The First 5 Lessons We Teach At Goldman Sachs (former $2m/yr VP explains)

Summary

In this video, a former Goldman Sachs Vice President shares key lessons that shaped his mindset and success. Emphasizing the importance of long-term greed, the ability to make quick decisions under pressure, and thinking probabilistically, the speaker reveals how these principles led to his $250 million business. Drawing from personal experiences on the trading desk, he highlights the importance of understanding incentives, managing risks, and learning from losses. The speaker encourages viewers to make smart, calculated decisions and build systems that serve them beyond short-term gains.

Takeaways

• 😀 Understand the importance of long-term thinking. Choosing long-term gains over short-term profits builds sustainable success.
• 😀 Learn to manage risk and make decisions quickly, especially when facing high-pressure situations, as seconds can make the difference.
• 😀 Think probabilistically: Evaluate risks and rewards based on the likelihood of different outcomes, not just the immediate results.
• 😀 Success often requires the ability to make decisions with high probabilities of success, even when the outcome is uncertain.
• 😀 Life is full of 'one-way' and 'two-way' doors—understanding the difference helps you make better decisions and avoid irreversible mistakes.
• 😀 When faced with a loss, focus on minimizing the damage instead of hoping the situation will improve on its own.
• 😀 The importance of knowing incentives: People’s behavior can often be predicted by understanding their motivations and incentives.
• 😀 Make decisions without waiting for the universe to send you signs. Act quickly and adjust your course if things don't go as planned.
• 😀 In trading and business, learn from your mistakes, recalibrate, and keep moving forward. The key is in the process, not just the outcome.
• 😀 Trust that decisions with a clear and rigid process over time will lead to more positive outcomes than relying on short-term, emotional choices.

Q & A

What is the key lesson taught at Goldman Sachs that can transform someone's life?

The key lesson is learning how to think long-term and be strategically greedy, focusing on building sustainable relationships and business over quick wins. This mindset can greatly influence both personal and professional success.

Why did the boss at Goldman Sachs tell the employee to unwind the trade, even though it made $2 million?

The boss emphasized long-term relationships over short-term profits. By exploiting the client for immediate gain, the firm risked damaging trust and losing potential future business, which could have been worth much more than the $2 million.

How does thinking probabilistically apply to decision-making outside of trading?

Thinking probabilistically means evaluating situations by considering the odds of different outcomes. It helps in making high-quality decisions by weighing risks and rewards, even in everyday life, not just trading.

What does being 'long-term greedy' mean in the context of the Goldman Sachs culture?

'Long-term greedy' refers to prioritizing sustainable growth, building trust with clients, and seeking consistent returns over time, rather than focusing on short-term profits that could undermine future opportunities.

Why is it important to make quick decisions, according to the experience on the trading desk?

In high-stakes environments like trading, decisions must be made quickly because delays can lead to significant financial losses. The ability to assess opportunities and risks rapidly is crucial for success.

What lesson does the author share about the importance of understanding incentives when making decisions?

Understanding people's incentives can help predict their behavior. Recognizing the underlying reasons for decisions, especially in trades or negotiations, allows one to avoid being the 'sucker' and to make smarter choices.

What is the difference between a 'one-way door' and a 'two-way door' in decision-making, as explained by Jeff Bezos?

A 'one-way door' decision is irreversible and requires careful consideration before proceeding, while a 'two-way door' decision can be easily reversed if necessary. Most decisions in life are 'two-way doors,' meaning they can be adjusted if things go wrong.

Why is it important to 'hedge' in a trading situation, and what mistake did the author make?

Hedging helps manage risk when you're unsure about the market conditions. The author initially thought they made a good deal, but after attempting to hedge, they realized they were misinformed and had become the 'sucker' in the trade.

What does the author mean by 'minimizing damage' in situations where things go wrong?

When things go wrong, the key is not to panic or wait for the situation to improve, but to take steps to minimize the loss and move forward, as staying stuck can often make the situation worse.

How does the experience on the trading floor help with decision-making in everyday life?

The experience on the trading floor, where quick decisions are essential, teaches the importance of acting decisively, managing risks, and adjusting when things don't go as planned. This skill is transferable to all areas of life, where timely and informed decisions are often needed.