The people I know at Goldman are generally bright and hard-working. The ones who perform agency work seem to serve the interests of their clients; the ones who are closer to proprietary traders tend to advance the interests of Goldman. There are some products for which it's very hard to have a pure agency relationship, though; the best way to keep them liquid is to trade with someone who is taking the other side of your trade.
I'd keep that kind of thing in mind when reading a story like this. It's asymmetric warfare: he has nothing to lose by talking about how bad Goldman is, but if Goldman talks back, they're a) dignifying a silly story, and b) creating an opportunity for irresponsible folk like Taibbi to willfully misinterpret them.
This article is the table tennis bronze medal of moral outrage.
That doesn't sound like a lowly VP.
It's rubbish that he has nothing to lose: coming out so publicly against your former employer never looks good on a resume. And Goldman can respond in the tradition of politicians facing similar stories: by using surrogates.
http://dealbreaker.com/2012/03/goldman-sachs-was-less-than-t...
VP in IB doesn't map to VP in any other industry I've seen. The (many, many) titles become more confusing when employees refer to Managing Directors (highest rank) as MDs, as if that wasn't overloaded. ("gonna see my MD today...")
Also, banks all vary in what they call equivalent titles.
EG UBS: Associate Director, Director, Executive Director, MD Deutsche: Assistant Vice President, Vice President, Director, MD
Bank of America and other places confuse things further with SVPs, FVPs, etc.
As another reply points out, he didn't manage that much money. Goldman had clients who managed that much money, and he apparently handled equity derivatives for those clients.
I once worked at a company that worked on an internal web app for one of the largest advertisers in the world, but that doesn't mean I "ran advertising for clients with a multi-billion dollar marketing spend."
To be clear, I can sympathize with someone who used to be in the business of working as an agent for his clients, and who is now in the business of executing the same transactions but taking the opposite side and then hedging his risk. I just don't think moral outrage is the right response to a change in the macro situation. One could argue that while financial markets got more sophisticated, Goldman Sachs coincidentally got evil, but I think it's more likely that markets evolved, Goldman evolved with them, he didn't evolve with Goldman, and he took it personally.
Several times now there have been internal documents and emails released that verify not only that there are people in GS that really are not looking out for their clients, but this was a fundamental strategy when it came to at least some of the derivatives they were selling, knowing that they were shit deals.
Sure, the argument can be made that it's just a 'few bad eggs,' but that argument just gets you so far.
Now, it's not out of the realm of possibility that that some of these things are taken out of context. In IT, it's pretty common to vent concerning some... difficult customers.
I think it's fair to say that you're right that some good people work there. Conceding that, I would like to see more by GS to address some of these other things.
A story like this is a nightmare to GS though. They've always prided themselves on valuing their reputation above all else and this is yet another shot to what they want to be seen as. However, it is important to realize that the public's perception of GS is different than their customers' perception. They were #2 in the league tables for M&A last year and their long time clients haven't shied away from using their services.
hierarchy is - management committee > partner managing director > managing director > executive director > vice president > associate > analyst
managing director is where you would be running a business, sort of like making general in the army, there are about 1700 of them. And the partners are the true senior managers and where real authority in the firm starts. Title inflation FTW.
He might have trouble eating lunch in this town without changing his name LOL. Best bet might be to write and try to be the next Michael Lewis (Liar's Poker, Moneyball, The Blind Side, contributes to Bloomberg and Vanity Fair, didn't turn out too bad for him.)
[edited Peter -> Michael]
http://online.wsj.com/article/SB1000142405270230469280457728...
When Goldman doled out annual bonuses earlier this year, Mr. Smith's small payment became a point of friction, according to people familiar with the matter. Mr. Smith hadn't previously voiced his concerns about Goldman to his managers, according to people familiar with the matter.
Occam's Razor says that the NYT was masterfully trolled.
So no, it's not Occam's Razor: if he were merely unhappy with his bonus, he would call another i-bank and move on.
BTW, I notice you're always quick to defend the big money status quo around here (you were against net neutrality a while back, IIRC).
What's in it for you, as a mere SEO "consultant"?
Are you paid to post these talking points, or do you really believe what you say?
Something happens to companies as they get larger, where the culture of a company starts dying from a death-by-a-thousand-cuts, and then they start promoting the wrong people into upper management that seem to really poison a very good company culture. It sounds like Goldman Sachs is one of these companies.
The irony is that I think the shift in mentality came from Wall Street itself pushing the idea of "maximizing shareholder value", in the 80s. This lead to a bunch of financially positive but culturally negative (some would say sociopathic) decisions, such as closing plants that were profitable, but weren't profitable enough. I think Michael Moore had a movie on this called "The Big One".
Forbes has an article on this, calling it "The Dumbest Idea in the World":
http://www.forbes.com/sites/stevedenning/2011/11/28/maximizi...
