billion market cap company with an $800 million IPO is just, it's the discount associated with getting that going has been less attractive to, you know, to investors. And part of the reason is, is public capital's, but private capital has been available without a discount. Yeah. But that, by the way, that could be a cyclical thing. In other words, we could see periods of time where private capital have a bigger discount. The public market will be more efficient. And then you'll see more of those companies come to the, come to the public market. But I think fundamentally, you know, we're going to operate with fewer public companies and the companies are going to be bigger. I mean, that's just, that's, that's the way the market structures evolve.

Sure, there are, there. In fact, somebody said to me recently, this is unprecedented. They were talking about ten companies having 30-some percent of, you know, 31% of the S&P. Yeah, you know, waiting on a market cap base. And I was like, no, it's not a precedent. How about the 1920s? How about the 1960s? How about, how about, you know, the late 1990s to 2000? You know, this is, I made the comment yesterday at the Economic Club because I was asked about the way the stock market's running. And if you actually look at the whole segment, I said a lot more than that. And I actually said before I said it, I said, look, I'm going to say something. I know it's going to create a lot of headlines, but I do, I do think it should be said, because I do think I've seen some of that behavior that I've seen before. And, you know, people are worried about missing out on this technology boom. Whether it's compute, whether it's storage, whether it's chips, etc. And so people are crowding in and that is a, that's a greed thing because they want to participate in their fear of, of missing out. What I should have said, okay, at that moment was all of that. But then I should have said, but, you know, it's kind of interesting because if you look at the S&P 500, the top ten companies, which, by the way, are, you know, mid to high 30s, market cap and those other three periods, you know, the, the top ten companies were also in the 30s. And one of the things I have pointed out to people is these top ten companies actually have more earnings, right, than the companies did and generate a lot of cash. They generate a lot of cash. So that's, that's something to absorb. But what, what I should have said is the market multiple, the earnings multiple on the top ten companies in the S&P. These are approximate numbers. So don't hold them to me directly. I actually looked at this this morning. Because I thought this would, this would come up. And so hold it as approximate. The top ten companies are trading on forward earnings in the low 30s. Okay. In the 1990s, late 90s, 2000 internet boom, those companies were trading at more like high 40s to 50. Yeah. Okay. You think about Cisco and its market cap was over 600 billion. So these multiples, yeah, are high. But the growth is pretty good. The earnings are real. Those numbers are on the high end of the distribution for sure, but not crazy. The other 490, okay, are trading between kind of 17 to 20, which by the way, 20 high side. When you add it all together it's kind of 22 times forward. A lot of it's at 17. You know, I actually think the 17 sounds pretty attractive. If you think that all these companies are going to be able to use technology, not all of them will execute successfully, but be able to use technology to improve operating processes and create more efficiency and therefore faster earnings growth and more investment in their business. You should see over the next five years improvement in the earnings growth of that other 490. I'm talking on average. So is the market running? Yes. Are people crowding into a handful of stocks because their fear of missing out? Yes. That's what I meant about the greed versus, you know, versus, versus fear. But this could go for quite some time because it's narrow. And on a historical context, you know, it doesn't look like Polaroid at 80 times earnings in the 1960s, doesn't look like RCA in an infinite amount of time, times earnings in the 1920s. So it's, you know, it's, I'm not sure is the bottom line. I'm not sure, but, but there's no question for a narrow group of stocks, the market's, the market's, the market's really running. And we've got a lot of, what's interesting to me is we have a lot of things going on in the macro with, with the war, with the oil shock, supply chains, inflation getting stickier, that are going to have an effect. And, you know, the market may absorb all that differently than it's absorbing it at the moment. At the moment it's kind of brushing it aside. Things can always get crazier. As Joe likes to say.

