What Happened to Goldman Sachs Quotes

“The ability to make rational decisions is limited, or bounded, by the extent of people’s information. To broaden employees’ understanding, a firm should promote a tradition of teamwork and interdependence and develop future leaders by rotating them among work assignments in different departments and geographic locations. In order to reduce structural secrecy, there may be short-term opportunity costs, but the long-term benefits are significant.12 Firms must think about long-term greed and what it means. Through actions and training, leaders must explain the pressures on short-term thinking and how the firm resolves the conflicts of short- and long-term goals. Potentially conflicting or confusing organizational goals, such as putting clients first while also having a duty to shareholders, require strong signals from leadership as to what is acceptable and unacceptable behavior. These nuances cannot be left to statements of principles; they must be modeled by leaders’ actions each day. Leaders must understand that external influences can shape the culture. For example, there are competitive, technological, and regulatory pressures. Responses to them can have unintended consequences, including drifting from principles. This can increase the probability of an organizational failure. An organization needs to understand to what extent models impact behavior, decisions made by business leaders, and organizational culture. For example, boards of directors of public companies should ask questions if earnings per share (EPS) estimates are too consistent with analysts’ estimates. They should ask whether the firm is managing to models or to what is in the best long-term interests of the firm. Leaders get too much credit and too much blame. Leaders need to uphold the firm’s shared values—and that is a key component to leadership.13 But too little emphasis is given to the organizational elements that shape behavior or provide an environment for leadership or change. An organization’s structure, incentives, and values last longer and have more impact than those of individual leaders. Usually when there is a change or loss or failure there is a tendency to blame one thing or one person, when typically there are complex organizational cultural reasons. It is the duty of leaders and board members to examine what is responsible, not who is responsible.”
― Steven G. Mandis, What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences

“Public disclosure supports an organization’s values and strengthens the organization itself. An organization should consider making personnel decisions more public. When people are dismissed or specifically not promoted because of bad behavior, it should be more public. There is a value to having public signals when behavior is not acceptable. Conversely, culture carriers, those that represent the values, even if they may not be the firm’s biggest revenue producers, must be promoted as a signal of what’s important.11 Generating dissonance or perplexing situations that provoke innovative inquiry can create competitive advantages and improve performance. Having some sort of interdependence should help create an environment that supports discussion and debate. Complementing this debate is balance between groups. Getting the input of leaders from different areas or regions, who have worked together and have good working relationships, is also important in encouraging dissonance. At the board level, in many situations, an independent lead director or independent chairman can add to dissonance. A sense of higher purpose, beyond making money in a materialistic society, can help people make sense of their roles. A firm needs to give employees a clear understanding of its values, its social purpose, and its sense of responsibility. However, leaders need to be conscious of not using the good works of their employees or of the firm to rationalize behavior that is inconsistent with its principles. An organization’s culture is transmitted from one generation to the next as new group members become acculturated or socialized. It is crucial to recruit people who have the same values and socialize them into the firm’s culture. Even if this restricts growth in the short run, it is important not to undervalue recruiting, interviewing, training, mentoring, and socializing. This is also very important in international”
― Steven G. Mandis, What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences

“Social networks can create competitive advantages and improve performance. An organization should consider creating some sort of partnership or sharing that is bound by financial or other interdependence and focus on improving the trust among the group members through socialization. The election or promotion into a leadership group should put a greater emphasis on culture-carrying qualities in the process.10 Leaders and board members should also monitor changes in the nature of the members of the group, cognizant that they can have an impact on the social network.”
― Steven G. Mandis, What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences

“Shared values, whether codified or uncodified, tie an organization together. A firm should determine its own basic set of nonnegotiable values, the minimal constraints. Leaders, not just boards of directors, should look to the meaning of a firm’s principles to define corporate ethics and guide employees’ actions, and try to determine objective ways in which to check deviations from the original meaning (for example, attrition rates, independent client interviews, independent exit interviews with departing employees).9”
― Steven G. Mandis, What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences

“Goldman, or even systemically important, publicly traded banks. It has much broader implications for organizations generally. This sociological study opened my eyes to the organizational elements as they relate to a culture and the importance of understanding them as they relate to organizational, competitive, technological, and regulatory pressures. The organizational elements help form the culture, the incentives and behavior—they can help a firm be “long-term greedy.” In addition, organizational elements can help constrain or manage organizational drift.”
― Steven G. Mandis, What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences

“This belief in the good of the firm seems to contribute to the commitment to hard work and outperformance, which has benefited the firm, but it has slowly and incrementally changed to also be used as a rationalization for behavior that may not be consistent with the original meaning of the firm’s principles. The sense of higher purpose explains why Goldman brushes off cases of bad behavior as “one-offs” or “exceptions,” why its employees should get swine flu vaccinations ahead of others, and why the firm believes that while its peers may not be able to handle situations where conflicts need to be managed through ethical behavior, Goldman can.”
― Steven G. Mandis, What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences

“So even though I had good feelings about Goldman getting the deal done for me, recognizing I never would have gotten it done without Goldman’s approach and ability to execute, I was slightly annoyed that, allegedly, Goldman used information to benefit itself with a larger client.”
― Steven G. Mandis, What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences

“As the deal progressed, Goldman better understood what I was doing and thought it was a great investment idea. Later, Goldman said it wanted to coinvest in the deal. This is an example of the powerful strategy Goldman claims of combining advisory work with coinvesting. Goldman,”
― Steven G. Mandis, What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences

“Most told me Goldman’s behavior does not reflect how clients interpret the principles, which is based in part on how Goldman itself portrays them externally. However, most people I interviewed said that does not necessarily make the firm’s behavior criminal or illegal.”
― Steven G. Mandis, What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences

“Value at risk (VaR) is a widely used measure of the risk of loss on a specific portfolio of financial assets, expressed in terms of a probability of losing a given percentage of the value of a portfolio—in mark-to-market value—over a certain time. For example, if a portfolio of stocks has a one-day 5 percent VaR of $1 million, there is a 0.05 probability that the portfolio will fall in value by more than $1 million over a one-day period. Informally, a loss of $1 million or more on this portfolio is expected on one day in twenty. Typically, banks report the VaR by risk type (e.g., interest rates, equity prices, currency rates, and commodity prices).”
― Steven G. Mandis, What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences

“Goldman was the only firm that had so many risk experts in the highest levels of management. As mentioned earlier, Goldman had learned from its 1994 experience.”
― Steven G. Mandis, What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences

“For simplicity I will use the word residual in front of a word describing an element of the culture that has changed but not enough that it is gone or unrecognizable.”
― Steven G. Mandis, What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences

“focus here first on the aspects of Goldman’s culture that helped it relatively outperform its peers during the credit crisis. Then I’ll explore the accusations of wrongdoing leading up to and during the financial crisis that were made against Goldman and how the firm has responded. The nature of the accusations, and Goldman’s responses, offer much food for thought about the change in culture and the potential future risks that Goldman, and the whole banking system, face.”
― Steven G. Mandis, What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences

“Goldman would provide M&A advice as well as involve its foreign exchange desk to handle the currency exchange for the purchase price. If Goldman missed the deal—meaning our bankers were not involved—then proprietary trading might possibly be involved in merger arbitrage (oftentimes, Goldman would make more money in proprietary merger arbitrage than if it had been hired to advise on the deal). Goldman ensured that we looked at each transaction and each flow and had some way to make money from it.”
― Steven G. Mandis, What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences

“The crucial differentiating advantage of Goldman Sachs would be one that outsiders might find surprising: Its complex variety of many businesses was sure to have lots of conflicts. Goldman Sachs, Blankfein said, should embrace the challenge of those conflicts. Like market risk, the risk of conflicts would keep most competitors away—but by engaging actively with clients, Goldman Sachs would understand these conflicts better and could manage them better. Blankfein (who spends a significant part of his time managing real or perceived conflicts) said, “If major clients—governments, institutional investors, corporations, and wealthy families—believe they can trust our judgment, we can invite them to partner with us and share in their success.”24”
― Steven G. Mandis, What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences

“So Goldman’s research alignment program was consistent with the firm’s teamwork approach, because it required different divisions to work together. But the SEC concluded that it violated securities laws requiring the firm to protect clients, even if there was an alignment that followed the principles of Goldman. To executives and board members, because Goldman had leading market share in IPOs and equity offerings, the collaboration seemed to be working effectively—it was an example of teamwork.”
― Steven G. Mandis, What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences

“The very year (2010) Goldman paid the largest fine in SEC history at the time ($550 million), the firm made almost $8 billion. Fines are almost like an expense that Goldman attempts to minimize but cannot avoid.3”
― Steven G. Mandis, What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences

“What really happened in the following years, though, was that trading became an increasingly dominant part of Goldman’s business, and this had a significant impact on drift.”
― Steven G. Mandis, What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences

“There was a statistically significant difference between the firms. Bear Stearns and Lehman more consistently met or exceeded analyst expectations and showed the highest correlations, implying that they were “managing to analyst models.” Obviously those two firms failed. Goldman showed a correlation to meeting or exceeding expectations (demonstrating the effect of analyst models) but actually had the least correlation among the firms; it was the worst, implying that it was willing to accept losses or deviate from the analysts more than the other firms. This may reflect cultural characteristics and possibly elements that helped Goldman do relatively better in the credit crisis (discussed later).”
― Steven G. Mandis, What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences

“Among these is the preference for all companies to have common measures, so Goldman was expected to employ the financial models used by the street and capital markets, including the desired measures of risk and performance. Ellis notes, “The persistent demand to meet or beat both internal and external expectations of excellence [is one of the] penalties of industry leadership.”
― Steven G. Mandis, What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences

“it instituted some new practices that made it more similar to its competitors. In a process that is described by academics as performativity, the models used by Wall Street to assess the firm had a reflexive effect on how the firm chose to perform. 16”
― Steven G. Mandis, What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences

“Of 221 total partners at the IPO in 1999, only 39 (16 percent) remained as of 2011. 15”
― Steven G. Mandis, What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences

“As a Goldman partner explained to me in an interview, Goldman was slowly losing its allure: the prestige of partnership, the mystique that had always marked the difference between Goldman and its competitors. 13 At the time of the IPO, no one knew that Goldman would (or would have to, as explained in some interviews with partners) become the highest-paying firm on Wall Street. It had traditionally paid less than its peers, except for partners, a business practice Whitehead felt reflected long-term greedy and attracted the right people who had this perspective.”
― Steven G. Mandis, What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences

“decisions were made in New York. Although the office furniture, office sizes, and set-up of cubicles were the same, the culture at Goldman in Hong Kong was different from what I experienced in New York. The Hong Kong office operated in a separate world. At the time, very few senior bankers from New York came for an extended period of time. Senior partners would jet in and jet out. Because Goldman was concerned about quality of execution, any deal of meaningful importance typically had a New York or London banker assigned to it.”
― Steven G. Mandis, What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences

“How big and important are proprietary trading and principal investing activities at Goldman? Glenn Schorr, a Nomura Securities equity research analyst covering Goldman stock, estimated that the Volcker Rule, which is intended to restrict proprietary trading and principal investing at investment banks, would impact 48 percent of Goldman’s total consolidated revenue. To put this into context, he estimated the impact at 27 percent, 9 percent, and 8 percent of total consolidated revenues of Morgan Stanley, Bank of America, and J.P. Morgan, respectively.”
― Steven G. Mandis, What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences

“Wall Street was historically more balanced between trading business and client business. I ran investment banking and oversaw investment management. But as the trading business got bigger and bigger, the client side made up less of the firm’s overall work. This was going on at every single firm, not just at Goldman Sachs. I began to believe I could add more value in the world by doing something else. It was a difficult decision. However, I realized I had lost some passion for what we were doing, and that’s when I talked to the CEO, Hank Paulson, about leaving. It was traumatic, but I felt like I had to make a change.45”
― Steven G. Mandis, What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences

“In 1996, trading and principal investing represented about the same percentage of revenues as investment banking (about 40 percent), but from 2005 to 2007, trading and principal investing accounted for about 70 percent of revenues, and investment banking had plunged to 15 percent.43”
― Steven G. Mandis, What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences

“By 1928, with only $20 million in partnership capital and either sole or joint control over funds worth $500 million, this created a devastating level of exposure on the eve of the October 1929 stock market crash. John Kenneth Galbraith used phrases such as “gargantuan insanity” and “madness … on a heroic scale” to describe GTSC’s strategy.21 When the crash came, GTSC shares fell from their high of $326 to less than $2 per share. The ensuing debacle and damage to Goldman’s reputation, leadership, and clients caused Goldman to stay away from the asset management business.”
― Steven G. Mandis, What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences

“Goldman had made a strategic decision not to represent companies initiating hostile bids, the only large investment banking firm to do so.”
― Steven G. Mandis, What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences

“One sign of organizational drift is a change in policies and business practices associated with a firm’s principles. Even before the IPO, Goldman began embracing opportunities it had once shunned out of concern for preserving its reputation for ethical conduct and to reduce conflicting interests.”
― Steven G. Mandis, What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences