Why Greg Smith is an Opportunist and Everyone Needs to Stop B*tching about Banks

jillmac's picture
Rank: Monkey | 45

Greg Smith's op-ed is nothing more than a cranky banker's sex tape.

The internet hasn't been this excited about a finance story since Mr. Taibbi at Rolling Stone invented a new sea creature to characterize Goldman Sachs.

In case you've been under a rock for the past 24 hours, the media is flying off the handle about an NYT Op-Ed by ex-Goldman ED Greg Smith.

More than a few people in my network, all of whom are anti-finance, have come out strongly in support of Mr. Smith as some kind of hero for speaking out against the machine.

I think they are not only wrong, but falling for Mr. Smith's carefully crafted marketing message.

Since when do we assume that sales people have our best interests at heart?

It is patently absurd to assume that anyone who makes a living on transaction volume or associated fees is looking out for you. We assume that marketplace actors are selfish. We assume people are selfish. Western governmental and economic standards are predicated on the belief that actors will exploit the limits of their power and charge what the market will bear.

We experience this skepticism of salespeople every day. We don't walk in to an AT&T store assuming the sales people will recommend a Verizon product if it better suits our needs. We have an entire library of jokes about used car salespeople. What's different about banks?

It would seem that sell side institutions, particularly GS, were just too good at doing what they were meant to - sell stuff. The clients buying complex equity derivatives packages from Mr. Smith should have done a much better job of executing due diligence than they did. The shareholders of institutions that blew up because they held subprime exposure should really be upset. They trusted management to be better stewards of their equity dollars.

Management has a fiduciary responsibility to look after investors. Your salesman does not. It would have been a violation of that responsibility to not try to grow GS's profits.

So why release on Op-Ed?

My guess? Political run. What's the best way to distance yourself from a career in the least popular area of the least popular firm? Be the guy who came out against it. You can almost hear the stump speech: "I came out against Goldman when everyone said I was crazy. It's time to get back to our American values..."

Forget the fact that this guy has been cashing paychecks all these years, and instead of trying to change GS culture, he just chose to depart and flame them.

Mr. Smith took a page from Paris Hilton: If you have the prerequisites to be a star but need a media push, expose yourself.

He can't be expecting much in the way of new finance opportunities. He's young enough to hit the White House. He's crafting a message. Don't get suckered in to his salesmanship.

From blog.connectcubed.com

Comments (18)

Mar 15, 2012

Agreed. Saying that GS is immoral and working with them for several years makes him a hypocrite.

The Four E's of investment
"The greatest Enemies of the Equity investor are Expenses and Emotions."- Warren Buffet

Mar 15, 2012

Except that the doods born in South Africa, if you have political ambitions to sell out GS you better be going big, as in Mr. President big.

Mar 15, 2012

Props for finding an audience likely to give you unbiased feedback.

If I had asked people what they wanted, they would have said faster horses - Henry Ford

Mar 15, 2012
happypantsmcgee:

Props for finding an audience likely to give you unbiased feedback.

To be fair the people supporting him arent unbiased, most of them are still coming down from that 'occupying' high.

OP made a good point about a political run, I hadnt thought about that, even the woman who used to pimp girls to the GS guys (and of course Eliot Spitzer) ran for office..

Damn you Rodger!

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Mar 15, 2012

I think it's pretty surprising that the op-ed seemed to have such a big effect on the stock - GS closing down 3.3%, while most other banks were flat or up slightly.

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Best Response
Mar 15, 2012

your point in a nutshell: salespeople are not fiduciaries.

you are absolutely right. i had posted a somewhat angry rant on another thread about GS's lack of integrity, but i'm putting my foot in my mouth. i read the entire letter an it was unclear whether he was talking about S&T, wealth/asset management, or investment advisory services. while it would certainly be a concern if you were screwing over your clients as the last two, sales is fair game.. especially if you're dealing with "sophisticated investors".

Money Never Sleeps? More like Money Never SUCKS amirite?!?!?!?

    • 2
Mar 15, 2012
jillmac:

It is patently absurd to assume that anyone who makes a living on transaction volume or associated fees is looking out for you. We assume that marketplace actors are selfish. We assume people are selfish. Western governmental and economic standards are predicated on the belief that actors will exploit the limits of their power and charge what the market will bear.

We experience this skepticism of salespeople every day. We don't walk in to an AT&T store assuming the sales people will recommend a Verizon product if it better suits our needs. We have an entire library of jokes about used car salespeople. What's different about banks?

