Leadership During Crisis with Lloyd Blankfein

Well, I grew up in Brooklyn, as you say, which is a stone's throw from Manhattan, but I probably went into Manhattan no more than three or four times. Two or three of those times would have been to the Radio City Christmas show when my parents brought me there. I might as well have been 400 miles away and not just four miles away. For those of you who visit the island of Manhattan, there's a lot of New York City around that. I'm one of those outer borough people. I grew up in the Linden Projects, public housing. I'm now 69 years old, so that dates me and my childhood. When we got there when I was an infant in the late 50s, I had two parents and a family that was coherent. I went to high school, overcrowded New York City high school, triple session high school. Disadvantages at the time, I thought one of the advantages was you only had about three or three and a half hours a day. They cleared out the school twice because they had three sessions. That seemed like a good idea at the time when I was a kid, but looking back, that's not necessarily the way to do things. I did well in that context and fortunately got into great schools on scholarship, for which I remain grateful today. That caused a change in the trajectory. I went through college, went through law school, got a job in a law firm for a long time, then made my way into finance.

The banking world was not even on the horizon. Where I grew up, very few people's parents went to college and nobody's parents had white collar jobs. I wouldn't have known what that was to even have a conversation about it. I knew there was a wider world. In my high school, I was on a swimming team. It wasn't a very good swimming team, and I wasn't a very good swimmer on the not very good swimming team, but I did have a coach that took an interest in me. For one summer, he tended to the waterfront of a camp in the Adirondacks which catered to kids who could afford to go to summer camp. I was hired for the summer, I think I was paid $100 for the whole summer, and I worked as an assistant to an assistant on the waterfront. What that gave me was exposure to kids I couldn't even grasp what they were. They came to this camp and had little TVs and their own paddle for canoeing. I thought these were kids from another planet. They were children of doctors and lawyers and professionals, not plutocrats by any means, but I got some exposure to different kinds. Generally, through reading and watching, I knew there was something beyond. My motivation at the time was to get away, go to an out-of-town school, whatever that meant. I applied to schools and I got in. I didn't get into all of them, but you can only go to one, and I got into a good one.

I don't know. I've had a lot of validation in my life, so when I look in the mirror I think to myself, 'Boy, I must really be terrific.' But the fact of the matter is, I say that to myself all the time. I'm sure other people say it to you? Other people don't say it to me. Look, everybody knows bad luck, but there's also good luck. You get to a crossroads. If I went to a college night that my own high school didn't have because not a lot of kids from my high school went to college, but I went to it. I met a guy who was handing out applications and talking about his school, a guy from Harvard. On that basis, I applied to Harvard and I got in. What if I had not done that? I would have gone to... who knows? There's a lot of randomness. You can charge people as fully accountable for everything that happens in their lives, and you can lean into certain places, you can steer your career and your life, you can put yourself into a different position and work hard. But the fact of the matter is, you have to sometimes be lucky, and you have to get people who have an interest in you. Some people carry themselves in a way that makes it more likely that people will take an interest in them, some less. You could be the Olympic athlete, but you could peak in a non-Olympic year. There's a lot of that. I think it's very important for very successful people to realize when they admire themselves and they have very libertarian tendencies because they think we should all enjoy what we have and not have restrictions or throw into a common pool. I think it's worthwhile to remind yourself that all of us who get to good places are beneficiaries of good luck too.

Yeah, of course. And lucky always sounds good, but there's good luck and bad luck. We would not be having this conversation had I not been CEO of Goldman Sachs. Would I have been CEO of Goldman Sachs if my predecessor wasn't appointed Secretary of the Treasury when he still had a lot of runway ahead of him in this job? Who knows? I could have retired as his number two. That's the point. That said, when you're in a leadership position, you're organizing things, you have to hold people accountable. It's not always useful because it's not... yeah, exactly.

I like that point of view. Keep that up.

