Take This Job And Shove It
One Goldman Sachs employee decided to quit his job in a very public manner.
Greg Smith, a London based Vice-President for Goldman Sachs, decided for some reason to make his departure from the investment firm very public by putting his resignation letter on the Op-Ed page of The New York Times:
Wall Street traders come and go all the time, but few have quit with the flair of Greg Smith. The way he resigned from Goldman Sachs, and what he had to say, could reignite a debate over how much Wall Street has changed in the wake of the financial crisis.
Very little, he said in an Op-Ed column in The New York Times on Wednesday. Mr. Smith, a London-based executive director for Goldman Sachs overseeing equity derivatives, decried a drastic change in culture at the firm since he joined it 12 years ago, with profits now coming before the interest of clients who, he wrote, are often derided as “muppets” by people at Goldman.
Mr. Smith is saying publicly what others whisper privately, which is why his cri de coeur may be so provocative. Even on Wall Street — where making money is good, and making more money is better — a few shibboleths still command respect, including the one that the customer should come first, or at least second, not dead last. Since the financial crisis, in fact, nearly all the big banks have claimed to be client-centric as they seek to rebuild public trust.
(…)
Mr. Smith’s criticism, much more than stories about bonuses or brickbats from the likes of Occupy Wall Street, could be especially painful for Wall Street now. Memories are still fresh of the Securities and Exchange Commission lawsuit filed in April 2010 accusing Goldman of fraud, after it sold clients complicated mortgage backed securities that later soured, and never mentioned that it had bet against them.
Smith’s Op-Ed, in addition denouncing what he contends Goldman has become, is also incredibly self-serving because, of course, things just weren’t don’t this way when he started out the in the business:
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.
(…)
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.
Felix Salmon isn’t buying it for a minute:
Smith has been in this business for 12 years, and he’s done extremely well by it. And to a certain extent, if the people who work for him are constantly asking how good a deal is for Goldman, rather than how good the deal is for Goldman’s clients, then that’s because of the example he set. What’s missing in his op-ed is any sense of mea culpa, any sense that he was at all part of the problem.
There’s a strong smell of faux-naive coming from Smith’s op-ed. “Leadership used to be about ideas, setting an example and doing the right thing,” he writes. “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.” Here’s a question for him: back when he made videos for Goldman urging candidates to join the company, were the people who got promoted those who had ideas and did the right thing? Or were they the ones who made lots of money for the firm? To ask the question is to answer it.
So let’s not pretend to be shocked that the most successful bankers are the ones who make the most money off their clients.
It’s hard to figure out what Smith’s motives are here. After what he wrote, one certainly can’t see any other investment bank in New York, or anyone else, hiring him at any point in the near future. Maybe he’s angling for an appointment to the SEC or a job with some think tank or lobbying firm in D.C. Maybe he wants to get invited on television (and I’m betting after this Op-Ed he most certainly will be showing up on CNN, MSNBC, and/or CNBC very soon.) Perhaps he wants to curry favor with a new crowd of people who find what he does for a living distasteful. Maybe he’s got enough money in the bank from all those clients he was selflessly representing without any concern for his own profit that he really doesn’t need to work anymore and he’s going to be kicking back on a beach in Maui in the near future.
Whatever Smith’s motivations, I’ve got to agree with Salmon, and with Daniel Drezner, that Smith’s rather obvious effort to style himself as some kind of noble whistleblower falls short. Are we really supposed to believe, as Salmon asks that profit wasn’t the motivation for traders, and the primary means of advancement, at Goldman (or any other investment firm) during this supposed Golden Era that Smith laments? Of course it was, and on some level there isn’t anything wrong with that. Profit maximization is, after all, what business is all about on some level. Pretending otherwise is just silly, and Smith’s decision to pour napalm on his bridges and set them on fire comes across as little more than pedantic moral preening.
Smith’s Op-Ed has accomplished one thing, though, it’s inspired a whole series of “Why I’m Leaving” parodies that started springing up first thing this morning. The first one that I saw, and still the best so far, appears at a parody site called The Daily Mash (some ads at link slightly NSFW), in which Darth Vader explains why he’s leaving the Empire:
TODAY is my last day at the Empire.
