What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences

by Steven G. Mandis

Overview

This is the story of the slow evolution of Goldman Sachs—addressing why and how the firm changed from an ethical standard to a legal one as it grew to be a leading global corporation.

In What Happened to Goldman Sachs, Steven G. Mandis uncovers the forces behind what he calls Goldman’s “organizational drift.” Drawing from his firsthand experience; sociological research; analysis of SEC, congressional, and other filings; and a wide array of interviews with former clients, detractors, and current and former partners, Mandis uncovers the pressures that forced Goldman to slowly drift away from the very principles on which its reputation was built.

Mandis evaluates what made Goldman Sachs so successful in the first place, how it responded to pressures to grow, why it moved away from the values and partnership culture that sustained it for so many years, what forces accelerated this drift, and why insiders can’t—or won’t—recognize this crucial change.

Combining insightful analysis with engaging storytelling, Mandis has written an insider’s history that offers invaluable perspectives to business leaders interested in understanding and managing organizational drift in their own firms.

Product Details

ISBN-13:	9781422194195
Publisher:	Harvard Business Review Press
Publication date:	10/01/2013
Pages:	400
Product dimensions:	6.40(w) x 9.40(h) x 1.30(d)

About the Author

Steven G. Mandis worked at Goldman Sachs from 1992 to 2004 in its investment banking, private equity, and proprietary trading areas. He assisted Hank Paulson and other senior executives on special projects and eventually became a portfolio manager in one of the largest and most successful proprietary trading areas at Goldman Sachs. Post-Goldman, he cofounded a multibillion-dollar global alternative asset management firm that was a trading and investment banking client of Goldman Sachs. During the financial crisis, Mandis was a senior adviser to McKinsey & Company before accepting a senior executive position at Citigroup. Currently, he is an adjunct professor at Columbia Business School and a PhD candidate in the sociology department at Columbia University. He holds an AB from the University of Chicago and an MA and MPhil from Columbia University.

Table of Contents

Prologue: A Funeral 1

1 What Happened 7

Part 1 How Goldman Succeeded

2 Shared Principles and Values 45

3 The Structure of the Partnership 69

Part 2 Drift

4 Under Pressure, Goldman Grows Quickly and Goes Public 93

5 Signs of Organizational Drift 117

Part 3 Acceleration of Drift

6 The Consequences of Going Public 155

7 From Principles to a Legal Standard 173

Part 4 Goldman's Performance

8 Nagging Questions: Leadership, Crisis, and Clients 199

9 Why Doesn't Goldman See the Change? 231

Conclusion: Lessons 241

Appendix A Goldman and Organizational Drift 253

Appendix B Analytical Framework Applied to Goldman 265

Appendix C Selected Goldman Employees and Lobbyists with Government Positions (Before or After Goldman) 271

Appendix D Value of Partners' Shares at IPO 283

Appendix E Goldman's History of Commitment to Public Service 293

Appendix F Key Goldman People 295

Appendix G Goldman Timeline of Selected Events 305

Appendix H Goldman's Culture and Governance Structure 329

Notes 331

Index 369

Acknowledgments 379

About the Author 381

Editorial Reviews

10/21/2013
In this riveting debut, Columbia Business School professor and former Goldman Sachs executive Mandis examines the factors that tarnished the firm's reputation in recent years. In addition to interviews with former and current Goldman employees, Mandis shares his own experiences as a young recruit and indoctrination into the firm's prestigious and demanding culture. He traces the changes that occurred following the firm's IPO, which many allege resulted in a shift in standards and misaligned incentives, concluding that in the wake of the IPO, the firm's exemplary culture and values drifted, exposing the firm to new dangers. Mandis also applies his research to draw general sociological conclusions, discussed in the section, "Lessons Learned," which highlights the importance of shared values, social networks, financial interdependence, public disclosure, innovative inquiry, a higher purpose, transmission of culture from one generation to the next, and a long-term perspective. Mandis's hefty, but elegantly-written tome is a must-read for anyone interested in the world of business and finance, history, or organizational dynamics. (Oct.)

Publishers Weekly

"Forget Greg Smith and those muppets. What Happened to Goldman Sachs by Steven Mandis is the book to read." — [as tweeted by] Andrew Palmer, Finance Editor at The Economist

“an accessible, clearly written book. Those interested in all things Goldman will find it useful for its appendixes, which include a timeline of the bank’s history and biographical sketches of its top leaders” — The New York Times

“…a remarkable new book…” — The Economist

“…an informative and interesting book. People who don't know what life in a big Wall Street firm is like will find the book enlightening.” — Fortune

“In this riveting debut, Columbia Business School professor and former Goldman Sachs executive Mandis examines the factors that tarnished the firm's reputation in recent years. “…a must-read for anyone interested in the world of business and finance, history, or organizational dynamics.” — Publisher’s Weekly

“… fascinating… for its sympathetic yet unflinching study of a firm and an industry that has come to epitomize what is problematic about Western capitalism, What Happened to Goldman Sachs is hard to beat.” — strategy+business magazine

“… entertaining and informative… a welcome addition to the literature on the rise and fall of corporations.” — Seeking Alpha (seekingalpha.com)

