NYTimes Op-Ed: Why I Am Leaving Goldman Sachs

[lcjjdnh]

This will be zinging around the Internet. To channel Bill Simmons, he took a page out of Dylan McCay's book: "May the bridges I burn light the way!"

http://www.nytimes.com/2012/03/14/opinion/why-i-am-leaving-goldman-sachs.html?ref=todayspaper

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.

 

[Bob Cook]

 

[Boom_70]

Wow! No doubt that Michael Lewis applauds.

It seems like the Goldman culture changed a lot when they
went from partnership to corporation. Behind the limited risk of corporation the leadership was will to push the envelope a bit further.

 

[ringer]

What I'd say to the naive writer?

Boo hoo
Welcome to the world.
You could make the same argument about just about any company over time. They change. They get less personal, less customer-oriented, more focused on the bottom line... even (gasp) unethical.

It sucks, but Valhalla doesn't exist in corporate culture -- and certainly NOT in banking.
What was he thinking?

(He must be about 34.)

 

[YankeeFan]

Bull****.

This like Congressman and Senators who decry "partisanship" when they decide not to seek re-election.

You think Goldman has really changed that much? Maybe he's changed. Maybe he's just gotten enough coin in his pocket.

But, to pretend the business has changed so much is bs.

 

[Bob Cook]

Bull****.

This like Congressman and Senators who decry "partisanship" when they decide not to seek re-election.

You think Goldman has really changed that much? Maybe he's changed. Maybe he's just gotten enough coin in his pocket.

But, to pretend the business has changed so much is bs.

Whether the culture has changed or not, it's pretty damning that a higher-up leaves Goldman saying the company exists to screw its clients out of their money, and by extension, screw the U.S. economy. If nothing else, if you have money, why would you trust it to Goldman at this point?

 

[The Big Ragu]

Goldman Sachs' response so far has been an ad hominem attack. Not surprising.

According to them he's a nobody with a puffed up title; He's a VP (common title; and junior level on Wall Street) who "heads" up a department of one (himself). Also said the real reason is he was disappointed by his bonus.

Dunno if any of that is true, but now would be the time for someone to flame out over disappointment in their bonus.

One of the best things about this is that Goldman hired a new head PR person yesterday -- a former white house press secretary at the end of Clinton's run, who was most recently an aide to Tim Geithner. What a place to walk into as the person in charge of PR.

 

[LongTimeListener]

Bull****.

This like Congressman and Senators who decry "partisanship" when they decide not to seek re-election.

You think Goldman has really changed that much? Maybe he's changed. Maybe he's just gotten enough coin in his pocket.

But, to pretend the business has changed so much is bs.

He may just be a disillusioned guy in his mid-30s. Hardly uncommon in any walk of life.

But Goldman has changed. The Goldman of 20 years ago wasn't trying to pass off bad derivatives to unsuspecting customers and banks, with the side benefit of torpedoing the world economy, because those things didn't exist. And the pre-corporation Goldman probably was an entirely different place, according to many other accounts as well.

 

[JakeandElwood]

Greedy investment bank is greedy.

 

[dixiehack]

That guy was grossly overpaid. I know this because he wrote something foe the newspaper.

 

[The Big Ragu]

You're confusing CEOs. Lloyd Blankfein is the "God's work" guy.

The newspaper/overpaid guy is Jamie Dimon.

 

[lcjjdnh]

Bull****.

This like Congressman and Senators who decry "partisanship" when they decide not to seek re-election.

You think Goldman has really changed that much? Maybe he's changed. Maybe he's just gotten enough coin in his pocket.

But, to pretend the business has changed so much is bs.

He may just be a disillusioned guy in his mid-30s. Hardly uncommon in any walk of life.

But Goldman has changed. The Goldman of 20 years ago wasn't trying to pass off bad derivatives to unsuspecting customers and banks, with the side benefit of torpedoing the world economy, because those things didn't exist. And the pre-corporation Goldman probably was an entirely different place, according to many other accounts as well.

Back when they had a partnership model, the business strategy was "long-term greed". When you convert to a public ownership, you create principal-agent problems--people no longer have the same incentives to think about the long-term.

 

[Bob Cook]

I thought maybe Matt Taibbi had a story at the ready, but his rip-you-off bank piece is about Bank of America. Actually, there's a line in here that, to me, explains a lot about why none of these bankers is rotting in a jail cell right now.

http://www.rollingstone.com/politics/news/bank-of-america-too-crooked-to-fail-20120314

They're in deep trouble, but they won't die, because our current president, like the last one, apparently believes it's better to project a false image of financial soundness than to allow one of our oligarchic banks to collapse under the weight of its own corruption.

My belief has been that the reason the Justice Department has held back prosecutions is because these banks were, and still are, sicker than we want to believe (though the Taibbi piece details, as others have, how financially ailing Bank of America really is). Even breaking up these banks into smaller units would reveal the stink.

 

[LongTimeListener]

Bull****.

This like Congressman and Senators who decry "partisanship" when they decide not to seek re-election.

You think Goldman has really changed that much? Maybe he's changed. Maybe he's just gotten enough coin in his pocket.

But, to pretend the business has changed so much is bs.

He may just be a disillusioned guy in his mid-30s. Hardly uncommon in any walk of life.

But Goldman has changed. The Goldman of 20 years ago wasn't trying to pass off bad derivatives to unsuspecting customers and banks, with the side benefit of torpedoing the world economy, because those things didn't exist. And the pre-corporation Goldman probably was an entirely different place, according to many other accounts as well.

Back when they had a partnership model, the business strategy was "long-term greed". When you convert to a public ownership, you create principal-agent problems--people no longer have the same incentives to think about the long-term.

Right. I don't know if there's a moral component -- I think there is, based on the testimonials about how "Wall Street" and "Liars' Poker" had the exact opposite effect of their intentions and actually turned out bankers who were more lustful of money instead of less. But the new rules have created separate and usually contrary goals for the banks and their clients.

Sounds like a system failure to me, one that should be addressed through regulation or at least vigorous prosecution based on the existing laws. But that's a bigger argument than just Goldman.

 

[Boom_70]

Bull****.

This like Congressman and Senators who decry "partisanship" when they decide not to seek re-election.

You think Goldman has really changed that much? Maybe he's changed. Maybe he's just gotten enough coin in his pocket.

But, to pretend the business has changed so much is bs.

He may just be a disillusioned guy in his mid-30s. Hardly uncommon in any walk of life.

But Goldman has changed. The Goldman of 20 years ago wasn't trying to pass off bad derivatives to unsuspecting customers and banks, with the side benefit of torpedoing the world economy, because those things didn't exist. And the pre-corporation Goldman probably was an entirely different place, according to many other accounts as well.

Back when they had a partnership model, the business strategy was "long-term greed". When you convert to a public ownership, you create principal-agent problems--people no longer have the same incentives to think about the long-term.

It's more about risk. Partners were less willing to take a risk when they had skin in the game.

 

[The Big Ragu]

Bull****.

This like Congressman and Senators who decry "partisanship" when they decide not to seek re-election.

You think Goldman has really changed that much? Maybe he's changed. Maybe he's just gotten enough coin in his pocket.

But, to pretend the business has changed so much is bs.

He may just be a disillusioned guy in his mid-30s. Hardly uncommon in any walk of life.

But Goldman has changed. The Goldman of 20 years ago wasn't trying to pass off bad derivatives to unsuspecting customers and banks, with the side benefit of torpedoing the world economy, because those things didn't exist. And the pre-corporation Goldman probably was an entirely different place, according to many other accounts as well.

Back when they had a partnership model, the business strategy was "long-term greed". When you convert to a public ownership, you create principal-agent problems--people no longer have the same incentives to think about the long-term.

Explain how a principle agent problem would have anything to do with a bank ripping off its clients.

A principle agent problem would explain a bank's employees having different objectives than investors in its stock shares.

Find me a GS investor who is complaining about anything like that.

GS's earnings have been great and are still growing at a fast clip, and its share price is up somewhere around 30 percent this year and consensus estimates have it continuing to go up (significantly) through this year. Investors aren't complaining about their employee's interests not being aligned with theirs -- why would they when they are making $$?

A principle-agent problem has zero to do with any of this. GS was just as dishonest with its clients when it was a partnership as it is today, and a shifting from employees working for partners to working for investors in stock shares, hasn't really changed their priorities or how they go about making money. They are driven by promotions and bonuses, just as they always have been.

 

[lcjjdnh]

Bull****.

This like Congressman and Senators who decry "partisanship" when they decide not to seek re-election.

