Latest / Masters in Business / Transforming ETFs with Bryon Lake of Goldman Sachs Asset Management

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Transforming ETFs with Bryon Lake of Goldman Sachs Asset Management · Masters in Business

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  Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. This is Masters in
• 0:11
  Speaker 1: Business with Barry Ritholts on Bloomberg Radio.
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  Speaker 2: This week on the podcast, I have another extra special guest.
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  Speaker 3: Brian Lake is.
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  Speaker 2: Chief Transformational Officer at Goldman Sachs's Asset Management. He got
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  Speaker 2: a start at power Shares in the ETF industry early
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  Speaker 2: and really has spent most of his career at the
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  Speaker 2: vanguard of disruption. First at power Shares, they're eventually bought
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  Speaker 2: by Invesco. He rises to become head of international ETFs
• 0:45
  Speaker 2: with them and for a couple of years was based
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  Speaker 2: out of London, then comes back to New York and
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  Speaker 2: gets tagged to run ETFs for JP Morgan Asset Management.
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  Speaker 2: He just is one of these people that has, through
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  Speaker 2: a combination of luck in Smart's, has been in the
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  Speaker 2: right place at the right time and has very much
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  Speaker 2: observed what it takes to satisfy clients to reach a
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  Speaker 2: particular outcome and to use the latest greatest technology, whether
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  Speaker 2: it cannibalizes your prior business or not, to help achieve
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  Speaker 2: those outcomes. I found this conversation to be fascinating and
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  Speaker 2: if you want to have some insight into what's going
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  Speaker 2: on at Goldman Sachs three trillion dollars asset management business.
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  Speaker 3: You'll find this conversation to be fascinating.
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  Speaker 2: With no further ado, my discussion with Goldman Sachs Asset
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  Speaker 2: Managements Brian Link Barry.
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  Speaker 4: It's a pleasure to be here. Thanks for having me.
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  Speaker 2: So I saw in one of the news outlets you
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  Speaker 2: get hired with this completely wacky title. Like our mutual friends,
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  Speaker 2: Dave Nadig was a chief futurist. So we'll get to
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  Speaker 2: the title in a bit, but I want to start
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  Speaker 2: with a little bit of your background that led you
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  Speaker 2: to the CTO position. Starting with bachelors from Taylor University
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  Speaker 2: International Business, Economics and Finance.
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  Speaker 3: What was the original career plan.
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  Speaker 4: Yeah, no, you know, I think I had read a
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  Speaker 4: Warren Buffett book early on. So I loved investing, I
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  Speaker 4: liked watching stocks, and you know, i'd read the Wall
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  Speaker 4: Street Journal that was always around in the home, and
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  Speaker 4: so I was able to really look into that. But
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  Speaker 4: I didn't realize that the entire asset management industry existed
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  Speaker 4: in the way in the way that it did. I
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  Speaker 4: think it's one of those that because the asset management
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  Speaker 4: industry often is working with financial advisors or other institutions.
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  Speaker 4: It's not as consumer of a business, whereas financial advisors
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  Speaker 4: obviously work with individuals. And so I didn't know the
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  Speaker 4: asset management industry existed in the way that it did.
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  Speaker 4: So I didn't know that. But you know, growing up,
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  Speaker 4: my parents were intentional about exposing us to international you know,
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  Speaker 4: traveling internationally. We were fortunate enough to do some trips
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  Speaker 4: throughout Europe and had just always been amazed by, you know,
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  Speaker 4: the different cultures and the different things that go into
• 3:03
  Speaker 4: to that. And so as we'll get into I'm sure
• 3:05
  Speaker 4: that that did end up playing out in my career.
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  Speaker 4: I think to be international business at Taylor, you just
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  Speaker 4: had to take a language, which of course I took,
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  Speaker 4: you know, eight years of Spanish and I can speak
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  Speaker 4: maybe fifteen words. But you know, that's that's how we
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  Speaker 4: kind of ended up with that one.
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  Speaker 2: So you start your career after college as an office
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  Speaker 2: manager at Fifth third Bank office manager.
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  Speaker 4: What branching up? It was in a branch so so
• 3:29
  Speaker 4: so now there's some some history there. My dad worked
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  Speaker 4: at Comerica Bank in Detroit co America Park, you know,
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  Speaker 4: the tigers field is named after k America it's one
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  Speaker 4: of the largest banks and uh in the in the country,
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  Speaker 4: and and you know, some of the formidable years I remember,
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  Speaker 4: you know, spending time, you know, the quality time I
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  Speaker 4: would spend with my dad. We'd be going to sporting events,
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  Speaker 4: right and you know, sometimes he'd bring somebody from work
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  Speaker 4: and I'd just sit in the back back of the
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  Speaker 4: car and listen to them talk shop. And you know,
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  Speaker 4: those things were just kind of even if I didn't
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  Speaker 4: understand was what they were talking about. The cadence and
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  Speaker 4: the perspective, the professional kind of interactions that they were
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  Speaker 4: having just kind of always always fascinated me. So my
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  Speaker 4: dad was as it was at co America Bank. I
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  Speaker 4: got a job at Fifth third Bank is literally a
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  Speaker 4: branch manager, and what I distinctly remember from that time
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  Speaker 4: is you'd get there at about seven thirty in the
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  Speaker 4: morning and you'd pull all the deposits that came from,
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  Speaker 4: you know, the previous nights, and there was a bunch
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  Speaker 4: of restaurants in the area and I would handcount three hundred,
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  Speaker 4: four hundred, five hundred thousand dollars worth of bills cash
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  Speaker 4: this was a little while ago now, and and you'd
• 4:27
  Speaker 4: strap it up and then you'd and then you'd have
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  Speaker 4: to like, I mean, oh, we're talking a full Duffel
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  Speaker 4: two too. Me's next to each other, right, like two
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  Speaker 4: major suitcases they go into. That's four hundred thousand dollars
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  Speaker 4: something something like that. Because this is from a restaurant.
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  Speaker 4: You got small bills and all this sort of stuff,
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  Speaker 4: and as and and and as interesting as that was,
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  Speaker 4: I was like, this is not the forever thing. And
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  Speaker 4: then at the end of the day you're helping, you know,
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  Speaker 4: the teller's balance out there, drawers and all this sort
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  Speaker 4: of stuff, and I was like, this is this is
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  Speaker 4: not the finance that I was that I was really picturing,
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  Speaker 4: And so that didn't last forever, but I do. That
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  Speaker 4: was exactly where it started at a fifth third at
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  Speaker 4: a fifth third branch and Lavonia, Michigan, not far from
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  Speaker 4: where I grew up.
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  Speaker 2: How did you find your way to investo?
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  Speaker 4: So I went to Taylor University. As we talked about,
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  Speaker 4: that's in the middle of Indiana. It's called Upland, Indiana.
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  Speaker 4: It's the highest point above sea level between Fort Wayne
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  Speaker 4: and Indianapolis's ten feet above sea level. This is corn.
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  Speaker 4: This is corn. This is cornfield.
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  Speaker 3: You must have a great view from there.
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  Speaker 4: You can see it all. You can see as far
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  Speaker 4: as the eye can can see a rose of corn.
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  Speaker 4: But they had a great finance program, and like I say,
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  Speaker 4: the culture at that university, which I'm still very connected with,
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  Speaker 4: you know, race some really interesting people. And so I
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  Speaker 4: graduate from there, I go back home to Plymouth, Michigan,
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  Speaker 4: just outside Detroit, and I'm living there kind of the
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  Speaker 4: post college thing. This is when I'm working at Fifth Third.
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  Speaker 4: But there was a girl that I had met at
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  Speaker 4: Taylor University who lived in Chicago, and so I really
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  Speaker 4: wanted to find my way over to Chicago. So I
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  Speaker 4: find I find my way over to Chicago, and I
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  Speaker 4: get introduced to a gentleman by the name of Bruce Bond.
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  Speaker 4: And you probably know Bruce, but you know, for people listening,
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  Speaker 4: Bruce founded power Shares originally, which was which was a
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  Speaker 4: startup ETF business he now runs into which is another
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  Speaker 4: ETF business. And and this was, you know, over twenty
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  Speaker 4: years ago. The entire ETF industry was less than one
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  Speaker 4: hundred billion dollars. And I was interviewing with Bruce and
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  Speaker 4: he just so happened to be a Taylor grad as well.
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  Speaker 4: And another one of my mentors is in the room,
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  Speaker 4: Ben Fulton, who also has been a very successful entrepreneur
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  Speaker 4: and was early on it at power Shares. And I
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  Speaker 4: distinctly remember I was, I was interviewing, and I was
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  Speaker 4: I was telling Bruce, Oh, I think ETFs could you know,
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  Speaker 4: really change the investment landscape, and this is really interesting.
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  Speaker 4: I was just parroting this article. And at the time,
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  Speaker 4: the article started with startup power Shares next to the
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  Speaker 4: petting zoo in Wheaton, Illinois, so it doesn't exactly scream
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  Speaker 4: high finance, right, And so I'm interviewing with Bruce will Oh,
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  Speaker 4: why do you want to be here? Oh, I'm really
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  Speaker 4: excited about this, and Ben interrupts. He says, who's the girl?
• 6:46
  Speaker 4: And I said, well, their name's Casey, and I really
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  Speaker 4: like her. And so now Casey and I are married,
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  Speaker 4: four kids later, we got a dog as well. But
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  Speaker 4: that was how I got to power Shares.
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  Speaker 3: And so this was five.
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  Speaker 4: So five yep, and and so like I said, the
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  Speaker 4: ETF industries one hundred billion dollars. Now, as you know,
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  Speaker 4: it's fifteen.
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  Speaker 2: Billions that spy, right, half of that half of that.
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  Speaker 4: Spy, and it's a it's an amazing kind of story.
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  Speaker 4: The idea behind power Shares was they were going to
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  Speaker 4: be the non market cap weighted ETF provider. So what
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  Speaker 4: we now call smart beta, what we now call thematic,
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  Speaker 4: what we now call you know, some of these other
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  Speaker 4: things that you know, different exposures that nobody was really
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  Speaker 4: thinking about at the time. Power Shares was really the
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  Speaker 4: innovator in launching many of those. And so I had
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  Speaker 4: the really good fortune of sitting in a very small group.
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  Speaker 4: So I was a twelfth employee at power Shares. I
• 7:32
  Speaker 4: had a very you know, I was very fortunate to
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  Speaker 4: sit with these people as they were building this business.
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  Speaker 4: The industry was going from you know, like I say,
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  Speaker 4: the whole industry is about one hundred million to your point, spy.
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  Speaker 4: Spy was kind of fifty. I'd probably had ten thousand
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  Speaker 4: conversations about ETFs within the first three years of my career,
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  Speaker 4: between the phone and then covering you know, a territory
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  Speaker 4: and working with with financial advisors, which was which was
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  Speaker 4: such an edge, as you know, you learned so much
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  Speaker 4: just having these conversations repetitively, and so that was kind
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  Speaker 4: of how I got to Chicago.
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  Speaker 2: So Invesco becomes a significant player in ETF's by acquiring
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  Speaker 2: power Shares the very next year. So you're there for
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  Speaker 2: a year, suddenly you're acquired. What's your new role like
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  Speaker 2: at Invesco.
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  Speaker 4: Well, this is you know, this is a really interesting
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  Speaker 4: time for me. And so you know, I know you
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  Speaker 4: like to ask your guests what books they like to read.
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  Speaker 4: I'm gonna I'm going to share a book early on.
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  Speaker 4: I got I got multiple books for you today, Barry.
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  Speaker 4: But the book that I that I like to read
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  Speaker 4: is there's a book called Innovator's Dilemma by Clinton Christians.
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  Speaker 4: Christians are right, and so think about what's happening now.
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  Speaker 4: So you have a large asset manager and Invesco, which
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  Speaker 4: was growth shop of the nineties, a you know, hundreds
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  Speaker 4: of billions of dollar asset manager acquiring this At the time,
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  Speaker 4: I think PowerShares was six billion dollar ETF fast grow,
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  Speaker 4: new technology, changing the game on what we're doing.
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  Speaker 3: Very disruptive, very disruptive.
