cMust read: Why I am leaving Goldman Sachs
Greg Smith, Goldman Sachs executive director and head of the firm’s United States equity derivatives business in Europe, the Middle East and Africa, has written a stinging indictment of the “culture” at Goldman Sachs. Refusing to learn any lessons from the recent derivatives crash, Goldman continues to think about its own profits rather than making money for its customers. This should be a wake up call for any of these customers who are in denial about Goldman’s “interests.”
Once again this represents a deep misunderstanding of “capitalist reality” by so-called capitalists. Where previously the error was in misunderstanding “spread the risk” to mean “give everyone a big piece of risk,” now the twisting of the old saw “what is good for General Motors is good for America” into “what is good for Goldman …” is based on the mistaken notion that the two companies stand for the same thing. Now, I don’t actually believe the first claim to be actually fully true, but I will take the intentions of that group of General Motors managers over that described by Smith at Goldman. When Adam Smith spoke of “self-interest” he did not mean “selfish interest.” See here. The recent government support for the auto industry has shown us how much larger “auto interests” are than just the companies themselves. “General Motors” in this sense includes the UAW. It includes the middle class jobs that result in retail sales, housing sales, state and federal tax revenue, et al. Virtual circles of capitalism. The Goldman approach only creates business cycles in which only Goldman appears to win short-term. Profit, profit, profit! forgets the word has other meanings. Profit from your mistakes means learning not gaming the system.
The Cluetrain Manifesto taught us that “markets are conversations.” I hope this is the beginning of a larger conversation that results in a market correction for Goldman. There can after all be an upside to “creative destruction” after all!
Zenosox: Untimely Meditations 