Quotes: Lloyd Blankfein - Streetwise: Getting to and Through Goldman Sachs, 2026

• ‘If you look at a forty-year chart, the market-performance graphs are smooth and rising. But living through this period on the ground, there were many moments of terror when it seemed the world was coming to an end: the 

  • 1987 stock market crash; 

  • the 1994 bond market crisis; 

  • the Asian debt crisis of 1997; 

  • Russia's default and the collapse of Long-Term Capital Management in 1998; 

  • and the bursting of the dot-com bubble in 2000.’ Pg x

• ‘I love the place but am not sure it fully reciprocates. I'm welcome but don't fully belong. I feel the same way when I walk into certain exclusive clubs today. In my mind, I'm still wearing that alligator shirt, wondering whether it's working.’ Pg 31

• ‘But what really drove purchases in a mostly speculator's market was news — government statistical reports, especially on inflation; pronouncements by pundits; threats of war; or interest rate changes. Because trading took place by voice over the phone, my job was to make sure I was on the line with a client at the very moment relevant news was announced. Then he or she would be trapped into dealing with me.’ Pg 56

• ‘What I didn't understand at the time was the ultimate significance of the global connections and the commercial instincts embedded in J. Aron's trading culture — a network built on street smarts.’ Pg 57

• ‘Whatever my own views, the gold business meant dealing with the central banks and treasuries of repressive governments and foreign powers hostile to the United States - China, the Soviet Union, and the Soviet vassal states of Eastern Europe. For those countries, gold and the metals that are often found with gold, such as platinum, pal-ladium, and rhodium—needed for catalytic converters on newer cars—were a principal source of foreign exchange.’ Pg 59

• ‘The financing cost of holding physical gold was built into the price of the futures contract, causing the future price to be higher than the cash price on the spot market. This difference is known as the carrying cost, or "contango."‘ Pg 62

• ‘In that case, Aron could buy cash gold and sell futures to hedge, essentially lending money to the futures market at a high rate of interest. When the market was bearish, like after the gold boom, futures would trade at a discount. In that scenario, Aron could sell gold for cash and hedge by buying futures at a lower price, effectively borrowing money from the market at a low rate. This strategy was a form of interest rate arbitrage with some complexities. The risk of interest rate changes could be easily hedged. A bigger challenge was finding sources from which we could borrow gold for short sales.’

• ‘To do that, Aron turned to central banks, the ultimate long-term holders of gold. For the central banks that held gold as part of their reserves, anything they got to compensate for their storage costs and earn a small lease rate perhaps twenty-five or fifty basis points—was gravy. For us, the availability of physical gold to borrow was the key to the operation.’ Pg 63

• ‘While the United States' own gold reserves are held in Fort Knox and at West Point, the New York Fed earns a fee for storing gold belonging to many other countries.’

• ‘The gold arbitrage that was driving most of the profits of J. Aron was simple, elegant, and disconcertingly easy for others to replicate. That was what made people at Aron so secretive. They didn't want anyone to know how they made their money.’

• ‘In April 1933, at the start of the New Deal, Franklin D. Roosevelt signed an executive order criminalizing the hoarding of gold in the United States. This was necessary to increase the money supply and increase federal spending during the Depression. Because the dollar was still convertible into gold, the Federal Reserve couldn't print more money unless it forced the conversion of more gold coins and bullion into paper notes.‘ Pg 64

• ‘Within Goldman Sachs, and on Wall Street generally, there was a hierarchy of prestige. Investment bankers were at the top of the food chain, higher than traders. Within the community of traders, equity (stock) traders were more important than traders in fixed income (bonds). Within fixed income, longer-duration bond traders were more important than short-duration traders (e.g., money markets). But anyone in any fixed-income business was more important than currency or commodity traders.‘ Pg 72

• ‘The cash-and-carry yield—the return on buying the stock index at its current price and simultaneously selling it forward at the higher future price-was substantial.’ Pg 75

• ‘K.V. advised that among the companies in the S&P 500, shares of banks and shares of companies involved in the liquor business would have to be excluded for religious reasons. Thus there would be "tracking risk" because the stock positions wouldn't exactly match the five hundred companies embedded in the futures contracts.’ Pg 76

• ‘Most fundamentally, Mark converted J. Aron into a risk-taking "principal" business that traded for its own account - a significant change in mentality for an operation that had always fixated on the risk-free part of risk-free arbitrage.’ Pg 79

• ‘Mark added people and analytics to trade options and derivatives to every asset class traded at J. Aron… Eventually, the energy-trad-ing business came to include physical assets—refineries, tankers, storage, and so on.’ Pg 81

