>> AS WE'VE SEEN, THE WAR WITH IRAN IS HITTING THE FINANCIAL SECTOR.

TEHRAN HAS DECLARED IT WILL GO AFTER ECONOMIC CENTERS AFTER ONE OF ITS OWN BANKS WAS TARGETED IN A STRIKE.

THIS AS OIL PRICES CONTINUE TO SKYROCKET, SPARKING FEARS OF A RECESSION.

KNOWS ABOUT NAVIGATING TIMES IN GREAT UNCERTAINTY IS THE FORMER CEO OF GOLDMAN SACHS.

HE LED THE COMPANY THROUGH THE 2008 FINANCIAL CRISIS.

HIS NEW MEMOIR "STREETWISE" LOOKS BACK ON HIS HUMBLE BEGINNINGS AND RISE TO THE TOP OF THE CAREER LADDER.

HE SHARES HIS REFLECTIONS WITH WALTER ISAACSON.

>> THANK YOU, CHRISTIANE .

WELCOME TO THE SHOW.

>> THANK YOU WALTER.

HAPPY TO BE HERE.

>> IN YOUR GREAT NEW MEMOIR YOU TALK ABOUT 17, 18 YEARS AGO.

THE GREAT FINANCIAL CRISIS.

HOW YOU GUYS GOT GOLDMAN SACHS TRUITT BUT YOU ALSO SAY WE ARE DUE FOR ANOTHER ONE AND YOU TALK ABOUT KINDLING BEING ON THE GROUND AND A SPARK COULD SET IT OFF.

IS $90 BARREL OIL AND FOUR DOLLARS OF GASOLINE AT THE PUMP, IS THAT THE SPARK THAT COULD SET IT OFF?

>> YOU KNOW, I DON'T THINK SO BUT ONE NEVER THINKS SO.

THAT'S THE NATURE OF A SPARK.

WE HAVEN'T HAD A RECKONING FOR A LONG TIME WHICH TO ME MEANS THE DISCIPLINE THAT ONE APPLIES AFTER YOU HAVE A CRISIS STAYS WITH YOU FOR A WHILE AND THEN IT STARTS TO EBB OVER TIME.

USUALLY IT HAPPENS EVERY FOUR OR FIVE YEARS BUT THIS HAS BEEN AN EXCEPTIONAL PERIOD.

WE HAVEN'T HAD IT FOR A WHILE.

SO USUALLY DISCIPLINE RELAXES, AT SOME POINT THERE HAS TO BE KIND OF A RECKONING AND THE LONGER IT TAKES SOMETIMES THE WORSE IT IS.

SOMETIMES THERE IS A TRIGGERING EVENT THAT IF THE KINDLING WASN'T ON THE FLOOR IT WOULD HAVE JUST PASSED UNNOTICED.

BUT AS YOU BUILD UP ALL OF THESE THINGS MAYBE SOMETHING COMES ALONG THAT TRIGGERS IT.

THE NATURE OF A BUBBLE, THE NATURE OF A SPARK IS THAT YOU DON'T ALWAYS PREDICT WHEN IT IS SO IT'S HARD TO TELL BUT I DON'T THINK SO.

THE WAR ITSELF OF WHICH COULD BE PART OF COULD BE IT IN THE LONG RUN BUT I DON'T NECESSARILY THINK SO.

THAT IS NOT MY BASE CASE.

IN FACT, THE VERY SEVERITY OF THE SITUATION MEANS THAT IT'S NOT GOING TO BE GONE FOR A LONG TIME WHICH MEANS ONE WAY OR ANOTHER, THIS SITUATION WON'T BE ALLOWED TO PERTAIN.

AND IT'S NOT $90 OIL, IF THIS DOES PERTAIN FOR A LONG TIME YOU'LL BE TALKING ABOUT $130 OIL.

>> WHAT WOULD HAPPEN IF IT GOT TO 130 A BARREL?

>> IT RAISES VERY DIFFICULT QUESTIONS FOR PEOPLE BECAUSE SOMETHING LIKE THAT IS JUST ALL BAD ALL AROUND.

BECAUSE HIGHER OIL PRICES WHEN IT SEEPS INTO THE SUPPLY CHAIN IS INFLATIONARY ON THE ONE HAND AND RECESSIONARY ON THE OTHER HAND.

