In the Vault: Turning Developers Into Clients With Marco Argenti From Goldman Sachs
In this episode of In the Vault, a16z General Partner David Haber talks with Marco Argenti, the chief information officer at Goldman Sachs, about bringing fintech processes into financial services, turning developers into clients, and how AI is a major inflection point in the history of technology.
“In the Vault” is a new audio podcast series by the a16z Fintech team, where we sit down with the most influential figures in financial services to explore key trends impacting the industry and the pressing innovations that will shape our future.
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Episode Transcript
This transcript has been condensed and edited for readability and clarity.
David Haber: Marco, thank you so much for joining. I had the pleasure of working with you during my time at Goldman, and I was really excited to chat with you. You’ve had a fascinating career, really at the forefront of a bunch of technology platform shifts. Maybe you could walk us through a bit of your career arc, what were the key learnings from each of those different periods, and how does that inform what we’re going through today?
Marco Argenti: I’ve been in technology pretty much all my life. I’ve tried different fields within technology, but it was always technology-centered. And since I was a kid, I was fascinated by computers, I was fascinated by the fact that you could have this impossibly malleable state machine that, potentially, you can get it to do whatever you wanted.?
And so all that within a computer, in a completely virtual world was something that made me dream of something bigger. I started just with regular software development, doing software of different kinds. And then I started selling. I had my own startup, but then really it was the internet that changed everything. And as a result of that, I moved to Canada in the ’90s where I was fascinated by this idea of the limitless distribution of knowledge, which is something that we will reconnect when we talk about AI.
David: Totally.
Marco: And so I started an internet company in the ’90s. We started one of the very first online stores. In fact, we launched a little bit before Amazon. Obviously, we weren’t as successful. Timing was great, something else about it wasn’t. And that was relatively successful. And also in collaboration with Microsoft, we built some of the largest online stores back then in the U.S. But then mobile was the next obvious thing. And it was really early days. We’re talking about 1999 or so.
I actually moved to Europe where a friend of mine was doing an IPO of a company and he acquired the mobile company almost as an afterthought. And so I became the CEO of that company, it was called Wireless Solutions. And then we started to really go down the path of mobilizing the internet, creating infrastructure for others to create mobile websites.?
So, then I went into apps. I went into this idea that the mobile web was probably not rich enough for a small screen and for the experiences, so we started actually the first app store that I know of, the Ovi Store, which got pretty successful because of the install base. So, we were doing something like 70 million downloads a day or something like that. So, it was actually quite a big thing. And I guess that was one of the biggest learnings of my career, which is, again, you need to be the biggest user of your own product. And the second one is that sometimes, little subtleties in user experience have a disproportionate effect. Obviously, at that time, I was dealing with a lot of app developers. Apps require a backend and those developers were really great at doing the application on the phone, but then it was actually hard for them to do a backend, to stand up at the server side of things. Sometimes apps had literally a server under people’s desk as a backend.
So, this whole idea of a computer on tap was so fascinating for me. And so when Amazon called me and they’re like, “Hey you want to come with us and do you want to actually start the mobile services, backend business within AWS?” I jumped to the opportunity. And that led me to start to talk to a lot of companies that were in manufacturing, because we were getting into IoT and supply chain, and then I started to talk to CEOs about the whole idea of digital transformation.
I started to feel like it’s pretty clear that technology is really moving from the back office into the center of the strategic agenda for CEOs. I was talking to the CEOs of Volkswagen, Philips, and other companies, and all of them, the common theme was, “We’re starting to actually be limited by our technology capabilities with regards to our competitiveness and we need to really form and train a muscle, a technology that is just as good as any other company, including technology company.” So, then I met David Solomon at re:Invent, which is the AWS conference where he was speaking, and then we started to talk and it was pretty clear that Goldman had the same vision that, especially in the world of finance, technology will play a disproportionately important role. And that’s what led me ultimately to join Goldman in 2019.
David: Maybe you can talk about that transition, coming from a business like AWS to financial services, which I think was new for you. What were some of your expectations versus reality?
