Goldman’s CEO Wants to Get Paid

I sometimes talk to students at colleges or business schools, and a question that one often gets asked in that circumstance is “what should I do with my life?” The venues being what they are, the way that question comes out of a student’s mouth is often “should I go into private equity?” I don’t know! Nothing in this newsletter is ever career advice. But my heuristic is that, if everyone in your graduating class is trying to get on a clearly defined and rigidly structured career track that leads to the same place, then succeeding on that track is a good safe prestigious well-paying thing to do, but maybe, you know, the peak is at least in sight? The way you make a lot of money in finance is by spotting market inefficiencies that no one else has seen; everybody kind of knows about private equity now.

More broadly, you could ask the question: “Is private equity a structurally lucrative sort of business, or did the relatively recent discovery of private equity turn a bunch of people into billionaires?” I wrote last month about KKR & Co.’s partial shift from doing traditional leveraged buyouts to making “strategic” acquisitions of companies that they planned to hold for the long term, and I suggested that this shift — along with the broader trend of private equity managers getting into private credit and becoming more general “alternative asset managers” — might have something to do with the business model reaching maturity. I wrote: