Wednesday, March 14, 2012

Goldman Sachs Employee Goes Totally Rogue

This is big. Most ex-Goldman Sachs employees still genuflect when they say the name Goldman Sachs.

Greg Smith in a departing letter rips the place to shreds in the New York Times. Noteworthy, although he slings plenty of mud, he doesn't understand what really makes Goldman evil. He doesn't once mention the way Goldman plays footsie with government. He doesn't bring up at all the billions shoveled to Goldman by the Treasury and Fed, during the recent financial crisis. He doesn't bring up the fact that Goldman is a primary dealer licensed to deal directly with the Fed, which gives Goldman a major inside edge. He doesn't once mention the Goldman placement of key employees throughout the financial regulatory agencies, both in the United States and abroad.

In other words, Smith is/was a minor league muppet at a very evil organization that he really still doesn't understand.  The firm in many ways is cult like. From the absurd hiring process that no decent man with balls would ever subject himself to, to the overall culture. It's all about internal intimidation.The players at the top may teach the others how to intimidate clients, but the real trick is that the top players know how to manipulate and intimidate the employees throughout the organization. The "rigorous" interview process is designed to find smart people who can be turned into Goldman sheep. These guys no every trick in the book and then some.

Here's Smith's rant, just keep in mind that Goldman is much more evil than this:
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. 
Read the rest here.


  1. "It wasn’t just about making money; this alone will not sustain a firm for so long." What a load of crap! It's always about making money, the only difference is whether you make it through the market or through influence peddling. "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." No free market business would ever make it by selling to customers what they don't need or even worse, what is bad for their business. The only way Goldman can afford to do this is through cronyism.
    Good on you for call this D-bag out. In essence, his "anti-Goldman rant" is just a diversion from what is really wrong with this company and this economic system. By the way, this sort of an articles which only serves to obscure the true causes of a problem (published by the Ministry of Propaganda remnants in the former Communist Bloc) is known as a "Shit-pie."

    1. Astute observation. It should be noted, albeit not surprising, that the top-rated comment on the article calls for tighter regulation. No mention about the revolving door or the oligarchical, govt-funded plutocracy this economy has become.

  2. This guy is the Bradley Manning of the corporate world.

  3. In other news, politicians are for sale, bankers are pirates, and shit stinks...

  4. They "know" every trick in the book.

  5. Looks like the guy was not good enough to be promoted to the next level. So, he whines about how people that make money are promoted over people who "have ideas and set a good example" i.e don't make money.

    Contrary to what Smith says, Goldman was ALWAYS a meritocracy that rewarded the people who made the most money. It gets harder to compete the higher you go in the firm and Smith apparently hit the ceiling earlier than he thought he would.

    Sorry, Smith you are in the 1% but not the 1% of Goldman who make partner.