Why I am leaving Goldman Sachs – By Greg Smith


This was published today bythe NYTimes. An interesting Op-Ed “artilcle”/resign  letter by Goldman Sachs Executive Director worth discussing:

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.

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.

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.

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.


Break the hate cycle


I just spent the last couple of hours watching history unfold. It is well-known by now, that last night (I write these words around 1:30 am of May 2nd) President Barrack Obama told the world that Osama Bin Laden, mastermind of the USS Cole and 9/11 attacks, was dead.

The news leaked about an hour before the announcement and by the time Obama took the microphone, there were already hundreds of people outside of the White House chanting and celebrating the fact. Crowds were also gathering around Ground Zero in New York City in what became an important and emotional chapter in US history.  

As the night progressed, discourse both in mainstream media and on the streets got charged up more and more and before long, what began with chanting of patriotic songs (God Bless America and the Star Spangled Banner) became a rowdy football fan-like behavior. “Yes, we can” evolved to “USA! USA! USA!” and “Na na na na, na na na na, hey hey, goodbye.”  On twitter, new users like OsamaInHell and GhostOsama were created and tweets making reference to the foursquare network  mentioning that Osama Bin Laden was the now mayor of Hell were retweeted all night. “Obama got Osama” T-shirts are already on sale. Admittedly, the trend was contagious and I even fell into it for a second. But we have to be better than this.

I can understand that the US needs to take a moment to celebrate achieving a goal they set a long time ago but we cannot let it become the catalyst of hate.

When the twin towers fell, I remember news media showing footage from Palestine of people celebrating in the streets. Watching Americans do exactly the same today, worries me. Death and vengeance should not be an occasion for joy and as Mohandas Gandhi famously said “an eye for eye makes the world go blind.”

I don’t mean to eradicate extremism. That would be naïve. But we cannot allow ourselves the easy privilege of going with the flow and letting the worst part of our human nature take over. I felt sick reading some racist comments from readers of news media saying that Obama’s speech should have started with “I got that cocksucker towelhead. We got him right between the frickin’ eyes.”  It is irrelevant to look for the root cause of the conflict, to point fingers and say who is to blame for all the hate… but far too quickly we’ve forgotten why the Taliban was in power in Afghanistan in the first place. In most conflicts, no one party is completely innocent and no one party is completely to blame.

Please, dear readers, let’s acknowledge this day in history for what it is and ONLY for what it is. Last night a man who considered his ends to justify his means which included targeting innocent civilians, was killed in a military operation in Pakistan. It was not the triumph of good over evil and it was not Obama “getting a cocksucker towelhead.”

Please break the hate cycle. It is time to call for unity, not vengeance (and you don’t want vengeance coming your way either).

All we are saying is give peace a chance.