Wednesday, October 20, 2010

Progress... the Goldman way

Truly, it's one of the most interesting business dilemmas of the new millennium. Goldman Sachs is raking in money, hand over fist, maximizing opportunities to profit despite an enduring and severe recession that is crippling the rest of the country.

If you look at their website, they tell you right up front what they believe in: progress. Because it's everyone's business. And Goldman Sachs is bringing "people, capital and ideas together to help our clients and the communities we serve."

They've also launched a new PR campaign that helps educate the masses on the benefits Goldman offers to the nation.

And yet, they get no respect.

Why is that, one wonders?

Because their PR campaign about their impact on progress is a lot of hogwash. It's PR mumbo jumbo. If we've learned ANYTHING about Goldman Sachs during this recession, it's that they'll do ANYTHING for a buck.

And the only client they serve faithfully, with dedication and respect, is their internal customer. Themselves.

How do I know? Because for two years now, they've told us that if they don't get their bonuses, the bright minds of Goldman Sachs will leave. In a huff. Because their bonus didn't live up to the brand promise of working for Goldman.

NEVER MIND that the financial sector (of which Goldman is the self-professed leader) exists today thanks only to a generous welfare policy coming out of Washington.

NEVER MIND that the economy is in a shambles, thanks in part to questionable investment instruments coming out of companies like Goldman Sachs, investment "opportunities" that packaged up bad debt and sold it to pension funds, etc.

NEVER MIND that Goldman Sachs can sell an investment instrument to one party, while simultaneously selling insurance to another guaranteeing a tidy profit should the Goldman Sachs investment instrument explode like a grenade, killing all the investors.

Try translating that business model to any other industry - meat packing, pharma, toy manufacturers, etc. As an example, let's just say an egg distributor knew its egg farms were filled with salmonella, that the eggs they sold were tainted by this bug, and it was, in their expert mind, a possibility that their eggs would cause serious illness to those who consumed them. [After all, they know how to count their chickens and eggs!] To maximize profit, to hedge against the catastrophe of an impending salmonella outbreak, they not only sold the eggs, but packaged up and sold a generous insurance policy to an outside firm (for a nice sum) that allowed the outside firm to profit enormously from the pain and agony caused by a salmonella outbreak.

Goldman Sachs can do what an egg company cannot. Yes, it paid a fine of $550 million for "mistakes" it has made in the Abacus deal, for "misleading investors," providing "incomplete information" and failing to clue the investors in on the fact that John Paulson was on the other side of the deal. But the deal itself would have been okay, if not for those paperwork issues.

Not really. Not if you want people to respect you. You cannot sell something to one party and sell insurance to another that ensures profit if your instrument fails catastrophically.

To earn respect, you actually need to stand by your instruments. You need to help your investors, not make them realize that if you choose to invest with Goldman, it's "buyer beware."

PR mumbo jumbo is meaningless without action to back it up, and Goldman Sachs has a long way to go to burnish the image of a once proud firm. In the meantime, they can happily count on their bonuses. Because let's face it. The bankers at Goldman are very, very, very good at capitalizing on the distress of others.

Strange that they suddenly need respect to go with their bonuses. But they might just be realizing that a "buyer beware" business model can turn customers into former customers.



1 comment:

ld said...

Check out http://en.wikipedia.org/wiki/Philosophical_progress

Then my favorite

http://legacydaily.com/2009/03/ecclesiastes/

Then this one

http://www.gutenberg.org/files/205/205-h/205-h.htm#2H_4_0002

Sorry for pasting the text here but couldn't help it.

"For my part, I could easily do without the post-office. I think that there are very few important communications made through it. To speak critically, I never received more than one or two letters in my life—I wrote this some years ago—that were worth the postage. The penny-post is, commonly, an institution through which you seriously offer a man that penny for his thoughts which is so often safely offered in jest. And I am sure that I never read any memorable news in a newspaper. If we read of one man robbed, or murdered, or killed by accident, or one house burned, or one vessel wrecked, or one steamboat blown up, or one cow run over on the Western Railroad, or one mad dog killed, or one lot of grasshoppers in the winter—we never need read of another. One is enough. If you are acquainted with the principle, what do you care for a myriad instances and applications? To a philosopher all news, as it is called, is gossip, and they who edit and read it are old women over their tea. Yet not a few are greedy after this gossip. There was such a rush, as I hear, the other day at one of the offices to learn the foreign news by the last arrival, that several large squares of plate glass belonging to the establishment were broken by the pressure—news which I seriously think a ready wit might write a twelve-month, or twelve years, beforehand with sufficient accuracy. As for Spain, for instance, if you know how to throw in Don Carlos and the Infanta, and Don Pedro and Seville and Granada, from time to time in the right proportions—they may have changed the names a little since I saw the papers—and serve up a bull-fight when other entertainments fail, it will be true to the letter, and give us as good an idea of the exact state or ruin of things in Spain as the most succinct and lucid reports under this head in the newspapers: and as for England, almost the last significant scrap of news from that quarter was the revolution of 1649; and if you have learned the history of her crops for an average year, you never need attend to that thing again, unless your speculations are of a merely pecuniary character. If one may judge who rarely looks into the newspapers, nothing new does ever happen in foreign parts, a French revolution not excepted.

What news! how much more important to know what that is which was never old! "Kieou-he-yu (great dignitary of the state of Wei) sent a man to Khoung-tseu to know his news. Khoung-tseu caused the messenger to be seated near him, and questioned him in these terms: What is your master doing? The messenger answered with respect: My master desires to diminish the number of his faults, but he cannot come to the end of them. The messenger being gone, the philosopher remarked: What a worthy messenger! What a worthy messenger!" The preacher, instead of vexing the ears of drowsy farmers on their day of rest at the end of the week—for Sunday is the fit conclusion of an ill-spent week, and not the fresh and brave beginning of a new one—with this one other draggle-tail of a sermon, should shout with thundering voice, "Pause! Avast! Why so seeming fast, but deadly slow?""