There’s something vaguely familiar about Greg Smith’s impassioned note of resignation from Goldman Sachs in the New York Times today. In case you don’t have time to read the whole thing (we highly recommend you do), here are the quotes you won’t want to miss.
In its most inflammatory section, Smith points a finger directly at the current chief executive officer, Lloyd C. Blankfein, and the president, Gary D. Cohn, who he says “lost hold of the firm’s culture on their watch,” accusing them for “the decline in the firm’s moral fiber” which he calls “the single most serious threat to [the company’s] long-run survival”.
Here’s are the important quotes from Smith’s letter:
1. On a “toxic and destructive environment:” 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 can honestly say that the environment now is as toxic and destructive as I have ever seen it.
2. On Bringing Young Recruits in: 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.
3. On the Company’s Moral Fiber: 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.
4. On Leadership: 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.
5. On Calling Clients “Muppets:” 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.
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.
6. On Setting an Example for Junior Analysts: 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.
7. On What it’s Like to Be a Junior Analyst at Goldman: 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.
8. On His 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.
9. On Morally Bankrupt People: 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.
10. His final suggestion to Goldman?: People who care only about making money will not sustain this firm — or the trust of its clients — for very much longer…People who care only about making money will not sustain this firm — or the trust of its clients — for very much longer.
As Goldman Sachs’s (as of today) former executive director, Greg Smith served as head of the firm’s United States equity derivatives business in Europe, the Middle East and Africa. His resignation, as well as his public defamation of the international investment banking and securities firm, is an enormous blow to the company, in London and abroad.