AS THE COST BURDENS RISE FOR PEOPLE.

AND SO THE MOST DREADED TURN IS PROBABLY STAG WHICH MEETS THE TWO ASPECTS YOU ARE SUPPOSED TO ACCOMPLISH AND USUALLY IN OPPOSITION ARE ON THE SAME WRONG SIDE.

HIGHER INFLATION AND LOWER GROWTH TOGETHER IS A KIND OF A VERY, VERY BAD SITUATION.

WHAT DO YOU DO?

YOU TRY TO REMEDY THE INFLATION BY RAISING RATES OR DO YOU TRY TO REMEDY THE LOW GDP SIDE BY LOWERING RATES IN RESPONSE TO THE CRISIS?

AND SO THAT IS A VERY POOR SITUATION TO BE IN AND ONE TRIES TO AVOID THAT.

>> THERE'S BEEN ABOUT 4% GROWTH IN THE ECONOMY IN THE PAST BUT HALF OF THAT DOES SEEM TO BE FROM A.I.

INFRASTRUCTURE AND THE COMPLEX INVESTMENT.

HOW MUCH DOES THAT WERE YOU?

>> AGAIN, I AM IN THE WORRY BUSINESS.

I THINK IT IS SOMETHING TO BE CONCERNED ABOUT BUT I THINK IF YOU ASK ME WHAT MY BASE CASE IS I THINK IT'S ABSOLUTELY TRUE.

I KNOW THERE'S A LOT OF CONCERN ABOUT A.I.

WHETHER THE EXPENDITURES WILL BE JUSTIFIED BY THE REVENUE.

THERE'S A LOT OF CONCERN ABOUT A.I.

BECAUSE THERE IS A WORRY IT WILL REDUCE EMPLOYMENT IN THE COUNTRY.

LOOK, ONCE THE GENIE IS OUT OF THE BOTTLE IT'S LIKE YOU CAN'T LEARN STUFF.

SO WE ARE GOING TO GO FORWARD WITH THIS, WE MIGHT AS WELL RECONCILE IT.

BUT ON THE WHOLE, I CAN'T BE NEGATIVE ABOUT ANYTHING THAT IS MAKING EVERYONE MORE PRODUCTIVE.

I UNDERSTAND THERE WILL BE DISLOCATION IN THE SHORT-TERM, MAYBE THERE WILL BE A LOT OF SOFTWARE JOBS THAT A.I.

CAN DO VERY EFFICIENTLY WITHOUT THE NUMBERS OF PEOPLE THAT HAVE DEDICATED THEMSELVES TO LEARNING THAT.

THERE WILL BE DISLOCATION, HAVE TO LEARN OTHER THINGS, MAYBE SOME PEOPLE WON'T BE ABLE TO BE RETRAINED AND WILL HAVE TO, THE POLITICAL SECTOR WILL HAVE TO DEAL WITH THE RAMIFICATIONS OF THAT.

IT WILL BE UP TO THE POLITICAL SECTOR TO SMOOTH OUT THE DIFFICULTIES AND SEE THAT THAT INCREMENTAL WEALTH THAT GETS CREATED GETS ATTRIBUTED IN A WAY CONSISTENT WITH OUR VALUES.

>> YOU TITLED YOUR BOOK STREETWISE AND I THINK IT HAS A DOUBLE MEANING MEANING THE REALLY ROUGH STREET YOU GREW UP ON IN BROOKLYN AND THEN OF COURSE WALL STREET HAPPENS.

BUT LET ME START IN BROOKLYN, YOU GROW UP IN A HOUSING PROJECT, A SCHOOL THAT IS PRETTY UNSAFE, YOU ARE SCARED TO GO TO THE BATHROOM AT TIMES.

AND YET, YOU CALL THAT CHAPTER, I THINK YOU CALL IT ADVANTAGES.

WHAT WERE THE ADVANTAGES?

>> THERE'S SOME IRONY IN THAT.

I DID GROW UP IN PUBLIC HOUSING, I DID GO TO A HIGH SCHOOL THAT THEY SHUT DOWN AFTER I LEFT AS A FIELD HIGH SCHOOL.

