Ben Horowitz & David Solomon on Why Scale Is The Only Thing That Matters

We were the largest wholesale funder in the world 10 years ago. There are a lot of things you want to be the largest in the world. Wholesale fund not one of them.

We got a lot of criticism like why are you raising money now? What are you stupid? And it turns out that the best time to raise money is when nobody has money.

Last year the four largest companies contributed 1% to GDP growth with their $400 billion of spending.

M&A and capital raising IPOs are driven by confidence. For the last four years, whatever the question was, the answer was no.

Okay. Now, whatever the question is, the answer is maybe.

David, you've been at Goldman now over 25 years. You know, what are you focused on to position Goldman for the future?

If you're in our kind of businesses, if you're attached to financial assets, this is as sweet a spot that I've seen.

With AI, if you have proprietary data and you have enough GPUs, you can solve like almost any problem. It is magic.

I've had the distinct pleasure of working at least indirectly for both David Solomon and Ben Horowitz and have a lot of affection for both Goldman Sachs and A6Z.

If you haven't read, I highly recommend reading the book The Partnership which is written by a guy named Charles Ellis which chronicles Goldman's nearly 160-year history.

And I think the most remarkable thing about Goldman's history is the fact that it's not a business built through a series of bank mergers.

Unlike many of its peers, it was really a business built brick by brick by generations of entrepreneurial partners raising their hand, going off and building new businesses, whether it was expanding into Europe or starting the merchant banking business or the wealth management division.

You know, many of these business units became global franchises. And I'd argue that, you know, Goldman was and still is one of the most entrepreneurial financial institutions in the world.

And as I think about where we are in our own evolution at Andreessen Horowitz, I kind of like to think that this is what Goldman Sachs must have felt like, you know, 50 or 75 years ago.

You know, a small group of entrepreneurial investors betting on a future weren't as rich as you guys that that also Goldman stopped speaking to Sachs like forever.

Like they got very mad at each other over was it Sachs who supported Germany in World War I?

So you actually remember your history. Wow. Yeah. Well, yeah, small partnership betting on the future with big hopes and ambitions. I'll leave it at that.

Well done, David. Thank you. But maybe, yeah, maybe just, you know, pulling on that thread, you know, David, you've been at Goldman now over 25 years.

You joined the firm, I believe, in 1999, just after the firm's IPO, you know, how has the firm evolved during your tenure?

And maybe more importantly, you know, what are you focused on to position Goldman for the future?

Before before first of all, it's great to be here. Great to be with everybody. Before I start on that, I just say one of the big lessons I have in my life is if you're joining a new firm, it's a private partnership.

Don't spend six months negotiating so you carry over past the IPO date. Join join before join before the IPO. It's a good good lesson for all of you in private partnerships.

You know, it's the firm's a remarkable place and I really appreciate what you said about the firm and the entrepreneurial spirit of the firm.

The firm was for a long time a private partnership. And the thing about private partnerships is you have this mutual agency where people go off and they do things.

There's some structure that creates a collective each year or each cycle where everything comes back and then there's a re-evaluation of the partnership shares and you go off again, you know, into the future to do more.

And that served the firm incredibly well and the firm stayed a partnership much longer than any other real totally big Wall Street firm.

But I'd like to say that the firm stayed a partnership until the last moment when it absolutely couldn't be a partnership anymore because it needed the permanent capital to really make it a relevant business.

If the firm hadn't gone public in 1999, it would have missed kind of the global expansion of capital markets and probably would look more like, not to pick on anybody, but just to pick any more like Lazard today than like Goldman Sachs.

And so, you know, the stewards of the firm at that point did an incredible job.

I think the challenge for us over the last 25 years and I think you know the leadership team over the last eight years has really done an incredible job at this working together to do this is somehow 25 years after an IPO we still have this partnership culture.

It's highly aspirational every two years to become a partner of Goldman Sachs we have 450 people who really are compensated and a correlation to how the overall enterprise does.

