Why I Left Goldman Sachs: A Wall Street Story (4 page)

The job prospects of MC Harvard’s group took a sudden and dramatic turn for the worse.

Josh, the son of the Wall Street billionaire, also committed a series of spectacular lapses in judgment. The interns had a room on the forty-first floor nicknamed the Swamp. You had to go down to the ground floor and take a separate elevator bank to get there; it was our special intern preserve. The Swamp had about ten rows of computers that we could use to do some work or check e-mail or surf the Internet, as there were usually no desks available on the trading floor. One afternoon, Josh made a kind of bed out of three of the chairs, lay down on it, and went to sleep, right in the middle of the day. By a stroke of extremely bad luck for him, a VP chose exactly that moment to stop by the Swamp…

Then Josh managed to top himself. He committed a gaffe that resulted in a rule that to this day is laid down to all Goldman summer interns: When you’re in an elevator, do not say anything. It doesn’t matter what—a joke or even a remark about the weather—just keep your mouth zipped. You simply never know who might be in the elevator with you. Josh learned this the hard way. He was riding up in a full elevator on a day when the head of the Chicago office was coming to speak to all the interns, and when someone mentioned the event, Josh chimed in, “The head of the Chicago office? Who the fuck cares about the head of the Chicago office?” You guessed it: the head of the Chicago office was standing at the front of the crowded elevator.

Josh was a great guy, really well liked by everyone in the program, and he never once tried to use his status as the son of a powerful financier to his advantage. He would not end up at Goldman. Instead, he went on to a successful career as a lawyer.

At the beginning of the summer, we’d been told that only half of us would make it through the intern program and be offered a job; in reality, it would turn out to be more like 40 percent. Most desks would hire only one person—two, in a couple of cases. What this meant was that, by the end of the summer, out of the seventy-five of us, around thirty-five would receive an offer.

Everyone was aware of this. Management was very careful not to cite exact statistics, but they definitely gave the impression that fewer than half of us would be getting jobs. They wanted to keep the pressure on without creating such a sense of backstabbing competition that people would act maliciously toward one another: management was constantly talking up teamwork.

At the same time, all the interns were smart. We all knew that not everyone was going to get an offer. So you needed to walk the line: be a team player but not a bad person, but also advance your interests and try to nab a job, because it
was
a race. Oddly enough,
Survivor
, the reality show, had just premiered that spring, and it often felt as though we were locked in a real-life version of it.

Everybody knew this, but nobody came right out and said it: you were in competition with the rest of your pod. As the summer passed, you got a sense for what everyone else was interested in, which desks everyone was going after, and then you did the math. Say there were twenty people who liked this one desk, but the desk was hiring only one person—what were your odds there? Should you go on to a less desirable desk, where you had greater odds of getting a job? I remember the way one Stanford woman lost out: she was going after a group where nine people were vying for two spots. Statistically, it wasn’t a good thing to try for, even though she was confident she was going to get it. Ultimately, it comes down to personality, and they liked two other people more. There’s luck involved as well. Maybe the day this intern met the managing director he hadn’t had his coffee yet.

What improved your chances of getting a coveted spot, though, was finding a rabbi—someone who liked you, thought highly of you, wanted to work with you, mentor you. Nobody came right out and said it, but that was what the whole internship program was about. This was confusing at first. You didn’t quite know whether you were in a marathon—ten weeks is a long time—or a sprint. What was the long-term goal? To get hired. How? Short-term, you had to impress people. You never knew who was going to be the person who would put up his hand and say, “We need to hire Greg Smith.” You needed someone to go to bat for you.

Many interns labored under the misconception that if they did a good job over the summer, they’d be hired. You got hired because you found someone who wanted to hire you: it was as simple and as cruel as that. You could have been the most exceptional person, you could have impressed everyone at the Open Meetings, you could have done great things, but if by week ten there wasn’t a managing director who was willing to persuade a partner to hire you, you were out of luck. Some interns didn’t get this concept until the end of the summer, by which point it was too late.

