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- [00:00]
Indiana University Announcer
Indiana University is shaping the future of healthcare, advancing discoveries that become treatments for Alzheimer's, obesity and cancer, and training the providers trusted to deliver them. See how IU solves what's next iu. Edu Impact.
- [00:18]
Tom MacKenzie
Bloomberg Audio Studios Podcasts Radio News. We can cross over now to Turin, where of course, our Tom MacKenzie speaking to David Solomon. The interview of the day here. Here it is.
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Interviewer
Given the geopolitical strains given now as well the shutdown in the U.S. david, does the U.S. economy weather the current political standoff in Washington and does that resilience that we've seen this year continue into 2026?
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David Solomon
Well, first, thank you for having me here. Delighted to be here. The US Economy is in pretty good shape and there are some very, very strong tailwinds that have really had a profound effect. And there are also some things going on that are creating headw and are probably leading the economy to underperform its expectations this time. But I'm optimistic that we're probably going to see an acceleration as we continue to head into 2026. The big structural issue that's kept the US economy going so well is the US and by the way, other developed economies around the world are running very aggressive fiscal stimulus plays. Governments are spending enormously into economies in the developed world, and that keeps the economy going even when you have other headwinds. Second, big macro phenomenon that's affecting the US Economy is all of the AI infrastructure build, all the capital spending, all that's going into the ground to support the deployment, the development, the continued growth of AI infrastructure into the enterprise. And that's a big tailwind, too. That's balanced on the other side by the implementation of the trade policies, which are still getting absorbed. I think we're seeing some of the effects from trade, but there's still, you know, there's still more to go in terms of really understanding how the trade policy is fully implemented and how it balances growth. And then obviously the world's a little bit more geopolitically fragile, and that has an impact on growth and, and, and, you know, kind of confidence. But when you balance it all, you saw the third quarter reading was quite strong. But year over year, from last December to this December, the overall growth trajectory would probably be a little bit less than 2%. And so that's slightly below trend, but.
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Interviewer
Still in pretty good shape and an acceleration into 2020.
- [02:32]
David Solomon
I think that as the trade policies are absorbed and you have the continued stimulus and the continued kind of tech spend, you've got a pretty good tailwind. You Know, I hear as I talk to CEOs that would kind of have their finger on the poll, certainly the upper end of the economy still spending quite strongly. A little bit more constraint on the downside on the, you know, the lower part of the economy. But I think the things you have to watch, you have to watch labor. There's no qu and labor short is a little bit softer. The Fed's watching labor carefully. And you know, I think you've also got to watch inflation and whether or not the impact of trade is just a one time price movement or there's something more significant that comes through and it's too early to know.
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Interviewer
And you touched on labor. How would you characterize the health of the US job market right now?
- [03:18]
David Solomon
It's a little bit, it's a little bit softer. And I think you can step back and you can understand why when you think about big enterprises and what's going on with technology, people are pausing hiring to really kind of evaluate how as they bring this technology into the enterprise, they can automate, create efficiencies, reinvest. And so, you know, I think at the moment that slowed hiring and as a result, you know, the labor numbers are a little bit softer.
- [03:41]
Interviewer
The Federal Reserve cut interest rates for the first time this year in September last month. The markets are expecting another approximately four cuts between now and this time next year. Another 1 percentage point of cuts with inflation remaining above the target for the Fed. Does that seem reasonable to you?
- [03:56]
David Solomon
I, I think it's in the distribution of outcomes. You know, I think we'll have to watch. I know there's a great parlor game of people kind of predicting what the world's going to look like six months, you know, 12 months out. If you think about what the world looked like in April and where markets were in April and think about where they are today, you know, I'd just be cautious. I think that I, I think that we've got competing forces between labor and inflation and how they balance, which is still a little bit uncertain, will have an impact on whether we get one more cut or we get, you know, two or three more cuts.
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Interviewer
Global stocks at record highs. U.S. stocks at record highs. The S&P 500 is up about 15% year to date. Nvidia's market cap is around four and a half trillion dollars. That's more than the entire market caps of France, uk, Germany, Italy combined. Does the market rally? Does this bull market. Are you comfortable with this bull market given some of the concerns you flagged?