After almost 12 years, first as a summer intern, then in the Death Star and now in London, I believe I have worked here long enough to understand the trajectory of its culture, its people and its massive, genocidal space machines. 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, throttling people with your mind continues to be sidelined in the way the firm operates and thinks about making people dead.
The Empire is one of the galaxy’s largest and most important oppressive regimes and it is too integral to galactic murder to continue to act this way. The firm has veered so far from the place I joined right out of Yoda College that I can no longer in good conscience point menacingly and say that I identify with what it stands for.
(…)
I hope this can be a wake-up call. Make killing people in terrifying and unstoppable ways the focal point of your business again. Without it you will not exist. Weed out the morally bankrupt people, no matter how much non-existent Alderaan real estate they sell. And get the culture right again, so people want to make millions of voices cry out in terror before being suddenly silenced.
Now that’s how you quit a job.
Hand Holding Resignation Letter photo via Shutterstock
Salmon has it quite right. I’d point in particular to this quote:
Ummm… if you’ve been a senior executive responsible for things like that for over a decade, then the culture at the company is exactly what you made it, you oblivious boob.
Maybe he’s just hoping the DFHs won’t burn his spare mansion down if he seems outraged enough.
I can’t help but wonder if this brave and noble warrior for the rights of little people everwhere on principle refused to accept whatever monetary-based compensation contractually was due to him from GS upon his departure, e.g., severance, stock, options, etc. I doubt it.
It’s also pretty clear that our hero notwithstanding this kerfuffle ultimately will land on his two feet. With that attitude he’ll be a natural for pretty much any liberal idiot media outfit here or across the pond. Hell, the New York Times Companies probably would make him their global business editor on the spot. (I’m presuming, of course, the NYT and its sister publications still will be operating tomorrow.) Lastly, it goes without saying that he’d be a natural for pretty much any university-based teaching gig in any big liberal city in the world.
Quotes from his subordinates suggest that, despite letting the bonus check clear before he blew the whistle, he is in fact a whistle-blower. He may be one of the good guys. Or, at least, as good as they get.
Wall Street has a “heads I win, tails you lose” mentality? I am shocked, shocked I tell you !
I thought most bankers were like George Bailey from “It’s a Wonderful Life”. I’m going to have to re-think my entire value system now.
Smith:
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.
Yeah, I’m sure it bothered him all the way to the bank. It’s easy to be just when it is all said and done. Especially if you’re filthy rich.
Smith can pound sand. Along with the lot of them.
I’m interested in hearing from The World’s Greatest Corporate Financier on this. Well not really. Really not at all.
The best thing about this kind of Wall Street bashing is that Romney is a de facto bashee.
Pogue…
Ever been to The Last Dollar?
@Hey Norm:
Is that a pub? Then probably. Is it to mean that have I ever been broke? Then definitely.
@ Pogue…
Your “handle” made me wonder if perhaps I knew you in the real world. Unfortunately it appears not. But your response is amusing none-the-less…you and me both.
@Hey Norm:
You never know… I’ve been around. I have circumnavigated the globe twice. I’ve slept underneath bridges and lived in a drainage pipe for two weeks.
I’ve never taken a dime off the labors of another man. I’ve never been compensated for labors I’ve never performed. I may leave this world with the same amount of possessions that I entered it. And if I do so holding to the aforementioned principles, then I’ll leave this world a better man than Smith or any of these other f*cks could ever be.
And if that sounds like a bunch of sanctimonious, self-righteous clap-trap to anyone… then they can pound sand too.
And Happy St. Paddy’s Day!
Sláinte.
I think the change is not that the highest money makers are the ones being promoted, but the emphasis on how they become the highest money makers. When it comes to investment banking, there is a big distinction between making money off of a client and making money with a client.
Heh. I remember back when I was a grad student in physics that we were similarly pissing and moaning about how our experiences weren’t what it was like for physicists in Ye Goldene Olde Days.