You think Goldman has really changed that much? Maybe he's changed. Maybe he's just gotten enough coin in his pocket.

But, to pretend the business has changed so much is bs.

He may just be a disillusioned guy in his mid-30s. Hardly uncommon in any walk of life.

But Goldman has changed. The Goldman of 20 years ago wasn't trying to pass off bad derivatives to unsuspecting customers and banks, with the side benefit of torpedoing the world economy, because those things didn't exist. And the pre-corporation Goldman probably was an entirely different place, according to many other accounts as well.

Back when they had a partnership model, the business strategy was "long-term greed". When you convert to a public ownership, you create principal-agent problems--people no longer have the same incentives to think about the long-term.

Explain how a principle agent problem would have anything to do with a bank ripping off its clients.

A principle agent problem would explain a bank's employees having different objectives than investors in its stock shares.

Find me a GS investor who is complaining about anything like that.

GS's earnings have been great and still are still growing at a fast clip, and its share price is up somewhere around 30 percent this year and consensus estimates have it continuing to go up (significantly) through this year. Investors aren't complaining about their employee's interests not being aligned with theirs -- why would they when they are making $$?

A principle-agent problem has zero to do with any of this. GS was just as dishonest with its clients when it was a partnership as it is today, and a shifting from employees working for partners and working for investors hasn't really changed their priorities or how they go about making money.

Employees get to extract short-term profits without taking on the long-term risks (here, reputation). Your points about Goldman shares going up and being a "buy" prove nothing--we don't have a counterfactual to compare it to.

In any case, even if accepting your arguments the employees and the owners have aligned interests, I'd say the shift to the public matter still changed the culture. Under your model, public shareholders have different interests than an owner that has most of his wealth tied up in the firm would--they only care about the short-term.

 

[lcjjdnh]

Bull****.

This like Congressman and Senators who decry "partisanship" when they decide not to seek re-election.

You think Goldman has really changed that much? Maybe he's changed. Maybe he's just gotten enough coin in his pocket.

But, to pretend the business has changed so much is bs.

He may just be a disillusioned guy in his mid-30s. Hardly uncommon in any walk of life.

But Goldman has changed. The Goldman of 20 years ago wasn't trying to pass off bad derivatives to unsuspecting customers and banks, with the side benefit of torpedoing the world economy, because those things didn't exist. And the pre-corporation Goldman probably was an entirely different place, according to many other accounts as well.

Back when they had a partnership model, the business strategy was "long-term greed". When you convert to a public ownership, you create principal-agent problems--people no longer have the same incentives to think about the long-term.

Explain how a principle agent problem would have anything to do with a bank ripping off its clients.

A principle agent problem would explain a bank's employees having different objectives than investors in its stock shares.

Find me a GS investor who is complaining about anything like that.

GS's earnings have been great and still are still growing at a fast clip, and its share price is up somewhere around 30 percent this year and consensus estimates have it continuing to go up (significantly) through this year. Investors aren't complaining about their employee's interests not being aligned with theirs -- why would they when they are making $$?

A principle-agent problem has zero to do with any of this. GS was just as dishonest with its clients when it was a partnership as it is today, and a shifting from employees working for partners and working for investors hasn't really changed their priorities or how they go about making money.

Employees get to extract short-term profits without taking on the long-term risks (here, reputation). Your points about Goldman shares going up and being a "buy" prove nothing--we don't have a counterfactual to compare it to.

In any case, even if accepting your arguments the employees and the owners have aligned interests, I'd say the shift to the public matter still changed the culture. Under your model, public shareholders have different interests than an owner that has most of his wealth tied up in the firm would--they only care about the short-term.

To simplify, I'd say this:

Partners care about the long-term. If shareholders also care about the long-term, this occurs because the change in the principal-agent relationship increases monitoring costs, etc--thus employees can benefit in the short-term at the expense of the long-term health of the company. Further, even if shareholders don't care about the long-term, this occurs because the principle now has different objectives than a partner would.

 

[TheSportsPredictor]

He'll be giving back all the money he made while working for that despicable company, right?

 

[DanielSimpsonDay]

He'll be giving back all the money he made while working for that despicable company, right?

He will, and just as quickly as any one of us would, i.e. never. The distasteful portion is the author's newfound ethics when it is clear that the institution and those in it have been doing these things he now holds as abhorrent for years.

That said, one has to admire the Resumegnation-like quality of it.

This guy would be proud.