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  Speaker 4: But as you know, in the Innovator's Dilemma, the legacy,
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  Speaker 4: the incumbent technology really tries to protect what they're doing
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  Speaker 4: while the up and comer is trying to disrupt what's
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  Speaker 4: happening and so Invesco acquires the power shares business, They're
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  Speaker 4: gonna they're gonna expand their offerings from traditional mutual funds
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  Speaker 4: to now include exchange traded funds.
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  Speaker 2: It's pretty pretty forward looking at a time where there
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  Speaker 2: was a lot of skepticism. I remember the early days
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  Speaker 2: where you and I first met at some ETF conferences
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  Speaker 2: and you're just genuinely shocked at how much skepticism and yeah, yeah,
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  Speaker 2: the kids are playing with this new fangled ETF thingy.
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  Speaker 4: Yeah, which is which is how so many of the
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  Speaker 4: new technologies come about. Right, But what's so Invesco acquires it.
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  Speaker 4: Various dude on their part. But but what was amazing
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  Speaker 4: for me is I had this unique opportunity. I was
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  Speaker 4: the first person that they put on the plane from Wheaton, Illinois,
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  Speaker 4: down to Houston, Texas or Atlanta, which is where Invesco
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  Speaker 4: head offices, and I was the one training them on ETFs,
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  Speaker 4: and so we were having this interesting conversation. The light
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  Speaker 4: bulb went off for me. It was like holy smokes.
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  Speaker 4: I could see both perspectives. These were these were incredibly
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  Speaker 4: success full asset management financial service individuals that were trying
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  Speaker 4: to digest and understand which now in hindsight looks so obvious,
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  Speaker 4: but at the time, to your point, looked like, I
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  Speaker 4: don't know if this thing's really gonna happen. And so
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  Speaker 4: that was a really a really formative time for me.
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  Speaker 2: And you know, when you think about certain companies that
• 10:17
  Speaker 2: have been really successful, they're the ones who have at
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  Speaker 2: full over long periods of time, they've figured out innovator's dilemma.
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  Speaker 2: They're willing to disrupt themselves. I'm thinking about you know,
• 10:28
  Speaker 2: the original iPod was a huge winner for Apple, and
• 10:32
  Speaker 2: they just kept making it faster, cheaper, smaller, with more capacity.
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  Speaker 2: And you could just hear someone saying, guys were selling
• 10:39
  Speaker 2: a ton of these with a gig capacity at five
• 10:42
  Speaker 2: hundred dollars. You now want to introduce a three gig
• 10:45
  Speaker 2: capacity at two hundred dollars.
• 10:47
  Speaker 3: You're going to kill our old sales.
• 10:49
  Speaker 2: Didn't matter, better we do it than someone else.
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  Speaker 4: Right, That's exactly right. You know. One of the quotes
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  Speaker 4: that we'd throw around a lot at that point is
• 10:55
  Speaker 4: that if you didn't like change, you were going to
• 10:57
  Speaker 4: like irrelevance even less. Right, And if you think about
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  Speaker 4: that was what was going to happen. This innovation and
• 11:02
  Speaker 4: this this whole story is about innovation and continuing to
• 11:06
  Speaker 4: look for new ideas. And you know, as you think
• 11:08
  Speaker 4: about how product gets developed, as you think about how
• 11:10
  Speaker 4: distribution happens, these are all things that inform all of
• 11:13
  Speaker 4: those all of those things. But yeah, that was an
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  Speaker 4: amazing time that then evolved into Hey, we've got investors
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  Speaker 4: from Asia, from Europe, from South America that are buying
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  Speaker 4: our ETFs listed on the New York Stock Exchange because,
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  Speaker 4: by the way, it's a security and so all these
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  Speaker 4: firms that had trading lines open in New York, we're
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  Speaker 4: happy to buy an ETF off the exchange. In that way, Hey, Brian,
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  Speaker 4: would you mind getting on a plane and going and
• 11:35
  Speaker 4: talking to some of these people and figure out what's
• 11:36
  Speaker 4: going on in these areas?
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  Speaker 2: So you go to Europe, in the Middle East, you
• 11:39
  Speaker 2: go to Asia. Eventually, after twelve years of work at
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  Speaker 2: Vesco Power Shares, you're running e f E in terms
• 11:49
  Speaker 2: of ETFs. Tell us about that experience.
• 11:51
  Speaker 4: That was an amazing thing. I had been doing this
• 11:54
  Speaker 4: global business development and so you know, combine a couple
• 11:56
  Speaker 4: of things that we've talked about here, So I had
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  Speaker 4: had you know, tens of thousands of conversations around ETFs.
• 12:03
  Speaker 4: I had been given the fortunate opportunity to talk to
• 12:07
  Speaker 4: incumbent asset managers and how they then are digesting ETFs
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  Speaker 4: in their portfolios and how that's going to change the
• 12:13
  Speaker 4: the industry and what's happening there. I had done that
• 12:15
  Speaker 4: then globally, so you understand the overall ecosystem. What's the
• 12:18
  Speaker 4: value proposition to investors to buy these? How are they
• 12:20
  Speaker 4: using them in portfolios? And then investor says, hey, would
• 12:22
  Speaker 4: you would you be interested in moving to moving the
• 12:24
  Speaker 4: family to London and running our international business everything kind
• 12:28
  Speaker 4: of xus. I jumped at the opportunity. I could have
• 12:30
  Speaker 4: been more excited. I didn't know when we talked about
• 12:32
  Speaker 4: my degree earlier international finance, I didn't know I was
• 12:34
  Speaker 4: going to move. But we were very open to it,
• 12:36
  Speaker 4: and you know, credit to my wife for being willing
• 12:38
  Speaker 4: to help raise the family.
• 12:39
  Speaker 2: What was it like bringing the kids to London and
• 12:41
  Speaker 2: sort of hey, you're leaving everything behind at least for
• 12:44
  Speaker 2: a couple of years, but it's going to be a
• 12:46
  Speaker 2: great adventure.
• 12:47
  Speaker 4: What were their react We moved over with a three
• 12:50
  Speaker 4: year old and eighteen month old and like a six
• 12:53
  Speaker 4: month old, and so the house hunt was all looking
• 12:55
  Speaker 4: for a flat in London that had a entryway level
• 12:59
  Speaker 4: with the sidewalk so that we could push the stroller
• 13:01
  Speaker 4: in right. That was and in London, I have you
• 13:03
  Speaker 4: been there, Like, there's a lot of steps and so
• 13:05
  Speaker 4: we like everything that we were but that was kind
• 13:07
  Speaker 4: of how we were. That was kind of how we
• 13:09
  Speaker 4: were thinking about but it was but it was an
• 13:11
  Speaker 4: amazing opportunity to go over there and understand the business
• 13:15
  Speaker 4: landscape now. At the time, in Vesco had two of
• 13:18
  Speaker 4: the most successful mutual fund managers, Neil Woodford being one
• 13:22
  Speaker 4: of them. And and and there was this pull away
• 13:27
  Speaker 4: from ETF because you'll remember ETF at the time meant
• 13:30
  Speaker 4: passive and the passive active debate was raging on and
• 13:35
  Speaker 4: people didn't quite realize yet that the ETF is a technology.
• 13:40
  Speaker 4: What you put inside of it is the investment engine, right.
• 13:43
  Speaker 2: And it's a it's a vastly superior technology if for
• 13:47
  Speaker 2: no other reason there are no phantom capital gains taxes
• 13:51
  Speaker 2: like we see in most mutual funds, but especially active mutual.
• 13:55
  Speaker 4: To name just one of the many, many, many benefits.
• 13:59
  Speaker 4: But you know you mentioned the MP three player earlier.
• 14:02
  Speaker 4: And this is the analogy that I always love to use.
• 14:05
  Speaker 4: You know, MP three is the evolution from the CD,
• 14:08
  Speaker 4: from the tape player, from the eight track, from the
• 14:11
  Speaker 4: vinyl record. Right. What you put on all of those
• 14:15
  Speaker 4: is the music, right, And so we love the benefits
• 14:18
  Speaker 4: of the MP three player. Now what we stream on
• 14:20
  Speaker 4: our phone, right, it gives us convenience, It gives us control,
• 14:24
  Speaker 4: it gives us variety. We now have every single see,
• 14:27
  Speaker 4: every single song that's ever been invented is in our pocket.
• 14:30
  Speaker 4: Plus podcasts like this, plus audio books, plus all of
• 14:33
  Speaker 4: these other things. So the convenience for the consumer, it's
• 14:36
  Speaker 4: the better technology. And then what we're having is this
• 14:40
  Speaker 4: interesting debate is so okay, So go back. I'm a
• 14:43
  Speaker 4: you know, think about an active portfolio manager saying, wait
• 14:46
  Speaker 4: a second, these indexes are eating my lunch. What's going
• 14:48
  Speaker 4: on with this thing? These ETFs and everything was synonymous.
• 14:51
  Speaker 4: The media was singing synonymous, index passive, ETF all the
• 14:54
  Speaker 4: same thing. So we had to break that apart. We
• 14:57
  Speaker 4: had to make it very clear to investors that the
• 14:59
  Speaker 4: ETF was the livery mechanism. What you put inside of
• 15:02
  Speaker 4: it was the investment engine that.
• 15:04
  Speaker 2: Makes a lot of sense. So how long were you
• 15:06
  Speaker 2: in London with Invesco.
• 15:07
  Speaker 4: For so with Invesco that was four.
• 15:11
  Speaker 2: Years and then JP Morgan comes a knock in and
• 15:14
  Speaker 2: they say, hey, we're looking for someone to head up
• 15:18
  Speaker 2: our international ETFs and since you're here in London anyway,
• 15:24
  Speaker 2: let's have a conversation. Tell us how you've found your
• 15:27
  Speaker 2: way over to JP Morgan?
• 15:28
  Speaker 4: Yeah, you know, And it was it was one of
• 15:30
  Speaker 4: those interesting things where there had been about a thirteen
• 15:33
  Speaker 4: year run there where I was at Startup power Shares,
• 15:36
  Speaker 4: Fast Growth Power Fast Growth power Shares and then Investco
• 15:39
  Speaker 4: power Shares, And even though I had never made a change,
• 15:43
  Speaker 4: those were three distinct cultures, three distinct different cycles of
• 15:47
  Speaker 4: the of the business, if you will. And we were
• 15:49
  Speaker 4: starting to get to this point and some of the
• 15:51
  Speaker 4: things that I've explained now in hindsight are vary intuitive
• 15:54
  Speaker 4: at the point, they were just starting to dawn on me.
• 15:56
  Speaker 4: Wait a second, If you could go into an established
• 16:00
  Speaker 4: asset manager deliver the disruption, but combine that with great
• 16:04
  Speaker 4: investment capabilities, combine that with great distribution capabilities, combine that
• 16:08
  Speaker 4: with a great brand, you can really change the landscape
• 16:11
  Speaker 4: and build something incredible and I like building. You know,
• 16:14
  Speaker 4: I said that some of the mentors that we talked
• 16:16
  Speaker 4: about earlier they were builders, and so I made the
• 16:19
  Speaker 4: difficult decision to, you know, go to JP Morgan at
• 16:22
  Speaker 4: that point in time.
• 16:23
  Speaker 2: Huh really really interesting. So you're head of International ETFs
• 16:27
  Speaker 2: in London for JPM. How did you end up back
• 16:30
  Speaker 2: in New York running America's ETF.
• 16:33
  Speaker 4: Yeah, we loved our time in London. And if I
• 16:37
  Speaker 4: really want to get New Yorker's riled up, I'll say
• 16:39
  Speaker 4: that that New York is a great city. London is
• 16:42
  Speaker 4: a world class city. The quality of life is high,
• 16:45
  Speaker 4: You've got parks, you can you know, the weekends are
• 16:47
  Speaker 4: a little bit slower than the intensity. Now, New York's
• 16:50
  Speaker 4: the alpha city, I'll give it that, But you do
• 16:53
  Speaker 4: have this kind of contrast between the two.
