E430: Goldman Sachs’ Michael Bruun on AI, Private Equity & The War for Talent

What if AI makes talent, not technology, the biggest competitive advantage in private equity? Michael Bruun is Partner and Global Co-Head of Private Equity within Goldman Sachs Asset Management. We break down how Goldman Sachs competes for the best middle-market assets, why Michael believes talent can move the needle more than almost anything else, and how higher rates have forced private equity back to the fundamentals of EBITDA and cash-flow growth. We also discuss how Goldman is implementing AI across portfolio companies, why transformation must start with the CEO, and why the war for exceptional talent may become even more important as every employee becomes AI-enabled.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  It needs to come from the top. The CEO needs to make it well understood by all employees that AI is an absolute must. And it's something that will change the way we do our business and we embrace that change. There needs to be some experimentation. If humans are not allowed to experiment, it is unlikely that we will get to the most relevant and most creative solution. CEOs are also faced, and this might at times be uncomfortable, with the task of deciding whether the rest of their excom or leadership team is actually ready for this transformation. The war for talent is bigger than it's ever been.

• 0:41Speaker 00

  If you can get the right people in with the right change mindset, they can move so much faster because they are AI enabled.

• 0:49David Weisburd?

  Michael, you're the global co-head of private equity at Goldman, where you've been for nearly 23 years. And when you were earlier on in your Goldman career, you were influenced by Lloyd Blankfein's saying about having skin in the game. Why was that so influential for you?

• 1:06Speaker 00

  Goldman Sachs services its clients in a multitude of ways. It provides advice, it facilitates financings, it's a very large market maker in multiple markets, stocks, bonds, commodities, and then it's a principal investor. And I think what Lloyd meant when he mentioned skin in the game was that we can be several things for clients and give an even more comprehensive service. So not only provide advice and provide financing, also at times put our money where our mouths is and invest alongside clients. And that gives a very unique and trusted relationship. And it's something that is unique to our firm.

• 1:46Speaker 00

  Very few firms can do it and no other firm does it at the scale of Goldman Sachs. And for those of us who have read his most recent book, Streetwise, you'll see that he specifically refers to this element and some of the unique characteristics of Goldman Sachs.

• 2:02David Weisburd?

  How do you build the right incentives within your team?

• 2:05Speaker 00

  Ultimately, we get judged on our investment performance. So it's incredibly important that our incentives are aligned with investment performance. Like most other private equity firms, you receive a combination of annual compensation and then you have a lot of your ultimate wealth creation or hopeful wealth creation tied to carry in the fund so that we are really aligned. And then we're also asking our investors to invest alongside us in the funds such that, again, we put our money where our mouths is. This is back to where we started, this culture of being a principal, both with the balance

• 2:48Speaker 00

  sheet of Goldman Sachs, but also with our colleagues' capital, but certainly also our own capital. We think that carry is important to incentivize great investment outcomes, but we also think that you need to have a lot of skin in your game at the most personal level.

• 3:04David Weisburd?

  You operate in the core middle market, 500 million to $2 billion deals, the most competitive part of the middle market, and you have some very formidable competitors. How do you outcompete them when it comes to the best assets?

• 3:18Speaker 00

  You're right, we have formidable competitors. We have been able to do well ourselves by activating Goldman Sachs. Nobody else has Goldman Sachs as their wingman or wingwoman in their investment strategy. I think we do that in a multitude of ways. We do the network piece that we already talked about, which is fantastic for sourcing and it's fantastic for value creation. In addition to that, we have one of the largest operating groups in our part of the market. We have more than 110 operational partners that drive value creation in our strategy. And then we have insights beyond what most firms see. We're 45,000 employees at Goldman Sachs.

• 4:02Speaker 00

  We are in most markets around the world and we get a lot of signals and those signals float back into our business such that we can navigate either the most complex operational environments, environments like the ones that we are seeing right now with very meaningful geopolitical uncertainty and also a much more blurry macroeconomic picture. We spoke about the network effect. We haven't spoken much about our value accelerator. This is something that we've built over the last 10 years. We felt that we needed to have very, very strong operators drive outcomes in our part of the market. It's something that you have seen in mega buyout, but we felt, why don't we take mega buyout operational resources and bring them in to the mid-market? How could you do that?

