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  Mar 15, 2012                  
     

Crisis: Corporate psychopaths - part B

 

  "TODAY is my last day at Goldman Sachs. After almost 12 years at the firm — first as a summer intern while at Stanford, then in New York for 10 years, and now in London — I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it."
 -- Greg Smith, New York Times, March 14, 2012

Previous crisis

This a follow up on my

Crisis: Corporate psychopaths - part A and
Crisis: On the supermen who are our leaders

in the former of which I provided a link to an interesting - to some, maybe inspiring video with Richard Fuld, Jr., then CEO of the now bankrupt Lehman Brothers, while I also considered several aspects of psycho-pathology, with quite a few useful and instructive links, and in the latter of which I raised and answered the question whether all or most of our leaders are psychopaths.

Yesterday the New York Times published an article by one Greg Smith - "a Goldman Sachs executive director and head of the firm’s United States equity derivatives business in Europe, the Middle East and Africa", the NYT says helpfully - the opening of which is quoted above, next to a picture of a vulture leaving a tribe of vultures.

The picture seems to sum up many of the reactions to Mr Smith's article on the internet, even though Mr Smith's second paragraph gives a deeply moral reason for his decision. Here it is:

To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money. Goldman Sachs is one of the world’s largest and most important investment banks and it is too integral to global finance to continue to act this way. The firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for.

It seems wise to be skeptical about Mr. Smith's public stance, but he does have a point, which may be summed up by "Greed is not good", even though the present leadership of Goldman Sachs seems to see it differently. According to Mr Smith, they see it the wrong way:

It might sound surprising to a skeptical public, but culture was always a vital part of Goldman Sachs’s success. It revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients.

As it happens I have briefly worked for a bank - a long time ago - and I am willing to believe this may once have been the internal corporate ethos: It's not really credible; it's clearly meant for public consumption and team-building; but it's overall possibly more correct than not, and then not because in these now lost days bankers were more moral, but because their clients and their shareholders had some power over their actions, and failing one's clients (on a fairly large scale) then was a rather certain way towards a bankruptcy - that the state also would not bail the bank out of.

But the above spirit has left Goldman Sachs (and not just there, I would guess, quite confidently), mr. Smith opines:

When the history books are written about Goldman Sachs, they may reflect that the current chief executive officer, Lloyd C. Blankfein, and the president, Gary D. Cohn, lost hold of the firm’s culture on their watch. I truly believe that this decline in the firm’s moral fiber represents the single most serious threat to its long-run survival.

But I don't think so. It is very likely that I would have a very low opinion of Mr Blankfein's and Mr Cohn's morality if I knew them better, but as it is I tend to believe they are just like Mr Fuld and other leaders of banking conglomerates who found that with deregulation and a booming economy they could get away with almost anything, including sluicing aways tens of millions to their own personal bank accounts, as long as there was a substantial end of year profit on the books, and maybe also if not, what with all those state bailouts by friends of the failing managers.

That is, I don't believe people or bank managers have grown worse: I believe that if you exempt people from painful sanctions for transgressing certain boundaries, then most people will transgress such boundaries as soon as that seems profitable for them. ("OK, we just deregulated and liberated theft, fraud, and swindle, all in the interest of God's Own Market Principles. Now you'll all be good boys and girls, won't you?")

Then again, Mr. Smith seems to see accurately enough how that worked out in Goldman Sachs:

How did we get here? The firm changed the way it thought about leadership. Leadership used to be about ideas, setting an example and doing the right thing. Today, if you make enough money for the firm (and are not currently an ax murderer) you will be promoted into a position of influence.

I suppose so, but I think this happened in a wider social and indeed educational context, namely (1) that the banks and their managers got deregulated during Clinton's presidency, while (2) almost everyone they employed had learned during their university years that truth does not exist and that all morality is merely relative, while then finding themselves in a position in a bank where "Anything goes!" as long as it's profitable for the firm.

The result is this, according to Mr. Smith, whom I believe:

I attend derivatives sales meetings where not one single minute is spent asking questions about how we can help clients. It’s purely about how we can make the most possible money off of them.

Then again, I would assume this has always been the case, for the most part, at least: To believe that banks exist to help their clients, is as naive as to believe that slave ships exist to help slaves: Profit is the motive in both cases, and clients resp. slaves the means - but what is allowable when making profits does not depend much on the manager or the captain, except in the very rare cases these are independent individuals with their own set of maintained personal values, but on what laws exist, that are being maintained by the courts, in the society that the managers or captains belong to. If these societies practice and preach that "Greed is good"; that all morals are wholly relative; and that anything goes ("the end sanctions the means"), as long as it makes a profit, then these are the rule by which most will play, indeed also while believing or at least pretending to believe that they are behaving quite morally: Don't their firms show a profit? Don't their firms exist to make profits? Doesn't almost anyone in the business try to rip off their clients? Well then, wouldn't one be mad to act differently? as Yossarian asked.

Mr. Smith has seen the evidence and the signs of the times at Goldman Sachs, and he does not like what he saw:

It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as “muppets,” sometimes over internal e-mail.

I believe him, and it shows just what I suggested: If "Greed is good"; if morals are relative; and if anything goes, as long as it does make a profit [Ovid: exitus acta probat], then these are the rule by which most will play, also or perhaps especially if it goes with acting as if one is a real tough guy or gal oneself, a winner, not a looser.