I read the biography on Goldman Sachs, and I don't doubt for one second that there was a historic culture that most of the employees were fiercely proud of. But as the author mentioned, a few mistaken promotions into power and the whole culture of a company can change through death by a thousand cuts. No doubt the same thing is happening at all large companies that started off with great roots. I saw this occur at Yahoo, where completely idiotic decisions were made in order to preserve revenues so that managers' bonuses were left in tact.
Is this something that can be avoided? I'm not sure... corporate culture starts at the top and works its way down. It's something that must be demonstrated by the leaders of the company at every level, and it filters down to the lowest ranks. So if you have a company with strong leadership, then I think it can be staved off for a while, but it requires a relentless focus.
I think promotion happens. When you're a fresh grad right out-of-college and the Managing Director says "client is our #1 priority", you take it to heart. That's your new mantra now. Nine years later, when the same Director, now promoted to the Board says the same line, you groan inside because you know exactly how often he calls his clients muppets. Slowly you begin to feel that the company is no longer the same wonderful, inspirational place of work that you signed up for.
Positions of power at any company, non-profit, government, or political organizations are not filled with do-gooders who want to give everyone a hug. They are filled with thick-skinned, ambitious, practical people who have learnt to say the right things at the right time. So if you're a junior exec., you will hear inspirational BS. As you join their ranks, you will hear their real thoughts. If the latter disgust you, it clearly means you aren't fit to join their ranks, not because of any lack of skills on your part but rather the difference in how you view the world.
To me all these execs leaving companies and saying "it's so different now" just means they all grew up and realized they didn't like what they signed up for. It's no different than couples splitting because "we grew apart." I highly recommend people quitting if things aren't working out ( http://chir.ag/200804242130 ) but I do not recommend airing out the dirty laundry, especially when no laws were broken because you're just scaring off the next company you intend to work for.
None of my above comments were in reference to anything at GS/Google/MS specifically. Facebook will start charging for integration some day too and some Dropbox exec will joke in company meetings about all the stupid people who save personal photos on their servers. People are people and companies are companies.
Full disclosure: I left Micosoft last year after I long debated the trade offs of starting my career over. I was a "top performer" and Microsoft makes a point of telling the many people like me to stick around for all sorts of reasons. Deferred compensation. Trajectory. Influence. Etc.
But then I actually got into the VP's circle and didn't like what I saw. This smooth-talking, confident leader within Office was some kind of sociopath. He and his comrades snickered after a middle manager announced he would put the blame on someone for failing to deliver a major feature. I was confused when it happened. Like one big inside joke, that would be my initiation.
This feature was promised three years ago to the previous President of the division, and it turned out to be a top priority for the incoming president. Well, the middle manager miscalculated and let it slip. We've all done this to some degree-- answer an email late, forget to deliver on a request -- it's part of being an engineer working with people. But the middle manager had done it at a big scale and was wrong.
Rather than admit it because that would end his career (as I'll explain in a minute), he threw someone else under the bus. He asked this senior PM to take the project over. Rather than give her support, he decided to undermine her. He had people give copious amounts of negative feedback on her specs, held back people from working with her, and lied about progress to management. He was setting her up to fail so he could swoop in and deliver it after she failed without the wrath of being late. We've all seen managers excuse being late because of low performers. The VP and his manager needed to construct a low performer. And all he had to do was signal to the herd to stay away from her with all the negative feedback.
The hell they put her through so they could save their asses. And the fucking snicker. She was a warm, smart, expert in this feature and had she been allowed to work she would have outdone the middle manager. But the middle manager was ambitious. And the VP seemed to like watching people destroy their lives. And he liked loyalty. He knew if he could get dirt on his managers he would keep them for a long time.
I try to be a good person. I try to be honest. I try to stand up for people. But I couldn't help her. For a year I gave as much moral support as I could without the inner circle knowing. But the politics were too thick and toxic to touch. I watched her nervous breakdown. And then I knew I had to leave. Maybe it really was this one bad team. But this was the rising star VP. If this is how he succeeded then the others VPs would have to eventually. And the middle manager was his replacement.
So, I got a different job. I took 3 months to travel in Europe to wash off the filth. And I checked in with my friend, and am pleased to hear that she has landed on her feet and is doing much better. At my current job the people argue about -- gasp -- the customer. What a difference.
But I am still angry that evil people -- the VP, the middle managers -- are allowed to continue. I don't agree we're supposed to be quiet. Food critics used to be afraid of giving bad reviews because they wouldn't be allowed to keep their jobs (in local markets unless you were someone politics would prevail). Now we have Yelp. Really bad restaurants should have a hard time of hiding. I wish there was something like that for managers and companies without blowback. I wish there was a way to give feedback on LinkedIn. The middle manager's profile is really funny to read. Apparently he runs all of big data at Microsoft. From Office. As a middle manager.
