From $11 in His Pocket to CEO of Goldman Sachs | Lloyd Blankfein

David, thanks for having me.

Oh, no, no, please stop. No, yeah, right. The interview's over, right? Please stop.

You know, look, it's an out-of-body experience. I was talking about a different person. I was talking about, you know, Lloyd at 15 or Lloyd at 17 years old. So I wasn't talking about me. I was talking about that person. So yeah, I could be a little bit dispassionate and clinical, but, you know, it's all part of the thing. And, you know, it contributes, it's sort of an explanation of all the unfortunate steps that got them to me to be the way I am today.

Well, in a way, you know, one of the things I wanted to accomplish, you know, when I walk into a room, I meet somebody, I have to say, you know, I may think of myself one way, but I have to remind myself, 'Oh my God, they're thinking of me as the guy who runs this,' and yet all of which is true, but that's not how I think of myself. And as between that person's very high view of me and my own view, I'm right, 'cause I've been with myself longer. And so part of what I wanted to do in setting things out the way they are is to really make it accessible. Look, I worked hard. I had a good, you know, good EQ, good enough IQ. Things that you, but, you know, but I wanted to make it kind of accessible. Like, I wasn't one in a zillion people who did it. You know, it was fortune in a way, and I wanted to make it so that, oh my goodness, look, in my life where I've met a lot of extraordinary people, I've met very few people who I couldn't figure out how do they do it.

Yeah. A young kid reading this, it's not gonna be for everybody. Not everyone's gonna have to have the same breaks, not everyone will work as hard, and not everybody will be as fortunate in this or that, but it's accessible. It's not impossible.

Well, you know, look, I was with my sister who I, you know, who I adore. She was like my parent. She was nine, more than nine years older than me, and, you know, she didn't have the break. She didn't go to college, never would have contemplated that she would go to college, and here I was, you know, I was, like, breaking through, and she was very attentive. And by the way, she didn't have a jealous bone in her body, and she was supportive. But I felt that, you know, it was a, you know, my enthusiasm was tempered that, you know, it was all about me, and I was aware of that. And I felt, you know, that she had, you know, my sister was older. You know, we grew up in public housing. You know, we were too crowded, too small a space, you know, too little money and too little of this and too little of that. You know, I was getting out. And I was sort of, like, leaving, you know, somebody behind on the dock. I felt somebody. And so, yes, my enthusiasm was a little bit tempered by that.

Well, the dog that caught the school bus, you know, that metaphor is, you know, gee, you wanted it, now you don't know what to do with it. That wasn't what was really dominating. It was just a little bit tempered by the fact that it occurred to me to be a little bit more empathetic to how she might have been feeling, and it wasn't necessarily that. That's not what animated her.

No, no, I just, you know, it was just, look, you know, I always saw, like, a lot of different sides to things. But I was happy. By the way, I was in part also the dog that caught the bus because I didn't know, I didn't necessarily know. But that wasn't really, I knew I was going on a different kind of adventure, and I was, you know, I was braced to be discombobulated.

But I absorbed it. Yeah. Yes, I said that other people referred to it, and I guess, I guess, it shouldn't be a shock that anybody who took the time to write a memoir wanted attention from time to time. You know? Fair enough.

Well, I think humor, in a lot of the ways I have it, is perspective. I always saw things a little bit, and by the way, I know this, and people have said it. And I was in a market. You know, I was involved in taking risk and being a risk manager and trying to anticipate things that would go wrong. That was my core competence, and I think humor is a different kind of perspective. You know, stepping out of your side, seeing the funny side of things, the lighter side of things, a different perspective, recognizing that in the historical sweep of things, you're, you know, you, it, and everybody, everybody's really, really down. Don't you, you know? And they, but they, but you know because you see to have perspective that there's a cycle to things. At the bottom, things look like they're getting worse, but they don't. They could. And at the top, you think things are gonna grow to the sky, but they don't. And so having that perspective and standing a little bit away from it and commenting from time to time. But in terms of using humor and being vocal about it and demonstrative, really that was kinda defensive on my part. You know, I was always, I was always very kind of intense and kind of focused, and that could be, you know, people didn't always enjoy being on the other side of it. And I learned over time that, you know, I'd walk into a room, and people would put the women and children down in the storm cellar and circle the wagons and be braced for it. And I learned over time that I was never going to shed that kind of intensity, but what I could do is I could sort of redirect it a bit and be more self-deprecating. And take the edge off. And that's really the purpose that that served for me, but, you know, but it, you know, not to quote that great philosopher Popeye, 'I am what I am, what I am.' So I'm not gonna step away from that. I'm always gonna have that personality.

Look, it's somewhere in between. You know, I was, only at home in East New York, Brooklyn before I left to the great world of Harvard and beyond. It was a quarter of my life, yet that quarter is 99%. You know, you're imprinted. I think you're formed. Now, that doesn't mean that you can't lean against your tendency. You're never gonna be a completely different person. But you could be made aware of what your tendencies are, lean against them, stop yourself in moments, take the edge off sometimes. And so the answer is, is someone who's not funny gonna be funny? No. Can you see things a little bit differently? Can you learn to have some perspective? Could you accept that? Yes, you can be a, you can make yourself a little bit different. But you go with what you are. Look, I'm not suggesting any resignation where you accept your status or accept your personality or accept this or that. You should always do it, but you should always learn to appreciate yourself because you're gonna be stuck largely with your foundation.

