Friday, March 16, 2012

Volume 4 Issue 9: Intelligent Investing

Being An Investment Banker - Part 4

First and foremost, I would just like to throw it out there that I am far from being dead. This is by far my longest absence in the last two years. I will explain why in the near future, but until then, here are some pickings from the recent weeks.

I have written before about the tough lives of investment bankers (herehere and here) and also about the fat paychecks.

Just a couple of days ago, an ex-employee at Goldman Sachs wrote an op-ed in the NewYork Times, exposing a glimpse of what he thought was a toxic culture that was prevalent at Goldman, which I am sure could be easily extrapolated to other investment banks on Wall Street:
“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.”
Yeah, if you think that investment banking has always been a cutthroat business, well, it’s not. “Teamwork, integrity, a spirit of humility, and always doing right by our clients” may sound like a bunch of hogwash now, but investment banking was borne out of a need to match savers with creative people who are in need of funding. And Goldman Sachs was the defender of the bullied back then, and far from being the bully. If you don’t believe me, read “The Culture of Success”. It is a well-written documentation full of insights into Goldman Sachs’ history from its inception until its IPO in 1999.

With the huge readership of the New York Times, nothing less than a furore was expected from the public as well as Wall Street. For starters, there is parody of the op-ed going around with Darth Vader choosing to leave the Empire.

The op-ed even got a reply from the CEO, Lloyd Blankfein, and President, Gary Cohn:
In a company of our size, it is not shocking that some people could feel disgruntled. But that does not and should not represent our firm of more than 30,000 people. Everyone is entitled to his or her opinion. But, it is unfortunate that an individual opinion about Goldman Sachs is amplified in a newspaper and speaks louder than the regular, detailed and intensive feedback you have provided the firm and independent, public surveys of workplace environments.
Blankfein goes on to admit that Goldman Sachs is not perfect, and is working on improving its culture, if you believe him:
We are far from perfect, but where the firm has seen a problem, we’ve responded to it seriously and substantively. And we have demonstrated that fact.
I don’t know what to make of this statement. From an analyst’s standpoint, it appears to be intentionally vague. They have definitely responded to “this problem” by issuing this reply as damage control. I don’t necessarily see a sense of true self-reflection, realization and most importantly, repentance. Forgive me, but it seems very hard to trust a man who claims to be doing “God’s work”.

As for the survey, it is hard to justify a survey result that claims that 89% of the employees at Goldman Sachs are satisfied with the jobs. When a company is filled to the brim with like-minded gold-chasers, it would not be unexpected to see that they are completely satisfied with being where they are. It is merely a diversion from the crux of the matter, which is the toxic culture at Goldman. Job satisfaction was never in question at Goldman. The survey should in fact ask, “Why did you join Goldman Sachs?”, and I can bet you a nickel that more often than not, the answer would be something along the lines of “BIG bonuses”.

This culture of seeking big bonuses is now so entrenched that pretty much any worker at Wall Street feels that they are entitled to it. Bonuses are no longer seen as a privilege, but an entitlement. This will be the topic of discussion in the next issue. 

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