Morning Coffee: The new way for Goldman Sachs partners to gauge their importance. The most significant nepo baby in finance
If it was possible to summarise the problems of Goldman Sachs’ CEO David Solomon in a single sentence, you couldn’t do much better than this elegantly worded little gem from half way through the latest longread on partners’ disquiet:
“Solomon has told partners to refrain from leaking to the media, people familiar with the matter said”.
When the instruction not to talk to the press gets into the press, you can be pretty sure that there are some disgruntled people about. The WSJ chronicles the airing of grievances at pretty heroic length, and they will be familiar to people who follow the news about Goldman. Solomon is the first CEO who wasn’t part of the pre-IPO partnership (although somebody would have had to have been, eventually). The consumer finance business has turned into a disappointment (although it wasn’t actually Solomon who created it, and very few of the people currently bemoaning the decision to invest in Marcus were saying so in 2018, since when the world has changed quite a lot). The traders felt that he wasn’t treating them fairly on the 2022 bonus pool (not exactly the first time this has ever happened in banking). And so on.
A lot of the criticism seems like it can be summarized as “once you’ve decided you don’t like somebody, you can always find a hundred reasons”. In a lot of business contexts, it’s more accurate to say that “feelings don’t care about your facts” than the other way round, and the undeniable facts are that Solomon is an outsider, with non-traditional hobbies, who attracts personal limelight and who has taken on a few powerful internal fiefdoms like the “merchant banking” and “special situations” teams. Consequently, he’s made enemies, and he’s had the bad fortune to do so in a bear market rather than a bull market – people can usually forget about their personal gripes when there’s load of money to go around.
So, DJ D-Sol has gone on a charm offensive. You know you're special at Goldman know if you get an invitation to D-Sol's house. Goldman partners are being invited along to Solomon’s Manhattan apartment for dinner and drinks, with their spouses and plus-ones. He’s also co-hosted “small retreats” with president/COO John Waldron, so partners can spend some quality time and feel like they’re being listened to.
The trouble with this approach is always that there’s a surprisingly fine line between “charm” and “offensive”. Every time you invite a partner round to dinner, you’re simultaneously not inviting over four hundred other partners. People will be able to judge their importance to the CEO by looking at who gets the intimate dinners, who gets the small groups at retreats – they might even be casting an eye over the wine served from Solomon’s famously excellent cellar. And when people’s perception of their own importance is at variance with others, they often get even more irritated.
It's possible to overstate matters. As a company spokesperson said, “smart people can have disagreements …it’s normal”. And while partners might grumble about recent acquisitions and bragging rights compared to Morgan Stanley, they also have to recognize that since Solomon took over, Goldman stock is up more than 50%, while the banking sector in general is down 23% and a couple of former market darlings have actually gone bust. Perhaps they should be buying dinner for him.
Elsewhere, if you heard someone had reached their mid-twenties with a PhD in History, a prolific Instagram account and a reputation for never saying anything in meetings and playing “drunken games of hide-and-seek” with models in the Hamptons, you would probably guess you were hearing about a kid from a rich family, but you wouldn’t necessarily predict that in ten years’ time they would be running one of the biggest investment funds in the world. Even if you got the tip that their last name was Soros.
Alex Soros, however, decided at that age to make some changes. Realizing that “If I don’t succeed, then I’m just another deadbeat lazy trust-fund kid”, he started to cultivate world leaders and liberal politicians as well as the beautiful people, getting himself enough of an education and finance and philanthropy to become the natural successor to the Soros foundation. Given that having such a family foundation is such an integral part of this story, it’s not easy to extract career lessons, but it’s interesting to see that nepos have their struggles too.
Goldman Sachs bought GreenSky for $2bn. Its sale could result in a $500m writedown. (Semafor)
Executive statements are cheap, but real estate moves are hard to fake. So it’s very interesting that Alantra, the Spanish boutique that’s been hiring very rapidly over the last two years, has now decided to move its headquarters to London, and is doing so specifically in order to access a bigger pool of potential further new hires. It’s being seen as a statement of confidence in post-Brexit Britain, but it’s actually more of a statement about the future of Alantra. (Financial News)
On a similar theme of “strategic statements are opinion, office moves are fact”, it’s notable that the combined US trading businesses of UBS/CS are going to be run out of the dealing floor of UBS’s premises on Avenue of the Americas, but a significant number of advisory bankers might be moving to Midtown to the CS building. (Bloomberg)
And meanwhile, Santander has closed down its small equity research business in London, moving coverage back to Madrid. (Bloomberg)
“Always yapping … he seems to like to rant and rave”. It takes a certain kind of personality to run a small activist investment fund (Institutional Investor)
It has been suggested, shockingly, that if the audit profession wants to attract and retain talented young employees rather than losing them to more prestigious roles, they should think about paying them more. Or maybe give them a really good wellness podcast subscription. (Financial News)
“You can never say for sure, but it's unlikely we'll be going back to that well. I think we've got it where we wanted. And we took out a lot of managing directors, creating capacity for others”. Interesting comments from James Gorman on Morgan Stanley’s last round of layoffs, which he noted was “not pleasant … I hate doing this”. (Business Insider)
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