Would You Jump Off a Cliff?

Why I Left Goldman SachsYou may remember back many months ago, Greg Smith wrote a high profile OpEd in the New York Times as he stepped down as a VP at Goldman Sachs. This last weekend, he was on 60 Minutes in a plug for this new book, Why I Left Goldman Sachs. Matt Yglesias, for one, doesn’t really care about all that. “But the ferocious anti-Smith push from Goldman Sachs PR and Smith’s critics in the media have me interested again!” he writes.

I’m glad to hear this, because I think what Smith has to say is important. And I especially thought that while I watched the 60 Minutes interview. The way it was cut together tended to minimize his arguments. The segment contradicted him by using Frank Partnoy, a former derivatives trader turned (God help us!) finance professor. His refrain was, “Who cares? Everybody does it!”

What everyone does is screw over their clients. Companies like Goldman Sachs are supposed to help their clients make money. Instead, they just use them to enrich themselves. And the more green the client, the better Goldman Sachs likes it.

This is basic stuff. It is like when you were a kid. Everyone’s heard it from their moms, “If everyone jumped off a cliff, would you?” Well, would you?! This is something we are supposed to learn at 5 or 6. Just because everyone else is doing it doesn’t make it right. But maybe we’re all supposed to know that people on Wall Street don’t have the ethics of a kindergartner.

Matt Yglesias explains this in the most forceful terms:

Norms matter. People work for money. But people also work for status, and people work because they take pride in a job well done. Ideas about what kinds of financial success merit high status and what kinds of jobs constitute a job well done are important. A doctor who bragged to you at a party about scoring a great deal on season tickets is doing something very different from a doctor who brags to you at a party about scoring season tickets after swindling a woman out of a bunch of money for unnecessary medical treatments. A doctor isn’t supposed to be hustling patients. Everybody knows that. The vast majority of journalists are working for for-profit enterprises that are publishing stuff in hopes of making money, but it’s much better to live in a world where the editorial personnel don’t understand themselves as merely engaged in a transactional quest for money rather than a genuine effort to entertain and inform the public. The idea that there’s a difference between making money by being clever and inventing something useful to sell to people and making money by being clever and inventing a way to persuade people to buy something useless is fundamental.

Amen brother!

Update (23 October 4:47 pm)

Hamilton Nolan has an excellent article at Gawker, In Defense of Being Outraged by Things that Everyone Already Knows:

The backlash, of course, is already well under way. The NYT‘s Andrew Ross Sorkin said he thought Smith “might have conned” the media into paying attention to him, because his book “doesn’t say anything particularly revelatory.” Nathan Vardi at Forbes dismisses Smith’s complaints, saying that clients distrusting their own banks is “precisely what should be happening in financial markets.” The NY Daily News complains that Smith’s book “failed to make his readers care” about the issues he raises. As Bloomberg View put it in its original snide dismissal of Smith’s op-ed, “If you want to dedicate your life to serving humanity, do not go to work for Goldman Sachs.”

I would simply like to assert that, no matter whether or not you believe Greg Smith is a hero or an opportunist, he did what we would all hope that our own banker would do: he spoke out publicly about something that was wrong. The fact that his charges are old news to the Wall Street people, the bankers, the financially savvy, and the media figures that cover them is not an indictment of Greg Smith. It is an indictment of everyone who accepted rapacious amorality as the natural order of things. It is not important whether or not Greg Smith is a hero. What is important is the principle that people in positions of power should not grow so inured to corruption or unfairness or the rotten nature of their particular institution that they accept that state of affairs without question. To understand how something works does not mean that we must lackadaisically assume that it should work that way. And we should never become so cynical that we create an environment in which whistleblowers receive more criticism than the institutions they blow the whistle on.

Everybody knows Wall Street rips off unsophisticated clients as a matter of course. One guy complained about it. That’s the problem.

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About Frank Moraes

Frank Moraes is a freelance writer and editor online and in print. He is educated as a scientist with a PhD in Atmospheric Physics. He has worked in climate science, remote sensing, throughout the computer industry, and as a college physics instructor. Find out more at About Frank Moraes.

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