Anyway, my point is there is opportunity to expose evil people and good people in their careers. We should find a way to do it safely. People should have an incentive to be good.
EDIT: grammar mistakes
Fear(s) motivate(s) people pretty well to do just about anything, including to keep silent (as you recommend), but I'm glad that people are brave enough, or stupid enough, to say what they think is right, even in the face of such fears. It might also turn out that the people who agree with the dissenters outnumber the powerful incumbents who they oppose.
It's called being wet behind the ears. Most people in that situation simply don't realize how much they don't know. And guess what you aren't going to be able to read about it and know either. You will find it out through life experience.
The upside is you aren't jaded and you will try things that older people will avoid because of their wisdom and experience.
For a long time, many of us have speculated that CEOs were overpaid but suggesting this was met with claims of being "anti-capitalist" and other such nonsense. Now thanks to the Forbes article and the book it's talking about, we can demonstrate that CEOs are * clearly* overpaid. Their own pay has gone up, while company performance per salary dollar has gone down. Meanwhile the rest of us produce vastly more than, say, 20 years ago, yet wages remain mostly flat.
Meanwhile the rest of us produce vastly more than, say, 20 years ago, yet wages remain mostly flat.
This claim betrays a misunderstanding of how productivity is measured, and how workers are compensated for their productivity (i.e., comp is wages + benefits, not wages).
Wages + benefits is not flat. http://www.minneapolisfed.org/publications_papers/pub_displa...
And productivity can easily go up due to factors unrelated to workers. E.g., if a company replaces workers with robots, the measured productivity (total production / # of employees) of the remainder will go up. Is this a reason to increase their pay?
Googlers are not sitting around making fun of their users, joking about them, giving them funny nicknames.
With these types of rants, it is hard to derive truth from fiction. Once a narrative is set up, everyone starts to keep feeding into it. It's easy to believe the worst about Goldman, so everything said "fits" and makes it believable. My own biases make it more likely to believe in stories of greedy people selling snake oil.
Still, one should be skeptical and avoid piling on.
They went public. My gf is a senior manager at GS (200+ drones in her department). When the company went public the partners could easily cash out. Without as much skin in the game, they could squeeze as much profit (aka bonus) from GS without worrying about the long-term viability. Also, hedge funds are now a more lucrative place to work for many people. So if GS doesn't pay, then a hedge fund will. Another thing is that prop trading made vastly more money than IBanking for the last decade, which changed who got promoted and rewarded. Finally, the company grew very rapidly in the last 10 years and much of it's culture got diluted with all the new people. It's not a bad place, it's just a normal IBank now.
The other tricky thing about culture is that it's a lot like trust: very hard to earn, very easy to squander. Once lost, it's difficult -- sometimes impossible -- to recover.
Goldman (or Google) is no where near death. But Goldman is still in crisis mode. The primary focus now is profit margin. making money for you and your clients isn't the point any longer. It's your position that matters. But Goldman, used to award your bonus not just based on your position. They used to survey your clients. And their opinion mattered. Not sure if they still do this. I haven't worked in Wall Street since 1996.
And Goldman isn't the only firm in this position, by the way.
And Google is sort of in the same place. FB scares the hell out of them. And instead of innovating (and taking risks) they copy.
Google and Goldman are blinded now. They can't see beyond their own models.
These companies are small empires in their own right, creating a lasting and prosperous empire is an monumental undertaking where chasing fads has little effect.
In business circles I find Bosch and IBM to be prime examples of quality in this regard.
It's importance in popular media and culture is vastly overblown. The rising and falling of the Dow on a daily basis is basically worthless from an economic point of view - it's just noise.
This is something that is inherent in a certain type of investor and Wall Street and you see it in YC as well as VC firms and (startup) angel investors.
While you might be able to get a local businessman on Main st. to believe in your idea which is profitable (but not sexy and not "billion dollar") that will probably make both of you money, you won't get anyone in the de facto startup community to take you seriously. They won't give you money unless you are shooting for the stars.
An interesting difference, though, is the Goldman-Sachs employee sees a problem with focusing on short-term gains, while the Google employee sees a mistake in a long-term bet (that Google can compete successfully with Facebook in the social realm).
When I worked at Microsoft in Product Support Services, our general director "got it" and encouraged us to break any rule if it helped the customer out, so long as we did so reasonably responsibly, something I took him up on to the point it seriously annoyed my direct manager. He left, and the group I worked with ended up getting shipped off to India. And given more recent discussions with Microsoft customer service, the question of "how do we deliver quality customer service" has become far less important.
I guess my musings lead me to the thinking that being good requires a level of confidence that is easy to lose as an organization, and that as it is lost, the organization can turn toxic fast. But we can't succeed all the time. We will face huge challenges. So how do we resist the urge to turn and focus only on the immediate challenge, whether a competitor or the bottom line?
In my experience - yes, this moral decay is a necessary part of the current corporate world. Or any corporate world. Or really, any world without the possibility of failure baked into it.
