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Generational Dynamics Web Log for 15-Mar-2012
15-Mar-12 News -- Resigning Goldman Sachs exec attacks toxic Generation-X culture

Web Log - March, 2012

15-Mar-12 News -- Resigning Goldman Sachs exec attacks toxic Generation-X culture

Executive describes illegal activities at Goldman Sachs

Former Goldman Sachs exec Greg Smith

Former Goldman Sachs exec Greg Smith

Greg Smith, a senior executive at Goldman Sachs, resigned on Wednesday, and published an op-ed attacking the toxic Goldman culture and, by extension, the entire Generation-X culture. Here are some excerpts:

"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. ... 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. ...
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."

Commentary on this letter in the mainstream media has been to sympathize with Goldman's "public relations problem" resulting from this letter, and to generate mocking criticisms of the letter.

But at this point, after banksters at Goldman and elsewhere created tens of trillions of dollars in fraudulent securities that caused the global financial crisis, I don't think anyone doubts the credibility of what Smith is saying.

Furthermore, I doubt that anyone any longer believes that Smith's accusations are unique to Goldman Sachs. This "screw the investor, especially the Boomer investor" attitude pervades the entire Generation-X culture.

Smith says, "I don’t know of any illegal behavior." He writes this in a letter where he's documenting plenty of illegal behavior. He says, "It makes me ill how callously people talk about ripping their clients off," and he explains that they rip their clients off by advising them to buy losing securities. Well, that's illegal behavior. Goldman's advisors have a fiduciary duty to their clients to give them the best advice. New York Times

What you should get out of this, Dear Reader, is what I've been saying for years: The same people who defrauded you and created the global financial crisis are still in the same positions and are still defrauding people.

Nobody cares about you except to take your money. I've documented many cases of provable lies on CNBC and Bloomberg TV by people who want to make commissions, but nobody cares because the liars purchase advertising. This is particularly true when they talk about price/earnings ratios (stock valuations) -- they ALWAYS lie about that because nobody cares. (See "Price/earnings ratio (valuations) trending toward collapse" from February.)

And of course the same is true of politicians in all parties in Washington, Brussels and Beijing, as I've documented many, many times.

(Comments: For reader comments, questions and discussion, see the Generation-X culture vs Boomer culture thread of the Generational Dynamics forum.) (15-Mar-2012) Permanent Link
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Generational Dynamics Web Log for 15-Mar-2012 15-Mar-12 News -- Resigning Goldman Sachs exec attacks toxic Generation-X culture

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Generational Dynamics Web Log for 15-Mar-2012
15-Mar-12 News -- Resigning Goldman Sachs exec attacks toxic Generation-X culture