But the big thing that I'm really proud of that as a broad leadership we've done is We've started to recognize that that we're not a small private partnership and you can't be a public company and not grow and have some form of top down strategic direction.

That really gets the whole thing making, you know, the 1 plus 1 plus 1 plus one equal, you know, more than what the math adds up to. And that's been a journey and it's been bumpy. You were there for part of those bumps. True.

But I think we've navigated well and I you know we've got I I still think you know the principles the values that we kind of sit upon as a firm.

We really strive to be the most exceptional financial institution in the world. We don't always get there but we strive for that and you know we really sit on four core values of client service, partnership, integrity and excellence.

Try to live it and I think the firm's in a really good place. But it's in some ways it hasn't changed at all in 26 years. In some ways it's changed. It's changed massively.

Are there a few things you're most focused on as CEO kind of looking forward, you know, for the next five or ten years?

Sure. You know, one of the things I I was a banker and I advised CEOs for a lot of my career, but actually owning the responsibility. That's one of my big takeaways the last eight years is very different than than giving advice.

You know, I think the most important thing that a CEO has to do in a big enterprise like this is they have to kind of own the strategy and the direction of the firm.

And you know, I'm focused on how we ensure we're executing toward growing the firm because I know we have to do that to perform on a relative basis.

But then I'm also thinking about and worrying about, you know, big picture strategic risks that can make the firm less relevant, less successful, less important, less competitive.

And you know for us I think there are two things that the firm is really focused on.

I think first of all one of the one of the things that makes the United States an extraordinary place is we have the most extraordinary capital markets most extraordinary financial system. The most extraordinary financial institutions.

I would argue that the six most important financial institutions in the US are all US financial institutions and there is no global institution that can compete in terms of its relevance in the world with the six most important US institutions.

When you look at those institutions, there are there are different kinds of institutions. There are retail banks, more traditional banky banks. That would include JP Morgan, Wells Fargo, Bank of America, City Bank.

They all have global businesses, but they are truly banks and what they do. They have retail platforms, retail businesses.

And then you've got two institutional firms. That doesn't mean they don't touch individuals in different ways, but Morgan Stanley and Goldman Sachs are both institutional firms.

And Goldman Sachs is a little bit of an island of one in the context of the way we're positioned as an institutional firm. And Morgan Stanley is a little bit of an island to one in terms of the way they're positioned.

Scale matters a lot and I just went through all those firms. The two smallest firms of all those firms are Goldman Sachs and Morgan and Stamale.

And so when there's turbulence in the world, you always want scale. scale in these businesses because they're so mature gives you enormous leverage and latitude.

And so we continue to think a lot about scale and we think out 5 10 15 years how are we going to maintain a level of scale that makes us competitive?

10 years ago it would be in unfathomable that Goldman Sachs could have a $1.9 trillion balance sheet but at the moment JP Morgan has a $4.5 trillion dollar balance sheet.

when JP Morgan's six, we're gonna have to be at least three and a half, you know, at least three and a half. And so, we have to think about how we can continue to create that scale because these are very mature businesses and it's hard to really build that scale you know, just purely organically.

So, that's one. Two, funding. Funding these enterprises is one of the big strategic risks to these enterprises.

These enterprises live on funding and liquidity and you know we don't have a traditional deposit funding platform. We've got and you participated in this a very excellent digital deposit platform that now has you know over $200 billion in deposits and we've also we have about $500 billion of total deposits.

15 years ago we had zero. So we fund about 40% of the firm deposits but deposits is a much more stable funding source than institutional wholesale funding. Commercial paper.

We were we were the largest wholesale funer in the world 10 years ago. There are a lot of things you want to be the largest in the world. Wholesale fun not one of them.

And so that strategically is another thing we were about. So those are big things on stepping back and getting away from the execution dayto-day and thinking 10 15 20 years which by the way I won't be here running the firm but it's still my responsibility to steward and and chart that.

I worry about that in the short term you know much more focused on technology across the organization and how technology shifts the way we do things, how we're rebuilding processes, operating differently while staying true to what we do.

Awesome. Well, we're here to help with that today, too. Absolutely.

Ben, maybe transitioning to you. You know, you and Mark started the firm at an auspicious time in the wake of the financial crisis in 2009. 2009.

You know, it turned out to be a really interesting moment because it was, you know, the beginning of mobile and the rise of the cloud.

Well, it's funny also, you know, we got a lot of criticism in kind of venture capital like why are you raising money now like what are you stupid and it turns out that the best time to raise money is when nobody has money.

I mean like it's very obvious in you know when you say it that way but just the nature of investing is people always want to invest you know high and they always want to walk away when the market is low and it just is one of those things so we we got very fortunate that I think.

Maybe you can kind of describe the evolution of the firm, you know, since you started and and again maybe what your ambitions are, you know, for the future as well?

Yeah. So the original idea and in venture capital like the fundamental thing that you have to be is you have to be what's known as top tier because if you're not top tier then the best entrepreneurs won't take your money.

And so like there are times when you can, you know, when the market is so blazing hot that, you know, you can be like a not important venture capital firm and dump into good deals and make money, but in most times if you're not top tier, you're going to go out of business.

And so you have to be that. And the difficult thing about being top tier is historically the way you became top tier was reputationally.

So if you're a Sequoia, you had invested in Apple and Cisco and Yahoo and Google. And so it's really hard to make up that ground if you're starting in 2009.

So the idea we had originally to get to top tier was to basically have a better product, a better product specifically for entrepreneurs.

So the venture capital product was great for LPs and but we thought mediocre for entrepreneurs. So we designed the firm to basically really enable a founder to basically build his or her own company and run it as CEO which wasn't kind of an idea then the idea was much more to replace the founder.

And you know there's a lot that went into it and because we were founders we knew what that was and so we kind of created a firm to give a founder like a brand and power and access and all these kinds of things.

VC said they did, but they they didn't have to because like they were top tier. It didn't matter. And so we did that and that's kind of how we got into position to kind of be a longlasting firm.

The second phase was really kind of based on something that Mark wrote in 2011 called software is eating the world.

And the idea with software as eating the world was basically if you looked at venture capital up to that point there were these studies that said in any given year there are going to be 15 you know approximately 15 technology companies that get to 100 million in revenue and those are going to be the companies that are worth money and nothing else is going to be worth money.

So the whole venture capital sport was how many of those 15 can you get into? Now with software if software was going to eat the world though we thought well maybe that 15 is going to be 150.

And maybe one of the features of a venture capital firm is going to be you're going to have to be able to scale it and none of the you know traditionally I remember Dave Swenson the great Dave Swinson RIP saying to me who was the ran the Yale endowment for years he said you know a good venture capital firm's like a basketball team you know five maybe six players that's it.

But you can't address you know a market where you have to be in 150 companies with six players so how do you organize how do you scale how do you design the firm so that you can get to the whole opportunity and yet still be like really really good at investing and not have more than five or six people talking about a deal.

And so that was sort of phase two and and that's really kind of I would say when we somewhat left the building in terms of you know what was going on Silicon Valley because nobody else was thinking that way.

And so this last year 2025 about 18 what is it 18.3% of all venture capital raised in the US was raised by us. So we're we're now like from tier one to the biggest and going forward what I think that looks like is and then I I get a lot of this thinking my my old mentor was Andy Grove.

You know it was actually at the end of his life but one of the things he said to me that I always remember and for for me for those of you who don't know him he was you know he ran Intel and he got it through that great memory crisis and and changed the company probably the greatest tech CEO we've seen.

But he said something that is very obvious in a way but also profound which was you know if you're the leader of an industry then the growth of that industry depends on you.

You have to grow the market like nobody else is going to do it. It's not going to like that that is coming on you. And he he really took that seriously at Intel.

And so when I think about you know what we are as a firm a lot of it is you know it's incumbent on us and a lot of the work that we've done on policy for crypto and things that we're doing internationally things we're doing on American dynamism is like how do we win not just you know we Andrea Horowitzman but how does the country win technologically how do we continue to compete with China how do we be relevant in the next hundred years like we were in the last hundred years and so and And that drives backwards into how we think about how we have to develop some horiz.

