Greg Smith quit his job at Goldman Sachs today, and he quit in a way that most of us can only dream of: by giving his firm a gigantic middle finger on the op-ed pages of the New York Times. Goldman, he says, just isn’t the hardworking, principled firm it used to be:
What are three quick ways to become a leader? a) Execute on the firm’s “axes,” which is Goldman-speak for persuading your clients to invest in the stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit. b) “Hunt Elephants.” In English: get your clients — some of whom are sophisticated, and some of whom aren’t — to trade whatever will bring the biggest profit to Goldman. Call me old-fashioned, but I don’t like selling my clients a product that is wrong for them. c) Find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym.
….It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as “muppets,” sometimes over internal e-mail. Even after the S.E.C., Fabulous Fab, Abacus, God’s work, Carl Levin, Vampire Squids? No humility? I mean, come on. Integrity? It is eroding. I don’t know of any illegal behavior, but will people push the envelope and pitch lucrative and complicated products to clients even if they are not the simplest investments or the ones most directly aligned with the client’s goals? Absolutely. Every day, in fact.
Felix Salmon, for one, is skeptical of Smith’s motives. I’m having a hard time too. If this were someone who started working for Goldman in the 60s, it would be easier to find him believable. But Smith started out at Goldman in 2000. He was a senior member of the firm during the height of the housing/derivatives bubble. This was not a period of time famous for its integrity and client-centered focus. So what, exactly, has changed in the past four or five years compared to then? Smith is maddeningly unclear about this.
So it’s a little hard to know what to make of this. Is Greg Smith a disgruntled employee? A genuinely outraged man of honor? Hopelessly naive? Angling for a job at the SEC? Planning to open his own boutique firm and hoping to gain a reputation for unusual probity? It is a mystery. But it’ll be interesting to follow Smith on the talk show circuit, which is his obvious next destination. Perhaps things will become more clear after a few more people have grilled him about this.