Marco: One of the big things when you do a transition from a tech company to a company in a different sector is whether that sector is regulated or not. And, of course, regulation is something that can be a barrier and you can think about that as slowing innovation. But then I learned maybe from my control theory background, which I studied in university, that you can actually use controls at your own advantage to gain velocity in the long term. So, that was a big learning and adaptation where regulation and other controls are actually very important for sustained speed of innovation. So, you might be slow at the beginning, but then eventually you’ll gain velocity. And so that was something that, I think, anybody that comes into a regulated industry has to realize.
The other thing is really introducing in the engineering team the concept of working backwards from the customer and really turning it into a principle that everybody can understand. So, we developed this leadership talent for engineers, the first of which is build with purpose. And it sounds fuzzy if you talk about it and, kind of sort of obvious, but really this idea that in order to be good engineers needed to really sit down with the businesses and really deeply understand the why. Because engineers they tend to start from the how. So, if you get a bunch of engineers in a room for example, if they need to do a web project, you can count the seconds before the discussion on frameworks come up. Right? And that’s a good discussion, but not a discussion I would start from.
So, this idea of saying, “Okay. We need to ask ourselves fundamental questions. Who’s the client? And really what is the problem, the opportunity that we’re trying to solve? And then how do we measure that? How do we know that that’s actually something that the client will like?” Those questions and then having them written into narratives, fundamentally started to change the culture. Because engineers tended to get really fuzzy requirements from the businesses and then kind of go into sort of a series of approximation. Whereas this idea of shifting left and actually writing down a plan that is very solid that any business person can understand before you write the first line of code. And so this idea of introducing the concept of platforms was extremely important to speed us up.?
David: And I recall that being actually a really important message I feel like that you brought to the firm, which was we’re gonna make the developer our client. And I think it was one of the first times that Goldman began thinking about the developer as a client. Maybe talk a little bit about that shift.
Marco: Yeah, and that was definitely new. Remember when I said that you need to understand as a leader what your clients are thinking by trying your own product. And I think also today, given the importance of developers, I think it’s also responsibility of a leader, not only technologists to try to really understand what developers are thinking and what they want and how they think and meet them where they are externally and internally. Because sometimes, even externally in your clients, the decision makers are not only the business people, but are also the choice of technology, which leads then to the choice of a service, is done by developers.
And so you really need to think of them as decision-makers even when you’re dealing with an external client. And we’re seeing that more and more every day.?
David: Goldman famously had built a lot of internal systems. How do you today think about leveraging internal engineering resources in terms of building software??
Marco: So, at the very beginning, we introduced our digital strategy tenets, if you remember, and one of them was look outside first before you build. Just because you have a bunch of smart people, you don’t necessarily need to build everything. And I think to me, the the acid test is where do I actually want to employ my best people and my best resources, into which kind of tasks? And is that something that will create some form of competitive differentiation or contribute to the growth of the business, etc.? If the problem is already being solved by someone else, there isn’t really a good argument to actually build it yourself. And also it doesn’t just apply to vendor software, it applies to open source in general. Obviously open source is an incredible wealth of intellectual property where there is tens of thousands or millions of people that have actually spent hundreds of millions of hours in figuring out some of the most difficult problems.
The first questions is, “what is out there that could actually give us this functionality?” And then, of course, you go into a very rigorous selection process because you need to make sure that the solution is widely adopted, that is supported, that is safe, is secured, etc, etc. So, in many cases, we decide to use a vendor or we decide to use open source, and then we build the scaffolding around it to make sure that, A.) it integrates with our systems and with our data, B.) it operates in a compliant and safe and secure way. But then at the core, the functionality, it’s something that you can leverage to make sure that you’re removing this undifferentiated heavy-lifting in a way and really focus on things that are creative to your business. Open source is something that, of course, you need to be careful about, you need to be extremely selective, but it can actually help a lot.
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David: It feels like we are entering a new platform shift with AI. How are you thinking about generative AI? What is Goldman Sachs already doing with it?
Marco: I would start by saying that, despite all the skepticism that I tried to apply and trying to suspend suspension of belief in this case, but I’m pretty profoundly convinced that at this point, that we really hit a major inflection point in technology that has really profound impact. There are societal impacts and business impacts. In my history of 40 years, it’s probably bigger than any of the revolutions that I’ve seen. Also, because of how quickly that became almost an essential tool for everyday life for a lot of people that I know, including myself and my daughter.