• 16:55
  Speaker 2: Is that generally true in Europe? Europe is a lot
• 16:58
  Speaker 2: more kicked back. Like I tell a story all the
• 17:01
  Speaker 2: time about being there in the midst of the dot
• 17:04
  Speaker 2: com implosion, and you could walk down the street in
• 17:06
  Speaker 2: New York and everybody's stressed out, and oh, yeah, the
• 17:10
  Speaker 2: economy is collapsing, But I have healthcare and retirement.
• 17:13
  Speaker 3: I'll be okay. It's a different headspace.
• 17:15
  Speaker 4: I feel that the human nature is true across both.
• 17:17
  Speaker 4: They're still you know, using our industry's language, there's still
• 17:20
  Speaker 4: fear and greed that they drive almost everything that happens.
• 17:23
  Speaker 4: The culture and the approach is different. So, you know,
• 17:26
  Speaker 4: I used to tell people if the objective was to
• 17:29
  Speaker 4: climb that mountain. In Europe, you said, we're going to
• 17:31
  Speaker 4: climb that mountain. Why do we want to climb that mountain.
• 17:34
  Speaker 4: That mountain looks high, what would what would be the
• 17:35
  Speaker 4: purpose of climbing the mountains? What's in it for me
• 17:37
  Speaker 4: to climb the mountain. In the US, you'd say, let's
• 17:40
  Speaker 4: climb the mountain. People say, let's go, and they're halfway
• 17:43
  Speaker 4: up the mountain and they crash and they roll back down.
• 17:44
  Speaker 4: And then half they up the mountain, they crash, they
• 17:45
  Speaker 4: roll back down. Both reach the top of the mountain
• 17:48
  Speaker 4: at about the same time. The approach of how you
• 17:51
  Speaker 4: get to the top of the mountain with, you know,
• 17:53
  Speaker 4: European culture versus US culture is always a little bit
• 17:55
  Speaker 4: of an interesting one. Of course, dramatic generalization there, but
• 17:58
  Speaker 4: there is a little bit too kind of that thoughtfulness
• 18:01
  Speaker 4: that that kind of comes uh, that kind of comes
• 18:03
  Speaker 4: through it in that So so you know, we moved
• 18:06
  Speaker 4: back to the US. We've got family back in the US,
• 18:10
  Speaker 4: and it just it just made sense for us. At
• 18:12
  Speaker 4: that time, we'd had our fourth child in the UK,
• 18:14
  Speaker 4: so we're we're moving back. And you know, I was
• 18:17
  Speaker 4: fortunate that, you know, I'd had international experience very early on,
• 18:20
  Speaker 4: so I understood the x US stuff. I had grown
• 18:22
  Speaker 4: up in the US, and and and knew that marketplace.
• 18:24
  Speaker 4: And so it was really a combination of those two.
• 18:26
  Speaker 4: Those two things. The really important thing that was happening
• 18:30
  Speaker 4: was investors were now starting to acknowledge and understand the
• 18:33
  Speaker 4: difference between ETF rapper and active and those those really
• 18:39
  Speaker 4: started to be the interesting conversations.
• 18:41
  Speaker 3: Where they're not mutually exclusive.
• 18:43
  Speaker 4: They're not mutually exclusive and and and you had a
• 18:47
  Speaker 4: lot of the passive providers that were going to do
• 18:49
  Speaker 4: their thing, and it was becoming quite obvious that that
• 18:52
  Speaker 4: was a commoditized product and a bit of a race
• 18:54
  Speaker 4: to the bottom as far as fees. And that's great
• 18:56
  Speaker 4: for investors, but if you have differentiated investment capabilities that
• 19:01
  Speaker 4: you can deliver through the ETF technology, that starts to
• 19:03
  Speaker 4: really bring you to an interesting to an interesting space.
• 19:06
  Speaker 2: So you're back in New York. What's that initial conversation
• 19:09
  Speaker 2: with Goeman Sachs? Like I wanna and my motivation for
• 19:13
  Speaker 2: asking that question is how do we get to the
• 19:17
  Speaker 2: title Chief Transformation Office, Sir? They could have just said, hey,
• 19:21
  Speaker 2: you're ahead of etf' us or head of whatever whatever
• 19:25
  Speaker 2: they wanted.
• 19:25
  Speaker 3: You to do.
• 19:26
  Speaker 2: This seems like it's a little more comprehensive.
• 19:29
  Speaker 4: Yeah, that's fair. So we've kind of unpacked my journey,
• 19:35
  Speaker 4: you know, and I've been fortunate a bunch of those turns.
• 19:37
  Speaker 4: I've tried to point some of those turns out through
• 19:40
  Speaker 4: the conversation, and when you log those, you kind of
• 19:43
  Speaker 4: understand that how the world is constantly changing and you
• 19:47
  Speaker 4: need to constantly kind of stay out in front of that. Okay,
• 19:50
  Speaker 4: And our industry is I always say this the best
• 19:55
  Speaker 4: industry in the world. We literally get to wake up
• 19:57
  Speaker 4: every day helping investors meet their financial goals, whether they're
• 20:00
  Speaker 4: paying for health care, whether they're trying to retire with dignity.
• 20:03
  Speaker 4: Like that's something that really motivates me about our industry,
• 20:06
  Speaker 4: and I get really excited about when we think about
• 20:10
  Speaker 4: how the industry is evolving. There is innovation happening in
• 20:14
  Speaker 4: so many places beyond just ETFs. I could wax lyrical
• 20:18
  Speaker 4: bt ETFs for a very long time, but now technology
• 20:22
  Speaker 4: is unlocked SMAs direct indexing models. You know, we're hearing
• 20:27
  Speaker 4: a lot of influential people talk about privates and how
• 20:30
  Speaker 4: those go into portfolios now, so private equity, private credit,
• 20:33
  Speaker 4: alternatives like real estate, infrastructure, and when you take a
• 20:38
  Speaker 4: step back, I had the great opportunity to kind of
• 20:41
  Speaker 4: learn this cross section of the entire asset management industry
• 20:43
  Speaker 4: through my kind of earlier years, different chapters doing the
• 20:47
  Speaker 4: ETF thing. But now I realize I can apply that
• 20:50
  Speaker 4: across an entire asset manager. And so Goldman's at an
• 20:54
  Speaker 4: interesting spot. Everybody knows Goldman we are a three point
• 20:58
  Speaker 4: two trillion dollar asset manager.
• 21:00
  Speaker 2: Which is a giant. Like there are only so many companies.
• 21:03
  Speaker 4: With the largest asset manager in the world.
• 21:05
  Speaker 2: Right, there's only so many firms that have trillions of
• 21:08
  Speaker 2: dollars as a wealth manager.
• 21:11
  Speaker 4: It's a big number. That's not lost on us. We're
• 21:15
  Speaker 4: top five on active public, we're top five on private investing.
• 21:20
  Speaker 4: So we've got this combination of public and private capabilities.
• 21:23
  Speaker 4: We've got some of these technology underpinnings, and the conversation
• 21:29
  Speaker 4: is really you and I both know. I think a
• 21:31
  Speaker 4: lot of people would agree with us. Our industry is
• 21:34
  Speaker 4: going to look very different five years from now than
• 21:36
  Speaker 4: it does today. That's the innovator's dilemma that we it
• 21:40
  Speaker 4: never stops. There's always this reinvention. There's always a new
• 21:44
  Speaker 4: technology that comes along that is driving this. And so
• 21:48
  Speaker 4: we really are focused to make sure that we are
• 21:51
  Speaker 4: positioned to serve our clients five years from now, and
• 21:54
  Speaker 4: to do that, we need to transform our business. The
• 21:56
  Speaker 4: industry is transforming and Golden needs to transform along with it.
• 22:00
  Speaker 4: And so there comes my title. Now. You know, I
• 22:03
  Speaker 4: like to joke like the nickname Optimus Prime hasn't hasn't
• 22:07
  Speaker 4: kicked in the way that I really really thought it
• 22:09
  Speaker 4: might have. At this point. I didn't get that gift
• 22:11
  Speaker 4: sent to me by by some of my friends in
• 22:13
  Speaker 4: the way that I that i'd wanted. But it's it's
• 22:16
  Speaker 4: really on the nose of what we're trying to do,
• 22:17
  Speaker 4: which is we feel very good about the investment capabilities
• 22:21
  Speaker 4: we have, but we know we need to transform our
• 22:23
  Speaker 4: business to serve clients five years from now, and if
• 22:25
  Speaker 4: we aren't intentional about how we're doing that, we're going
• 22:28
  Speaker 4: we may miss that. And and because I was able
• 22:31
  Speaker 4: to live that as ETFs did that at Invesco, as
• 22:35
  Speaker 4: ETFs did that at JP Morgan, I can now apply
• 22:38
  Speaker 4: that across the entire franchise at Goldman Sachs, which I'm
• 22:41
  Speaker 4: having a blast now. It's it's still build. There's a
• 22:45
  Speaker 4: lot of work that we have to do that goes
• 22:46
  Speaker 4: into that, but that's what I wake up every day
• 22:49
  Speaker 4: thing about.
• 22:49
  Speaker 3: So I'm hearing two things from you. They're kind of fascinating. First,
• 22:53
  Speaker 3: you've lived through.
• 22:55
  Speaker 2: The innovator's dilemma and recognized how important it is to
• 23:00
  Speaker 2: keep up, to be an agent of change, to not
• 23:03
  Speaker 2: let some hey we're gonna eat our own lunch before
• 23:05
  Speaker 2: someone else does.
• 23:06
  Speaker 3: Totally get that.
• 23:08
  Speaker 2: Now you come in to this role at Goldman, tell
• 23:11
  Speaker 2: me about the team you're putting together. What areas are
• 23:15
  Speaker 2: you looking at? Because that that's sounded like kind of
• 23:20
  Speaker 2: a goofy title when I first heard it, but now
• 23:22
  Speaker 2: that I'm hearing you describe it, it's it sounds like
• 23:27
  Speaker 2: management at Goldman has said, hey, this is really changing quick,
• 23:31
  Speaker 2: and we have to be on the on the no
• 23:33
  Speaker 2: pun intended at the at the vanguard of change. We
• 23:35
  Speaker 2: have to be at the cutting edge or someone else
• 23:37
  Speaker 2: is going to eat our lunch.
• 23:39
  Speaker 4: Yeah. No, that that's exactly right. And and to your point,
• 23:43
  Speaker 4: if you're intentional about transforming your own business and making
• 23:46
  Speaker 4: those tough decisions, you stay out in front of this
• 23:49
  Speaker 4: and and so you know, I got excited about that role.
• 23:53
  Speaker 4: The platform the organization is incredible. When I step back
• 23:59
  Speaker 4: and think about world class asset managers, they really have
• 24:02
  Speaker 4: kind of four things that that are kind of pillars
• 24:06
  Speaker 4: that they that they need to be successful at. They
• 24:08
  Speaker 4: need to have really good foundations, so so operations, engineering,
• 24:11
  Speaker 4: all the all the platform that it lock in tech
• 24:14
  Speaker 4: locking and tackling UH. They need to have modern UH
• 24:18
  Speaker 4: and innovative products that what you build on top of
• 24:21
  Speaker 4: those that the the the investment outcomes for investors performance
• 24:24
  Speaker 4: needs to be exceptional and and we're fortunate at Goldman
• 24:27
  Speaker 4: to have some incredible investors and in some great areas
• 24:31
  Speaker 4: that really help unlock that for us on the public
• 24:33
  Speaker 4: and the and the private side. You need to have
• 24:36
  Speaker 4: a way to deliver that to the marketplace. You need
• 24:38
  Speaker 4: to talk to investors about that, so you know how
• 24:41
  Speaker 4: you market, how you distribute that that that needs to
• 24:44
  Speaker 4: come in because you know, I've seen a lot of
• 24:46
  Speaker 4: great products that nobody knew existed, and so it doesn't
• 24:49
  Speaker 4: go anywhere. And then you know, the fourth thing is
• 24:52
  Speaker 4: you kind of have to have operating rhythm. You need
• 24:54
  Speaker 4: to know what your identity is as an asset manager.