I've seen a lot of idiotic decisions made at Google, many of which have been complained about on Hacker News, many more of which are hidden causes of things that are complained about on Hacker News. In every case, when I looked at the chain of decisions that led to things being the way they are, every single decision was rational, given the information that all participants had at the time. There's no vast conspiracy dedicated to turning Google evil, no influx of incompetent new PMs & designers. Some of the most questionable decisions have come straight from old timers like Marissa, or even from Larry Page.
Instead, it's an information problem. Running any enterprise the size of Google or Goldman Sachs requires trading off many competing factors. To make the tradeoff, someone has to keep all that information in their head at once. There's no other way to balance competing demands; if you keep only part of the information in your head, your decision will be biased towards the part that you've loaded into your brain. If you try to spread decision making across multiple people, the decisions will be biased towards the part that the person who screams the loudest can hold in his head (which is usually a smaller subset than optimal; it takes mental effort to scream loudly).
I often see mystified posters on HN wondering why Google did something or other, and a good amount of the time, I know (but can't say) exactly why we did it. The userbase does not have all the information. Unfortunately, they don't care that they don't have all the information; they want Google to work as expected, and the fact that there may be internal systems that don't quite behave according to their mental model is irrelevant. And so the fact that decision makers make decisions based on information that users can't have becomes a liability in this case, biasing them away from what's "good" for the user.
I remember Paul Buchheit writing here, several years ago, "A system's participants don't have to be rational for the system itself to be rational", referring to market economies. I'd posit that the inverse also holds: a system with completely rational participants can still be irrational, if information flow between participants is not organized in a rational way.
Rationality is emotionless and mechanical. It's about making a reasonable decision based on whatever information is available to you. However, rational decisions do not involve morals, culture, or feelings. This is exactly what companies like Google and Goldman Sachs are being criticized for.
When game theory is baked into your corporate culture, this is what you get. The company starts an inevitable slide from "Do No Evil" into "Make the Best Decision You Can With the Information You Have".
If I look down into my wallet and see no money there, and I'm hungry for lunch, and I decide to steal some money from a little old lady, that may be a perfectly rational decision to make. An outside observer may say I'm being evil, but they don't have a complete information picture about how hungry I am, or how long the line at the ATM is, or that everyone else is eating lunch so I have a duty to my shareholders to do the same.
To the parent post question, of avoiding deterioration of institutional culture from such principles there are two answers. Best is to align corporate equity interests with long-term interests, which are generally customer interests. That generally means not going public, as stock market attention to short-term interests is a constant distraction from long-term interests. Failing that, be lead by a mutant like Buffett or Jobs, who understand the long-term interests and have the authority to ignore the short-term to get long. But the availability of mutants is unpredictable and it's really best to get the capital structured properly.
What I am asking is whether great places to work inevitable decay as the company gets large, and if that is the case, what is the point of a startup? Why not seek to make an idea that scales down rather than scales up? Is it all about personal wealth? But for those of us who want to build great businesses, in every sense of the word 'great,' how do we get around this problem?
I have my own ideas but they are largely untested.....
OTOH, if they had all the information, they might set new expectations. Essentially you are describing a corporation that is failing to communicate properly.
I think it's as mundane as simple, Darwinian selective pressure. The ruthless ones perform better[1]. The people who have ethical constraints, or who consider the long-term, find themselves under-performing by comparison. They can choose to either mimic this destructive behavior or get marginalized as they are seen as ineffective and stubborn.
So basically, ethical behavior is unstable, and having one sociopath on a team will tend to make others act the same way. It's not exactly inevitable, but it's the natural tendency. If you want to stop it from happening, you have to work very hard and be very diligent.
[1] Or rather, they perform better in more visible ways, i.e. by more objective metrics and over a shorter time period.
by construction:
The documentary is critical of the modern-day corporation, considering its legal status as a class of person and evaluating its behaviour towards society and the world at large as a psychiatrist might evaluate an ordinary person. [...] corporations are systematically compelled to behave with the DSM-IV's symptoms of psychopathy
You delude yourself into thinking you're inherently superior, a "Master of the Universe", even as you have never been able to explain to your mother what you do. Sooner or later you realise your colleagues are smart but terrifically insecure human beings, valuing their roles for who association with the firm's name makes them rather than what they actually do. Thus hierarchy is strictly enforced and innovation rages furiously in quaint, safe areas, e.g. introducing "new" leveraged/inverse hedged swaps, while ignoring fundamental assumptions, e.g. the trading floor should be siloed by product.
The bureaucracy and technical debt, combined with constant turnover in the under-paid operations and IT staff, mean that gaining understanding of the firm's as a whole as of no less than a quarter ago is a Herculean undertaking. And it's worse when you talk about the sales traders - none of them understand their product (they don't need to - the client's the one taking the risk), it's a miracle if they know a few shortcuts in Excel, and every one of them has an opinion on how xyz company (or country) should re-structure without having read a single term sheet or prospectus.
