The Partnership: The Making of Goldman Sachs

Front Cover
The jury is still out on what the future of Goldman Sachs will look like, but no one can argue that the 139 year old firm has been (and, if Warren Buffett has his way, will be) the dominant investment banker and dealer on Wall Street. What does Buffett see that we on the outside do not? It¬'s all about the people.

Charles D. Ellis has written a landmark book that couldn¬'t come at a better time. The Partnership: The Making of Goldman Sachs is the colorful and fascinating story of Goldman¬'s rise to power through many life-threatening changes in markets, competition, and regulation. It tells the personal history of the men and women who built the world¬'s leading financial powerhouse from a firm that was disgraced and nearly destroyed in 1929, limped along as a break-even operation through the Depression and WWII, and, with only one special service and one improbable banker, began the rise that, in half a century, took Goldman Sachs to global leadership.

A conversation with Charles Ellis:

* Is Goldman Sachs really a lot better than other firms at managing risk?

The big difference is in the cumulative power of many ¬“small¬” details. The difference in the speed, accuracy, and extent of communication inside the firm; the difference in intensity, focus, and disciplined toughness of the men and women hand selected to work there and real difference in recruiting, training, and compensation. All add up to a decisive advantage in management. Leaders and co-leaders manage Goldman¬'s many business units with rigor and drive; risk management is the envy of other banks; and coordination is powerful across business units and markets around the world.
As every Olympic athlete knows, such small differences make all the difference between gold, silver or bronze ¬– or no medal at all. In the current, very difficult test, Goldman Sachs has come in 1st ¬– again.

* Goldman Sachs is often described as the best managed Wall Street firm. Is that true?

Yes, it is true. Goldman Sachs is the best managed ¬“Wall Street¬” firm ¬– and the best led. Management is why Goldman Sachs is consistently rated the best firm to work for and gets top ratings from clients all over the world. Superior management is why the firm earns more profit, develops more effective people, has made itself the market leader in the U.S., U.K, Germany, France, China, Japan, and in most major lines of banking business. No other firm comes close.
One of the things you will learn in The Partnership is just how Goldman succeeded in making themselves different from any other Wall Street firm. They learned early on that in order to survive, they had to not only make money, but create a culture that was universal, that demanded absolutely loyalty and, most importantly, act as one organism.

* Why does Goldman Sachs put so much weight on its ¬“culture¬”?

Goldman Sachs culture works. In the complex, fast-changing, global, 24/7 securities business almost all the important decisions are made in highly specific and complex settings under great time pressure. These decisions cannot be made by headquarters and they cannot be deferred. They must be made locally by local market and business experts thousands of times every day.
Rules won¬'t work. If rules were written for every type of decision in all those different businesses in all the world¬'s different markets in all the different cultures, the resulting Rule Book would be far too large and complex to read or use.
Culture ¬– its way of working ¬– is the universal ¬“stem cell¬” that enables Goldman Sachs to operate so forcefully in so many different national markets and in so many different businesses.

* With all its different business activities all over the world, doesn¬'t Goldman Sachs have problems with conflicts of interest?

Yes! The firm certainly has many, many conflicts of interest. While it could take a defensive approach and try to avoid or minimize those risks of conflicts, the firm believes the more realistic and effective approach is to recognize those risks, be candid about them with clients and counterparties, and actively manage the conflicts. The firm strives to deal with each of them in such thoughtful and effective ways that clients and customers will know Goldman Sachs can be trusted to manage conflicts better than any other firm.

This is, of course, an assumption of enormous responsibility ¬– particularly on the scale on which Goldman Sachs operates ¬– so it raises the obvious next question: Who will watch the watcher?
 

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THE PARTNERSHIP: The Making of Goldman Sachs

User Review  - Kirkus

Investment-strategy consultant Ellis (Capital, 2004, etc.) gives the financial powerhouse a largely bullish evaluation.His expansive appraisal does, however, report the bad times along with the good ... Read full review

LibraryThing Review

User Review  - Mr.Durick - LibraryThing

This book is miserably organized and miserably edited. There are lacunae and non sequitors throughout. Nevertheless there are lots of interesting facts here and some reflections on personalities ... Read full review

Contents

Beginnings
1
Goldman Sachs Trading Corporation
17
The Long Road Back
30
The Largest IPO
53
Transition Years
63
Gus Levy
75
The Wreck of the Penn Central
96
Getting Great at Selling
116
Breaking and Entering
345
How BP Almost Became a Dry Hole j55
356
Changing the Guard
373
Transformation
399
False Starts in Investment Management
415
Robert Maxwell the Client from Hell
437
Making Arbitrage a Business
463
JAccuse
481

The Risky Business That Roared
132
Revolution in Investment Banking
153
Principles
183
The Two Johns
192
The Early Years 2i5 14 Figuring Out Private Client Services
232
Ugly Duckling
250
Tender Defense a Magic Carpet
269
The Uses and Abuses of Research
283
John Weinberg 397
297
Innocents Abroad
320
Building a Global Business
512
Steve Quit
533
Collecting the Best
552
Jon Corzine
566
LongTerm Capital Management
582
Coup
606
Paulsons Disciplines
636
Lloyd Blankfein Risk Manager
665
Copyright

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About the author (2008)

Charles D. Ellis is a consultant to large institutional investors and government agencies. For thirty years he was managing partner of Greenwich Associates, an international business strategy consulting firm he founded that serves virtually all the leading financial service organizations around the world. Ellis earned his M.B.A. from Harvard University and his Ph.D. from New York University. He has taught investment management courses at Harvard and Yale, and is the author of twelve books. Ellis has served on the boards of Harvard Business School and Phillips Exeter Academy and is currently chairman of the Whitehead Institute for Biomedical Research, a trustee of the Robert Wood Johnson Foundation, a director of Vanguard, and a trustee and chair of the investment committee at Yale University.

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