Also, Mr. Smith seems a bit naive, presuming he is honest:

It astounds me how little senior management gets a basic truth: If clients don’t trust you they will eventually stop doing business with you. It doesn’t matter how smart you are.

I really don't think so: Clients of banks are also interested in profits, and as long as they believe - with or without justification - that their banks are making profits for them, somehow, and more than other banks would, they will remain clients. (As Madoff and Ponzi well knew.)

If there is a problem - and I agree with Mr. Smith there is one, as I agree that it is mostly a moral problem - it is that all restraints and almost all regulations have been thrown away or have been thoroughly eroded, and the only norm or end that remained, both for banks and for their managers, is profit, and the more profit the better, it doesn't matter how, for apart from monetary profits all ends, all values, all norms and all ideas are illusions, built on sand. (*)

Mr Smith is upset by what he saw and heard at Goldman Sachs:

These days, the most common question I get from junior analysts about derivatives is, “How much money did we make off the client?” It bothers me every time I hear it, because it is a clear reflection of what they are observing from their leaders about the way they should behave.

Yes, but as I explained: That's what they all learned, at Goldman Sachs and at their universities, and indeed they are being moral after their own fashion, and they do follow their leaders and their leaders' norms, quite morally so, while engaging proudly in groupthink, like nearly all ordinary men.

Here is most of Mr. Smith's last paragraph:

I hope this can be a wake-up call to the board of directors. Make the client the focal point of your business again. Without clients you will not make money. In fact, you will not exist. Weed out the morally bankrupt people, no matter how much money they make for the firm. And get the culture right again, so people want to work here for the right reasons.

I fear he will be seen by his former peers and superiors as a softy, a wimp, and as a man who just doesn't understand the realities of life. Then again, I don't think he is and am willing to believe he resigned for the reasons he gave, and also that his reasons are commendable.

Then again, I don't think they are realistic: The climate at banks will only change if the managers of banks are - again - made personally responsible for their personal failings, and are also not allowed to enrich themselves in the ways this has grown normal in the last 10 years or so, where persons like Mr Fuld could take home tens of millions of dollars each year, basically for practising "Greed is good" and "Après nous le déluge?" (**)

Finally, given my title: Do I think Mr Smith is a psychopath? Probably not: He does seem to have a respectable moral reason - and further see my Crisis: On the supermen who are our leaders.

Previous crisis


Note

(*) Actually, if the only end is profit, the rest - or most of it - follows logically. So why is profit not the only end, and not even an important end? Because in any society the rules by which one plays are complicated, interlaced, and manifold, and the ends of the rules by which one plays are also generally manifold. In the end, any human society is a set of cooperating groups and individuals, all with many different ends and many different values, and to presume that in any given society monetary profit, which is one of the ends of firms, corporations and businesses, is the stole standard to judge all behavior, all plans, and all ends indeed is almost idiotically stupid, if seriously believed. Indeed, even in most firms profitability is not the prime aim of the firm, but the firm's survival is, much like it is also for the society and the individuals in it, and that survival, once more or less certain, in each instance is taken to be a survival that serves various different ends, even for one person.

Profit, like much else, is a legitimate end only to the extent that it contributes to a good life for many, not a few. And a good life is not a life filled with hunting for profit, but a life one enjoys without harming others.

(**) French: "After us the deluge": Madame de Pompadour to her lover Louis XV - that is, in paraphrase: 'We profited to the best of our abilities from the world, let those who come after us clean up the mess. F*ck them - at least our own lives were great!'
 


P.S.
Corrections, if any are necessary, have to be made later.

 

As to ME/CFS (that I prefer to call ME):
1.  Anthony Komaroff Ten discoveries about the biology of CFS (pdf)
2.  Malcolm Hooper THE MENTAL HEALTH MOVEMENT: 
PERSECUTION OF PATIENTS?
3.  Hillary Johnson The Why
4.  Consensus of M.D.s Canadian Consensus Government Report on ME (pdf)
5.  Eleanor Stein Clinical Guidelines for Psychiatrists (pdf)
6.  William Clifford The Ethics of Belief
7.  Paul Lutus

Is Psychology a Science?

8.  Malcolm Hooper Magical Medicine (pdf)
9.
 Maarten Maartensz
ME in Amsterdam - surviving in Amsterdam with ME (Dutch)
10.
 Maarten Maartensz Myalgic Encephalomyelitis

Short descriptions of the above:                

1. Ten reasons why ME/CFS is a real disease by a professor of medicine of Harvard.
2. Long essay by a professor emeritus of medical chemistry about maltreatment of ME.
3. Explanation of what's happening around ME by an investigative journalist.
4. Report to Canadian Government on ME, by many medical experts.
5. Advice to psychiatrist by a psychiatrist who understa, but nds ME is an organic disease
6. English mathematical genius on one's responsibilities in the matter of one's beliefs:

7. A space- and computer-scientist takes a look at psychology.
8. Malcolm Hooper puts things together status 2010.
9. I tell my story of surviving (so far) in Amsterdam/ with ME.
10. The directory on my site about ME.



See also: ME -Documentation and ME - Resources
The last has many files, all on my site to keep them accessible.
 


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