[captioning made possible by bloomberg television] from our studios in new york city this is charlie rose. In his state of the Union Address this year president obama praised Small Businesses as the lifeblood of our economy. Semple initiatives are assisting entrepreneurs to grow their companies. One of them is called 10,000 Small Businesses and led by Global Investment bank Goldman Sachs. There was a conversation held today at bloomberg headquarters and i moderated a discussion between the c. E. O. Lloyd blank fine and the former mayor of new york city who is the founder of bloomberg, that is michael bloomberg. We talked about the importance of Small Businesses to the economy. All big businesses started out as Small Businesses. You wouldnt have those if you didnt have the Small Businesses. Small businesses give you the opportunity to try new things, from the economys point of view, from societys point of view, new inventions really come out of Small Businesses. And then theres the Economic Impact of generating jobs. If you were to go to Goldman Sachs with how many employees do you have . 32,000. Or bloomberg with 16,000. Exactly half that number. There is a structure. You just cant run a business of that size without a lot of structure. And there are a lot of people that wouldnt ever get through the screening process unfortunately at either of our companies because they have nontraditional educations. They have stuff on their resume that just big businesses would have difficulties dealing with. You have people need flexible hours. People have different set of skills. Small businesses can accommodate people who are different. And i can speak for lloyd. I think both of us have very similar backgrounds. We were sort of young and up and comers and wise ass is not the decontraception but both of us were not traditional following a corporate path. We both did he was a commodity trader. I was an equity trader. We did what we did and we looked for organizations that allowed you to be yourself. And most companies dont do that. Of any size. The Small Companies do. And now the struggle for both of us is to make sure that in our companies, to the extent humanly possible, we have those career paths for the nontraditional person. But nevertheless, i think it fair to say its the Small Company that can adapt to the needs of the employee, the bigger the company is, the more the process has to go in the other direction. And you would add to that . Im sitting here and im when i listen to mike im part of the audience, too. Because im thinking i feel a little bit im glad to be in his company. Because the fact of the matter is mike, the mayor works for a Company Called bloomberg. I work for a Company Called not a blankfein in it. The fact of the matter is a little bit of envy there . Well, of course envy. Who wouldnt . You would have to be crazy not to. But what i do is appreciation and also appreciation of the difference. And thats something that the mayor has more in common with the entrepreneurs in this room than i have with the entrepreneurs in this room. I joined a company in full swing and was a great company. Even before i got there and im thinking about how to maintain it and a little a professional manager. The mayor like the entrepreneurs in this room took a lot of risk and took a deep breath and went all in. And knows a little bit about the trials and the tribulations and the sweaty palms that you get and of course youre in this big building now. And its hard to realize there was a time when the mayor was like the people sitting in this room and i never was. Do you remember what it was like sitting in this i gave a welcome this morning and talked about the first day, my biggest accomplishment was a getting a small refrigerator and a coffee pot and some milk and instant coffee. The second day we had four people. And it grew from there. You want to describe how you got into Goldman Sachs . Well, i got into i got into Goldman Sachs really by acquisition. Because i had gone to now, i grew up in east new york. The projects. And i did go to very fancy schools along the way but my resume really wasnt up to a wall street set of resumes. I went to college, law school and practiced law for a while and like a lot of people in that era wanted to get a job in finance and new york being a finance town. Everyone youre running into being like that sounded exciting and fun. I applied to nalm of wall street firms. Including Goldman Sachs. And got turned down by all of them. Including Goldman Sachs. Which is why to this day i admire the firm that i run today. Because they have the good sense they had the good sense. But i did the only job i could get that kind of had related to wall street was jay ahren and company which was a Commodity Trading firm and on the prestige meter between equities and fixed income and commodities was just above the toaster. Compared to the other jobs. But i got a job there. And soon that firm got acquired by Goldman Sachs. Thats how i got into Goldman Sachs. And just for the record, when i got out of school, instead of going to vietnam i applied to two firms. Both offered me a job. Goldman was one of them. I turned them down and went to Salomon Brothers. Was that a close between Salomon Brothers and vietnam . [laughter] yeah. And then you got fired. And then i got fired in 1981. Yeah. Best thing that ever happened to me. But ive always thought tomorrow is going to be the best day of my life. And i really i cant remember even the day i knew i was going to get fired i had never been fired before. And i wanted to see what it was like. [laughter] i just i have nothing in common like going in the deep end, isnt it . I have nothing in common with people who are looking at the glass being half full. It is what it is. That was yesterday. What are you going to do about it . Just tomorrow. And its always been