EPS Review #100 - Goldman Sachs

There has been a delay in my reviews because the 100th should be significant, and the obvious significant recent event is my retirement from Goldman Sachs. But I am not sure I have a lot of perspective on an experience that took up half my twenties, all of my thirties, and half of my forties. And it is hard to compare this career with my other two jobs: four years lazily teaching English in Japan, and one year playing around at MFS.

If you like, you can read about Goldman. Emanuel Derman worked there in a quant group similar to mine, and wrote My Life as a Quant: Reflections on Physics and Finance. I did not know him directly, but colleagues did, though they generally had a snide word to say. A fellow manager in my group was Nomi Prins, who wrote Other People's Money: The Corporate Mugging of America. The Economist included this in a list of books of the year, though Nomi only worked with us a year or so and nobody had much praise for her usefulness. This may tell you more about the atmosphere among managing directors than about Nomi. The book that is handed out at employee orientation is Lisa Endlich's Goldman Sachs : The Culture of Success. This is reputedly a bit fawning, but I actually do believe that Goldman has smarter people and is better run than most companies. I have a copy, but am unlikely to read it, because, guess what, I know all I need to about GS for a lifetime. If you want to know what sort of interview questions we ask, you could read Heard on the Street. And finally, though I read them both ages ago, I felt that The Bonfire of the Vanities was completely unrealistic, while Liar's Poker rang true.

In the dreary business-speak that grinds you down daily, "our chief asset is our people." It is true, though. Armen Avanessians has been the head of Goldman's quantitative group since I joined it as one of five (there are now over 400 "strategists"). Of all my Wall Street interviewers, he was the only one to ask hard questions, and continued to impress me with his knowledge of all things financial, as well as sneaky methods for dealing with people. I won't mention others by name, but there were certainly genius-level programmers, many physicists (I enjoyed being able to ask on our chat system questions like "Neutron stars...just neutrons or other stuff too?" and getting several instant answers) as well as experts in medieval French, ping-pong experts who could also play (and afford) a Stradivarius, movie-makers, wits, musicians, aviators, English Lit majors (not many!), pub-quiz sharks and unlimited gizmo-philes. Of course, most of these interesting personalities were subjugated to the all-encompassing, 24-hour rush to make money. I would also remark that many of these now very wealthy people were not born with silver spoons in their mouths (I consider myself spooned right up). The Harvard donation-dunning people loved pointing out that Lloyd Blankfein started life on the wrong side of the tracks in a school with double shifts. So say what you like about the huge income-spreads in today's first-world; it is still a place where you can go from a modest income to an obscene one with the right amount of brains, luck and getting yourself a good education.

Hank Paulson praised Goldman employees for keeping the world financial markets running and liquid in the aftermath of the September 11th attack. It was hard not to snort, as if banking were comparable to life-or-death situations. But I do not think bankers are greedier than any other business, that produces something for pennies and sells it for dollars. It is just that money is so intangible. One of the most memorable events on the trading floor was when sterling fell out of the ERM in 1992. The screaming and shouting, the falling-over-backwards-in-the-chairs! It is well known that Soros made over $1billion on that day, and he was not alone. I guess all that money was essentially paid from the taxpayers to the money-men, though it is hard not to blame the politicians for tilting against reality, albeit one avidly manipulated by the financiers. This utilitarian ambiguity is why Patricia left Morgan Stanley to make the world safe for MRSA.

Wow, I have come this far and not quoted my friend Tom: work sucks. Surprisingly few people believe this. Sure there are parts that one enjoys: I am quite proud of the enormous software system that we put in place at Goldman, that is at least as sophisticated and complex as anything Microsoft produces. But there are loads of other things that I enjoy more, that I can do now. It was so dismal to commute to work every day. I estimate that I rode the Thameslink well over 5,000 times, in the company of other exhausted and ageing businessmen. And work is so feudal: we may vote in a democracy every few years, but our waking minutes are ruled by local fiefdoms, hierarchies and rivalries. This taints business friendships. Toward the end I was marveling at some juicy earth-shaking gossip before I caught myself and realised that most normal people would not care in the least, beyond curiosity that professionals making eight figure incomes should find it necessary to eliminate each other. How many novels are there about office life (excluding academe and criminal law)? I cannot think of any, barring The Man in the Grey Flannel Suit (review #74), which was really a war novel. Nobody wants to know about it.

Anyway if you look outside and the sun is shining, it is probably shining on me.