Goldman Sachs: Fortune Favors the Old - [Business Breakdowns, EP. 58]

Business Breakdowns

May 19 2022 • 58 mins

This is Matt Reustle and today we are breaking down the 150 year-old investment bank – Goldman Sachs. From the outside, investment banks like Goldman are black boxes of profits and the embodiment of “Wall Street”. But as with most things, the reality sits somewhere between the polarizing designations. Goldman is neither a vampire squid nor are they doing God’s work.

To break down Goldman, I am joined by longtime financials analyst Marc Rubinstein. For loyal listeners, you will remember Marc from our popular episode on Blackstone. For those who haven’t listened, I think you’ll enjoy that one in tandem with this.

Having personally worked at Goldman for a decade it was great to go through the inner workings of a bank with Marc. We cover what it means to sit at the center of the capital system – and the various ways a bank facilitates risk management and risk transfer. We cover the DNA of bank profitability as we go through the core segments of a bank: asset management, sales & trading, and investment banking. And we talk about culture – the mystery and the prestige that has followed Goldman since its days as a private partnership. I learned a ton through this conversation, and I think you will too. Please enjoy this breakdown of Goldman Sachs.

For the full show notes, transcript, and links to the best content to learn more, check out the episode page here.


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Show Notes

[00:03:24] - [First question] - Blackstone: Beyond Buyouts; What an investment bank is, what they do, and how they make their money

[00:06:48] - Matt Taibbi’s Rolling Stone article; Why Goldman is perceived as the industry villain

[00:10:34] - The scale of Goldman today and how it looked fifteen years ago in light of the financial crisis

[00:13:55] - Industry size that Goldman operates in and their growth factors

[00:14:58] - How investment banking deals result in profits for Goldman and their ties to macro environments

[00:17:38] - Generating revenue and bottom line dollars in sales and trading as a market maker

[00:21:01] - Margin differences between investment banking and trading

[00:23:52] - Asset management and profits generated from supervising over a trillion dollars in assets

[00:26:30] - How investors value banks as a whole and the metrics and multiples used

[00:29:35] - The differences between varying levels of assets and how a bank’s balance sheet looks like today compared to the past

[00:34:40] - Whether or not there’s a way to quantify the differences of leverage and stepping into the consumer space

[00:39:02] - The leadership at Goldman over the years and what David Solomon brings to the table

[00:44:31] - Goldman’s outlook, the bull case and key drivers for success in the future

[00:49:34] - Build versus Buy versus Partner; other potential competitors and risks to Goldman

[00:51:32] - Thoughts on the strength of their core business and classifying them

[00:54:53] - Lessons for investors when studying Goldman’s story and what he’s changed his mind to as he’s worked in this industry for so long