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Goldman Sachs CEO David Solomon: the Code Conference interview (transcript)

“It’s one of the functions of building a big, powerful platform that has a lot of positive impact. There are other things that come with it. It’s your job to evolve.”

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David Solomon
Goldman Sachs CEO David Solomon
Asa Mathat for Vox Media

Politicians and the public are increasingly skeptical of Big Tech, but do Facebook and Google deserve the techlash? Goldman Sachs CEO David Solomon says “deserve” isn’t the right word.

“When you have platforms that have a billion-plus people on them, you’re going to get a lot of the good in society but also on something to that scale, you’re going to see some of the bad,” Sachs said on the latest episode of Recode Decode. “It’s not a question of deserve. It’s one of the functions of building a big, powerful platform that has a lot of positive impact. There are other things that come with it. It’s your job to evolve.”

Speaking with Recode’s Kara Swisher and Teddy Schleifer at the 2019 Code Conference, Solomon said one thing Silicon Valley can learn from Goldman Sachs is the value of self-awareness.

“You’ve got to find a way to look and listen to what others are saying and be very, very open to the fact that the way you see yourself and the way our community, our society, our markets see yourself, might be different than the way you see yourself,” he said.

You can watch the interview below on YouTube, or listen to it on our podcast Recode Decode — which is available on Apple Podcasts, Spotify, Google Podcasts, and TuneIn; this episode also features an interview with Rockefeller Foundation president Raj Shah. But if you’re short on time, scroll down to find a full, lightly edited transcript of Kara and Teddy’s conversation with David.

Teddy Schleifer: So Kara ...

Kara Swisher: Yes?

Teddy Schleifer: If Silicon Valley’s about to be pretty strongly regulated, demonized, you know, what industry actually might know a lot about being demonized, regulated?

Kara Swisher: A banker?

Teddy Schleifer: Wall Street.

Kara Swisher: Yes, exactly.

Teddy Schleifer: David Solomon, come on out.

Kara Swisher: Cool, David, come on out.

David Solomon: Just another conference introduced as a demon. I mean, yeah, it’s terrific.

Kara Swisher: Yes, so no, no, you’re not the demon now.

Teddy Schleifer: There was a while, a decade ago, I know you were not the CEO at the time, but there was a while when people had some pretty negative things to say about Goldman Sachs, pretty negative things about Wall Street. You guys obviously survived. You’re here today. Goldman Sachs is not some vestige of the past. What advice do you have for Silicon Valley out there that is maybe in the 2007 moment, maybe this is never going to happen, everything’s going to be fine, what advice do you have for an industry going through its own convulsions?

Well, first of all, thank you for having me. I’m happy to be here. Finance grew a lot. We were just talking backstage how finance really grew and expanded. It was a very localized, fragmented business and really through the ’80s, ’90s, 2000s, finance globalized and the platforms that the big finance companies had became very large, very global, very influential, very powerful. That brought a lot of change.

Now, what happened in finance, a lot of the institutions ... Goldman Sachs had been around for a long time and had morphed for a long time, yet still, when you’re going through that, you have a perception of yourself and a perception of the way you’re viewed that’s potentially different than the perception that others have as they look at you from the outside. The first thing you have to say about what’s going on in tech and with these big platforms is that they’ve had enormous success. They’re in the position that they’re in because they’ve had enormous success. They’ve done a lot of things right. They’ve made a difference and they’ve brought products and services that have mattered to people in a very expansive way, but over a relatively short period of time.

One of the pieces of advice I would have is that you’ve got to find a way to look and listen to what others are saying and be very, very open to the fact that the way you see yourself and the way our community, our society, our markets see yourself, might be different than the way you see yourself. I think that’s one of the mistakes that in finance we made. Certainly at Goldman Sachs, we weren’t as attuned to that.

Kara Swisher: To self-awareness.


Kara Swisher: Self-reflection.

... as we should have been. Much better now, I hope.