I skipped a grade early, but I also went to a failed, and then subsequently failed, New York City high school.

Yeah. Yes. It was on triple session, which means that they cleared the room out, the whole school out twice. So you went in the morning, there was an afternoon session, and there's a late afternoon session of the school building because it was, and in those days, you know, you took your majors, and I'd done all that thing at a very young age, not out of sheer brilliance, but because there were no electives or special courses or advanced placement.

Oh, no, no. I was, you know, I was good in my high school where, you know, where only a reasonable but minority of the kids in the school spoke English. So I rose to the top of the heap in the school. So I'm not, I'm being factual.

I think I would've done better in hindsight. I was geared to do everything as soon as you can. It was early, and I thought it was, I thought it was almost status-y that I was younger. But of course, a year here and there at my stage of life, and even at your stage of life, is no big deal. Very small percentage of who you are, substantially fully formed. But at 15 or 16, you're still a work in progress, and those years are very important. And had I been a year older, a year more mature, a year more experienced, a year more comfortable with myself, I would've gotten more out of college instead of, you know, in addition to all the intimidation that Harvard would impose on people, even from the best prep school, let alone, you know, a very urban high school, you had to, I had to add to it the fact that I was younger and even for where I came from, less sophisticated.

Yeah. I grew up in a place, you know, my father worked nights at the post office, civil service, but prior to that, he had lost his job, and he was unemployed for a while. And, you know, and I grew up with, you know, things were tight. By the way, I didn't think we were poor. Like everybody else, you know, 85% of the country, we thought we were middle class. I just didn't know better. And so I was used to, like, living things tightly and closely and, you know, everything was on a budget, and if you spent money, I remember breaking my glasses once, and that was, like, a big deal 'cause they had to be replaced. And so everything was kinda tight. You get to Harvard, and oh, my God, you know, I lived in a room that had a fireplace and, and, you know, you can go into the, you know, the food hall and just take the food and as much as you wanted. And stuff like that. I had not, I had not, like, I had not lived like that before. And I remember this one thing that really, it was nothing, but it just stuck with me, that I went, when I went and tried out for crew, and kids were, like, kids, you know, in the observation of the coaches there, were taking towels and ripping the towels to make headbands for themselves so they, you know, so they could work out. And I'm saying, 'You're destroying a towel.' I mean, in my household, I think I was using towels that were new, you know, my great-grandfather brought them over from the, you know, from Eastern Europe, and 45 years later was still using the same towel. I mean, I couldn't imagine that there's a, some culture somewhere that people just could be that so reckless.

Yeah, that was another thing that was very important. So when I'd gotten there, you know, I had my full tuition and room and board covered, which is an embarrassingly slight number compared to what it costs today. But of course, there are books and the other expenses that you have, you know, living. And for that, the way the financial aid worked then, and I knew something about the financial aid 'cause subsequently I worked on financial aid for Harvard. You know, by the way, I went to a different school than my roommates went to because I worked 15 to 20 hours a week. And that meant I didn't do the, you know, extra curricular activities. And so some of that may have been character-building, but, you know, I'm not sure dorm crew at the end of the day or serving the poor, maybe a little bit, but not really. But I, at one point, I, you know, ran out of money. I had literally, I remember I had $11, and so I went to the financial aid office to say it, and somebody just very matter-of-factly at the financial aid office said, 'What do you need?' I said, 'Well, like, I don't know what I need. I just know that I know what I'm missing.' Something. So he goes, says, 'Hand me a piece of paper,' which had, you know, looked like an income statement. 'You know, we'll write, you know, the expenses are on this side. Write down your, you know, what you have and, you know, see what the difference is.' And so I did it, and I made it come out to a, you know, the deficit was a round number of $500. This is, you know, for me circa, you know, what was it? 1971. And, you know, way back when $500 was more, you know, a lot more than it is today, and I put that in, said my offer. She looked at it and, you know, gave me a check for $500 right then and there.

She said, 'This is what you need, this is what you got.' And it was, like, easy. I didn't have to testify. I didn't have to write an essay. I didn't have to get audited or somebody go over. They didn't say, 'Here's $450.' They just, yeah. They negotiate exactly like that. And so that really stuck with me as, you know, kind of like a way to do things, which had vast more impact on me than the dollars.

But again, that's my personal belief. But when I'm talking to other people, why should they give? And other people say, why should they do that when, you know, not everybody in the world is sustained or has enough calories, or look at the people in war-torn regions, don't they need it more? The answer is yes, yes, yes, yes, yes. You know, the human race should be strivers, so we should still explore and launch rockets to the moon at great expense. And I think there's a need and a utility for great institutions that should be somewhat oblivious to the very tightest, tightest cost controls because we recognize what we're trying to accomplish here.

