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.
These are the parting words of Greg Smith, who announced in the NY Times this morning that he was quitting Goldman Sachs because of the reasons stated above. Mr. Smith is 33 and was at the firm for 12 years, ending up as executive director and head of Goldman’s equity derivatives business in Europe, the Middle East and Africa.
Most people will enjoy seeing Lloyd Blankfein, its CEO, twist in the wind. I don’t. I think there is much to what Mr. Smith says about GS and about Wall Street. It’s no shock they want to make tanker loads of money. But the popular meme about Wall Street by Wall Streeters has been that they were professionals, like lawyers and accountants who owed a duty of trust to their clients. Dissuade yourself of that fantasy. It’s never been that way, despite Mr. Smith’s lament.
I’m not saying they are crooks and neither does Mr. Smith. I worked for a brokerage firm 40 years ago and the elderly and courtly president of the firm, one who had survived the Crash of ’29, gave me this simple lesson in the life of stock brokerage. He said, “Harding, think of us like a grocery store with stock on the shelves. Your job is to get that stock off our shelves and sell it to someone.” I did and was pretty good at it. But the pressure was constant to “get your gross up”. I quit.