Kara Swisher: Yeah, definitely. One of the things that I always say is when you try to interview a lot of people, there is a lack of self-reflection, of impact. I think last night they started to talk about that, but it’s really difficult. I always make the joke that Silicon Valley is so not self-reflective it’s a miracle they can see in mirrors. It’s just really hard for them. Do you think it’s deserved, the techlash, when you look at this? You’re thinking about lots of things, taking these companies public, mergers and acquisitions, where finance is going. Do you think it’s deserved, or where do you think they are in the spectrum?

“Deserved” is a complicated word. As I said, these are very, very successful companies. One of the things, when you have platforms that have a billion-plus people on them, you’re going to get a lot of the good in society but also on something to that scale, you’re going to see some of the bad. It’s not a question of deserve. It’s one of the functions of building a big, powerful platform that has a lot of positive impact. There are other things that come with it. It’s your job to evolve. I think one of the reasons Goldman Sachs has been around for 150 years is it’s had lots of periods of time where it’s faced pressure and it’s found ways to evolve and become something slightly different, or move in a direction that was necessary to serve its clients, its stakeholders. I think that’s important for all businesses.

You have to remember, these are very young businesses. No matter what, when you look at these businesses, 20 years is a very, very short period of time in the lifecycle of companies that are really going to have a lasting impact. I don’t think about it through the lens of what’s deserved. It’s the reality of, this is where we are, these have become very, very big businesses, they’ve changed the way we operate in the world. Given that, there’s some positives and there are some issues that have to be dealt with.

It’s their responsibility. The leaders of those organizations have to figure out, both in their own actions and working collaboratively with government and all sorts of stakeholders, how they want to evolve their businesses. If they do that successfully, they’ll do just fine. By the way, there will be bumps. They’ll make a lot of decisions that are right. They’ll make some decisions that are wrong. They’ll have to adjust. By and large, they’re really good companies and they’ll find ways to navigate.

Teddy Schleifer: Do you think, similar to Goldman Sachs in 2007, that a company like Facebook or Alphabet has been too inward-looking and is not really aware of the perception out there of them?

That’s not for me to judge. I get to say about Goldman Sachs is, we came out of the financial crisis, one of the things that we had to wrestle with was we had been a private partnership at a very, very private company, and we went public in 1999. We had only really been public for about eight or nine years when the financial crisis came. We were growing about 17 percent compounded a year during that period of time. The world looked very, very different, because when you’re growing, you think you’re doing everything right.

We navigated ... there are certain aspects to the way we navigated risk through the financial crisis where we outperformed on a relative basis versus others. We came out of that and we went right back to doing what we did, not really being tuned in and sensitive to the fact that the world had changed. For each of these companies, you can’t make generalizations. Every company’s got to look at where it is and you’ve got to focus forward, how do we want to evolve how we’re defined, how do people talk about us?

I think one of the things for sure that comes with visibility is there’s good things that come with visibility and there are bad things. You’ve got to have really thick skin and you can’t listen to everything that’s said. You’ve got to decide what’s really important. You’ve got to decide what you stand for. You have to listen to the criticisms but you can’t let the criticisms define you. I think these companies will find ways to navigate this.

Kara Swisher: Let’s talk a little bit about, I want to get to what Goldman Sachs is doing, all the different investments you’re making and the shift in the financial, digital financial stuff, but first let’s stick with Silicon Valley, these IPOs. How do you assess right now? There’s been some shaky IPOs, pretty much all of them, or you don’t think that? How do you look at the IPO market right now? We had Uber going out and Lyft coming out, the performance has been not what was expected a year ago. Obviously we’re waiting for Airbnb and some others to go public. How do you look at the overall landscape for tech?

Look, there have been some IPOs that have underperformed expectations, and there are IPOs that have done very well: Pinterest, Zoom, non-tech, Levi’s. The IPO market is alive and healthy. I think the big fundamental change with the IPO market over the course of the last decade is the real expansion of the availability of private capital.