Well, I guess I must be super competitive in some things, not in others. I had an unusual path at Goldman. Goldman is an investment bank, deservedly earns its reputation for its relationship in the most sophisticated parts of transactional investment banking. I came up through the trading side, an unusual path. If I had to say what helped me the most, what skill or talent I had, it's that I was always able to work well with other people. Other people didn't always like it, but I think at the end of the day they always appreciated it. I tried to make people around me better. I tried not to compete with my subordinates, for example, which some people tend to do and makes for a poor relationship. I think I would get credit for making people better than they might otherwise have been. I think that's the contract that a lot of people in leadership positions make implicitly or explicitly with people, and people know whether you're that kind of person. I don't think in any of the skills required for my job, whether it's presentation, trading, marketing, I think I was pretty good at every one of those things, but I don't think I was ever the best at any one of them, even among the people around me. But I tell you, I didn't stop the people who were better than me from being better than me, and I had no problem touting their virtues. I thought my success would come if my team was doing well. That's a bit of a leap of faith, but I give credit to my organization at Goldman that that worked. You didn't have to fight with people for credit. If you consistently were part of groups that performed well, people would notice.

Look, I worked in a place... the metaphor of the 800-pound gorilla. You have to stand away and give room for the 800-pound gorilla. I worked in a jungle that had 100 800-pound gorillas, and any given day, 70 have to be convinced to stand back and say 'please, after you.' Part of it is to get people to believe that it is in their narrow self-interest for their own self-promotion to temporarily at least put their individual self aside and work for the betterment of the platform. If you make that platform really terrific, you can then use that platform for your own ambitions within the firm or even outside the firm. In most of the places we operate, people are really happy to get Goldman Sachs partners on their boards or to give them promotion. The head of a regional Fed the other day, a Goldman Sachs alum was appointed. That doesn't seem to be a detriment on your resume to have that. That's because the platform itself has been really tended to and enhanced, and then it's available for all the people who are part of that network and alumni group, existing employees who benefit from that platform that they invested in. But if it was every man or woman for themselves all the time, the platform wouldn't be that good. We might have some individual stars, but even they wouldn't be as good or as valuable or as important as they were.

First of all, Goldman Sachs is a big bank, but among the big banks, it has a relatively small population. It's not a large-scale consumer bank, not really a mass affluent business. For one thing, where we recruit and the people we hire tend to be on the higher end, very ambitious. Goldman is a bit of a graduate degree for people in that respect. People have gone on into different things, a lot of diverse activities, but they're regarded as competent. Because of that reputation, we attract people who are like that, who then become more like that, and it's a virtuous circle. I'm happy to say that 25 years after the IPO, and that's also a reason why Goldman Sachs had a distinctive culture. It stayed private for a very long time, but even 25 years later, I think Goldman Sachs deservedly enjoys a reputation as a place where people in finance would want to go to start their career. There are other places like that. I think Apple has that reputation in design, Procter & Gamble historically in marketing. You look at marketers all around various groups, a lot of people have roots in Procter & Gamble. GE in industrials, people who ran industrial companies have roots in GE. I think Goldman Sachs is somewhat like that in finance. It's a great place to be, a very virtuous circle. You make people better, and you'll get the best people.

Look, we have that situation now. I think if you look back, could it have been like this in the Gilded Age in the late 19th century, where people who are very successful, very wealthy, and don't seem to have lost a step or any element of their ambition? You realize that people are performing because of their sense of competition and their sense of collegiality with peers and just their interest in the subject matter. It's a wonderful thing. Certainly people would have lost the economic incentive a long time ago, and yet they seem every bit as motivated, maybe more so. When people go into combat, who are they fighting for? Everybody's thinking about God and country, but really people are performative for the people next to them who they went through training with. Those are their peers. I think we have that today, and I've had that in my own firm. I think of what will so-and-so think of me. By the way, in crisis, which Goldman Sachs managed to... we always seem to have the crisis of the century every four or five years. I always used to tell people in my own firm, 'Look, you're a cohort going through life together. You may be in your 20s, you may find this very hard to believe, but your other colleagues who are also in their 20s or early 30s, roll the clock forward 25 years and they may be running all the powerful institutions in the world. Though that's hard to believe, that is the case. You will age into that cohort. How you perform now, and sometimes it occurred in a crisis, will determine your reputation with the people around you who may not seem that important today, but they will be, I assure you. That reputation will be embedded and very hard to shake. So take my advice: perform for them now, because memories are long. The memory of you formed today will determine the confidence that people have in you at very tense moments when they're very much in a position to have a lot of influence over you.'