• 24:56
  Speaker 4: You need to know what your identity is as as
• 24:59
  Speaker 4: you know as an executive that these firms and and
• 25:02
  Speaker 4: have a way to execute against that in a in
• 25:05
  Speaker 4: a process oriented way. So those are the things that
• 25:08
  Speaker 4: I really, I really think about as you frame that conversation.
• 25:11
  Speaker 2: So, Golman is a big shop. You're obviously not doing
• 25:14
  Speaker 2: all this heavy lifting yourself. Tell us about your team.
• 25:17
  Speaker 4: Yeah, no, we've got We've got an incredible team across
• 25:19
  Speaker 4: all all of those areas. So who you're working directly with, Well,
• 25:24
  Speaker 4: that's one of the beautiful things about my role is
• 25:26
  Speaker 4: I can work across all four of those pillars and
• 25:29
  Speaker 4: so I you know, we've got incredible people on the
• 25:31
  Speaker 4: oup side that are that are thinking about the foundation,
• 25:33
  Speaker 4: incredible people on the technology side that are thinking about
• 25:36
  Speaker 4: you know, the nervous system of the of the asset manager.
• 25:39
  Speaker 4: You know, our product team is incredibly innovative. The investors.
• 25:43
  Speaker 4: You've had some of some of the investors on here before.
• 25:46
  Speaker 4: Asias was on who who's an incredible And he's an
• 25:49
  Speaker 4: incredible investor, He's got a great story and and and
• 25:53
  Speaker 4: so working very closely with him and thinking about, you know,
• 25:55
  Speaker 4: what types of strategies do we need to bring and
• 25:56
  Speaker 4: and so on and so forth, I mean, it does
• 25:59
  Speaker 4: it does? You know? The what's this cool thing about
• 26:00
  Speaker 4: this title is it does give me some nice scope
• 26:03
  Speaker 4: to execute across really the entire leadership team of the
• 26:06
  Speaker 4: of the first.
• 26:06
  Speaker 2: So you're not looking When I initially heard this, I
• 26:09
  Speaker 2: with my initial thought is Goldman just want to be
• 26:12
  Speaker 2: a bigger player in.
• 26:13
  Speaker 3: The ETF space.
• 26:14
  Speaker 2: But this sounds much bigger and more comprehensive.
• 26:17
  Speaker 4: So when I step back and think about what are
• 26:19
  Speaker 4: the fast growing product areas of our industry, there's there's
• 26:24
  Speaker 4: three that are worth calling out. So alternatives, there's going
• 26:29
  Speaker 4: to be more alternatives and private investments in particularly particularly
• 26:34
  Speaker 4: retail portfolios going forward.
• 26:36
  Speaker 2: And when you say privates, we're talking credit, equity, debt,
• 26:41
  Speaker 2: real estate, the whole gamut.
• 26:43
  Speaker 4: Yeah, and and you know better than I, but there's
• 26:46
  Speaker 4: companies that are staying private for longer. You know, there's
• 26:50
  Speaker 4: companies that can access plenty of funding while staying private.
• 26:53
  Speaker 4: So the impetus to go public isn't necessarily there anymore.
• 26:56
  Speaker 4: But people want to own these world class companies and
• 26:59
  Speaker 4: so you know, that's an important thing now on the
• 27:01
  Speaker 4: credit side, if you can enhance your yield a little bit.
• 27:03
  Speaker 4: So okay, So so alternatives as portfolio is that own
• 27:07
  Speaker 4: both public and private is going to be a big thing.
• 27:09
  Speaker 4: So alternatives is growing to grow exceptionally. Separately managed accounts
• 27:14
  Speaker 4: and direct indexing. Again, we're you know, now we're talking
• 27:16
  Speaker 4: about investor outcomes. Am I getting a better tax outcome?
• 27:20
  Speaker 4: Can can we use technology to help improve my outcome?
• 27:22
  Speaker 4: On this? Direct indexing allows you to do that.
• 27:25
  Speaker 2: Did you guys build a direct index product or buy
• 27:27
  Speaker 2: a director.
• 27:27
  Speaker 4: In We've built We've been doing this for years and
• 27:30
  Speaker 4: this is one of the things that I think makes
• 27:32
  Speaker 4: us unique is we've got a lot of these capabilities
• 27:34
  Speaker 4: that that were that were home grown within Goldman and
• 27:37
  Speaker 4: that in house that we're that we're now delivering to
• 27:40
  Speaker 4: the marketplace. On the alt side, we've been doing that
• 27:42
  Speaker 4: for three decades. Sometimes it was for Goldman's own balance sheet.
• 27:45
  Speaker 4: Sometimes it was a proprietary thing, but now we've made
• 27:48
  Speaker 4: that available to investors around the world, so that it's
• 27:50
  Speaker 4: really an access story there. And then of course ETFs
• 27:53
  Speaker 4: are going to continue to grow. And as we think
• 27:54
  Speaker 4: about you know, public equities, you know, ETF probably has
• 27:58
  Speaker 4: the biggest addressable market and one of the largest kaggers,
• 28:02
  Speaker 4: but you've got to have all three of those. I
• 28:05
  Speaker 4: really think those three. So so those are the three
• 28:07
  Speaker 4: that I that I really, I really spend a lot
• 28:09
  Speaker 4: of time thinking about. And when we think about the
• 28:12
  Speaker 4: general generational wealth transform uh, that's going to happen over
• 28:16
  Speaker 4: the next couple of years, that's that's going to be
• 28:19
  Speaker 4: really profound, and I know that's definitely something that you
• 28:21
  Speaker 4: spend a lot of time because it's gonna go to
• 28:22
  Speaker 4: the next generation. The next generation is going to want
• 28:24
  Speaker 4: to use their new modern r than the new modern
• 28:27
  Speaker 4: investment capabilities, and so these are gonna these are gonna
• 28:30
  Speaker 4: feed right into that. There will be tens of trillions
• 28:31
  Speaker 4: of dollars in motion. And how we think about, you know,
• 28:35
  Speaker 4: providing those services to clients is really important.
• 28:38
  Speaker 2: So I really have always thought of you as a
• 28:41
  Speaker 2: public markets guy, But you're what I'm hearing is, yeah,
• 28:45
  Speaker 2: public markets are going to be a key part of this,
• 28:47
  Speaker 2: But there's a lot more beyond just stocks and bonds
• 28:50
  Speaker 2: that are publicly traded, and a lot more beyond ETFs
• 28:53
  Speaker 2: and mutual funds. Where do you see Goldman going with
• 28:57
  Speaker 2: privates in GSAM within the asset management group?
• 29:01
  Speaker 4: Yeah, No, I think it's one of our top priorities.
• 29:04
  Speaker 4: So we've got decades experience in doing private investments, and
• 29:09
  Speaker 4: and and I do want to be careful because a
• 29:11
  Speaker 4: lot of times people talk alternatives writ large, and there's
• 29:14
  Speaker 4: a lot of specifics in that, you know.
• 29:16
  Speaker 3: Not talking about hedge fund.
• 29:17
  Speaker 4: We talked about private equity, we talked about private credit.
• 29:20
  Speaker 4: You've got infrastructure, real estate. You would use all of
• 29:23
  Speaker 4: those in your portfolio for different outcomes, real estate and infrastructure.
• 29:26
  Speaker 4: Maybe a low correlation or increased yield private credit like
• 29:29
  Speaker 4: slightly increased yield off public credit. Private equity maybe gives
• 29:32
  Speaker 4: you different upside, you know, opportunity versus versus public equities,
• 29:37
  Speaker 4: and so you can use those in your portfolios. And
• 29:39
  Speaker 4: so but again it's just an innovation story. And these
• 29:43
  Speaker 4: these types of investments have been available to investors for decades,
• 29:47
  Speaker 4: but not available to all investors and not available through
• 29:51
  Speaker 4: the format that investors wanted to access that. And I
• 29:54
  Speaker 4: you know, ETFs taught us not only the what, but
• 29:56
  Speaker 4: the how how do I get access to those? ETFs
• 29:58
  Speaker 4: unlocked that And I think we're going to continue to
• 30:00
  Speaker 4: see that on the alternative side as we as we
• 30:02
  Speaker 4: have breakthroughs on technology, if we have breakthroughs on access,
• 30:06
  Speaker 4: those will become increasingly available to more and more investors
• 30:10
  Speaker 4: so they can build more specific portfolios. Going back to
• 30:12
  Speaker 4: the purpose of why we do all of this to
• 30:14
  Speaker 4: get the outcomes that they're looking for, and if you
• 30:17
  Speaker 4: can incorporate those into your portfolio to drive those outcomes,
• 30:20
  Speaker 4: that really is a differentiator with that, and it's important
• 30:24
  Speaker 4: for us to do that, and so we're really focused
• 30:27
  Speaker 4: in those areas.
• 30:27
  Speaker 2: So private alternatives have scaled up over the past few
• 30:31
  Speaker 2: decades from a few billion dollars to a few trillion dollars.
• 30:36
  Speaker 2: How large can this sector expand to over the next decade?
• 30:41
  Speaker 4: So alternatives and privates substantially ten tens of trillions of dollars.
• 30:49
  Speaker 2: Tens of trillions, Yeah, like this could be a twenty
• 30:51
  Speaker 2: thirty trillion dollars space.
• 30:53
  Speaker 4: Yeah, I mean think think about the companies. You know,
• 30:56
  Speaker 4: there's there's a couple of companies that come to mind
• 30:58
  Speaker 4: right now that are staying private, that are that are huge,
• 31:01
  Speaker 4: you know, trillion dollar companies around the way to being
• 31:02
  Speaker 4: multi trillion, just a couple of companies, let alone the
• 31:06
  Speaker 4: entire thing. And then when you pull in private credit
• 31:07
  Speaker 4: into that, when you pull in some of these other areas,
• 31:10
  Speaker 4: I think this will be massive. And ten years is
• 31:13
  Speaker 4: a really long time. And that's another thing that we've
• 31:15
  Speaker 4: learned in this industry is that you know, even when
• 31:17
  Speaker 4: markets wabble a little bit, once you stretch out and
• 31:19
  Speaker 4: look over the long haul these things, it's barely barely
• 31:23
  Speaker 4: registers on the chart. And so these these things do
• 31:26
  Speaker 4: grow in that way. And you know, I'm bullish on markets.
• 31:29
  Speaker 4: I'm bullish on you know, innovation, and you know, as
• 31:33
  Speaker 4: technology unlocks these these wealth capabilities for more and more investors,
• 31:38
  Speaker 4: that is only going to be a positive thing to.
• 31:40
  Speaker 2: So I'm with you every step of the way so far.
• 31:43
  Speaker 2: But but let's take off our sonny sonny goggles and
• 31:47
  Speaker 2: say what are the challenges going to be? How what
• 31:51
  Speaker 2: are the heavy lifting ahead in order to bring these
• 31:53
  Speaker 2: sort of full suite of services, all these different products,
• 31:57
  Speaker 2: especially these new fangled private it's into a core portfolio
• 32:02
  Speaker 2: and a basic model. What's the challenge here?
• 32:08
  Speaker 4: Education?
• 32:09
  Speaker 3: Mm hmm.
• 32:10
  Speaker 4: And we've seen this play out. Use my use my
• 32:14
  Speaker 4: past experience in ETFs. I can't tell you how many.
• 32:17
  Speaker 4: Oh I don't know if I'm never buy an ETF.
• 32:19
  Speaker 4: I don't know if, however, buy a fixed income ETF.
