Why I Left Goldman Sachs
By Greg Smith
(Grand Central Publishing, 276 pages, $29.99)
I had a friend once who had a tendency to get a bit out of control at work. So his boss decided to rein him in by assigning him one week to work on a Saturday night, essentially keeping the operation alive by answering the phones. On the designated Saturday evening he came in and slipped a note under the boss's door – the boss definitely didn't work weekends – indicating that this employee also didn't work Saturday nights. He then disappeared.
On Monday morning, when the boss was back at work, a frantic search began to find the missing employee, who was a star that the company desperately didn't want to lose. The boss obviously couldn't cede power, so the employee was asked as penance to catch up on some ancient accounting for travel advances, and he returned to his regular shifts, knowing who was really the boss.
In bad times at work, many of us harbour fantasies of quitting our jobs in a flamboyant manner. That was my favourite story, until March 14 this year when Greg Smith wrote a long opinion piece in the New York Times announcing he was quitting Goldman Sachs because the company had lost its soul.
Now he has a book, dipping into further details, and it's anything but flamboyant. If he tapped into a common quitting fantasy in his opinion piece, here he touches on another common theme in work and life: How something that seems magical and blessed can slowly turn sour. We've all experienced this, whether with a job, an involvement with a voluntary group or religious organization, or a romance. Drip, drip, drip, drip. Suddenly the balance tips, and you're not quite sure exactly why – although you can list incidents that may seem trivial – and you know your heart has significantly changed.
That makes Mr. Smith's tale a difficult story to share because nothing dramatic happened to him directly. Certainly Goldman Sachs had many dramatic moments in recent years, including fighting for survival during the financial implosion by turning itself into a bank holding company rather than an investment banker, and paying a $550-million (U.S.) settlement to the U.S. Securities and Exchange Commission after being charged with fraudulent activities over a mortgage-backed security.
While those events affected Mr. Smith's thinking, they were not breaking points preventing him from working at the firm. They were simply part of what he saw, day after day, as the search for profit led his colleagues to forget the obligations he felt they owed their clients.
Mr. Smith doesn't sneer at investment bankers, and he bled Goldman Sachs blue, as he puts it. He relished his privileges as a high-earning, high-spending member of the investment banking community. He talks about trying to rein in the $10,000 a year he was spending on taxis, his $500,000 bonus, and the outsized parties he attended.
As he details the increasing concerns he was feeling about the firm, he reveals the simultaneous bloom of his career prospects, if his mentors could help him avoid the corporate snake pits and he could be successful in his new role as head of the firm's U.S. derivatives business in Europe, the Middle East and Africa.
He had rivals and enemies, and was not getting along well with others, so perhaps there is more to his story than he reveals. But it seems an honest, far from vituperative account, that repeatedly comes back to his clients and how Goldman Sachs was moving away from serving them properly as it increasingly became a hedge fund with its own assets at risk.
Mr. Smith refers to the four sons in the Passover Seder of his Jewish creed, and sets out the four clients on Wall Street: The wise client, the wicked client, the simple client, and the client who doesn't know how to ask questions. The wise clients are hedge funds and other large institutions that have huge resources, and became allies with Goldman Sachs, brought in early to deals and investing alongside the company. The wicked clients are smart clients willing to push the envelope, trying to game the system to their own advantage.
As for the simple clients, he says, "You would be appalled at how backward and badly run certain large asset managers and pension funds can be." Big and bureaucratic, they were easy prey for the clever guys on Wall Street. The client who doesn't know how to ask questions was too trusting, leaping into exotic investments that they didn't understand.
Mr. Smith recalls one of his wise clients, who said they would continue to invest with Goldman, Sachs because of the company's brilliance, but would never trust the firm. "I hated not being trusted," Mr. Smith writes. As he saw colleagues overcharging and steering clients to unwise investments, he wondered what had become of the company's legendary principle: "Our assets are our people, capital and reputation. If any of these is ever diminished, the last is the most difficult to restore."
Mr. Smith may be a hero to some, a chump to others, and a deceitful ingrate to Goldman Sachs managers. His book is worth reading, not because it is dramatic but because it is not dramatic; not because it is his story or Goldman Sach's story but because it shows how an obsession with profits can carry us into places we might prefer not to be, drip by drip by drip.
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Special to The Globe and Mail
Harvey Schachter is a Battersea, Ont.-based writer specializing in management issues. He writes Monday Morning Manager and management book reviews for the print edition of Report on Business and an online work-life column Balance. E-mail Harvey Schachter