Goldman is no longer looking at building as many highly leveraged investment products. “We have reduced the lab where we used to have all these people creating and engineering these things.”
But he expects risky products to pop up again, likely from the unregulated funds that Goldman competes with. He likens it to squeezing a balloon. As regulators apply pressure in one spot, the risk moves to where there is less pressure.
“If the past has any reference to the future, which it has for the past multiple hundred years in the financial services industry, you should bet that at some point in the future these products will all reappear. They will be called something else.”
Commodity pit to president
Mr. Cohn’s bespoke suit and loafers say banker, but his broad-shouldered, thick-chested physique is the kind of build that helps make a successful trader in the rough-and-tumble pits of the commodity business. He career spans both roles.
Born in 1960, he grew up in suburban Cleveland, the son of a real estate developer. He coped with dyslexia well enough to win admission to American University’s business school in Washington, D.C. After graduating in 1982, he found himself back home.
In a commencement address at his old university in 2009, he said he lacked interviews and prospects. He was “having a great time,” until one morning his father walked into his room at 6:30 a.m.
“I had been in bed for about an hour, I think, and [he] said, ‘what are you going to do with the rest of your life.’ I ironically told him, ‘you’re looking at it.’ That did not go over very well in my house.”
Job-hunting followed shortly thereafter. Mr. Cohn ended up at United States Steel, selling siding and window frames.
On a business trip to Long Island, he went to the commodities exchange in New York. After spending the day wondering how to land a job there, he saw a trader heading to the airport. He offered to share a cab, and on the way to La Guardia he talked his way into an interview the following Monday.
“I literally got home Friday night and my first stop on the way from the airport was the bookstore. I bought the McMillan Options as a Strategic Investment book and read it four times – as I said, dyslexic guy read it four times over the course of the weekend and came back in and interviewed and was offered a job. That’s how I started in the financial services industry.”
He began by trading silver. From the commodity pits, he was recruited by Goldman, where he has remained for the past 24 years. He rose through the commodities trading side of the business, and made partner in 1994, four years after joining. By 2003 he was head of the firm’s global securities business.
Today, as president, chief operating officer and a member of Goldman’s board, Mr. Cohn earned $12.5-million (U.S.) in 2012. He is one of the handful of internal candidates mentioned as possible successors to Goldman’s CEO, Lloyd Blankfein. (Until recently, that group also included a Canadian, J. Michael Evans, but he has since left the firm.)
What Goldman will look like when Mr. Blankfein eventually passes control is not clear.
If regulation is holding back Goldman’s returns, that problem is unlikely to be resolved any time soon. Mr. Cohn argues that it took 11 years for the last of the major securities laws to be put in place after the crash of 1929 – and the 2008 crisis was more complicated because it involved much more than just stocks. He knows there is likely much more rule-making to come.
“As far as we can understand where the regulatory world is going, we feel like we have done a good job of adapting to the new world. But we are also acutely aware that the environment in the regulatory world is always changing.”
If the regulators and firms like Goldman have missed something, and the world faces another financial mess, Mr. Cohn is well aware that all the public relations in the world may not save the company from another drubbing.
“I feel like we’re in a much better position now but I’m not naive. I understand that the world could change tomorrow and that if something goes wrong in the world and people want to write about Wall Street, they are still going to potentially pick on us.”