• 32:21
  Speaker 4: Come on, Like you know, I used to keep a
• 32:23
  Speaker 4: list of people that tell me they would never buy
• 32:25
  Speaker 4: an ETF that eventually call hey, Brian, could you come
• 32:27
  Speaker 4: tell me a little bit more about those ETFs? And
• 32:28
  Speaker 4: so this there's always the early adopters, the mavericks, and
• 32:33
  Speaker 4: then there's the and then there's the bulk and and
• 32:35
  Speaker 4: it kind of pulls through and so, you know, I
• 32:37
  Speaker 4: think it's incoming upon folks like our firm, Goldman, you know,
• 32:42
  Speaker 4: things like this where investors, you know, are educated about
• 32:46
  Speaker 4: what's available to them. I know your your firm does
• 32:48
  Speaker 4: a lot of work around that as well. Education. Here's
• 32:51
  Speaker 4: the benefits, here's how it works, here's how here's the
• 32:54
  Speaker 4: concerns that you should think about. You know, whether it's
• 32:56
  Speaker 4: the liquidity or whether it's the return profile, the timings
• 32:59
  Speaker 4: of those things, is the cash flow? These are all
• 33:01
  Speaker 4: things that people need to be educated on. But but
• 33:03
  Speaker 4: you know, let's use let's use active fixed income ETFs
• 33:07
  Speaker 4: as a proxy. Okay, there was there was years investors. Wow,
• 33:10
  Speaker 4: like a bond isn't isn't tradable on the exchange, and
• 33:14
  Speaker 4: there's a liquidity mismatch, So gosh, what do I do? Well, Now,
• 33:17
  Speaker 4: what we know is that when you put fixed income
• 33:20
  Speaker 4: in an ETF, you basically take an analog vehicle and
• 33:24
  Speaker 4: make it digital. We've taken these clunky bonds and we've
• 33:27
  Speaker 4: made them digital. Not only that, but we've diversified it.
• 33:30
  Speaker 4: So you buy one ETF ticker that diversifies you across
• 33:33
  Speaker 4: one hundred bonds. Often those bonds will trade it a
• 33:36
  Speaker 4: tighter spread than if you went and bought the basket
• 33:38
  Speaker 4: of the bonds separately. So you've got this innovation effect
• 33:41
  Speaker 4: that happens on the exchange. You can buy one share,
• 33:44
  Speaker 4: sell one share. You're not buying big one hundred thousand
• 33:46
  Speaker 4: dollars bond at a.
• 33:47
  Speaker 3: Time, so fractional share you can.
• 33:49
  Speaker 4: You can, you can do all sorts of things, and
• 33:52
  Speaker 4: but it took education for people to understand how that
• 33:56
  Speaker 4: was was going to work, and I and I think
• 33:57
  Speaker 4: there's a really easy corollary there for the alternative space,
• 34:00
  Speaker 4: which we need to continue to do that. I want
• 34:03
  Speaker 4: to live in a good neighborhood. I respect a lot
• 34:05
  Speaker 4: of the firms that we compete with that are also
• 34:07
  Speaker 4: leaning in and trying to educate around around this space.
• 34:11
  Speaker 4: And so I think the industry needs to do a
• 34:13
  Speaker 4: good job of coming together and making sure that we're educating.
• 34:15
  Speaker 4: But we need to be intentional about that. We can't
• 34:19
  Speaker 4: just let it happen. We need to lean in and
• 34:20
  Speaker 4: we need to invest in. We need to make sure
• 34:22
  Speaker 4: that we're educating people around that.
• 34:23
  Speaker 2: Fast forward ten years in the future, what does success
• 34:27
  Speaker 2: look like in this space? And I'm not just talking
• 34:29
  Speaker 2: about AUM. Yeah, three becomes four, becomes seven, becomes ten.
• 34:33
  Speaker 2: Hold that aside, what does GSM look like ten years
• 34:38
  Speaker 2: from now? If you've been successful in your role as
• 34:42
  Speaker 2: chief transformation officer.
• 34:46
  Speaker 4: Outcomes for clients are what they were intending to be.
• 34:50
  Speaker 4: So there was a clear understanding of what they wanted
• 34:53
  Speaker 4: to achieve and we were able to deliver that for them.
• 34:59
  Speaker 4: Tying it back to this conversation. There's going to be
• 35:01
  Speaker 4: some bumps in the road. There's going to be some
• 35:03
  Speaker 4: turns that we need to make, getting getting as many
• 35:06
  Speaker 4: of those rights as we possibly can, educating well, making
• 35:10
  Speaker 4: sure that we're communicating extremely clearly on what it is
• 35:13
  Speaker 4: that we're delivering to investors. I might even stop there
• 35:18
  Speaker 4: if we can. If investors are are pleased with the outcome,
• 35:23
  Speaker 4: and we and we match their expectations on that, and
• 35:26
  Speaker 4: we get a couple of these tough calls right along
• 35:28
  Speaker 4: the way, I think I think that would be success
• 35:31
  Speaker 4: for us. I don't think we need to go deeper
• 35:33
  Speaker 4: than that. And you know, wax lyrical about some of
• 35:35
  Speaker 4: these other things. I think those are the things that
• 35:36
  Speaker 4: we need to be focused on.
• 35:39
  Speaker 3: And sort of a broader question.
• 35:43
  Speaker 2: So you've worked in New York, We've you've worked in Chicago,
• 35:45
  Speaker 2: you've worked in London. What are the differences with these
• 35:50
  Speaker 2: total solutions for US investors and overseas investors? How do
• 35:55
  Speaker 2: they look at highlight, look at ETFs, how do they
• 35:58
  Speaker 2: look at the world of investing? How do they look
• 35:59
  Speaker 2: at privates? There used to be a giant difference. You know,
• 36:03
  Speaker 2: occasionally there were ADRs trading on the New York socc Exchange.
• 36:07
  Speaker 2: Has the world come together and it's similar or are
• 36:11
  Speaker 2: there still big differences between someone putting money to work
• 36:15
  Speaker 2: in Berlin or Paris versus New York in Chicago.
• 36:19
  Speaker 4: I remember the first time I listened to Masters and
• 36:21
  Speaker 4: Business podcasts. I was running through Battersea Park in London
• 36:26
  Speaker 4: and thinking, Wow, this is this is this is great.
• 36:28
  Speaker 4: And Barry always says his guests are extra special. Man,
• 36:31
  Speaker 4: that must feel really good, and I was watching them
• 36:33
  Speaker 4: back I was wondering if I was going to get
• 36:35
  Speaker 4: the extra special today or the special or where that
• 36:37
  Speaker 4: was going to go. You raise an interesting point. You know,
• 36:40
  Speaker 4: our world is increasingly global, Information increasingly travels globally, so
• 36:44
  Speaker 4: there is a convergence that's happening where portfolios are starting
• 36:47
  Speaker 4: to look more and more similar. You still do have
• 36:51
  Speaker 4: some home bias things that play into portfolios that I
• 36:55
  Speaker 4: think will always be the case. Some of that's just
• 36:57
  Speaker 4: driven by currency, some of that's driven by cultural differ diferences,
• 37:00
  Speaker 4: but there is a convergence. The conversations that I'm having
• 37:03
  Speaker 4: around the world are on the institutional side. They're a
• 37:06
  Speaker 4: little bit further ahead on the alts thing. They've been
• 37:10
  Speaker 4: using over there. Globally, I would say globally, institutions are
• 37:13
  Speaker 4: closer to twenty percent of their portfolio alternatives, whereas you know,
• 37:17
  Speaker 4: a typical retail investor is less than five percent, and
• 37:20
  Speaker 4: I think the retail investor goes closer to that twenty
• 37:22
  Speaker 4: percent number. And that's true, that's true really globally.
• 37:26
  Speaker 2: Five years ago, right before the pandemic, I was having
• 37:30
  Speaker 2: a conversation with people in Europe and there was sort
• 37:34
  Speaker 2: of perplexed by the passive craze in the US. And now,
• 37:40
  Speaker 2: admittedly we had a lot more scandals in the two thousands,
• 37:43
  Speaker 2: everything from IPO spinning, anim spinning right up to Bernie Madoff.
• 37:47
  Speaker 2: But they kind of scratched their head and looked at
• 37:52
  Speaker 2: low cost passive indexing as like a distinkly American phenomena.
• 37:58
  Speaker 2: Is that still the case? Have they?
• 37:59
  Speaker 3: Like?
• 38:01
  Speaker 2: How much of that is is tax differences? How much
• 38:03
  Speaker 2: of that is they just want a hand on the tiller?
• 38:07
  Speaker 2: What's the gap?
• 38:08
  Speaker 4: So you land in London Heathrow, and you've got options
• 38:10
  Speaker 4: to get to Midtown. You can take a taxi, you
• 38:14
  Speaker 4: can take the Heathrow Express, you can now take the
• 38:17
  Speaker 4: Elizabeth Line. I suppose you could walk if you wanted
• 38:20
  Speaker 4: to the point being, there's a lot of different ways,
• 38:23
  Speaker 4: and really the point is is what outcome are you
• 38:26
  Speaker 4: looking for? And I would say that investors now are
• 38:31
  Speaker 4: saying the best portfolios have active and passive capabilities within them.
• 38:36
  Speaker 4: They both play a role. There's a sliding scale where
• 38:39
  Speaker 4: sometimes different asset classes should be more attractive on the
• 38:42
  Speaker 4: passive side, sometimes more on the active side. We had
• 38:46
  Speaker 4: this with the mag seven where you saw such concentration
• 38:49
  Speaker 4: risk in some of those names on the indexes that
• 38:51
  Speaker 4: investors may maybe we're managing risk by just going moving
• 38:55
  Speaker 4: away intentionally from owning all those names. I like to
• 38:59
  Speaker 4: remind people the S and P five hundred was launched
• 39:02
  Speaker 4: in nineteen twenty three, had two hundred and thirty three
• 39:04
  Speaker 4: stocks in it at the time. It didn't expand to
• 39:06
  Speaker 4: five hundred until the fifties. It didn't become an investable
• 39:10
  Speaker 4: product until until Vanguard and Bogel put it into a
• 39:14
  Speaker 4: into basically a fund at the time in seventy four
• 39:16
  Speaker 4: seventy I had I had early seventies in my head
• 39:19
  Speaker 4: as well, not available in an ETF until nineteen eighty three.
• 39:23
  Speaker 4: So if if that was the best investment. Why did
• 39:26
  Speaker 4: it take seventy years for it to be made available
• 39:29
  Speaker 4: to investors? And and and what's telling us that we
• 39:32
  Speaker 4: should stop that? So I'm a huge believer in innovation
• 39:35
  Speaker 4: going forward. Then the great investments are being in you know,
• 39:38
  Speaker 4: great investment strategies are being invented every day. I think
• 39:42
  Speaker 4: investors are more and more aware of outcomes as opposed
• 39:45
  Speaker 4: to inputs than than they ever have been. And so
• 39:49
  Speaker 4: all of these tools, and you know, there's thousands of
• 39:52
  Speaker 4: ETFs now there's gonna be you know, there's gonna be
• 39:54
  Speaker 4: a lot of alternative capabilities. These are these are just
• 39:57
  Speaker 4: they're they're like the songs on our You can put
• 40:00
  Speaker 4: the perfect playlist together for yourself, and you can combine
• 40:04
  Speaker 4: all these things to get that playlist, maybe for the workout,
• 40:06
  Speaker 4: maybe for the commute, whatever that is. And so this optionality,
• 40:10
  Speaker 4: it's great for investors. It's a good outcome. Yes, they
• 40:13
  Speaker 4: need to weighe through it a little bit more. I'm
• 40:14
  Speaker 4: sure there's great songs that I haven't heard yet. But
• 40:17
  Speaker 4: that's how's that's where this thing is going. As all
• 40:20
  Speaker 4: these these investments become available in that way.
• 40:22
  Speaker 2: We were talking earlier about that title and how encompassing
• 40:27
  Speaker 2: it is, and that your charge is essentially to revamp
• 40:32
  Speaker 2: and innovate in the entire suite of Goldman's Sachs asset
• 40:37
  Speaker 2: management products, everything from what goes into them, the sort
• 40:41
  Speaker 2: of outcomes you're looking for. It sounds pretty comprehensive. What
• 40:46
  Speaker 2: is it about today that has led to so many
• 40:50
  Speaker 2: companies saying, hey, you know, we really are a danger
• 40:54
  Speaker 2: of falling behind, and rather than rest on our laurels,
• 40:59
  Speaker 2: we have to become edge and be the change as
• 41:02
  Speaker 2: opposed to being affected by the change. Like tell us
• 41:05
  Speaker 2: a little bit about your thoughts there.
