Greg Smith, who resigned in spectacular fashion from Goldman Sachs this week by publishing a takedown of the investment bank in The New York Times, said he knew his time was through when “I could no longer look students in the eye and tell them what a great place this was to work.”
The former recruiter and intern-program manager's cri de coeur, which set chiselled jaws flapping from Wall Street to Bay Street, charges that Goldman's leadership has led the firm astray by fostering a culture of “short-term greed,” which is bad, rather than “long-term greed,” which used to be considered good.
It's kind of like the difference between good cholesterol and bad cholesterol. Are you picturing Gordon Gekko popping statins in a corner office?
But this isn't the first scathing rebuke to be penned by a disenchanted financier on his way out the thick mahogany door. Michael Lewis, for one, did a pretty good job in Liar's Poker of denouncing the junk-bond markets he’d worked on in the 1980s, and his big, swinging insider jargon was much sexier than Mr. Smith's revelation that Goldman types call clients “muppets.”
Mr. Smith's aim is to “wake up” the board of directors, convince it to turf the short-term thinkers and fix Goldman's culture “so people want to work here for the right reasons.”
But it is a little hard to take seriously this pained cry of “nothing's like it used to be!” from a 33-year-old banker who joined the firm right out of college in 2001. He presents as kind of an odd, premature dinosaur: Is it really true that the firm was a wholesome, client-pampering mom-and-pop shop for “many years” of his 12-year tenure, and then suddenly shifted under his feet?
Nowhere does Mr. Smith ever pause to wonder if this could be a longer-term, fundamental flaw of capitalism that he has only recently come to understand.
Which is not to say he's altogether wrong. Roger Martin, dean of the Rotman School of Management in Toronto agrees that short-term profit maximization “will actually hurt shareholders in the long run.”
But he says this mentality on Wall Street (he thinks Canada's Bay Street “is not as ‘advanced' – in a good way”) has been festering since the 1980s – so Mr. Smith's visions of a Golden Age of 2004 don't hold much water.
A downtown Toronto financier tells me that everybody at his independent investment bank had read the op-ed. “The most damning thing … is that it surprised absolutely no one,” he says. Bay Street simply assumed that these were the rules of the game, down south in the land of collateralized debt obligations.
Still, perhaps what Mr. Smith, a youngish person whose job was to recruit younger people, was really hoping was to dissuade the next, less-jaded generation of the best and brightest from making a career of enabling Wall Street's vices. He may be disappointed. One Queen's University business student, who has already lined up a post-graduation job at a large U.S. investment bank, says that the post-Goldmangate reaction on campus was decidedly one-sided.
“That guy doesn't have many friends around here,” he says, sounding like a proto-Smith – somebody just happy to have been offered a high-earning job at a recognized firm, defending his future bosses against some unemployed party pooper.
Indeed, the record shows that these out-the-door screeds seldom have the effect the writer intends. Michael Lewis, who joined Wall Street just out of Princeton's art history program, thought he had undermined big finance's allure in 1989, with Liar's Poker's colourful indictment of the shenanigans he'd witnessed as a young bond salesman at Salomon Brothers.
Revisiting his motivations in 2010 , he wrote: “I hoped that some bright kid at Ohio State University who really wanted to be an oceanographer would read my book, spurn the offer from Goldman Sachs, and set out to sea.”
It didn't quite turn out that way. “Six months after Liar's Poker was published,” Mr. Lewis wrote. “I was knee-deep in letters from students at Ohio State University who wanted to know if I had any other secrets to share about Wall Street: They'd read my book as a how-to manual.”
Not to be a spoiler, Mr. Smith, but you know the Twilight Zone episode that features the profound-sounding alien tome, How to Serve Mankind? It's actually a cookbook.
Andrew Braithwaite is a Canadian writer based in Boston.