00:00hi everyone welcome to the a six in Z
00:02podcast today's episode is at Stephenie
00:04Cohen chief strategy officer at Goldman
00:07Sachs in conversation with a 6nc general
00:09partner Martine casado the discussion
00:12which originally took place at our
00:13annual a6 and Z summit in November 2018
00:16covers everything from the ins and outs
00:18of M&A to the always hot topic of build
00:21versus buy as well as other things top
00:23of mind in big company innovation okay
00:32great so thank you so much for joining
00:35so broadly we're gonna be talking about
00:37innovation in large companies you know
00:39you can kind of frame the problem in in
00:42two ways there's inorganic and those
00:45organic right I mean there's not a lot
00:46of options at the most macro level and
00:48Stephanie has been involved on both
00:51sides she's done almost two decades of
00:53M&A and now she's the chief strategy
00:56officer of Goldman Sachs so involved in
00:58you know strategy and innovation broadly
01:00so that to start off it would be great
01:02because the audience probably isn't as
01:04familiar with your background as I am so
01:07if you could kind of give maybe the
01:08long-form of your bio and then we'll
01:10kind of jump in to M&A first we'll talk
01:12about that and then we'll kind of
01:13streamline that into internal innovation
01:16cool great so I started at Goldman Sachs
01:19almost 20 years ago so out of preschool
01:22and it's the only full-time job I've
01:26I started in our M&A group I ended up
01:29then transferring to our Industrial
01:32Group I ran our general industrial
01:33business I spent seven years on the west
01:36coast doing non tech M&A so the least
01:38cool person in Silicon Valley doing non
01:40tech M&A flanked of to Portland and
01:43Washington and Los Angeles for that
01:45matter and then I started and ran a new
01:49business inside the firm which was M&A
01:51for financial and strategic investors so
01:53that was an included venture capital but
01:55was also private equity pension funds
01:57sovereign wealth funds family offices
01:58and then I was asked to be chief
02:01strategy officer and that I started in
02:03January all right great
02:05so to start off with maybe we'll start
02:07with the M&A side you know you know
02:10having been in a large public
02:11organization and kind of struggling with
02:14I think every name was kind of one of
02:15like the hairier topics because I cause
02:17Aztec lists did we do it in-house we're
02:18not doing it how's this and that so I
02:19thought maybe we've provide some framing
02:21for like at a high level how do you
02:23think of the tension between an M&A
02:25versus kind of internal or organic great
02:28so I don't think about it as tension I
02:30think about it as the way that we think
02:33about it is that we want strategy and
02:35M&A to be in the same place so instead
02:38of having a group of people that goes
02:39off and does strategy and a group of
02:40people that goes off and does M&A and by
02:42the way incentivizing a group of people
02:44on the M&A group just to get deals done
02:46our view is that they should be in the
02:48same place and the idea really is is you
02:51need to know what your strategy is so
02:52first you have to decide where you want
02:53to go where you're trying to head and
02:55then the question is do you do it
02:57organically or in organically and I
02:59don't think it's an either/or it's a
03:00both and in many cases when we're
03:03looking at it we look at opportunities
03:05and say if we could buy a business what
03:08would that business be and and therefore
03:10how much would be ultimately be willing
03:12to pay for that business and is it
03:13available and if it wasn't available how
03:15do we do it organically and we kind of
03:17run those things right next to each
03:19other and in many cases were as we're
03:22going after new initiatives and one
03:23example would be we recently over the
03:26last couple of years has gotten into
03:28consumer banking through a brand that we
03:30call Marcus and if you look at that
03:33business we've actually done it both
03:35so we've bought a couple of businesses
03:37but we've also built it organically and
03:38I think that mix of doing things
03:40together in exactly the same place is
03:42what's helped us succeed so for the M&A
03:45side I think the broad view has been
03:48that it almost always fails right this
03:50kind of like the academic view certainly
03:51there's a number of examples for that my
03:53experience has been quite different
03:54actually so was acquired about the large
03:57business and so I thought maybe it'd be
03:59great to hear your thoughts on like are
04:01there like the right preconditions for a
04:03success or are these exceptions is this
04:06survivorship bias so one thing on the
04:09studies when I first started in M&A I
04:12started reading those studies and they
04:14were too depressing for me because I was
04:18an analyst I've been doing M&A for
04:20twenty years for other companies and now
04:22responsible for doing it for us and when
04:25I've seen companies do M&A well and by
04:28I have seen I have helped companies by
04:31businesses that they've ultimately ended
04:32up selling so I've certainly seen some
04:35of the round trip the when companies
04:38decide to do something for strategic
04:41reasons when everyone gets together and
04:43decides it's the the right thing to do
04:45and by everyone I mean it doesn't mean
04:47everyone has to agree because getting to
04:49consensus in some of these situations
04:50may actually not be the right answer but
04:52what I mean is the people at the table
04:54are not just the deal guys and gals it's
04:56also the people have to integrate the
04:58transaction when both of those people
05:00are at the table from the beginning and
05:02understand what they're buying
05:03understand what it's gonna take for the
05:05acquisition to succeed I find you have a
05:07better chance of it succeeding not
05:09because they're always right but because
05:10they're there together as a team the
05:13second thing and this happens more with
05:15more innovative businesses than more
05:17old-line industrial companies a lot of
05:20times you're buying the business not
05:21just for the product of the technology
05:23but it's for the people and being humble
05:25enough to actually leave those people
05:27alone to continue to innovate and
05:29succeed and in some cases the people
05:31that you have bought at a much smaller
