CNBC Transcript: Goldman Sachs Group Inc (NYSE:GS) CEO David Solomon Speaks with CNBC’s “Squawk Box” From Davos Today
WHEN: Today, Thursday, January 23, 2020
WHERE: CNBC’s “Squawk Box” – Live from the World Economic Forum in Davos, Switzerland
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Following is the unofficial transcript of a CNBC interview with Goldman Sachs CEO David Solomon on CNBC’s “Squawk Box” (M-F 6AM-9AM) live from the World Economic Forum in Davos, Switzerland today, Thursday, January 23rd. Following is a link to video from the interview on CNBC.com:
Watch CNBC’s full Davos interview with Goldman Sachs CEO David Solomon
All references must be sourced to CNBC.
ANDREW ROSS SORKIN: All this week in Davos, we’ve speaking to the heads of America’s biggest banks. And joining us right now is perhaps one of the biggest.
GOLDMAN SACHS CEO DAVID SOLOMON: Yes. Definitely.
ANDREW ROSS SORKIN: We’re trying to figure out how to say that right. Goldman Sachs’ Chairman and CEO David Solomon is here. Thank you for being with us.
GOLDMAN SACHS CEO DAVID SOLOMON: Great to see you guys. Absolutely. Thank you.
ANDREW ROSS SORKIN: one of the great barometers, if you will, of CEO confidence and market confidence in the world, in part because you get to spend so much time with so many different clients. And here, I know you have -- how many meetings all in, do you think?
DAVID SOLOMON: A bunch.
ANDREW ROSS SORKIN: A bunch? A bunch.
DAVID SOLOMON: Yeah, probably 30, 35.
ANDREW ROSS SORKIN: Okay. So, what was the big take away from those meetings in terms of that confidence?
GOLDMAN SACHS CEO DAVID SOLOMON: Sure. Well, it’s nice to be here. And one of the things I really enjoy about Davos is just the opportunity to interact with people and get a soundbite for how people are feeling, what’s on their mind. You know, certainly, I would say from an economic perspective, and just kind of looking forward to 2020, you know, people are relatively confident that global growth will sustain through 2020. The chance of an economic slowdown, barring some sort of an exogenous event that’s not defined for us, is relatively low.
In the U.S. in particular, the underlying strength of the consumer continues to be very, very strong. That’s making up or carrying the economy through some weakness on the manufacturing side, where capital investment has been a little bit slower than we would like to see. But there’s no question that things feel relatively good. And I think we saw at the end of the year, a little bit of an acceleration. And so, we head into this year with some optimism.
But I do think as we look forward we had earnings acceleration last year. My guess is as we get into this year, we’ll have a little less earnings growth in the U.S., which obviously could weigh on investors. And we obviously had a very strong year in the market last year. So, we will have to watch and see.
BECKY QUICK: Is this going to be the year that we actually see additional capital expenditure put to work?
GOLDMAN SACHS CEO DAVID SOLOMON: You know, I don’t know if this is the year. I think over time we will see some progress. I think the Phase One China Deal is a positive, just in terms of confidence. But there’s no question that the manufacturing sector is still a little soft.
BECKY QUICK: How much do you worry that Davos is a contraindicator?
GOLDMAN SACHS CEO DAVID SOLOMON: It’s one of the things I’ve observed. I’ve come here for over a decade every year. And, you know, there are certainly years where I would observe that the consensus, when you look back with a view of hindsight tends to kind of miss the mark. And last year I think was an interesting example. Because I do think that participants here have a tendency to look through the rear-view mirror at the most recent experience
. If we remember a year ago, December was tough. But I also remember being on your show last year and saying I know everybody is so pessimistic because of December. But when I listen to the meetings I’m having with people, the businesses are performing pretty well. That’s not synching up for me. I wasn’t predicting but I wasn’t hearing it. This year we obviously are coming from, you know, a period that would breed more confidence.
But still, as I get around and talk to people, people feel relatively good but they’re worried about the length of the cycle. And you know, I think people are watching very closely.
ANDREW ROSS SORKIN: We just talked to Stacey Cunningham from the New York Stock Exchange and Adena Friedman earlier from the Nasdaq. When you look at the public markets, you’ve been involved in a lot of IPOs. You were on the panel as well that we talked about these IPOs. Are you as confident as perhaps they were or they are about next year?