a successful formula. I think most people are successful. Every once in a while you buy a Lottery Ticket that gives you 100 million. But most people optimists go out and create things. And ive always described a good salesman is a salesman that if the door is slammed in his or her face, she or he goes to the next door believing that they are going to make the sale. A great salesman knocks on the same door. Comes back, yes. Pessimistic entrepreneurs is an oxymoron. Yes. But i suspected that lloyd has the same quality you did even though he was not founder of Goldman Sachs in the sense running the firm with a kind of risk taking, entrepreneurial passion. And its a balance between we are very regulated world. Litigious world. Theres nobody does anything on their own. Lloyd answers to a board. He answers to his employees. He answers to his wife and kids. We all answer to lots of people. And who do you answer to . Is diane in the room . My girlfriend. Just gravity. But its the balance. How do you keep it open to the next Rocket Scientist thats going to come in and do something that just no chance this working. And yet it is. At the same time, you still have the obligations and the bigger you get, it is harder to i was talking to sam pomosano and they have 700,000 people in i. B. M. Or Something Like that and how do you keep the spirit going . And i. B. M. , if you are a computer scientist, and you want to really forget about the commercial side, you want to really i. B. M. Is today the old bell labs. This is where the great ones, theyve been able to keep that culture. For 100 years. Thats exactly right. They had to go through a transition, too. There was a while that they were slowing down and brought in. Everybody does. Who isnt an entrepreneur where everything is a smooth ride . And you go through these things and you get criticized and you have to have a thick skin. Yeah. Youve been there . Ive been there. And by the way, you dont you dont buy a thick skin. And you dont even know you have it until somebody starts to try to puncture it and you discover what youre made of. But there is some value in terms of understanding what mistakes youve made. Or what successes you have had to understanding the elements of them so you can continue them. And learn from them and take although i think in business and in life, any decision that is reasonably well thought out and presented to others correctly and followed through on probably doesnt make any difference whether it was a or b decision. But the big problem is when nobody makes a decision or that just not even thought out or they make a decision with no way of implementing it. But theres no right and wrong answer. And its not like a physics problem where you can replicate the experiment a number of times to see which is better, a or b . Its over and done. Life gives you mid course corrections whether you want them or not. So youre going on this area and its wrong and you know its wrong instantly. People mark themselves for the opportunity. You knock on the door. The door slams in your face six times and you change your pitch. But at the same time, when you look at the quality of people that youre hiring, at Goldman Sachs. Tell me what youre looking for. Well, i listen to the mayor talk and this is one of the things, we do get a little bit channeled at Goldman Sachs. We have people who came up a certain kind of way. Recreating themselves in the next generation. Which by the way, i look at i told you my background. My c. F. O. Of our firm went to rutgers and my president went to american university. And we and we only go recruiting at wharton and harvard. These things dont always work that way. And sometimes you get overly channeled and theres a bit of laziness that seeps in. Because its so much easier to just fall into that pattern. I would say that the realm of the people who do well in our operation is so broad that you have to narrow it artificially and it has you excluding a lot of people that are nontraditional the way the mayor described it. Mike, did you have a management philosophy having to do with performance of your employees . And how you how you both quantified their achievements or failures and how you inspired them to go beyond . I think you can attract good people if you do two things. One, youve got to give them authority to go along with responsibility. I dont know anybody that wants to take a job where they dont where theyre not going to have the opportunity to do something. Right. And i thought the administration that we put together in new york City Government, we attracted people, including very senior person from Goldman Sachs. Bob steele. Because you gave them the authority, they werent just going to be spokesmen for the head office. I think if you look at president ialed a mingses, and its not just obama, but most president s modern day, all the decisions are made in the white house and then out in foggy bottom or the pentagon or wherever they implement. But they dont have a lot of authority to make decisions. And i think those are unattractive jobs and wouldnt want to take it. The other thing is you always want to work in a company where the person that you work for has your back. As they would say. If one of our people screws up, City Government or here, and it was a rational thing, they try and just didnt work. Or just said something stupid. We all say things stupid. If youre going to shoot everybody that said something stupid, there would be nobody left. And so i want to make sure people see me walking down the aisle with that person telling a joke, laughing. And having a cup of coffee. And because people have got to understand that if they dont try or if they dont fail, theyre going to be how do i phrase it, that they cant fail and succeed. The truth of the matter is you want people to try skiing double black diamonds and ski