Yes, I remember. How could you not? Most people would erase that from their memories, but the financial crisis hit in 2008. What was that like? What were the darkest days during those crises? What was your rock bottom? The crisis unfolded. You could see signs of it. You watch these movies, and the horses start to act a little nervous, the chickens start to cackle, the birds start circling like in a Hitchcock movie. We sort of had that happen in 2006, 2007. We had a fund that was an arbitrage fund that on a very volatile day would move four basis points. I remember sitting in a movie theater just looking at the P&Ls instead of the movie on my BlackBerry at that time, and looking down I said, 'Oh gee, it moved 7% today.' You could just see that things were happening. We got into gear and did things to adjust, get rid of existential risk on our balance sheet. We didn't know what was going to happen, but we saw precursors and were expressing nervousness publicly that things were afoot. But we never knew how severe it was. I would say at that time, Goldman Sachs was still private in the sense that people didn't know who we were. We had clients, we had fresh people whose only job was to keep us out of the newspaper, not into the newspaper. It wasn't really bris, and all of a sudden the economy came into sharp focus, banks in particular, large banks more in particular, and Goldman Sachs more particular than others because we were large market makers at that time, in the middle of a lot of flows. We weren't a consumer bank, people on the street wouldn't have known us, and not knowing us generated a problem because all of a sudden we became kind of spectral. 'Who are you? Who are those people?' I would say the toughest moments were when the firms that were most like us started to have very big problems. Bear Stearns, a couple of them folded. We were frankly much more secure, much better, but in a crisis like that, in a real credit crisis where nobody is willing to take anybody's credit, you have obligations to pay money out and the money that is owed you isn't coming in because people are unwilling to send stuff to you because they don't know it'll be there to perform. Everybody was at risk. Us, but everybody was at risk. There was a dark moment where the crisis entered into a phase where the panic was like a tsunami. You could be an Olympic swimmer or a six-year-old child standing on the same beach; both would drown. It didn't matter how good you were because if there's that kind of thing, that was averted. But those generated some very unpleasant moments.

Yeah, and it's hard to achieve. Look, we were a public company, there's a stock price, we're in the news. If you left things alone, if we had 35,000 people around the world, I would say 34,000 people would be stopping what they were doing and staring at the screen all day, listening to commentary, wringing their hands, or just playing traumatized by worry. I'd say my job at that point was to get people to do sensible things and to do their work. At that time, we were distressed by the situation, but our clients were more distressed than we were. We were in a better position, big balance sheet, we had the systems and technology to look at things and payments and flows. We didn't like what we necessarily saw, but we felt in control. This was a time when our clients really needed us. The point was that we were both an actor here, a target, but also a player in having to try to sort things out for everybody else. What we had to do was to get people to do their jobs. I literally came on and talked to all the senior people, got big groups of people together and said, 'Look, if you want to help the firm, which everybody did, and if you want to help the world, do your jobs, your regular assigned jobs, like you've never done them before. I know your stress, I know you're curious about what's going on. Here's the deal: I will keep everybody informed, but I need 98% of the firm to do their jobs and 2% of the firm to help work out our own situation, deal with the official sector, and get ourselves on the right path going forward. I promise I will tell you what's going on. You won't miss anything, so you don't have to stare at the screen all day.' I think that's the fact. The people who get into that headspace are going to be remembered as the people who made the biggest contribution to the resolution and helping their clients. It was actually a chance to advance our reputation and our relationship, and that's what we did. I'd ask people: do your job, escalate issues because issues were coming up all the time. 'This person won't accept our name as credit, we don't want to accept somebody else's name as credit.' Elevate your problems quickly so you can get an answer. We're not hesitating, we're very decisive about what we're doing. Stay in front of your clients, find out what their problems are. At the end of every day, I'd send a voicemail out to people. If there was something going on, I would address it, but mostly in the voicemail I said, 'I went by my normal schedule. I went to France, I went to China, I went to places where we're doing business. Landed in Frankfurt, saw 12 clients. The clients had these concerns, we were able to do this, we did a good job for them, we sorted this out. I'm a little concerned about this area.' I would set a voicemail to 35,000 people. A lot of it didn't address specific problems but rather showed that I was doing my job too, just saying that life is going on. Even in the context of these difficult times, we did a financing today for so-and-so and it worked out very well. You get up every day, fight, go to sleep exhausted, get up the next day, go out and fight. Then one day there's no one left to fight, you've gotten through the problem.

In a crisis, you find out a lot about people. We had people who on their resumes were brilliant athletes, fabulous people, and some of those people were hyperventilating in a corner. Then we had people who didn't look like they could walk up a flight of stairs without stopping three times, and they were magnificent. You learn about people, and you also learn about yourself, which is the most important person to learn about. One of the things I would say to myself, and I still say to myself sometimes, is 'no choice, no problem.' In other words, you're in a situation you didn't volunteer for, it just came upon you in a wave. So what are you going to do? You have no choice. So it wasn't hard to get going. It was unpleasant, but it wasn't hard. Hard is when I have to pick between two different identical shades of white for my wife.

