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Morning Coffee: David Solomon's new reason Goldman Sachs bankers will be busy for the next decade. Data specialists vs liberal arts graduates

Goldman Sachs CEO David Solomon has always been optimistic that investment banking revenues would come back again. Solomon's past optimism was, however, based upon the premise that the energy transition and pent-up dealmaking and capital raising would lead the revival. Speaking yesterday, he added a new factor to the mix.

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Artificial intelligence (AI) will keep Goldman's bankers busy for the next five to ten years, said Solomon, speaking on Goldman's investor call to mark its first quarter results. They won't be busy adding prompts to large language models themselves, but dealing with the fallout of the AI revolution for clients. AI is cropping up in "virtually every client conversation," said Solomon. "There is an enormous appetite for perspectives on how certain aspects may play out, including the timeline for commercial impact, shape of potential regulations, impact on jobs, and where value will accrue in the ecosystem."

The implication is that Goldman's client-facing bankers need to develop fast opinions on how AI works and why it will transform the sectors they cover. AI expertise is the new key to unlocking client conversations, said Solomon: Goldman is busy advising clients about "how to think about potential use cases in their operations." Longer term AI considerations will themselves drive deals, and "there will be significant demand for AI-related infrastructure and as a result, financing," Solomon declared. 

Separately, and simultaneously, AI is transforming Goldman's own business. Solomon noted that the firm has "a leading team of engineers dedicated to exploring and applying machine learning and artificial intelligence applications," to use cases within Goldman Sachs itself and said it's focused on "enhancing efficiency" for developers. 

Goldman isn't alone. The New York Times last week claimed that some banks are considering cutting their analyst classes by 66% and letting AI do the work of junior bankers instead. Financial News has been out talking to some of them. Samik Chandarana, head of digital banking at JPMorgan said reassuringly that AI is simply a "tool" to get juniors on the "journey a lot faster." 

For the moment, what JPMorgan really needs are a lot of "business aligned data specialists" who can sit next to junior bankers and understand how AI can be applied to their jobs, said Chandarana. 

However, once they've built the models, those data specialists might prove superfluous. “It will be the revenge of the liberal arts graduates,” one senior Wall Street banker told Financial News. “You have an infinitely smart companion who can automatically perform tasks like modelling and deck creation, so the skill set that will be most prized is critical thinking, creativity, taking the data and advancing it to come up with new ideas.”


Goldman said net income for the first three months of the year was $4.1bn, up from $3.2bn a year earlier and almost $1bn ahead of analyst forecasts. “Where we stand today it’s clear that we’re in the early stages of reopening of the capital markets,” said Solomon, adding that inflation, commercial real estate weakness and geopolitical tensions could all slow growth. “While the environment is constructive and markets expect a soft landing, the trajectory is still uncertain”. (Financial Times) 

Don't get too excited about research rebundling. There are fewer listed companies for European analysts to cover these days, and fund managers have an entire apparatus for apprising unbundled research which they're unlikely to dismantle fast. (Financial Times) 

Hedge fund Element is returning $4bn to clients and managing its own capital. (Bloomberg) 

Schonfeld Strategic Advisors upped its staff size to 952 from 856 last year, despite its job cuts. (PIO Online)

JPMorgan hired Christopher Dass from Deutsche Bank as a managing director covering pharma-tech and pharma-services companies. (Bloomberg) 

Hedge fund founder Sanjay Shah is in court for the CumEX tax fraud. He says he did nothing wrong and that his complex trades were "like a ballet" which he thought was permissable. (Financial Times)  

My retired friends keep texting and asking me out for lunch. (WSJ) 

Stealing forks from the office has become a thing. (WSJ) 

Gen Z are holding "PowerPoint parties." The PowerPoints are on things like Taylor Swift. (CTVNews) 

Male bonobos turned out to be about three times as likely as chimps to engage in aggressive behavior. (Science) 

Ares is setting up an office in Miami. (Bloomberg) 

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AUTHORSarah Butcher Global Editor

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