Yet, at the same time as the firm was putting us through the wringer, it was wooing us. Because Wall Street was competing with Silicon Valley for talent in 2000, Goldman needed to entertain the candidates. So while we were spending two or three nights a week preparing for the Open Meetings or whatever desk we’d be rotated to next, on the other couple of nights, we were going out to company social events. Attendance was expected. Some of the events were for networking: you’d get together in a big room and meet all the people on the various desks in an informal setting, over a beer. The point was to put yourself forward to people in an area that interested you.

And then there were events that were just for fun, to impress the interns. We went to a couple of Yankees games. They took us to Broadway shows; we saw either
River Dance
or
Lord of the Dance
—I can’t quite remember which. And oh, did we eat that summer. Whenever we went to one of our meetings during the day, even if it was held at three in the afternoon, there would be a full spread of food outside the room—and not just cookies and tea, but sandwiches, giant platters of them, plus beverages and dessert. I put on about fifteen pounds that summer. There was a lot of muttering about overkill. We had just eaten lunch at noon, and now here were all these sandwiches. It seemed like a colossal waste of money.

As did the fruit. In those days, Goldman had fresh fruit, big plates of it, everywhere on the trading floor. There was so much of it that it couldn’t possibly all be eaten—I remember seeing piles of rotting fruit with clouds of tiny flies swarming around them. It was said that Goldman was spending tens of thousands of dollars a month just on fruit. When the technology bubble burst, the fruit was the first thing to go.

But in the summer of 2000, the bubble hadn’t burst yet: Tech was still booming. Dot-coms were all the rage. All a company had to do then was put that magic suffix
.com
after its name, or the prefix
e-
in front of it, and its value would instantly soar, to absurd, stratospheric levels. That summer on the Goldman trading floor, you saw a lot of “deal toys” (Lucite blocks commemorating tech deals) on people’s desks; you saw a lot of celebratory baseball caps bearing tech company names; you saw a lot of high-fiving.

And amid this irrational exuberance, I found an island of solidity: I found my rabbi.

Early in the summer there was a lot of talk, in meetings and among the interns, about the roles we aspired to within the company. I gave the question a lot of thought. I had already decided that sales and trading, the last bastion of true, unadulterated capitalism, interested me more than asset management (a slower business, investing money for large institutions and wealthy individuals) or investment banking (helping companies raise capital or reconfigure themselves). Sales and trading itself contained three roles: salesperson, trader, and quant (aka strat). The last was immediately out, as far as I (and most everybody else in the program) was concerned: I was good at math, but I was no genius; I didn’t have a PhD. The choice then became salesperson or trader. It was a decision you needed to make in the first two or three weeks of the summer, and the answer wasn’t instantly apparent. When you walked onto the trading floor, you couldn’t tell who was who. There were just rows and rows of people. Over the first few weeks, I began to understand who chose one specialty and who chose the other, and why.

The salesperson, of course, dealt with clients. And whether the client was a mutual fund in Boston, a macro hedge fund in New York, or a sovereign wealth fund in the Middle East, these clients managed hundreds of billions of dollars in assets, executed trades with the firm frequently, and paid Goldman commissions ranging from thousands of dollars per year to the double-digit millions. Salespeople called their client contacts every day, gave them advice, listened to their problems, tried to think of investment ideas for them. It was important to build a relationship of trust with the client, because that was what you were going to be measured on: how much business the client did with the firm. A typical salesperson was friendly, outgoing, a little bit schmoozy; able to keep calm in tight situations, to juggle a lot of balls at the same time. A salesperson had to be someone who was happy talking to people the whole day.

Traders were much more introverted. They sat at their desks managing risk. Was the market going up or down? Did they need to sell stock or buy? They were trying to protect the firm’s money, make sure that nothing irresponsible happened, that we didn’t lose $10 million doing a stupid trade. Trading was also a more quantitative role: you had to be quick, decisive, aggressive.

