Why I Left Goldman Sachs: A Wall Street Story (8 page)

Rudy was a culture carrier. And he was sufficiently impressed with the gravity of the occasion to want to commemorate it in classic Wall Street fashion: by cutting the trader’s tie in two and hanging the snipped-off piece from the ceiling.

The only problem was I wasn’t wearing a tie that day.

A bit of background: Salespeople and traders at Goldman Sachs had worn suits and ties up until the late 1990s, but during the tech bubble, Goldman started to compete with Silicon Valley for the best and brightest recruits, and some of the new economy’s customs had rubbed off on old Wall Street. (Goldman was ahead of the curve on this: some banks, such as Lehman Brothers, kept their suit-and-tie policy much longer.)

By the time my summer internship started, the firm had changed its dress code from business formal to business casual, and a number of eager interns had gone a bit overboard, with the women wearing short skirts and the guys black disco shirts on the trading floor. It got to the point where Human Resources was forced to send an e-mail around to the entire intern class, reading, “This is Goldman Sachs; this is not Club Goldman.”

The following summer, when I joined the firm full-time, a second-year analyst took a few of us new analysts aside for an entrance briefing. “Let me give you guys a little useful advice,” he said. “Two words: Brooks Brothers. That’s the Wall Street uniform.” So, with minor variations, we all paid attention. You went out and bought five pairs of Brooks Brothers khaki dress pants—maybe, if you were daring, you got a pair or two from Banana Republic; maybe a pair or two would be brown instead of khaki—and ten dress shirts in different shades of blue. To this day, some combination thereof is the standard attire among 90 percent of the males on Wall Street trading floors.

Almost all the partners and managing directors, however, wore expensive but understated suits that came from stores such as Brioni, or that had been custom-tailored on Savile Row or in Hong Kong. Hermès or Ferragamo were the standard when it came to ties, scarves, and accessories for men and women. The unwritten rule about how Goldman Sachs partners and MDs were expected to dress: make sure it was understated, in neutral colors, and not too flashy, but also make sure people could tell it was expensive.

A single one of these suits would have cost me more than three months’ rent, so I stuck to the two baggy-ish Brooks Brothers suits I had invested in when I joined the firm full time. I would wear these whenever I met with clients—usually about once a week.

But as fate would have it, on the historic day I executed my first trade, the day my severed necktie was supposed to be ceremonially hung from the ceiling, I was dressed in business casual.

Like a good manager, Rudy improvised. From his seat next to mine at the head of a long row of salespeople, he stood up and announced to the few who were watching, “In honor of the occasion, I’m now going to cut your button off.” He motioned to me. “Come over,” he said. He took my shirt (incidentally, one of the dark blue ones I’d bought for my summer internship) by the collar, cut off the top button, and, to the applause of the onlookers, placed it on top of my computer screen. I shook Rudy’s hand firmly.

Rudy then did something I hadn’t expected. He took the liberty of sending an e-mail to about twenty-five people on the International Equities trading floor, all the most senior people included. It read, “Today is a big day, and a significant milestone in the career of Springbok. He did his first trade, in South African Breweries. This trade made the firm $600. Please join me in congratulating him and wishing him a long and successful career on Wall Street. In recognition of this special day, instead of cutting his tie, I have cut a button off his shirt.” Soon after the e-mail went out, a stream of people, a number of them managing directors, started coming up to my desk, in complete seriousness, to shake my hand. I was being welcomed to the club. It was a proud and happy moment.

Still, there was nothing soft about Rudy Glocker. During my first weeks on the desk, he gave me a copy of Chris Matthews’s
Hardball
, with its practical advice on how to succeed in a cutthroat political environment. Rudy was hard-core and liked things punctual, perfect. He hated vulgarity, and kept a curse jar on his desk: you had to put a quarter in every time you swore. Most of all, he detested lateness. Early on, I got into a few situations where I took our research analysts to see clients and, because the clients had extra questions, the meetings ran late, throwing the whole schedule off. Rudy was irate—and was able to make his feelings very plain without a single profanity. I learned to make sure meetings ran on schedule.

This is what made his congratulatory e-mail unexpected and all the more meaningful. He could have just cut my button and put it on the screen and said, “Well done,” instead of publicizing my success to the whole trading floor. The traditionalist in him took pleasure in the ceremony, but some part of him enjoyed making an untried kid feel good.

One morning in early 2002 Rudy said to me, “Today is going to be a scary day. Some people are going to get their marching orders.”

The year 2002 was a tough one at Goldman. The markets were in a state of severe contraction post-9/11, and people were being let go. There was also a worry that Goldman Sachs was just not big enough to compete with banks such as JPMorgan Chase, Citigroup, and Bank of America, which had massive balance sheets and could extend huge loans to corporations in order to win business. Morale in the office was low, and tensions ran high. You could see that your bosses were fearing for their jobs. Many fears were well founded.

Marching orders
, I thought.
What a funny expression
. I’d never heard it before. But I knew right away what it meant.

“But don’t worry,” Rudy said. “Everything will be okay.” I took this to mean that our three-person team would remain safe. Then I saw people starting to get called in to the partner’s office.

All the offices and conference rooms on the forty-ninth floor had glass walls—you could see exactly what was going on inside, in good times and in bad. In fact, it’s true across the board at Goldman Sachs: it’s company policy for all offices on Goldman’s trading floors around the world to have transparent glass walls.

So I could see right into the office where the partner in charge of the forty-ninth floor sat facing the person about to get the axe. The partner has to do the dirty work himself—has to look the person in the eye and say, “I’m sorry, we’re letting you go.” Thankfully, I’ve never heard those words said to me, but they were something that everyone feared those first couple of years after September 11.

Even the partners themselves weren’t immune. It was at this point in 2002 that the firm started flushing out a number of the old guard—the pre-IPO partners, some of whom had been at the firm for decades—to make way for the new breed. The newer partners and MDs seemed to carry themselves with a swagger: less understated, more flashy. Less plastic Casio watch, more gold Rolex. It was hard to feel sorry for people worth tens of millions of dollars who were getting the axe, but the traditionalist in me thought that it was sad to be losing people with such long institutional memory. Another thing I noticed: in early 2002 Goldman hired a very senior guy from another firm to run sales. In the pre-IPO, pre-1999 world of Goldman Sachs, a high-level lateral hire would have been considered sacrilege. You were supposed to build your talent from within.

One firing during the bear market stands out in my memory. It was of a guy just out of business school and considered an up-and-comer—he had just been given a whole batch of new clients to start covering. Everyone was surprised he was let go. But on his desk, he was the low man on the totem pole, and therefore expendable. (Wall Street follows a last-in, first-out policy, and Goldman Sachs was no exception.) I clearly remember that when this guy left, he stormed out, his face bright red. Then he stopped by one managing director’s desk and made a kind of odd backhanded gesture at him—a flick of the fingers from the forehead. It was a hand signal I had never seen before, but I knew one thing: it was not a friendly goodbye.

We did everything we could to hold on to clients in 2002. Once, I was called on to make a special contribution of my own to the cause.

As I settled into my role as a salesperson on our desk, I began covering some of my own clients—one of whom, to my good fortune, turned out to be a former Stanford classmate and buddy of mine, an Indian guy named Prakash. Small world. Prakash worked in the Boston headquarters of a mutual fund behemoth with hundreds of billions of dollars under management, as a sector specialist in the technology space: his job, as a research analyst, was to tell the rest of his firm what he thought of the stocks in that sector so the company could form an objective opinion—i.e., one not clouded by the advice of Wall Street (in the form of Goldman Sachs, Morgan Stanley, etc.)—on how it should invest its assets.

(Clients such as Prakash’s employer liked doing their own stock research because of an inherent conflict of interest within investment banks, one that would ultimately result in a $1.4 billion settlement between the ten biggest banks and the government in 2003. Eliot Spitzer, then the New York Attorney General, led the charge in bringing light to this conflict and sought to install strict separations between investment research and investment banking. Research analysts—who were supposed to be objective in their recommendations to clients—started putting huge valuations on Internet companies that had no apparent earnings, in order to win lucrative investment banking business from the same Internet companies they were writing about in their reports. The result? A massive Internet bubble that ultimately burst.)

Prakash reported to a number of portfolio managers (PMs), who would use his research and opinions to determine whether to buy for their specific funds any of the tech stocks he covered.

At the time, a number of popular and forward-thinking technology companies were Israel-based, and Israel was one of the territories our sales team covered. My job was to advise Prakash on Israeli tech stocks. In the course of business, I’d call him almost every day: it felt quite surreal to be on the phone with a buddy I used to get hammered and go to Stanford Cardinal hoops games with, discussing hot tech stocks such as Check Point Software and Comverse Technology.

Prakash was a hard sell. The technology bubble was still bubbling in Israel, but he took an extremely skeptical view of stocks for which many investors were willing to pay huge sums. It made him (and still makes him) extremely good at what he did.

Eliot Spitzer wasn’t alone in his suspicion of investment banks. Prakash used to give me a hard time about the role Goldman had played in the Internet bubble, which had burst while we were seniors in college and before our respective careers in finance began in 2001. I had gotten used to Prakash’s inquiring, sometimes cynical, worldview: not just on markets, but on questions like whether Tyrone Willingham was doing a good enough job as Stanford football coach. Prakash could almost have been called a “perma-bear,” Wall Street’s term for an investor who always sees the glass half empty. Still, some of Prakash’s points had given me pause.

In underwriting companies like Webvan and eToys, had the firm been giving them its golden stamp of approval, telling the investing public that it was safe to go into the water? Did the firm’s research analysts really believe that these companies were worth billions of dollars, even though they were losing money at the time of their IPOs? Was Goldman doing something highly irresponsible by inflating a bubble: luring investors into subpar companies so that the firm could collect 7 percent in investment banking fees and a big payday when taking the companies public? Prakash was a research analyst himself, and liked cold, hard objectivity. He didn’t think Goldman was being objective, or fair to the investing public.

I used to see Rudy ask hard questions of our bankers before pitching deals to clients, but I can’t say many other people were doing this.
Even if Prakash has a point
, I thought,
weren’t investors also to blame for buying into the hype?
And besides, Merrill Lynch, Salomon Smith Barney, and Credit Suisse were far more egregious about making conflicted recommendations.
This is Goldman Sachs
, I thought.
We may have made some missteps, but we hold ourselves to a higher standard than the other guys.

Prakash’s shop was one of the eight-hundred-pound gorillas of the asset management world—a massive client for all of Wall Street, arguably one of the biggest and most important due to its sheer size and market-moving influence and its ability to pay millions of dollars annually in commissions. So the fact that I had a contact there who was also a buddy—one who was often able to give me a quick scoop on whether his company was bullish or bearish on certain stocks—was a lucky and valuable thing for me. Rudy certainly valued the connection. Once, he and I flew to Boston to play basketball with Prakash and his colleagues in a Goldman Sachs–versus-client matchup—although, Rudy, at six foot five, and Prakash, at about six-two, made me feel as if I were playing a different sport. Every time Prakash came to New York, Rudy encouraged me to take him out for a fancy dinner, on Goldman Sachs’s tab, of course. Usually Prakash humored me and let me choose the restaurant; often we went to SushiSamba in the West Village.

One day Rudy happened to let drop that Ted Simpson, one of Goldman’s Boston salesmen, had been running an annual Ping-Pong tournament for years for all its clients there. “Oh,” I said. “I used to play very seriously growing up.”

“How seriously?” Rudy asked, seriously.

“I played on the South African team at the Maccabiah Games,” I said. “We won a bronze medal.”

Rudy’s eyes lit up.

I realize that having been a table tennis phenom may not command the same respect as, say, beating Tiger Woods on the PGA Junior Series or outgunning Roger Federer at Junior Wimbledon, but it seemed to impress Rudy. I started playing at age ten in Johannesburg, with my father, on a fold-up table we had in the garage. We began by just hitting the ball around now and then, but it soon got to a point where we were playing every day after he got home from work. My dad considered himself quite a good player. Within three months, though, I started beating him consistently.

I loved the game and improved quickly. I had also been a serious tennis player for a while, and this helped. I liked hitting the ball hard, and I had an even temperament. There was a table tennis team at the King David School, and I joined it. I ended up winning the school tournament in fifth grade, beating a seventh-grader in the final in a heart-stopping best-of-three-setter, where I came back to win from five match points down with fifty students and teachers watching and cheering. Then my teacher sent me to a club to play league table tennis, and I started getting lessons. I was selected to represent the state team in the national championships when I was thirteen, and I went to the Maccabiah Games in 1993, when I was fourteen.

The Maccabiah Games (sort of a Jewish Olympics) are one of the five largest sports gatherings in the world, bringing five thousand Jewish athletes from more than fifty countries to Israel every four years. Nineteen ninety-three was the first year that South Africa, which had previously been boycotted by international sports federations because of apartheid, was allowed to attend. We took a big contingent to Tel Aviv that year: a couple hundred athletes. It was the experience of a lifetime for me, just past bar mitzvah age and never overseas before.

Playing in the junior-age class, our three-boy team—I was number one in singles—outlasted teams from Argentina, Brazil, Canada, Denmark, Germany, Great Britain, Mexico, and the United States. Israel crushed everybody, and took the gold medal; Australia won silver. My best friend, Lex, had also attended the Maccabiah Games, as goal keeper on the soccer team, and when we got back to King David, we both got special blazers to wear: blue with gold trim.

After hearing of my past sports success, Rudy immediately fired off an e-mail to Ted Simpson, saying, “Springbok will be representing the New York desk at the Ping-Pong tournament.”

Simpson wrote back: “Who’s Springbok?”

In response, Rudy e-mailed him a photograph of a springbok, the actual animal. You had to be there, but I thought it was hilarious.

So I flew to Boston on Goldman’s tab—the justification being that, while there, I could meet with Prakash and talk Israeli tech stocks—and met Ted Simpson.

Ted was a VP in his mid-thirties, a salesman in the mold of Rudy, whom he physically resembled, right down to the bald dome, though he wasn’t as tall. Like Rudy, Ted was hardworking and thoughtful; he did what was right for his clients. He had nurtured deep client relationships in the Boston investing community, where the biggest players were (and are) Fidelity, Putnam Investments, Wellington Management, State Street, and The Boston Company. These mutual fund giants are some of the caretakers of Main Street’s retirement savings. The culture of Boston was much more geared toward long-term-oriented mutual funds (which managed retail money), as opposed to the high-flying hedge fund world. Simpson’s laid-back personality and dry sense of humor were a good fit for the environment in Boston and the type of clients he covered.

The backstory of the annual Goldman Sachs Ping-Pong Tournament, Ted told me, was that the same guy, an Indian portfolio manager from Putnam, had won it five years in a row, and that winning the tournament was the highlight of the guy’s year. But from the moment I walked into Jillian’s—a pleasure palace replete with free-flowing alcohol, spicy chicken wings, bowling alleys, plasma TVs, and dozens of Foosball, pool, and table tennis tables—and saw my alleged competition practicing, I knew he didn’t have a chance against me.

I’m not trying to brag. But competitive table tennis, like every sport, has its levels. Any number of internationally ranked players could have (and had) made mincemeat of me, yet simply put, the Putnam portfolio manager (let’s call him PPM) and I were not in the same league. I was confident he wouldn’t be able to return my serve, and if it came to a rally, he wouldn’t be prepared for the kind of severe spins I could put on the ball. I could see that he was a very good basement player, nothing more. I could have beaten the guy in my sleep.

The tournament draw was posted. Thirty-two people, and PPM was seeded number one. Since the organizers knew I was good, I was the number two seed. Play began.

I was rusty—I’d been working such long hours since joining Goldman that I’d barely picked up a paddle—but I soon remembered my form. And nobody gave me a serious challenge. PPM and I plowed through our halves of the draw, heading toward an inevitable confrontation. I watched a couple of his matches. PPM’s opponents were easy pickings: recreational players dressed in jeans and polo shirts. And PPM, looking very professional in his special sneakers and running shorts, T-shirt, and headband, was mopping them up. Of course he’d brought his own paddle—a serious player would never show up without his own stick. And of course I’d brought along my trusty Donic Appelgren blade with Vario rubbers—red on one side, black on the other.