Episode summary
Former Goldman Sachs CEO Lloyd Blankfein: “We Haven’t Had a Reckoning in Years”
Wall Street Week
· · Guests: Lloyd Blankfein
Summary
Lloyd Blankfein argues that the war in Iran is a serious geopolitical shock but may prove only a temporary market problem unless it disrupts oil flows through the Strait of Hormuz. He says his base case is that markets will absorb the conflict, though oil prices and supply chains will feel knock-on effects and existing market anxieties were already present before the war began.
Blankfein uses his memoir, Streetwise, to frame Goldman Sachs as both a risk-taking and risk-managing institution. He says the firm learned to insulate itself from unexpected shocks rather than simply chase profit, and he links that discipline to the need for investors to think in terms of downside scenarios, not just upside cases.
He also argues that the economy is still creating wealth, but that wealth is being distributed poorly. He says the U.S. market, lower rates, fiscal stimulus, and large AI infrastructure spending are supporting growth, while asset owners get richer and everyone else falls further behind. In his view, the world is less global and more multipolar than people once assumed, and that shift makes supply chains, rare earths, and national security central to investing.
Key takeaways
- Blankfein says the Iran war may hit oil and supply chains, but his base case is that the market impact will not be enduring.
- He argues that long periods without a downturn create complacency, and that the longer a reckoning is delayed, the worse it can be.
- Blankfein says the macro economy is creating wealth well, but is allocating it poorly, widening the gap between asset owners and everyone else.
- He says globalization proved less durable than many believed, with COVID and the global financial crisis exposing national boundaries in capital and supply chains.
- Blankfein thinks investors now have to factor in geopolitical fragmentation, including rare earths and strategic supply chains, as national-security issues.
Notable quotes
“My base case is that it should... it will reflect the markets for a while, but not forever, and maybe not even that long a while”
“we were also very good risk managers, which is a whole different exercise than going out and taking risk for funding profit”
“And the longer-- Really, not since the global financial crisis. That was a long time-- 2008 was a long time ago”
“And it also has to allocate wealth, distribute it according to the values of society. And it's doing less well in that regard”
“the world wasn't as integrated and global as we thought”
How the episode opens
Lloyd Blankfein lived through several geopolitical upheavals during his time at Goldman Sachs, including as its chair and CEO. He's written of his experiences in his new book, "Streetwise, Getting To and Through Goldman Sachs. And we welcome him now to "Wall Street Week.
Congratulations on your new book just out. It is a book at least largely about risk management. You have been a risk manager.
Goldman Sachs has been in risk management. We now have new risk in the war in Iran. If you were managing for that risk, how would you manage it?
-Well, actually, the war itself is usually... those things tend to come and they tend to go. Look, it could be-- it could fall off the rails.
It could close the Strait of Hormuz for a long time. I don't think that's going to happen. I don't think they have the capacity-- the Iranians have the capacity to do that.
But a lot of bad things happen. My base case is that it should... it will reflect the markets for a while, but not forever, and maybe not even that long a while.
The price of oil will clearly be affected. The oil is part of the supply chain. Knock-on effects for other things.
But I think we'll revert back to all the anxieties that we had even before the war started. And they were-- It was an anxious market, and there was some fragility in the market even before that. But I'm not...
the war is, you know, the war is, you know, is very, very important. It just may not be that enduring a problem for the markets. Westin: So in "Streetwise," your book, you don't just emphasize the importance of risk management.
You take us behind the scenes of how you manage risk, how Goldman Sachs managed risk.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- risk management
- geopolitical conflict
- fiscal deficits
- late-cycle markets
- wealth inequality
Companies and tickers mentioned
- GS
- Goldman Sachs
Watch the episode
Watch “Former Goldman Sachs CEO Lloyd Blankfein: “We Haven’t Had a Reckoning in Years”” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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