Today is the day that Greg Smith’s $1.5 million opus, ‘Why I left Goldman Sachs,’ finally hits the shelves. At 252 pages it’s not exactly a door-stopper, but there’s a lot more to it than the reiteration that clients were called “muppets” and that Greg was good at ping-pong.
Needless to say, Smith has been roundly discredited prior to the book’s publication. He was only a VP and wasn’t privy to serious information about the goings on within the firm. Smith always ranked in the lower half of his peer group during appraisals. He said the culture of the Goldman was corrosive and yet he gave his colleagues the highest possible scores for client focus and leadership in annual assessments. Nor did he ever bother submitting, ‘unsolicited feedback,’ which Goldman encourages as a way for staff to vent dissatisfaction in a constructive way.
Most damningly of all, Smith was earning $500,000 and had made it clear that he wanted to earn $1 million. When he was asked about this by Anderson Cooper on yesterday’s 60 minutes interview, he didn’t deny it but said he would have quit Goldman anyway.
Finally, doubts have been raised about the veracity of some of the incidents Smith reports in the book – for example, there was no female intern who burst into tears and ran out of the room according to a fellow member of Smith’s intern class.
Nevertheless, with these caveats, Smith’s book is a good read. It does make the case –from Smith’s perspective – for Goldman’s cultural dissolution. It does offer some interesting insights into getting into and staying on at the firm. We’ve extracted the most interesting elements below and leave it to you to decide whether Smith’s account is to be trusted or not.
- Smith says that less than 40% of Goldman’s sales and trading interns receive full time job offers.
- He says that only 1 in 45 people who apply for a summer internship or a full time graduate role at Goldman Sachs get an offer.
- Smith claims that only 50% of Goldman’s second year analysts (in sales and trading) are promoted to the third year.
- Every year, Goldman promotes around 1,000 VPs. But it also makes 1,000-2,000 people redundant.
- Summer interns are grilled at so-called ‘Open Meetings’. These are ‘interrogation chambers’ held twice a week at 6pm, attended by all interns, where senior staff would fire off challenging questions like, ‘Why was crude oil down 3% today?’. Interns would be expected to answer there and then.
- Greg Smith got his first internship in banking (at Paine Webber) by cold-calling 30-40 banks and brokerage houses and offering to work for minimum wage. This gave him the experience he needed to get into Goldman.
- Smith claims that Goldman holds two interview places open for the first people to apply online after applications open. He submitted his application at 12am on that date.
- If you want to convert your Goldman internship into a fulltime job offer, you will need to have a ‘rabbi’ – “someone who liked you, thought highly of you, wanted to work with you, mentor you. Nobody came right out and said it, but that was what the whole internship program was about.”
- You won’t be told whether you’ve got a full time job offer until 2 weeks after the internship ends.
- At all levels, it helps if you are given a nickname. “Typically, the people who didn’t get nicknames were junior analysts who Hannigan and Johnson [Smith’s managers] could tell early on were not going to make it.”
- “A typical salesperson was friendly, outgoing, a little bit schmoozy, able to keep calm in tight situations, to juggle a lot of balls at the same time. A salesperson had to be someone who was happy talking to people the whole day.”
- “Traders were more introverted. They sat at their desks managing stocks….Trading was a more quantitative role: you had to be quick, decisive, aggressive.”
- Being a good salestrader/salesperson is partly about leaving good voice mails. They need to be no more than 90 seconds long and to hit 4 or 5 key points of the day.
- If you’re at Goldman in New York you need to dress yourself at Brooks Brothers – khaki trousers (if you’re a man) and dress shirts in different shades of blue.
- MDs at Goldman wear expensive and understated suits from Brioni or Savile Row. Accessories are Hermes or Ferragamo.
- When Smith was a junior analyst he says he came up with the idea of, ‘writing a simple five-line email before earnings came out.’ This was sent to all sales traders and traders on his floor and was well received.
- Greg Smith claims to have been in the top quartile of his analyst class.
- Following the financial crisis, Greg began writing reports on market events. One of his MDs forwarded one of Smith’s reports to Paul Tudor Jones saying Smith was a, “real money guru.” He tried to build this niche, and although his partner mentor thought it was great, it wasn’t popular with his manager because it didn’t bring in revenues.
- In his first year in London, Smith says he built his business by 35% and increased the number of clients they actively traded with by 80%. He claims he outperformed his peers by 10% on his bonus and had been told “by multiple partners” that a promotion to MD was 2 years away.
- Smith says the rot began in 2002 when Goldman started ‘flushing out’ the old guard –the pre-IPO partners. These old timers were replaced by a newer, flashier breed. At the same time, Goldman began hiring senior people from outside the firm – this would never have happened previously.
- In the past Goldman would judge its people 50% on their commercial performance (Did they bring in business?) and 50% on their worth as a culture carrier (Did they promote collaboration, teamwork and the values of the company?).
- As the culture changed, Goldman de-emphasized culture-carrying and started promoting people purely on the basis of commercial performance. The influence of these new commercial MDs pervaded the whole firm. “People who had risen to leadership positions during the crisis, elevated for their ability to bring in cash rather than to lead, now consolidated their power.”
- Smith says Goldman’s ‘partner mentor’ told him Gary Cohn was aware of the problem with the newly promoted MDs. Goldman had wrongly promoted a lot of people who had been selling ice in the Sahara Desert. “Gary is very worried about this,” Smith said he was told.
- As Lloyd Blankfein shifted Goldman’s culture in favor of traders, clients came to be seen as counterparties rather than advisees. “Advisees are like children,” says Smith. “Counterparties…are adults…anything goes.”
- In a sign that the old culture was waning, one partner allegedly said: “If I have to choose between my reputation and my P&L, I choose my profit and loss, because I can ultimately recover my reputation.”
- In the depths of the financial crisis, Smith says Goldman partners didn’t display much leadership and spent most of their time looking at the bank’s share price and obsessing over their own net worth.
- Following the crisis, Smith claims Goldman people became obsessed with ‘elephant trades’ which brought in more than $1m and with GCs or “gross credits”. These were what crucially determined how well people would be paid and everyone competed internally over how they were allocated.
- London was the wild west, said Smith. The culture was corrosive. It was here that he came across the term “muppet” being bandied around in conversations.
- Goldman recognizes that there are cultural issues in London, Smith alleges. He says he met with a partner who said, “The leaders in London aren’t generally client guys like we are in New York. They’re focused on getting clients to do things, not asking clients what they need.”
- The partner allegedly told Smith that Gary Cohn and Michael Sherwood don’t get on.
- Goldman people in London are more likely to brag and speak callously about clients, said Smith. In New York they know they’d “get into hot water.”
- There’s a phenomenon at Goldman called, ‘the Partner Laugh’. “This occurred when the trading floor was dead quiet and suddenly you heard some kiss-ass VP erupting into fits of laughter and slapping his knee in response to some joke the person by his desk was telling. The longevity and high pitch of his laugh would tell you the person by his desk was a partner.”
- You need mentors to tell you things as they really are – this is the only way of cutting through the politics. Smith had several.
- You can meet partners at the urinals. Smith had several urinal encounters with Dave Heller, a pre-IPO partner and one of Goldman’s heads of trading.
- In 2006 Smith’s desk brought in millions in revenue and he had done “at least 50% of the heavy lifting on the desk.”
- “I was well aware that a VP or MD could have been paid between 5-7% of that total, assuming the firm was having a good year overall – which it was.”
- If you want to move internally, it helps to be friendly with HR. At the end of his 2nd year , Smith’s group was disbanded but he was saved by an email from “a woman in HR” saying there was a job on the Futures Execution desk.
- If you move internally at Goldman, you’ll still be interviewed to death. Before Greg Smith moved to London he had 19 interviews over 2 days.
- “It didn’t matter if the person he was talking to was make or female, he [Gary Cohn] would walk up to the salesman or saleswoman, hike up one leg, plant his foot on the person’s desk, his thigh close to the employee’s face, and ask how markets were doing.”
- A senior partner allegedly set up a prank interview and duped other partners into interviewing a professional actor impersonating a major potential hire.
- The actor who was impersonating a candidate acted like a complete “asshole” – interrupting the interviewers, putting his feet on the desk. When they asked him what his goals where, he said he’d like two helicopters – one at the top of a ski slope, one at the bottom.
- When the actor was asked if he had any questions for the firm, he said: “I have a lot of mental health problems. How’s the firm’s psychiatric coverage?”
- Doug Miller, an MD, allegedly pontificated, “All these guys in finance, making two million a year….We’ll be lucky if we can find something for $80k a year. I’m going to tell my children to go into the sciences.”