05:33company become the leaders in a large
05:35organization it's recently I've been
05:39working with with a woman who was
05:41acquired by a very large company and her
05:44entire tech team is basically become for
05:47a much larger organization that the CTO
05:50the head of marketing all of those
05:52people from a much smaller company have
05:54now taken over those positions at a
05:55larger company and that's been a recipe
05:57for success and as you've made this kind
06:01of evolution like earlier in your career
06:02there's kind of more mature markets
06:04which in my experience is largely about
06:06kind of finances and cash flows and
06:08things I don't know very much about for
06:09sure as you get more into innovation a
06:12lot of the acquisitions happen say
06:14pre-revenue a really early revenue and
06:16it's much harder to value the assets at
06:18this point like like strategic values
06:21enormous because if you don't do it
06:23maybe you'll go out of business so
06:24that's a big number but on the other
06:25side like it doesn't really make sense
06:26just from the number so like how do you
06:29think about putting a dollar on like the
06:32value for a company or in M&A in these
06:34kind of more strategic and early so a
06:36couple things you know we deal with this
06:38question not just in M&A but also on the
06:40organic side because if you think
06:42about things that we're building
06:43internally they're definitely
06:45they're like way pre-revenue there are
06:47years and years and years away from
06:48pre-revenue and they may never get there
06:50and so this question of how you value
06:52that is not just a question for the M&A
06:54side but it's also a question on the
06:56organic side and what I find is that in
06:59most big companies people do want
07:00numbers yeah and so you do what you'd
07:04expect what you what you learned if you
07:06went to business school would you do the
07:07really long DCF analysis to get to a
07:09place where something actually has
07:11revenue and actually has runnings and
07:12then you get yourself in a lot of
07:14trouble when that gets to a single
07:16answer like 1.25 billion dollars right
07:19that inevitably that's wrong but what
07:23those what the math teaches you is what
07:25do you need to believe in order for it
07:27to succeed so do you need to believe
07:29that the company is going to grow at a
07:30hundred percent on the top line for the
07:31next 20 years probably not happening do
07:34you need to believe that it only needs
07:35to grow at 10 percent and down to five
07:37and that seems more rational and that
07:39type of conversation even if you get
07:41into a room with a company or with
07:44executives that haven't dealt with these
07:45higher growth businesses that's that's a
07:47debate that you can have rather than is
07:50it worth 1.25 or 1.4 so I've kind of a
07:53funny experience with this which is you
07:55know this year was acquired for a dollar
07:56amount much higher than our revenue very
07:59high multiples I actually found that
08:01there was a huge asset post acquisition
08:02because it's one thing to acquire a
08:04company it's an entirely different thing
08:05to digest it I think this is a real hard
08:07thing to do and I'd like to talk about
08:09but having a high price tag on it
08:11actually really helps with a commitment
08:13to do that just because it was so
08:15material so I don't know if this is a
08:16totally self-serving warped way to think
08:18about it but I'd like to argue that high
08:21valuations are actually pretty good in
08:23this but I'm wondering if this matches
08:24with your experience this gets to people
08:27everyone being at the table right so if
08:29you're gonna buy something for a couple
08:31million dollars you probably don't have
08:33very many senior people at the table and
08:35therefore who actually it has a vested
08:38interest in the success rather if you
08:40buy something for something that has a
08:42lot more zeros than that there's a lot
08:44of people at the table and there's a lot
08:46of people who have decided to do it and
08:47whether they all agreed or not at that
08:50valuation they're gonna they're gonna
08:52get behind it so there's just a higher
08:54cost of failure and when there's
08:56the higher cost of failure people tend
08:57to focus I don't think it's a reason to
08:59get people to pay more but when I was on
09:02the when I was on the south side it
09:05raises this there are these deals where
09:07there's kind of no value meaning it
09:09could be worth anything depending on how
09:12much you need it and even more
09:13importantly how much you think someone
09:15else needs it when I was on the sell
09:17side my favorite thing was to find the
09:19buyer who not only wanted to win but was
09:22afraid to lose when you had the guy or
09:24the gal who thought that their arch
09:25their their biggest rival was gonna buy
09:27something that was how you got actually
09:29got them to pay a lot so I try not to be
09:31that person so what will maybe I did for
09:37the south side right baby let's talk
09:39about it from the buy side which is like
09:40you know a lot of acquisitions and
09:42especially mergers do fail because it is
09:44difficult to kind of digest something
09:45that large right and so like how do you
09:47think about kind of the preconditions
09:49for a successful acquisition post sale
09:53right you talked a little bit about that
09:55from like being humble about acquiring
09:57the team etc but like not being in a
10:00reactive State also seen so so like you
10:02know I mean how do you think at a macro
10:03level when it comes to strategy making
10:06sure they're successful yet the so it's
10:09helpful if you're right at the beginning
10:11meaning you you understand you
10:13understand it's helpful if you don't end
10:16up you haven't bought a big innovative
10:17business and the market turns but the
10:19second thing is you know what you bought
10:20and what I mean by know what you bought
10:22that's particularly important in the
10:24enterprise space where it's more
10:26confusing right so your company you sell
10:29a lot to a certain sector and then you
10:30buy another product that you think goes
10:32into that exact same sector and then you
10:34actually find out that the sale is made
10:35by two different people two four two
10:38totally different reasons and there's
10:40actually not the synergy that you
10:41thought was going to be there and so