• ‘At that point, the European central banks were trying to control exchange rates under something called the European Exchange Rate Mechanism, or ERM. The ERM was supposed to serve as a kind of training wheels for an eventual common European currency, and it was already showing some of the problems that would later emerge with the euro. Weak and unstable currencies like the Italian lira were tied to strong and stable ones like the German mark. The ERM allowed trading within a range, but when a currency approached the bottom of the band, that country's central bank was supposed to intervene to support it by raising interest rates and perhaps by buying its own currency in the market. Betting with or against central banks (usually the latter) could be a way to make a lot of money.’ Pg 83

• ‘Soros earned over $1 billion for his Quantum Fund by betting correctly that sterling would be devalued, despite the UK central bank's strenuous efforts to maintain its targeted exchange rate band against other European currencies.’ Pg 84

• ‘Swings of 10 percent or more were not uncommon. And if a transaction never closed, currency bought in anticipation could generate a large loss. Sophisticated hedging of currency risk was thus critical to M&A outcomes. In that kind of scenario, confidentiality was paramount, and currency strategy had to be embedded in the overall planning without involving banks that were not participating as M&A advisers. So it made sense for members of our group to join the Goldman M&A team, working "behind the wall" on transactions.’ Pg 88

• ‘The value of the underlying asset could fluctuate, and the number of pounds needed to remain fully hedged could be known only at the end of the hedge period. What you really wanted to hedge against was the value of the stock at an indefinite point in the future. An early product that Armen, Tim, and I helped to develop was the "quantity adjusting" option. Our "quantos" would automatically adjust the coverage of the option to the foreign currency value of the asset at the expiration of the option period. This was both more effectual and often less expensive than a traditional foreign currency option.’ Pg 92

• ‘Because there was usually a significant possibility of a deal falling through, a normal option would be more than what was needed, because the option would still have value even if the underlying transaction evaporated. So we designed a "contingent" option hedge that would disappear if the underlying transaction failed, even if the currency-option part of it was in the money. This contingent option hedge could be offered more cheaply while still satisfying the client's objective.

• ‘It was a classic Thucydides Trap-established power threatened by rising power leads to conflict—but inside the same company.‘ Pg 95

• ‘In 1986, Euromoney, a British magazine focused on international finance, published a poll that ranked Goldman Sachs as one of the top twenty bank foreign exchange teams. That was an extraordinary outcome given that we had been a nonplayer a few years earlier and still weren't functioning fully as market makers in currencies. Did we campaign for a spot in the rankings? You bet we did. We asked our clients to vote for us in the poll.’ Pg 98

• ‘As the Soviet Union collapsed, it was dumping massive quantities of processed aluminum onto the world market. This created a glut-there was much more aluminum than soda-can companies and auto manufacturers could absorb in the short term. As a result, refined aluminum was deep in contango, meaning that the futures price was significantly higher than the spot price. Even if nobody needed aluminum just then, buyers still wanted futures contracts for aluminum. By agreeing to buy it in the future, they were guaranteeing a high interest rate to the current holders. Even with the cost of storage, there was potentially a large profit to be made by holding the aluminum and hedging out other risks around currency and interest rates. This is what's called a cash-and-carry transaction.’ Pg 100

• ‘Commodities in backwardation also offer an implied yield, which can be realized by buying the commodity at a lower price in the future compared with the spot price. If the spot price remains unchanged by the end of the term, the difference between the futures price and the spot price becomes profit. However, there is risk involved if the price of oil moves up or down. The key idea is that if prices stay the same and the spot price doesn't change, you earn the discount. In this way, commodities in backwardation act as a growing asset, similar to a Treasury bill that increases in value as it matures and is redeemed’ Pg 102

• ‘But all this innovation and expansion at J. Aron contained the seed of something even more important for the firm-Goldman's transformation into a global firm comfortable taking greater risk with its own capital, and not just on behalf of clients.’ Pg 105

• ‘In moments of organizational-chart ambiguity, try simply acting like you're in charge anyway. If people listen, fine. If they don't, just shrug and move on. People usually respond to demonstrations of leadership more than to titles.’ Pg 106

• ‘The New York Times reported that the average Goldman partner had capital in the firm valued at $9 million. Maybe I would too someday, but my economic situation was not immediately improved. In fact, it worsened in the short term. I'd made $550,000 the previous year. But the way it worked at Goldman was that every partner received a "draw" of $200,000 and a share of partner profits. The draw was like a base salary. Your share of profits after taxes would feed into your "capital account," on which the firm paid you an 8 percent return.’ Pg 109

• ‘From that point forward, the firm would prepare my tax returns. This wasn't just a perk. It was meant to ensure that all Goldman partners paid all their taxes on a conservative basis and that all information about firm investments stayed within the Goldman ecosystem. In addition, the firm would help me set up a charitable foundation. I was expected to put money in, be philanthropic, and play a role serving local civic and educational institutions.’ Pg 110

