Just as Wall Street’s occupiers have largely faded from the headlines, one of Wall Street’s own has published in The New York Times what appears to be a riff on his resignation letter, using it to denounce the business practices of his now-former firm, Goldman Sachs. According to the ex-employee, Greg Smith, Goldman’s current leadership has allowed the firm’s once client-centric culture to deteriorate to the point where the profitability of a product dominates all considerations of what might be good for the client. I’m scratching my head a bit.
Some 20 years ago, when I first assumed lead responsibility for a set of mutual funds, a more experienced colleague gave me some advice. “You need the Street,” she advised me. “They have the analytics, the research and the market information that makes it possible to do your job, but never forget that when they call with all that good information, it’s because they want you to buy a block of bonds.” In his letter, Mr. Smith castigates his colleagues for their condescending attitude toward their clients, and for calling them “Muppets,” among less polite terms, I imagine. But after he’s told us about how important he was inside his firm and beyond, is he any less patronizing? Does he really think that the asset managers he bragged about “advising”—including “two of the largest hedge funds on the planet, five of the largest asset managers in the United States and three of the most prominent sovereign wealth funds in the Middle East and Asia”—are more naïve than the seasoned muni bond manager who shared her wisdom with me?
Every business has to balance the responsibility of returning a profit for its owners with the obligation of treating its customers fairly and honestly. Most of us strike that balance by recognizing that a competitive world will see to it that those two objectives are more frequently complementary than they are conflicting. Of course, the seller of any item—be it potatoes, cars or equity derivatives—has a knowledge advantage over the buyer. Some sellers will attempt to exploit that advantage to sell shoddy merchandise at a profit. But are the rest of us really the “Muppets” of Mr. Smith’s article? Don’t we have the responsibility to know what we are buying and how to say “no” when we don’t understand? I wish nothing but failure to individuals and firms that push the uninformed to buy unsuitable products, but I would be remiss if I didn’t tell the supposed victims that they failed in their responsibility as well.
 Greg Smith, “Why I Am Leaving Goldman Sachs,” The New York Times, March 14, 2012.