Why I left Goldman Sachs provides a rare insight to Wall Street and how it makes it money!
On March 14, 2012, more than three million people read Greg Smith’s bombshell Op-Ed in the New York Times titled “Why I Am Leaving Goldman Sachs.” The column immediately went viral, became a worldwide trending topic on Twitter, and drew passionate responses from former Fed chairman Paul Volcker, legendary General Electric CEO Jack Welch, and New York City mayor Mike Bloomberg. Mostly, though, it hit a nerve among the general public who question the role of Wall Street in society — and the callous “take-the-money-and-run” mentality that brought the world economy to its knees a few short years ago. In his book ‘Why I left Goldman Sachs’, Smith picks up where his Op-Ed left off.
I really enjoyed this book. It confirmed a lot what I thought about the world of investment banks. That is, they exploit those with money. The book goes through Smith’s career and how he sees a change in culture from helping clients to trying to make as much money as possible. Regardless of the interest of their “muppet” clients.
Goldman Sachs gets paid for doing transactions. The more complex and the more often they do transactions, the more money they make. Similar to how personal financial advisors get paid but the banks deal with people and businesses who have a lot of money (pension funds, hedge funds, insurance companies). The book talks about experiences where the people working at the bank are providing information to their clients just to get them to do more transactions. One example was when Goldman’s changed their views on large European banks from positive to negative back to positive which wasn’t in line with how Goldman actually viewed these banks. By changing their views a lot it meant that their clients made numerous large and complex transactions. Making the bank a significant amount of money, whilst their clients were losing lots of money.
I enjoyed reading about the different types of people what Greg worked with throughout his career. It seems that everyone working there has a strong character. Like in the movies, there are people who work at these banks which really do think they are ‘gods gift to mankind’ and treat everyone below them (in terms of career level) as minions. I do like the fact that the ultimately, some of the most senior people are those who are super smart and are good with people (i.e. happy to talk to Greg about sports despite being much more senior than him).
The book highlights that Wall Street can see both sides of every trade, so like a casino, ‘the House always wins!‘.
I have a lot of respect for Greg Smith for writing this book – very brave!
What actions am I going to take after reading this book?
This book reinforces my view that you should question why someone is giving you advice. Are they actually looking out for you or trying to make good money for themselves? Don’t get me wrong, banks do provide good services. They help people and businesses get exposure to the markets. In some cases, they can help you manage your risks. The key is to make sure that you are not being ‘sold to’. If you don’t understand how you can lose money from the deal, then don’t do it. If anyone says ‘you can’t lose money’, then walk away, it’s simply not true!
In the context on managing our money, I’m very cautious about taking financial advice. I like to read about a topic and see what others are doing, then do deeper research. I will seek advice at times but on specific points and ensure I get a second opinion before proceeding. See my blog ‘What is my issue with personal financial advisors?‘ to see why I have such a cautious view. I don’t want this to put people off managing their money or investing. There are many good books to help you – we my top recommendations here
Thought provoking = 7 (out of 10)
Enjoyment of reading = 8 (out of 10)
Money making = 6 (out of 10)
Overall score = 6.84
Read again = Probably not