Ben Horowitz and David Solomon: The Sweetest Macro Spot in 40 Years

1. 0:00 – 2:09

   Introduction

   1. DSDavid Solomon0:00

      We were the largest wholesale funder in the world 10 years ago. There are a lot of things you wanna be the largest in the world. Wholesale funder, not one of them.

   2. SPSpeaker0:06

      We got a lot of criticism, like, "Why are you raising money now? What are you, stupid?" And it turns out that the best time to raise money is when nobody has money.

   3. DSDavid Solomon0:14

      Last year, the four largest companies contributed 1% to GDP growth with their $400 billion of spending. M&A and capital raising, IPOs, are driven by confidence. For the last four years, whatever the question was, the answer was no. Okay, now whatever the question is, the answer is maybe.

   4. DHDavid Haber0:29

      David, you've been at Goldman now over 25 years. You know, what are you focused on to position Goldman for the future?

   5. DSDavid Solomon0:34

      If you're in our kind of businesses, if you're attached to financial assets, this is as sweet a spot that I've seen.

   6. SPSpeaker0:41

      With AI, if you have proprietary data and you have enough GPUs, you can solve, like, almost any problem. It is magic.

   7. DHDavid Haber0:56

      I've had the distinct pleasure of working, at least indirectly, for both David Solomon and, and Ben Horowitz, and, uh, have a lot of affection for both Goldman Sachs and a16z. Um, if you haven't read, I highly recommend reading the book The Partnership, uh, which is written by a guy named Charles Ellis, which chronicles Goldman's nearly 160-year history. And I think the most remarkable thing about Goldman's history is the fact that it's not a business built through a series of bank mergers, unlike many of its peers. It was really a business built brick by brick by generations of entrepreneurial partners raising their hand, going off and building new businesses, whether it was expanding into Europe or starting the merchant banking business or the wealth management division. You know, many of these business units became global franchises, and I'd argue that, you know, Goldman was, and still is, one of the most entrepreneurial financial institutions in the world. And as I think about where we are in our own evolution at Andreessen Horowitz, I kinda like to think that this is what Goldman Sachs must have felt like, you know, 50 or 75 years ago. You know, a small group of entrepreneurial investors betting on the future-

   8. DSDavid Solomon1:58

      Partners weren't as rich as you guys. That, that was a-

   9. SPSpeaker2:00

      Yeah, and, and also Goldman stopped speaking to Sachs, like, forever.

   10. DHDavid Haber2:06

       [laughs]

   11. SPSpeaker2:07

       Like, they got very mad at each other over...

2. 2:09 – 8:54

   Goldman's Evolution from Partnership to Public Company

   1. SPSpeaker2:09

      It was that Sachs had supported Germany in World War I, so [laughs] basically-

   2. DSDavid Solomon2:13

      You know, you actually remember your history.

   3. SPSpeaker2:14

      Yeah.

   4. DSDavid Solomon2:15

      Wow, yeah.

   5. SPSpeaker2:15

      Yeah.

   6. DHDavid Haber2:16

      Um, well, yeah, small partnership betting on the future with big hopes and ambitions. [laughs] I'll, I'll leave it at that. Um-

   7. DSDavid Solomon2:21

      Well done, David.

   8. DHDavid Haber2:22

      Thank you. Um, but maybe, yeah, maybe just, you know, pulling on that thread, um, you know, David, you've been at, at Goldman now over 25 years. You joined the firm, I believe, in, in 1999, just after the firm's IPO. You know, how has the firm evolved during your tenure? And, and maybe more importantly, um, you know, what are you focused on to position Goldman for the future?

   9. DSDavid Solomon2:42

      Oh, before, before, first of all, it's great to be here, great to be with everybody. Before I start on that, I'd just say one of the big lessons I have in my life is if you're joining a new firm that's a private partnership, don't spend six months negotiating so you carry over past the IPO date. Join, join before, join before the IPO. It's a good, good lesson for all of you in private partnerships. Um, you know, it's, it's, the firm's a remarkable place, and I really appreciate what you said about the firm and the entrepreneurial spirit of the firm. The firm was, for a long time, a private partnership, and the thing about private partnerships is you have this mutual agency where people go off and they do things. There's some structure that creates a collective each year or each cycle where everything comes back, and then there's a reevaluation of the partnership shares, and you go off again, you know, into the future to do more. And that served the firm incredibly well, and the firm stayed a partnership much longer than, than any other real-

   10. DHDavid Haber3:35

       Got it

   11. DSDavid Solomon3:36

       ... big Wall Street firm. But I, I'd like to say that the firm stayed a partnership until the last moment-

   12. DHDavid Haber3:41

       Hm

   13. DSDavid Solomon3:41

       ... when it absolutely couldn't be a partnership anymore because it needed the permanent capital to really make it a relevant business. If the firm hadn't gone public in 1999, it would've missed kind of the global expansion of capital markets and probably would look more like, not to pick on anybody, but just to pick a name, more like Lazard-

   14. DHDavid Haber3:57

       Hm

   15. DSDavid Solomon3:57

       ... today than, than, than, like, Goldman Sachs. And so, you know, the stewards of the firm at that point did an incredible job. I think the challenge for us over the last 25 years, and I think, you know, the leadership team over the last eight years has really done an incredible job at this, working together to do this, is somehow, 25 years after an IPO-

   16. DHDavid Haber4:15

       Right

   17. DSDavid Solomon4:15

       ... we still have this partnership culture. It's highly aspirational every two years to become a partner of Goldman Sachs. We have 450 people who really are compensated in a correlation to how the overall enterprise does. Um, but the big thing that, that I'm really proud of that is a broad leadership we've done is we've started to recognize that, that we're not a small private partnership.

   18. DHDavid Haber4:36

       Hm.

   19. DSDavid Solomon4:36

       And you can't be a public company and not grow and have some form of top-down strategic direction-

   20. DHDavid Haber4:42

       Yeah

   21. DSDavid Solomon4:42

       ... that, that really gets the whole thing making, you know, the one plus one plus one plus one equal, you know, more than what the math adds up to. And that's been a journey, and it's been bumpy. You were there for part of those bumps.

   22. DHDavid Haber4:53

       Yeah, sure.

   23. DSDavid Solomon4:54

       Um, but, um, but I think we've, we've navigated well, and I... You know, we've got... I, I, I still think, you know, the principles, the values that we kinda sit upon as a firm, we really strive to be the most exceptional financial institution in the world. We don't always get there, but we strive for that. And, you know, we really sit on four core values of client service, partnership, integrity, and excellence, try to live it. And, um, and I think the firm's in a really good place. But it's, it's, in some ways it hasn't changed at all in 26 years. In some ways, it's changed, it's changed massively.

   24. DHDavid Haber5:25

       Are there a few things you're most focused on as CEO, kind of looking forward, you know, for the next five or 10 years?

   25. DSDavid Solomon5:30

       Sure. You know, one of the things I've... I, I was a banker, and I advised CEOs for a lot of my career, but actually owning the responsibility, that's one of my big takeaways the last eight years, is very different than, um, than giving advice. You know, I think the most important thing that a CEO has to do in a big enterprise like this is they have to kind of own the strategy and the direction of the firm. And, you know, I'm focused on how we ensure we're executing toward growing the firm, because I know we have to do that to perform on a relative basis.But then I'm also thinking about and worrying about, you know, big picture strategic risks that can make the firm less relevant, less successful, less important, less competitive. And, you know, for us, I think there are two things that the firm is really focused on. I think first of all, one of the, one of the things that makes the United States an extraordinary place is we have the most extraordinary capital markets, the most extraordinary financial system, the most extraordinary financial institutions. I would argue that the six most important financial institutions in the US are all US financial institutions, and there is no global institution that can compete in terms of its relevance in the world with the six most important US institutions.

   26. DHDavid Haber6:41

       Mm.

   27. DSDavid Solomon6:41

       When you look at those institutions, there are, there are different kinds of institutions. There are retail banks, more traditional banky banks, um, that would include JP Morgan, Wells Fargo, Bank of America, Citibank. They all have global businesses, but they are truly banks in what they do. They have retail platforms, retail businesses, and then you've got two institutional firms.

   28. DHDavid Haber7:08

       Mm.

   29. DSDavid Solomon7:09

       And that doesn't mean they don't touch individuals in different ways, but Morgan Stanley and Goldman Sachs are both institutional firms. And Goldman Sachs is a little bit of an island to one in the context of the way we're positioned as an institutional firm, and Morgan Stanley is a little bit of an island to one in terms of the way they're positioned. Scale matters a lot.

   30. DHDavid Haber7:26

       Mm.
3. 8:54 – 15:33

   How a16z Went from Top Tier to 18% of All US Venture Capital

   1. DSDavid Solomon8:54

      wholesale funder in the world 10 years ago. There are a lot of things you wanna be the largest in the world. Wholesale funder, not one of them.