Yes. Yes. Yeah.

No, I wouldn't have 'cause even though money was tight, but I wasn't that wired to go for money. In other words, money was tight because money was tight. And when I was a kid in high school, I worked and contributed money into the household. And so I was always aware what things cost, and that you had to have it. But I don't think at any point in my life I was trying to maximize my income or the stage. It's one of the ironies, I think that at a time when young kids today have a life expectancy at close to or in excess of 100, you know, as life expectancy has grown on, all of a sudden they have to, at a younger and younger and younger age launch their professional career, even though they have a much longer runway in front of them, and a chance to become a complete person and a better developed person. I think what the concept of that, and I'm, you know, he's not here, and I'm, you know, he's a complicated, you know, Peter Thiel is a complicated guy who I've met from time to time. So not to address him personally, but the idea of kids not getting a general education and just focusing at the earliest they possibly can on to be commercially successful, I think it's subversive. I think for a million reasons, for people's own personal education to become a more complete person, become a better person. But if you only were concerned about commercial advancement and didn't care about being a better well-rounded person and an enriched person, and you only cared about the commercial outcome, let me tell you, in the commercial world, you still have to get along and deal with people. And people wanna deal with interesting people and not the narrowest person. And so I don't doubt that there's, and of course, legend, success stories of people who dropped out of school and done these fabulous things, but, and so it's good for them. They'd never trade that in, never go backwards, and I'm really happy for them. But I think generally, in the greater world, I think undergraduate years are for liberal arts, becoming, you know, expansive and becoming the more interesting person that will be as a result of those greater interests, and being more interesting to other people will lead to more, even more commercial success.

Of course.

Yeah. To graduate, to learn as much as you can, to learn, to read, if you wanna be a physicist, read history. You don't know the way the world's going to evolve anyway. You know, 15 minutes ago, everyone would've wanted to be a software engineer. And that doesn't look so good. Coding boot camps. Coding boot camps. Right? They were all the rage a few years ago, and now look. And now you might as well have butter churning boot camps, or have a whole course on how to use your slide rule. And what, and my kid, if I said that, my kids would go, 'What's a slide rule?' And so you don't know the way the world's going to evolve. And I'll tell you something else you don't know. You don't know the way you're going to evolve. Undergraduate years is not just to wait to see how the world evolves. It's to learn things so you could see how you evolve and how your interests develop.

Well, not to prepare you for them 'cause you don't know the one after that. How about just to prepare you to have an open mind and a curiosity about things?

Yes, I agree.

Would I give, you know, paths diverge in Yellow Woods. Who knows? I, you know, I was what I was. I developed in that way. I don't know. Look, hey, let me say it, I evolved the way I did.

Look, I compare myself, I love my kids. They grew up differently than I did. I had some, I call my first chapter advantages. You know? If you look at it, because I had, there were burdens I had that other people didn't have, and there were benefits I had that other people didn't have. I'll give you one important one that people like my kids didn't suffer from. I never had to source my motivation. If I had a job and somebody offered me 50 cents an hour more for a different job, I would've taken that one because I needed it. And I didn't have to source. It wasn't like, 'Is this gonna fulfill me? To be or not to be?' You know? It was, like, I didn't have to source my motivation, so life was easier in that way.

Now, if you are very well off and you could do anything. The problem, it's like now, I'm retired. So every day I get up, I don't set my alarm clock. I could decide what I wanna do. Sometimes it takes me till about 5:00 in the afternoon to figure out what I wanna do that day, by which time I'm already starting to, by all the, the day is over, and I'm starting to think about where I'm gonna have dinner. You know, I get kind of, you know, I get kind of tied up. I can't get tied up in stuff. But when I was younger, I didn't get tied up in anything. I knew what I had to do. Simple. And life was simpler. So if I went back in time and made myself wealthier at a younger age, would that have helped me or not? I don't know. I am what I am.

Yep. Yep.

Let me tell you, to take a gap year would, for the way I grew up, would have looked so frivolous.

I did. Yeah. But everybody, yeah, but people took on loans. I mean, I didn't feel like, oh my God, I'm so, you know, look how I'm suffering 'cause I'm taking on loans.

Yep.

For about four and a half years.

Well, yeah, it was kind of defaulted into it because like a lot of people, you know, in a big law firm in those years, it's probably a lot different today, but in those years, you worked at a law firm for about eight or nine years. You were up for partner. You made it or you didn't. Then in between, people would peel off and do other things. Become a general counsel, go out, you know, become, you know, go to a commune and live. Something, they'd do something different along the way. And that usually happened around the time that you were kind of, you'd, like Groundhog's Day. Halfway through, you'd pick up your head, see if you saw your shadow or not, and I picked up my head, didn't see my shadow.