- [04:54]
David Solomon
Am I, Am I comfortable you know, yes, I sleep very well. I'm not, you know, I'm not going to bed every night worried about what will happen next. But markets, markets run in cycles. And whenever we've historically had a significant acceleration in a new technology that creates a lot of capital formation and therefore lots of interesting new companies around it, you generally see the market run ahead of the potential because they're going to be winners and losers. They're going to be winners and losers. If you go back and you think about the Internet, pick on Amazon. You know, Amazon was one of many companies that was prosecuting that kind of opportunity. Many of the companies went away. Amazon became an incredible company. You're going to see a similar phenomenon here. I wouldn't be surprised if in the next 12 to 24 months we see a drawdown with respect to equity markets. But that shouldn't be surprising given the run we've had. But generally speaking, I think what's super exciting is the technology is expanding, new companies are being formed, and the potential of this technology deployed into the enterprise can be very, very powerful. And so it's an exciting time in the market. You know, the market looks forward.
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Interviewer
What does that mean for. For dealmaking? You've seen a pickup in dealmaking. What is the scale of the pickup you expect to see and what are you seeing in Europe?
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David Solomon
The pickup in dealmaking broadly is meaningful, but it's particularly accelerated in the US and what's driving the pickup in dealmaking is a changed regulatory environment. So if you were thinking strategically and you wanted to really expand your scale or your competitive position in almost any industry for the last four years in the United States, the answer was no. From a regulatory perspective, it really wasn't. What's the question? What could the answer be? The answer was no. And I think CEOs at this point, imagine they're in an environment where you actually can get strategic transactions done to expand your competitive position. And so we obviously, inside Goldman Sachs, we have an early look at that activity in those dialogues, and I would say it's accelerated very significantly. If you just look at the facts in terms of what's public, we've obviously had a very significant M and A quarter. We had a $1 trillion MA volume quarter this past quarter. And if you look at large cap, M and A, meaning M and A for companies that are $10 billion or larger, it's up 100% year over year. So there is real momentum in the dealmaking environment. I think you're going to see an acceleration of that into 26 for sure. And increasingly, CEOs are testing what the bounds are of their ability to enhance their competitive position or improve their scale and their lead where they have a leading position in a variety of industries. And I think the regulatory environment is going to permit that at the moment.
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Interviewer
Okay, so it sounds like you're going to be very busy, you and the team on dealmaking in 2026. What are your priorities, David, for Goldman and the franchise next year?
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David Solomon
Well, we don't really think about it, you know, next year. Our French, our priorities always start with the way we face and serve our clients. But in 2019, 2020, we laid a strategic plan out for the firm and we've been executing against it for the last six or seven years. And as you highlighted earlier in the discussion, we've created a lot of value because we've grown the firm. At the end of the day, as a public company, we have to grow. We might be a big mature public company, but we have to grow. We have to grow. We have to grow our earnings. And to do that, you know, you have to have a cogent plan where you're investing in different parts of the business. We have two big principal businesses, our investment banking and trading business, where I think there's little debate about our leadership position. It's an extraordinary business, very big business. We've been investing in adding more resources to that business over the last five, six years. We've increased our market shares very meaningfully in that business. Our market shares are up about 350 basis points over the last five years in that business. And then separately we have the fifth or sixth, seventh, depending on how you look at it. Largest active asset manager in the world. We manage about 3.3, $3.4 trillion through our asset and wealth management platform. That business is growing high single digits is what we've put out publicly. It's actually been growing faster than that. And we continue to invest in a variety of aspects of that business where we see real growth. We can grow our wealth business, which is an ultra high net worth wealth business. We can continue to grow our alternatives platforms, private capital formation. And we have a very flexible solutions business where really for big institutional capital allocators, we have an ability to really create and customize what they need from an investment perspective.
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Interviewer
There's been a lot of discussion here at Italian Tech Week about how to get globally significant generational businesses, tech businesses built out of Europe, $100 billion plus. What is your prescription for that?