There was a time in which in order to study a subject, I needed to physically go to a library, and then it took me hours before I could actually read something. If I didn’t understand the subject deeply enough, I had to match myself to the right book, which was not easy, and then climb this ladder of knowledge until I was finally equipped to understand a certain subject.
Physical barrier removed, but knowledge barrier was still there from the age of Gutenberg to now hasn’t really changed. It has changed now. That’s why I sometimes compare the invention of AI to the invention of the printing press in a way that it removed a major barrier. First one was a physical barrier. This one is a knowledge barrier. Your prompt most often determines your level of knowledge and the AI actually explains things to you that are attuned to that level of knowledge. And then you can climb that ladder by asking more and more questions and interactively the AI will get deeper and deeper into a subject. It’s almost like having a personal tutor that can be available now to billions of people, which is kind of unprecedented. And I think that will have profound repercussions on the way we shape the education system and the way we shape just the access to knowledge, but also how quickly you can ramp up and become proficient in your own job.
We think about it in Goldman as a sort of a spectrum where on the left side, which is the more immediate opportunity, it’s the impact on productivity. And I think that could be pretty significant, possibly one of the potentially most significant productivity enhancements that we’ve seen. And then you walk the spectrum all the way on the right side where you have more like alpha generating or growth generating use cases, which might not return on investment right away because you actually might need to train your AI, you might need to make it really understand your business and we require investment.
One of the things I am really keen on is, hey, this is something really new that we profoundly do not understand. Nobody really understand AI profoundly yet. The things that we don’t know are probably more than the things that we know. So, we need to sandbox that into an environment that will allow us for safe innovation and safe experimentation. So, we have set up a working group or a committee that reviews all the ideas where we selected out of hundreds of ideas, we’ve selected about 15 or 19 actually at this point that we’re at different phases of piloting.
I think the very first thing that we’re actually starting to be using AI at scale is developer productivity, back to developers, right? And we’re seeing the developer productivity go up can be anywhere from 10% to 40% depending on the developer, depending on the use case, which is massive, even if it stays at 10%. But then also it has a direct impact on developer happiness, which by the way, you and I know that it is one of the most important factors for productivity is pretty well understood. And then, of course, it’s a journey because at the beginning, you implement tools that are generic, but then you start adapting the whatever copilot type of AI you’re using for your developers with institutional knowledge.
David: People may not know that Goldman has thousands of engineers. So, even just the 10% to 40% impact on productivity can have a significant impact on the bottom line.
Marco: But then you can extend that to how many of our 45,000 are actually people that are in the knowledge business. I mean, it’s most of them, right? And so then when you started expanding to that, to bankers, to investors to personal, you know to private wealth managers, and then even eventually to register investment advisors. So, that knowledge, it’s so powerful because, at the end of the day, it changes not only your own productivity, but also your dynamics with your clients. And then eventually will actually become the new normal in the way actually clients expect to deal with you and actually can create the competitive differentiation on the way we actually create products and make decisions and create strategies and so on and so forth.
David: I’m curious what you think AI’s impact might be on financial services as an industry maybe 10 to 15 years from now.
Marco: It’s funny because this is one of those things in which it’s even hard to predict the next six months, right?
David: It’s moving very quickly.
Marco: With the speed that things that are evolving, and there are still very big open questions right now. First of all, it will be a sort of a table-shifting type of phenomenon where it will create new leaders, it will reinforce a position of some of the leaders that are actually able to be at the forefront of this and be able to leverage that in the proper way. So, I think it will create differentiation, for sure. I think one trend in financial services has been that speed is becoming more and more of a factor. Price is important, but how quickly you can price is also very important, especially with some clients. And the switch from batch to real-time and more like having a real-time business where you need to make decisions really fast that you need to settle really quickly, that you need to go through front to back extremely quickly.
And so all that, I think, this shift towards more of a real-time business is something that AI definitely will accelerate. The ability to have very complex models of the world and of the economy. I think the relationship with clients will change. And as I said before, the expectation of clients of you being extremely good at providing personalized advice, personalized portfolios, understanding deeply what are the repercussions of certain events in your investment strategy, and being able to provide that kind of information at a speed and at a level of quality that is probably unprecedented.
David: Marco, thank you so much for the time. Always a pleasure.
Marco: David, thank you so much.
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