No, no. I was doing actually well, but I decided I, based upon the way the lifestyle that the partners were having and what they were working on, and to me was like, I was a tax lawyer, and there were people in the next office. You know, you'd get these things called advance sheets when new cases would come down. Now it would all be online. There, it would come in the mail, and guys would be waiting to get the advance sheets of the new cases that were decided and read them so they could see how they impacted the state of the tax law. And it was like the Wells Fargo wagon was coming, and they couldn't wait to get it. And I would dread getting them 'cause then I'd have to read those things and it was so boring. And I'm saying to myself, you know, I was doing well in the law firm, but I said, 'But I'm never gonna, you know, if I have to compete against those people that love this stuff and I don't, and to me it's really a job. And they love it.' I said, 'I better find something that I like better than this to do.' So I looked at it and said, 'I don't like what this future is.' So I'm in New York, and so what do you do? If you start looking for another job, it's finance, 'cause we're a finance town. And so I applied to all banks and investment banks and maybe a consulting firm or something like that, you know, New York kinds of things. And it, I kinda got rejected at all the important ones. By the way, including Goldman Sachs. I went and got an interview. Didn't do well. And by the way, I never did any work. I didn't even know what investment banks did. I remember going up in the elevator at one of these things, and on the elevator they had, on the top of the elevator lit up. You know, it said, you know, private finance, fixed income trading, municipal bonds. And I realized, I started writing it down 'cause up until that point I didn't know what they did in these firms. And that, you know, instead of saying sportswear, lingerie, probably a bad sign in retrospect. Yes. A bad sign of what I did. And so I got turned down, and then I got, through a headhunter, called me up and introduced me to this commodity trading firm, J. Aron & Company. J. Aron, yeah. And I got a job there, and Goldman Sachs acquired them right about the time I was interviewing there.

So I got in through the back door at Goldman, and that's how I got into the firm.

You know, so I go from a set, by the way, I liked my law firm, I mean, I liked the job. I just didn't, the content of it, over time, I wasn't gonna, I didn't think I'd be that great at it. But it's a place where it was, Donovan Leisure, it was a great firm. It's no longer there, but it was one of the big firms at the time.

But a lot of firms have been, you know, through merger, it doesn't exist. And you could hear a pin drop in the firm. I had my, you know, I had an office. I had a secretary. At 4:00, they came out, around with a tea cart. Like, it was like, you know, like we were, you know, like it was like old- Do you drink tea? Well, I did when I was there. And they came with cookies and stuff, and it was just so, you know, it was just so, um, fuddy-duddy and lovely.

And then, you know, I go to this- Not for you though, right? Yeah … commodity trading firm where j- yeah, the big trading floor, and people were screaming at each other- a- and that, and I, you know, it was a, it was a little bit of a shell shock.

But I got a job. Those guys said, uh, 'Can you, can you…' You know, in fact, the guy who interviewed me literally c- was calling me college boy. I mean, calling me college boy, which tells you something about the- the rest of the people that worked there.

And so, um, I ended up, uh… Yeah, he said, 'D- c- can you think you can work in that?' And I said, you know, 'Work in it? I go home to it every day.' Yeah, exactly. Kind of thing, 'cause I was used to… Yeah, and, and so I did, and it, and it suited me. It suited my, my, uh, it suited my short attention span. Um, and, uh, I, I, I kind of, I liked it. You know, I like processing information. I like the impact of events on markets. You know, you had to know everything that was going on all the time.

Being in the middle, and you know, a little pandemonium, but everybody knew what was going on. And, you know, people would be fighting with their spouses. In those cases, fighting with your spouse has meant fighting with your wife … uh, around the thing, and shouting at each other and shrieking, and, and it was… You know, and it was just a cacophony of noise. But if somebody said something wrong- the whole room would stop, and everybody would look at that place because it was… You know, people were able to- They had ears out for- People were able- Yeah … to select anything. So, you know, I enjoyed it, and I lear- you know, and I learned a lot, and I learned that it suited me.

No, not at all. It's silent. People have headphones on. People could- They're on their screens. People will, people will email to, um, to the person sitting next to them … rather than lean over and whisper to them.

You know, I don't know. It's times. It's like could Michael Jordan beat so-and-so in basketball? They're different games, different times. I'd say people who are good and motivated and disciplined will be good in whatever environment you throw them into. They'll just develop different skills.

But, you know, so look, I think things are more the same than they are dissimilar. Similar. So it's less, you know, different technology, you know, different noise level, different, you know, of 50 different things. But at the end of the day- It's still what's going on, people trying to guess- the future, people- people still trying to be disciplined about their mistakes. People, you know, people taking a warehouse full of information trying to figure out- what's important, what's not important. And those basic fundamental things have probably been going on for all recorded history. You know, when people were, when people were tapping things onto rocks- and tablets, they would, you know, there were still people transacting and trading and trying to figure out whether this would be more valuable later or in a different place than here.

Well, Goldman Sachs historically was a, was a part literal and a legal partnership- but by the way, it still operates as a kind of partner like today. What it means is that the owners of the firm are the se- you know, are a whole echelon, a whole layer of the senior people of the firm- and they be- that everyone behaves like o- owners. And so it tends to be a little bit flatter organization, less stratified. The people who nominally are employees and subordinates on an organizational chart are your co-owners. And as owners, they feel entitled to information, and they act and behave like owners who care about the success of the whole enterprise, not just their narrow job. And when you run a place like that, you feel somewhat that your, you know, your legitimacy is based upon the consent of the, your co- your fellow owners- who in a corporation would be your subordinates, and you would owe them very little, but when they're your co-owners, you owe them a lot. And so the whole style and way of running things and thinking about things and the, you know, relationship between yourself and your, the person above you or the person below you is, is different in terms of- you know, how you carry yourself in terms of consequence. So that in a partner- in a partnership generally, and in ownership culture, there generally is more loyalty to the institution- because you're a co-owner of it and not just a temporary renter of it. Right. Right. You're a partner in the firm literally. Partner. And so- So that's kind of what it means.

But that stayed as one part and was operated separately for a long time, and even though I joined Goldman Sachs, in my book, the subtitle of my book has the word Goldman Sachs in it- I was still a little bit aloof from core Goldman- because J. Aron, the company that I joined, was in a separate building for a long time. Even though it was acquired, it wasn't integrated in. And that took years and for a, you know, and that took for a long time. So even when I became A partner then of Goldman Sachs, I would say things like, 'I'm going to visit Goldman Sachs.' Yeah, right, right. And, you know, I talked about Goldman Sachs in the third person. It took over time, it got integrated. It's kind of lost to memory now these many years- many, many years later.

In the annals of Goldman or world or the history of fraud, it's a very- it's not even a detail, not even a parenthetical. Right, but it's a lesson. I was ver- relatively still a junior guy, but maybe on the cusp of breaking through. And I was running a, uh, foreign exchange desk in business, and long story short, he was a guy that was m- you know, that was committing i- i- he was a very substantial, important figure in the UK firmament. And it turns out he was committing fraud by moving funds from his public company and the pensioners of his public company- to a private company- that he o- that was his property, and, and manipulating it. And one of the devices he used to manipulate this was doing foreign exchange transactions, which he was totally authorized to do, blah, blah, blah. But guess what? He was, the way he was doing it and executing it was calling the foreign exchange desk at Goldman Sachs, me- … as the principal, and I was so enamored of the idea that I was talking to the great man myself- that I didn't exercise a lot of critical faculty. Now, was there critical faculty ex- I don't know. There was just- he was doing foreign exchange, having them delivered. Did I, would I have checked on it, inspected? Would I, should I have been suspicious? No. But I, the point was that when it was all sorted out, I felt so guilty- of my very minor administrative involvement in it that I turned it in my own head to a big thing. And I remember lawyers talking to me and briefing me. I thought they thought I might be called to testify. What was I gonna testify to? That I was in his… You know. Yeah, yeah. But it wasn't a big deal, but I, you know, but it was, you know, I thought, 'God, you know, can I, uh, can I get fired?' Yeah. 'Can I get this? Did I do something wrong?' And so the natural guilt, you know, being a guilt-ridden person to begin with, it fed on me. But I also learned that, as you said, that I was worth being a, that I was now in a position of influence.

And you know what I've noticed? I'll say something more generically. The kinds of people who had the job I had- Aren't out and about and mingling and using, you know, their pr- you know, you get, you, you develop, you know, when you have to be at a job where you're one of the big equity providers or capital providers or lenders and you have to exercise judgment about- you know, a discipline on behalf of your balance sheet and your shareholders and the firm, you know, this, 'I'll do this, I won't do that, I'll invest in this, I won't do that,' everybody's coming to you, and, you know, you have a lot of friends. But you, you, you're in a position to, you know, do very important and make or break certain opportunities for other people. And I think over time it makes you a little bit more, uh, you know, a little bit more, um, careful- and disciplined and maybe even a little bit more remote. And wary. Yeah. Uh, best, best word, about stuff, and maybe that transit. So, you know, and I noticed that among, uh, you know, among people who had that job when I had that job and people afterwards- you don't see those people as much out and about.

Well, well, well because you… That's what struck me about it, was that you had an early negative experience with that that affected you a lot, but that really helped you because you were wary of the favor bank early on.

It's very funny. It's like I have a lot of friends and people I vastly, you know, greatly admire from, in my career who I engage with in business- and I have social friends and, you know, not zero, but I tended not to, I tended-- my best social friends were the ones that I didn't have, uh, uh, that I wasn't doing b- that business with. And vi- and the vi- and the ri- and the reverse. It's a simpler relationship. It's true. It's just a simpler relationship. And I just could be more open and less wary.

Didn't feel quick to me.

Yeah. I think rescue is a little- It- There was, I- Address it. Yeah. Addre- Make it better … address- Sorry, maybe not rescue. Address it. Um- Improve its performance. Oh, God, I love your word choice, man. At least on the second try. Uh, um, yes, it was a focus because at that point I had, I'd been in the commodities division and I, then we merged the c- the fixed income and the commodity much, the much larger fixed income division- with commodities and I ran that. And then there was, you know, the equity division was run pretty, what I thought- Pretty inefficiently- because at that point it was the trading division was viewed as a facilitation division. 'Cause the way the firm made more money and m- the bigger part of what it did, even in people's consciousness, was it did IPOs and brought ca- brought coun- companies- to market. Yep. And raised capital. And in order to raise capital, you have to be able to trade the securities. Once the, once the, once the securities get created by a company, goes public, you had to be able to trade it. And that trading was viewed as a facilitation in order to get the IPO- the capital raising. Right. And it wasn't viewed as a profit center in and of itself. In fact, it lost money con- continuously, but it lost less money than was being made- in fees for doing the capital markets, the fundraising.