• 41:07
  Speaker 4: So, investors have made it quite clear what they're trying
• 41:11
  Speaker 4: to accomplish in their in their portfolio. So when you
• 41:14
  Speaker 4: see things that are growing as fast as they are,
• 41:16
  Speaker 4: like direct indexing, which is growing at a kager of
• 41:18
  Speaker 4: north of twenty percent a year, When you see things
• 41:21
  Speaker 4: like SMAs that are growing at the rate that they're growing,
• 41:24
  Speaker 4: when you see ETFs that are growing at that rate,
• 41:27
  Speaker 4: some firms lead, Some firms are responding to that, but
• 41:31
  Speaker 4: ultimately it's the investors that are that are leading that conversation. Now,
• 41:36
  Speaker 4: once we realize that stuff like an SMA or direct
• 41:39
  Speaker 4: indexes the delivery mechanism. ETF is the delivery mechanism, and
• 41:43
  Speaker 4: then what you put inside it is the investment capability.
• 41:47
  Speaker 4: That actually becomes an interesting conversation. So many asset management firms,
• 41:51
  Speaker 4: using ETFs as the example, are now saying, hey, we've
• 41:53
  Speaker 4: got great investment capabilities, we just need to make those
• 41:56
  Speaker 4: available in the ETF technology, which is which is how
• 42:00
  Speaker 4: investors are trying to get that exposure.
• 42:02
  Speaker 2: And define SMAs for people who don't know the shorthands.
• 42:05
  Speaker 4: So, a separately managed account is an account where you
• 42:08
  Speaker 4: as an individual can allocate to a strategy and you
• 42:12
  Speaker 4: actually own the individual names and then they can trade
• 42:14
  Speaker 4: it on behalf of you as an individual, as opposed
• 42:17
  Speaker 4: to owning a co mingled vehicle like an ETF for
• 42:21
  Speaker 4: or a mutual fund.
• 42:22
  Speaker 2: All right, so let's talk about some new products that
• 42:24
  Speaker 2: have come out buffer ETFs. Tell us a little bit
• 42:27
  Speaker 2: about that.
• 42:28
  Speaker 4: Yeah, I mean this this just continues on the on
• 42:30
  Speaker 4: the spectrum as we think about innovation. You know, so
• 42:33
  Speaker 4: a quote comes to mind from Rick Rubin. I don't
• 42:35
  Speaker 4: I don't know if anybody's ever quoted Rick Rubin here,
• 42:37
  Speaker 4: but you know, how do you.
• 42:38
  Speaker 3: They have the new book. Definitely a lot of people.
• 42:41
  Speaker 4: It's great, right and and you know, so the one
• 42:42
  Speaker 4: that that stuck out to me. And obviously he's famous
• 42:44
  Speaker 4: for producing the Beastie Boys, which is, you know, great
• 42:46
  Speaker 4: New York and.
• 42:47
  Speaker 2: A ton of other arts, a ton of artist range
• 42:49
  Speaker 2: is kind of incredible.
• 42:50
  Speaker 4: I love it and and it's it's absolutely amazing. But
• 42:53
  Speaker 4: you know, he he makes two important points. One is,
• 42:56
  Speaker 4: it's not like serendipity happens in lightning strikes. You've got
• 42:59
  Speaker 4: to grind it out. Like these artists that have made
• 43:01
  Speaker 4: some of the most creative and best music, they're grinding
• 43:04
  Speaker 4: it out and sometimes it hits, and sometimes you really
• 43:06
  Speaker 4: got to work it. And he's asked, how do you
• 43:08
  Speaker 4: put together an album of twelve hits? You write twenty songs,
• 43:11
  Speaker 4: you pick the twelve best ones, and so you know,
• 43:13
  Speaker 4: that's something that comes to mind for me. I think, really,
• 43:16
  Speaker 4: what you're trying to do is find the tension between
• 43:19
  Speaker 4: innovation and solving an investor need. And you and I
• 43:24
  Speaker 4: could dream up something crazy from an innovation standpoint and
• 43:26
  Speaker 4: wouldn't solve an investor need and be a waste of
• 43:29
  Speaker 4: time and energy. There's also needs that are going unmet
• 43:32
  Speaker 4: right now where people need to solve those and so
• 43:35
  Speaker 4: you're constantly looking for that tension between the two. And
• 43:39
  Speaker 4: it really is a team sport. You work with investors
• 43:41
  Speaker 4: that are experts at that you work at, You look
• 43:43
  Speaker 4: at the data, You talk to clients and understand what
• 43:46
  Speaker 4: it is that they're trying to achieve. You know, the
• 43:49
  Speaker 4: way I think about it at Goldman is, you know,
• 43:51
  Speaker 4: to use our music analogy earlier. We make a lot
• 43:53
  Speaker 4: of great rock and roll. We want to make sure
• 43:55
  Speaker 4: that it's available in the MP three rapper, you know,
• 43:57
  Speaker 4: the ETF rapper, and so you know, we launched active
• 43:59
  Speaker 4: munich capabilities, which we think is a differentiator. We're leaders
• 44:02
  Speaker 4: in that space.
• 44:03
  Speaker 2: And then the bustle Active UNY tell us about active meetas.
• 44:05
  Speaker 4: Yeah, active met. I mean, you know, so if you're
• 44:07
  Speaker 4: thinking about the high net worth or the ultra high
• 44:09
  Speaker 4: networth space, they think a lot about taxes, and so
• 44:12
  Speaker 4: when you think about the MUNI space right now, you
• 44:14
  Speaker 4: get the tax benefits of owning those. When you can
• 44:17
  Speaker 4: do all the things that we talked about earlier with
• 44:19
  Speaker 4: fixed income ETFs and muni's delivered, you know, you have
• 44:23
  Speaker 4: like a great combination. So we launched the different spectrum
• 44:25
  Speaker 4: of those longer durations, short duration, high yield, et cetera,
• 44:28
  Speaker 4: et cetera. And so those are those are really interesting things.
• 44:30
  Speaker 4: On the buffer side, I think this is also a
• 44:32
  Speaker 4: really fascinating space. Embedding options and strategies isn't a new thing.
• 44:37
  Speaker 4: Sophisticated investors, insurance companies have been doing this for years.
• 44:41
  Speaker 4: Covered call strategies. You know, I used to work with
• 44:43
  Speaker 4: Financial Advice. They did that themselves on some of the
• 44:46
  Speaker 4: names that were in the portfolios. But now that the
• 44:49
  Speaker 4: industry has developed to the way that it has and
• 44:51
  Speaker 4: you can deliver these ETFs the way that we do,
• 44:54
  Speaker 4: you can start to give investors the outcomes that they're
• 44:56
  Speaker 4: looking for, and when you put them into a big
• 44:57
  Speaker 4: uma or a broader portfolio, these can really play an interesting,
• 45:02
  Speaker 4: an interesting role. So buffers are great. You can get
• 45:04
  Speaker 4: invested a lot of people nervous, there's uncertainty whether you
• 45:07
  Speaker 4: know the headline risk of the day right whatever that is,
• 45:10
  Speaker 4: and you say, hey, you know, these are designed to
• 45:12
  Speaker 4: protect you to the downside five to ten percent, fifteen percent,
• 45:15
  Speaker 4: but you could still participate in the upside, so you
• 45:17
  Speaker 4: can keep yourself inequities and if that helps you sleep
• 45:20
  Speaker 4: at night and it helps you stay invested, you are
• 45:22
  Speaker 4: going to get a better outcome in the long run.
• 45:24
  Speaker 4: And so they're a tool that investors can use along
• 45:27
  Speaker 4: with the other tools we launched three. They're designed to
• 45:30
  Speaker 4: reset on a quarterly basis, and so there's some thoughtfulness
• 45:32
  Speaker 4: around that. You know, at the beginning of each month,
• 45:33
  Speaker 4: you've got one that's resetting.
• 45:34
  Speaker 2: So we're recording this literally first day of the new quarter. Yeah,
• 45:39
  Speaker 2: Q one, twenty twenty five. If it's going to be
• 45:41
  Speaker 2: known for anything, it's going to be all about the volatility.
• 45:46
  Speaker 2: That that felt like the craziest five percent rowdown we've
• 45:50
  Speaker 2: ever experienced. Wait, that was just five percent?
• 45:52
  Speaker 3: Why did it feel like it was?
• 45:54
  Speaker 2: You know, between the news flows and all the mayhem
• 45:57
  Speaker 2: around tariffs. How do you see market volatility influencing investor behavior?
• 46:06
  Speaker 2: Is the move into products like buffered ETFs just a
• 46:11
  Speaker 2: short term reaction to the volatility we're experiencing or is
• 46:15
  Speaker 2: this a more longer lasting phenomena.
• 46:17
  Speaker 4: Yeah, this is the Warren Buffett you near term voting machine,
• 46:21
  Speaker 4: long term weighing machine. Right, the volatility the markets interer
• 46:24
  Speaker 4: day that's just bouncing around based on the headlines. I
• 46:27
  Speaker 4: think we're in an increasingly headline driven marketplace. There's more
• 46:30
  Speaker 4: information available than ever, whether you're on X, whether you're
• 46:33
  Speaker 4: watching Bloomberg, whether you're listening to something. But at the
• 46:35
  Speaker 4: same time, investors need to be reminded that just because
• 46:38
  Speaker 4: they're more informed doesn't mean they need to make new decisions.
• 46:41
  Speaker 4: You need to have a strategy. There's a lot of
• 46:43
  Speaker 4: strategies that work, by the way, but you need to
• 46:44
  Speaker 4: have a strategy and stick to that strategy. And if
• 46:48
  Speaker 4: you do that and you keep an eye on your
• 46:49
  Speaker 4: expenses and you rebalance on a regular basis, you and
• 46:52
  Speaker 4: I both know the outcomes are going to be good.
• 46:54
  Speaker 4: If you are panicked in a scenario where the market's
• 46:56
  Speaker 4: drawn down five percent, you maybe weren't in the right
• 46:59
  Speaker 4: strategy to begin with. And so these things are common.
• 47:02
  Speaker 4: The market has a ten percent draw down pretty much
• 47:05
  Speaker 4: every single year, so you should expect these things. And
• 47:08
  Speaker 4: so to me, it's all about the preparation. If you're
• 47:11
  Speaker 4: panic making a decision the day that the SMP is
• 47:13
  Speaker 4: down one percent, you're doing it at the wrong time.
• 47:16
  Speaker 4: You're not in the right headspace to do that. You
• 47:17
  Speaker 4: should have made that decision six months prior, when you're
• 47:20
  Speaker 4: when you were you know, thinking, you know, soundly about
• 47:22
  Speaker 4: what was going to happen. And I do think that
• 47:24
  Speaker 4: all these tools that are available, whether it's buffer ETFs,
• 47:26
  Speaker 4: are active munis, or you know, some of the other
• 47:28
  Speaker 4: strategies that we're delivering, those those can benefit Now we
• 47:32
  Speaker 4: think about direct indexing, it benefits from these drawdowns because
• 47:36
  Speaker 4: the way the technology can embed losses in your portfolio
• 47:39
  Speaker 4: can help offset some of the gains that you're going
• 47:41
  Speaker 4: to have at some point down down the road. And so,
• 47:44
  Speaker 4: you know, I think investors are starting to wake up
• 47:45
  Speaker 4: to that factor as well as like, oh, hold on
• 47:47
  Speaker 4: a second. Over time, if as long as this thing
• 47:50
  Speaker 4: continues to go up, this intra month, intra day volatility
• 47:54
  Speaker 4: may actually benefit me in a way because now these
• 47:57
  Speaker 4: different capabilities are available to me. And again that's something
• 48:00
  Speaker 4: that's a relatively new phenomenon that's been unlocked by technology
• 48:02
  Speaker 4: that just didn't exist before that.
• 48:04
  Speaker 2: So let's talk a little bit about direct indexing. We're
• 48:06
  Speaker 2: big direct indexers. I was skeptical about this, I don't know,
• 48:10
  Speaker 2: ten fifteen years ago because the technology was so cludgy.
• 48:14
  Speaker 2: You would literally get these you know, stacks of reports.
• 48:18
  Speaker 2: But today, because of a free trading and b software,
• 48:23
  Speaker 2: it's fast, easy, you could tilt it and whatever factor
• 48:27
  Speaker 2: style you want. But but my initial thought on direct
• 48:31
  Speaker 2: indexing was, oh, some people aren't going to want tobacco
• 48:34
  Speaker 2: or don't want guns, or you go through all the
• 48:37
  Speaker 2: list of don'ts. But that hasn't been the biggest driver.
