E430: Goldman Sachs’ Michael Bruun on AI, Private Equity & The War for Talent

Michael Bruun (0:00)

It needs to come from the top. The CEO needs to make it well understood by all employees that AI is an absolute must, and it's something that will change the way we do our business, and we embrace that change.

There needs to be some experimentation. If humans are not allowed to experiment, it is unlikely that we will get to the most relevant and most creative solution. CEOs are also faced, and this might at times be uncomfortable with the task of deciding whether the rest of their ex-com or leadership team is actually ready for this transformation. The war for talent is bigger than it's ever been. If you can get the right people in with the right change mindset, they can move so much faster because they are AI enabled.

David Weisburd (0:49)

Michael, you're the global co-head of Private Equity at Goldman, where you've been for nearly 23 years.

When you were earlier on in your Goldman career, you were influenced by Lloyd Blankfein's saying about having skin in the game. Why was that so influential for you?

Michael Bruun (1:06)

Goldman Sachs services its clients in a multitude of ways. It provides advice, it facilitates financings, it's a very large market maker in multiple markets, stocks, bonds, commodities, and then it's a principal investor.

I think what Lloyd meant when he mentioned skin in the game was that we can be several things for clients and give an even more comprehensive service. So, not only provide advice and provide financing, also at times put our money where our mouth is and invest alongside clients, and that gives a very unique and trusted relationship. It's something that is unique to our firm. Very few firms can do it, and no other firm does it at the scale of Goldman Sachs, and for those of us who have read his most recent book, Streetwise, you'll see that he specifically refers to this element and some of the unique characteristics of Goldman Sachs.

David Weisburd (2:02)

How do you build the right incentives within your team?

Michael Bruun (2:05)

Ultimately, we get judged on our investment performance. So, it's incredibly important that our incentives are aligned with investment performance.

Like most other private equity firms, you receive a combination of annual compensation and then you have a lot of your ultimate wealth creation or hopeful wealth creation tied to carry in the fund so that we are really aligned. And then we're also asking our investors to invest alongside us in the funds such that again, we put our money where our mouth is. This is back to where we started. This culture of being a principle both with the balance sheet of Goldman Sachs, but also with our colleagues' capital, but certainly also our own capital. We think that carry is important to incentivize great investment outcomes, but we also think that you need to have a lot of skin in your game at the most personal level.

David Weisburd (3:04)

You operate in the core mill market, 500 million to $2 billion deals, the most competitive part of the middle market, and you have some very formidable competitors. How do you outcompete them when it comes to the best assets?

Michael Bruun (3:18)

You're right. We have formidable competitors. We have been able to do well ourselves by activating Goldman Sachs. Nobody else has Goldman Sachs as their wingman, a wingwoman in their investment strategy. I think we do that in a multitude of ways.

We do the network piece that we already talked about, which is fantastic for sourcing and it's fantastic for value creation. In addition to that, we have one of the largest operating groups in our part of the market. We have more than 110 operational partners that drive value creation in our strategy. Then we have insights beyond what most firms see. We're 45,000 employees at Goldman Sachs.

We are in most markets around the world, and we get a lot of signals and those signals flow back into our business such that we can navigate either the most complex operational environments, environments like the ones that we are seeing right now, with very meaningful geopolitical uncertainty and also a much more blurry macroeconomic picture. We spoke about the network effect. We haven't spoken much about our value accelerator. This is something that we've built over the last 10 years. We felt that we needed to have very, very strong operators drive outcomes in our part of the market. It's something that you have seen in Megabuyout, but we felt, why don't we take Megabuyout operational resources and bring them in to the mid-market? How could you do that? Again, Goldman Sachs has a ton of relationships to senior executives who maybe normally would operate in a Megabuyout context, but actually felt compelled to come to us, to our part of the market, because it was an opportunity to stay with Goldman Sachs, an institution they probably work with in a different context. Maybe they advised them, maybe they financed them at other parts of their career, and now they finally had an opportunity to actually make a real impact from an operational perspective. And we chose, and each firm does this in their own way, but we chose to do this through what we call centers of excellence.