Greg Smith and Goldman Sachs: A Bad Romance

Photograph by Herman Estevez/Grand Central Publishing via Bloomberg

Greg Smith, as he tells it in Why I Left Goldman Sachs, claims the firm didn’t treat its clients very well. He was upset about this, so he quit. But instead of giving two weeks notice and heading off to some pub to toast his 12 years at the firm, Smith wrote an editorial for The New York Times, which they published on March 14. Then he grabbed his stuff from his London office on a Saturday night when he knew no one would be in and flew back to New York. The article ran on Monday. A media pile-on and a $1.5 million dollar book deal soon followed.

For some, Smith was a hero, a man of principle taking a stand against the shadowy power that duped its customers while enriching itself, and even standing up at his own expense for an institution he loved; for others, he was a dirty rat, a self-interested turncoat of the lowest variety. In this line of thinking, a principled man who thinks a firm is not treating its clients right should contact HR and get some paperwork on corporate values rolling.

Goldman Sachs’s secret culture has long been both a point of pride for the firm, as well as a source of annoyance for those not on the inside, which is why all the seemingly trivial scraps in Smith’s Op-Ed have been poured over obsessively (a practice that will no doubt continue when the book is released). For example, in his original article and in a corresponding section of the book, Smith related that traders in London sometimes called their clients “muppets.” This was not meant to convey that the clients were funny or often broke out in song, but that they were not intelligent and easy to fool. There’s debate over how much of a put-down it is to call a person a muppet, or whether the term was used at the firm. James Stewart of The New York Times reports that “muppet” is common slang in London. Goldman Sachs hired forensic specialists to search firm e-mails for mention of the word. The result, a nine-page document, was delivered to the Bloomberg organization in advance of publication. They turned up a lot of references to the new Muppets movie, but no systematic discussion of fund managers as muppets.

Conversation about the book has become a referendum on Greg Smith as a person. This is a tough battle for Smith to win, at least as he portrays himself in print. He does not seem to be aware, most importantly, of how awesome he thinks he is. In his telling, he is ever the perfect employee, cruising through assignments with few mistakes. He and a colleague, he writes, became known as “the guys who, if you needed to put the ball in someone’s hands in the final stretch of the game, were not going to screw it up under pressure.” The memoir, like the dinner story, is a genre that thrives when the narrator is self-effacing, the butt of all jokes—Michael Lewis, in Liar’s Poker, takes his own achievements as a suspicious sign about Salomon Brothers—but Smith reverses this entirely. He compliments himself on his “dry sense of humor,” he saves parties with his jammin’ iPod, and, in one of the strangest subplots, details his international triumphs in Ping-Pong. In 1993 he represented South Africa in the Maccabiah Games. He “took the gold medal,” and has the special blue blazer to prove it.

Such self regard is probably at the root of Smith’s problems with Goldman Sachs. It may be a result of a missing, and crucial, faculty: a useful skepticism. Smith’s lack of perspective about his own abilities may have carried over into his judgment about an institution whose purpose is to profit on financial transactions. He writes in enough places, enough times, that he loves Goldman Sachs that a reader can’t doubt it. He seems to have developed a crush on the place, in a first-kiss kind of way. He prides himself without irony on being a “culture carrier,” one of the employees who gets why the firm is great and looks out for its long-term health and interests in the most official way. He actually writes that he looks forward to a “mandatory training session” in London. And he’s deeply disappointed that more people did not seem excited about the firm’s recommendations for best practices.

As for the love interest, Goldman seems to have enjoyed their arrangement while it was useful. Smith was well-paid. He earned $200,000 annually in his years as an associate and $500,000 a year running the London side of the U.S. equities business. But the firm had other interests in the end, and when Smith came up one too many times against the reality of the business—you really are what you earn, and the client will never trump that—he was heartbroken. So he wrote the financial world’s most well-read breakup note.

The lesson of the book is as useful for fund managers trying to get an order executed and company captains sitting through a merger presentation as it is for a new hire enjoying her first perks. Don’t love a financial institution too much, no matter how good it makes you feel sometimes. In the end, it will never really love you back.

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