A departing Goldman Sachs Group Inc. (GS) employee mounted an unprecedented public attack on its “toxic and destructive” culture in a New York Times opinion piece, becoming the first serving insider to openly criticize the firm.
Greg Smith, identified by the newspaper as an executive director and head of the firm’s U.S. equity derivatives business in Europe, will leave the firm after 12 years, blaming Chief Executive Officer Lloyd Blankfein and President Gary Cohn for losing hold over the firm’s culture. Executive directors are junior to managing directors and partners, the most senior rank.
His op-ed piece can be found here (surprisingly, not behind the paywall), and let me pull some quotes for you.
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.
[...] 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.
[...] 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.
Smith would be about 35 at this point (assuming he joined out of his MBA program: he's younger if it was straight out of college), so he's not wet behind the ears and has seen first hand the toxic nature of money. Lots and lots of money.
I suppose it was inevitable that the housing bubble would make more money for Wall Street than nearly every other bubble combined. And that it would turn Wall Street sharks into megalodons, supersharks with no remorse and no thought about anything besides the eyes on the prize.
After all, these same folks grew up in an America that valued money above all else, that put television programs like Lifestyles of the Rich and Famous front and center during their formative years. We minimized the collective aspect of what made America great, the clasped hands, the men and women working side by side on the factory floor to make affordable quality products, not necessarily the cheapest, but the best value, the best your money could buy.
We lost sight of that in the rush to profits, egged on by an investor class more and more out of touch with America. Indeed, it's no surprise to me that trading is done by software now, not human beings.
After all, it's a war, and in war it's much easier to kill someone by pressing a button miles away than walking up to them, knife in hand.
I don't envy Smith the backlash he'll receive here, and I offer my services to defend him as best as I can in any way I can, because telling the truth in finance is a rare commodity, and one that there ought to be a trading floor opened for.
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