While I agree with your observation about this Smith's motive, I simply cannot buy your nihilistic self-destrucutve view on capitalism. There is nothing wrong with market players exploiting opportunities or maximising profits. But when you engage in deceit and openly insult your own customers a line gets crossed. Banking is not the car sales industry. On issues of money, a certain degree of prudence, maturity and integrity counts for something.

Mar 15, 2012

I'm sick of people doing whatever necessary to get in the spot light, even selling out their firm. Where were these complaints when GS was signing his paychecks. Absolutely disgusting.

"For what shall it profit a man, if he shall gain the whole world, and lose his own soul?"

Mar 15, 2012
unslain:

I'm sick of people doing whatever necessary to get in the spot light, even selling out their firm. Where were these complaints when GS was signing his paychecks. Absolutely disgusting.

It's pretty humorous that you'll defend GS' questionable / dishonest business practices while having "For what shall it profit a man, if he shall gain the whole world, and lose his own soul?" in your signature.

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Mar 15, 2012

he is too ugly, even for politics.

Mar 15, 2012

Sad he wasn't dealing with hedge funds or they'd burn his ass. I know MDs who've been put into their place trying to flog a bs idea to a HF client.

Some guys in treasury departments of corps are tools buy HF is a diff ball game.

Mar 15, 2012

There's something about human nature that makes it difficult to trust people who are dishonest with people who trust them. And it's hard to work for people you don't trust.

Guys, the industry needs reform. I am happy making less money if it means all of the sociopaths in this industry go to jail or at least get kicked out of the business.

Screw it, bring on 90% marginal tax rates like we had in the '50s. I want to see the sociopaths who put money over ethics suffer, even if it hurts me a little. If the only way to make them suffer is to put a cap on honest peoples' earnings, fine. This hurts them a lot more than it hurts the honest folks in the business.

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Mar 15, 2012

I don't see why anyone would champion dishonest business practices and treating customers like crap. Not all salespeople are out to screw their customers. Companies that do that, outside of finance, don't last. I mean, shit, look at great companies like Zappos, they are entirely built upon a foundation of quality customer service.

I agree 100% with IlliniProgrammer when it comes to wanting to cleanse the industry of sociopaths. They're bad for business and bad for the economy.

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Mar 15, 2012
TheKing:

I don't see why anyone would champion dishonest business practices and treating customers like crap. Not all salespeople are out to screw their customers. Companies that do that, outside of finance, don't last. I mean, shit, look at great companies like Zappos, they are entirely built upon a foundation of quality customer service.

I agree 100% with IlliniProgrammer when it comes to wanting to cleanse the industry of sociopaths. They're bad for business and bad for the economy.

This is spot on. I mean, it's just not sustainable for a business to continue screwing over their customers.

I agree with the premise of Smith's letter, but his execution left much to be desired.

"Rage, rage against the dying of the light." - DT

    • 1
Mar 15, 2012

Let's be honest, he is obviously an opportunist. But is he an opportunist pointing out a real problem? Maybe. In sales, sure the obvious objective is to make money, but it's really to forge and maintain relationships. If you are constantly fucking over your client the relationship is gonna fal and the future revenue that the client would brin is gonna disappear. The obvious best way to achieve both, is to give great service that maximizes your profit while also doing the best for the customer. GS seems to be focusing on the first part, and being smooth operators they hide the detrimental effect on the second. People know buying volcano insurance is stupid, but does the CRO of X company who went to Fredonia State University really know that Y complex Synthetic Derivative has less profit potential, more tail risk, and fits their goals worse than a more vanilla product? Probably not if Ivy League educated MD is telling him the opposite (not lying, but observing a particular situation that may never arise). People who are less educated or hold less prestigious jobs often are either angry or have an inferiority complex toward what society considers on paper as their betters. I remember my father talk about being in a meeting and the client leaving and someone telling him that the dude went to Princeton- supposedly the whole conversation changed after that (all the others went to really crappy schools that you have never heard of). Whether you ascribe to this or not, there is power behind names and GS is the most prestigious in the IB industry. Because of this their opinions can override commonsense of people who otherwise may know better. GS and other prestigious firms (including universities and other industries) exploit this on a daily basis and when it crosses into harming the clients is where it becomes a problem.

Reality hits you hard, bro...

Mar 21, 2012

good point on the possible political run. he could be trying to set himself up for a different future, as it were. However it won't be in U.S. politics. He's originally from South Africa and went to Stanford here in the U.S.

"Everything comes to those who hustle while they wait."
-Thomas Edison

Mar 21, 2012

Real talk:

Maybe the guy doesn't have ulterior motives. Maybe he's just disappointed in what he sees around him vs. what it used to be like. Maybe he thinks he can make some sort of a difference. Not everyone has ulterior motives.

Mar 21, 2012
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