AND I WOULD SAY THE ADVANTAGES OF THAT ARE LOW EXPECTATIONS BY ME AND OF ME AND FOR ME AND SO IT WAS ALSO PRODUCED A LOT OF MOTIVATION TO GET OUT.

AND FRANKLY, MY EARLIEST MOTIVATION THAT I CAN RECALL, NOBODY IN MY FAMILY AND EVEN MY SIBLINGS HAD GONE TO COLLEGE AND I DIDN'T KNOW ANYBODY, NONE OF THE PARENTS THAT I KNEW WENT TO COLLEGE.

I DON'T NUMBER ANYBODY HAVING A SUIT.

VERY BLUE-COLLAR.

NOT NECESSARILY THAT DIFFERENT FROM A LOT OF PEOPLE.

IT WAS VERY MOTIVATING.

>> SO HOW DID YOU GET TO HARVARD?

>> THE THING THAT I WAS REACHING FOR, THE CARROTS THAT I WAS REACHING FOR WAS TO GO TO A OUT-OF-TOWN SCHOOL.

I WASN'T CONTEMPLATING IVY LEAGUE.

I CAN'T EVEN RECALL WHETHER I EVEN KNEW WHAT THAT WAS BUT I DID GO TO A COLLEGE NIGHT AT HIGH SCHOOL IN A NICER NEIGHBORHOOD.

I WENT IN, NOBODY WAS CHECKING I.D.S, THERE WAS NO METAL DETECTOR IN THOSE DAYS GETTING INTO NEW YORK CITY PUBLIC SCHOOLS AND THERE WERE VARIOUS BOOTHS AND I CROSSED THE BOOTH THAT WAS OCCUPIED BY I THOUGHT IT WAS A GROWN-UP AND IT WAS PROBABLY A YOUNG GUY, HE WAS FROM HARVARD.

THERE WERE PEOPLE THERE FROM OTHER IVY LEAGUE SCHOOLS.

I TOOK AN APPLICATION AND WE CHATTED, HE COULDN'T HAVE BEEN NICER AND I THINK I FILLED OUT THAT APPLICATION LIKE YOU WOULD FILL OUT A LANDING FORM IF YOU GOT OFF AN AIRPLANE.

THERE WERE QUESTIONS AND I WROTE ANSWERS TO THEM.

I DIDN'T APPROACH IT LIKE I WOULD A TEST TODAY KNOWING WHAT I KNOW TODAY.

AND SOMEHOW THEY TOOK ME WHICH IS WHY I'M GRATEFUL.

I DIDN'T GET INTO EVERY SCHOOL BUT I DID GET INTO THAT ONE AND THAT WAS A GOOD ONE TO GET INTO.

AND IT WAS CULTURE SHOCK WHEN I GET THERE.

I'M NOT SURE IT WAS A GREAT PLACE FOR ME TO GO GIVEN THE ADJUSTMENTS I HAD TO MAKE BUT I'LL TELL YOU, IT WAS A GREAT PLACE TO HAVE GONE FOR ALL THE DOORS THAT GOT OPENED.

BY THE TIME I WAS DONE WITH FOUR YEARS I SHOULD HAVE STARTED THEN.

I WAS THEN PREPARED TO FIRST GET INTO HARVARD AS A RESULT OF MY FOUR YEARS.

THERE WAS SOME DIFFICULTY.

BUT I LABELED IT ADVANTAGES BECAUSE I DON'T KNOW.

I DIDN'T HAVE TO SOURCE MY MOTIVATION.

AT THIS POINT IN MY LIFE I KNOW A LOT OF COMFORTABLE AND WEALTHY PEOPLE AND THERE'S A LOT OF TO BE OR NOT TO BE.

ANXIETY ABOUT WHAT SHOULD I DO.

AND THOSE ARE PEOPLE WHO HAVE CHOICES.

I DIDN'T REALLY HAVE A CHOICE.

GO FORWARD IF SOMEBODY PAID ME $.25 AN HOUR MORE THAN ANOTHER PERSON, I TOOK THAT JOB.

I WASN'T SITTING THERE WRINGING MY HANDS ABOUT FULFILLMENT AND WHO AM I. AND WHERE DO I WANT TO GO WITH THIS.

THERE'S SOME ADVANTAGES TO HAVING NO CHOICE.