Luckily, there are start-ups that are raging equally furiously but with un-paralleled agility towards the financial sector. Alas, we'll have to find a new slot-in role a la consulting, investment banking, and sales & trading for insecure college graduates without hard skill sets to plump.
Note on recruiting
I've seen some comments tacitly saying Messr Smith should have known what he was getting into when he signed up for the job.
I was recruited by a very charismatic and values-driven MD when I was 19. Our desk merged with the rest of the firm's shitty culture when he was fired for being too ambitious. I didn't join for the six-figure salary - I turned down other offers that paid more at the time. There are lots of other people I know, brighter than I am, who were similarly drawn to the thought of a dynamic work-day filled with brilliant, ambitious people all working to solve difficult problems (that could be a tech company's recruiting ad...). Maybe I should have been more clairvoyant, but in the end what drives people to finance and what drives people to tech isn't all that dissimilar - the unique cultures change like to unlike from there.
This also characterises hackers and Silicon Valley. There are some really good people on Wall Street just as there are some real turds in Silicon Valley.
If you go back into Goldman Sachs's history it was a venerable firm with a storied past of forsaking short-term profit for the client, i.e. being long-term greedy instead of short-term greedy (quoting a GS executive from the 1970s). It started changing in the 1980s and completed its transformation after its IPO.
Values aren't a function of sex or ambition.
The biggest problem was that there's little incentive in financial products to pursue true creativity or innovation that generates value for your clients. Both the market and the regulatory climate make it very hard, and very risky, to develop and market new products. It's a lot easier to just find innovative ways to strip value from your clients, or make new securities look a lot like old securities.
My role at Lehman involved helping issuers structure securities for various capital markets. I did not see us openly fleecing clients in the style of Enron or this Goldman article, but it was pretty clear that some kinds of deals were far more profitable for the firm than others, and it was going to be in your interest to promote those kinds of transaction. It's the people at the top who set the incentives and set the culture of a firm, and things will only generally get worse as they trickle down the structure to individual teams who are more interested in their personal comp than the overall corporate brand.
One of the main reasons I wanted to go back to tech from finance was that I felt like there's at least a lot of tech companies (Amazon and Google included) where delivering true value to the end user is the primary value, and how you get promoted and paid. I did not feel that was the case on Wall Street; it was more important how many fees your team brought in than whether the issuers (clients) were still in business a year later.
Wall Street could do the same by changing its incentives, and grow massively together with their clients. Once they understand that clients all the way to the end ("crowd") investor can also be happy users.
One thing that bothered me about this article though, is that it just seemed like he had a personal reason to make his superiors look bad. After all, he built his entire career in Goldman, so why burn your bridges? Unless they are already burned and you are leaving with a blast anyway, and maybe you are trying to get back at someone.
Wall Street can't really grow that much more. It's already something like 11% of US GDP and that's way too much for an industry that really doesn't produce anything much. Fin services shouldn't be more than 3-4% of an economy, barring export of services to other countries.
I'd argue this is part of why it's starting to eat its own young; it's an industry full of extremely driven, competitive people but it has started to run into the natural limits of its potential size. If the industry starts to shrink a bit, things will get even uglier. It's not like there's a natural other industry for all these people to work in that's growing and will take the oversupply - if things get worse it will look like a piranha pool in the dry seasons where a million fish have been concentrated into one puddle.
>specifically for tech jobs
Which kind of tech jobs? For banks, or something unrelated?
I think sample size is 4 at GS, maybe 10 elsewhere.
“We disagree with the views expressed, which we don’t think reflect the way we run our business,” a Goldman spokeswoman said. “In our view, we will only be successful if our clients are successful. This fundamental truth lies at the heart of how we conduct ourselves.”
Mr. Smith described himself as an executive director and head of Goldman’s U.S. equity derivatives business in Europe, the Middle East and Africa.
A person familiar with the matter said Mr. Smith’s role is actually vice president, a relatively junior position held by thousands of Goldman employees around the world. And Mr. Smith is the only employee in the derivatives business that he heads, this person said.
"they're a bunch of guys going 'I'm only worth 10 million and the other guy's worth 40. Rip everybody off.' ..they're a bunch of scum."
http://www.nytimes.com/2008/10/19/business/19gold.html?pagew...
As it turns out, the human race is extremely intelligent and wherever there is an opportunity to make money (corrupt or not), people are probably doing it. I would call it a conspiracy theory, if it were not occurring in plain site. Exactly which Americans approved of the multibillion dollar bailout, show of hands?
I agree: This deserves a great deal more attention.
Hell, just the Henry Paulson tax giveaway should have caused civil unrest.
http://www.reddit.com/help/reddiquette
If you disagree with me, that is cool - just leave a comment telling me why. If you think my comment is irrelevant for some reason, also let me know why.