Awesome. Maybe maybe we'll transition just a little bit to to markets. You know, David, you know, how would you describe kind of the macro environment? You know, what are you hearing from the CEOs that you, you know, work and advise most closely?

Sure. You know, first Justin and and Ben and I were talking about this. If good times if you're in if you're in our kind of businesses, if you're attached to financial assets or investable assets, this is, you know, I've been doing this for 40-some years. This is as sweet a spot that I've seen kind of macro picture.

Now, that doesn't mean there aren't all sorts of difficult complex things going on in the world, but I think we're at a moment. Let's just be here in the United States for a minute. can go around the world and talk about anywhere you want, but let's just start here in the United States.

The combination of the significant amount in continued continuing to increase fiscal stimulus, and by the way, the big beautiful bill that started in 26 just adds more to that. It's not that we weren't in a very stimulative place, we just added a whole bunch more.

We have fiscal stimulus, we have monetary stimulus because we're in a rate cutting cycle. That doesn't mean I think we're going to see many more rate cuts, but we're probably going to see a couple more.

We are in a capital investment super cycle, like something we've never seen. Last year, the four largest companies contributed 1% to GDP growth with their 400 billion of spending.

We are in a deregulatory unwind cycle from a massive regulatory surge during the last administration to a deregulatory windback that is very stimulative.

All these things it's it's just such a cocktail of stimulus that it's very very hard to slow the economy down.

And while average Americans definitely feel a lot of stress because everything's more expensive. You could talk about inflation going from 9 to three, but the bottom line is everything is 25 to 30% more expensive. And that's the way Americans feel it.

There's pressure, but at the same time, there's enormous financial leverage that keeps the economy going and it makes the economy a little bit more versatile.

And so, if you own monetary assets or investable assets, if you're around growth and technology, these are pretty this is a pretty prime environment. I'll give you a hundred things that can set it off.

Last April, you know, if you were if you were in Davos last January, people felt the same way. And then in April, we had a speed bump, but was all of you short speed bump.

And I think one of the things that also has there are two things that I think has the market moving ahead. One, you've got a president that if you look at the speed bump last April, he marks to market to that market every single day.

And the market's going in the wrong direction, he has no problem adjusting very, very quickly. And number two, the productivity gains from AI investment and putting it into the enterprise and having the enterprise pick it up.

The market is pulling forward a lot of what they expect to be delivered over the next 1, two, three, four years. And so that's a that's a pretty prime macro environment.

Now geopolitics much tougher. We're moving back to a multip-olar world and the risk of a geopolitical problem that really slows down growth is just I'm not saying it's high but it's much higher than it's been from the last for the last you know kind of 10 20 30 years since the wall fell and you know look the world is the world is fragile social media creates a lot of volatility and division the way people absorb information the way information moves makes the world faster moving but also more volatile.

And so a lot can go wrong but at the moment from an economic a base economic perspective that cocktail of stimulus is pretty powerful.

Maybe a follow-up question for for both of you. I mean you know do you expect to see a lot of M&A or IPOs this year? How how are you sort of advising your CEOs? We have a yes a lot of them in the audience.

It's a good banker respon just just factbased. Okay based we had you had a very very tough regulatory environment. M&A and capital raising IPOs are driven by confidence and so if you have a tough regulatory environment that is something that affects confidence from an M&A perspective on strategic M&A for the last four years whatever the question was the answer was no right okay now whatever the question is the answer even if it's very very significant the answer is maybe so what do C CEOs like to look forward they like to do big things they want to and so there's there's a lot of activity fact and so I I just think Again, this is an environment where you're going to see a significant I think this could be the biggest M&A year.

This is just me predicting. I think it'll be the biggest M&A year in history this year. It's going to be a bigger IPO year. Reason thinking a bunch of these big companies that are finally deciding they want to come through the pipe. But you you'll have a view on that too.