GOLDMAN SACHS CEO: Well, IPO performance last year was good. And you know, we had the discussion that we had about a handful of IPOs or potential IPOs that didn’t work. But when you look at the overall performance of IPOs last year, the basket was up 34%, which is strong performance versus obviously excellent market performance. The market is still open and receptive. I think there’s a little bit more focus on earnings and long-term business models and profitability, the sustainability of profitability in businesses and little bit less focus on growth. I actually think that’s healthy. But I would expect to see, if the environment stayed as benign as it is, I would expect to see a relatively robust IPO market this year.
ANDREW ROSS SORKIN: You sold out of Uber.
DAVID SOLOMON: We did.
ANDREW ROSS SORKIN: Why?
GOLDMAN SACHS CEO: We made an investment in Uber very, very early stage. We had met the company when it was very young. We made a small investment and turned into a very large balance sheet investment. So, for the first time since we made that investment we had an opportunity to monetize it. And as we do with any public equity that winds up on our balance sheet, because we would rather not have the market to market in that we reduce those because they’re financial investments as we move. But that speaks nothing.
You know, I spent time with Dara yesterday, you know, listening to him talk about his view of the company. It’s no comment at all on our view of the company. But it’s an investment we put a few million dollars in six, seven years ago and it turned into a very successful financial investment.
JOE KERNEN: There are some videos making the round of -- on planes in China, certain provinces and people actually being tested--reportedly being tested on planes for this virus, this coronavirus. Is that on the radar screen?
DAVID SOLOMON: It’s definitely on the radar screen.
JOE KERNEN: Who do you go to with that? Do you have people to talk to about that type of risk as well?
DAVID SOLOMON: We have people that monitor risks like that inside the organization. Obviously, our team in Asia, you know, is focused on it. We have a large number of people in Hong Kong and Beijing and in Shanghai. So, obviously first and foremost, we’re concerned with our people, as everyone should be with their people. We’re monitoring it very closely. It’s an example of the kind of thing that if it did progress in a negative way, it’s one of those exogenous events -- confidence. And we remember, as I’m sure you do—
JOE KERNEN: SARS.
DAVID SOLOMON: --SARS, and the impact it had on risk assets, and the impact it had on the markets. And I think it’s too early to call that or expect that, so my hope is it will get resolved in a positive way.
ANDREW ROSS SORKIN: I want to ask you about the other big theme here, which is stakeholder capitalism and governance and the role of all these things. I’m curious, what you think the role of banks should be in all of this. Which is to say, do you have a greater responsibility to actually use your own influence to put pressure on companies to make changes?
GOLDMAN SACHS CEO DAVID SOLOMON: So, look, I think this topic of stakeholder -- you know, I think it’s an interesting topic, broadly. I don’t think we have a greater responsibility. I think we all have a responsibility. We all have a responsibility in the context of our platforms and our businesses to serve our stakeholders well. You know, our first-priority is to serve our shareholders, to drive long-term returns for our shareholders. But I’m a big believer that unless you take care of your stakeholders more broadly in the medium and long-term, you won’t deliver outstanding returns. So, I think it’s very, very important. We think a lot about, you know, our platforms and things we do, and we try to contribute in ways that we think improve market structure and the capital markets broadly.
In fact, I mentioned something that we’ve been thinking about that we’re going to roll out here publicly, which speaks to our, you know, kind of using our platform and our position. I think from a governance perspective, diversity on boards is a very, very important issue. And we have been very, very focused on it. So, we’re trying to find ways to encourage that. And I come from a position of my own experience where I look at the Goldman Sachs board. We have four women out of 11.
We have a black lead director. I really value the diverse perspectives, you know, I’m getting which are helping me run the company. I look back at IPOs over the last four years and the performance of IPOs where there’s been a woman on the board in the U.S. is significantly better than the performance of IPOs where there hasn’t been a woman on the board. So, starting on July 1st in the U.S. and Europe, we’re not going to take a company public unless there’s one diverse board candidate with a focus on women and we’re going to move toward 2021 requesting two.
And we realize that this is a small step but it’s a step in a direction of saying, you know what, we think this is right, we think it’s the right advice. We’re in a position also because of our network to help our clients if they need help placing women on boards. So, this is an example of our saying how can we do something that we think, you know, is right and helps move the market forward?
