Goldman exec blasts firm on the way out in NY Times Op-Ed

geecee

Platinum Member
Jan 14, 2003
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43
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http://www.nytimes.com/2012/03/14/opinion/why-i-am-leaving-goldman-sachs.html?ref=business

Interesting. Of course, the cynical among us could point out that he made quite a bit of money at the firm that he is so willing to take a parting shot at. But whether or not it detracts from what he wrote is up to you to decide. :p

Why I Am Leaving Goldman Sachs
By GREG SMITH
Published: March 14, 2012

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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Phokus

Lifer
Nov 20, 1999
22,995
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Goldman Sachs is the "Vampire Squid wrapped around the face of humanity"
 

Beev

Diamond Member
Apr 20, 2006
7,775
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Good for this guy. Stuff like this needs to be as public and well-known as possible, for every company.
 

ichy

Diamond Member
Oct 5, 2006
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Ugh, as if Goldman Sachs was some sort of virtuous, noble company ten years ago :rolleyes:
 

geecee

Platinum Member
Jan 14, 2003
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Wow, this got moved to P&N? I never come in here. It's scary. :p
 

Genx87

Lifer
Apr 8, 2002
41,095
513
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And then you gotta love the obvious character assassination attempt article.

http://www.forbes.com/sites/nathanvardi/2012/03/14/a-goldman-sachs-executives-midlife-crisis/

Honestly that article at that link was what I was thinking while reading his NYT's piece. Since when has Goldman Sachs not held the beliefs he is talking about in his opinion piece? Why now, does it suddenly go against his morality and he has to get out?

I have no doubt at all what he is saying is true. But I dont think it is something that has only shown up recently at Goldman Sachs.
 

unokitty

Diamond Member
Jan 5, 2012
3,346
1
0
Interesting article.

But the reality is that if you are a former Goldman-Sachs CEO, New Jersey Governor, and a big enough contributor to the Presidents Campaign Fund, you can steal 1.6 billion dollars.

And when you testify before your political colleagues in Congress, just wave your hands and say, "I don't know."

Of course, the bankruptcy investigation headed by a former FBI head could be tough... But it won't stop the company officers who oversaw the disappearance of the 1.6 billion dollars from getting their bonuses.

You might think that something is wrong here... Just don't expect anyone with the right political connections to miss a bonus over it.

Uno
 

monovillage

Diamond Member
Jul 3, 2008
8,444
1
0
Wow, this got moved to P&N? I never come in here. It's scary. :p

Welcome to ATP&N!
I'd like to apologize now for the jerks that hang out here (I am one btw) sometimes we go over the top and get rude and make wild ass statements and accusations. It doesn't mean we don't like you though.
 

Munky

Diamond Member
Feb 5, 2005
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76
Good to see more people acknowledging the fraudulent and parasitic nature of the too big to fails.
 

crownjules

Diamond Member
Jul 7, 2005
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Honestly that article at that link was what I was thinking while reading his NYT's piece. Since when has Goldman Sachs not held the beliefs he is talking about in his opinion piece? Why now, does it suddenly go against his morality and he has to get out?

I have no doubt at all what he is saying is true. But I dont think it is something that has only shown up recently at Goldman Sachs.

I've read other pieces on Wall St. and, while it's not a new thing in that it's never existed, it's just not something that consumed Wall St. firms like it has in the last decade. That is the shifting away of principles from a long-term, client focused methodology to a short-term, firm profits first method of operation. In the former, you're taking measured risks and everyone benefits from it. The latter is what leads us to places like the financial meltdown of 2007-8. Firms put money into insane bets and lose their clients' money but escape culpability themselves.
 
Nov 29, 2006
15,606
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How is this news? We've all known this for awhile now havent we? At least i have, and i assumed the rest of you were enlightened as well :)
 

Dari

Lifer
Oct 25, 2002
17,134
38
91
Honestly that article at that link was what I was thinking while reading his NYT's piece. Since when has Goldman Sachs not held the beliefs he is talking about in his opinion piece? Why now, does it suddenly go against his morality and he has to get out?

I have no doubt at all what he is saying is true. But I dont think it is something that has only shown up recently at Goldman Sachs.

It hasn't always been this way. What he's saying is basically true. The firm used to want to kick people out as soon as they got in because it did not want them to become complacent/comfortable. It wanted hunger and drive. It was conservative. Now, it basically screws its clients dry.
 

gevorg

Diamond Member
Nov 3, 2004
5,075
1
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How long until Goldman Sachs dig up and unleash all the dirt on this guy?

lloyd-blankfein-goldman-sachs.jpg
 

bfdd

Lifer
Feb 3, 2007
13,312
1
0
Obviously being ran by terrible people who don't understand the capitalism in which they're trying to prosper from. Short term gains and loses are not capitalism, they're just utilitarian desires being acted upon. Retards. Happiness comes from within, not from doing or getting shit.
 
D

Deleted member 4644

I've read other pieces on Wall St. and, while it's not a new thing in that it's never existed, it's just not something that consumed Wall St. firms like it has in the last decade. That is the shifting away of principles from a long-term, client focused methodology to a short-term, firm profits first method of operation. In the former, you're taking measured risks and everyone benefits from it. The latter is what leads us to places like the financial meltdown of 2007-8. Firms put money into insane bets and lose their clients' money but escape culpability themselves.

This.

It's not like it was all flowers and unicorn farts before. But back in the 1950s, 60s, and maybe 70s it was more about personal relationships and trust.

That started to change by the 80s 90s and forward...
 

ky54

Senior member
Mar 30, 2010
532
1
76
Obviously being ran by terrible people who don't understand the capitalism in which they're trying to prosper from. Short term gains and loses are not capitalism, they're just utilitarian desires being acted upon. Retards. Happiness comes from within, not from doing or getting shit.

And the worst are or were in the Obama administration... and people wonder why we are so screwed?
 

Dulanic

Diamond Member
Oct 27, 2000
9,949
569
136
Wall street is not about long term viability, it is all about the short term profits. Who cares if you fuck over the company in the long run, it won't effect that person in the short term.

That same idea is growing beyond wall street too and into most companies now.
 

LegendKiller

Lifer
Mar 5, 2001
18,256
68
86
Interesting article.

But the reality is that if you are a former Goldman-Sachs CEO, New Jersey Governor, and a big enough contributor to the Presidents Campaign Fund, you can steal 1.6 billion dollars.

And when you testify before your political colleagues in Congress, just wave your hands and say, "I don't know."

Of course, the bankruptcy investigation headed by a former FBI head could be tough... But it won't stop the company officers who oversaw the disappearance of the 1.6 billion dollars from getting their bonuses.

You might think that something is wrong here... Just don't expect anyone with the right political connections to miss a bonus over it.

Uno

I thought they had accounted for all of the money?
 

Fern

Elite Member
Sep 30, 2003
26,907
173
106
I've read other pieces on Wall St. and, while it's not a new thing in that it's never existed, it's just not something that consumed Wall St. firms like it has in the last decade. That is the shifting away of principles from a long-term, client focused methodology to a short-term, firm profits first method of operation. In the former, you're taking measured risks and everyone benefits from it. The latter is what leads us to places like the financial meltdown of 2007-8. Firms put money into insane bets and lose their clients' money but escape culpability themselves.

I believe I've heard of similar culture shifts in parts of the big international accounting firms.

I'm pretty sure KMPG (Peat Marwick for us old guys) was churning clients through crappy high priced tax shelters to raise big fees and partners were criminally charged. Not much different than what the author claims about GS IMO.

Fern