• 4:45Speaker 00

  Again, Goldman Sachs has a ton of relationships to senior executives who maybe normally would operate in a mega buyout context, but actually felt compelled to come to us, to our part of the market because it was an opportunity to stay with Goldman Sachs, an institution they probably worked with in a different context. Maybe they advised them, maybe they financed them at other parts of their career. And now they finally had an opportunity to actually make a real impact from an operational perspective. And we chose, and each firm does this in their own way, but we chose to do this through what we call centers of excellence.

• 5:19David Weisburd?

  What you call areas of excellence, it's such a trend I see across all private equity firms, which they take somebody that a middle market company could never hire. They just don't have the gravitas, even if they could pay them enough. And sometimes these companies are in remote locations like my hometown, Indianapolis, Indiana. And Goldman takes one of the key talent in that space and then fractionalizes that person across multiple companies. And then now suddenly they might have a 10, 20% access to this talent that they couldn't recruit at this phase of their company.

• 5:53Speaker 00

  That's a good way of expressing it, but I would say that talented person, that talented executive usually has a network, he or she has a network. And so they will bring in even more talent. They're a talent magnet. That's an even better way. I might incorporate that into our playbook. They are indeed talent magnets. First, they open the eyes of the existing management team. Sometimes we'll have to do changes to the existing management team, but for certain, those management team will see what good looks like in specific areas of the value creation playbook. That's probably the most powerful thing that you can give a company. I mean, giving them a new customer, that's very powerful, or giving them a great introduction,

• 6:35Speaker 00

  giving them a new supplier relationship, that's pretty powerful, but giving them talent is what really moves the needle.

• 6:43David Weisburd?

  We call this at our firm, putting a body at a problem. Everybody's extremely busy. So if you come to me and you say, hey, I got this AI stack that could really improve your business, I may intellectually agree with you and you might be incredibly credible and make a really good pitch, but an hour later, I'm going to be distracted by my next task and now I go on to other priorities. But if you recruit a top person in that space to me, now it's somebody's entire job to deal with that all week long. And that actually compounds. Ideas, though sometimes sexy, though really interesting and maybe even empirical, don't compound as well as talent.

• 7:23Speaker 00

  I agree with you. And one thing is theorizing of all the things that we could be doing, but putting a great person behind it, somebody who's maybe led companies or led big functions in companies so you can actually get the throughput and you can get the followership from the portfolio company is incredibly important. I see that not only on the frontline stuff, the fancy stuff, in sort of like the tech stack or some of the supplier relationships, these things are equally important. Some of the things that we may, as customers of some of these companies, don't see day to day, this is where some of the magic really happens. Just imagine the difference between having access to the greatest LLM vendors in the

• 8:08Speaker 00

  world right now versus not having access or during COVID, having access to the most important supplies that you needed to produce your product or produce your service. Getting the right talent, getting the right network effects around some of this can really change the trajectory of a company at this moment in time. And so we have actually noticed that our playbook works the best in volatile times. And it's been pretty volatile for the last several years. And so having senior leaders who have seen a lot, who's used to volatility, is used to making decisions around your portfolio company is incredibly important.

• 8:44David Weisburd?

  Double click on that. Why does it work better during volatile times?

• 8:47Speaker 00

  Because you need to make decisions faster and those decisions need to be made on a sound set of observations and based on a lot of experience. And so either you've gone through a crisis or you haven't gone through a crisis. If you've gone through one crisis, you are better prepared to go through the next crisis. And the world has gone through multiple iterations of very high volatility in the last few years. And this is where I really see the leaders step up. We learn more as humans when we're in volatile times and those humans who have gone through the volatility can really step out. Best example right now, we're faced with maybe the most consequential moment in private equity driven by AI.

• 9:29Speaker 00

  Either you face up to that challenge and that opportunity, or you don't. And having leaders around your business who may have experienced AI, because no human has really experienced AI until it's all like all of a sudden arrived. But they have seen big seismic changes in tech roadmaps. They've seen big changes to their business models. And so having these people around our companies. And here's the beauty, by focusing on the upper mid-market, there is this talent arbitrage, because many of the leaders that we have involved in our portfolio have seen it even greater scale. So now they can take that toolbox and apply it in the upper mid-market. And I think that they think it's more fun, because you can actually move things faster in the upper mid-market. So it's all like high list and agnostic.