10:43being right about that I find is really
10:45important but even if you're wrong about
10:48that then the question is what happens
10:50and so taking a group of people
10:54internally who have experience with MA
10:57who know the internal business who know
10:59how to get things done from your engine
11:01internal engineering team from
11:02compliance having an internal team in
11:05pairing them with the the company I
11:07think it's really important you
11:09we talked about it a little bit as the
11:11Batphone like who's the Batphone to the
11:13person inside corporate to actually get
11:15something done because those first
11:17hundred days tend to be really important
11:19for someone who comes in new to a job
11:22for a new company that you've bought and
11:25what can really kill you is if you're
11:27sitting off trying to get stuff done you
11:29can't get access to the internals so if
11:31you've bought something where you want
11:32to leave it off to its own devices but
11:34you want to make sure that they don't
11:35they don't think you got to give them a
11:38bad phone do you think there's a
11:40responsibility for like the banker or
11:42even the investor and these like or is
11:44it kind of one of these okay so when we
11:52talk about strategy I'll talk about
11:53clients being at the center of
11:55and I don't think we'd have very many
11:57clients if all we cared about was was
11:59getting deals done so I think if you're
12:01if it will do my you know my pitch for
12:04being a good investment banker but if
12:05you're a good investment banker you
12:07understand your client you understand
12:09the types of things that are going to
12:11work for them or not and you help them
12:13when it's not when it's not working I
12:16wanted to kind of probe which is there's
12:19this adage at lease and tech at least in
12:21Silicon Valley that like you go after
12:22the premiere property and like some
12:25people believe that's the case because
12:26it's the best thing you have and there's
12:28this other you know view that this is
12:30it's overvalued so you actually want to
12:32be in the number two either there's an
12:33investor that's what you want to acquire
12:34because let's say you own distribution
12:36or whatever is maybe there's value so
12:38how do you think about this question of
12:40like premiere property versus like the
12:42number two and like how that fits within
12:44strategy yeah I think it depends I think
12:46there are a certain place there's
12:48certainly some some industries where
12:50it's more of a winner-take-all win or
12:51take most and getting the premier
12:55property really matters but if you're if
12:56you're a big company and you have access
12:58to for example clients and distribution
13:01maybe the party that's the number two is
13:03the number two they don't have access to
13:05that and so then they have the same
13:06product but they don't have access and
13:08then you should buy the number two and
13:09not the number one and maybe the the
13:11number one has a much better product but
13:14it only takes a small tweak to make it
13:15better but when you're going after
13:17product and technology my hunch is that
13:20the paying for the number one makes
13:23I I mean I think in general like this
13:25question is terrifying for a lot of
13:27business leaders like it certainly was
13:28for me and I'm not thinking like like
13:31buying a company when you're running a
13:32large business is like one of the few
13:35decisions you really have to live with
13:36none of the other ones like you kind of
13:38work your way out of in some way or
13:39another but these and so I was petrified
13:41for like the first kind of you have any
13:43deals that I was involved in and so you
13:45know you've ever seen hundreds of
13:46billions of dollars worth of these deals
13:49over you know two decades it's like how
13:52do you prepare or maybe prepare CEOs or
13:55business leaders for like the mental
13:57wrath of doing M&A they can't hide why
14:00do you know you can't hide from that the
14:04outcome the you know one of the things
14:05that I've seen companies do which I
14:07think works particularly for large
14:09businesses is they do a red team green
14:11team at the end at some point in the
14:14process and what I mean by that is you
14:16get to a point where you've decided what
14:18your strategy is you really want to buy
14:20this business know what you want to pay
14:21and you're there and there's nothing
14:24that's stopping that train and if you
14:27stop and actually have a group of really
14:30smart people internally and maybe with
14:32your external advisor say we're gonna
14:34show up for one day for two hours and
14:36we're gonna make the case on the other
14:38side and in the process of making that
14:41case I've seen by the way very large
14:43companies change their mind and avoid
14:44mistakes but I've also seen them they
14:47figure out what are the pinch points for
14:49where there might be failure and it also
14:51it helps to embolden you to say we
14:54understand the risks we know what we're
14:55doing and we're gonna go forward but we
14:58know where the mistakes may happen I
14:59mean you're now moving into a separate
15:02role which is on innovation which is um
15:06which is fantastic I'm wondering like do
15:09you think that this is going to kind of
15:10impact your views on M&A now that you're
15:12kind of in like basically the the
15:15driver's seat for innovation the you
15:17know everyone when I first started in
15:19the job everyone said oh goldman sachs
15:20must go into a ton of M&A because they
15:22put M&A banker in charge exactly so i
15:27kept a couple of clients on the on my
15:31old job mainly so i wouldn't have this
15:33real itch to do M&A and then just do M&A
15:36like oh my god I haven't done a deal
15:37this year I have to do something so no
15:40Goldman Sachs is not doing deals just
15:41because Stephanie really really likes
15:42doing M&A so that's that's one the
15:46second piece of this is you know because
15:50I've just recently started in the
15:52strategy job and we have a new CEO CEO
15:55and CFO we are really more focused on
15:59the strategy side of the equation than
16:00we are on on the M&A side of the
16:03equation and what I mean by that is that
16:05we're just figuring out exactly what our
16:07what our long term strategy is gonna be
16:09we've been around for a hundred and
16:10fifty years so certainly we have a