Edit: More appropriately -- http://ycombinator.com/newsguidelines.html
"'There are a couple of things out of place. 1) This guy has been at firm for 12 years and is only a VP…a pissant of sorts. He should have been an MD-light by now, so clearly he has been running in place for some time. 2) He was in U.S. equity derivatives in London…sort of like equities in Dallas…more confirmation he is a lightweight. Somewhere along the line he has had sand kicked in his face…and is not as good as he thinks he is. That happens to a lot of high achievers there.'"
It's an industry where many firms have had to develop their own network transport layers, database engines, languages, etc. Where machine learning and big data have been standard practice for over a decade. Where understanding complexity and concurrency theory are important, and designing lock-free algorithms can be a daily activity. There's very few areas of core CS that aren't used in investment banks.
In most large finance companies though, it's also true that a lot of the less-exciting back office development work is being done by software developers who are overqualified for the roles but attracted by high wages.
'It changed man. The culture wasn't the same as when I joined five years ago.'
These 'I said GOODBYE SIR!'s are interesting, but I'm not sure how much reliable information can be gleaned from them. What ever happened to not 'burning your bridges'?
This is a resumé.
Looking forward to wikileaks bank-leaks.
Our Clients' Interests Always Come First
http://www.goldmansachs.com/who-we-are/business-standards/bu...
>"... if we serve our clients well, our own success will follow."
Then a few lines below, they essentially define what success looks like for them and say that profitability critical to achieve those goals. It seems like that profits are a more direct way to achieve "success" for them.
> "Profitability is critical to achieving superior returns, building our capital, and attracting and keeping our best people"
This should serve as a reminder that you can talk, talk, and talk some more, but ultimately, you need to "walk the walk" for your words to carry a significant impact.
Basically, IMHO, he has made his money, is burnt out and wants to do something else and thought it'd be a good idea to write this article since it perhaps increases his profile for he wants to do next.
I left a couple of years ago after a three year stint. It was partly out of the boredom of babysitting a legacy platform that had little future, but mostly because the department's role devolved into getting away with doing the minimum for clients to justify our fees.
No matter how well GS pays, despite the relatively poor bonuses, it's not going to be possible to attract and retain the kind of staff they need. I wonder how many other nerds sit at their desks and catch a minute's respite by daydreaming of building something great? If they're lucky enough to have the freedom and enough of a financial cushion to take the leap I highly recommend it. I've not been happier since.
But as the ancients implied, one who testifies of themself is not trustworthy. :-/
in all seriousness though, he probably saw this as a golden moment to build his personal brand, gain some media exposure, and leverage that exposure and brand building into another job offer, a writing gig, or a TV gig. consider it a golden parachute moment.
While it feels good to recognize the eroding integrity of the industry (assuming it existed in the first place); I don't think this messenger is praiseworthy. Reeks of self-righteousness to me... and somehow I'm certain he'll be starting his own fund in the coming months.
"What?! When?
I hold him in very high regard - he took care of us junior guys, gave us great pieces of advice, and in general came across as one of the more personable, friendly, and genuine guys on the floor.
Read more: http://www.businessinsider.com/former-goldman-intern-this-is...
Now that the big bonuses, expensive sell-weekends and general prestige associated with being in finance have washed away, people on Wall St are looking around realizing the emperor has no clothes. There's no money anymore, and there was never anything ultimately redeeming about their work.
The only silver lining is that hopefully now our best and brightest will be focused on solving real problems that matter.
Lots of discussions on "evil Goldman Sachs" or "the useless profession of finance" that I have seen also include the business of management consulting (McKinsey, Bain, BCG, etc) as the similar career tracks. It is true that lots of elite students at US colleges are interested in Banking and Consulting when they graduate. They are interested because both careers are prestigious and lead to more things.
But the comparison is very limited.
There is a passage at the end of his op-ed when he talks about his first days in the values driven organization learning the ropes of what the work is, how to be productive at it, and how to take the client perspective always.
I worked for McKinsey from 2003-2006 and I had that same first-day experience and it was more or less my experience throughout. I talk to folks now and they still think/act this way -- values are super important, the client comes first, being smart is all about helping the client better and therefore the firm prospering in the long run. People bragged about "we turned down the work" ALL THE TIME because it isn't a good use of "the client's money/time/focus".
There have indeed been scandals where individuals (even the ex-head of the firm!) have done unethical things at McKinsey.
These are more famous because McKinsey is so super duper integrity focused and they are embarrassing, but they happen on a backdrop of client service.
And indeed many many public spirited, "business isn't really what I'm about" people come work at McKinsey and leave and go on to do other things.
The big thing about consulting firms like McK which is really great and different from banking -- apart from the values which may be good for their business -- is that they are places for GENERALISTS. You get there and work on a wide range of problems, with a wide range of analytics/collaborative/communication skills. This is what is great about consulting and why people go on from there to do great things.