Had the mindset- and there's no reason why the traders shouldn't be charged with making money. And very often, if you tell people they don't have to make money, they don't make money. If you tell them they have to make money, they make money. You know, they just, uh, you know, it just rewires them. And so we went over there and rewired, and I had a lot of help in that. There were other people who came. You know, I was then running those divisions. And, um, I moved people over who were v- you know, very good and had gone through that same kind of evolution in fixed income and in other places, and they did it. But in those days, it was very inefficient in terms of population, the way it was organized. We, y- you know, I think we had 82 people covering Fidelity. Yeah. And I said, 'You know something? Why don't we have somebody talk to them about all this stuff?'

You know, I don't know. At that point, there were other people in the firm who'd been there a little bit longer, and they we- they were elevated way b- higher and before me- that were still there. Yeah. I just thought it was something that I wanted to do. Right. I mean, I wasn't-

Maybe. I, even now, I don't know the people. There were other people who were named. I thought it was just weakness on the part of the more, of these, those other people, that they didn't take it on- and do it. Yeah. And they didn't wanna take risk and, you know, do something that would work. Yeah. I had nothing. Right. I, I didn't mind. I was just focused on, on, uh, on getting it done. It sort of annoyed me that it was run poorly and inefficiently, and that, that was my principal motivation- Yeah. Yeah … the annoyance.

I wanted to, yeah. And I did it, and I knew the people there knew it, how to do it. Yeah. They just had to be to- By the way, that's in everything. You know, very often, I, look, I, I don't know anything, but I, you know, anything that's organized circa 20 years ago needs something different today. Things evolve- and move on. I'm sure- half of the good things at Harvard are between the devi- you know, are between- the units that you have- and the different departments, and they fall in between, and then s- other part, departments are growing unto each other. I'm sure there are people who are doing, you know, there's a, there's a research project or a course that could be in the School of Public Health, the medical school, the bio department, or some other place, and yet- you have all these divisions- and everyone has their thing. Yes. And if someone came in today, they would probably reorganize it differently. But that's a high bar to get over- because everybody who runs each of those places doesn't wanna give up his- Right … branch. And the question is, who has the energy to just go in and fix it once and for all?

Or you.

Well, it was me there- … but you there in the new place. But I'm saying, but that's what has to be do. And then the second you expose yourself and lift your head about of the bo- above the parapet, everyone in all those groups who are f- probably fighting away from you will then agree on one thing. You're a bad guy.

Yes. Okay. I'm foretelling. All right. No, but it's just the nature of things.