16:12strategy but we're really you know we've
16:15talked about this publicly we're really
16:17looking at every business from a front
16:18to back perspective all of the the end
16:20markets that we're in and not in and
16:21figuring out where the best places are
16:23for us to compete where we feel like we
16:25have real superpowers so interestingly
16:27even though the world believes that oh
16:29we must be doing a lot of M&A I've
16:31actually spent more time thinking about
16:33strategy and innovation than I ever did
16:35in my my old job what and what then just
16:37before we get into that what type of M&A
16:40does Goldman Sachs do internally or
16:42focus on internally primarily so
16:44recently most of our MA has been in the
16:47consumer business which is more of a
16:49which is a newer business for us in our
16:50investment management division in on the
16:52asset management side and the reason for
16:54that is that you can do smaller either
16:57more tech focused or tuck-in
16:59acquisitions so just as an example so we
17:01we've been building a consumer business
17:02we bought the GE deposit platform we
17:05bought clarity money which is a personal
17:07financial management tool and we bought
17:10Bond Street mainly that was an aqua hire
17:12we basically hired the people when we
17:15bought Final Four some of the IP and for
17:16for the people so that is kind of the
17:19full spectrum of how we're going to
17:20think about M&A which is buying things
17:22that are pre revenue product buying
17:24things that have revenue that would be G
17:26deposits and then buying things more for
17:28talent or for IP and then on the asset
17:30management side we've done against
17:32smaller more tuck-in asset manager deals
17:34if you go way back to some of the deals
17:37we've done we also bought J Aaron and
17:40you know one of the this whole idea
17:41about being humble our last CEO came
17:44from J Aaron so that was that was an
17:46acquisition are actually our CEO and the
17:48CEO came from from J Aaron which was
17:50come out of these trading business so
17:52that was a that was a much you know that
17:53what the people from that deal would say
17:55they started in the garage right and in
17:57the in the basement and they ended up in
17:59the in the top of the building
18:00you haven't geography bias when you do
18:02M&A means the so my entire team is based
18:07in New York City a few so there you go
18:08what we're working on this problem the
18:11the answer is that we have we are we're
18:15a global business we have big business
18:16in Asia and in Europe we we tend to be
18:19relatively New York centric from an
18:21Operations perspective and again I talk
18:23to you about how we're transitioning our
18:25management team you know as we're doing
18:26that I think there's more of a need to
18:28spend some time internally but you know
18:31when I first started my my job I
18:33actually went to Asia in the first
18:35couple of months because it was real
18:37it's really important it's really
18:38important to our business it's really
18:39important to the future
18:40and I thought it was important that they
18:42see me fantastic all right so now you're
18:46in the chief strategy officer role
18:47you're not a traditional background for
18:49this type of role so I was wondering if
18:51you had any insight into kind of the
18:52selection process and kind of their
18:54expectations so I was totally surprised
18:57so much so that when they called and
18:58asked me for the to do the job I was I
19:01was at home because I was traveling a
19:03week and I was about to go to the
19:04airport and I paused for long enough
19:06when I was asked that the person see me
19:08you know it's a really big get it again
19:12I know what my ants are supposed to be I
19:14just wasn't expecting the phone call so
19:16I think the reason why I'm gonna see
19:19this historically chief strategy officer
19:20at goldman sachs really did special
19:23project so the last person is now the
19:25CFO and started and helped build the
19:28marcus business there was a desire at a
19:30hundred billion dollars a market cap for
19:32us to build a world-class strategy an MA
19:33function and the view is that I had seen
19:35that given my my previous experience and
19:38then I also had built a business in
19:40cyclamen Sachs from a clean sheet of
19:42paper we like to call it you know start
19:44up inside goldman sachs and not many
19:46people had had done that and so when I
19:48got the job they handed me a white sheet
19:50of paper and said go tell us what your
19:52do you actually believe you can do
19:53startups inside their companies I think
19:55you can do certain things inside big
19:57companies so just if so I'll talk to you
19:59about what we're doing and you'll tell
20:01me so when I first started we
20:03we analysis thing called accelerate
20:05which was the idea that we thought the
20:08people of Goldman Sachs had really good
20:09ideas but they were having a hard time
20:11getting them through our organization
20:13organizations so we went out to all
20:1440,000 employees and said were open for
20:17ideas and so we got almost a thousand
20:20ideas and that was a lot more than we
20:22expected and we developed a system and
20:24we got them down to about 150 and we had
20:27them pitch and we've gotten them down to
20:29kind of 10 to 15 that we're gonna fund
20:31so we're gonna figure out if you can
20:32really do startups inside goldman sachs
20:34but what we learned was that there are
20:36businesses that are critical to what we
20:39do and can only be built inside goldman
20:41sachs meaning they're directly related
20:43to everything we do every day they're
20:44directly linked to compliance and our
20:46balance sheet and building them outside
20:47is gonna be too difficult but there's a
20:50whole there's then levels of things that
20:53we have no business doing inside goldman
20:55sachs so i think companies get in
20:56trouble when they try to do things that
20:59should happen externally internally and
21:01what i mean by that is i think there are
21:03certain types of talent that have no
21:06desire to work inside an organization
21:08there's 40,000 people that's highly
21:10regulated and is publicly traded and so
21:13we need to harness those skills in that
21:16intellectual capital and they're not
21:18gonna harness that inside and those
21:20types of things have to happen outside
21:21and which is why we need to partner with
21:23the venture community with accelerators