Kara Swisher: Right, staying private too long.

Well, I’m not saying that people were staying private too long, it’s just private capital’s available. It’s available in size. I used to say to people, “Look, we take companies public for a living, so ...”

Kara Swisher: “Please, go public.”

We like it when people go public. I used to say to people, “There are three principal reasons why you should go public. You need capital, you need the currency, or you’re fundamentally a seller and you can’t find liquidity in another venue.” There’s a fourth reason why, and we’ve seen this now, the companies have taken more capital and they’ve gotten much larger. There is no question that there is a different kind of discipline that’s applied to companies when they go through the process of going public and they have to operate in the public markets. I’m not making a judgment that that’s better or worse for the companies, but it’s different. It’s a different ... It’s a more structured form of discipline. I think that’s a helpful thing for companies when they get to a certain size, a certain scale.

Companies are complicated. As you get bigger, you’re taking lots of capital. As you get global, it’s hard to manage these businesses. Public company structures add discipline to that process and I think there’s a benefit to that. I wouldn’t say that these companies have stayed private too long or not, but I do think that there’s an evolution in all this and there’s been a lot of capital available. Candidly, if I was running one of these companies and there was a lot of capital available, I’m not sure I would have handled it any differently.

When you look at a handful of the companies that have not performed to expectation, I just say — as someone who’s taken a lot of companies public and there was a point in my career where I ran that business for Goldman Sachs — one of the hardest things to do is take a company public where the expectation of how that company’s going to do on an IPO is different than the reality at the time that you’re going public. It’s very, very hard. Those tend to disappoint. If you go back and you look historically, three companies where there was very, very high expectations in their IPO — Google, Facebook, Uber — and all three were IPOs that initially, in the months right after the IPO, all were considered as not having performed as expected.

Teddy Schleifer: Sure, but this all gives fuel to the idea which has circulated Silicon Valley for five years of the ten-year bull market that Silicon Valley’s in a financial bubble. There’s this quote, that I’m sure you know from Chuck Prince, right before the financial crisis, “When the music stops playing, things will get complicated, but for now the music’s playing, so you got to dance.”

I remember that quote.

Teddy Schleifer: You remember that quote. To what extent do you feel like people are dancing too much, so to speak, in Silicon Valley? How worried are you about a bubble?

Silicon Valley is a reflection of what’s going on with capital and money all over the world. We have the most extraordinary push of monetary policy in the history of the world. With interest rates basically zero all over the world, it’s not surprising that people move out on the risk curve and people look for more risk assets.

Teddy Schleifer: You don’t see it as a Silicon Valley-specific problem, if it is one.

I think that people are looking, they’re looking for returns in an environment where riskless returns are basically zero — or negative, even, in a lot of places. I think there are places where people are out on the risk curve in Silicon Valley and places where they’re not. But I think all of this is a function of the fact that we’ve been through a long cycle of risk on.

Now, bubbles, think all different things about bubbles. This is not 1999, 2000. This is different for a lot of reasons, but do I think that generally speaking, investors are willing to pay more for the potential for growth now than they might be at a different period of time? Yes.

People are assuming ... and a lot of these companies, it’s not that they’re not good companies, we’re talking strictly about valuation, that the growth trajectory over the next five years and the execution of all the things they’re saying they’re going to do is going to go off flawlessly. Some will, some won’t. I don’t necessarily think about that as a bubble, I just think that people are further out on the risk curve than they’ve been at other points in time.

Kara Swisher: Let’s talk about a specific company. You just mentioned them, Facebook and Google had since done well, and you mentioned Uber as the third one which has not, has been more disappointing to investors. They did have a great run-up for a long time, and they did have tons of cash from all over the place. There was tons of availability of capital for them. Assess how Dara’s doing and where that change is, because I think a lot of people feel that this is a business that was over-indexed, essentially. And you guys were an investor.