I quickly realized that I would not have been happy sitting at a desk, never talking to clients. I was very attracted to the idea of building relationships with some of the smartest investors in the world. What I also learned that summer was where the tension came between salespeople and traders. Traders were trying to protect the firm’s capital; salespeople were trying to protect their relationships with their clients. These were contradictory things. It wasn’t always obvious that helping the client was going to help the firm; in fact, a lot of the time, this wasn’t the case. A lot of the time, protecting a client meant steering it away from risky trades—giving up what might be a short-term advantage to the firm in favor of the long-term relationship with the client. This was what Goldman’s longtime leader Sidney Weinberg meant by “long-term greedy.”

With regard to becoming a salesperson or a trader, usually the intern class splits about fifty-fifty: in the first few weeks of the summer, roughly half the class starts homing in on the trading desks; the rest gravitate to the sales desks.

Early in the summer, I became friends with an Israeli intern who told me about a small, slightly obscure subgroup of the Emerging Markets Sales group called New Markets Sales. Emerging Markets Sales sold stocks from the developing world (Latin America, Southeast Asia, and, in the group that interested me, Israel, South Africa, Russia, Poland, and Turkey) to U.S. institutional investors (hedge funds, mutual funds, pension funds). New Markets Sales felt like a natural fit for me: I was excited by the idea of emerging markets, and I was from South Africa; I also spoke pretty good Hebrew.

Then, in week five, some good luck came my way: my little pod and I spent three days on the Emerging Markets Sales desk.

What smart interns do—for “smart,” read “determined”—is keep returning to the area they like. So whenever I had a coffee break, I’d come back and see the New Markets Sales team. I tried to get some work from them, to show them I could do things. I ran spreadsheets, did stock reports. I met the senior VP who was running the desk: a cool and correct woman. And I met her second in command, an associate named Rudy Glocker.

Rudy was a big guy, six-five. He’d played tight end and linebacker for Joe Paterno at Penn State. His nickname was the Beast. Some senior guy had given him the name not only because of his size but because Rudy was just so hungry: he made more calls to clients before 6:00
A.M.
than anyone else on the floor. He was in his early thirties, a little old for an associate, but he’d been around the block: he’d taken some time off after college, sold sporting goods in the former Soviet Union, coached football, gone to Harvard Business School.

Rudy was old-school. By this, I mean that he came from rural Pennsylvania, and his values, politically and financially, were conservative. He was serious and straitlaced. He played basketball every Thursday night. He liked routine. With Rudy, the client came first.

Still, Rudy ruffled feathers. He could be acerbic, and he didn’t care whom he was talking to. There’s a story about Rudy and a research analyst, a partner, who was coming through the Boston office, where Rudy later transferred from New York. Rudy was to take the partner to see all his clients to discuss Goldman’s research views. The partner, who had arrived with a big briefcase filled with heavy books, plopped it down and said, “Rudy, you wouldn’t mind carrying this around for the rest of the day, would you?” “No problem,” Rudy said, then added: “And leave your shoes; I’ll shine them, too.” Rudy’s boss, who was standing right there, said, “Rudy, in my office right now.”

One of Rudy’s main jobs was selling IPOs, initial public offerings. IPOs occur when a formerly private company sells shares to the public for the first time, and these shares start trading on an exchange such as the New York Stock Exchange (NYSE). IPOs can contain an innate conflict of interest for a firm like Goldman. When a private company is going public, the bank that’s doing the deal for them puts together a memo listing all the reasons their clients should love this deal. The problem is that the bank is on both sides of the deal: privy to what may not be so great about the company going public, but also trying to market shares in the soon-to-be-public company to its clients, all the while purporting to be objective.

Rudy would do the analysis for himself and say, “Yes, there are these three great things about this company, but there are also these three bad things, and we should be telling the clients about them as well.” Often the client would call and say, “What do you think of this deal?” and Rudy would say, “Let me take you out for coffee this afternoon.” Then, over coffee, he’d say, “Let me be honest with you: this is not a great deal; I don’t think you should invest in this company.” Rudy’s bluntness, which made him very popular with clients, would eventually prove to be his undoing at the firm. And not just Rudy’s undoing: this type of fiduciary minded salesperson would one day become an endangered species at Goldman Sachs.