Photocopied versions of Greg Smith's book are covertly circulating in Manhattan. Among other things, they reportedly include the revelation that Goldman bankers go crazy for omelettes and will knock each other over to get to the omelette area in the Goldman canteen. Smith also says he came across Lloyd Blankfein naked and 'air-drying' himself in the gym (something which he specifically states that he did not interpret as a display of power), that Goldman in London is full of cigarette smokers, that he once saw an MD charge a $1 ChapStick to expenses, and that drug taking is regarded with horror at Goldman because it belies an inability to take the pace.
More of this will come out next week following the book's official launch. Smith is also appearing on the US documentary 60 minutes on Sunday. After that, he'll be participating in a 'media blitz.'
Next week, Goldman's diminutive baby-faced South African nemesis will be everywhere.
Goldman has already gone on the offensive. As we noted last week, Goldman has been briefing against Smith - accusing him of being greedy and vindictive because he was neither paid nor promoted. There was more of this yesterday. Goldman's expanded Greg Smith defence is as follows:
- Smith was promoted to VP in 2006 and he was still a VP 5 years' later in 2011.This was because he wasn't up to much.
- Smith regularly complained about not being promoted to MD and he was the lowest paid VP out of all those who joined with him in his training class.
- In assessments, Smith ranked himself highly, but from 2007 to 2011 he was always ranked in the lower half of the firm by his colleagues.
- Smith didn't have much responsibility: he worked with big clients like AQR Capital Management and the Government of Singapore Investment Corporation, but he had no direct responsibility for those accounts and he wasn't in an advisory role.
- Smith wanted to generate revenue and to make more money. He asked to be moved to a different sales desk.
- When Smith was moved to that different sales desk, where he had a female boss, he was unable to respect her as his manager. He felt she was a peer and that he was her equal.
- Goldman had discussed the possibility of getting rid of Greg Smith.
Goldman's take down is comprehensive. Smith comes out looking sexist, petulant and not very nice. His biggest indictment is his tendency to score himself far higher than everyone else scored him in assessments: the way Goldman tells it, Smith was seriously deluded about his self-worth.
Other former Goldman bankers have no sympathy for Smith.
"Greg Smith - "You only pay me $500k a year to forward Traders Bloomberg mgs's to clients. I want $1mln" - GS "You're already overpaid" #fail," tweeted ex-Goldman trader Anton Kreil yesterday.
"A company like Goldman is full of people who feel that they should be paid more than the guy or girl on the desk next to them," says Lex Van Dam, another ex-Goldman trader and former colleague of Kreil's. "I am old fashioned and believe that people should focus on doing a great job and being good to clients."
Smith isn't the only one suffering seeming delusions of grandeur. This week, Raphael Geys, ex-head of European fixed income at SocGen has been busy arguing that he was sacked in 2007 because he was, "too good" and would have been too expensive for the bank to keep on. Geys argues that he was responsible for more than doubling the gross revenue of his division from €205m to €440m between 2004 and 2007.However, this conveniently overlooks the fact that the market itself was growing at a phenomenal rate during those years: Lehman, for example, boasted of doubling its fixed income revenues between 2004 and 2005 alone.
The problem for investment banks is that they're full of people like Smith and Geys who rate themselves highly and fully expect to be paid. Sometimes this is merited, often it's not. As we noted this week, the market in London is split between optimists and pessimists. The optimists think they either deserve to be paid very well; the pessimists expect to be paid nothing at all. The optimists outnumber the pessimists by more than two to one.
Banks have only themselves to blame. Having repeated the mantra that they only hire the best of the best, it's unsurprising when employees believe it.
As this paper suggests, banks might be better off hiring mediocre people who are simply grateful to have a job. The mediocre are so thankful that they work harder and that extra effort more than compensates for their lower ability. People with delusions of mediocrity also don't leave in a huff and write books that boast of seeing their former CEO standing naked in the work locker room.