In the "old" world of Goldman Sachs this might have been true too -- when they were investment bankers advising clients on what to do. You and client win in this scenario. But much of the firm's money these days is made from TRADING, where there is a loser on the other side -- apparently the client.
Mr. Smith's editorial describes a lot of the reasons I left when paired with the dire outlook for the business now and back then. As others sort of noted, much of the business changed simply from the sources of profits. OTC (Over the Counter, i.e, non exchange traded) derivatives dealing and proprietary trading started driving all revenue. From a cursory glance OTC derivatives create a zero sum game with the client. The bank takes one side, the client takes the other. Yes, on a large enough scale things should balance out, and perhaps no moral hazards will develop, but at the most fundamental level the client or the dealer wins.
This opens the door to a very unique class of businesses including casinos, some annuity providers, buyers' agents in real estate where the provider has a strong conflict of interest with their client. Previously banks did not have these conflicts, or the divisons with these conflicts were not the dominant earners. Well maybe M&A advisors on the buyers' side had an issue, but that was generally less lucrative to advising the seller or on a hot IPO.
The question becomes, is this a Goldman problem, or a banking industry problem? I am studying for the CFA, simply because the information is fresh in my head, and I may need it some day. CFA ethics clearly states that one must always put the client's interests ahead of the firm. I remain foreign to the sort of magic that allows for this, while allowing one to operate as a derivatives dealer and stay solvent.
Simultaneous, Mr. Smith forgets about the sort of horrible clients these banks must deal with on a daily basis. Remember that the best guys at these firms are the ones that get spots at hedge funds, asset managers, and sovereign wealth funds. They know how to screw a counter-party better than anyone. Anyone who has ever sat on a fixed income trading desk knows how viciously PIMCO swings around their size to trade through the market. Every junior trader has gotten crossed by a non-repetent small hedge fund. I doubt the clients ever thought Goldman or any other bank was their friend. To assume that a bank would help a client when there is blood in the water is lunacy.
You can probably tell I still have a lot of unresolved issues about exactly what is right here. I have major issues with conflicts of interests. If I ever return to finance, I will stay on the buy side. At least that way my interests and the client's are fully aligned. I deliver higher returns and get paid more.
Funny side note: Michael Lewis said that he wrote that as more of a warning. He was astounded (and a little horrified) to find out it was being used as a how-to.
$2.2Billion is, to me, a lot of money.
I see a pattern among consumers. Lots of businesses give consumers what they want and tap into their emotional sensitivities, rather then what they need. Who's to blame? the business? or the consumer? the business is just seeing an opportunity for some profit. There's a misalignment in some industries between really serving the client, and making profits.
Example: - Junk food companies and fast food: they give us what we want: great tasting good that makes us addicted, but is it what we need?
The guy in the article has been at GS 10 years, heads up a desk, and is only an MD. Bank promotions are normally announced early in the year, and bonuses vest about now.
I'm guessing he is pissed off he didn't get MD, and has waited for his bonus to hit his account before self-destructing.
Stage 2 in his plan will be to push his ex-colleagues under the bus by writing an article about how evil bankers are, as per City Boy (http://en.wikipedia.org/wiki/Geraint_Anderson)
In other words, the most recent wave of talent that Greg Smith talks about is more interested in being associated with the Goldman brand, rather than the genuinely possessing the underlying desire to be world class bankers.
Also, perhaps this happened years ago and now its too late because those B players are now running the show.
However big you are supporting your customers and being contactable when there are problems is an essential cost of business.
http://blogs.msdn.com/b/jw_on_tech/archive/2012/03/13/why-i-...
What if clients don't trust anyone? Its about risk/reward ratio. Trust/faith went out the window when the scam of a monotheist God gave into the lesser mistake of ubiquitous currency. The religion of the Semites was nursed on trade. Money is the visible face of the Abrahamic God. Its with this righteousness that Goldman Sachs engages in the world with such impunity.
Gone are the lineages of the priestly classes. Gone is the prudent care of the warrior/king caste. The merchants rule in the decadent age. Soon we will be holden to the mind of the sudra slaves.
When your primary goal is to repackage existing value and make money from usury, it's a little bit steep to expect your employees to care about anything else - your primary incentive is how much money you can extract from dead labor, and not 'the success of clients' or anything else.
It makes one think that they are hiding -- perhaps they're ashamed of themselves?
Basically it's the same reason that Wal-Mart doesn't put its name on a distribution warehouse facility. People would try to walk in thinking it's a store.
We wanted to share with you the below communication which was today sent to the people of Goldman Sachs:
Goldman Sachs Logo Office of the Chairman March 14, 2012
Our Response to Today’s New York Times Op-Ed
By now, many of you have read the submission in today’s New York Times by a former employee of the firm. Needless to say, we were disappointed to read the assertions made by this individual that do not reflect our values, our culture and how the vast majority of people at Goldman Sachs think about the firm and the work it does on behalf of our clients.
