I want to introduce a concept I have been thinking about for a while, and that Goldman Sachs just demonstrated with unusual clarity.
The concept is volatility-positive. A business is volatility-positive when its revenues are positively correlated with market disruption: when uncertainty, dislocation, and chaos are structural features of its revenue model rather than threats to it. When the world breaks down, a volatility-positive business makes more money.
Goldman just reported its second-highest quarterly profit in firm history, in the middle of an oil shock, a naval blockade, and the most geopolitically volatile quarter in years. Most companies had a hard quarter. Goldman made $17.23 billion in revenue, posted a 19.8 percent return on equity, and returned $6.38 billion to shareholders.
This is not luck. It is architecture. And understanding the difference between these two things is, I think, one of the most practically useful frames available for analyzing businesses, investment portfolios, and careers in the era we are entering.
What Volatility-Positive Actually Means
Let me be precise, because the concept is easy to confuse with adjacent but different ideas.
Volatility-positive is not a description of risk tolerance. It is a description of revenue architecture. A risk-tolerant business is one whose management team has the stomach to operate through uncertainty. That is a character trait, not a structural feature. A volatility-positive business is one where the mechanics of revenue generation are structurally linked to disruption: not just that management handles it well, but that the business model itself captures value when uncertainty rises.
The distinction matters because volatility-positive businesses should be valued differently from their peers. Standard DCF models penalize earnings variance even when the variance is directionally positive during the periods that matter most. If a business makes dramatically more money when uncertainty is high, and uncertainty is structurally going to be higher for the next decade, that variance is a feature, not a bug. Current frameworks mostly treat it as the latter.
The Taxonomy
Goldman is the most visible example, but the category is much broader. Here is a working taxonomy of genuinely volatility-positive business models.
Large diversified investment banks are the archetype. When rates swing wildly, rates trading wins. When M&A freezes, restructuring advisory wins. When equity markets crater and recover, equities trading and prime brokerage win. When everyone needs to hedge, derivatives desks win. The diversified architecture means volatility in any asset class tends to generate revenue somewhere on the platform. Goldman’s equities desk posted record revenue of $5.33 billion this quarter, up 27 percent, because the Iran conflict created massive institutional demand for repositioning. Investment banking fees were up 48 percent on completed M&A advisory. The diversification captures most of the volatility premium even when it doesn’t capture all of it.
Large commodity traders (Vitol, Glencore, Trafigura) are structurally volatility-positive. Their business is arbitraging price dislocations across geographies and time. The wider the dislocations, the larger the arbitrage opportunities. The Hormuz blockade is not a crisis for the major commodity traders. It is a profit expansion event.
Restructuring advisory firms benefit when leveraged businesses hit distress. Higher rates, geopolitical shocks, and slowing growth all push companies toward restructuring. Advisory fees in those situations are materially larger than in normal M&A, because urgency is high and stakes are existential. The same conditions that suppress traditional deal volume produce restructuring volume.
Specialty catastrophe reinsurers are volatility-positive with respect to tail risk. When the perception of tail risk rises, whether from climate, geopolitics, or cyber, premium income expands before losses do. The businesses with disciplined underwriting capture the premium expansion; the ones without it get wiped out when claims arrive. The distinction is critical, but the category, properly underwritten, is structurally volatility-positive.
Short-duration lenders and market makers, businesses that reprice quickly and hold positions briefly, benefit in rate-volatile environments because they can adjust faster than competitors and capitalize on credit dislocations that punish slow-moving balance sheets.
Volatility-positive is not a description of risk tolerance. It is a description of revenue architecture. The distinction will separate the compounders from the casualties in the decade ahead.
False Positives
The frame is only useful if it has real exclusions, so it is worth being specific about what looks volatility-positive but is not.
Airlines are the most common false positive. Trading desks hedge fuel costs, and airlines do get more pricing power when demand is inelastic. But airlines are deeply volatility-negative at the structural level: fuel is a cost, and economic disruption, the kind that accompanies serious geopolitical shocks, destroys demand fast. The hedges help at the margin; they don’t change the architecture.