   2. DHDavid Haber8:59

      Right. [laughs]

   3. DSDavid Solomon9:00

      Um, and so, um, that strategically is another thing we worry about. So those are big things when stepping back and getting away from the execution day to day and thinking 10, 15, 20 years, which by the way, I won't be here running the firm, but it's still my responsibility-

   4. DHDavid Haber9:13

      Sure

   5. DSDavid Solomon9:13

      ... to steward and, and chart that. I worry about that. The short term, you know, much more focused on technology across the organization, how technology shifts the way we do things. How are we building processes, operating differently while staying true to what we do?

   6. DHDavid Haber9:26

      Awesome. Well, we're, we're here to help with that today too.

   7. DSDavid Solomon9:28

      Absolutely.

   8. DHDavid Haber9:28

      Um, Ben, m- maybe, uh, transitioning to you. Um, you know, you and Mark started the firm in an auspicious time, uh, in the wake of the financial crisis [laughs] in, in 2009.

   9. SPSpeaker9:38

      2009, yeah.

   10. DHDavid Haber9:39

       Um, you know, it turned out to be a, a really interesting moment because it was, you know, the beginning of mobile and the rise of the cloud.

   11. SPSpeaker9:45

       Well, it's funny also, y- you know, we got a lot of criticism, um, i- in kind of venture capital. Like, why are you raising money now? Like, what are you, stupid? Um, and it turns out that the best time to raise money is when nobody has money. I mean, like it's, it's very obvious and, [laughs] you know, when you say it that way. But, uh-

   12. DHDavid Haber10:05

       Mm

   13. SPSpeaker10:05

       ... just the nature of investing is people always wanna invest, you know, high, [laughs] and they always wanna walk away when the market is low, and it just is, uh, is one of those things. So we, we got very fortunate then, I think. Yeah.

   14. DHDavid Haber10:20

       And m- maybe you can kinda describe the evolution of the firm, you know, since you started and, and again, maybe what your ambitions are, you know, for the future as well.

   15. SPSpeaker10:27

       Yeah. So the original idea, a- and in venture capital, like the, the fundamental thing that you have to be is you have to be what's known as top tier. Because if you're not top tier, then the best entrepreneurs won't take your money. And so like there are times when you can, you know, when the market is so blazing hot that, you know, you can be like a not important venture capital firm and dump into good deals and make money. But in most times, if you're not top tier, uh, you're gonna go out of business. And, um, and, and so you have to be that. And, and the difficult thing about being top tier is historically the way you became top tier was reputationally. Oh, if you're Sequoia, you had invested in Apple and Cisco and Yahoo and Google. And so it's really hard to make up that ground if you're starting in 2009. So the idea we had originally to get to top tier was, um, to basically have a better product, a better product specifically for entrepreneurs. So the venture capital product was great for LPs and, um, but we thought mediocre for entrepreneurs, so we designed the firm, uh, to basically really enable a founder to, uh, basically build his or her own company, um, and run it, uh, as CEO, which wasn't kind of an idea then. I- the idea was much more to replace the founder. Um, and you know, there's a lot that went into it, and because we were founders, we knew what that was, and so we kind of created a firm to give a founder like a brand and power and access and all these kinds of things that VCs said they did, but they, they didn't have to 'cause, like-They were top tier, it didn't matter. Uh, and so we did that, and that's kind of how we got into position to kind of be a long-lasting firm. The second phase, uh, was really kind of based on something that Mark wrote in two thousand and eleven called Software is Eating the World. And the idea with Software is Eating the World was basically, uh, if you looked at venture capital up to that point, there were these studies that said, in any given year, there are going to be fifteen, you know, approximately fifteen technology companies that get to a hundred million in revenue, and those are gonna be the companies that are worth money, and nothing else is gonna be worth money. So the whole venture capital sport was, how many of those fifteen can you get into? Uh, now, with softwa-- if software was gonna eat the world though, we thought, well, maybe that fifteen is gonna be a hundred and fifty, um, and maybe one of the features of a venture capital firm is gonna be, you're gonna have to be able to scale it. Uh, and none of the, you know, traditionally-- I, I remember Dave Swenson, the great Dave Swenson, uh, RIP, saying to me, who was the, uh, ran the Yale endowment for years. He said, "You know, a, a good venture capital firm's like a basketball team, you know, five, maybe six players, that's it." Uh, but you can't address, you know, a market where you have to be in a hundred and fifty companies with six players. So how do you organize, how do you scale, how do you design the firm so that you can get to the whole opportunity, um, yet still be, like, really, really good at investing and not have more than five or six people talking about a deal? Uh, and so that was sort of phase two. And, and that's really kind of, I would say, when we somewhat left the building in terms of, um, you know, what was going on in Silicon Valley, uh, because nobody else was thinking that way. And so this last year, twenty twenty-five, about eighteen point-- what is it? Eighteen point three percent of all venture capital raised in the US was raised by us. So we're, we're now, like, from tier one to the biggest. Um, and going forward, what I think that looks like is-- and then I, I get a lot of this thinking. My, uh, my old mentor was, uh, Andy Grove. Um, you know, and it was ac- actually at the end of his life. But one of the things he said to me that I'll always remember, and, uh, for, for m- for those of you who don't know him, he was, uh, you know, he ran Intel, and he got it through that great memory crisis and, and changed the company. Probably the greatest tech CEO we've seen. Um, but he said something that is very obvious i, in a way, but also profound, which was, you know, if you're the leader of an industry, um, then the growth of that industry depends on you. Uh, you have to grow the market. Like, nobody else is gonna do it. It's not gonna, like... That, that is incumbent on you, and he, he really took that seriously at Intel. And so when I think about, you know, what we are as a firm, a lot of it is, you know, it's incumbent on us. And a lot of the work that we've done on policy for crypto and, um, things that we're doing internationally, things we're doing on American dynamism is like, how do we win? Not just, you know, we, Andreessen Horowitz win, but how does the country win technologically? How do we, uh, continue to compete with China? How do we, uh, be relevant in the next hundred years like we were in the last hundred years? And so, and then