So one of the things I was going to say to you, you say that Uber’s one that hasn’t done well. We’ve been an investor in Uber for a long time, we’ve done very well.

Kara Swisher: Yeah, if you got in ... Yeah but from 2015, if you didn’t get in ...

But maybe that’s the lens that we should be looking through.

Kara Swisher: Yes, okay.

The fact that for five minutes in time, Uber went public and it’s trading a little bit below its IPO, what I think Dara is focused on, appropriately, is how he’s gonna build value in this company over the course of the next five years. And he inherited, he stepped into, a very, very complicated platform.

Kara Swisher: That’s a nice way of putting it, yeah.

And a very, very young company where that was a lot of change. He stepped in with no chief financial officer. He stepped in with a lot of senior leadership that he needed to hire. He stepped in with multiple platforms and multiple investments, some of which he’s keeping, some of which he’s made decisions to de-emphasize or not to allocate capital to.

So the test in all these things is how you do over time, and you know, this is an incredible platform. It’s built a very big brand in a very short period of time. It’s got its hands in a lot of different businesses. And the execution risk will now be seen, you know, can they execute on a lot of this? And can they grow the business? Can they create paths to profitability in these different platforms? And if so, it’s going to be a monster business. If not, it’ll be a big business. But you know, I’m watching with everybody else. We’re a shareholder. I’m a personal shareholder.

Teddy Schleifer: You have an angel investment?

I am, I was in some venture funds that were in very, very early. The firm also ...

Teddy Schleifer: Made some news.

A few years ago, the firm sold the security to private wealth clients. Private wealth clients, that was a convertible security where you earned a very small interest rate, but your principal converted into shares and a discount to the IPO price, and that discount was bigger the longer it took for them to go public.

And I bought some of that security because at the time, they were raising money privately at a very high valuation, given what they were doing and on autonomous and other things, it was clear they were going to keep raising equity. And this was basically a way of preventing yourself from being diluted as they made the path to the IPO. It turned out to be a terrific security.

Kara Swisher: What about M&A? Talk about that, because there hasn’t been a lot of M&A, though it’s the bigger companies, there just was one, there was one, Salesforce just ...

Teddy Schleifer: Salesforce yesterday.

Kara Swisher: Just bought a company, Tableau.

Teddy Schleifer: Tableau.


Kara Swisher: That used to be a very big market for you all, for your business. How do you look at the M&A market?

It’s one of the cornerstone businesses that we’re in. We advise companies on strategic activities, we advised Tableau yesterday on its sale to Salesforce. Yesterday morning, you also saw this Raytheon-UTX transaction.

I think strategic activity continues to be very high. CEOs are engaged. And if you step back and you think about the mindset of CEOs across lots of industries, you’ve got to find ways to drive growth. And so there hasn’t been as much, there’s been some, but there hasn’t been much M&A in the tech space.

Kara Swisher: There hasn’t.

Because there’s been a lot of growth. And so if you’re a CEO and you’re operating where your business or your platform or whatever you’re doing is creating organic growth, there’s not a lot of reason to think about doing things strategically, but if you’re operating in other parts of the economy, where the growth is more GDP or trend and you have to figure out how to accelerate a strength in your position, it’s a big part of the dialogue.

Scale matters. One of the reasons scale matters is because there are very few businesses that don’t use technology to sell their products, connect with their clients or customers, manufacture what they do. And the dollars needed to invest in tech platforms in almost any business requires scale, they’re significant. And so M&A is a way of people creating scale to protect their position. So I think you’ll continue to see meaningful activity ...

Kara Swisher: If they’re allowed to. If they’re allowed to.

Well, I think, generally ...

Kara Swisher: I can’t think of a thing that government will let Google or Facebook buy, at this point. With any significance.

Well, I think you’re looking at two companies that you just mentioned, at a moment in time.

Kara Swisher: Well, they have a lot of money.