Crypto exchanges are a subtler false positive. Trading volume does spike during market volatility, and exchange revenue does rise. But the structural fragility of crypto infrastructure (counterparty risk, regulatory vulnerability, liquidity crises, the tendency of the ecosystem to blow up in precisely the high-stress moments where you’d expect it to capture the most value) means it fails the volatility-positive test when it matters most. FTX didn’t survive a volatility event. It was destroyed by one.
Media and news organizations generate traffic and engagement during crises. But their primary revenue model is advertising, which is deeply pro-cyclical. Eyeballs go up during disruption; advertiser spending goes down. The two moves cancel each other, sometimes worse. A media business is not volatility-positive just because it gets more readers when the world is on fire.
What This Is Worth
If you believe structural volatility is elevated for the next decade, the valuation implication is concrete, and it is roughly this. Goldman currently trades at about 1.7x tangible book value and roughly 13x forward earnings. JPMorgan, a more diversified but less trading-heavy peer, trades at 2.2x tangible book and 14x forward earnings. The market is still implicitly treating Goldman’s trading revenue as the lower-quality cash flow: cyclical, mean-reverting, worthy of a discount.
That is the frame I am arguing is wrong. In a world where Goldman’s trading and advisory architecture captures structural volatility rather than weathering it, the right comparable is not “investment bank discounted for cyclicality.” The right comparable is a specialty business whose revenue profile happens to be persistently lumpy but durably tied to an expanding opportunity set. That business reasonably trades at 2.0x to 2.3x tangible book and 15x to 17x forward earnings. Applied to Goldman’s current book, that is a 25 to 40 percent upward revaluation. The equivalent case applies across the taxonomy (commodity traders trading at single-digit P/Es, specialty reinsurers trading at book), with the magnitude varying by how purely volatility-positive the revenue architecture actually is.
This is not a price target. It is a rough sketch of what happens when an assumption that was correct for twenty years (volatility is an episodic shock to be averaged through) gets replaced by an assumption that is correct for the next ten (volatility is the operating environment). The repricing is partial, slow, and easy to miss in quarterly prints. It is also, I think, one of the more durable arbitrages available to a patient investor who is willing to hold through the noise.
Where the Frame Breaks
Every analytical frame has boundary conditions. Three matter.
The first is existential volatility. Goldman’s architecture is volatility-positive up to a threshold. In 2008, when counterparty confidence collapsed across the entire system simultaneously, even Goldman’s diversification required a federal backstop. The frame works across most of the volatility distribution; it doesn’t hold in the true tail.
The second is volatility type. Goldman’s equities desk is positive with respect to market volatility. It is not obviously positive with respect to a structural regulatory restructuring of investment banking, or an AI-driven collapse in market-making margins. The frame requires specificity about which kind of volatility the business is positive to.
The third is crowding. If the market broadly reprices volatility-positive businesses, the premium gets arbitraged away. The 2018 collapse of volatility-linked ETFs showed what happens when a volatility-related trade becomes crowded and the mechanics of the positioning itself create instability. Volatility-positive is a structural observation, not a risk-free positioning recommendation.
The Career and Portfolio Version
Here is the question I find most useful to sit with: look at your own situation and ask, specifically, if volatility increases significantly for five years, does it hurt you or help you? Not in general, but desk by desk, revenue stream by revenue stream, skill by skill.
If the answer is mostly “hurts,” name that clearly. You are volatility-negative. The right response is different from the volatility-positive response: more cash, shorter horizons, more flexibility in your cost structure, less leverage.
If you find genuine volatility-positive exposure in your situation, if disruption tends to flow in your direction structurally, the discipline required is to build the architecture deeper and press the advantage when the volatility arrives. Don’t let good quarters make you complacent about the thing that’s generating them.
Related reading: The Quietest Repricing and Fragility.
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