That's true actually. That's amazing perspective. Thank you for sharing that, that's inspirational. I am curious though, I think of the banking industry as a services-related business. At the end of the crisis, I did feel that down. I'm just curious to get your take: what did you think of the bailouts that were offered? What do you think about the lack of regulation or the new regulation that was put in place? What were your thoughts at that time?

At that time, my thoughts were related to the practicality of survival in the system. But if you try to regulate the world so that no one ever takes a risk and it can't happen again, you'll turn the entire country into a Treasury bill and there won't be progress. The debate that has to happen, and it does happen although not in these words, is you want to make the financial world safe from the 80-year storm, but you want to have the 79 good years in between where you have risk takers and people financing risk. Think of all the risks of all the companies that in your professional life you've been associated with. Those companies were underrated way earlier than anybody knew they would become the behemoths they are. People took risk in those areas, banks financed them. If they turned out to be wrong, people would have had losses. If the losses were so big and so extensive that they jeopardized the system, maybe some rules and laws might have changed. But if you organize yourself around the principle of avoiding the risks that could under certain circumstances lead to that, you'll end up with a very low growth system.

I would say that the Federal Reserve and our regulators know everything. Just because they know it, they're people too. I don't think the head of the New York Fed, the head of the central bank, didn't see the mortgage crisis coming, and when it started they thought it was localized, just subprime. So people can be wrong in their judgments, but it wasn't from a lack of transparency. It just wasn't transparent to people who had no interest in peering into that system. You might find the place where you work highly transparent, you know what the people around you are doing. But pick up the general press or the minutes of congressional hearings and read the C... you didn't go to the congressional hearings. People will say they don't have a very good vision into what you guys are doing. Now I was in your industry too, because we're obviously bankers and representing your industry, so I have the perspective on it. But a lot of people who claim a lack of transparency are not looking. Sometimes it's not transparent because it's new and the actors themselves aren't clear on what's happening. We're all buffeted by macro forces beyond our control. We're having this conversation, who knows what's going on in some basement somewhere that somebody else is going to announce the day after tomorrow. Would we rather not do that? Take the US economy, by far the largest economy in the world, the most nimble, the fastest growing. How could that be? Usually size is the enemy of entrepreneurialism, great growth, speed, flexibility, and resilience. But no. So we have a system. Periodically we will take risk, that risk will turn out to be excessive, which will be very clear in hindsight, not very clear in prospect. It'll be bad. We'll do things that we wish we couldn't do wrong. Some people will be hurt who don't deserve to be hurt, some people will be saved who you wish it were otherwise. We'll work it out, we'll have hearings afterwards, people will inspect, we'll legislate again, but hopefully not so much that we don't have another cycle. What you don't want to do is, in order to protect us from the 80th bad year, you don't want to have 79 uninteresting years of slow or no growth just to protect yourself from the problem area. This would not be a popular thing. I don't know, I'll probably regret saying this, and I certainly won't enjoy reading it back, but that's the inevitability. If you read history or financial history, there are cycles to things. Whenever anybody says to me, 'The past was so obvious, why didn't you see it? You must have seen it,' I say, 'Okay, if you're so clairvoyant, tell me what's happening next.' Tell me whether all the money pouring into some of the projects that a lot of people are working on, even if they're good, can all those companies be good? When do those mistakes get written off, and how violently do they get written off? If you legislate against making mistakes, you won't have any progress.

