The Rise And Fall Of Goldman Sachs' Marcus
Introduction to Goldman Sachs
This section provides an introduction to Goldman Sachs and its core business of investment banking.
Goldman Sachs' Core Business
- Goldman Sachs is a well-known investment bank that manages money for the wealthiest individuals, governments, and CEOs.
- The company's bread and butter is closing deals in high-rise corporate offices and advising clients on how to tap capital markets.
- Goldman Sachs is known for being the leader in investment banking and markets, with 70% of the company dedicated to this business.
Why Did Goldman Sachs Try Consumer Banking?
This section explains why Goldman Sachs decided to enter consumer banking despite its success in investment banking.
The Roots of Goldman's Foray into Consumer Banking
- In 2008-2009, during the financial crisis, Morgan Stanley became a bank holding company due to concerns about potential bankruptcy.
- Afterward, there were questions about Goldman's business model. In 2014, they decided to try consumer banking as an opportunity for growth.
- They launched Marcus in 2016 as their first step into consumer banking.
Apple Card Unveiling
This section discusses the unveiling of Apple Card by Goldman Sachs.
Launching Apple Card
- In 2019, Goldman unveiled Apple Card. It was a huge coup since they didn't have credit card relationships before.
- However, they failed to appreciate that they would have to set aside funds for loan losses as they added more customers.
Strategic Plan for Growth
This section explains Goldman Sachs' strategic plan for growth.
Goldman Sachs' Strategic Plan
- In 2021, Goldman Sachs was on top of the world, leading investment banking league tables and making money hand over fist.
- They decided to invest in their core businesses and identified four areas for growth: asset management, wealth management, transaction banking, and consumer banking.
- They planned to run the firm more efficiently and put out targets and metrics to track performance over time.
Conclusion
This section provides a conclusion to the transcript.
Final Thoughts
- The consumer business was a distraction from what Goldman Sachs is known for. If they were going to do it, they needed to do it at a much higher level than they did.
- The knock against Goldman Sachs was always that consumer banking wasn't in their DNA.
Goldman Sachs' Consumer Banking Business
In this section, the speaker discusses Goldman Sachs' foray into consumer banking and the challenges they faced.
The Thinking Behind Entering Retail Banking
- Goldman Sachs believed that if they could handle Investment Banking and emerge from the financial crisis unscathed, they could probably handle retail banking as well.
- However, retail banking requires a different skill set than investment banking. Often, people who are good in retail banking have been doing it for decades.
- One of the criticisms from the beginning was that retail banking was not in Goldman Sachs' DNA.
Challenges Faced by Goldman Sachs
- Executing personal wealth management or investment banking with dozens or perhaps hundreds of clients is different from executing consumer banking at scale.
- While there were parts of it that were executed very well (e.g., building a deposit platform), execution in some areas was poor due to trying to do too much too quickly.
- David Solomon has a smaller margin for error today because consumer banking is a mess and he cut bait on it very quickly.
Progress Made by Goldman Sachs
- Despite challenges faced by their consumer business, Goldman Sachs has made progress in improving market share across their core businesses of trading and investment banking.
- They have also made progress in growing their firm, improving how they serve clients, and strengthening their business.
Future Outlook
- Winning would cure all if they have the right strategy and leadership. If they can get towards their targets and eliminate some losses in consumer business, then things will improve.