4. 15:33 – 19:00

   "As Sweet a Spot" as Solomon Has Seen in 40 Years

   1. SPSpeaker15:33

      that drives backwards into how we think about how is to develop Andreessen Horowitz.

   2. DHDavid Haber15:38

      Awesome. Maybe, maybe we'll transition just a little bit to, to markets. Um, you know, David, you know, how would you describe kind of the macro environment? You know, what, what are you hearing from the CEOs that you w- you know, work and advise most closely?

   3. DSDavid Solomon15:51

      Sure. You know, first, Justin, and, and Ben and I were talking about this. If, um-

   4. SPSpeaker15:58

      Good times

   5. DSDavid Solomon15:58

      ... if you're in, um, if you're in our kind of businesses, if you're attached to financial assets or investable assets, um, this is, you know, I've been doing this for forty some years. This is as sweet a spot, um, that, that I've seen kinda macro picture. Now, that doesn't mean there aren't all sorts of, um, difficult, complex things going on in the world. But I think we're at a moment, let's just be here in the United States for a minute. We can go around the world and talk about anywhere you want, but let's just start here in the United States. The combination of the significant amount and continued, continuing to increase fiscal stimulus. And by the way, the big, beautiful bill that started in twenty-six just adds more to that. It's not that we weren't in a very stimulative place, we just added a whole bunch more. We have fiscal stimulus. We have monetary stimulus because we're in a rate cutting cycle. That doesn't mean I think we're gonna see many more rate cuts, but we're probably gonna see a couple more. We are in a capital investment super cycle, like something we've never seen. Last year, the four largest companies contributed one percent to GDP growth with their four hundred billion dollars of spending. Um, we are in a deregulatory, um, unwind cycle from a massive regulatory surge during the last administration to a deregulatory wind back. That is very stimulative. All these things, it's, it's just such a cocktail of stimulus that it's very, very hard to slow the economy down. And while average Americans definitely feel a lot of stress because everything's more expensive, you, you could talk about inflation going from nine to three, but the bottom line is everything is twenty-five to thirty percent more expensive, and that's the way Americans feel it. There's pressure, but at the same time, there's enormous financial leverage-

   6. SPSpeaker17:53

      Mm

   7. DSDavid Solomon17:54

      ... that keeps the economy going, and it makes the economy a little bit more versatile. And so if you own monetary assets or investable assets, um, if you're around growth and technology, these are pretty-- this is a pretty prime environment. I can give you a hundred things that can set it off.Um, last April, you know, if you were, if you were in Davos last January, people felt the same way, and then in April we had a speed bump. But it was a relatively short speed bump. I think one of the things that also has-- There are two things that I think has the market moving ahead. One, you've got a president that if you look at the speed bump last April, he marks to market to that market every single day. And if the market's going in the wrong direction, he has no problem adjusting very, very quickly. And number two, the productivity gains from AI investment and putting it into the enterprise and having the enterprise pick it up, the market is pulling forward a lot of what they expect to be delivered over the next one, two, three, four years.