>> YOU TALK ABOUT YOUR DAD, THERE'S A WONDERFUL SCENE WHEN HE RETIRES AND THERE'S A MACHINE WRAPPED IN PLASTIC BEHIND HIM.

WHICH IS A MACHINE THAT CAN SORT THE MAIL BETTER.

WHAT DID YOU THINK AT THAT MOMENT WHEN YOU SAW THE MACHINE THAT COULD REPLACE WHAT YOUR FATHER HAD DONE.

>> BY THEN WHEN MY FATHER WAS RETIRING I WAS I MAY HAVE EVEN BEEN IN GRADUATE SCHOOL AT THAT POINT.

I HAD SEEN MORE OF THE WORLD.

I HAD NEVER SEEN HIS PLACE OF BUSINESS BUT I KNEW HE SAT WITH A BATTERY OF PEOPLE SORTING MAIL AND AT HOME HE WOULD PRACTICE THAT.

HE KNEW THE NAME OF EVERY VILLAGE.

EVEN PRE-Z.I.P.

CODE.

EVERY VILLAGE IN CONNECTICUT AND WOULD MEMORIZE THESE SO HE COULD SORT THE MAIL.

AND HE WAS RETIRING AND SO WE SNUCK INTO THE POST OFFICE.

I DON'T THINK THEY HAD THE APPARATUS FOR HAVING GOING AWAY PARTIES IN THAT PART OF THE GOVERNMENT.

WHAT IS THIS HUNK OF METAL THAT SEEMS TO STILL BE WRAPS UP?

AND IT WAS AN ELECTRONIC MAIL SORTER THAT WOULD HAVE DONE EVERYTHING EFFICIENTLY, QUICKER, NEVER MAKE A MISTAKE AND THEY JUST KEPT IT THERE BECAUSE IT WAS THE GOVERNMENT.

THEY DIDN'T LAY PEOPLE OFF WHICH IS WHY MY FATHER LIKE THAT JOB BECAUSE EARLIER IN HIS LIFE HE HAD BEEN PRIVATE SECTOR AND HAD BEEN LAID OFF AND LOOKED FOR A JOB.

BUT WHAT A SOUL CRUSHING THING THAT MUST BE TO BE DOING YOUR JOB IN FRONT OF A MACHINE THAT COULD HAVE DONE IT MUCH BETTER, FASTER, MISTAKE FREE.

I KIND OF FELT SAD FOR MY DAD.

>> I LISTEN TO YOUR TALK ABOUT YOUR DAD, IT MAKES ME THINK OF A REALLY LARGE QUESTION WHICH IS WHAT IS THE PURPOSE OF AN ECONOMY?

TO CREATE WEALTH AND CREATE GROWTH, BUT OTHERS MIGHT SAY NO, IT'S TO CREATE DIGNITY.

IT'S TO CREATE A GOOD SOCIETY.

>> WHAT THE ECONOMY HAS TO DO IS TWO THINGS.

IT HAS TO CREATE WEALTH, AND A GOOD ECONOMY HAS TO DISTRIBUTE THAT WEALTH IN A SENSIBLE WAY, IN A FAIRWAY ACCORDING TO THE VALUES OF THAT COMMUNITY.

I WOULD SAY AT THIS POINT WE HAVE DONE A VERY GOOD JOB OF CREATING WEALTH.

WE ARE THE BIGGEST ECONOMY IN THE WORLD, USUALLY SIZE AND BIGNESS IS THE ENEMY OF SPRIGHTLY NESTS SPRIGHTLY AND SPEED AND RESILIENCE AND GET OUR ECONOMY WHICH MAY HAVE BEEN GROUND ZERO FOR A LOT OF PROBLEMS, NO ONE RECOVERS FASTER OR REALIZES THEIR MISTAKES FASTER AND REALLOCATE INVESTMENT DOLLARS TO MORE PRODUCTIVE THINGS.

AND SO WE ARE VERY GOOD AT CREATING WEALTH.

BUT AT THE SAME TIME IT'S BEEN POOR INDUSTRY-LEADING THAT BECAUSE THE WEALTH CREATED HAS BEEN MOSTLY BECAUSE OF THE VALUE OF ASSET PRICES SO PEOPLE WITH ASSETS ARE GETTING RICHER AND THOSE WITHOUT ASSETS ARE AT BEST STANDING STILL BUT NOT GETTING WEALTHIER BECAUSE THEY DON'T HAVE THE ASSETS GROWING IN VALUE.