• ‘Goldman Sachs charged fees in its investment banking business and earned brokerage fees in its equity business. J. Aron was a principal business. We now made most of our money buying from and selling to other principals, not by buying and selling on their behalf. This was another key distinction. While Goldman Sachs referred to its "clients," J. Aron had "counter-parties." Pg 111

• ‘The natural solution to internal conflict at Goldman was usually to rearrange businesses, complicate reporting lines, combine groups, and create co-head management structures-with a lot of quiet and sometimes not-so-quiet infighting and politics in the background. Sometimes it worked, sometimes it didn't.’ Pg 113

• ‘Nothing gets me more rattled than everything going well.’ Pg 114

• ‘Suskind retired in 1990, Jimmy Riley replaced him as head of the worldwide metals business, reporting to me. I brought a lot of intensity to my role. In those years, there were shortages of platinum-group metals that were needed to make catalytic converters, which the EPA required new cars to have in order to meet emissions standards under the Clean Air Act. Those elements—platinum, palladium, and rhodium— are mined in only a few remote locations, primarily in South Africa and the Russian Arctic. On the basis of weight, they were the most expensive metals in the world, the latter many times’ Pg 116

• ‘But as the Maxwell story unspooled, it emerged that he had been committing financial fraud on a large scale. Maxwell was siphoning his company's pension funds to support an overleveraged and failing business empire. He died owing Goldman $62 million in unpaid loans and left the firm holding worthless shares in his primary media company, which was now bankrupt. He had stolen much more from his own workers.’ Pg 118

• ‘There was nothing inherently illegal or unethical about a client providing funds for a trade from one entity and having proceeds paid into another. But it should have raised a red flag.’

• ‘Because the partnership was reorganized every two years, that meant that many former or "limited" partners, who had retired after the years covered by the settlement, had to write checks to the firm..’ Pg 119

• ‘The financial upside to a partnership was great, but the liability was unlimited… anyone at the firm could do something at any time that meant you could lose not only your job but also your home and all of your other financial assets.’

• ‘I learned that problems could come from any direction, or out of no-where, and that it paid to be paranoid about what could go wrong. I also came to see that my rising status and growing success at the firm created a susceptibility to being used… That is, I was now someone worth manipulating.’

• ‘Especially when dealing with someone I was flattered to be dealing with, I had to cultivate a self-protective cynicism.’ Pg 119

• ‘J. Aron used the Armenator, which-not to get too technical—was a simulation-based system. We ran ten years of historical returns and reported the worst, the fifth-worst, and the tenth-worst returns as our "risk." Fixed income based its system on the Black-Litterman model (the fascinating Fischer Black again). It was linear, which means that it projected forward a range of possible outcomes.

• ‘There are advantages and disadvantages to both methods. A historical model is by definition limited by what has happened in the past. A linear model can lead to a significant understating of risk if you are writing out-of-the-money options. Under many circumstances, though, options don't behave in a linear fashion. There was no firm-wide committee to allocate or manage risk overall. We didn't have SecDB yet. Value-at-risk systems that could track risk levels on a daily basis were just starting to emerge‘ Pg 121

• ‘The cost of a trading blowup is not just the loss on the position but the way that the aftermath makes you risk-averse and less able to take advantage of new opportunities. That excessive caution can turn out to be even more expensive.’ Pg 124

• ‘Loss aversion is a natural cognitive bias. Correcting for it and adjusting quickly to new realities is part of what makes a superior trader. Managing traders, I observed that what distinguished the best ones wasn't that they were necessarily right more often than others. They simply adjusted more quickly. They made more money when they were right and lost less money when they were wrong.’ Pg 124

• ‘Lacking the polish and finesse of investment bankers, who court CEOs and fall into the CEO role more easily themselves, bond traders weren't necessarily well-rounded thinkers. But everywhere on Wall Street, they were ascending to the tops of firms, because the fixed-income business was driving huge profits. There was a macro explanation for this trend. 

  • With fiscal deficits mounting during the Reagan years, the US Treasury issued government bonds in unprecedented quantity. The Federal Reserve's policy interest rate spiked above 19 percent in 1981 and then began a long slide to nearly zero after the global financial crisis. Declining interest rates fueled a thirty-year bull market in government debt, creating an enormous tailwind for bonds. A version of the same phenomenon was occurring with debt issued by European countries and Japan, which rose in price as yields declined. And it wasn't just government bonds. There was an explosion in what were then called junk bonds, or high-yield debt.’ Pg 129

• ‘Being an unlimited liability partnership just created too much risk and vulnerability when times were hard. A crisis was so threatening to the general partners that it created powerful pressure to leave, just to protect the wealth they'd built up over’ Pg 131

