Blankfein, who’s been Goldman CEO since 2006, steered it through the fallout of the global financial crisis of 2007-2008. He said the experience had taught him to accept that the worst thing you can imagine will inevitably happen.
“Most risk management is really just advanced contingency planning and disciplining yourself to realize that, given enough time, very low probability events not only can happen, but they absolutely will happen,” said Blankfein.
“The definition of infinity is that you wait long enough, everything happens.”
Blankfein said in his view, the major problem during the financial crisis was that ordinary people were banking on the fact that the scenario they feared the most, the collapse of real estate prices, was not a possibility.
“Once you think that something is improbable and everybody thinks it, people modify their behavior in a way that makes it more probable,” said Blankfein.
“Everyone thought it was so improbable that so many people would default on real estate, it actually created a greater probability that it would [happen] because more capital flowed into that sector.”
Full article: Goldman’s Blankfein: The Worst Case Scenario ‘Absolutely Will Happen’ (Business Insider)