SO THE GAP BETWEEN THE RICH ARE AND NOT RICH IS EXPANDING AND CREATING POLARIZATION THAT WE SEE IN THE ECONOMY THAT ALSO HAS INFILTRATED THE POLITICAL ECONOMY.

AND THE POLITICS OF OUR COUNTRY.

BOTH OF THOSE ASPECTS ARE TRUE.

THE LATTER PART IS MORE A FUNCTION OF THE POLITICAL SECTOR.

>> WHAT WOULD YOU DO TO HAVE WEALTH AND EQUALITY REDUCED IN THE POLITICAL SECTOR?

>> THE WAY TO DO THAT ALWAYS IS TO INCREASE THE THINGS THAT GET DISTRIBUTED FOR FREE.

IT COULD BE HEALTHCARE, IT COULD BE CHILDCARE, IT COULD BE EDUCATION FOR YOUNGER THAT SOME PEOPLE PAY FOR BUT THAT OTHERWISE COULD BE SOMETHING THAT IS JUST DISTRIBUTED.

YOU PAY FOR THAT BY PROGRESSIVE SYSTEM THAT PEOPLE DON'T HAVE BIG INCOMES DON'T PAY A LOT OF TAXES AND THE PEOPLE WHO HAVE BIG INCOMES.

AND I THINK MOST PEOPLE ARE FOR THAT AND A LOT OF THE DEBATE THAT TAKES PLACE THAT IS ANTAGONISTIC TO THAT IS NOT SO MUCH ANTAGONISTIC TO THE PROGRESSIVITY OF THE SYSTEM BUT WHETHER IN FACT THERE IS WASTE AND WE ARE SPENDING MONEY ON STUPID THINGS OR INEFFICIENTLY ON THINGS.

I THINK IT'S APPROPRIATE TO LOOK AT A LOT OF STUFF THAT WE HAVE BEEN PAYING FOR A LONG TIME, THAT A LOT OF BUREAUCRACY HAS BEEN BUILT UPON.

YOU DON'T KNOW WHAT YOU DO WITHOUT UNTIL YOU TRY TO DO WITHOUT.

I THINK FORGIVING IF THE GOVERNMENT DID SOME THINGS AND HAD TO REVERSE COURSE BECAUSE WE DECIDED THAT SOME THINGS THAT WERE IDENTIFIED AS WASTEFUL OR UNNECESSARY TURNED OUT TO BE MORE VALUABLE THAN WE THOUGHT.

BUT I THINK THAT HAS TO BE DONE AND I THINK WHILE YOU ARE DOING THAT WHAT HAS TO BE DONE IS RAISING THE MINIMUM STANDARD OF LIVING FOR PEOPLE WHO DON'T HAVE RESOURCES.

AND ADDING STUFF TO IT BY PAYING FOR THAT WITH A MORE PROGRESSIVE TAX SYSTEM.

>> INCLUDING HEALTHCARE.

>> EVEN HEALTHCARE.

I THINK THAT PEOPLE WILL RAIL AGAINST THE SYSTEM AND MAYBE IT IS WORTH REELING ABOUT.

I'M NOT AN EXPERT ON OBAMACARE AND WE CERTAINLY ARE EXPENDING A LOT MORE MONEY FOR HEALTHCARE THAN OTHER COUNTRIES AT A PERCENT OF OUR MUCH HIGHER GDP AND DON'T NECESSARILY HAVE THE RESULTS TO SHOW IT.

INCLUDING HEALTHCARE.

>> WE TALK ABOUT HOW THE INEQUALITY OF WEALTH THAT COMES FROM GREAT ASSET, GROWTH AND THE BOOMING ECONOMY BUT LEAVING PEOPLE BEHIND HAS LED TO A BACKLASH.

BUT PART OF THAT TOO COMES OUT OF THE CRISIS YOU WRITE ABOUT IN THE BOOK, THE 2008 FINANCIAL CRISIS THAT THERE WAS A PERCEPTION AND PERHAPS REALITY THAT THE BANKS GOT BILLED OUT, THE AVERAGE PERSON DIDN'T.

