Goldman Sachs’ David Solomon on the Firm’s Performance, the Global Economy & What to Expect in 2022

2021 Performance Drivers:

• The firm recorded record revenue and record earnings per share (EPS) due to robust client activity across investment banking and markets.
• Strong inflows were achieved in both asset management and wealth management businesses alongside exceptional investment performance.
• CEO David Solomon attributed this success to a pandemic-induced economic structure that favored client activity, despite a complex macro environment.

Strategic Execution and KPIs:

• Goldman Sachs is tracking ahead on nearly all 35 key performance indicators (KPIs) established during the 2020 Investor Day.
• Strategic objectives include strengthening core businesses and developing four growth platforms: transaction banking, asset management (specifically alternatives), wealth management, and the digital consumer bank.
• The firm plans to update investors on its forward view in February regarding the next few years.
• The firm launched a transaction banking platform in the last two years to serve corporate clients.

Macroeconomic Outlook and Challenges:

• Solomon forecasts a shift in 2022 focus from the pandemic to macroeconomic factors, specifically inflation and slower economic growth.
• He predicts above-trend inflation and sluggish growth will persist due to previous monetary and fiscal policy actions, noting that inflation feels non-transitory to CEOs with an average four-and-a-half-year tenure.
• The firm anticipates a "hawkish Fed pivot" leading to higher interest rates, which will negatively impact equity valuations.
• Solomon believes the pandemic is becoming endemic and society must learn to live with it, citing effective vaccines and treatments.
• He warns that asset prices are heavily influenced by low rates and "free money," suggesting a correction in valuations for highly priced growth stocks, which are already down over 30%.

CEO Sentiment and Market Trends:

• Universal topics discussed with CEOs include the pandemic roadmap, workforce return-to-office strategies, inflation, and the U.S.-China bilateral relationship.
• CEOs are actively grappling with supply chain bottlenecks, labor constraints, and wage pressures.
• An acceleration in M&A activity is observed, driven by consolidation among strong companies rather than large transformative deals.
• The M&A landscape is dominated by mid-sized deals ($1–$10 billion) rather than large transformative transactions, as regulatory environments have tightened for big deals.
• Technology and banking sectors remain constrained from executing large-scale transformative M&A compared to other industries.

Strategic Acquisitions:

• GreenSky: The integration is progressing well; the firm expects this acquisition to close shortly. It provides a critical 15-year-old merchant network for the digital consumer bank, saving an estimated 7–10 years of build time. GreenSky will operate as an independent platform during early integration.
• Invergo (referred to as "NN" / European asset manager): Acquisition expected to close by the end of Q1. It rolls assets into the European asset management platform and includes a significant contract with a large insurer.
• Both acquisitions are viewed as strategic additions to expand capability and client reach in Europe and digital banking.

Social and Sustainability Initiatives:

• Solomon asserts that while private enterprise can direct improvements, "big problems" and policy changes must be driven by the public sector.
• The firm updated its sustainability targets, focusing on capital allocation for climate transition, affordable healthcare, and transportation infrastructure.
• Goldman Sachs aims to act as an intermediary to help clients transition their businesses to a sustainable future.
• Diversity efforts are driven by both ethical imperatives and economic logic; increased participation breeds economic growth.
• Key external platforms include "10,000 Women," "10,000 Small Businesses," and the newly launched "1 Million Black Women" initiative.

Leadership Lessons and Career Advice:

• Lesson 1: Organizational performance provides the latitude to influence and drive important initiatives; without performance, execution is hindered.
• Lesson 2: Success requires a "North Star" approach: prioritizing the safety and productivity of employees, serving clients, and supporting communities.
• Advice for Youth: Solomon advises a "long view," urging young professionals not to be in a hurry and to invest patiently in their careers.
• Workplace Presence: He emphasizes that despite remote work tools, "showing up" to build relationships remains critical for learning and growth.
• Personal Experience: Solomon revealed he was turned down twice from Goldman Sachs in his 20s and never imagined running the firm then.

Recorded Context:

• The conversation was recorded on Thursday, January 6, 2022.
• Allison Nathan, a senior strategist in Goldman Sachs Research, served as the interviewer.