Well, Hank and I, my predecessor, who, and subsequently, and that's part of the story, became Secretary of Treasury. Yep. We had this course of deal. Like, a, a fabulous guy, very smart. D- we couldn't be more different. He's a, you know, Christian Scientist- from the Midwest, and- you know, I'm a Brooklyn J- you know, Brooklyn Jew. Yeah. And, but we got along, you know, we got along great, but one of the things in our course of dealing with each other is we kind of- Even though we, everybody works around the clock seven days a week. Yeah. We never called each other at night or on weekends, even though I called everybody else at that time, and so did he. I see. But we never called each other. Huh. And then one day on, over the weekend, I'm out of the house, and I get a call from Laura on Memorial Day weekend- on the Sunday of Memorial Day weekend, and he says, 'Hank's called the house. He's looking for you.' This is, you know. And you're like, 'Uh-oh.' And I go, he didn't even have my cell phone number. This is my boss, and does it show you how rare it was. And I go, 'Hank? Calling me? At home?' Yeah. And he was calling, he, and I knew what was going on because for, you know, for a few weeks before that, he was approached by the president, who's, you know, uh, Bush, who's, by the way, who's, um, chief of staff was ex-Goldman. Yeah. So, you know, like a lot of people in the administration, and every administration is ex-Goldman. And I, I know that Hank was being offered, uh, being Secretary of Treasury, but it was the second term of Bush, so it was the second half- of the second term of a, by then, unpopular president- who wasn't gonna get anything done. Right. With a, with a con- So you weren't sure he was gonna take it? He wasn't sure he was gonna take it. I was pretty sure he was gonna take it. Because you're secretary, you know, it's, it's a very har- You know, you can act reticent, but it's very hard to turn that down. And also, and which I said to him at the time when he said, 'I'm not gonna…' I said, 'I think you're gonna take it.' I, you know. Why? I said to Hank at the time, the- It's des- Hank, what was your first job out of college? Which I knew, and he, I knew, obviously he knows. It was, oh, White House fellow. Yeah. I said, 'You know, the die is cast. You, so your, your, your first job was Washington. You're not gonna turn down, you, you, you know, you gonna wait till there's a better president- or a different time?' Yeah. You know, there's a once in… And so he ended up taking it and, um, and he said, um, you know, so he was calling to tell me that he was gonna take the job, and that, uh, we should fly down together, that he was going down to, uh, the Rose Garden on Tuesday, this was a Sunday, on Tuesday to fly down with him, and we'll discuss transition. Okay. And, you know, so- And then you knew. Yeah. Yeah, then I knew. And so I was thinking, 'Oh my God, this is the hit.' And he said, 'I'd like you to be my successor. Of course the board has to do that,' blah, blah, blah. And so my knees are knocking. I was scared. But, um, and, you know, gave me a couple days to stew about it. But when he said we'll fly down together- it was a short flight from New York to D- to Washington. Yeah. So at least I'll have 15 minutes, because once he got the nomination, he couldn't, you know, he had to be away from the firm. So it's like the hit by a bus- scenario- And you had to prepare while you could. Yeah … scenario in which case he's not gonna engage with the firm anymore. Yeah. 'Cause he, he'd have to have a wall then, 'cause he had to first, you know, get confirmed by the Senate and be remote from the firm. And I remember thinking, you know, 'Well, at least I'll be able to discuss the transition.' And then we get on the plane and we start talking about what he should ask, you know, you know, read his, you know, read his acceptance speech, read Bush's speech. And I realized, whose transition are we talking about? Yeah. Exactly. Yeah. You thought you were gonna get the helm, and you were- I thought it was my transition- but it was his, obviously. You know, my mind, I think his job was important, so we talked about his transition. And then it was, uh, it was an interesting thing because didn't have the normal, you know, where the senior guy is retiring and, you know, here's the successor and we're gonna overlap for six months. Yeah. And I'm gonna show him where the keys are- and where the bathroom is and all these other kinds of things and what's on the shelf. Yeah. And he just sort of, you know, disappeared and, you know, off and running. Which, which has advantages too. It does. Although it turns out, you know, this was 2006, so times were, were good financially. You have about 15 minutes. For about 15 minutes. Yeah, it turns out that that prep wouldn't have really maybe prepared you for what was to come. No, no. Well, it would've been, you know, it would've been… Look, it would've been, if nothing else, it would've allowed me to get my kinda sea legs. I remember- that week we had a glo- scheduled a global p- you know, like our partners meeting that was in Chicago where, you know, a young first term Senator Bara- uh, Barack Obama- was speaking to our partners, and Warren Buffett. And the very next week after that we had our board meeting- In, uh, Beijing. Yeah. Which, and, and the board meeting when you have these f- you know, remote board meetings is just an excuse to turn them into very big client events. Yeah. So we had, you know, we had, you know, we were hosting all these parties, one in the Forbidden City, one on, literally on the Great Wall. Invited, you know, half the, you know, people from the, you know, standing committee- were at the party, and all the, you know, CEOs of state-owned enterprises, which are also ministerial positions- Yes. were there. And I'm like… Actually, I was CEO designate because Hank didn't wanna, uh, as he shouldn't have, give up his title until he was confirmed- which took a couple of months 'cause they- And who knows anymore? Yeah … today would take years. Yeah. Right. Today it only took a couple of months. And so, but he couldn't c- obviously couldn't come to any, so I was the de facto CEO of the company. Yeah. And I'm walking along, and I had to learn to get, uh You know, acclimated isn't right. Statesmanlike. You had to be statesmanlike right away. Statesmanlike, which was not necessarily how I was honed and picked for the job. No. And I remember one of my board members, one of my most important board members at that time, 'cause when I say my board members, they were Hank's board members- but now they became my board members. I'm walking along to a dinner in China, uh, and, uh, you know, the, you know, are Chinese. Nominally we're the host, but are, really the hosts are the Chinese- 'cause we're having it in their Forbidden City on, on their Great Wall. Are in front of us, I'm hanging, you know, with some of the executives of the firm and the boar- and board members, and I get a I literally feel a kick in my butt. And I turn around, and who kicked me? And it was Ruth Simmons. Oh, yeah. Yeah. Uh, Ruth Simmons, who was then the, uh, president of Brown- Brown, yeah … who had a distinguished career before that, and a di- and a distinguished post-Brown career. Yes. Very important, very imp- you know, good board member and a good friend and a mentor, uh, and tormentor at times. Um, kicked me, and I turn around, I was, like, startled. She said, 'You get up there with those guys.' Get up there. Yeah. You know, it was great. Be the statesman. Yeah. Well, it was right. I mean, here I was, I, you know, I hadn't gotten accommodated to who or what my job was, who I was at that point. Yes. Yeah. I didn't feel like it, but whether I felt like it or not- You were gonna, you were gonna have to get up there. Exactly. Get up there with those guys. Yeah, you better be ready. And that was a, that was another lesson- and a data point for me.