   8. DHDavid Haber18:47

      Mm-hmm.

   9. DSDavid Solomon18:47

      And so that's a, that's a pretty prime macro environment. Now, geopolitics, much tougher. We're moving back to a multipolar world, and the risk of a geopolitical problem that really slows

5. 19:00 – 21:33

   M&A Outlook: "Whatever the Question Is, the Answer Is Maybe"

   1. DSDavid Solomon19:00

      down growth is just-- I'm not saying it's high-

   2. DHDavid Haber19:02

      Yeah

   3. DSDavid Solomon19:02

      ... but it's much higher than it's been for the last, for the last, you know, kind of ten, 20, 30 years since the wall fell. And, um, you know, look, the world is, the world is fragile. Social media creates a lot of volatility and division, the way people absorb information, the way information moves-

   4. DHDavid Haber19:19

      Mm

   5. DSDavid Solomon19:19

      ... makes the world faster moving, but also more volatile. Um, and so a lot can go wrong, but at the moment, from an economic, a base economic perspective, that cocktail of stimulus are pretty powerful.

   6. DHDavid Haber19:30

      Maybe a follow-up question for, for both of you. I mean, uh, you know, do you expect to see a lot of M&A or IPOs this year? How, how are you sort of advising your CEOs? We have a-

   7. DSDavid Solomon19:38

      Yes

   8. DHDavid Haber19:39

      ... a lot of them in the audience. [laughing] It's a good, good banker response. [laughs]

   9. DSDavid Solomon19:43

      Uh, just, just fact-based.

   10. DHDavid Haber19:44

       Okay.

   11. DSDavid Solomon19:44

       Fact-based. We had-- You had a very, very tough regulatory environment. M&A and capital raising, IPOs, are driven by confidence. And so if you have a tough regulatory environment, that is something that affects confidence. From an M&A perspective, on strategic M&A, for the last four years, whatever the question was, the answer was no.

   12. DHDavid Haber20:03

       Right.

   13. DSDavid Solomon20:03

       Okay, now whatever the question is, the ans- even if it's very, very significant, the answer is maybe. So what do CEOs-- CEOs like to look forward, they like to do big things. They wanna... And so there's, there's a lot of activity. Fact. And so I, I just think, again, this is an environment where you're going to see a significant-- I think this could be the biggest M&A year, this is just me predicting, I think it could be the biggest M&A year in history-

   14. DHDavid Haber20:27

       Wow

   15. DSDavid Solomon20:27

       ... this year. It's gonna be a bigger IPO year. The reason I'm thinking, you got a bunch of these big companies that are finally deciding they wanna come through the pipe. But you'll, you'll have a view on that too. Um, I could-- Being a public company is a horrible thing. I-- Do not recommend. [laughing] Do not recommend.

   16. DHDavid Haber20:43

       It is challenging from time to-

   17. SPSpeaker20:44

       Hey, you just have to be okay with getting sued-

   18. DHDavid Haber20:48

       Wow. A lot

   19. SPSpeaker20:48

       ... all the time.

   20. DHDavid Haber20:49

       [laughs]

   21. SPSpeaker20:50

       Um, you, you know, it's funny. We, we had a company that just went public, and they're like, "We might get sued." I was like, "Of course, you're gonna get sued. You're public. This is America." Like...

   22. DHDavid Haber21:00

       [laughs]

   23. SPSpeaker21:00

       "What are you talking about?" Um, so I, I agree, I agree a lot on, on the M&A front, except w-with the, uh, kind of exception that, like, it's not clear, uh, the FTC's, uh, kind of position on these things yet. And so far as-- And I mean-

   24. DHDavid Haber21:20

       Especially on big tech

   25. SPSpeaker21:20

       ... yeah, especially on big tech. Even on, like, small tech, they've been very, very aggressive. Um, so I think M&A will happen, but it may happen more in the form of IP transactions and that kind of thing

