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 Posted: Wed, 14th Mar 2012 19:33 Post subject: Why I Am Leaving Goldman Sachs |
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Summary: Senior Goldman director resigns and lashes out at the morally bankrupt culture of the firm in the New York Times. Shitstorm ensues. The most amusing thing is he was also deeply involved in recruitment.
http://www.nytimes.com/2012/03/14/opinion/why-i-am-leaving-goldman-sachs.html?_r=2&pagewanted=all
| Quote: | TODAY is my last day at Goldman Sachs. After almost 12 years at the firm — first as a summer intern while at Stanford, then in New York for 10 years, and now in London — I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it.
To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money. Goldman Sachs is one of the world’s largest and most important investment banks and it is too integral to global finance to continue to act this way. The firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for.
It might sound surprising to a skeptical public, but culture was always a vital part of Goldman Sachs’s success. It revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients. The culture was the secret sauce that made this place great and allowed us to earn our clients’ trust for 143 years. It wasn’t just about making money; this alone will not sustain a firm for so long. It had something to do with pride and belief in the organization. I am sad to say that I look around today and see virtually no trace of the culture that made me love working for this firm for many years. I no longer have the pride, or the belief.
But this was not always the case. For more than a decade I recruited and mentored candidates through our grueling interview process. I was selected as one of 10 people (out of a firm of more than 30,000) to appear on our recruiting video, which is played on every college campus we visit around the world. In 2006 I managed the summer intern program in sales and trading in New York for the 80 college students who made the cut, out of the thousands who applied.
I knew it was time to leave when I realized I could no longer look students in the eye and tell them what a great place this was to work.
When the history books are written about Goldman Sachs, they may reflect that the current chief executive officer, Lloyd C. Blankfein, and the president, Gary D. Cohn, lost hold of the firm’s culture on their watch. I truly believe that this decline in the firm’s moral fiber represents the single most serious threat to its long-run survival.
Over the course of my career I have had the privilege of advising two of the largest hedge funds on the planet, five of the largest asset managers in the United States, and three of the most prominent sovereign wealth funds in the Middle East and Asia. My clients have a total asset base of more than a trillion dollars. I have always taken a lot of pride in advising my clients to do what I believe is right for them, even if it means less money for the firm. This view is becoming increasingly unpopular at Goldman Sachs. Another sign that it was time to leave.
How did we get here? The firm changed the way it thought about leadership. Leadership used to be about ideas, setting an example and doing the right thing. Today, if you make enough money for the firm (and are not currently an ax murderer) you will be promoted into a position of influence.
What are three quick ways to become a leader? a) Execute on the firm’s “axes,” which is Goldman-speak for persuading your clients to invest in the stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit. b) “Hunt Elephants.” In English: get your clients — some of whom are sophisticated, and some of whom aren’t — to trade whatever will bring the biggest profit to Goldman. Call me old-fashioned, but I don’t like selling my clients a product that is wrong for them. c) Find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym.
Today, many of these leaders display a Goldman Sachs culture quotient of exactly zero percent. I attend derivatives sales meetings where not one single minute is spent asking questions about how we can help clients. It’s purely about how we can make the most possible money off of them. If you were an alien from Mars and sat in on one of these meetings, you would believe that a client’s success or progress was not part of the thought process at all.
It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as “muppets,” sometimes over internal e-mail. Even after the S.E.C., Fabulous Fab, Abacus, God’s work, Carl Levin, Vampire Squids? No humility? I mean, come on. Integrity? It is eroding. I don’t know of any illegal behavior, but will people push the envelope and pitch lucrative and complicated products to clients even if they are not the simplest investments or the ones most directly aligned with the client’s goals? Absolutely. Every day, in fact.
It astounds me how little senior management gets a basic truth: If clients don’t trust you they will eventually stop doing business with you. It doesn’t matter how smart you are.
These days, the most common question I get from junior analysts about derivatives is, “How much money did we make off the client?” It bothers me every time I hear it, because it is a clear reflection of what they are observing from their leaders about the way they should behave. Now project 10 years into the future: You don’t have to be a rocket scientist to figure out that the junior analyst sitting quietly in the corner of the room hearing about “muppets,” “ripping eyeballs out” and “getting paid” doesn’t exactly turn into a model citizen.
