Is Goldman Sachs cooler than Google?

In a piece by CNBC titled, "Has Google lost its cool?" Sam Biddle, editor of Valleywag, claimed, "Google is Goldman Sachs with bean bag chairs." It was a critique of Google becoming too large to be risky, volatile, and thrilling. It was also a critique that sparked the imagination of R. Martin Chavez, who had been Goldman Sach's CIO for one month at the time. Chavez reflected on his tenure from "strat" to CIO in a Harvard University talk last week.

At Goldman Sachs, Chavez has been involved in three major initiatives that have dramatically changed the business model of the company, including product, product systems, process, organization design, new customer segments, and customer engagement strategies:

(1) The Securities Database (SecDB)

With his "strat" colleagues in the 1990s, Chavez dreamed of a place in which every single risk to which Goldman Sachs was exposed would live. This Securities Database (SecDB) now computes 23 billion prices across 2.8 million positions and 500,000 market scenarios to measure risk and analyze the price of almost any security in the world. For years, this system has been an industry-leading competitive advantage for Goldman's internal operations, but just last year, Goldman started a new chapter of leverage for this advantage: giving it away. While not open-sourced or available to the public in any way, Goldman aims to grant access to SecDB to its most sophisticated clients through its most powerful apps, Strategy Studio and Marquee.

Internally, this multi-decade investment in analytics has had an affect on the organization. 600 people used to work on a vast trading floor, yelling and slamming phones like you would see in popular Hollywood movies. Now, Goldman has just two people trading equities while 200 software engineers work on systems that, in effect, do the job on their own.

(2) Marcus.com

With trading floors now nearly obsolete, Goldman is converting the space into project-team spaces for more internal disruptions. In just 12 months, one of these teams birthed a completely new analytics-based product: Marcus.com. Marcus is Goldman's new attempt at a consumer-facing product; this one allows individuals with prime credit (credit scores above 660) to apply for personal loans up to $30,000 to refinance credit card debt or pay for a household project. Chavez's vision here is seamless loan approvals without any human interaction, asking less questions (more correlated to financial trustworthiness), approving in seconds not days, and transferring funds in the same day, if at all possible.

For any large company, 12 months between conception and launch is lightning fast. Goldman was able to accelerate by hiring external talent with retail experience (and thus being very clear with themselves that serving the public was not Goldman's demonstrated area of expertise), giving them adequate team space to work intensely without disruption, and stitching together existing open and closed platforms rather than starting from scratch.

(3) Blockchain

Blockchain is a concept invented by those working on Bitcoin; it is an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way. For Goldman and other large banking institutions, this could mean tremendous cost savings and security for large, international, risky trades. With this incentive, Goldman has been looking to invest in the fintech startup that is going to crack this opportunity. First, Goldman invested in R3 CEV, but then shifted its investment to Axoni when Axoni demonstrated successful trials of its blockchain solutions. Axoni is also targeting less funding ($60 million versus R3's $150 million goal). Though there are no tangible results from this investment yet, it does indicate Goldman's willingness to evolve the traditional financial industry, at least where large cost savings and minimal investment are involved.

Through all of this activity, Chavez and Goldman Sachs demonstrate a very strong ability to challenge the status quo within the firm. They are playing with core tenets of the Goldman business model, trusting in math and computer science to shift its products, organization design, and customer targets. But, does this mean they are cooler or more innovative than Google? Reviewing Google's top 10 announcements in 2016, there are a few low points. Most of Google's innovations are a mix of acquisitions of external technologies, incremental iterations off of existing products, and near copies of competitors' products. Perhaps Biddle was right.

But, there is one major discrepancy between Goldman's business approach and that of Google: open innovation. Google consistently invests in new technology platforms that, in turn, spur millions of new applications external to the Google organization. To be clear, these are financial investments not donations, and Google certainly expects a return on these investments like Goldman; however, Google is donating opportunities for creativity across the tech world to disrupt the information economy through these platforms. Blockchain could be Goldman's only external investment in fintech platforms that could benefit the industry more than itself, if no exclusivity clauses are involved. And even then, the size of that investment is a mere fraction of its CFO's annual compensation. Where is Goldman's willingness to invent a new financial industry, not just evolve its ability to stay on top of the current system?

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David Sylvia, this post's author, is the founder of Crusoe World, a brand consultancy with all-in-one life and business strategies for leaders of a new world. After traveling to 23 countries and growing billion-dollar brands, David and Crusoe coach bold leaders with life advice, business model, and brand story frameworks so one day they may make a mark on the world. #findyourstory and #exploremore