And you’re asking me broadly about the broad M&A market, which last year was $4 trillion.

Kara Swisher: Right, right.

Teddy Schleifer: Right.

So I mean it’s, I’m making a comment that I think that’s going to continue to be a part of our economic ecosystem.

Kara Swisher: Of other companies. Right.

You know, I think that when you look at large-cap tech, it’s going to be trickier at this moment in time.

Teddy Schleifer: Let’s talk about your business. You guys have made a big push into Marcus, which is your consumer-facing brand for banking. JP Morgan recently announced that they’re sort of, not exactly the same thing, but a digital native app, Finn, they were closing that down.

There are a lot of companies in Silicon Valley, Robinhood, SoFi, we’re having them on the stage later today, everything from Square. They’re consumer-facing at their core. You know, things like product and design. You guys are a Wall Street institution doing things in tech. To what extent do you feel like consumer banking is just too crowded for Marcus to succeed? I know you said last week that investors would be throwing money at it, if it was a private company, right?

Well, we’re very proud of what we’ve accomplished in building out a consumer platform. As you point out, we haven’t been in consumer businesses. The variety — and this gets to the evolution point — the variety of reasons as to how the world evolved, where we decided that we needed to start to find a way to move in the direction of consumer businesses. We thought that there was an opportunity to deliver a different kind of product and service that helped consumers manage their financial affairs in a much more integrated way, with a lot less friction.

JPMorgan Chase is a huge ... Chase is a huge consumer franchise. They’re going to continue to be a huge consumer franchise. We think there are opportunities to use a digital platform in a different way, and then in a small number, 2.5 years, 2.5 to three years, we’ve got 4 million customers. We’ve brought them $45 billion of digital deposits into the firm, and that’s still growing, and that’s very important. That’s very important for us. And the feedback we get from clients on the services we’re providing on the platform is very, very good.

JD Power just gave us an award as the No. 1 firm in consumer loans from a customer service perspective, which is, for a business that’s a couple years old, that’s good progress. So I think there’s an opportunity for a lot of people to provide products and services that take friction out of how we manage our money, and I think we’re off to a good start but we’re building something for the next 20 years.

Kara Swisher: And the same thing with credit card?

Credit card is in addition to that.

Kara Swisher: Talk a little bit about how that came about.

We’ve announced this partnership with Apple, and the card is in beta, it’s being tested. There are a bunch of them poised at Goldman Sachs, and a bunch of them poised at Apple that have them. I will tell you that my experience with it so far is that it’s easy to use, there’s less friction, the information at your disposal is terrific. It will launch by the end of the summer, and, you know, we’re excited about it.

Kara Swisher: How did it come about? Talk about the specifics.

Well, what came about from our perspective, you know, we had been thinking about building an integrated digital platform. We started with deposits and unsecured loans. But our vision was always that there’s the opportunity to put on a digital platform everything that people need in a very integrated, seamless way.

So, you need to spend, you need to borrow, you need to save, you need to invest, you need to insure and protect, you need credit card functionality, you need all these products, and you want to integrate them. You start with a white sheet of paper, you can build a much better model for how people can manage their financial affairs digitally. And so we started.

And so, it was a natural progression to think about a credit card. We have the benefit of having relationships with a lot of these companies, they have big customer bases, and we have the advantage, unlike others that are in the credit card business, that we didn’t have historical business. So we built a platform from scratch. It’s the first credit card platform to be built in the last 20 years.

Kara Swisher: And why Apple? What was, because of the ...

Well, we have a long, historical relationship with Apple. We’re very close to Apple. They were thinking about the business at a time that we were thinking about it. They spoke to a number of firms, and we found that kind of our vision and their vision, there was a lot of overlap in that.

Teddy Schleifer: Right.

And so, we went down the road ... And look, with partnerships, they can always be complicated, but we’ve got a long history and we’re very optimistic that the partnership will do something that’s neat.