I being a public company is a horrible thing. I do not rant. Do not rant. It is challenging from kind. You just have to be okay with getting sued a lot all the time.

You know, it's funny. We had a company that just went public and they're like, "We might get sued." I was like, "Of course you're going to get sued. You're public. This is America." Like, what are you talking about?

So I agree. I agree a lot on on the M&A front except with the kind exception that like it's not clear the FTC kind position on these things yet and so far yeah especially on big tech even on like small tech they've been very very aggressive so I think M&A will happen but it may happen more in the form of IP transactions and that kind of thing than as a traditional M&A.

I hope not, but but that that may be the case. And then yeah, look, I I think there's going to be a lot of IPOs coming out of our world. So I think there's going to be some out of necessity that the companies are growing so fast.

We have so many companies like went zero to over hundred million dollars in less than a year. Some zero to over a billion dollars in less than a year. So which like we've never seen that before.

And then the kind of correlary to that in AI is that leads aren't what they once were. So for my whole life in technology and for the whole history of software, there was this thing called the mythical man month.

And the way the mythical man month, you know, nine women cannot have a baby in a month. And so you can't just if you're Google, you can't just put a thousand software engineers on a product and wipe out a startup because you can only build that product with say seven or eight people and once they figured it out, they've got that lead and you're going to have to, you know, you're going to be behind for a long time.

That's not true with AI. So with AI if you have data you know particularly proprietary data and you have enough GPUs you can solve like almost any problem. It is magic.

But it means that you can throw money at the problem. And we've never had that in tech. And so I think that that's actually going to drive a lot of IPOs because people are going to want to get out and have the capital to continue to compete because it's really necessary.

You don't just have a lead you can sit on. So so it's going to be a very exciting year.

I think you you were talking about the FDC earlier. I know you and Mark are spending a lot more time in DC than you ever have. You know what are some of Chris and Chris? Yeah. You know what are some of the policy you know agendas you're most focused on and and why do you think this is you know more important now than it's ever been?

Well, the first one was crypto because you know we we thought then and we continue to think crypto is an extremely important technology.

It's kind of you know not not just the kind of most profound breakthrough in kind of financial technology that we've seen but a real breakthrough in just how society works.

So everything from you know how do property rights work on on the internet you know like you know how what what is the right architecture for things that where creatives contribute most of the value what's the right business architecture what is stakeholder capitalism really these are all things that that get solved with crypto so we thought it was so important and so important for the advance of society and to not have us like descend into communism and these kinds of things.

And it got completely banned by the last administration, but not through a legal process, not through a legislative process, but just through like sheer will and you know, we'd say abuse of power of the of the government, including techniques like debanking.

Our company got wells notices which I've never seen before in a private company. So just an attack from the government on an industry, a technology industry in this country. And so we were like, well, we've got to get in and work on that.

And so the first thing was the Genius Act and the Stable Coin Bill, which passed and is now law and we're very proud of that. The second one which we think is the more important bill is the clarity act which is also known as market structure which kind of establishes and it's such a necessary thing for this technology because you have these tokens that can represent Pokemon card that can rep represent a stock certificate that can represent a dollar and there were no rules to say well which one is this token and the approach of the Biden administration was everything's a security to the point where they sued artists for like, oh, I painted a picture and I made an NFT. Oh, you sold a security. Like that that crazy.

So this one we're trying to get past right now and we've had some drama around it which I'm not going to comment on, but that's a thing. The second one that's really important is AI.

So you know like with I think with the automobile or with electricity with these new technologies people kind of freak out about them because they they do have big impact they are going to change the world and with AI in particular you know there's some of the calls are coming from within inside the house where people are really trying to kind of scare the population sometimes to achieve regulatory capture and other things.

But if you ban the technology, which some people are calling for, or ban or kind of infringe people's ability to do mathematics, which is something that a lot of people are calling for, then I think we're definitely going to lose the AI rights to China, which has like massive, you know, hundredyear implications.

And so the key things we're trying to protect are one, the model is the model. It is a model. It's a mathematical model. It predicts things. It's not like a sentient being. Like maybe we'll figure out how to do that. We don't know how to do that yet. So, it's not sentient.