• 10:11Speaker 00

  I'll tell you, one of the greatest things in my career is you saw like you venture few, in my case, several decades now of your career. And all of a sudden, I get to work with the most senior executives from a ton of different companies, a ton of different backgrounds, and we're all on the same team. And I think what normally happens in people's careers is you saw like every year become slightly closer to being the oldest person in your team. In my career, I've had this wonderful experience that I saw like went somewhere between 12 and 15 years into my career. And then all of a sudden, we started building this. And now I have this group of people who have seen even more than I have. And I get their advice every day and I get to work with them every day. And so that has been personally very rewarding journey.

• 10:55David Weisburd?

  It used to be a very common diligence question in the venture space, which is, have you seen the last downturn? In other words, were you around in 2008? I started my career literally in 2008, so I could check that box. But for 13, 14 years, there was a bull market. And the premise of that question is, sure, you could ride a bull market, but what happens when there's a bear market? How do you react to that? In many ways, it's an unknowable question. You must experience it before even you yourself know how that could affect you.

• 11:25Speaker 00

  I saw like hit the great financial crisis, I guess, four years into my career. And that sort of like reset a lot of expectations. And then we went on. And since I was spending the vast majority of my time in Europe, we in 2011 went into sort of like the sovereign debt crisis. So once again, we were sort of like experiencing this setback. And then we actually had, as you mentioned, like this decade-long bull run up until sometime 21, 22, inflation rates, a lot of other factors. And all of a sudden, you had to reset. And one of the things that you couldn't rely on was multiple expansion and rely on variable low funding costs in the debt market. I think that's been healthy for the industry.

• 12:09Speaker 00

  In some ways, we're, despite the tech roadmap changing dramatically, we're kind of going back to basics, going back to you drive value by compounding EBITDA and cash flows. And you need to get used to driving value in a rate environment that I would characterize as all like normalized. If I add the base rate that we're experiencing in most places in the world, plus the credit spreads, it looks much closer to the average that you have seen for several decades than anything that we obviously experienced in that bull market, especially in that kind of 19 to 20, 21 period, where things really accelerated.

• 12:46David Weisburd?

  It's interesting, because for a decade or so, people were pricing in the lowering of interest rates into their model. And when I look at interest rates, all things being equal, the opposite should be true. You should be ready for the interest rates to go up and make your business anti-fragile to that. You should never price in the interest rates going down. That seems like a crazy strategy, but yet that was the modus operandi for so many private equity firms for probably a decade or so.

• 13:10Speaker 00

  I don't know how many actually priced like a lowering rates, but I would certainly say that.

• 13:14David Weisburd?

  Or maybe they just thought they were that good.

• 13:16Speaker 00

  Yeah, exactly. But maybe they thought we got complacent by assuming that rates could stay low for a very long time. You had a quantitative easing for a very, very long time, et cetera. If you look at the other way around now, you're pricing your model in a way where, let's call it, you're in a normal environment. And so rates, it might be sort of like a kind of a normal distribution. They might go up, they might go down. It's very hard to tell. Right now, we on our side are hedging a lot, right? So we are hedging base rates for many years out in the future, because we want to remove as many externalities from the return equation as possible. Want to take out as much regulatory risk as we can.

• 14:01Speaker 00

  We want to take out as much kind of market, base rate, credit spread risk as we possibly can, knowing that nothing can be hedged forever. So what are we talking? We can maybe hedge ourselves three to five years. We're not making the presumption that we can hedge a lot further. Want to take out FX risk. And we want to take out as many risks related to the supply chain as possible. One of the things we saw through during COVID was obviously that supply chains had to be rewired significantly. So we're thinking a lot about these things. So what we're left with and what investors in our strategies are paying for is kind of our raw value creation capability and our raw strategy capability.

• 14:43Speaker 00

  And probably our ability to then ultimately exit this company to a strategic buyer. So there is a lot of focus on, are you picking assets of strategic relevance, of high intrinsic value? And then what are you doing with them for the, say, three to seven-year time period that you are expected to own these assets?

• 15:03David Weisburd?

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• 15:48David Weisburd?

  And as a high invest listener, you will get 50% off. Check the show notes for your exclusive discount code. I look forward to seeing you there. And you mentioned this also before, that your assets are more attractive to strategic investors, because there's this value creation. How do you explain that? Is it just profits are higher, so therefore they're more attractive? Or is there something fundamentally not in the spreadsheet?

