With the impending release of Greg Smith’s tell-all book about his time at Goldman Sachs, it’s finally time for me to vent a little about his ridiculous New York Times Op-Ed last Spring.
Immediately following the online release of the New York Times Op-Ed that would launch a thousand Muppet jokes , I printed it out and handed it to my editor in chief[1] because I knew she would be interested. I knew everyone would be interested. Smith nailed the 2008-2012 financial Zeitgeist [Goldman is greedy!] and he made a credible witness as an insider.[2]
Now, there’s three things that must be said about Smith’s bombshell of an Op-Ed, two of them complimentary and the third one, not so much.
First, Smith’s letter, compared to Lloyd and Gary’s dead-speak corporate response, was an unfair fight the likes of which we haven’t seen since Mike Tyson took down some of his patsy opponents in the late 80s. Smith can write some interesting sentences, while Lloyd and Gary, just as clearly, cannot. Their passive voice construction, reference to a workplace poll about employee satisfaction, and clear put-down of his status at the firm[3] simply did not respond to Smith’s main accusation.
Second, and most importantly, Smith’s main accusation is absolutely true. Yes, Goldman collectively only cares about the money.[4] Yes, you get promoted at Goldman for profitable behavior. Yes, higher complexity products have a greater chance of being profitable than lower complexity products, so you will be rewarded for trafficking in higher complexity products. Yes, Goldman employees tend to favor their employer’s needs over the needs of their clients in the long run, and sometimes, in some cases, even in the short run. All true, although I’m not sure why any of this is news.
Third, and most problematic, however, is Smith’s assertion that “Goldman has changed” during his ten year career from 2002 to 2012. That, my friend, is complete malarky. [5] Goldman didn’t change. Goldman was like that when I started there in 1997. Goldman was like that in 1985.[6] Goldman was, no doubt, like that in 1931. Goldman didn’t change. Greg Smith changed. He became a middle-aged guy who no longer wanted to compete and win at everything, at all costs. He grew up.
And yet, he does still need to compete, and that’s the worst part. There’s a kind of pathetic part of Greg Smith that does want to compete and win at everything, so he must tell New York Times readers about his scholarship to Stanford, the bronze medal in the Maccabiah Games in table tennis, and about being a finalist for the Rhodes scholarship.[7] He must enumerate the size of his hedge fund clients and their assets under management. After ten years he has evolved enough to know there is more to life than ripping clients’ faces off, yet he can’t quite break the habit of telling you how much size matters to him.
I wish you well, Greg Smith[8]. But I sense this is going to take some time for you.
[1] Mom
[2] albeit on his way to becoming an untouchable outsider in record time.
[3] Their roundabout way of highlighting what a no-status worker Smith was: while commenting that 89% of clients found service from the firm positive, and “for the group of nearly 12,000 vice presidents, of which the author of today’s commentary was, that number was similarly high.” Very clever, Lloyd and Gary. We get it, Smith is a Vice President nobody in your eyes.
[4] If this is too blunt, we can treat you like a child and tell you the opposite: Yes, Virginia, there really is a Santa Claus, and yes, your friendly bankers at Goldman really want what’s best for YOU.
[5] As Joe Biden would say, to his good friend Paul Ryan.
[6] See e.g. Michael Lewis’ Liar’s Poker
[7] On the one hand he’s bragging. On the other hand, the evil voice in me has to say: The what games? Never heard of them. In table tennis, you say…Is this a joke? Are you trying to undercut yourself? And you’re bragging about being a Rhodes finalist? And this is what you’re most proud of ten years later?…let’s just move on.
[8] But forgive me if I don’t rush out to read the book you’ve produced with a reported $1.5MM advance, chock full of descriptions about the size of your client base.
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3 Replies to “Midlife Muppet Crisis”
You may be right that the firm hasn’t changed since 2002, but do you really think the 1999 transformation from a partnership to a publicly traded corporation had no impact on the firm’s culture? That would surprise me. Incentives are different at a public company, and behaviors change as a result. People who can hit quarterly numbers get promoted rather than people with longer term visions. The Goldman of 2012 may be similar to the Goldman of 2002, but I bet the Goldman of 1992 was a different animal.
It’s a good question, I don’t know. I caught the tail end of the partnership in my first year at GS. I didn’t notice anything particularly different by the time I left in 2004. All the Greg Smith ‘accusations’ seemed to apply equally to 1997 and 2004.
Having said that, I do ascribe to a version of what you’re suggesting – Michael Lewis described well the difference between partnerships and public firms w/r/t risk management. Asserting that the risk management of public firms was notably worse than partnerships…Partners would never put their own capital and reputations on the line to engage in the kind of leverage and short-timerism that public companies do. If its not your money, its a lot easier to risk it…
The vampire squid still has its defenders. What a shame.