David Solomon ’84, co-head of Investment Banking at Goldman Sachs, returned to Hamilton on Oct. 2 and spoke with students on the role finance plays in the world. Solomon, who majored in government at Hamilton, described how finance had always fascinated and intrigued him because it “helps [him] put in perspective how the world is changing, and how all of those changes affect all of us and what we do.”
Investment banking, then, is an interesting field because you have to deal with very complex questions that don’t have right answers, merely judgments and opinion. He outlined three such questions that people in finance are dealing with today, and how they may develop in the future.
First, Solomon discussed China’s unique economic transformation from a mostly agricultural and self-sustaining society to an urban consumer-based economy. In order to accomplish such a transformation in a relatively small amount of time, the Chinese government had to make large investments into city infrastructure. Now, the government must step back and make room for consumer spending in order to sustain the economy. Solomon remarked that China has been moving in this direction for some time, most notably by privatizing previously government-owned businesses. Despite the current volatile state of the Chinese economy, Solomon firmly believes that their economy “will surpass that of the United States within the next 20 or 25 years.”
Next, Solomon addressed a growing myth that we will run out of oil in the near future. He argued that at every point in the past 40 years when oil prices skyrocketed, it was not due to a permanent shortage of oil, but rather due to other factors that prevented or slowed the exportation and refinement of oil. Prices have been rising and falling consistently in the recent past, and there’s no reason to start panicking about the end of oil, especially due to the U.S.’s amount of untapped oil fields.
Third, he discussed technology and how its accessibility is transforming the way everyday people interact with others. It’s important to remember, Solomon argued, that technology is growing and evolving at a rapid pace, and that many of the businesses and ideas we think are permanent will be outperformed or will become irrelevant in as little as a few years.
Solomon pointed to Facebook as an example. Facebook is currently the 10th highest valued company (around $300 billion), but some are starting to think it’s not worth that much because its revenues won’t drastically increase, and are relatively low at the moment for such a high valued company. Furthermore, as we become more efficient in technology manufacturing and application, a natural consequence is that we make it cheaper and that it is installed to replace some types of workers. Both of these issues require, then, that we make some sort of adjustment in order to maintain a sustainable consumer-based economy.
Finally, Solomon addressed finance as a career. He advised the students in the audience to prioritize doing something that is exciting and interesting as soon as possible, rather than taking uninteresting jobs in the hopes that they will eventually become interesting. Further, he reflected on his time at Hamilton as pivotal to his success in finance. Solomon remarked that Hamilton and liberal arts educations in general force students to learn effective communication skills, which are some of the most important and applicable skills in any industry. Moreover, he argued that the value of liberal arts educations may become increasingly contentious in the next 20 to 25 years, but that it’s extremely important to teach students how to think, question, persevere, communicate and interact with people.