When I was a first-year analyst I didn’t know where the bathroom was, or how to tie my shoelaces. I was taught to be concerned with learning the ropes, finding out what a derivative was, understanding finance, getting to know our clients and what motivated them, learning how they defined success and what we could do to help them get there.
My proudest moments in life — getting a full scholarship to go from South Africa to Stanford University, being selected as a Rhodes Scholar national finalist, winning a bronze medal for table tennis at the Maccabiah Games in Israel, known as the Jewish Olympics — have all come through hard work, with no shortcuts. Goldman Sachs today has become too much about shortcuts and not enough about achievement. It just doesn’t feel right to me anymore.
I hope this can be a wake-up call to the board of directors. Make the client the focal point of your business again. Without clients you will not make money. In fact, you will not exist. Weed out the morally bankrupt people, no matter how much money they make for the firm. And get the culture right again, so people want to work here for the right reasons. People who care only about making money will not sustain this firm — or the trust of its clients — for very much longer.
Greg Smith is resigning today as a Goldman Sachs executive director and head of the firm’s United States equity derivatives business in Europe, the Middle East and Africa.
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nerrd
Posts: 3607
Location: Poland / USA
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| Posted: Wed, 14th Mar 2012 21:58 Post subject: |
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Investment bank exec that grew a conscience? Impossible! I call a fake.
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| Posted: Wed, 14th Mar 2012 22:24 Post subject: |
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I think he just made the calculation that being a banker is becoming riskier by the day, best get out now before the mob comes by and throws a bunch of bankers under the guillotine.
Per Ardua Ad Astra
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| Posted: Thu, 15th Mar 2012 01:17 Post subject: |
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did u see Margin Call 2011 movie?
it brings interessant discussions about this theme.
Good movie about that
And I dont believe its fake. This is really happening
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spankie
VIP Member
Posts: 2958
Location: Belgium
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| Posted: Thu, 15th Mar 2012 10:44 Post subject: |
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Tsss, I dunno.
Has been like this for the past 20-30 years. Some people complain, some leave, but things never change.
Just read the book 'Liar's Poker'. It is about a guy who used to be a broker @ Salomon. He describes how they push things onto their clients to clean their own books, how they fuck over clients, how they make millions fucking over those clients. We are speaking 1980s. So we are 30 years further down the lane and things haven't changed at all.
Why? Reason 1 is that the muppets still believe they can earn shitloads of money by following the advice of the big banks. If companies just stopped believing those big banks actually know all the tricks, things would change by itself. Corporate USA and Europe is just giving those bankers a reason to exist because they exist.
I think it is fair to say that a lot of people should know that a lot of banks have no clue what they are doing and that they are screwing you over half of the time. Just go to a retail bank and try to close your bank account. They will pull amazing shit out of their asses to convince you to stay, they will offer 'riskless high yield investments' etc etc. And people actually belief that crap and pay 3% fees a year for some crappy product!
I just read some article last week that the big commercial banks, JPM, Morgan Stanley, Goldman Sachs and all the Swiss banks are *AGAIN* building CDOs, and other mortgage backed securities and are pushing them again on 'wealthy clients'. So, who's to blame for that? If you read a newspaper the last 3-4 years you should know that those things did not exactly turn out to be the best invesmtment in the world and is not riskless at all.
So who is to blame for the current culture at the big banks? Personnel as a starter, but also a lot of greedy clients that want to be fooled. Without happy clients, no bank, fair enough. But as a client you can decide to change, you can decide to not buy a certain product and you can collectively say ''fuck you Goldman" and they would be out of business in no time. But a lot of them are fooled by the prospect of quick bucks if you pay a big fee to the goldman boys.
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| Posted: Thu, 15th Mar 2012 13:21 Post subject: |
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So what happens to all the money he earned? Since he has a guilty conscience and since he earned that money by doing something he despised, I assume he'll donate the money earned to some charity.
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| Posted: Thu, 15th Mar 2012 13:24 Post subject: |
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| Mister_s wrote: | | So what happens to all the money he earned? Since he has a guilty conscience and since he earned that money by doing something he despised, I assume he'll donate the money earned to some charity. |
Hey it is still a banker..