• 16:11Speaker 00

  I think there's a lot that's not in the spreadsheet. Like, one of the most important things that you can't actually see in financial ledgers right now is, does this company have a good tech stack? Does this company have a homogeneous set of data? Is it a clean data set? These are some of the things that will be very consequential for the way companies adopt AI. And so when we do our due diligence and we budget, like, what do we need to change? Where do we need to have more cost in order to maybe solve certain issues that we have observed during due diligence? We bake that into our returns, and then that's what we're changing. And so when a strategic buyer then arrives and say, it might have been a very dispersed data set.

• 16:55Speaker 00

  They might have had 25-year P systems. They may not have had a data lake, a lake house, whatever. Like, they may not have all this in check at the time we acquired it. But after our ownership period, we fixed all of this and we high graded the company, what I usually refer to as we future-proofed the company. And that's when we think that the company is of more strategic importance. It's by no means guarantee, but we know that all of these steps will also make the company perform better. Obviously, one of the things you have to accept is it's going to cost you some money normally. So you need to bake that into your model. For example, one of the things that we like doing is doing a carve-out. Usually, a carve-out is happening when a company wants to focus

• 17:39Speaker 00

  on its core capabilities, its core businesses. That could mean that the company that is being carved out has been to somewhat at least strategically neglected for some time. So there is an expectation that there's a lot of things that are not at the level that we would hope for to have an exceptionally well-performing company. So when we do the carve-out work, we're literally budgeting, and we need to change a ton of things. The good news about doing carve-outs is, however painful some people might think they are, it's also kind of a line in the sand. It's an opportunity to put the best tools into the company instead of sort of like changing a lot of legacy stuff.

• 18:15David Weisburd?

  It's a forcing mechanism.

• 18:16Speaker 00

  Absolutely. It's a forcing mechanism. And so we will put those tools in, we'll go through the hard work, but there could be a bit of a J curve, because as you're doing all of this, it will cost you real money. But hopefully, it will allow the company to grow much faster on the other side and certainly be good for profitability or margins.

• 18:33David Weisburd?

  That's Sam Zell's former partner, Mark Soder, who now also continues to run his family office. And one of the things he talked about is the absurdity of the private equity model, which is, you take an asset, you grow it for three to four years, then last year, you're dressing it up to sale, and then you sell it to one of your competitors. Today, we have this rise of continuation vehicles. It just hit $110 billion. Are you guys looking at continuation vehicles? And are there some assets that you want to continue to own for many years?

• 19:00Speaker 00

  I think it's quite normal for a private equity investor, especially at the deal team level. And I've been there myself several times, that you fall in love with your asset. You've been building this asset, and you think it's a wonderful asset. And you wish that you could own it forever, because it's a well-performing asset. And then you don't have to go through the burden and go and buy another asset. That's very relatable. The thing is that your investors is entering into a, so like, time-bound relationship with you. You need to generate DPI along the way. And it shouldn't be one of those where you wait for 10 years and then you're trying to deliver everything in year 10. You should do that continuously along the way. By the way, when you have your colleagues' money and your balance sheet.

• 19:45David Weisburd?

  A lot of pressure.

• 19:45Speaker 00

  There's a lot of people reminding you about that at any moment in time. So we feel that dynamic, which is something I appreciate and probably has meant that we have generated DPI, maybe at moments in time where you could say, oh, things are, it's really sunny. Let's continue for a little while longer. We have large businesses at the firm where we engage in continuation vehicles. And we can certainly see the value of continuation vehicles, especially when you are buying into the continuation vehicles and you have a lot of choice, which my colleagues who run those businesses have. They've been doing it for a very long time and they've been very, very successful. As I think about it in our direct private equity strategies, we have not been big users of continuation vehicles.

• 20:29Speaker 00

  It's not actually because we have anything against continuation vehicles. It's just that we have mostly sold our assets to strategic buyers who acquired those assets with synergies and therefore were able to pay the highest price for the asset. We do have assets that we would like to own. And so I could see ourselves using continuation vehicles as one of many, many sources to continue to stay invested in a company, but at the same time also return capital to our LPs. I'll say that there are other versions of CVs that are almost even simpler, like selling a minority stake to a close partner or somebody where you think that you can continue in a strategic or synergistic ownership structure.

