In Memory of Greg Smith and Goldman Sachs

In case you missed this story, please visit the link to The New York Times article: http://www.nytimes.com/2012/03/14/opinion/why-i-am-leaving-goldman-sachs.html.
Greg Smith is leaving the investment bank after many years, revealing what the investment bankers do with their clients: nicely or not so nicely dealing with them and from time to time calling them “muppets” and more…,well, they stop short of eating them, of course. Nobody eats clients. Not even in fiction.

Rare that someone openly talks about the inner workings of such an investment bank. The more entertaining is the article in The New York Times. Should Greg Smith speak the truth, he is a hero in a world long gone; a world which nobody in 2012 would be able to remember anymore: a fantasy world where ethics, professional conduct, moral and integrity exist and matter. Today…., well, how do you spell “moral”? And what do you mean with “integrity”?
Not born with it, so doesn’t come naturally to me. Ok, understood. Let’s crack on and rip off some more customers.

By the way, ripping off customers is not something specific to a single industry or sector in the economy. It happens here and there, just where the opportunities offer themselves. Not grabbing such an opportunity would be an opportunity cost. So whether we sell a CDO squared to a stupid provincial banker, or mis-sell a (payment protection) insurance to a stupid financially illiterate average man, or sell yellow-painted iron as gold bullion to a stupid retiree, or washing powder at a (far too high) price pre-agreed with several of our competitors to millions of stupid housewives, in all those cases the details don’t matter. The commonality matters: taking advantage of others for a gain. A simple concept, tested over the centuries. And it works.

If you don’t like the concept: well, speak up. If you like the concept: hey, enjoy the fruits before they turn into rotten apples, and, my friend, don’t choose me as a customer.

Sidenote: Derivatives and investment banking. Derivatives are a zero-sum game, think e.g. futures, or swaps. One party wins, the other party loses. So what?

Hmm, as many would agree, some of the smartest brains get recruited into investment banking and derivatives trading. Some argue even that they frankly ARE the smartest brains. There they deal with a counterparty. So then, if the smartest brains are with the investment banks, what sort of brains are then with their corporate clients? Well, the logic goes, that the guys working with the corporate clients are of the second league. Ok then, so what happens if the first league deals with the second league in a zero-sum game? Ahh, here we go: the guys from the first league are the winners and the guys from the second league are the losers. That’s the game. Really simply. As Greg Smith reveals in The New York Times, the guys from the second league working with the enterprises are called the “muppets”. These guys must feel pleased, right? One feels better being called a “muppet” compared to being called a “stupid donkey”, right? And they do so. They feel pleased. Why? Because – , remember, what’s the name of the game? Well, it’s “Smart beats Stupid”.

Count yourself lucky if you are smart and enjoy the article in The NYT. And, if you need customers also for the long-run, then just treat them sufficiently nicely.
If you are the kind of person calling for a better society and for keeping up ethical standards and values, then be happy. You will have lots of friends, as others had decades and centuries ago before you.