• ‘Around that time, Goldman started doing 360-degree performance reviews, which solicited feedback not just from your boss but from subordinates and peers as well. My 360 reviews were generally very positive but always had the same criticisms: I didn't listen well. I was intimidating. I was too harsh.’ Pg 139

• ‘I had been in sales, and I'd dabbled in trading and had a good and evolving sense for risk management. I was a quick learner. But I didn't have the quantitative training to be a great trader in the modern era. I needed the people who did have that background to give me their best, and to make it easy for me to understand their specialties. If they were going to do that, they had to know that I'd appreciate their good work and return the favor.’ Pg 140

• ‘At the start of 1999, the ECU—an accounting currency that was a basket of other European currencies— was going to be converted into the euro, which would actually replace many of those European currencies. They weren't quite the same thing, because the ECU included sterling and certain smaller currencies that weren't going to be included in the euro. The ECU was trading at such a huge spread in relation to the euro that it cried out to be arbitraged.’ Pg 144

• ‘In a partnership, profits "pass through" to the partners, who pay tax on them as individuals. The profits are taxed only once. Incorporating, you pay corporate tax on profits, and then pay tax again as individuals when the corporation distributes its after-tax earnings. The profits are taxed twice. And while that drawback didn't outweigh the benefits for our Wall Street competitors, there was reason to think Goldman would receive a lower valuation in the public markets than they had. ' Pg 151

• ‘partners who have built up a significant amount of net worth within the firm and have a negative outlook for the firm have an incentive to retire in order to "lock in" the value of their capital account and insulate it from potential future losses. In a public structure, the impact of a negative outlook (if it is shared by the market) on net worth is immediately recognized and therefore does not create an incentive to retire.‘ Pg 158

• ‘In 1997, Morgan Stanley acquired the retail brokerage Dean Witter. Citigroup was in the process of acquiring Salomon Smith Barney, which had itself absorbed Travelers Insurance. Merrill Lynch acquired Mercury Asset Management, the largest investment manager in the UK. And in Europe, the Swiss bank UBS acquired S.G. War-burg. As profitable as it was, Goldman was smaller than these new "universal" banks.‘ Pg 159

• ‘LTCM had several highly profitable years making what are called relative value or convergence trades. These are trades based on the assumption that correlated securities, such as five-year and ten-year Treasury notes, or French bonds and Italian bonds, might deviate from but would eventually revert to their long-term historical relationships. Because these paired positions were diversified across asset classes, LTCM was meant to be well insulated against risk. That theoretically low risk was the justification for LTCM's leveraging itself at more than thirty to one.

  After returning a substantial share of its "excess" capital to its investors earlier in the year, the fund held just $3 billion in capital against more than $100 billion in swaps and derivative positions.’ Pg 163

• ‘After the IPO, "partners" would technically no longer be partners but employees, just like the rank and file. The payment for their future services would be ordinary income, just like everyone else's. That meant we could attach vesting and noncompete requirements… Naturally, a five-year vesting period would have far more retention impact on a nonpartner than on a partner, who would receive a significant distribution of shares.‘ Pg 167

• ‘The offering prospectus also had to detail new governance structures. Prior to the IPO, Goldman Sachs had been run by a small group of partners, with decisions often made through a more infor-mal, consensus-driven approach. Now the firm had to meet the requirements of being a publicly traded company, which included a new board of directors with independent members. This shift was necessary to align with the expectations of investors and regulatory bodies, but it also required careful consideration of how much influence the existing partners should retain.’

• ‘SOMEONE COULD WRITE A FASCINATING book about what the 221 Goldman partners did after the IPO… Malcolm Turn-bull, an Australian partner, became leader of his country's Liberal Party and eventually prime minister.’ Pg 169

• ‘Another irony is that Goldman provided more information to the public than we previously had, but less information to partners below the senior management level, because partners were free to buy and sell Goldman's stock and having material nonpublic information would restrict them.‘ Pg 172

• ‘As Warren Buffett likes to say, price is what you pay. Value is what you get.’ Page 178

• ‘Through our principal investments area (later called the merchant banking division), we were functioning like a private equity firm, making our own large investments in many of the new dot-coms.’ Pg 179

• ‘Following the urge to visit the scene of the crime, I moved toward the burning piles, where I gaped at the surreal, apocalyptic landscape. I wish I had given a thought to the carcinogenic air I was breathing in that day and in the weeks after. There's no way to know for certain, but I've long suspected that toxins I was inhaling contributed to my lymphoma diagnosis fourteen years later.‘ Pg 184

• ‘Equities trading was therefore primarily a facilitation business - it was viewed as a cost of obtaining fees from the IPOs. The equities traders thought of their P&L as the net of the fees and commissions we brought in, less trading losses. In other words, they were trying to not lose as much money trading a newly public company's shares as we made in fees from that company's IPO.‘ Pg 190