At least we had enough common sense to not write a NYTimes Op-Ed about it.
I think it’s entirely possible that the company he started out at is not the company he left. In many ways, it is analogous to my feelings about the changes in the Republican party. One day, you pick your head up, look around and say “wait a minute, what is going on here? What happened?”
That he was present during this time period, and yes most likely part of the problem doesn’t (to me at least) detract from his message. He has had his Jerry McGuire moment.
@Stormy Dragon: In fact, didn’t someone do some number-crunching and discover that the average investor in private equity would have done just as well with a decent mutual fund?
The VCs running the funds made out like bandits, however….
Maybe they should re-write “It’s a Wonderful Life” so George Bailey says “You don’t understand, your money is in my house, and your money is my house, and your money is in my house….”
Fascinating. A Goldman Sachs insider writes an op-ed saying that the world’s biggest investment bank doesn’t give a damn about making money for its clients, but actually wants to milk them dry, and his only comment is that the writer is self-righteous.
I guess that’s the way of the libertarian. If banks cheat their customers, then they’re just living up to their potential in the free market. It doesn’t matter that some of these customers were municipalities whose investment people were suckered by the slicksters at Goldman, and because of that innocent citizens are suffering. Serves those suckers right!
Nope, for a libertarian, the only sin is feeling a sense of responsiblity to other people, and feeling shame for having done wrong.
The point is not whether he’s noble, the point is whether what he said is true.
This a really bullsh-t attempt to steer the narrative away from the central point.
But of course the rich can do no wrong, and we must worship them as gods, not question whether they are in fact just thieves. See, because if they’re thieves, we’d have to regulate them. And that is the sum of all evils. So let’s talk hypocrisy and avoid the actual issue.
Well, we should note that if the universal response wrt GS was “duh!” then the other part, about a systemic problem carries more weight.
OK – that’s good. Things haven’t changed but they’re all different and aren’t the same but it’s always been that way. Whatever.
@michael reynolds:
This is key, Michael. Apologists for the corrupted Finance sector will smear the messenger so the rest gets ignored.
Or maybe he just means they turned up the greed from giant squid level ten to vampire squid eleven.
@Tsar Nicholas:
they still print the New York Times?
@john personna:
Nigel Tufnel: Well, it’s one louder, isn’t it? It’s not ten. You see, most blokes, you know, will be playing at ten. You’re on ten here, all the way up, all the way up, all the way up, you’re on ten on your guitar. Where can you go from there? Where?
Marty DiBergi: I don’t know.
Nigel Tufnel: Nowhere. Exactly. What we do is, if we need that extra push over the cliff, you know what we do?
Marty DiBergi: Put it up to eleven.
Nigel Tufnel: Eleven. Exactly. One louder.
Marty DiBergi: Why don’t you just make ten louder and make ten be the top number and make that a little louder?
Nigel Tufnel: [pause] These go to eleven.
The NYT will be around long after you’ve stopped exposing your ignorance of who’s still writing, what’s still being published, etc…
@Jen: No, Goldman has been known as a house of rapacious buccaneers far earlier than Mr. Smith’s arrival at their doorstep. And kudos to Doug for listing his real position at GS: vice president. GS has probably a few thousand VPs listed on their employee roll. Which means, if he’s been there for 12 years, he had hit a ceiling, and wasn’t privy to the big bucks and monster bonuses.
@TC@LeatherPenguin: Precisely. Our merriment is not an attempt to smear the messenger; it’s simply that this smacks a little too much of Inspector Renault’s “I’m shocked, SHOCKED to find gambling here!”
“Your winnings, sir.”
“Oh thank you.”
Barry Ritholtz has good bullet points here. He has mentioned the partner-to-traded transition before, and I guess it makes sense. Partners would be getting both money and non-monetary benefits (position, power, influence) which might encourage them to long-term relationships.
Part of the vampire squid problem is that customers are rapidly burned.
Justin Fox also centers on the partnership issue, with a good history of GS here.