21:26with incubators but we shouldn't be
21:27doing that stuff ourselves awesome so I
21:29want to dig into that a little bit more
21:30so you know and and this is kind of the
21:34issue I always had with kind of internal
21:36startups which is like if I had a
21:37founder come to me and say okay listen I
21:39have one customer and I'll always have
21:42one customer I'm gonna work with that
21:43one customer to create my product and
21:45like that's gonna drive everything
21:46including the economics like I wouldn't
21:48be convinced that a you know they're
21:50solving a real problem they've eaten
21:52product market it's almost like that
21:53we're not economic Darwin is and you
21:56know has you know been brought to bear
21:58on this problem right so how do you you
22:02know how do you provide an environment
22:04where you're actually confident that the
22:05internal efforts are gonna be solving
22:08real problems versus being these kind of
22:09you know ingrown inbred in-house kind of
22:16so some of that is your question on by
22:17verse build so if you're competing the
22:20own your own internal projects with
22:23either by and by by I mean just buy the
22:26product from a software other
22:27perspective or by meaning by the company
22:29if you're if you're doing that in a
22:32relatively systematic way I think you're
22:34avoiding some of those those problems
22:37the the other point is there there are
22:39certain solutions where did we build the
22:42exact perfect thing that would have been
22:44perfect for everyone else no but we
22:46build something that was perfect enough
22:47for us and so that's the kind of its
22:49core to us it's part of our DNA we want
22:51to do it and and I'm sure we'll get to
22:54you know we have a long history of
22:55having built a lot of stuff internally
22:56we're trying to get better can I put a
22:58little salt on that wound having had a
23:01lot of experience I've you Goldman Sachs
23:04is one of like actually like the leaders
23:05in tech like strictly from innovation
23:07and so I mean I I spent probably 10
23:10years in various projects one thing that
23:12was very unique in addition to being
23:14such a leader in technology was like
23:17they built you built everything like
23:19from like your own white box which is to
23:22remember like you were the only big ESX
23:24customer that didn't use vSphere like I
23:26mean it was like really one-off and and
23:28I actually think that like within the
23:30startup community there's this view that
23:31like goldman sachs is like the one
23:33that's not like the others even
23:34including like the big banks and so like
23:36how do you manage that tension of like
23:38do we kind of build this very unique you
23:41know goldman sachs only thing versus
23:42kind of the broad you know so a couple
23:48things when so history when i started
23:50and in 1999 we had just stopped using
23:53the word program that we had created for
23:56ourselves because microsoft microsoft
24:01work didn't work for us internally it
24:03does now but that's okay so that's
24:05already start it so so the way we're
24:07thinking about it is there are certain
24:09things that are more commodity or exists
24:12meaning the products exist out there
24:14they're they work great we should use
24:16that we are using that and one of the
24:18things that we've done in the past which
24:21has not been great is that we've been
24:22customized those products so we've
24:24tweaked the things that are that are
24:27available and the problem with that is
24:30upgrades when you when you tweak and
24:32it's out it's very hard on on smaller
24:35companies when you do that so we have a
24:37rule now against doing that so I hope
24:39for that makes people feel better stop
24:42the tweaking of the of stuff that's
24:45generally available off the shelf there
24:47are things that we believe are areas
24:50where we're not serving a customer well
24:51they're really solving an unmet need for
24:53us our tech guys will tell me that's
24:55more and middleware for us we're gonna
24:57build that stuff ourselves we're open to
24:59ideas we're gonna build that stuff
25:00ourselves and then there's another layer
25:02and this is what I was talking about a
25:04little bit before which is sometimes you
25:06just don't have access to the talent or
25:08the capability so there are highly
25:10innovative solutions that we do think
25:12are differentiated but we are also going
25:13to get those from the outside and you
25:15know as I was talking to our team before
25:17coming here they mentioned to me pin
25:19drop is a great example of something
25:21that we thought was innovative and
25:22differentiated but we were not going to
25:24build ourselves fantastic I think I
25:27think rules around this or great ideas
25:29like you know like don't build your own
25:31thing or whatever but like in my
25:33experience like organizations probably
25:35changed a lot slower than the rules
25:36change and in particular and I've seen
25:39this a lot with like the large banks
25:40actually particularly outside of goldman
25:42sachs where like there's an effort to do
25:44an internal project and like it's like
25:46the cool thing for a few months but then
25:48like the white blood cells come out they
25:50kind of come in and they like you know
25:52and it has a slow death and whatever
25:53like have you thought about how in
25:55addition to the rules you actually
25:56protect these internal efforts from the
25:59momentum or like the the broader
26:01momentum of the organization so a couple
26:04things one when I first started I spent
26:07a lot I still spend a lot of time but I
26:08directly went to Alicia Weizhou who is
26:10our CIO now George Lee who's here is Co
26:13CIO and we agreed that there was no
26:16daylight between firm-wide strategy and
26:18tech strategy meaning there there was
26:21nothing like the tech guys are off doing
26:22that and for my strategy wants to do
26:24that and then when for my strategy wants
26:26to do something can't get a tech
26:27resources so no daylight meaning that we
26:29don't again we don't always have to
26:30agree but then we have to debate what's
26:33worth what the priorities are going to
26:34be and so it helps a lot of the the
26:36problem that problem the second thing is
26:38you do have to let certain experiments
26:44on their own and so we have an RD
26:46function inside of engineering which is
26:49a good place for that the accelerate