“… a profound tale.” — The Financial Times

“Several authors have tackled the question of how Goldman's culture changed post-1999 but none so deftly as Steven G. Mandis…” — The Wall Street Journal

“Mandis’s book describes changes at the bank and across the industry that have contributed to the unflattering portrait of Wall Street that has taken hold since the financial crisis.” — Politico (politico.com)

“… a more somber, studied look at the bank’s culture…. His book, [What Happened to Goldman Sachs] has the added gravitas of being the basis for Mandis’s PhD dissertation on his former employer at Columbia University.” — Bloomberg Businessweek

“… ‘organizational drift’ can erode the core values that make any company successful. Steven G. Mandis, a former Goldman Sachs investment banker, explains how that happened to the Wall Street firm and offers prescriptions for combating the problem in this insightful volume.” — Fort-Worth StarTelegram

“If you've lost patience (or interest) with the oodles of books that have been churned out about the financial crisis (many of them excellent), reignite your curiosity enough to pick up What Happened to Goldman Sachs?” — 800 CEO READ

“Mandis uses a sociological theory he calls “organizational drift” to explain why and how the culture of his former employer changed over the course of the past three decades. His analysis contributes to an understanding of the inadvertent yet profound consequences that can result from growth with any large organization.” — Business Digest

ADVANCE PRAISE for What Happened to Goldman Sachs:

Bethany McLean, coauthor, The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron and All the Devils Are Here: The Hidden History of the Financial Crisis; contributing editor, Vanity Fair—
“Steven Mandis’s exploration of how the culture at Goldman Sachs changed should be required reading for anyone who is interested in how organizations evolve and in the culture of Wall Street more generally. Mandis resists judging the firm, but rather explains, thoughtfully and clearly.”

Donald MacKenzie, professor of sociology, University of Edinburgh; author, An Engine, Not a Camera: How Financial Models Shape Markets—
“The financial crisis has shown us how little we understand about banks as organizations and about their internal cultures. Mandis’s pioneering study is thus essential reading for anyone concerned about the future of the financial system.”

Gerald Davis, Wilbur K. Pierpont Collegiate Professor of Management, Ross School of Business, University of Michigan—
“What Happened to Goldman Sachs explains the organizational processes that led Goldman to drift from its vaunted ‘clients come first’ culture as it grew from a modest-sized partnership to a vast public corporation. Steven Mandis combines an insider’s experience with the tools of sociology to show how pressures for growth resulted in the Goldman Sachs that we know today.”

Anat Admati, George G.C. Parker Professor of Finance and Economics, Stanford Graduate School of Business; coauthor, The Bankers’ New Clothes: What’s Wrong with Banking and What to Do about It—
“Steven Mandis, in his thought-provoking book, shows how even a disciplined partnership aiming to put its clients’ needs first can, bit by bit, become a large, complex corporation mired in conflicts big and small. Mandis’s nuanced and convincing analysis reveals the key forces that we all need to worry about when it comes to banking—or any sector that’s so important to the health of the economy: conflict of interest, self-dealing, and excess risk-taking.”

From the Publisher

Several authors have tackled the question of how Goldman’s culture changed post-1999 but none so deftly as Steven G. Mandis.”
—The Wall Street Journal

Politico

A profound tale.”
—The Financial Times

The Wall Street Journal

entertaining and informative… a welcome addition to the literature on the rise and fall of corporations.”
—Seeking Alpha (seekingalpha.com)

The Financial Times

Fascinating . . . for its sympathetic yet unflinching study of a firm and an industry that has come to epitomize what is problematic about Western capitalism, What Happened to Goldman Sachs is hard to beat.”
—strategy+business magazine

Seeking Alpha

In this riveting debut, Columbia Business School professor and former Goldman Sachs executive Mandis examines the factors that tarnished the firm’s reputation in recent years. . . . A must-read for anyone interested in the world of business and finance, history, or organizational dynamics.”
—Publishers Weekly

strategy+business magazine

An accessible, clearly written book. Those interested in all things Goldman will find it useful for its appendixes, which include a timeline of the bank’s history and biographical sketches of its top leaders.”
—The New York Times

The Economist

An accessible, clearly written book. Those interested in all things Goldman will find it useful for its appendixes, which include a timeline of the bank’s history and biographical sketches of its top leaders.”
—The New York Times

The New York Times

Sean Runnette performs this tale of an epic business collapse with a tone of thoughtful resignation. This couldn’t be more effective in framing the author, a sociologist and former Goldman executive, as both trained observer and tragic victim. The story begins in 1979, before the then 118-year-old bank partnership became a traded stock, and continues through organizational changes that the author says forced staff to drift away from the company’s founding principles. A thoroughly researched study that cites interviews with key people, it’s also informed by the author’s familiarity with the SEC, the U.S. Congress, and the laws Goldman exploited that led to the 2008 government bailout. The author’s skill with narrative and Runnette’s sensitivity give this story Shakespearean proportions that make this extended saga riveting. T.W. Winner of AudioFile Earphones Award © AudioFile 2016, Portland, Maine

MAY 2016 - AudioFile