Teddy Schleifer: I want to ask you about brand. Obviously, you guys were talking backstage. You’re competing these days for talent with Peloton, Slack, maybe even Juul, and engineers think about going to any of these places. It’s interesting that you guys brand Marcus as “Marcus by Goldman Sachs.” To me that means, you think that Goldman Sachs, among millennials, still has some cool. How sure are you that that’s true among ...

Kara Swisher: He’s asking if you’re cool.

I’m definitely not cool. There’s no question about that. The answer to that is, we’re trying to figure it out. You know, so here’s this company that’s been around for 150 years. In any brand survey, it certainly has a very aspirational brand. That doesn’t mean it’s perfect and there are no detractives to the brand, but it’s a pretty powerful brand.

But we were entering consumer businesses and we decided to do it under a different banner. Now, over time, you know, who knows where that will go. Over the next 20, 30 years as we build a platform, it might be that we wind up with just one brand, Goldman Sachs. It might be that we wind up with multiple brands because you can segment. You know, we have a private wealth business for ultra-private wealth that is Goldman Sachs.

As we build other businesses we’ll have to see, but the answer is we’re thinking about that, and we actually have, with individuals, we have three brands at the moment. We have Goldman Sachs, we have Ayco, which is basically a corporate counseling wealth management brand where, through corporations, for corporate employees, we help them with wealth management, finances, taxes, you know, those kinds of things. And that’s a company that’s been around, that we bought about 15 years ago. And that’s a real brand, and that brand has resonance, and then we’ve got Marcus, so we’ll have to see.

Teddy Schleifer: This is part of a broader push by you, internally, to make the stodgy Wall Street institution more relatable, right? I mean, you’ve done things like relax the dress code. You’ve done things like make sure there’s rules governing work on weekends. Do you feel like that’s a legacy item for you? To make this somewhat ... You know, most people don’t have touchpoints with Goldman Sachs, most people think of it just part of the Wall Street firmament. You want this to be internally something that people can say, “Hey, I work at Goldman Sachs,” and that is seen as a positive, cool thing to be doing in the world.

Well, you’re touching into something that’s very important. Now, we’re a talent organization. We have platforms and different kinds of businesses, but we are a talent organization, we’re a professional services organization, and so attracting and developing talent is a huge part of what makes the place tick.

Teddy Schleifer: And you’re aware of the perception of what Goldman Sachs is?

I’m aware of all the different perceptions of what Goldman Sachs is, and one of the things that I’m also aware of is that 74 percent of our employee base is millennial or Gen Z, 60 percent of our employee base is 30 years old or less. And so, you know, the world’s just more competitive than when I started 35 years ago.

And you’ve gotta be relatable, so the things you’re talking about — dress, how people work, etc. — we’re very fortunate that Goldman Sachs is one of the top five or 10 places that when people are coming out of undergraduate school, they want to go start a career, get some training, get some skills, meet people, network.

You know, we compete very well, we hire about 2,500 people out of school a year, we get tens and tens of thousands of applications for those jobs. It’s a very desirable place to start a career. To attract people mid-career — we have 11,000 engineers at Goldman Sachs, we compete with all the big tech platforms for engineers — we have to have a relatable organization, we’ve got to be a little bit more human than the way that the organization was defined. And so we’ve been thinking about that.

Kara Swisher: Is that the same thing when you’re thinking about IPOs and attracting companies that ... Because you have Slack doing its thing, everyone is ... How do you look at those efforts not to be involved in the typical road show atmosphere?

Teddy Schleifer: Direct listings.

Kara Swisher: Yeah.

Direct listings. So look, there’s been one direct listing and now there’s going to be a second. We’ve worked on both those direct listings as an adviser. I mean, people come to us given our experience around these things. Direct listing is not for everyone. For starters, the primary reason people go do an IPO is they want to raise the capital and so direct listing doesn’t solve that problem. Spotify was a very visible, branded platform. It’ll be interesting to watch Slack, the next one. I think there’ll be some direct listings, but I don’t think we’re going to wake up tomorrow and have the whole IPO process shift in this direction.