• 21:15Speaker 00

  We also very much like that trade where you on one end are taking some money off the table, but also very much so like invest into the future, potentially with a partner that could help you, say do M and A or other things that could accelerate the journey. So nothing against CVs. I just think with most things in life, you should diversify your sources of liquidity.

• 21:35David Weisburd?

  Yeah, it's such a good point that the CV itself, if you want to sell the CV essentially to yourself. And obviously there's different conflicts around that and how to navigate those. But your competitor implicitly is a strategic investor and it's really hard to compete against strategic investor. That's going to value the asset above and beyond its intrinsic value. That's almost the definition of a strategic investor.

• 21:55Speaker 00

  Absolutely. The strategic investor with synergies should at most moments in time prevail. And that's certainly what we've seen in our strategy, that the well-performing asset, where we have built that intrinsic value usually gets sold to a strategic buyer. That has been the history of our strategy. That's not to say that we won't use the CVs going forward. But I don't see like, so like a significant share of our exits happening through CVs based on what I'm observing and the pipelines that I'm seeing.

• 22:28David Weisburd?

  I was having dinner with one of the largest VC firms in the world that are doing accounting rollups of all the industries. And it's really started making me think about the integration of AI into everything. You guys are in a very interesting part of the market because you're not lower middle market. So these companies have some scale, but there's also a lot of meat on the bone because these companies are not yet very large companies. Today, what are you seeing in terms of AI being integrated? What's actually being done within the companies that's moving the needle? If you run a business, you probably start your morning with way too many tabs open. You're checking revenue, ad performance, email, inventory, spreadsheets. And before you've made a single decision, you've already spent your morning just figuring out what happened yesterday.

• 23:13David Weisburd?

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• 23:57David Weisburd?

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• 24:41David Weisburd?

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• 25:26David Weisburd?

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• 26:09David Weisburd?

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• 26:46Speaker 00

  I think that every company is at a different level of maturation. It all starts with, does the CEO of the company have an AI mindset? Do they understand that it's a strategic imperative that they get on with this? I have not met a company where AI wasn't important. Like you can mention a few blue collar businesses where you'd say AI couldn't possibly disrupt this business. You're probably right, but how does a company gets its customers? What are the insights they're learning for whatever task it is that they're doing? And so I think AI will be relevant for all companies.

• 27:25Speaker 00

  What we have told our portfolio companies, the advice that we have given is that try and focus on a finite set of tangible outcomes to start your AI journey. Don't try and spread AI anywhere in the business in an uncontrolled way. From a safety, security perspective, you need to kind of do the right thing and implement this in an appropriate way. What we've seen is that AI falls into fundamentally two categories. Either it's scaling revenue or it's improving your margins. People will say this is a way too basic framework, but it's a good way to think about it. Because at the end of the day, what we really like our companies to do,

• 28:10Speaker 00

  in addition to do some of the backend stuff that we talked about, having the best culture, the best talent, the best tech stack, et cetera. We fundamentally like to grow these businesses at an ever higher margin so that we can get that EBITDA growth and cash flow generation. When we look at the revenue side of things, we have noticed that independent of which sector the company operates, there's a lot to do in terms of client service. You can service your client really well through AI, whether it is by being more relevant in your conversations from a sales perspective or it's by surfacing the issues that the client have. Like the obvious example is they'll call you in your call center and the AI tool can significantly help the humans in the call centers.

• 28:56Speaker 00

  I'm sure we all have been looking at Jevon's paradox a lot more than we did in the first 40 years of our lives. And all of a sudden we see that these call centers have probably as many humans as they had before. They're just handling way more calls because they're now AI enabled. We have really interesting examples. We have a company that is in the contact lens space or spectacle space. And they have noticed that many of their clients didn't showed up at the scheduled appointment time. Wouldn't it be nice if somebody calls you in the morning and said, hey, remember that you have your 10 o'clock appointment? That's really good for two things. First of all, you don't have a person in the store waiting for you and not being utilized.

• 29:37Speaker 00

  And secondly, every time you enter the store, it's an opportunity to provide better service to you and potentially do a sale of contact lenses or products. Examples like that have been incredibly powerful. And once you think about it for a minute, you go like, but selling contact lenses, how is that so different from selling an insurance service or insurance service or cybersecurity? Maybe there are some trades that are the same. And so we are taking those playbooks and moving them quite rapidly from one portfolio company to another. That's really the cool thing about AI. For many years, if you were a healthcare investor, you didn't speak to the tech investor. You didn't speak to the financial services investor. Because of AI, all investors can learn from each other. All investors can speak to each other.