It's just a model. So, we're trying to say don't regulate math. Regulate the applications of that math. So, if somebody uses AI to break into a bank or you know, steal your money or you know, make a robot that that shoots somebody, then that's illegal. But the technology itself shouldn't be illegal.

And then there's the kind of most pressing one right now is every state wants to have their own set of AI laws which will basically make it impossible for new companies to innovate because you can't comply with 50 different laws from 50 different states. So we're trying to get that done.

Kind of shortly following that, there's an issue of how copyrights are treated. And can you build a statistical model over copyritten work, not reproduce the copywritten work, but just build a model about it so that the kind of software becomes smarter.

We think that's very important because China absolutely doesn't respect copyrights even. They don't respect just copying it. let alone building a statistical model and we're going to have kind of a weaker AI if we can't train on all the data, can't train on the complete data. So those are the main things that we're trying to push forward.

Awesome. You know, one of the things that that was very evident to me during my time at at Goldman was how you know client centric the firm was and I know 1GS was a big kind of focus of yours. I'm curious how AI is changing the way you guys both work internally and and also how you're delivering, you know, better for clients?

Sure. Well, the I mean firm is the firm's business is serving our clients and so I you know I technology has for decades and decades and decades been making productive people more productive.

Goldman Sachs is a professional services firm filled with productive people that are very productive and technology has been changing the way they work, evolving the way they work, making them more consequential, allowing them to expand the scope and the footprint of what they impact.

And you know, this technology is another acceleration of that for sure. You know, in the in the simplest form and and this is a a a a broad oversimplification, so please take it as such. There are two things that we're focused on.

One, we've got lots of smart people. These are tools and applications. We're trying to get them into their hands and give them access to them and access to models and access to applications. So that they can experiment with them, play with them, figure out how on a day-to-day basis is they're executing for clients and doing the things they're doing, they can be more productive, more powerful, have more impact.

We're good at this. We've done this before. Our people are good at it. It takes time but we we know how to do this and we're doing it and you know it's really constrained by how we get the best tools, the best models, the best applications, get them by the way regulatory cleared because we have to deal with regulatory constraints and everything we touch and we do.

That's a huge barrier for us. We're just not a company that can say oh this is great. Let's try it. We have to have a huge process before we can try anything. But we know how to do that. We're doing that and that is that is expanding the productivity of our people and and you see real time uptake on that that's really accelerating.

The more interesting thing to me as the CEO is that this technology allows us to really look at fundamental operating processes on a massive enterprise and completely reimagine them to automate them and make them more efficient. Not just simply for the benefit of doing them with less people or with less costs, but for the benefit of taking some of that savings and giving us more capacity to invest in growth areas of the business where we're constraint.

And so we don't have the ability to just spend as much money as we want and lose as much money as we want. We actually have to be held accountable every year to how much money how much money we spend and how much money we make and what kind of a return we generate.

Thanks for generally don't last forever. No, they don't last forever. But they actually interestingly there are companies that have proven that they can last for 10-15 years where the accountability on the way you're deploying your capital is put off for a long period of time. We have to look at it every year.

So I would say in the last few years we've been constrained just simply we spent last year we spent $6 billion on technology. I would have loved to spend eight. Okay. But if I spent eight our returns would have been hundreds of basis points lower. And you know what? We couldn't do that. Sure.

Now if we can actually find $2 billion of efficiency around reimagining processes then I can spend eight and wind up with the same returns. So we we laid out we actually called it 1GS 3.0 a program where we picked six specific processes in the firm and we said we are going to do the work to really completely reimagine them.

We have not put out publicly how that changes workforce, how much capacity that creates, but it's super significant. And it's not that there are only six. These are just the first six. So, this is one of the reasons why the market's running forward.

I think this opportunity is huge, but this is hard. This is hard because you're asking people to go kind of take away their empire and do their empire differently. It's got to be driven top down and and it's hard, but we're we're going to make a lot of progress. So those