• 48:41
  Speaker 2: It seems like the biggest driver is managing capital gains,
• 48:44
  Speaker 2: taxes and tax loss servicing. Tell us a little bit
• 48:47
  Speaker 2: about Goldman Sax asset managements direct indexing products.
• 48:50
  Speaker 4: People want to avoid taxes, they want to defer them, right,
• 48:53
  Speaker 4: and so these are.
• 48:54
  Speaker 2: But these aren't deferring taxes. These are these being able
• 48:58
  Speaker 2: to offset gains. So you're not it's not like you're
• 49:01
  Speaker 2: kicking the can down the road. You are actually paying
• 49:04
  Speaker 2: less taxes. According to black Letter IRS law, there's nothing
• 49:08
  Speaker 2: exactly bechu. This is well understood and perfectly.
• 49:12
  Speaker 4: Legit really really well put and that's super clear. And
• 49:15
  Speaker 4: so you know basically what happens is you manage it
• 49:19
  Speaker 4: back to an index. So let's call it the S
• 49:20
  Speaker 4: and P five hundred and so the ideas we're trying
• 49:22
  Speaker 4: to give you the S and P five hundred outcome.
• 49:24
  Speaker 4: But at any given point in time, some of the
• 49:26
  Speaker 4: names in the S and P might be up, some
• 49:27
  Speaker 4: of the names might be down, and if you can
• 49:29
  Speaker 4: trade and take some of the losses on the names
• 49:32
  Speaker 4: that are down, you can offset some of the gains
• 49:34
  Speaker 4: that are on the up stuff. You know, later on
• 49:37
  Speaker 4: our technology we developed again in house. You know, we
• 49:40
  Speaker 4: think it's a really modern and dynamic technology because it'll
• 49:43
  Speaker 4: trade on a daily basis. This isn't a monthly thing
• 49:45
  Speaker 4: or or some like set rigid time. We can actually
• 49:49
  Speaker 4: take take advantage of some of the the inter day
• 49:52
  Speaker 4: volatility and intra month volatility that we've been seeing lately.
• 49:55
  Speaker 4: And so you know, it's a fast growing space for
• 49:58
  Speaker 4: US where I think number one number two in the
• 50:00
  Speaker 4: country on you know, direct indexing solutions. And to your
• 50:04
  Speaker 4: point is it is helping individuals improve their tax outcomes. Now, internationally,
• 50:10
  Speaker 4: you know, direct indexing was a little bit more you know,
• 50:13
  Speaker 4: this customization thing, right, and we do still see that
• 50:17
  Speaker 4: with some of our institutional accounts in the US. It's
• 50:20
  Speaker 4: really a tax story. Internationally, it's a little bit more
• 50:21
  Speaker 4: of a customization story.
• 50:22
  Speaker 2: Well, when you say customization, I tend to think of
• 50:24
  Speaker 2: value driven. So jim O'Shaughnessy told the story of I
• 50:30
  Speaker 2: think they were managing money for the New York Bishop's
• 50:33
  Speaker 2: retirement plan. And of course if you're managing money for
• 50:37
  Speaker 2: the Catholic bishops, no abortificance and no companies that are
• 50:41
  Speaker 2: paying for things like that, like they're following a specific
• 50:46
  Speaker 2: set of These are our five key principles and we
• 50:49
  Speaker 2: can't violate them and express that in a portfolio.
• 50:53
  Speaker 3: You can do that with direct index.
• 50:55
  Speaker 4: Technology allows customization and that that's really what we're talking
• 50:59
  Speaker 4: about there is there's a customization based on that in
• 51:01
  Speaker 4: that sense values driven and investing, and that technology has
• 51:05
  Speaker 4: unlocked that. And because maybe one size doesn't fit all,
• 51:08
  Speaker 4: and so now that we have that technology, you can
• 51:09
  Speaker 4: develop specific strategies, as you know, to drive the outcomes
• 51:12
  Speaker 4: and the exposures that people are looking for.
• 51:14
  Speaker 2: So look around the corner for me, what are some
• 51:16
  Speaker 2: of the new technology Like ETFs are fairly well established,
• 51:19
  Speaker 2: still not very well adapted, but that's coming along. What
• 51:23
  Speaker 2: are some of the other technologies we're looking at down
• 51:26
  Speaker 2: the road? Where are the next areas that are ripe
• 51:29
  Speaker 2: for innovation and disruption?
• 51:32
  Speaker 4: I think the client experience is going to be a
• 51:34
  Speaker 4: big part of that. How frequently can you get that information?
• 51:38
  Speaker 4: You know, one of the hallmarks of ETFs, of the
• 51:41
  Speaker 4: separate managed accounts that we've talked about direct indexing is transparency.
• 51:45
  Speaker 4: It used to be buyer beware. The you know, the
• 51:48
  Speaker 4: financial services company and their Ivory tower had more information
• 51:50
  Speaker 4: than you, and so buyer beware. Now it's the other
• 51:52
  Speaker 4: way around. Investors have more information available to them than
• 51:57
  Speaker 4: ever before. It's a bit like you know here in
• 51:58
  Speaker 4: New York City. You know, you go to a restaurant,
• 52:01
  Speaker 4: you pull up you know, your favorite app, and you
• 52:03
  Speaker 4: won't go to a restaurant it's got less than four stars,
• 52:05
  Speaker 4: it's got less than a thousand people that have rated it.
• 52:06
  Speaker 4: You have that information as a consumer available to you.
• 52:10
  Speaker 4: And that's true in the financial services industry as well.
• 52:13
  Speaker 4: And so that's that's the thing that's really exciting to me,
• 52:16
  Speaker 4: is that the transparency that we're delivering to investors is
• 52:20
  Speaker 4: helping them get that outcomes and they're and they're more
• 52:23
  Speaker 4: they're more aware of that than ever and I think
• 52:25
  Speaker 4: that's just going to continue to increase. We acknowledge that
• 52:29
  Speaker 4: we need to be providing real time information we acknowledge
• 52:32
  Speaker 4: that holdings need to be on the website on a
• 52:34
  Speaker 4: real time basis. If you want access to portfolio managers,
• 52:36
  Speaker 4: they're more than willing to talk. That's the type of
• 52:39
  Speaker 4: innovation that I think we're going to be seeing.
• 52:41
  Speaker 3: I want to throw a curveball out.
• 52:43
  Speaker 2: Okay, you've spoken about doing the dirty work early in
• 52:48
  Speaker 2: your career. Yeah, which I think of as you know,
• 52:52
  Speaker 2: get the reps in, do the heavy lifting. But but
• 52:55
  Speaker 2: tell us about the dirty work and how that helped
• 52:57
  Speaker 2: shape your work ethic today.
• 52:59
  Speaker 4: You got to ain't the fence, Mister Miyagui told us
• 53:01
  Speaker 4: right like, there was a method to the madness. There
• 53:05
  Speaker 4: A lot of times I'll talk to people and it's
• 53:08
  Speaker 4: you know, they're they're, oh, what about this? I'm trying
• 53:10
  Speaker 4: to I'm thinking about my career, and basically what they're
• 53:12
  Speaker 4: asking me is what's the minimum I can do to
• 53:13
  Speaker 4: get promoted or get paid more money? Wax wax on,
• 53:16
  Speaker 4: wax off, right, right, And of course we want those
• 53:19
  Speaker 4: outcomes for people, But if you get your mindset to
• 53:21
  Speaker 4: the spot of I want to deliver excellence, I want
• 53:24
  Speaker 4: to do this job the best that I can and
• 53:27
  Speaker 4: whether that's just wrapping up the day's reports, whether that's
• 53:30
  Speaker 4: taking your call notes, whether that's making sure that you're
• 53:32
  Speaker 4: entering your CRM information correctly and accurately. There's all sorts
• 53:36
  Speaker 4: of things that you can do excellently. And we see
• 53:39
  Speaker 4: these people all the time. Whether it's professional athletes or
• 53:42
  Speaker 4: whether it's some of the great artists that we're aware of.
• 53:45
  Speaker 4: These are people that want to be professionals and excellent
• 53:48
  Speaker 4: at what they do. They're not doing the minimum to
• 53:50
  Speaker 4: get promoted to the next thing. And so that to
• 53:52
  Speaker 4: me is the dirty work you got to do. You
• 53:54
  Speaker 4: got to do the work, and you've got to be
• 53:56
  Speaker 4: willing to push yourself to do that work, have the
• 53:58
  Speaker 4: discipline and carry carry through on that. You don't get
• 54:01
  Speaker 4: the virtue if you haven't done the hard work. And
• 54:04
  Speaker 4: so you have to put in the work to get
• 54:06
  Speaker 4: the outcome that you want. And what you'll find is
• 54:10
  Speaker 4: that those things increase I found exponentially. And so once
• 54:14
  Speaker 4: you start to put in the work, it starts to
• 54:16
  Speaker 4: grow exponentially and you start to see that.
• 54:18
  Speaker 2: Are you suggesting that hard work compounds over time?
• 54:21
  Speaker 4: I absolutely think I think it does. And I'll add
• 54:24
  Speaker 4: to that, you build your talent stack over time. And
• 54:27
  Speaker 4: I've referred to that phrase throughout the conversation. But you know,
• 54:30
  Speaker 4: I had the good opportunity to have a lot of
• 54:32
  Speaker 4: client conversations. Then I learned international, Then I learned you know,
• 54:36
  Speaker 4: how to work with people that think about things differently
• 54:39
  Speaker 4: than you do. Like, once you add up all these things,
• 54:42
  Speaker 4: you you can make connections and you can think about
• 54:44
  Speaker 4: things in a way that maybe people that don't have
• 54:46
  Speaker 4: the same talent stack haven't thought about.
• 54:48
  Speaker 2: Huh, really really really fascinating stuff. So let's jump to
• 54:51
  Speaker 2: our favorite questions. We ask all of our guests starting
• 54:55
  Speaker 2: with what's been keeping you entertaining these days? What are
• 54:58
  Speaker 2: you watching or listening to? Okay, so, oh the way,
• 55:00
  Speaker 2: this is a pandemic holdover question that I keep finding.
• 55:06
  Speaker 4: Everybody's still stuff. Okay, so let's keep with the theme.
• 55:11
  Speaker 4: And and so a big, a big thread that's pulled
• 55:14
  Speaker 4: through our conversation is innovation and music. So the defiant
• 55:20
  Speaker 4: ones that you haven't seen it, I'm recognizing your faces.
• 55:24
  Speaker 3: No, I've seen the preview for.
• 55:26
  Speaker 4: It, Jimmy Ivine and doctor Dre. So the you know
• 55:30
  Speaker 4: you want to talk about like.
• 55:31
  Speaker 2: An Apple documentary, Well, you.
• 55:33
  Speaker 4: Think about these two individuals. They basically have produced almost
• 55:36
  Speaker 4: every artist that we've heard for the last twenty years. Right,
• 55:39
  Speaker 4: it's first hand interviews with them and their artists talking about, Oh,
• 55:43
  Speaker 4: you know, Tom Petty, what was it like when you
• 55:44
  Speaker 4: were singing that song and Jimmy Ivine was in the
• 55:46
  Speaker 4: studio with you yelling at you and do it again
• 55:48
  Speaker 4: in another cut? Or what about what about this? Or
• 55:51
  Speaker 4: you know doctor Dre when you were in Compton in
• 55:53
  Speaker 4: la early on, like, you know, tell me about what
• 55:55
  Speaker 4: the first record scratch on a hip hop album sounded like. Right,
• 55:58
  Speaker 4: So they're talking about that now. It culminates in the
• 56:01
  Speaker 4: building of the Beats headphones, which was of course acquired
• 56:04
  Speaker 4: by app. Right, that's even another meta thing for me
• 56:08
  Speaker 4: as well. So there's this amazing creative juice they're grinding
• 56:12
  Speaker 4: it out. Both of them tell a story of like
• 56:13
  Speaker 4: grinding it out, they create amazing music, and then it
• 56:17
  Speaker 4: culminates with hey, wait a second, like there's not high
• 56:19
  Speaker 4: quality headphones out there for people to Okay, so that's
• 56:21
  Speaker 4: one the defiant ones. It's not on Netflix anymore, so
• 56:24
  Speaker 4: you've got to go to Amazon Prime and buy it
• 56:25
  Speaker 4: and buy it there at least sas Rogue Warriors. Another
• 56:31
  Speaker 4: one on two for two.