In a company of our size, it is not shocking that some people could feel disgruntled. But that does not and should not represent our firm of more than 30,000 people. Everyone is entitled to his or her opinion. But, it is unfortunate that an individual opinion about Goldman Sachs is amplified in a newspaper and speaks louder than the regular, detailed and intensive feedback you have provided the firm and independent, public surveys of workplace environments.
While I expect you find the words you read today foreign from your own day-to-day experiences, we wanted to remind you what we, as a firm – individually and collectively – think about Goldman Sachs and our client-driven culture.
First, 85 percent of the firm responded to our recent People Survey, which provides the most detailed and comprehensive review to determine how our people feel about Goldman Sachs and the work they do.
And, what do our people think about how we interact with our clients? Across the firm at all levels, 89 percent of you said that the firm provides exceptional service to them. For the group of nearly 12,000 vice presidents, of which the author of today’s commentary was, that number was similarly high.
Anyone who feels otherwise has available to him or her a mechanism for anonymously expressing their concerns. We are not aware that the writer of the opinion piece expressed misgivings through this avenue, however, if an individual expresses issues, we examine them carefully and we will be doing so in this case.
Our firm has had its share of challenges during and after the financial crisis, but your pride in Goldman Sachs is clear. You’ve not only told us, you have told external surveys.
Just two weeks ago, Goldman Sachs was named one of the best places to work in the United Kingdom, where this employee resides. The firm was the highest placed financial services company for the third consecutive year and was the only one in its peer group to make the top 25.
We are far from perfect, but where the firm has seen a problem, we’ve responded to it seriously and substantively. And we have demonstrated that fact.
It is unfortunate that all of you who worked so hard through a difficult environment over the last few years now have to respond to this. But, our response is best demonstrated in how we really work with and help our clients through our commitment to their long-term interests. That priority has distinguished us in the past, through the financial crisis and today.
Thank you.
Lloyd C. Blankfein Gary D. Cohn
I'd be more inclined to trust their communications, but as he cites in several parts of the letter about leaked internal communications to support his feelings. Then we also have other people stepping forward saying "Yes I worked at xxxxx, and I saw, suspected, or participated in fleecing clients." To what degree is all arguable. Are these all well timed publicity stunts of a person trying to take clients away from a firm to start his own? That's one hell of a conspiracy theory, and probably pretty unlikely. Maybe he is. Who cares.
Here's what I think. The last down turn shook Goldman to the core, and with it all the good will they had for their clients. Suddenly, the money train looked like it could derail permanently. When you got a lot of cash it's really easy to look like a genuine and generous person/firm. "Here there's enough cash to go around for all of us," they'll say.
But, when that cash dries up. Generosity dries up too. And it's all too easy for people to turn into selfish, desperate people. Remember back during the crash when Carl Icahn was quoted saying he had friends that didn't know how they were going to live on $10 Million/year? That was the desperation setting in.
Here's the thing though. S&P 500 closed the decade out flat. Contrast that with the 80's & 90's where it had multi-year straight growth. It was easy, and the money was easy. Now all that easy money ain't around. This drought is playing out all over the financial industry. Goldman ain't the only one behaving badly.
The most visible (to a young person) sign of a bank's character is how it treats its employees. The 90+ hour weeks and terrible conditions in the "analyst" program (the term has nothing to do with analysis; it means "whale-shit") are not a new invention; that goes back to the 1980s. Before that, banking was dominated by the Mad Men culture: the hours weren't long but the politics was just as malicious.
There was a qualitative change after the banks went public. The old partnerships were inherently more prudent. And that's where the old culture came from. The new corporate structure rewards any risk-taking where losses lag gains by a year or more. So the culture changes.
Many investment bankers knew they were selling crap at insane valuations during the internet bubble. Hell, the first time I saw IB's taking advantage of mass mania was the junk bonds era and Michael Milken.
Those guys have had the culture of taking advantage of clients for a very long time. It might be argued that the author of the OP article is just a slow learner... But I give him major props on teaching what he learned.
Character in a limited sense, but I don't know how much that translates into client satisfaction. Foxconn, Apple, and Disneyland come to mind.
As a trader I officially had a 50 hour week. I stayed for 70+ hours because I found the work I was doing, at least initially, interesting (I was generally the last trader on the desk to go home). Specifically regarding investment bankers, yes they work very long hours, but the analysts there generally see the time as financial boot camp. Besides, the staff senior to them are no less workaholic.
Some start-ups have their employees working 90+ hours. This isn't because they're evil but because they have limited resources, a lot of work, and the people there are amazingly passionate about what they're doing.
Limited resources. That's why the long hours are not a sign of evil in startups but are one in banking. Banks could easily hire more people. Startups generally hire good people as soon as they can.