Kara Swisher: And then in Long-Term Stock Exchange, we had Eric [Ries] here, how do you look at those?

I met with Eric, it was a while ago when he was first getting started. I have ...

Teddy Schleifer: Probably when you didn’t think it was going to happen.

No, I actually thought he was a super super smart guy. And I thought it was super super interesting. It’ll be interesting to see how this all evolves. I think there’s going to be a lot of disruption around equity platforms, exchanges, liquidity. This is an area ... And look, we’re a big big player in it, but also see the disruption coming in a lot of different directions. So it’s definitely a space where there’s going to be an evolution over the next decade as to how that works. But scale, global, connectivity to the pipe that the clients want to be connected into, those things are super super important.

Teddy Schleifer: Just one final thing before folks line up for questions. China. There’s a growing, maybe somewhat bipartisan consensus that China is not as much of a friend to the US as we’ve thought for the last 20 years. I’m wondering, do you think of your obligations ultimately as to just Goldman Sachs shareholders? Or do you feel any obligation to the US specifically? At a time when there’s kind of this rising tension between the two nations.

Oh we feel an obligation to a lot of stakeholders. Certainly our country is an important stakeholder. And I feel strongly. I would side on the fact that we had a foreign policy initiative over the last 30-40 years that led us in a direction with China and has led to a bunch of imbalances. And look, for ourselves, we’ve had a joint venture there that we’ve wanted to control for 15 years, and we’ve been told that we’d be able to make progress and move towards having economic control in that joint venture. And it hasn’t happened. In other words, it’s not a level playing field with respect to the way we operate there. Someone from there can come operate here. And I think that’s got to be rebalanced. I think it’s going to be a long, arduous process. It’s not just about trade. It’s not just going to get solved.

In the short term, I think that there are some disagreements that we and China have, and when we’ve had ... China’s a rising power. We are a power, and we are a power that used to have 50 percent of global GDP. We now have 20 percent of global GDP. The last time we dealt with a rising power, you go back and you look at Russia, we weren’t economically entangled with them so we could isolate them. We don’t really have a good roadmap for dealing with a rising economic power that’s a very very significant trading partner.

Kara Swisher: What are your thoughts on the tariff that President Trump is doing?

I would side with most people, that generally speaking, tariffs aren’t productive economically for our economy. I do think that we have to find ways to pressure China and I haven’t come up with necessarily a better way to do that. I think the thing that becomes complicated is we’ve got a lot of skirmishes going on. And the big skirmish is over in that direction. And I think the more we can focus on that, the better chance we have of bringing others along and possibly making more progress and moving forward.

Kara Swisher: Okay. Questions from the audience? Right here.

Crawford Del Prete: So hi, Crawford Del Prete from IDC. I have a question for you in the sense that ... You touched on this briefly, but about the number or public companies. So if you go back to ’97, we had about 7,000 public companies, today we have between 3,500 and 4,000. Can you just sort of look out for us and kind of ... What does the public company world look like five years from now? Just from the sense of, you’ve got this concentration and this smaller number. And you talked about why companies go public, but it just seems like the theater for how we’re going to be investing in public companies is, just by definition, going to change going forward. I’d love your thoughts on that.

Yeah, sure. And look, five years is a short period of time, but I think as you look forward here’s what’s fundamentally changed. If you go back, when I started my career in the early ’80s, if you were a small company and you needed capital, there was only one place you could really turn: the public markets. I mean, there was early-stage venture and then there were the public markets. So you had companies going public raising $5 million, $10 million, $20 million. Given the concentration of institutional capital and how important that is to the public marketplace, there’s no market for companies like that anymore. So companies have to have scale and market cap to have liquidity. And in that context, that delays the process of when companies can go public.