ANDREW ROSS SORKIN: That’s a big move. And that’s a breaking piece of news right here.
BECKY QUICK: Is that what you were talking about last year when you said you would tell us one thing we didn’t know?
DAVID SOLOMON: Well, actually, you said to me, ‘Will you tell us one thing we didn’t know?’ I said,
‘Okay, I’ll tell you one thing you don’t know.’ So, I wasn’t planning on it but when you prompted that last night, it sounded like a good thing to move forward.
BECKY QUICK: I like it.
ANDREW ROSS SORKIN: Let me ask you. When you said you’re going to move towards requesting--
DAVID SOLOMON: No, no. We’re going to start--when you look at this, there’s a process to something like this. So, July 1st, one. In 2021, two. And we are going to start the dialogue with our clients. And look, we might lose some business. But in the long run this I think is the best advice for companies that want to drive premium returns for the shareholders over time.
BECKY QUICK: You mentioned that you can help, that you have networks and you know a lot of people, so you can help some of these boards if they can’t find diverse candidates. Is that something you do for a lot of companies you take private now? Or take public?
GOLDMAN SACHS CEO: We do help companies. People come to us often asking for help with respect to placing board members. We’re going to continue, you know, to do that. We have tried to put more of a formal process around identifying strong pipeline and perspective candidates. One of the things that we’re trying to do, and I think this has been a constraint to more diversity on boards, there’s been a bias toward if you’re going to put somebody on a board, they have to be a CEO or CFO or they have to have had public board experience.
And so, just looking to gender, for example if you put that hurdle there, then you’re eliminating an enormous number of women with decades of experience that can really make a perspective--you can bring a positive or diverse perspective to the governance of companies. And so, one of the things we’re trying to figure out is how to broaden that aperture and also, to accelerate a much broader appetite for the kind of diverse candidates that can make a difference.
ANDREW ROSS SORKIN: How much of this is being driven by the experience of WeWork? Can I ask--and the reason I mention that is you were one of the underwriters of that company. Obviously, it came out with that S1 originally without any diverse board members at all and they added a woman very quickly when it became clear that there was going to be pressure for that. Is that what drove some of this?
DAVID SOLOMON: To be perfectly honest, WeWork is one of many data points that have led us over a number of months to talk about this. But it wasn’t specific, and to be honest, it never really -- until yesterday, you reminded me of the fact that that’s the way the S1 filing -- it wasn’t in the thought process as we debated it. What was in the thought process is over the last couple years in the U.S. and Europe, there were 60 companies that went public without a diverse broad member. And when you think about where we are today and what we’re trying to accomplish and what the right advice is, and this is rooted in what we strongly believe is the right advice for our clients, we thought it was time to find a way to contribute more aggressively to that.
BECKY QUICK: You’re just over a year in. I guess it’s been a year and three months that you have really taken over the helm. And you have made changes. You’re changing the way the company reports earnings. You’re making it less opaque, giving more kind of clarity to investors. What’s the feedback that you got after just doing this for the first time this past week? And what did you hear back from investors?
DAVID SOLOMON: Well, the feedback we’re getting particularly on transparency is positive. I think you know we have our first Investor day ever next Wednesday. And so, obviously we’ll take a bunch of feedback, you know, after that Investor day.
But, you know, I’ve tried, as I started to transition into running the company, to really think about certain principles that I think are important for us to deliver for our shareholders and also, drive the organization forward. And, I think transparency is important in business. I think it matters. And I think for us to be giving that advice to our clients and not be a role model in the context of that, you know, doesn’t make sense.
ANDREW ROSS SORKIN: How pleased are you with the relationship with Apple right now? And the Apple credit card business?
DAVID SOLOMON: Very, very pleased. We have a long history with Apple over a long period of time. Interestingly, we did not take Apple public in 1980. But we -- our relationship with Apple really started in the mid-90s when Apple got into a little bit trouble and needed capital. And actually, the time we did the first-ever overnight convertible bond that was ever done for Apple in the ’90s and that started our relationship. Over a long period of time it’s been a good partnership. And I think because of that partnership that it allowed us to expand the partnership to do the card. And it’s--we’re very pleased with how it’s going.