• 56:32
  Speaker 3: I never heard of that.
• 56:33
  Speaker 4: One, sas Rogue Warriors World War two. The UK builds
• 56:37
  Speaker 4: an off record kind of rogue Warrior group, the original
• 56:42
  Speaker 4: kind of Seal Team six. Think about them like this,
• 56:44
  Speaker 4: and these guys they start in North Africa and they
• 56:47
  Speaker 4: would do secret missions overnight. They'd go on to German
• 56:50
  Speaker 4: aircraft camps and blow up planes overnight, or they'd really
• 56:53
  Speaker 4: disrupt their fuel flow, or they would do these things
• 56:56
  Speaker 4: that were more targeted strikes to disrupt the flow. So
• 56:59
  Speaker 4: sas Rogue Warriors, I think that's maybe is a BBC.
• 57:03
  Speaker 4: It's more international. You got to get one of these
• 57:05
  Speaker 4: one of these other apps to watch that one. Those
• 57:07
  Speaker 4: are the things I'm I'm watching. I like to listen
• 57:10
  Speaker 4: to audiobooks, so right now I'm listening, like listening to
• 57:13
  Speaker 4: Go Like Hell, which was four versus Ferrari is the
• 57:16
  Speaker 4: movie that you've seen, but that was great. It's based
• 57:18
  Speaker 4: on this book, and how's the book. It's excellent. It
• 57:22
  Speaker 4: goes to many many different layers of detail than you
• 57:25
  Speaker 4: can get across in the In the movie, quotes Fromenzo
• 57:28
  Speaker 4: Ferrari about you know you want to go fast find
• 57:30
  Speaker 4: good competition, find somebody that's willing to die out there,
• 57:32
  Speaker 4: like these are these are great things right? That are
• 57:34
  Speaker 4: that are driving and innovation there as well. Right, So
• 57:37
  Speaker 4: Shelby comes up with the GT forty, which I just
• 57:40
  Speaker 4: took my son to a museum over the last week
• 57:42
  Speaker 4: and we were seeing one of the original GT four
• 57:44
  Speaker 4: forty of courses.
• 57:44
  Speaker 3: The shockingly that people don't really.
• 57:47
  Speaker 4: Forty inches tall, and one of the drivers was was
• 57:50
  Speaker 4: six foot two. So they built a little bubble the
• 57:52
  Speaker 4: game next verse in over his over his head on that.
• 57:54
  Speaker 2: Right, just so the helmet will fit into thought.
• 57:57
  Speaker 4: Just so the helmet would would fit on that. Now
• 57:59
  Speaker 4: this is interesting, right, So Ferrari Independent Auto shopped in
• 58:03
  Speaker 4: you know, northern Italy, and then Big Ford. You know,
• 58:06
  Speaker 4: they're telling this story of like a big corporate bureaucracy
• 58:08
  Speaker 4: and all these things and how do they compete? And
• 58:10
  Speaker 4: then here's here's my last book for you, Barry, How
• 58:13
  Speaker 4: Music Got Free.
• 58:14
  Speaker 2: I recall seeing the title go by.
• 58:17
  Speaker 4: How Music Got Free? So to really bring all this
• 58:19
  Speaker 4: home for us today. So the MP three, in fact,
• 58:23
  Speaker 4: the MP one, MP two, MP three and MP four
• 58:26
  Speaker 4: are invented in Germany. What they discover is that the
• 58:29
  Speaker 4: human ear can't understand the fidelity of the MP four,
• 58:32
  Speaker 4: so they don't need that much information, so they drop
• 58:34
  Speaker 4: it back down to an MP three. The MP three
• 58:37
  Speaker 4: then launches things like ready Napster. Right, So now Napster
• 58:41
  Speaker 4: is out there, and all of a sudden, the entire
• 58:44
  Speaker 4: music industry, the bottom has fallen out on all of
• 58:47
  Speaker 4: their revenues because instead of spending eighteen dollars to buy
• 58:50
  Speaker 4: a CD, everybody is stealing music off of Napster. And
• 58:53
  Speaker 4: this is this is the parallel to the conversation we
• 58:56
  Speaker 4: were having earlier the delivery mechanism. We're all listening to
• 58:59
  Speaker 4: the same music. We're also listening to the same rock
• 59:01
  Speaker 4: and roll, but this invention. So it tells the story
• 59:04
  Speaker 4: of you know, guys that are working at the pressing
• 59:07
  Speaker 4: plan of the CD sneaking out, sneaking the major the
• 59:09
  Speaker 4: what do they call them, the master excuse me right
• 59:12
  Speaker 4: out ripping it onto the computer and throwing it onto Napster.
• 59:15
  Speaker 4: And then it talks about the Sony executive sitting here
• 59:17
  Speaker 4: in midtown saying, oh my gosh, my revenues are down
• 59:20
  Speaker 4: forty percent this year because nobody's buying CDs. Anymore, and
• 59:23
  Speaker 4: it informs like this real life story of how the
• 59:27
  Speaker 4: entire music industry.
• 59:28
  Speaker 2: Got, how music got free, how music got I'm definitely
• 59:32
  Speaker 2: tell us about your mentors who helped shape your career.
• 59:36
  Speaker 4: You know, so I mentioned my dad, you know that
• 59:38
  Speaker 4: that you know, I learned so much from him and
• 59:40
  Speaker 4: he guided in that way. I was fortunate my mom
• 59:41
  Speaker 4: and dad, you know, very loving home, and we were
• 59:43
  Speaker 4: you know, we were great there. You know, we talked
• 59:46
  Speaker 4: about Ben Fulton, we talked about Bruce Bond to stick
• 59:49
  Speaker 4: with the Bees, Bobby Brooks, like these are these are
• 59:51
  Speaker 4: individuals that are in the industry that I've got the
• 59:53
  Speaker 4: utmost respect for. I've also been fortunate to have some
• 59:55
  Speaker 4: really good bosses throughout the years that I learned a
• 1:00:00
  Speaker 4: little bit something different from each of them. You know,
• 1:00:02
  Speaker 4: Bruce is an incredible entrepreneur. Bends an incredible product person
• 1:00:05
  Speaker 4: and an entrepreneur. In the UK, I'd work with some
• 1:00:08
  Speaker 4: people that had consulting backgrounds, and you know, at the
• 1:00:10
  Speaker 4: time I wasn't so sure, but you know, the way
• 1:00:12
  Speaker 4: that they think thoroughly and logically is a real differentiator.
• 1:00:17
  Speaker 4: And you know, and then some of the client people
• 1:00:19
  Speaker 4: that I've worked with over the way that they can
• 1:00:21
  Speaker 4: connect with people and and really build rapport and ultimately
• 1:00:26
  Speaker 4: trust those I've been very fortunate to have those people
• 1:00:28
  Speaker 4: in my life.
• 1:00:29
  Speaker 3: Some great names.
• 1:00:30
  Speaker 2: Our final two questions, what sort of advice would you
• 1:00:33
  Speaker 2: give to a recent college grad interested in a career
• 1:00:36
  Speaker 2: and either investing or finance.
• 1:00:39
  Speaker 4: You know, we talked a little bit about this, but
• 1:00:41
  Speaker 4: if you're more likely, if you're fresh out of college,
• 1:00:45
  Speaker 4: you are rich in time and potentially poor in life,
• 1:00:50
  Speaker 4: and so that is a distinct advantage where you can
• 1:00:54
  Speaker 4: take that time and invest in yourself develop that stack
• 1:00:58
  Speaker 4: that we talked about earlier. The other thing that I
• 1:01:01
  Speaker 4: would say is I wouldn't be a Goldman if I
• 1:01:04
  Speaker 4: didn't start at Power Shares years ago, and I had
• 1:01:06
  Speaker 4: the opportunity to be a small fish in a small pond,
• 1:01:09
  Speaker 4: and then I grew to be a medium sized fish
• 1:01:11
  Speaker 4: and a small pond, and then I had an opportunity
• 1:01:13
  Speaker 4: to go to some of these other firms that I've
• 1:01:14
  Speaker 4: been and now ultimately at Goldmansacs. And so I do
• 1:01:16
  Speaker 4: think sometimes people look for the biggest pond and the
• 1:01:19
  Speaker 4: biggest brand, and I think if you can get into
• 1:01:22
  Speaker 4: a small pond, you get exposure to more skills in
• 1:01:26
  Speaker 4: a slightly different way, and you can build that skill
• 1:01:27
  Speaker 4: stack in a different way. You know. I often find
• 1:01:30
  Speaker 4: people you know they want to start on the you know,
• 1:01:32
  Speaker 4: the analyst programming and go. That's great. And firms like
• 1:01:34
  Speaker 4: ours train people and they do an amazing job. But
• 1:01:37
  Speaker 4: there are nonlinear ways to access some of these things.
• 1:01:40
  Speaker 2: And our final question, what do you know about the
• 1:01:43
  Speaker 2: world of investing ETF's products, innovation and disruption today that
• 1:01:49
  Speaker 2: would have been useful thirty years ago when you were
• 1:01:51
  Speaker 2: first starting out.
• 1:01:53
  Speaker 4: Ultimately comes back to being a people business. You can
• 1:01:55
  Speaker 4: have the best innovation, you can have the best product,
• 1:01:57
  Speaker 4: you can do all like the biggest marketing campaign, all like.
• 1:02:01
  Speaker 4: It's all about keeping the purpose at the center as
• 1:02:04
  Speaker 4: your north star of what you're doing. Outcomes for investors
• 1:02:07
  Speaker 4: we talked about this help them achieve their financial goals,
• 1:02:09
  Speaker 4: retire with dignity, pay for healthcare, keeping that at the
• 1:02:13
  Speaker 4: center and making sure that you're aligned with your purpose
• 1:02:18
  Speaker 4: around the people. I've been so fortunate, you know, you
• 1:02:21
  Speaker 4: and I have been friends now for going on a decade,
• 1:02:23
  Speaker 4: little bit more probably others in the industry. It's the
• 1:02:26
  Speaker 4: people that really make this thing, this thing go. You know,
• 1:02:29
  Speaker 4: I know that sounds kind of cliche, but twenty five
• 1:02:31
  Speaker 4: years ago, when you're just trying to make it happen,
• 1:02:33
  Speaker 4: you know, maybe it's this next thing and it's really
• 1:02:35
  Speaker 4: sitting down, listening and connecting with people.
• 1:02:38
  Speaker 2: I think that's a great answer. We have been speaking
• 1:02:41
  Speaker 2: with Brian Lake. He is a partner and Chief Transformation
• 1:02:45
  Speaker 2: Officer at Goldman Sachs Asset Management. If you enjoy this conversation,
• 1:02:51
  Speaker 2: well be sure and check you out any of the
• 1:02:53
  Speaker 2: five hundred somewhat we've done over the past eleven years.
• 1:02:57
  Speaker 2: You can find those at iTunes, Spotify, YouTube, Bloomberg, wherever
• 1:03:02
  Speaker 2: you find your favorite podcasts, And be sure and check
• 1:03:06
  Speaker 2: out my new book How Not to Invest The ideas, numbers,
• 1:03:10
  Speaker 2: and behaviors that destroy wealth and how to avoid them
• 1:03:14
  Speaker 2: How Not to Invest, wherever you buy your books at.
• 1:03:18
  Speaker 2: I would be remiss if I do not thank the
• 1:03:20
  Speaker 2: Cracked team who helps him put these conversations together each week.
• 1:03:23
  Speaker 2: John Wasserman is my audio engineer. Anna Luke is my producer.
• 1:03:28
  Speaker 2: Sean Russo is my researcher. I'm Barry Reynolds. You've been
• 1:03:33
  Speaker 2: listening to Masters in Business on Bloomberg Radio,