6. 21:33 – 23:03

   Why Leads Aren't What They Once Were in AI

   1. SPSpeaker21:33

      than as a traditional M&A. Um, I hope not, but, but that, that may be the case. And then, yeah, like I, I think there's gonna be a lot of IPOs coming out of our world 'cause I think there's gonna be, some out of necessity, the, the companies are growing so fast. We have so many companies that, like, went zero to over $100 million in less than a year. Um, some zero to over a billion dollars in less than a year. So we, we take-- Like, we've never seen that before. And, uh, and then the kind of corollary to that in AI is that, um, leads aren't what they once were. So for my whole life in technology and for the whole history of software, there was this thing called the mythical man-month. And the way the mythical man-month, where, you know, nine women cannot have a baby in a month. Uh, [laughs] and so you can't just-- If you're Google, you can't just put a thousand software engineers on a product and wipe out a startup because you can only build that product with, say, seven or eight people. And o-once they've figured it out, they've got that lead, and you're gonna have to, you know, you're gonna be behind for a long time. That's not true, uh, with AI. Um, so with AI, uh, if you have data-

   2. DHDavid Haber22:51

      [laughs]

   3. SPSpeaker22:51

      ... you know, particularly proprietary data, and you have enough GPUs, you can solve, like, almost any problem. It is magic. Uh, but it means that you can throw money at the problem. Uh,

7. 23:03 – 25:24

   Crypto Policy: The Genius Act and Clarity Act

   1. SPSpeaker23:03

      and we've never had that in tech. And so I think that that's actually gonna drive a lot of IPOs because people are gonna wanna get out and have the capital to continue to compete, uh, because it's really necessary. You don't just have a lead you can sit on. Uh, so, so it, it's gonna be a very exciting year, I think.

   2. DHDavid Haber23:21

      You, you were talking about the FTC earlier. I know you and Mark are spending a lot more time in DC than you ever have. Um, you know, what are some of-

   3. SPSpeaker23:28

      Chris

   4. DHDavid Haber23:28

      ... and Chris, yeah. [laughs] Um, you know, what are some of the policy, uh, you know, agendas you're most focused on? And, and why do you think this is, you know, more important now than it's ever been?

   5. SPSpeaker23:38

      Well, the first one was crypto because, um, you know, we, we thought then and we continue to think crypto is an extremely important technology. Um, it's kind of, uh, you know, not, not just the kind of most profound breakthrough in kind of financial technology that we've seen, but a, a, a real breakthrough in, um, just how society works. So everything from, you know, how do property rights work on, on the internet, you know, like-Uh, you know, how-- what, what is the right architecture for things that where, uh, creatives, um, contribute most of the value? What's the right business architecture? What is stakeholder capitalism, really? Um, these are all things that, that get solved with crypto. So we thought it was so important and so important for the advance of society and to not have us like descend into communism and these kinds of things. Uh, and it got completely banned by the last administration, but not through a legal process, not through a legislative process, but just through like sheer will and, you know, we'd say abusive power of the, of the government, including techniques like de-banking. Our company just got Wells notices, um, which I've never seen before in a private company. So just an attack from the government on, uh, a-an industry, a technology industry in this country. And so we were like, "Well, we've got to get in a-and work on that." And, um, so the first thing was the, uh, Genius Act and the Stable Coin Bill, which passed, and is now a law, and we're very proud of that. The second one, which we think is the more important bill, is the Clarity Act, which is also known as Market Structure, which, um, kind of establishes, and it's such a necessary thing for this technology

8. 25:24 – 28:03

   AI Policy: "Don't Regulate Math"

   1. SPSpeaker25:24

      because you have these tokens that can represent Pokemon card, that can re-represent a stock certificate, that can represent a dollar, um, and there were no rules to say, well, which one is this token? And the approach of the Biden administration was everything's a security to the point where they sued artists for like, "Oh, I painted a picture, and I made an NFT." "Oh, you sold a security." Like that, that crazy. Uh, so this one we're trying to get passed right now, [laughs] um, and, uh, we've had some drama around it, which I'm not gonna comment on, but, uh, that's a thing. The second one that's really important is AI. So, uh, you know, like with, I think with the automobile or with electricity, uh, with these two technologies, people, uh, kind of freak out about them, um, because they, they do have big impact. They are going to change the world. And with AI in particular, uh, you know, there's-- some of the calls are coming from within s-inside the House where people are really trying to kinda scare the population, sometimes to achieve regulatory capture and other things. But if you ban the technology, which some people are calling for, uh, or ban or kind of infringe people's ability to do mathematics, which is something that a lot of people are calling for, um, then I think we're definitely gonna lose the AI race to China, which has like massive, you know, hundred-year implications. Uh, and so the key things we're trying to protect are, one, the model is the model. [laughs] It is a model. It's a mathematical model. It predicts things. It's not like a, uh, sentient being. Like, maybe we'll figure out how to do that. We don't know how to do that yet, so it's not sentient. Um, it's just a model. [laughs] Uh, so we're trying to say, "Don't regulate math. Um, regulate the applications of that math." So if somebody uses AI to break into a bank or, um, you know, steal your money or, uh, you know, make an-a robot that, that, uh, shoots somebody, then that's illegal. Um, but the technology itself shouldn't be illegal. Uh, and then there's, uh, the, the kind of most pressing one right now is, um, every state wants to have their own set of AI laws, which will basically make it impossible for new companies to innovate because you can't comply with fifty different laws from fifty different states. So we're trying to get that done. Um, kind of shortly following that, there's an issue of how copyrights are treated, um, and can you build a statistical model over

