"He's there for a variety of reasons, including just the importance to the country and to the market of Apple not only for its innovation, but for the scale of its business and its market cap and how important it is. The fact is all of us have to be innovators, otherwise we would have been weeded out. We must be an innovator in our business because if I think of a number of big broker-dealers and investment banks that were thriving when i entered this industry 30 years ago and how few are left—and this can go industry by industry—we must all execute well and innovate or else our clients will leave us."
On whether he believes he gets enough credit for how innovative Goldman Sachs is:
"The fact of the matter is we are in an industry that will always be somewhat controversial. In most industries, you make a strategic decision of consequence once or twice a year. We make strategic decisions about ourselves, but also for our clients, and when we do it for our clients, we stand by them and we own that decision also.
"And a lot of them will be right. Some will be wrong. And even the ones that are right, won't look good for a long time. So we are always going to be a bit in the limelight, and some people will wish we had done things differently. Why did you recommend this company be sold to that company? Why did you recommend to somebody that they not finance or expand their business? Why did you recommend to somebody that they do something domestically or overseas? We will always be second-guessed on these things. I think some of that comes with the territory throughout a very challenging period. I am always reminding myself, all you can do is the best you can do. By and large, our clients have voted. They have stuck with us and we seem to do ok." On Goldman's involvement in Knight Capital's trading snafu—Jeffries and Getco ultimately rescuing the company—and whether Goldman has gotten so big that it's tough to be nimble:
"This was an important element of our business, so we didn't have an interest in acquiring those assets. But you make a good point. When they got in trouble, we not only had the risk profile and the kind of market-making attitude, we also had the financial heft to be able to go in and buy positions in the marketplace. So that's very important. I think we are pretty nimble. Look, what's the most nimble economy in the world when you look at the problems in Europe? The most nimble economy in the world is the U.S. economy, the U.S. economy which makes its adjustments very quickly, industries sort itself out, deleverage faster than any other economy in the world. You'd have to say the biggest economy in the world by far, the U.S. economy, is also the most nimble economy. Nimbleness is not always the enemy of size or vice versa."
On how Goldman will have as good a year as 2012 when high yields could be facing a bubble:
"Certain things worked better last year than we thought, and certain things worked worse than we thought. Now it's nice to say—I'll say something—that our returns were nearly 11%, but in the history of our firm and what our expectations are, it's only against the backdrop of very lowered expectations that that looks like it was such an extraordinarily good year. It wasn't.
We still have a lot of work to do, but I wouldn't have called last year a first-quartile opportunity set or even a second quartile. It certainly got a little bit better towards the end of the year. But you commented and others have commented about the low volumes in the fixed-income market, in the equity markets, the low volume of M&A for this part of the cycle." On where Goldman will make money this year:
"Well, guess what? A lot of the year when you talk about yourself and you want to extol how great everything is, you talk about how wonderful things are. The minute you turn to what's going to happen next year, you start to really be happy about all the things that are not going well so they can improve. My expectation is the cycle does shift, and M&A will get better and the volumes will go out, if not next quarter then the quarter after.
"But you know something? A lot of things in the world have changed forever, but a lot of things are cyclical. And one of the things in the world that are cyclical now is people's anxiety about the future, the low state of security about what happens next, and consequently, the low level of activity is more of a cyclical thing than a secular change. Other secular changes we adapt to wholeheartedly, like technology, like regulation, like the demographics of the world that lead to BRICs becoming very important economies. But certain things like volume and low expectations and anxiety about the future, those are cyclical things that will come and go."
On whether the U.S. can be considered nimble given the political gridlock in Washington right now:
"The politics are tough and some of it is chaos. And I know we're providing great theater to the rest of the world who could point at us and be amused by it. But the fact of the matter, for all the bad politics that we're seeing, a lot of stuff is done. Our banks have deleveraged. Consumer has largely deleveraged. Even the budget deficit, which we're fighting over hammer and tong, we did $1.5 trillion of deficit reduction the sequestration, and the sequestration builds in another $1.1 trillion or $1.2 trillion, and that will happen. It may not be the sequestration. Hopefully that could be put off. It may not be. But if it is put off, it has to be replaced by other deficit reduction. So for all the noise, the US will have done something like $2.6 trillion of deficit reduction, and the man in the street thinks nothing was done. It's not a neat process. It's not enough. More has to be done, but it's not nothing, and it's more than anyone else in the world did."