Of course. Whenever I see something happen, somebody says, 'Do you miss it?' I say, 'Yeah, a third of the time I miss it, maybe a quarter of the time I miss it, and the rest of the time I'm just so happy I'm not setting my alarm clock in the morning and I don't have to leave my family on a Saturday afternoon to make sure I was in China Monday morning.' I was doing that all the time. Let me just say, I find myself engaged in the same sort of conversation in my head that I had freshman year of college: 'What's the meaning of life?' You work along, and when I first left my job, I said, 'Oh gee, I should teach.' So I went and got a low-level lectureship at a very prominent institution. I didn't love it. I didn't like it. I said, 'This is not what I want to do. I'd like to learn, not teach, and I don't want to be in finance.' I said, 'What do I wish I knew?' I was always interested in anthropology, linguistics, history. I didn't know enough about physics, the physics of large things and the physics of small things, quantum. So I spent the last couple of years going to lectures, listening, reading up on what I can. I'm somewhat relieved by the fact that since nobody in the world understands this stuff anyway, it wasn't a burden on me that I didn't understand it. With a lot of stuff, I get frustrated if I don't get it, but I'm sort of relieved that maybe five people in the world really understand it, and maybe not even five. So I can enjoy it without the burden of not being an expert, of not being perfect. I started recently writing a little bit of a memoir, a little bit talking about crisis management, trying to be useful, but in my tone and perspective. I saw a lot of stuff about the system that works well and works poorly, and people saying things that just don't make any sense if you actually lived through it. You want the world to come out a certain way. Ruminations on risk and how you think about risk and manage it. That's been interesting. But again, getting back to the meaning of life: you're supposed to work and make yourself wealthier and wealthier to be a benefactor for people you'll never know, either beneficiaries of charities you'll never meet or descendants you'll never meet. Is that a big point? I don't criticize everything, you want to improve the world around you, but really what's the meaning? What is it for? At the current moment, I've always been curious about stuff, and now I have the time and luxury to get people to teach me stuff I don't know, or to read about it, with Audible and Great Courses on tape. I can go through a menu and learn about stuff I didn't know before. That makes me happy. Of course, if I pick up the paper and some people have done something that I think I could have done better, or they're doing things in a dopey way, I pick up my grandchild's plastic telephone that's connected to nothing and I rail into it, giving fabulous advice to no one on the other end. So yes, it's frustrating sometimes not to be engaged at a very high level in policy and to be effective in that way, and I miss that for sure. Other times, I am relieved that I don't have to pay the price of that, which usually involves running around the world all the time and spending most of your time on an airplane or in other places so you can meet those people that will inform you and who you in turn will inform and engage with. So there's a trade-off. I will probably find the right balance the day before I expire, when it's all too late.

I don't know. Again, it gets to the meaning of life. What's the point? I can just think of all the people a hundred years ago who were just like us, having these conversations that nobody knows about anyway. I think you want to make a contribution to the world. When I see people in distress, it tears at me just like it does probably to you. You want to fix certain things, contribute money, contribute your time and effort to a certain amount of things like that. But in terms of do I really want to... I'm working on a book project now, and I say, 'Gee, what's this? Will I feel...' I have a sense of wanting to have something that contains myself in some way, but then I think to myself, 'What's the value? I already know everything I know.' You get into these debates. When you're sitting around as a freshman, I found motivation a lot easier when I was young, getting out of the projects, going to school on scholarship, had student loans, and was very poor. Then I knew what I had to do as a matter of survival. With all the freedom I've acquired as a result of such success as I had, now I have choices. Sometimes on a day where my calendar is clean, I say, 'What a luxury,' and then I spend the next 10 hours thinking of what I want to do, and by the time I figure it out, it's time to go to bed.

I agree. By the way, I like to learn about old things. You go to dinner parties and the host says to you, 'Who do you want to sit next to?' I say, 'Sit me next to anybody, because everybody knows something I don't know.' It's like when you're a carpenter, every tool, every screw has a name that nobody knows but the professional. I'm always curious about this stuff. I walk through the streets and see a street sign that says Crosby Street, and I wonder who Crosby was. The best thing that most affected my life, and I know we've looped away into various AI, but Google was the world. I Google 100 times a day just because it's wonderful. I watch a movie and I want to know what became of that actress from some 1940 movie.

But don't get me wrong, at times I pick up the paper and I know these people. I still keep in touch, I talk to people I used to work with, people I used to advise call me up. I do enjoy the business, I do enjoy the game. I enjoy meeting with people who are leaders in advancing important things. In order to be interesting to those people, they lose interest in you if you're not advancing important things. So my ability to be relevant to the kind of people I like talking to from time to time is a little bit lost by the way I've diversified my own stuff. I find myself taking an entry-level course in a metaphorical way in 50 different courses. But if you're only taking entry-level courses, it's interesting for me but not interesting for somebody who's sophisticated in the space. So you have to find some balance. We're back to being strivers, still searching. Whoever finds balance, your chemistry changes and you're not balanced anymore anyway. You change your mind about things.

Well, thank you for your time as well. I appreciate it.