A Goldman Sachs executive’s dramatic farewell on the opinion pages of the New York Times is drawing a mixture of ridicule, disbelief and pessimism. Greg Smith, VP (there are thousands of these at Goldman), excoriates his former colleagues for their inattention to clients and blames a culture that has become “toxic and destructive.”
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.
See Nathan Vardi at Forbes for why Smith’s cri de coeur should raise eyebrows, namely because his moral epiphany comes several years too late:
Smith is not the first person who wants to tell his former bosses to shove it. He is also not a whistleblower. He remained happily employed at Goldman after it took a massive taxpayer bailout. He stuck around to enjoy the firm’s $45 billion of 2009 revenues after Goldman got $10 billion from the Treasury Department’s Troubled Asset Relief Program and sold $29 billion of low-cost bonds backed by the Federal Deposit Insurance Corporation’s Temporary Liquidity Guarantee Program. Goldman was also allowed to become a bank holding company and borrow cash from the Federal Reserve’s discount window for just about nothing while riding the yield curve the Fed had set up. Smith stayed for all that.
Andy Borowitz has a hilarious fake rebuttal from CEO Lloyd Blankfein, assuring clients that the firm is doing all it can to ensure that its employees remain unencumbered by their troublesome consciences:
At Goldman, we pride ourselves on our ability to scour the world’s universities and business schools for the finest sociopaths money will buy. Once in our internship program, these youths are subjected to rigorous evaluations to root out even the slightest evidence of a soul. But, as the case of Mr. Smith shows, even the most time-tested system for detecting shreds of humanity can blow a gasket now and then. For that, we can only offer you our deepest apology and the reassurance that one good apple won’t spoil the whole bunch.
Vegetables: Noah Millman has a lengthy analysis here.