• 30:22Speaker 00

  And therefore you're also seeing some convergence on valuation multiples between multiple sectors where you go, at the end of the day, is this software company so different? Like it delivers a certain amount of revenue growth and a certain amount of margin and a certain amount of cash flow and you can do a certain amount of bolt-on M and A? Why should that be valued so differently from a financial services company that has the same financial characteristics, assuming that it's in the same part of the risk spectrum from a geography perspective, from a customer concentration perspective, all these other factors that impact investment returns or perceive risk of an investment? On the optimization part of the equation, obviously we're seeing huge efficiency gates.

• 31:05Speaker 00

  Some of the more sort of root or repetitive tasks can easily be either replaced or supplemented by AI. And then of course, on the coding side, because we own companies that do their own code, et cetera. They're obviously massively enabled by AI. I think.

• 31:23Speaker 00

  The advent of AI, and I'm sure we're going to have more advanced versions of AI in the coming quarters and years, I think means that the platforms that have the capabilities to invest the most into these resources should have breakout performance, or it's definitely going to create dispersion in performance, because either you have it or you don't have it. If you look at some of the press releases and activities around our platform, you will see that we, as a firm, are very engaged with the LLMs. We are a customer, we have 12,000 engineers at Goldman Sachs. We are a customer of the most important vendors in that market. We have investment businesses, growth equity investment business engaging

• 32:05Speaker 00

  with these companies. We have our private equity business engaging with these companies. We have just formed a company, actually formed multiple companies that are engaged in servicing, actually companies of our size, the size of the companies in our portfolios, to help them adopt AI. And so we think that's a real differentiator, that we have kind of that purchasing power as a firm and can engage in so many different asset classes to get share of mind of those extremely important vendors.

• 32:36David Weisburd?

  I want to double click on how AI is actually implemented within the companies themselves. You see this over so many different portfolio companies. You see best practices. What are the best practices? How does somebody integrate? Is this something that there's an AI team? Or is it the best practice for every employee to have a share of their time and effort around AI? What works best?

• 32:57Speaker 00

  Well, I'm sure that differences within companies, there are different cultures. But what we see is it needs to come from the top. The CEO needs to make it incredibly well-understood by all employees at the relevant firm that AI is an absolute must, and it's something that will change the way we do our business, and we embrace that change. One of the things that we have done is, again, back to the scale and the resources that we work with, we have stood up an AI university where we're literally taking the CEOs of the portfolio through that university. It's a short, but very impactful curriculum.

• 33:40Speaker 00

  And after going through that, they can be a much better talking partner with their board and with their employees. So it all has to come from the top. You'll also see that our own firm had communicated very clearly 1GS 3.0 and the strategic imperative of getting on with adoption of AI. When it then comes to how do you implement it in your business, you can do it in multiple ways. And I think there needs to be a bit of top-down and bottom-up. There needs to be some experimentation. It needs to be done in a secure, safe environment, and that environment can be created. And there's a bit of a thousand flowers bloom that has to happen, because if humans are not allowed to experiment, it is unlikely

• 34:25Speaker 00

  that we will get to the most relevant and most creative solution. So that definitely needs to be room for experimentation at the ground level at the organization. At the same time, I think CEOs are also faced, and this might at times be uncomfortable, with the task of deciding whether the rest of their excom or leadership team is actually ready for this transformation. Do they have a CTO that is experimenting with AI, that wants to drive AI? Do they have a CRO or head of sales who says rev ops or something related to figuring out cross-sell opportunities to the client base should be done using AI

• 35:10Speaker 00

  tools and not just do it the way we did before late 2022? You see that very quickly. And some of the people who don't embrace that change is unlikely to be the relevant leaders. So CEOs right now, and this is something that we are actively engaged with our CEOs to talk about, which is, do you have the right leadership team to go through the adoption of AI? And clearly, like in so many other seismic shifts that you have seen over the years, you may not in every single position have the right leader. So it's about making sure that you have the right leadership team. If you do have the right leadership team, or you make relevant changes so that you have the right team, then I think you're

• 35:53Speaker 00

  starting to get to the right environment. But then it becomes a war in terms of, do you have the right supplier relationships? This is back to where we can add value and talking about our network playbook, which is, okay, you might have a CTO that embraces change, that want to implement LLMs or some of the models that are focused on specific tasks or very long-running tasks, but do you have the access? That's where we can help. We can make sure that company, that management team gets on the map of that vendor, and they can understand that it's synergistic, because they're not just servicing that portfolio company, they're servicing that portfolio company in partnership with Goldman Sachs.