Well, and by the way, it speaks to things that are going on in the current market- It does. It does … in, in the current environment. But, you know, things accumulate on people's balance sheet, and you can look at them, and what does that mean, balance sheet? You know, you know, if you're a big bank, you have a lot of assets and liabilities. You own- you own stuff. Yes. Assets is another word for stuff. Yeah. And a lot of the stuff you own you've had for a long time, and you have a kind of id- idea of what they're worth. And really, the fluctuations of value in what you have should flow through your income. Yeah. If it's worth less, it's a loss. If it's worth more … But generally- If you're not selling them every day, you don't know that the value of them has changed. Right. And you just take it for granted that the value is the same unless you hear otherwise generally. And- and sometimes they sit there forever and they… You don't change the price of them. And then suddenly, at some point, you find out, 'Oh my God, they're not worth what I thought they was.' Yeah. 'I'm really a lot… We're really a lot less wealthy. We really had losses that we haven't accumulated or acknowledged in the world.' Yep. So what we always had was a culture where we marked things to market every day. We'd look at the value of things. Did the value change? And we'd run that through the P&L.

We had a separate part of the firm. I see. Okay. In other words, we had traders who buy and sell things and who can live in a fantasy world if they want to, that this is worth more than I paid for it. I see. Okay. But we had another part of the firm who didn't enjoy that fantasy world- who would go out- The risk management side … the risk management side. Yeah. And controllers, we call them. Yeah. And they would go out, and they would assess the value of it, and they would look for parallel instruments, and they would look for analogous things, and they would look for things that sold in the market that were like it. And you know something? If they couldn't find anything, they would lower the value, and if they got challenged in that- by a trader, the controller would say, 'Okay. Go out and sell a couple of them and see what price you get.' Yeah. So it's adversarial by design. And hear me wrong. It's adversarial by design. And by the way, those people got… They were partners, too. Yeah. And they got paid well for doing that job, and they were parallel, and they could have done each other's jobs, and so they were high status in the firm. Yeah. And so we got a sense, apparently earlier than other people- that a lot of the triple A securities, the mortgages- that existed on people's balance sheets, that other people thought were money good, that were as good as Treasuries- as US Treasuries, were not.

Because- … or you marked them … people had to sell them and go to market. They were continually being marked down. The… By the way, the other thing about marking them down in value is it makes it easier for the traders to sell them. I see. Yeah. Because if you have something that's marked at 100- And the best you can get for them in the world is 72, you don't wanna take the 28 loss. Yeah. But if it's already marked down to 72- you've already had the loss. I see. So you might as well sell them. Yeah. So for a variety of reasons, marking it to market and making you take the medicine- early was a risk management tool and a good accounting tool, and it als- and it made people do that. And as a result of that, our balance sheet and our awareness of what was going on was, was better. Right. So you were- By the way, we didn't know that we were gonna be right in the long run. Right. Things that the market was paying 72 for could've been really five minutes from now- worth 100. You know, it could've been a mo- you know, in other words- we didn't necessarily know it was right, just was that was what the market was saying.

Right. It's because you had a adversarial culture of pricing these, these trades and saying, 'Look, I-' A forced, a forced imposition of reality. Yeah. Of current reality. Right. So as soon as something happened in the world that sends you a signal back, you noticed it- and you had to account for it. And, and so it makes you much more attuned to the signal, and it makes what you have conform to the current reality. Yeah. And other people were living in a relative fantasy place where all of a sudden when the c- started to unfold, they had literally Hunt, some of them hundreds of billions of dollars of losses that were not taken- which eroded all their capital. Right. And so firms went under.

Right. Our big achievement during those years of the global financial crisis was we didn't lose money. Yeah. We didn't make money- but we didn't lose money, and we had, and we were a firm that was known for taking a high-risk profile. Yeah. And we fulfilled our functions in the market because while this is going on, we're buying from people who wanna sell, selling to people who wanna buy, performing our normal market-making functions- and taking on risks, and so fulfilling those obligations. It was not fun. It wasn't pleasant. It was a lot of work to break even. And by the way, there were huge swings- while we're trying to break even because you can't always sell what you have. Yeah. You have to sell things that are like it, but they're not exactly like it. Yeah. And there are different timings and different things, and so you have to have computers and algorithms and smart people- to figure out how to get yourself close to even. Yes. But we managed to get close to even. Which is better than going out of business. We- Which is better than kill- dying. Dying, yeah.

Well, all the institutions are always frenemies. Yeah. They have to be because even when you do When you do an M&A, there's more than one advisor, and there's people on the other side, and you, and you have to be able to have good working relationships, and so sometimes you're adversarial, the next time you're co. You're bringing a c- a huge company public, there are four d- you know, there are four underwriters- and the underwriters have to

In that particular case, it was the government that brought everybody together.

And the government, of course, is adversarial to you all the time and structured that way, except at times they need cooperation that goes beyond their ability to command you.

And so but everybody has the same interest because you don't want the world to—

Well, you would. Again, it wasn't necessarily a level of trust, it was a level of self-interest, and that was commanded. People would still have that self-interest. Everything is always different.

In those days, the central bank could convene a meeting. The New York Fed in the conference room of the New York Fed convene a meeting, and you get the heads of 12 institutions, let's say a dozen institutions, and that would be 90% of the exposures that they were worried about. And maybe the Big Five were 84% of the exposures that they were worried about. It was very concentrated.