26:51team which is in for my strategy is a
26:52good place for that but we basically
26:54have pockets where people are protected
26:57and by protected I mean protect
26:59protected from budget issues protected
27:02from the people whose jobs that they're
27:03impacting because because they're
27:05absolutely right this isn't the typical
27:06innovators dilemma which is it certain
27:09businesses are easier for us to build
27:11because they're separate and apart from
27:13what we do on our do every day which
27:15again this is more the consumer business
27:17but another thing that we're focused on
27:19that we've talked about is cash
27:20management and payments well this gets
27:22to the very core of what we do every day
27:24is our core investment banking clients
27:26its court or internal payment functions
27:28and so protecting that team is actually
27:31significantly harder than protecting a
27:33team that's just doing something totally
27:34new right because everybody has an
27:35opinion it's like if this is such an
27:37issue actually one of the bangs you know
27:40I think I feel like I'm seeing like the
27:41entire gradient of solutions to this and
27:42the most extreme I've ever seen like the
27:44bank literally created a new legal
27:46entity they had a new like building and
27:49then they hired people into this
27:50building this is around this cloud
27:51effort because core idea was gonna kill
27:53it etc it actually turned to actually be
27:55quite successful except it probably grew
27:58you know I'd have to pace it normally
28:00what if it was internal and had access
28:02to the internal resources etc kind of
28:03had all the problems like like a
28:05traditional startup as with access to
28:06the customer so I have have you thought
28:07about like to what level you can provide
28:10isolation to these efforts and still
28:12give them access so the way that we like
28:15to think about it is we like in places
28:18where we're worried about that we try
28:20them to treat the internal organization
28:23like a customer so first best customer
28:26right so instead of treating them so
28:30instead of creating conflict you say
28:33we're gonna build this how would you
28:35like us to build this to your point on
28:36do you create things that are truly
28:39providing good customer service or you
28:42just because you have got your you have
28:43a monopoly so it's the best way to do it
28:45but honestly the only way to really do
28:48it is for the top to be focused on this
28:50so I'll just give you an example so
28:51David took over recently and our very
28:53first meeting with the senior executives
28:57have to get to yes faster and we need to
28:59learn to fail and that may sound like
29:01not may not sound like genius but to the
29:04Goldman Sachs organization that's been
29:05around for a hundred and fifty years
29:06that prides itself on being the best at
29:09everything no failure is not something
29:11that's super easy inside the halls of
29:13Goldman Sachs but if you treat if you
29:15teach people that failure works and is
29:18okay then they're much more open it's
29:21talked about how you do that without
29:23abdicating like responsibility or
29:26abdicating ownership or accountability
29:28so we think that the thing I talked
29:31about the accelerate idea that we talked
29:33about one of the benefits of it is that
29:35we're gonna fund some stuff that fails
29:37and if the team does a bad job the team
29:40is gonna fail and so we will make sure
29:42that that happens but if the idea fails
29:44but the team did a did a great job
29:47then we're gonna celebrate that and so
29:49it's only by example to be perfectly
29:51honest with you it's gonna take us a
29:52while because I think you got to
29:53demonstrate that if you do a good job
29:55but for whatever reason because lots of
29:58startups fail your idea fails it's okay
30:00and do you maintain some metrics for
30:02internal success for innovation is it
30:04like it's a line item is it because
30:12we're investment bankers we have to do
30:15so we we try to we've tried to Institute
30:19what's what we determine ROI framework
30:22around innovation and honestly we're
30:25just we're just working and we're just
30:27getting started okay so more thing I
30:30wanted to touch before I want to talk
30:31more broadly about kind of how you view
30:33the role so you know you're doing your
30:36internal things but you've also
30:37mentioned that you want to work with
30:39partners and and I think one of the
30:41macro trends that's actually impacting
30:43technology adoption is vendor
30:45consolidation which is like if I talk to
30:48you CISOs in particular so see so today
30:50can't answer all the emails that come in
30:51let alone evaluate the product let alone
30:53make a good decision right and so this
30:55is almost as tension between saying okay
30:58i want business efficiency of working
31:00with a few partners versus i want to
31:02kind of you know comb the landscape of
31:05innovation talk to as many as possible
31:07and like have you export kind of this
31:08tension as you move away from just doing
31:10to working with partners then how can
31:12you trade off between you know this is
31:14Cisco and they do everything versus you
31:16know here 50 startups - who knows what
31:18they do so one of the benefits we have
31:20around innovation is that we are
31:21investors so we we invest on the balance
31:24sheet we have funds where we invest
31:27across the spectrum of size and stage of
31:30companies and one of the benefits of
31:32that is some of this dialogue has a dual
31:35purpose right so there's the what makes
31:37sense for us from internal innovation
31:38perspective and by the way if we don't
31:41it doesn't make sense for us to use it
31:42or there's no use for it inside the firm
31:44there may be a place for us to invest
31:46inside the firm and then oh by the way
31:47we also have an advisory practice that
31:49cares a lot about building relationships
31:51with new companies so I think some of
31:53that inbound inquiry is less destructive
31:57for us because we have all these places
31:59where they can be potentially relevant
32:01to the firm whether it's an investment
32:03banking and asset management and wealth
32:04management we have we want the companies
32:06coming to us we want new and innovative
32:08companies calling goldman sachs so it's
32:10it's a little bit less of an issue
32:12certainly our our tech and engineering
32:14team has to has to deal with it