9. 28:03 – 32:54

   One GS 3.0: Reimagining Processes with AI

   1. SPSpeaker28:03

      copyright and work, not reproduce the copyright and work, but just build a model about it so that the kind of software becomes smarter. Um, we think that's very important because China absolutely doesn't respect copyrights, even th-they don't respect us copying it [laughs] , uh, let alone building a statistical model, and we're gonna have kind of a weaker, uh, AI if we can't train on all the data, can't train on the complete data. So those are the main things that we're trying to push for.

   2. DHDavid Haber28:32

      Awesome. You know, o-one of the things that was, that was very evident to me during my time at, at Goldman was how, you know, client-centric the firm was and, uh, I know One GS was a big kind of focus of yours. Um, I'm curious how AI is changing the way you guys both work internally and, and also how you're delivering, you know, better for clients.

   3. SPSpeaker28:50

      Sure. Well, the, the, the-- I mean, firm is-- the firm's business is serving our clients, and so I, you know, I... Technology has for decades and decades and decades been making productive people more productive. Goldman Sachs is a professional services firm filled with productive people that are very productive, and technology has been changing the way they work, evolving the way they work, making them more consequential, allowing them to expand the scope and the footprint of what they impact. Um, and, you know, this technology is another acceleration of that for sure. Um, you know, in the, in the simplest form, and, and this is a, a, a, a, a, a, a broad oversimplification, so please take it as such, there are two things that we're focused on. One, we've got lots of smart people. These are tools and applications. We're trying to get them into their hands and give them access to them and access to models and access to applications, um, so that they can experiment with them, play with them, figure out how on a day-to-day basis as they're executing for clients and doing the things they're doing, they can be more productive, more powerful, have more impact. Um, we're good at this. We've done this before. Our people are good at it. Um, it takes time, but we, we know how to do this, and we're doing it, and, you know, it's really constrained by how we get the best tools, the best models, the best applications, get them, by the way, regulatorily cleared because we have to deal with regulatory constraints in everything we touch and we do, and that's a huge barrier for us. We're just not a company that can say, "Oh, this is great. Let's try it." We have to have a huge process before we can try anything, but we know how to do that. We're doing that, and that is, that is-

   4. DSDavid Solomon30:29

      ... expanding the productivity of our people. And, and you see real time uptake on that that's really accelerating. The more interesting thing to me as the CEO is that this technology allows us to really look at fundamental operating processes in a massive enterprise and completely reimagine them, to automate them and make them more efficient. Not just simply for the benefit of doing them with less people or with less costs, but for the benefit of taking some of that savings and giving us more capacity to invest in growth areas of the business where we're constrained. And so we don't have the ability to just spend as much money as we want and lose as much money as we want. We actually have to be held accountable every year to how much money, how much money we spend and how much money we make and what kind of a return we generate.

   5. SPSpeaker31:14

      Those kinds of abilities generally don't last forever.

   6. DSDavid Solomon31:16

      No, they don't last forever. But they actually, interestingly, there are companies that have proven that they can last for 10, 15 years, where the accountability on the way you're deploying your capital is put off for a long period of time. We have to look at it every year. So I would say in the last few years we've been constrained. Just simply, we spent, last year we spent $6 billion on technology. I would've loved to spend eight. Okay, but if I spent eight, our returns would've been hundreds of basis points lower, and you know what? We couldn't do that.

   7. SPSpeaker31:41

      Sure.