So I think the chance of us going back to 7-8,000 US public companies is low. I do think things could ebb and flow a little bit from here. I do think we’ve been in a period of time where private capital has been abundant. In a different environment, private capital might not be quite as abundant. I mean, I know it’s hard for anybody to imagine, but if we were in an environment where there was a 6 percent US treasury there wouldn’t be so much private capital available. My guess is one day we’ll wake up, there will be a 6 percent US treasury again. So these things can ebb and flow, but I think that capital formation has just become a lot easier privately. And that will continue to keep people out of the public markets until they really need to go. And they’ll generally be larger companies.

Crawford Del Prete: Yeah, thank you.

Kara Swisher: Okay, very quick, one more question. Sorry, we’re trying to keep on time today. I know we didn’t yesterday. Go ahead.

Pam Dillon: Sure. Pam Dillon, RingIT Database Software. David, my question has to do with the public and private markets again. You were discussing all the reasons that someone would want to go public. Of course there are reasons that someone would not want to go public. Goldman is equally powerful in the private markets. Can you talk about the financial disciplines that are developing there? The reasons that CEOs might find and face similar disciplines, financial disciplines, that the public markets up until now were really responsible for.

So we spent a lot of time on that, broadly. But I think one of the big reasons people don’t want to go public, and I think it’s a good reason, is the public markets do push more short-termism on performance. And that has an effect on investment decisions, and that has an effect on how you manage the business. At the same point, that short-termism creates a discipline around capital allocation that is just different than what you get in a private company structure.

One of the things that I think will be interesting to watch, and it’s not going to happen with smaller businesses, but when you start raising billions of dollars of private capital, at $10 billion-plus of valuation, the capital sources are often investors that are generally structured to be public company investors. So you’re taking mutual fund money, you’re taking pension money, you’re taking money that normally is used to certain kind of reporting protections, information protections, that you’re not getting in the private markets.

And I do think there’s a risk that we could see over time, I don’t think this is a pressing issue now, but over time, we could see more regulation that leads to different barometers of standards for what you have to do. So the public company standard could get translated, instead of in a black-or-white line, public or private, it could get translated into size, capital raised, investor bases, etc. So that would be something that I think you could see transition.

And generally speaking, I’m not religious public/private, there are benefits to both. There are differences in the way companies should be managed. I think one of the things that companies and boards and the investors that back them need to do is you need to understand that company, its motivation, its objectives, and under what structure do you have the best chance of making that company successful over time? And it’s different for different businesses.

Teddy Schleifer: One last thing: diversity. Goldman Sachs never had a female CEO. I know that it’s very important to you, one of the first things when you showed up there. You have a 33-person manager committee. Went from three women to seven. Pretty good. Is that fast enough?

It’s not fast enough. And I’m spending a lot of time on this. And I’ve been out publicly setting aspirational goals for the organization and trying to create more concrete accountability in the organization for moving faster. I think that we’ve made progress, but it’s not as much as I’d like us to make. There are things that we’re trying to do that are more specific and more proactive to move along. And I’m trying to change the lines of the filter.

So for example, just using your management committee example, certain jobs at the firm have put people on the management committee. And I just said, “You know what? We’re not going to wait anymore. Who are the three or four most important women in the firm who aren’t on the management committee? Regardless of what job they sit in, we’re putting them on the management committee.”

Teddy Schleifer: Even if their title didn’t correspond?

Even if their title didn’t correspond with what the historical practice had been. So, new lens. And I think, look, these are the things that you have to try to do. There are some things that are broad accountability and metrics and process. And there are other things where leadership, it’s got to start at the top, has to say, “You have to see every day that I care about this, and I will move the organization forward.” And hopefully you make some progress and you get the organization to follow some more. But we have to make — and it’s not just we corporate, the corporate world — public, private has to make more progress on diversity and inclusion. It’s a business necessity and it’s right.

Kara Swisher: All right. David Solomon. Thank you.

Thank you. Appreciate it.

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