32:16the second thing is if you have a
32:18perspective around it's not by verse by
32:22erbil that's both then you are gonna
32:25force yourself to deal with individual
32:27vendors in a lot of cases because you
32:28are looking for very specific solutions
32:31of course like every big company we have
32:33both we have very big vendors and we
32:34have very small ones but we are we are
32:36quite open to dealing with smaller
32:39companies and you know one of the
32:41benefits of dealing with smaller
32:42companies is you do have an impact on
32:44how they're gonna actually innovate
32:46right it's actually interesting right
32:48like so you guys do do investments
32:50actually you've invested alongside us on
32:52a number of deals including barefoot
32:53which I'm actually pretty close to but
32:55I've almost always viewed at Goldman
32:58Sachs investment company is overly
33:00financial right but now there's an
33:01opportunity of doing strategic
33:03investments like you know if a vendor
33:05makes an investment like all their poppy
33:07lining with their business and they
33:08they'll do an M&A later on like have you
33:10turned that corner that now your
33:12investment committee is something that
33:13or or maybe you were there all along
33:15that is actually aligned with your role
33:17and your internal innovation strategy or
33:19they still pretty separate so we have
33:22actually a long tradition of invest
33:24on the balance sheet in strategic
33:26investments for the strategic
33:29investments and some of it some of them
33:31are companies where we're going to use
33:32their product some of them are companies
33:34where it does not make sense for us to
33:36own the whole business but we are we
33:39want to be a key strategic partner there
33:41have even been places where we have
33:42built businesses and spun them off we we
33:44try to take a holistic perspective on
33:46this there are though investing
33:49businesses they have nothing to do with
33:50the Balanchine and strategic investing
33:52and they their fiduciaries great so I've
33:55been kind of drilling down to some
33:56specifics it'd be great if you could
33:57kind of provide kind of like a broad
33:59view of your vision for the role and
34:01kind of some efforts that you've kicked
34:02off and and just kind of bring it up a
34:04level so so started in January we knew
34:08new executives so we won't go through
34:10the goldman sachs grant vision but in
34:11terms of where i've been focused it's
34:14basically on three things one is client
34:16centricity and that sounds really
34:18obvious but as a firm were actually
34:21organized in a quite siloed divisional
34:23way and you know the way that we talk
34:26about ourselves has not always been with
34:28with the client first and so one of the
34:30first things that we decided to do was
34:32really focus make sure it was clear that
34:34we were focused on clients so clients
34:36being at the center of everything we do
34:37and really looking at everything through
34:39that lens whether they're corporates and
34:41government's institutions or individuals
34:43and when you take a really complicated
34:45investment bank and you wipe away all
34:47the complexity and just say all I care
34:49about other clients it makes it a lot
34:50easier to think about what the
34:52innovative ideas are the second thing is
34:55innovation which I talked about through
34:57accelerate and then the third piece is
34:59around diversity and by diversity I
35:02don't mean the traditional view of
35:04I mean diversity of thought diversity of
35:06ideas diversity of geography diversity
35:09of ways of doing business diversity of
35:10ways of finding M&A and investing ideas
35:13you know the idea really is that we need
35:16to look at things from a new perspective
35:18but one of the things that we are
35:20running out of my team which is related
35:22to this is launched with gs which is our
35:25commitment to invest 500 million dollars
35:27and women founded owned and led
35:28businesses and to invest client capital
35:31in women managers and the idea behind
35:33that was actually quite simple we felt
35:35that women were not getting the capital
35:37or deserved and that it really meant
35:38that they were a good investment so
35:40there's a lot of capital out there which
35:42many people know but in a place that's
35:44being under invested in we thought there
35:46was a really good investment opportunity
35:48in and as you build out your
35:50organization maybe you can talk a little
35:52bit about the team structure because
35:53this is one of these unending Quagmire's
35:55that nobody's ever figured out like if
35:57you're like on top of it maybe you drive
35:59too much influence and then you don't
36:00get the innovation if you're an
36:01influencer then maybe you know nobody
36:03will listen you type things so how have
36:05you thought about doing the
36:06organizational structure around this so
36:08when I started the strategy team at
36:09Goldman Sachs the 40,000 employees was
36:11five people so so we built the team and
36:15actually not by design a little bit by
36:18accident but because I wanted diversity
36:20of thought we've actually built a very
36:21diverse team from from background and
36:24just where they've come from in terms of
36:27experience so it's not all a bunch of
36:29investment bankers that worked in
36:30financial institutions we have plenty of
36:32those but we also people have really
36:34broad backgrounds the second thing just
36:36where we started which is that M&A and
36:38strategy we're gonna be together meaning
36:39that we weren't gonna separate M&A in
36:41strategy that they needed to be together
36:42and that our investing on the balance
36:45sheet was going to be done also
36:46alongside us meaning there's this idea
36:48of should you build it should you buy it
36:50should you partner and so all of that of
36:52that decision-making was going to happen
36:53together the other the other thing we
36:56decided and this was advice I got I
36:58think I still agree with it is that
37:00divisions should be responsible for
37:02their own strategy so you weren't going
37:04around and telling people how to operate
37:06their business but you were setting a
37:07broad strategic objective clients are at
37:10the center of everything we do
37:11innovation diversity and then there will
37:14be places where you're building a new
37:16business or you need cross divisional
