When I first borrowed ‘Chasing Goldman Sachs’ by Suzanne McGee, I didn’t expect to be finishing the rather thick tome. It turned out to be a pretty fine book with its ‘utility’ analogy of the function of the financial industry and tracing the evolution of the industry from a boring, administrative sort of place to one where brains were pit against brains with unintended (disastrous) consequences.
It was essentially a discussion on the problems in the system itself – culture, regulatory capture (to a certain degree) and incentive problems. There was the typical journalist sort of inconclusive discussion about where the industry to move towards in the coming future. I often write stuff like that to sound intelligent because saying nothing and facilitating viewpoints is the best way out when you find it too risky to take a stand on the issue.
And then I was watching Margin Call, which depicted the sort of culture as well as paradigm that people in the industry have about themselves and the rest of the world. Indeed, it was pointed out by Suzanne that the Wall Street approach towards a problem is vastly different from that of someone on Main Street:
On Wall Street, when you spot a problem, you figure out how to profit from it; not how to solve it.
So let’s say you know Enron cooked their books; you don’t blow the whistle! At least not until you’ve accumulated vast amounts of short position on their stock. If you know a war is going to break out in the Middle East before everyone else, you don’t call for peace or try and prevent it – you buy oil futures! And so the examples go. That’s the way they work, don’t expect them to try and prevent a crisis; tell them about it and they’ll shrug and go behind their cubicles to their spreadsheets and start computing potential cashflows in different states of the world.
Towards the end of the book Suzanne talks about the importance of learning Goldman Sachs’ strategy rather than trying to emulate their returns. I guess it applies to many aspects of life. You realise that when your friends do brilliantly in exams, and you hope to beat him at his game, you don’t just go all out to ramp up your studying hours and consult tutors for every other thing. You find out what he does, understand his motivations, find your own motivation and work out a niche for yourself. Don’t scramble for the solution only when trouble comes along or try and catch up only when you’re falling back – have a strategy, know what you want and then know what to do about it. Only then, you’ve a chance at getting close to ‘chasing Goldman Sachs’.