Technology concentrates value among Wall Street's top performers

Transcript

From the transcript How I Invest publishes with the episode.

1. 10:30

   I'd love to talk a bit about kind of taking a step back three years and how you've seen Wall Street change over the past decades since you first joined Goldman and perhaps even more so in recent years. Is it really sort of the financial crisis and regulation that drove most change? Was it technology? Is it kind of the rise of private markets or something totally different? You know, I would say Wall Street has again, what what it say you know, it doesn't repeat, but history doesn't repeat, but it rhymes or you know, I'm thinking that, you know, the DNA of a pig and the DNA of a human are about 97% the same, but the 3% makes a big difference.

2. 11:15

   I would say it's different now, but 97%, you know, you have ambitious people making their way in the world, taking risk. The tools are different, and you're contributing yet another set and layer of very important tools that'll make things more efficient. But at the end of the day, it comes down to the judgment that gets applied to the the to the information and the data. You know, you wanna have the best data because you're competing with other people who are trying to get better data than you have it.

3. 11:43

   But at the end of the day, you're at the fulcrum. You humans are at the fulcrum of a bigger lever. Having said that, the leverage is much greater. And so the people who are very good and very important to the organization are worth more, and maybe the people who are less important are worth less. And so if I had to say one thing that's different, I think, is that the person who is making the decision has much more leverage today because everything has an extra two zeros at the end of it.

4. 12:20

   And so I would say the winners are gonna be bigger winners. And the and the people who are just, you know, filling out the ranks are gonna have, you know, are gonna have are gonna have less fulfillment probably in in in the world that we're in today. But it's gone through those things before. You know, once when I started at Goldman in trading, there was a trading room of hundreds of people, you know, big buildings, which we don't need as much big buildings as before, and to get prices and to get liquidity, you'd have 10 people pick up a phone and call out and get 10 things, and somebody would scoop them all up.

5. 13:02

   Now someone's just tapping on a machine. And they're still functioning. It's all you know, it's better. When I started out, I spent three hours a day proofreading telexes. Nobody's proofreading what's a telex? You know that ticker tape that used to fall out of building windows when somebody would you know, when you know, when somebody, you know, when the soldiers came back from World War one, there was a telling that people were doing that.

6. 13:27

   Nobody's doing that now. I'm sure it was character building in some way, but not so much that it was worth so much time. There's just much more leverage in the system where the person who's you know, it's if it's not winner take all, it's winner take most. And therefore, the people who help with that who are special are worth more. And, you know, so, you know, you know, I'm sure that 90% of the people here are in the top 10% of their organization.

7. 13:57

   So, you know, you have nothing to worry about. Actually, that that's a debate that we we end up having a lot. There's you know, I guess you can think about AI as a technology elevating everybody, but then your point is more about maybe it's the superstars that it elevates the most. It's all leverage. The world is and I think of it as a lever in a fulcrum. The people, you know, at the fulcrum are gonna lift more than they ever could have before, and it behooves you to do it.

8. 14:29

   You know, people are wringing their hands about spec what choice do you have? You know, you can't in in trade, you know you know, trading evolved differently. Now it's, you know, you're you're entering things, and if you wanna get a price and, you know, we're not focused on this business principally, but if you wanna take an offer or hit a bid in the in a in a market, you're gonna the person who's one millisecond faster, who lives whose machines are a half a block closer to the exchanges machines wins a 100% of the time.

9. 15:04

   So how could you not invest in the technology to get closer? And the same thing applies to the people who are exercising judgment over, you know, investment decisions. It may not be, you know, as as obvious, but you you wanna have the best tools and resources or at least have an arms race, you know, have a, you know, you know, a nuclear settlement where if you don't use it, I won't use it. But guess what?

10. 15:30

    They're using it, so you better you better you better catch up and try to stay ahead. And if you're not trying to be ahead, you're gonna fall behind. You know, everyone's going and anguishing over whether you should have the spend or not. I said, who can afford it? How could you not do it? And if later you overspend or you invested in the you know, too bad. Sorry. You know, let's fix it quickly. But what choice do you have?

11. 15:54

    You can't walk off the field.