ANDREW ROSS SORKIN: The reason I ask, though—
JOE KERNEN: Was Jobs back yet? Who was the CEO then? Gil Amelio? Or John Sculley?
DAVID SOLOMON: It was right when Jobs came back –
JOE KERNEN: Right when he came back.
DAVID SOLOMON: After Sculley. Right when he came back. It would have been around -- don’t quote me on exactly, but I think it would be right when Jobs came back around ’97 or something like that.
ANDREW ROSS SORKIN: The reason I ask is I think there was an expectation that Apple was going to promote this product in the same way, for example, they’re promoting the Apple Plus TV products. You would see billboards. You would see -- it would be on your phone -- everybody was going to have to get one of these credit cards. And I don’t think we have seen that kind of marketing at this point.
DAVID SOLOMON: So, there are a couple of things I think to think about with that. First of all, we’re five minutes into this. This started four months ago. And when you actually look, we haven’t disclosed the number of cards, but as I said to you once before when we had this conversation, the take up in cards is multiples, multiples what any co-branded card has ever had in the early days. We’re building a platform for us, from a risk management perspective, I actually--it’s growing plenty fast. And it’s going to continue to grow plenty fast.
BECKY QUICK: You don’t want the heavy branding just yet.
GOLDMAN SACHS CEO DAVID SOLOMON: We want to make sure that we’re delivering for the customer first of all, and the customer is getting great experience. That from credit risk management perspective. We’re doing the right things. And I think they’re supporting it in exactly the way they should be. And I’m very optimistic about the long-term partnership.
ANDREW ROSS SORKIN: Final question, Bernie Sanders went after a guest who was sitting right here just yesterday, Jamie Dimon. He took a shot at him, said he likes corporate socialism because of the amount of money that the banks took during the financial crisis. I don’t know if you saw this. He claimed that the bank had taken $416 billion. What do you make of that?
DAVID SOLOMON: You know, what did Jamie make of it?
ANDREW ROSS SORKIN: I don’t think he made much of it.
DAVID SOLOMON: Yeah. I don’t -- I’m watching the political process like everybody else. And I’m staying focused -- I’m staying focused –
JOE KERNEN: In terms of the conflict between you and Bernie, I hate to see this. First Hillary said something about Bernie. Now you’re in a spat defending Dimon. You guys have to get along if you think you’re getting anywhere.
ANDREW ROSS SORKIN: The other side, you’re saying.
JOE KERNEN: You guys don’t need a lot of dissension if you have to go up against Trump. If I were you --
ANDREW ROSS SORKIN: I see.
JOE KERNEN: Have you spun here?
DAVID SOLOMON: No. I’m focused on my day job here. Very focused.
ANDREW ROSS SORKIN: No spinning. There’s a lot of parties. How many -- have you got any invites to spin here?
DAVID SOLOMON: I’m very focused on my day job here. I’m focused on my day job here.
JOE KERNEN: But at the Super Bowl, you’ll be there, right?
GOLDMAN SACHS CEO DAVID SOLOMON: I was lucky enough to be invited to play at a party at the Super Bowl. And what’s nice about it, is to make a very, very significant contribution to a charity I support, Shadowproof, which is terrific organization that helps people and families with big addiction opportunities. And so, the opportunity—I was going to be down at the Super Bowl, to play for an hour and make a nice charitable donation, I think is really terrific.
JOE KERNEN: I was thinking about getting into do this, this business. If I were to spin some like Jethro Tull, or Blood, Sweat and Tears. Do you do the music I know?
DAVID SOLOMON: Joe--
JOE KERNEN: What do you spin? What are you spinning? Do you know new music?
BECKY QUICK: Yes, he does. He’s deep into it.
JOE KERNEN: Can I do that?
ANDREW ROSS SORKIN: Give me what’s the hottest new artist out there that you love.
GOLDMAN SACHS CEO DAVID SOLOMON: Lots of artists out there I love. I’m working on a track that’s going to be out with a new British singer whose name is Hayley May who has put a few things out.
ANDREW ROSS SORKIN: Can you find it yet?
DAVID SOLOMON: You cannot find it yet because it’s not up. But it will be up soon.
ANDREW ROSS SORKIN: Very cool. Appreciate it. Great to see you.
DAVID SOLOMON: Very nice to see you.