TELL ME WHAT YOU THINK THE RAMIFICATIONS OF THAT WORK.

>> CERTAINLY, IT CONTRIBUTES TO A SENSE OF THINGS BEING UNFAIR AND BEING RIGGED.

AND IN FACT THE BANKS THAT ACCUMULATED LOTS OF BAD ASSETS KIND OF WENT UNDER AND THE PEOPLE WHO WERE RESPONSIBLE FOR THOSE BANKS AT THE END OF THE DAY LOST A LOT OF VALUE BUT AT THE END OF THE DAY THE GOVERNMENT DOESN'T LEND MONEY TO PEOPLE.

AND THE CENTRAL BANK DOESN'T LEND MANY.

THE BANKING SYSTEM DOES.

AND BECAUSE THE BANKING SYSTEM WAS IN DISTRESS ANY MONEY YOU PUT INTO THE BANKS WERE KEPT AND RETAINED BY THE BANKS BECAUSE THEY HAD TO INCREASE BY REGULATION.

THEY HAD TO INCREASE THEIR RESERVES THAT WERE LOST AND HAD BECOME EXHAUSTED.

THE REASON WHY THE FINANCIAL AND RECESSION THAT RESULTED FROM IT LASTED SO LONG WAS BECAUSE IT WAS ALSO A BANKING CRISIS.

AND THE INSTRUMENT BY WHICH INDIVIDUALS GET REACHED AND THE ECONOMY GETS STIMULATED WAS UNDER STRESS AND THAT IS WHY THAT RECESSION LASTED QUITE A LONG TIME.

>> YOU TALK ABOUT BEING AN OUTSIDER.

FEELING LIKE A REAL OUTSIDER AT HARVARD.

DID YOU FEEL LIKE A REAL OUTSIDER THE WHOLE TIME YOU ARE RUNNING GOLDMAN SACHS?

>> I STARTED WRITING THAT POINT BOOK AT A POINT IN WHICH MY LIFE IN EAST NEW YORK, BROOKLYN.

IT WAS A QUARTER OF MY LIFE AND YET THAT QUARTER, I'M NOT A LOT OF THINGS AND I'M NOT A DEVELOPMENT PSYCHIATRIST BUT I CAN TELL YOU BUT I AM A FATHER AND GRANDFATHER AND ICY I THINK YOU GET STAMPED AT A VERY EARLY AGE IN A CERTAIN KIND OF WAY.

THOSE TENDENCIES AND YOU GET FORMED AND YOU CAN LEAN AGAINST THEM.

BUT YOU NEVER ARE WITHOUT THEM.

AND SO I WAS STAMPED A BIT AS SOMEONE WHO WOULD WALK INTO A ROOM AND BE VERY VERY AWARE THAT I WAS DIFFERENT FROM OTHER PEOPLE AND WHAT THAT MEANT.

AND COMING ON FROM THE WRONG SIDE OF THE TRACKS MY NATURAL EMPATHY IS LOOK, I GET INTO A CAR AND THERE IS A DRIVER IN THE FRONT AND WHAT IS HE DOING WITH HIS TIME AND DOES HE HAVE LUNCH, IT MAKES YOU THINK A CERTAIN KIND OF WAY.

MY IDENTIFICATION IS GOING TO BE BORN OUT OF THOSE LIFE EXPERIENCES AND IT'S JUST A VERY FUNNY THING.

THOSE EXPERIENCES AT A VERY EARLY AGE GET STAMPED INDELIBLY AND THEY ARE ON ME.

SO THAT WAS A LONG-WINDED ANSWER SAYING YES, I COULD BE THE CEO OF THE COMPANY AND STILL WALK INTO A ROOM AND KNOW THAT I'M A LITTLE LESS POLISHED THAN THESE PEOPLE.

I AM A LITTLE LESS THIS AND A LITTLE MORE THAT AND THAT REMAINS A PREOCCUPATION FOR YOUR WHOLE LIFE.

I'LL TAKE IT TO MY GRAVE.

>> LLOYD, THANK YOU FOR JOINING US.

>> THANK YOU WALTER.

I ALWAYS LOVE TALKING TO YOU.

THANK YOU.