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David Solomon
I mean, my prescription for that is savings in Europe and capital in Europe needs to come into the risk economy in Europe. You just don't have the scale and scope of the available savings here. Getting deployed into the tech risk ecosystem at the pace that it should when you compare and you look to the way things are deployed in the United States. And in fact, one of the things that happens here is capital from here looks over there. And so there are enormously smart, talented people. There are lots of great ideas, capital formation and a real focus on risk taking. Stuff's going to go right, stuff's going to go wrong, but you got to take risk, you've got to deploy capital. This really has to become a bigger center of capital deployment. And also the more we can get the European Union to be operating as an economic union and taking advantage of the 400 plus million people that are here as opposed to the individual states, for lack of a better term, the more we can get the tech economy working that way, I think the better chance we have of reaching your goal, which I think would be a very noble goal for the world. So I mean, the more, the more innovation over here, the better for the world. Yeah.
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Interviewer
So Ursula von der Leyen will be here. So your one message to the European Commission president would be centralizing or capital. Capital certainly is there. The urgency.
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David Solomon
I, you know, I'm feeling more urgency when I'm over here. But still, you know, the regulatory process in Europe is slow. Capital markets union for sure. You know, more encouragement of risk taking in capital markets, trying to bring it all together. Consolidation of the banking system instead of national champions in every market. Consolidation in the exchange system instead of champions in every market. You know, those are all things that will make capital formation easier, risk capital formation better, and will allow the acceleration of great companies here in these markets.
- [11:25]
Interviewer
You have lent into tech and into AI. Your team are telling me you have 12,000 engineers across Goldman Sachs. You have an, the Goldman Sachs AI assistant. You have an AI developer. What parts of the business, and you've talked about some of them, whether it's wealth or asset management or trading or the consumer. What parts of the business at Goldman are going to be most transformed by AI?
- [11:44]
David Solomon
Well, I, I think, you know, the business of work is getting transformed by AI broadly. And you know, we are, at our heart, we're a professional services firm. If you think about Goldman Sachs and the value it brings to its clients, its value is deployed really among three different things. People, capital, technology. And so if you think about AI, AI really allows smart, talented, driven, sophisticated people to be more productive, to touch More people that have better information at their disposal, better analysis. I mean, this is a journey we've been on. This technology accelerates it. But when I started 42 years, years ago and I wanted to look at five different companies and think about how to compare the trading in five different companies, I had to go to the library, I had to go to the microfiche, I had to spend hours really thinking about how to put that comparison together. Obviously today you can do it in a fraction of a second speaking into your phone. So this journey in providing tools to super productive people and giving them more capacity to serve their clients and to be more productive is obvious. And we've been working on all those tools, as most enterprises have. I think the more interesting thing for enterprises broadly, and this isn't unique to Goldman Sachs because the world is underpinned by technology. Coding is time consuming, but this technology allows you to code with greater productivity and efficiency. So one great coder now with a tool such as Cognition Labs, Denim, Devin, for example, you know, really creates massive coding capacity for one coder as opposed to, you know, having 10, 20 people sit around for a few days. So big productivity there. And then of course, when you think about operational systems in any business, the ability to accelerate automation and therefore drive more productivity, it's not just a cost exercise. It's actually about taking that productivity and having more capacity to reinvest in growth in your business. You know, we'll spend, you know, $6 billion on technology this year. I would have liked to spend 8, but I can't afford it because I've got to deliver returns. Yeah, but with this technology, my ability to spend more and invest more in growth and accelerate things that can grow our enterprise, it's more available to us.
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Interviewer
5, 10 years time. Fewer jobs in banking as a result of AI.
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David Solomon
I don't think that's the right lens. I think there are places where the number of jobs, the actual jobs will come down. But the way the lens I look at it is, you know, I think we can continue to grow Goldman Sachs, I think we can continue to serve a wider slice of clients with these tools and these capabilities being integrated into the firm, changing our processes. The question, you know, the way I would answer the question, if the firm was the same size and it didn't grow, we would certainly be operating with fewer, fewer people. But if the firm grows and you expand and you can invest in other areas for growth, we'll wind up with more jobs 10 years from now than we have today. Just as, by the way, we have in every step along the journey for the last 40 years as technology has made us more productive. I don't think it's different this time.
