As I've said many times, the financial sector is short-sighted, short-term, and willing to screw
over their own clients.
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.
Greg Smith is resigning today as a Goldman Sachs executive director and head of the firm’s United
States equity derivatives business in Europe, the Middle East and Africa.