Oh, here's, here's what I can say publicly. I think it's very important. These models are incredibly powerful. And I think it's very, very important that these companies that are producing these incredibly powerful models work collaboratively with the government and with the private sector to give people opportunities to understand, you know, what these models can do and to try to continue to secure our critical infrastructure as effectively as we can do. I think the, it, that the process around this was perfect. No, but we're learning as we go, and I think there are a lot of things in the process that have been good and have been helpful. It wouldn't surprise you that just using financial services, for example, is the eight largest banks are significantly ahead on cyber investment and cyber protection over the last decade than bank number 2,000. Yeah. That sits in the middle of the country. Yeah. In, in Arkansas. Okay. And the risk in financial services, it doesn't mean that there can't be issues for the biggest banks. And the biggest banks need to constantly, constantly, constantly, constantly think about this. We invest a lot in this and we're all over this. That doesn't mean we can't have a problem. We could. But the risk is that, you know, a medium-sized bank has a problem and it creates fear in a broader group of medium-sized banks. And you don't have to look that far. If you look at SVB and now SVB had a problem and it created fear. Yeah. And a variety of banks. You could see a cyber attack at a mid-sized bank creating ripples through the banking system which will be, which will be, you know, dislocating. And so, you know, I think it's really important that we figure out, you know, how to help the broader business community get more invested. And by the way, that's something's got to happen, both by the private sector investing more, but also the government finding ways, you know, to help. So, you know, I do think that the administration's executive order to get these models is important. There's got to be coordination between the government and business on this. And I think the process will continue to get better. They're going to be more models. There's going to be more process. And, you know, we've obviously had a team that's, that's learning, looking, you know, we learn things, making adjustments. And we're going to continue to do that. But that's, that has been a part of what we do. This might be accelerating a little bit, but it's not that different from what we've been doing for a long time. Just maybe the pace of some of the change, what these models can do is going a little bit faster. And so we've got to be more nimble and we have the resources to do that. What I worry about is all the companies that don't have the resources to do it. And it's, by the way, it's not just financial infrastructure. We think about energy infrastructure. The biggest utility company is going to be way ahead of, you know, a local water company in Akron, Ohio. Right. And so, you know, everybody's vulnerable. And so we've got to figure out how to help people and bring people along.

Yeah. I mean, I've been, I've been playing with it. You know, I've been, I've been playing with it. And what I'd say is what I think is cool about it, as someone who's, who's produced a bunch of music, and I want to come back to that because I think there's an important kind of lesson to learn about history in terms of music production, to where it is. I, I think it's super cool, but what it does is it opens up the creative channel to people that would never have an opportunity to produce music. Okay, let's just a little bit of history about music production, because by the way, 30 or 40 years ago I could never have produced music. Now it's so happens I played an instrument when I was in elementary school and high school. I played the saxophone. I can read music. I understand music theory because I played an instrument for, for, you know, 12 years when I was in, out of, you know, out of college, you know, I would call myself a recreational drummer. I mean, I could sit on a drum set and carry a two-four beat and, you know, so I, I understand basic music theory, but, you know, I've been a rock and roll guy forever. Like, I love Bruce Springsteen. Okay. I saw my first Bruce Springsteen show in 1978, the Darkness on the Edge of Town tour, when he wrote that album. And by the way, the albums that came before had a bunch of them that came after he sat in a studio, or he sat at a piano, or he sat with a guitar. He wrote notes down on paper, he wrote lyrics down on paper. He played around with it. Then he invited human beings into the studio with him that played piano, organ, drums, guitar, horns, saxophone, all different things. And they sat there and they made the music and somebody recorded it and it got pressed onto a vinyl album. Okay, a lot of the music that we listen to today has been made on a computer, on platforms called Logic Pro or Ableton. Which is actually how I work to produce the music that I produced. And so if you want horns, you can choose from 150 different horns. Okay. You don't need 15 different musicians, okay. Nobody's talked about, you know, the difference how technology evolved. And by the way, what it did is because Logic Pro and Ableton exist and I'm relatively dysfunctional on the platforms. You know, I can muddle my way around, but I need an expert to help me because they can do in three seconds what takes me ten minutes. But what it allowed is it for somebody to say to me, hey, I want this kind of a sound, okay? I didn't now have to write the musical notes down. Okay. You could basically, you know, basically take out a piano and, you know, say this chord sound, this chord progression, try it on the computer. You could say, I want this to be done in horns instead of in a piano, click, it's now horns. And you can basically, you know, put a top line together. That's very interesting with the computer, a lot of the music that's produced today that we listen to is produced that way. Okay. Now what you've got is you've got an application that's basically doing that. Okay. And I think there are a couple of big issues that need to be wrestled through with this. The first is these AI apps are using other people's content in some way. Right. And the artists aren't getting in any way compensated, you know, for that. And I think you've got to think about how you're going to bring the artist community and their IP, you know, in the discussion of this over time. And, you know, it's not gotten a lot of attention, but I think is a very, very important, a very, very important thing that has to be dealt with. And secondly, this goes back to the whole discussion I had about voice when I was talking about my daughter and screenwriting. Oh yeah. Okay. You know, the stuff I produced, okay. It's my voice. I said, I like, I like the way this sounds to me. So do it this way. I like the way this feels. So let's try it this way. Okay. And then you put it out there and you see whether or not anybody likes it. Obviously the technology allows you to do it faster, but without a human being really, then massaging it and tempering it. Okay. You know, I, I think you get, you're going to get at the moment certainly mediocrity and as opposed to, you know, really, really interesting, resonant stuff.

Well, thank you for having me, guys. And I appreciate, appreciate the conversation. Yeah. It was a lot of fun, a lot of fun, a lot of fun.