🔴Leaving One Opportunity for Another at Goldman Sachs (w/Peter Kraus)

🔴Leaving One Opportunity for Another at Goldman Sachs (w/Peter Kraus)


My mother said to me something that stuck with me my entire career She said don’t do something you would regret and I would regret not taking up a job. So I took the job And in 1974 Wall Street was not what it was today. It was a very different place I mean if you were talking about the bond trading business that meant actually Cutting out the coupons on the Bund and taking it down to the trust department to get your cash payment It wasn’t exactly the same kind of bond world that you have today and equities were you know? Certainly traded but at five cents and commissions in commissions, I think would be regulated in 1973. It was a very different world banks were Interesting, but not you know, very exciting and so the investment banking world existed I didn’t really know it that much and Accounting was a interesting profession and you know people don’t necessarily think about account even today but in the 60s You know accounting grew dramatically because the SEC actually required all Public firms to actually have audits and that meant that the business grew Dramatically in that time period so you were at the end sort of the tail end of a big growth spurt in accounting And that’s why it looked like an interesting profession Yeah, so so from the accounting world I mean there must have come a point where you figured there was something bigger and broader. Well, I know I’d love peat Marwick I thought accounting was great. I like the you know, I was interested in tax. I was interested in auditing I was interested in consulting and they had all those different capabilities. I like numbers. I like clients I like people a lot of good things but you know the business began to slow down and inflation actually began to eat away at the cost structure and I came up with a new idea at peat Marwick a new business to build and I went to my boss and I said Either I’m gonna build this new business or I’m gonna leave because I don’t really want to keep doing what I’m doing And he said well Kane won’t go build a new business and you know We tried to do that and my first client was goldman sachs Okay, and little did I know goldman sachs decided to offer me a job not doing that sudden teeth I see the business like it or it was just no and there were names of goldman had Announced to the world that it was gonna build a mortgage business. Oh, yeah, this is 1985 and they were behind Credit Suisse and Saw yeah, and they wanted to catch up and so their idea was they were gonna start this mortgage business and they took two partners toll Kirschbaum one and gene mercy was the other and They Co headed this mortgage securities business and they went and hire a hundred people and I think I was employer number two or three but I was a partner at Peat Marwick and they were gonna hire me as a vice president and that was a little challenging not so much for me But my wife was not particularly happy about that and I remember my father said to me he said wow You’re gonna go down to Goldman Sachs. You’re a big fish in a small pond There will be a small fish in a big pond which I didn’t think was very motivational Yeah, my mother said to me something that stuck with me my entire career She said don’t do something he would regret and I would regret not taking up a job. So I took the job. It’s funny I did the first big career move. I made where I went from Robert Fleming, which is a small Independent investment Merchants Bank in the UK to UBS and my first six eight months there. I felt like that I was out of my depth completely and thinking what the hell did I do here? You just feel so small and then it ended up being probably the best decision I haven’t made because it was a new business you didn’t have it was new business I had that opportunity, but the one thing about Goldman that I thought was really unique peat Marwick was a Governance structure where you sorta had to be a jack-of-all-trades. You had to be a technician You had to be a client person you had to be a manager You had to operate your business you had to go get new clients, you know nobody’s good at all those things and what was really interesting about Goldman Sachs is they had sort of a An ability where if you were a technically strong person or you were a very good client person or you were a good trader? everybody could actually execute on their skill set and just on their skill set and yet the compensation levels were consistent so you didn’t have people trying to be managers because you got paid more Yeah You know you could be a really good merger guy and get paid as Well as the really good investment banking guy as well as the really good trader. Yeah, and that Created a really interesting dynamic I thought to attract talent and to allow people to specialize and be much more effective in their roles so that was the thing that actually I thought was special about the firm and Made me feel like okay, it’s worth the risk. So, where did you go with you? What was your chosen? Skill that you decide to focus on it code. Basically, I’m a Salesman. I mean at the end of the day Yeah, I’m really good with people and I’m willing to ask for the business and I’m willing to put myself out there I’d say that over my time there I was able to build both technical skills and trading skills and investing skills and today, you know I’m probably more multi-dimensional than I was when I first started but that was the that was the core skill at the time Walk is through building that business because Salomon wasn’t behemoth back then I mean anyone that wanted to challenge yourself government probably on the only people that could have done it with any reasonable expectation of success What was it like to see? Goliath there and communist David Singh, right. How do we how do we knock this guy down? Well, I think you know Ignorant is bliss a little bit. So You know, I’m not sure we necessarily appreciated this society’s gillen Sophistication, but it was also a great time of innovation. I think of money sort of like water it Finds the lowest level it always moves to that level cash flows are similar And so if you think of finances just a series of cash flows. Well, how do you structure the cash flows? And how do you think about the cash flows? How do you optimize the cash flows? well, that really hadn’t been done very much until the mid 80s and Collateralized mortgage obligations and interest rate swaps and things like that but we were all new and one of the reasons why I ended up at Goldman Sachs was The accounting profession was reacting Ratt readily are actually quite frequently to changes in finance So for example in the early 80s, there were no interest rate swaps So in the early 80s, she started that to create these collateralized mortgage obligations. How did you account for these things? You know, what were the accounting methodologies that you used? And so actually it was quite innovative And so even though we were starting something new We were in a space where we thought innovation would actually work and in fact we did we innovated a lot of things and and so did the whole street but Goldman was part of that and that’s Really how we competed? so I was very very fortunate to have been at Goldman Sachs at a time of meteoric growth in a period where in a place within the firm where the financial markets were growing rapidly and focused on a segment of the of the Economic world being financial institutions that were also changing dramatically Yeah, if you go back in 1983 in this country or in 1985 in this country You had state and federal regulations that prohibited bank mergers between states So we had three thousand four thousand banks and there were really no mergers of any significance less. It was within a state And as those state laws broke down in the compacts the regional compacts broke down you had the significant explosion of bank merger activity and with that Bank merger activity you had financial innovation you had Expense reduction and you had significant growth in capital markets all happening at the same time all focused on the financial markets and so I was lucky I was you know in the middle of that and Benefiting like other people were in the middle of that but my particular focus at the time was on financial institutions banks insurance companies and asset managers and There was huge explosion in that yeah market and so I got to basically ride that Opportunity and that became global it would start in the US and it became global And we were able to build a Goldman a very big and very consequential financial institutions business and Goldman was one of the first organizations had actually focused on financial institutions as being a specialty and said well, you know The regulations are unique. The nomenclature is unique. These organizations aren’t like, you know, Procter & Gamble You really have to understand something about them that’s special And if you did you could provide more value to your client And so today it’s obvious of all the firms have financial institutions practices, but that wasn’t obvious in 1985 yeah, and so again, we were lucky enough to sort of see that and capitalize on it and and that actually Was the opportunity for my career? You You

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