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Interviewer
So you, you fought to be clear. You foresee more headcount in 5, 10 years time.
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David Solomon
That's because I think we're going to be running a much bigger enterprise.
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Interviewer
Do you, do you worry about. There have been some, there's been some hand wringing in terms of the investment. We've seen the hyperscale, it's $350 billion in terms of capex and data centers and infrastructure and the concern that the return on investment isn't being matched, that's not matching the revenue on the other side. Does that, does that concern you, that mismatch?
- [15:14]
David Solomon
Well, sure, it concerns anybody that's deploying capital, but I think the journey is pretty clear. Even though we're at the beginning of the movie, not the end of the movie. I guarantee you at the end of the movie the whole, there'll be a bunch of winners and there'll be a bunch of losers. There'll be a bunch of capital that was deployed that ultimately delivered very attractive returns and there'll be a lot of capital that was deployed that did not deliver returns. And you can go back in any super tech cycle or any big investment cycle and that is the pattern you'll see. It's not, again, it's not different this time. We just don't know how that will play out. But it's very exciting to see these technologies get deployed and the impact that's going to have it just, it allows productive people and productive businesses to be even more productive. And so people get very caught in this question of more or less and you know, I prefer a lenses as there are obviously things where we're going to have a lot, a lot fewer people. But I'd love to have the capacity to go get more people to spend time with clients. I'd love to have the capacity to invest in new businesses where I think we can affect clients and we need people to do that, those things. So it's a give and take and nobody stands still.
- [16:21]
Interviewer
To be clear, you're not worried about.
- [16:22]
David Solomon
An AI bubble, You know, an AI bubble. I, I think that there will be a lot of capital that's deployed that will turn out to not deliver returns. And when that happens, okay, people won't feel good. Okay, if, you know, I don't, I'm not going to use the word bubble because I don't know, I don't know what the path will be. But I do know people are out on the risk curve because they're excited. And when they're excited, they tend to think about the good things that can go right and they diminish the things you should be skeptical about that can go wrong. We're in one of those environments where people are out on the risk curve and there'll be a reset, there'll be a check at some point, there'll be a drawdown. The extent of that will depend on how long this goes. By the way, if we were having this conversation in 1988, you would have been asking the same 1998, you would have been asking the same question. Yet the environment went on for another three years until there was then a significant check in 2001 and 2002. So I'm not smart enough to know. I think it's going to go on for a while. I think the opportunities are great. I think they're very exciting. But I also see complacency around risk taking and when that happens, ultimately there'll be some spread speed bump system drawdowns.
- [17:41]
Interviewer
David Solomon, chairman and CEO of Goldman Sachs, thank you so much.
- [17:45]
David Solomon
Thank you. Appreciate it.
- [17:48]
Interviewer
Thank you.
- [17:48]
David Solomon
Thank you. Appreciate it.
- [17:55]
Tom MacKenzie
What a wonderful conversation. Also with, I have to say, a spinning set. Not something that you see every day. Tom MacKenzie they're speaking with our Goldman, well, the Goldman Sachs chief executive, David Sullivan at times Tech Week. They talked about the Fed, they talked about tech and some of of course, the things that we should be watching out for.
- [18:13]
Indiana University Announcer
Indiana University is shaping the future of health care. Advancing discoveries that become treatments for Alzheimer's, obesity, cancer and other rare and complex diseases. And training the next generation of providers, doctors and nurses trusted to address health challenges with skill, compassion and purpose. From the lab to the clinic, from research teams to patient care, IU talent is driving medical innovation, improving health outcomes and strengthening communities. See how IU solves what's next? IU Edu Impact how can you grow.
- [18:47]
Tom MacKenzie
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- [19:04]
Indiana University Announcer
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