double black diamonds youre going to fall. If you dont fall you arent skiing the right steep slopes. And you arent challenging yourself. You arent challenging yourself. So you got to have some confidence that theres somebody behind you. And i think too many in government, they never stand behind you. Thats they throw somebody to the winds right away and read in the paper that soandso, and i thought Kathleen Sebelius was undeserving of getting unceremoniously fired in a nasty way. No question that obamacare, software didnt work and it wasnt implemented the right way. Ok. They screwed up. But the whole question is obamacare something that the country needs and finding a way is to make it work, and if it doesnt then we shouldnt have it. But if it does its not going to be perfect and you cant shoot the people who delivered it not perfectly. And feel the same way about shinseki . I dont know just the little bit i read in the paper. It is true the head person is responsible. On the other hand, the head person was not the head of the v. A. The head person was the head of the country. And when we have this, weve got to fire the head person, they will why arent you resigning . I take full accountability. Hes fired. [laughter] just in general. You have to be careful. In leadership. Not that particular instance. But i say in general, you have to be to the point you have to be careful. I just a corollary with what the mayor said and an embellishment you have to be as a leader, you have to be very careful between learning from your mistakes somebody made this point about going out and learning. Right. Versus being a secondguesser. And letting the way things turn out, inform your view in terms of the criticism youll give somebody who made the decision before the events unfolded. So in other words, now that i know it was bad and this software didnt work, now that i know this, you should have known. But really what you have to do is put yourself in the shoes of the person when things were foggy. And you didnt know. What kind of decision . If you hold people accountable for information that could have had it veers from a learning experience into secondguessing and who wants to through that process . And i think that one of the things problematic in the country today is the process of taking the risk the personal risk that someone takes and taking a responsible government job. Even if you want to serve. Because its such a dangerous place to be, to be secondguessed and held up and potentially vilified for things not working out well even though you made a great decision based upon the information that was available at the time. And at the end of the day youre going to get people to fill all these jobs. But it might not be the people you want. I want to come back to a point you raised and its often expressed dont let perfect be the enemy of good. The idea is you have to be decisive. You have to make decisions. Yes. You cant just and thats the executives job. And the legislators job is different. What i find offensive and you see it every day, when you read the articles in the paper, congressmen or senator says mr. Blankfein, isnt it an outrage, shouldnt you feel ashamed that you served Vanilla Ice Cream in your cafeteria on a day that the president made National Strawberry ice cream Appreciation Day . And then the guy leaves the room. But you see the congressman saying that. And then when lloyd is trying to answer the question, the congressman gets up and walks out. He doesnt care. He was told and sometimes they just arrested from the National Strawberry ice cream manufacturers association. The question. Often the questions arent questions. Their accusations and the whole idea is to get visibility, inches, minutes, whatever. And they dont want an answer and dont know what theyre talking about. Theres a City Council Person and wont tell you who but they are in the pocket of one union. And the person comes in and the city council, and takes the question and reads it. Not sometimes fumbling over the words. And then leaves. Thats unfortunately the society we have. But the executives dont have that option. You make the decision and then you got to learn to live with it. And very small difference between being pigheaded and having the courage of your convictions and knowing when you gave it the Old College Try and it didnt work out and time to change and go on. When is it you just have a feel. What are the lessons you learned during the crises you faced during the heart of 2008 . Well, aside from the content of the underlying things and just taking it as a lesson in crisis as opposed to the specific one, id say you learn that people and what people you know, the lolet that people have, and the work ethic that people have and the sense of belonging and ownership that people have is hugely important. And i think its a big takeaway. Myself and other people in this room that you cant do things by yourself. And you also learn in a crisis what people are made of. There are people that i work with who world class athletes, manly men. Women, strong women. And held themselves out and when the crisis happened, people, metaphorically curled up in a fetal position. Then we had people who worked for us that didnt look like they could climb a flight of stairs and they were brutes. And they were stalwarts and worked out well. And you just dont always know whats whats going to happen. But its a very, very big difference how people behave. And ill say the most important lesson, one notch more important than that, you learn about other people. And people learn about how you act in a crisis. But the most important thing is you learn about how you act in a crisis. And its very important to know who you can count on, and who you can trust. But the most important lesson is you learn the stuff that you yourself is made of. And thats what either