The Partnership: The Making of Goldman Sachs
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The jury is still out on what the future of Goldman Sachs will look like, but no one can argue that the 139 year old firm has been (and, if Warren Buffett has his way, will be) the dominant investment banker and dealer on Wall Street. What does Buffett see that we on the outside do not? It's all about the people.Charles D. Ellis has written a landmark book that couldn't come at a better time. The Partnership: The Making of Goldman Sachs is the colorful and fascinating story of Goldman's rise to power through many life-threatening changes in markets, competition, and regulation. It tells the personal history of the men and women who built the world's leading financial powerhouse from a firm that was disgraced and nearly destroyed in 1929, limped along as a break-even operation through the Depression and WWII, and, with only one special service and one improbable banker, began the rise that, in half a century, took Goldman Sachs to global leadership.A conversation with Charles Ellis:• Is Goldman Sachs really a lot better than other firms at managing risk? The big difference is in the cumulative power of many “small” details. The difference in the speed, accuracy, and extent of communication inside the firm; the difference in intensity, focus, and disciplined toughness of the men and women hand selected to work there and real difference in recruiting, training, and compensation. All add up to a decisive advantage in management. Leaders and co-leaders manage Goldman's many business units with rigor and drive; risk management is the envy of other banks; and coordination is powerful across business units and markets around the world. As every Olympic athlete knows, such small differences make all the difference between gold, silver or bronze — or no medal at all. In the current, very difficult test, Goldman Sachs has come in 1st — again.• Goldman Sachs is often described as the best managed Wall Street firm. Is that true? Yes, it is true. Goldman Sachs is the best managed “Wall Street” firm — and the best led. Management is why Goldman Sachs is consistently rated the best firm to work for and gets top ratings from clients all over the world. Superior management is why the firm earns more profit, develops more effective people, has made itself the market leader in the U.S., U.K, Germany, France, China, Japan, and in most major lines of banking business. No other firm comes close. One of the things you will learn in The Partnership is just how Goldman succeeded in making themselves different from any other Wall Street firm. They learned early on that in order to survive, they had to not only make money, but create a culture that was universal, that demanded absolutely loyalty and, most importantly, act as one organism. • Why does Goldman Sachs put so much weight on its “culture”? Goldman Sachs culture works. In the complex, fast-changing, global, 24/7 securities business almost all the important decisions are made in highly specific and complex settings under great time pressure. These decisions cannot be made by headquarters and they cannot be deferred. They must be made locally by local market and business experts thousands of times every day. Rules won't work. If rules were written for every type of decision in all those different businesses in all the world's different markets in all the different cultures, the resulting Rule Book would be far too large and complex to read or use. Culture — its way of working — is the universal “stem cell” that enables Goldman Sachs to operate so forcefully in so many different national markets and in so many different businesses.• With all its different business activities all over the world, doesn't Goldman Sachs have problems with conflicts of interest?Yes! The firm certainly has many, many conflicts of interest. While it could take a defensive approach and try to avoid or minimize those risks of conflicts, the firm believes the more realistic and effective approach is to recognize those risks, be candid about them with clients and counterparties, and actively manage the conflicts. The firm strives to deal with each of them in such thoughtful and effective ways that clients and customers will know Goldman Sachs can be trusted to manage conflicts better than any other firm.This is, of course, an assumption of enormous responsibility — particularly on the scale on which Goldman Sachs operates — so it raises the obvious next question: Who will watch the watcher? Publishers Weekly In this history of investment bank Goldman Sachs, Ellis (Winning the Loser's Game) covers the same ground as Lisa Endlich's Goldman Sachs: The Culture of Success-with notable stylistic differences. From Marcus Goldman's purchase of his first commercial paper in 1869 to the firm's current success, Ellis's account is lively and engaging where Endlich's is accurate but dry. Ellis sheds light on events through dialogue and detailed descriptions of people's thoughts and feelings, embellishments that the author terms "recreations" in his epilogue. The effect of infusing such narrative techniques into the history of Goldman Sachs is entertaining, but it pushes the envelope of nonfiction, especially since the author appears to have interviewed only former partners of the firm. More damagingly, Ellis fails to report much about actual business, and attempts to do so-such as a chapter on Rockefeller Center financing-require lengthy digressions and are incomprehensible due to the complexities of the transactions. Without links to business, boardroom conflicts take on the air of petty squabbles. More a composite memoir of senior Goldman partners than a traditional history, this book will satisfy readers curious about the philosophies and personalities of the firm. (Oct.)Copyright © Reed Business Information, a division of Reed Elsevier Inc. All rights reserved.
1 Beginnings 12 Disaster: Goldman Sachs Trading Corporation 173 The Long Road Back 304 Ford: The Largest Ipo 535 Transition Years 636 Gus Levy 737 The Wreck of the Penn Central 968 Getting Great at Selling 1169 Block Trading: The Risky Business That Roared 13210 Revolution in Investment Banking 15311 Principles 18312 The Two Johns 19213 Bonds: The Early Years 21514 Figuring Out Private Client Services 23215 J. Aron: Ugly Duckling 25016 Tender Defense, a Magic Carpet 26917 The Uses and Abuses of Research 28318 John Weinberg 29719 Innocents Abroad 32020 Breaking and Entering 34521 How Bp Almost Became a Dry Hole 35622 Changing the Guard 37323 Transformation 39924 False Starts in Investment Management 42525 Robert Maxwell, the Client from Hell 43726 Making Arbitrage a Business 46327 J'accuse 48128 Building a Global Business 51229 Steve Quit! 53330 Collecting the Best 55231 Jon Corzine 56632 Long-Term Capital Management 58233 Coup 60634 Getting Investment Management Right 61535 Paulson's Disciplines 63636 Lloyd Blankfein, Risk Manager 665Notes 689Index 711