   8. DSDavid Solomon31:41

      Now, if we can actually find $2 billion of efficiency around reimagining processes, then I can spend eight and wind up with the same returns. So we, we laid out, we actually called it One GS 3.0, a program where we picked six specific processes in the firm and we said we are going to do the work to really completely reimagine them. We have not put out publicly how that changes workforce, how much capacity that creates, but it's super significant. And it's not that there are only six, these are just the first six. So this is one of the reasons why the market's running for it. I think this opportunity is huge, but this is hard. This is hard because you're asking people to go kind of take away their empire and do their empire differently. It's gotta be driven top down, and, uh, and it's hard, but we're gonna, we're gonna make a lot of progress. And so those are two simplification, but those are the two big things what I like to sum.

   9. DHDavid Haber32:35

      A- anything, Ben, you'd, you'd add to that? And just w- where do you sort of see the proliferation of this technology in the enterprise, and, or what are you most optimistic for in the next, I don't know, five to 10 years?

   10. SPSpeaker32:45

       Well, I think that for kind of the reasons David cited, like we're at the very, very beginning in the enterprise, um, y- you know, like changing

10. 32:54 – 34:00

    Will AI Agents Change Investing?

    1. SPSpeaker32:54

       people and processes and so forth in a, in a big existing company is, uh, no matter what the technology is, is complicated. Um, y- you know, in our firm, as you know, uh, we are kinda taking a very aggressive approach to kind of first automating all the things people do and don't like to do, or, you know, it's not like the funnest part of the job. We've also kind of gotten all of our data in a Databricks data lake, and so we can ask, you know, basically any question about the firm or the portfolio. Customers for it, works fantastic.

    2. DSDavid Solomon33:29

       You know, AI, AI, AI agentic investing can be very, very interesting because, you know, models work on the facts that are available, and one of the things about investing is sometimes the biggest changes in the way you have to think about investing a portfolio comes from things that are completely new and unexpected. It can't be incorporated in a model because-

    3. SPSpeaker33:48

       It can't be something from the past.

    4. DSDavid Solomon33:49

       Yeah.

    5. SPSpeaker33:49

       Exactly.

    6. DSDavid Solomon33:49

       It can't be something from the past. And so the bottom line is once it happens, then it can be quickly incorporated in models, and models can move very quickly, but still, you know, you start from a place. And so it's, I, I'm,

11. 34:00 – 35:33

    Favorite DJ

    1. DSDavid Solomon34:00

       I'm really interested to see how it works. And look, one of the things you've gotta, you've gotta wonder why there are a handful of people, there are a handful of people who have so outperformed as investors over a long period of time, but you encounter them in handfuls. Generally speaking, you know, people underperform. And so if the models are based on the information that the people who are underperforming all have-

    2. SPSpeaker34:24

       [laughs]

    3. DSDavid Solomon34:24

       ... it's gonna be interesting to see whether something different comes out of it.

    4. SPSpeaker34:28

       Yeah. Yeah.

    5. DHDavid Haber34:29

       Awesome. I, I think we're running out of time, but, um, maybe one last bonus question. Um, favorite DJ? N- no self-nominations.

    6. SPSpeaker34:37

       [laughs]

    7. DSDavid Solomon34:37

       Favorite DJ today?

    8. DHDavid Haber34:38

       Yeah. Or it could be in the past. Yeah.

    9. DSDavid Solomon34:40

       Jon Summit.

    10. DHDavid Haber34:41

        Okay.

    11. DSDavid Solomon34:41

        I think Jon Summit is, Jon Summit is doing really, really cool things as a DJ. He's an incredibly interesting young guy that's got a lot of energy, and he's, he's evolving very much the context of how kind of big club house DJs do what they do. I think, I think he's doing a great job.

    12. DHDavid Haber34:57

        Ben?

    13. SPSpeaker34:57

        Like, I'm gonna stay in my lane, which is the past, and hip hop DJs, I'm gonna say DJ Jazzy Jeff.

    14. DHDavid Haber35:04

        Oh. [laughs]

    15. SPSpeaker35:04

        Um, who is a, like very underrated, because his, uh, partner, the Fresh Prince, became Will Smith. Um, but, uh, DJ Jazzy Jeff is a great, great all-time DJ. Yeah.

    16. DHDavid Haber35:15

        Awesome. Thank you guys so much for doing this.

    17. DSDavid Solomon35:18

        Thank you, David.

    18. DHDavid Haber35:19

        Awesome. [clapping] [upbeat music]

Episode duration: 35:34