OpEd
by Greg Smith
New
York Times, March 14, 2012
This is the most stunning,
authentic piece we have ever read. You can feel the disappointment, evedisgust,
in his words. The breach of trust is palpable as is the consequence of such a
loss of trust and integrity.
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.
At Altaview, we understand
the kind of trust that clients place in us.
We also know that we have to earn that trust, day by day. The
large financial institutions have lost sight of whom they are there to
serve. They do not exist to serve their
own interests. When Blankfein seriously wrote that he is doing God’s work, you
know that Wall Street had truly lost their moral compass. We are here to serve our clients’ best
interest. We are here to listen, to
counsel, to help and to advise. It all
begins and ends with the client.
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.
Smith is stating what we know is in the back of
many clients’ minds- how can I be sure that my interests are being served. How
do I know that my investment professional really gets it, really is there for
me. How can I ever be sure. We know that is what most clients think about
and that is why we believe that it is the client who has to drive the
relationship. We earn their trust each
time we do what we say we’re going to do. We earn their trust each time we
follow through with a commitment. We earn their trust when we tell the truth.
We earn their trust when we do what’s right for the client, not what earns us
the most money.
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.
We understand what kind of
climate we’re working in and we know how cynical clients have become. We don’t blame them. We are cynical too. That is
why we work so hard to do our due diligence. Because we want to look each
client in the eye and honestly answer each question. We don't hold anything back. If there is risk in the investment, we’ll be
the first ones to tell you. Trust is all
we really have to sell to our clients.
Anybody can sell product. That’s
the easy part. Not everybody can
authentically offer trust.
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.
These days, the most common
question I get from junior analysts about derivatives is, “How much money did
we make off the client?” It bothers me every time I hear it, because it is a
clear reflection of what they are observing from their leaders about the way
they should behave. Now project 10 years into the future: You don’t have to be
a rocket scientist to figure out that the junior analyst sitting quietly in the
corner of the room hearing about “muppets,” “ripping eyeballs out” and “getting
paid” doesn’t exactly turn into a model citizen.
When I was a first-year
analyst I didn’t know where the bathroom was, or how to tie my shoelaces. I was
taught to be concerned with learning the ropes, finding out what a derivative
was, understanding finance, getting to know our clients and what motivated
them, learning how they defined success and what we could do to help them get
there.
My proudest moments in life
— getting a full scholarship to go from South Africa to Stanford University,
being selected as a Rhodes Scholar national finalist, winning a bronze medal
for table tennis at the Maccabiah Games in Israel, known as the Jewish Olympics
— have all come through hard work, with no shortcuts. Goldman Sachs today has
become too much about shortcuts and not enough about achievement. It just
doesn’t feel right to me anymore.
I hope this can be a
wake-up call to the board of directors. Make the client the focal point of your
business again. Without clients you will not make money. In fact, you will not
exist. Weed out the morally bankrupt people, no matter how much money they make
for the firm. And get the culture right again, so people want to work here for
the right reasons. People who care only about making money will not sustain
this firm — or the trust of its clients — for very much longer.
Hats off to Greg Smith for
his strong moral character and the guts to stand up and say what needed to be
said.
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