37:18collaboration and so that's where we get
37:21involved we try to leave divisions to
37:24their to their own devices however we
37:25try to be helpful so in places where we
37:28think there are new ways for us to help
37:30divisions drive their strategy I'll send
37:33actually generally a more junior member
37:34of my team down into the division and
37:36basically offer their services for free
37:38and and if they find it incredibly
37:41helpful and it helps them build a
37:43relationship and what you find is that
37:45you you get a lot of phone calls for
37:47people to ask your help that one of the
37:50I first started if you're the CFO of
37:52Goldman Sachs you you get a calendar
37:54people know what committees you're on
37:55people know what you're supposed to do
37:57no one knew what the chief strategy
37:58officer of Goldman Sachs was supposed to
38:00do because we'd never really run it that
38:02way and so that's what we did the last
38:03eight months which was we taught people
38:04when to call us and the idea was don't
38:07call us when your revenues are off by
38:09three percent you're just trying to
38:10tweak your business model call us when
38:12you're trying to fundamentally change
38:13how you're serving your customer when
38:15you're when you feel like you have a new
38:18exciting idea or call us when you're
38:20when you're doing brainstorming around
38:21what your five-year plan is you know
38:24I've seen I've seen innovation used to
38:28solve all sorts of ilds like maybe the
38:31most pernicious case it's like oh here's
38:33someone that's not very happy why don't
38:34you go work on an innovation project you
38:36find like you know if like for whatever
38:37reason it's a common thing you know
38:40otherwise it's just like you know that
38:41the company isn't doing very well like
38:42maybe let's innovate and that'll solve
38:43the problem other ones is like there's a
38:45very specific problem that we need to
38:46solve right like how do you at the
38:51highest of all think about prioritizing
38:54what you work on I mean the way that I
38:56hear you describe it I love it I love
38:58this tension picture like that like like
38:59you come from an M&A mindset it's like
39:00this almost like this free market thing
39:02but like there's a lot of kind of
39:03organizational impacts that have so like
39:05you know as the as the environment
39:07shifts and it will how are you gonna
39:09think about how you prioritize which
39:11efforts the fun which efforts to kill
39:12yeah the the way that we're we're
39:15focused on focused on it but we're still
39:17we're still working through it is where
39:20do you want to where do you want to be
39:21so where are you today so where do you
39:24where are you today what we also we
39:26always have to do the math where are you
39:27today what is the if you look at all of
39:29the growth plans that exist everyone's
39:31plans where does that get you to in the
39:32next three to five years and how big of
39:34a delta is that from where you actually
39:36want to be and in in a regulated
39:39institution actually it's pretty
39:40complicated because you have strategy
39:42you have finance and then you have
39:44regulatory all three which you actually
39:46have to figure out to get you to to the
39:48promised land of where you want to be
39:49but if you don't have a perspective
39:52about where you want to go yeah then you
39:54get stuck in like the the individual
39:56details that are teaching you how you
39:58can grow a couple more percent when
40:00you're missing when you're missing the
40:02big picture so we try to we try to focus
40:04where we want to go and then the other
40:06place is there's a lot of really
40:09important things that have to happen
40:11every day so you talked about your
40:13innovation being a vacation innovation
40:14for put on right so see you could get to
40:17a place where you actually distract the
40:19whole organization because in an
40:21organization of tens of thousands of
40:22people there's a lot of people every day
40:24who just have to be with their clients
40:27execute and they need to have fun doing
40:29that and not feel like they're not doing
40:31the fun stuff that all the fun stuff is
40:33the cool innovation in the corner and
40:35you know part of again this accelerate
40:38idea was around giving people the
40:40opportunity to do that while still
40:42allowing them to do their day job all
40:45right listen we only have a couple
40:45minutes so one capstone question so not
40:47everybody here knows that you were a
40:48competitive figure skater which is rad
40:52so I started skating when I was six and
40:55one of the great things about skating is
40:57there's there's nothing harder than like
41:00the audience in front of you like the
41:01judges behind you and you're in the
41:02center of the ice alone right so there's
41:04no there's nothing else that ever feels
41:05like that so it was a really good
41:08learning experience but but one of the
41:10great things about skating which you
41:12only learn as you get older and then
41:14you've read a thousand books about grit
41:16and everything else which is one of the
41:18things about skating and a lot like
41:19gymnastics is you fall a lot a lot
41:23meaning like every time you're learning
41:25a new jump you're like spending like the
41:26entire time like on the ice like soaking
41:28wet coming off like we pads all over the
41:30place so that you don't injure yourself
41:32and so what you learn is you learn to
41:34get up and so you said when you spend
41:37half of your practice session on the on
41:39the on the ground you learn you learn to
41:41get up and you learn that failing is
41:43that the only way to learn is to fail
41:44and and again when you're performing and
41:48it doesn't always go perfectly and
41:49sometimes you fall but that doesn't mean
41:51they're not gonna win I got very early
41:54I actually won my by the way my parents
41:56tell me I would have quit figure skating
41:58except for I got a first-place trophy in
41:59my very first competition so my parents
42:01like oh yeah they came over we keep
42:03doing this but free young I actually I
42:07messed up in a you can't like I could
42:09still see it I messed up in a
42:11competition and and I still won and it
42:14was because I because I like you
42:16couldn't tell because I just kept
42:18and so that's what you learn well thank
42:21you so much for joining us please give
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