Per Ardua Ad Astra
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spankie
VIP Member
Posts: 2958
Location: Belgium
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| Posted: Thu, 15th Mar 2012 16:01 Post subject: |
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| Mister_s wrote: | | So what happens to all the money he earned? Since he has a guilty conscience and since he earned that money by doing something he despised, I assume he'll donate the money earned to some charity. |
Can't blame him for taking the money they are giving him. Some people earn 10million a year for throwing an orange ball through a hoop... is that doing a service to the society?
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| Posted: Thu, 15th Mar 2012 18:38 Post subject: |
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Being judgemental after you get what you want/need is cowardice and easy. A man who is truly burdened by his conscience would not keep all his millions he made by fucking over others. I wouldn't be surprised if this man starts working at another bank next year. You think he'll do charity work to 'redeem' himself?
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StarSpeak
Posts: 423
Location: Fascism's Paradise
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| Posted: Thu, 15th Mar 2012 23:13 Post subject: |
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when I first saw this I thought someone on nfohump was a GS'er... they're calling this 'muppetgate' hehe.
GS's shares feel a weenie 3%, so no real problems for them yet
piracy isn't a hobby, it's a way of life
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Sin317
Banned
Posts: 24322
Location: Geneva
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| Posted: Thu, 15th Mar 2012 23:46 Post subject: |
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you cant have a concience and be an investment banker, or broker etc.
the moment you start to think about what you are actually doing, by speculating money and goods and what sometimes SEVERE impact that will have on some (or often a lot of) people, you would hesitate.
thats why they are starting to use more and more computers now, doing their dirty work. No concience, no ethics, works 24/7.
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spankie
VIP Member
Posts: 2958
Location: Belgium
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| Posted: Fri, 16th Mar 2012 13:33 Post subject: |
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Yeah, Sin317, correct.Probably true about the computers, but a lot of people forget that people are finally in charge of a company. Noone will ever admit that he is completely replaceable by a computer. Can you imagine some Vice President going to its chief and saying. 'Actually we are totally replaceable by a computer, please fire the whole department'. Nobody, especially when the department is making money will try to change things that involves proving yourself replaceable.
Just on a little side note. People are coming to a realization that computer based trading is bullshit, so they are imposing more limits and I personally see computerized trading declining in the future. There are a couple of reasons, but the most important one: If you have 100% computer trading, trading makes no sense. Nobody will make mistakes, nobody will get greedy, nobody will get scared. So there are no inefficiencies that the computers can 'abuse'. If you make the markets too efficient, you push out all the retail traders that have the feeling they get screwed over every time the computers start running. In the end you would have a system that has no reason to exist. It is like letting a big nigger fight a small child in a boxing match. You keep adding more big guys, you will win faster and faster. But in the end, nobody want to box anymore and you end up with 10 big guys in the ring that will have to start fighting each other. But they train together, so nobody kicks someone else's ass and nobody will systematically win. So they decide to not get bruised and just wait in the ring for some muppet to try again. Eventually the boxing sport will disappear and you have no reason to exist.
24/7 trading was proposed a couple of years ago and got trashed. People realized it makes more sense to do 8h trading in usa, 8h in europe, 8h in asia. You can do 24h trading if you go from market to market. There is no need for 24h trading in the usa.
And a second thing. You are probably right that investment banking is a cut throat business. And the decisions you take have a severe impact on other people. But most of the other people in the business do know and do realize the cut throat behaviour and have chosen to be in that world. And the cut throat behaviour is also present in other sectors and other companies as well. Imagine yourself working in the FDA and you have to approve or disapprove a phase III medicine of a small biotech company. You approve, people get rich. You disapprove and the company goes bankrupt, patients dont get the medicine, billions of investment dollars wasted.
It is perfectly logical to understand that some people can deal with these things better than others. Should you judge them? Well, probably not. Should they be allowed to vent inner feelings about the company? Probably. To be honest, they guy is not really telling breaking news, is he?
I think it is just a way to justify his exit for himself. He could not take the stress and predatory behaviour and wants to exit. It is a big change in his career, so he wants to vent thing and explain why he is quitting. Things will pass, nothing will change, banking will remain competitive.
And on a side note. I am pretty sure that other commercial banks are not lined up at the moment to pick him up, after all, he was shitting on the system.
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