• 36:34Speaker 00

  And so we're spending an enormous amount of time. And this is what I find fascinating right now, that this is a very, very good reason to work together and not isolate yourself and say, hey, I got this covered. No, learn from your colleagues. We see that the seminars that we do with our management teams, the seminars that we do with our LPs, when the topic is AI, we get enormous followership, and we have a ton of follow-ups where people are learning from each other.

• 37:02David Weisburd?

  You mentioned earlier Jevon's Paradox, which is this paradox that the things that humans are good at, AI will struggle with, and the things that AI is good at, humans struggle with. You mentioned the call centers. There's also another paradox, which is the faster the technological change, the less the technology matters, and the more it's the culture. What does that mean? Take a thought experiment. Today, AI is coded in English language, so everybody has the basic operating principles. If you have the most forward-looking, most mentally flexible, most ambitious team, within some period of time, they're going to beat the most AI-native team that maybe is inflexible and not willing to try different things. So all these things we were talking about before we were recording,

• 37:47David Weisburd?

  so many things are downstream of incentives and culture. So the question becomes not which AI tool do I implement, but which leadership do I implement that will find the AI tool? Because the AI tools are changing every single day. So if you're actually optimizing on the technology, you're probably going to be behind in the next six months when there's the next technological leap.

• 38:07Speaker 00

  That is such a good point. I mean, in a weird way, it used to be that a great employee, operating a great culture, could achieve a lot. But just think about what a great employee with nine agents can achieve, right? And so you're putting your finger on an incredibly important point, which is the war for talent is bigger than it's ever been. Like, right now, if you can get the right people in with the right change mindset, they can move so much faster because they are AI-enabled. It's not about just them moving fast. It's like them moving fast in partnership with AI. And so, again, this then puts even more pressure on leadership. And that's why we start with saying, do we

• 38:51Speaker 00

  have the right people or the right person at the top? Are they themselves embracing this change? Or do they keep their head in the sand and hope that AI will be over in a few quarters from now? Because it's not. I would also say that I think the world, and maybe it's just us as human beings, because we have access to so much information, and maybe we have access to more information today than we had three years ago. It's not just AI moving fast. You also see agendas, political agendas, market volatility moved a lot faster than you've seen in other areas. So I think people who embrace that, people who understand that the only constant right now is really change, and are very comfortable

• 39:34Speaker 00

  operating in that environment, they're probably the future leaders of these businesses. And we will have to support those leaders, and we will have to support a culture that embraces that. At the same time, I think it's important that you don't forget about some of the things that made your companies great, or made the company that I work for great. We always emphasize things like partnership, client service, integrity, excellence. I don't think AI is going to change any of that. Those remain our core values. We just need to see how can AI be adopted in that cultural framework.

• 40:13David Weisburd?

  Speaking of culture, Goldman Sachs arguably has the best culture at scale, 45,000 employees. You've been here for 23 years. If you could go back to when you first started, you could give yourself only one piece of timeless advice, what would that be?

• 40:29Speaker 00

  I think when you're early in your career, you're exceptionally focused on getting to the next destination. If I could give myself an advice today, enjoy the journey a little bit more and learn from that journey. You and I talked about disruption of technology. You talked about geopolitics. We talked about a lot of things, and a lot of things are changing really fast. Wouldn't it be wonderful if we look back in a year from now and say, that was actually a really exciting journey, instead of always just thinking about the next thing? I think when you're in the journey, you're also thinking more about, how can I prove this thing today that drives innovation? The thing we spoke about AI is a lot about,

• 41:13Speaker 00

  how do we make this thing that we're doing right now a lot better? Or how do we even reimagine what we're doing right now? And so, again, one of the advices I would give to myself is enjoy the moment, enjoy the journey a little bit more. If you do that, I'm sure you're going to get to that next great destination.

• 41:31David Weisburd?

  Wise words, and thanks so much for taking the time to sit down.

• 41:35Speaker 00

  Thank you.