British bankers were much in demand last week. Chinese and Russian financiers, among others across the globe, have wanted the answer to a question, an answer that only their British colleagues could provide: what, exactly, does the word “muppet” mean?
On Wednesday one Greg Smith, the London-based head of Goldman Sachs’s equity derivatives business in Europe and Africa, had resigned from the firm in spectacular fashion by writing an article for The New York Times entitled “Why I am leaving Goldman Sachs”, in which he revealed that “over the last 12 months I have seen five managing directors refer to their own clients as ‘muppets’”.
Bear in mind that the language used by stock market traders is notoriously profane, and you can understand the excited curiosity of the global financial milieu: what is the weight of obscenity contained in the word “muppet” that it so shocked a man who had been at the sharp end of the business for more than a decade?
A friend tells me that a Chinese banking colleague, having feverishly passed him a note during a meeting last Wednesday with the words “What is a muppet?”, looked disbelieving (and highly disappointed) when he got back the slip of paper and read: “A light-hearted term for an idiot, derived from a children’s television series once popular in the UK.” To say this would barely register on the scale of insults available to speakers of Cantonese is an understatement.
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In fairness to the author of the New York Times article/resignation letter, this was just the verbatim illustration of his general argument: that Goldman Sachs had become a different business from the one he had joined in 2000 straight out of university. Whereas it was back then single-mindedly devoted to the welfare of its clients, it had, said Smith, now become purely profit-driven, seeing those customers merely as means of boosting its own bonus pool. Can you believe it? I mean, can you believe any person of high intelligence — Goldman doesn’t take those who aren’t — imagining that the main function of those clients was other than to generate the maximum profit for the firm?
This, by the way, does not make Goldman Sachs unique, either within the financial services sector or in the entire world of businesses great and small; quite the contrary. In the words of an online comment to a financial column celebrating Smith as a whistle-blower: “I am at a loss to understand the controversy. As a private company Goldman exists to maximise the difference between sales price and costs of goods sold. Provided they operate in a competitive market, what is the problem? Smith’s particular business was to sell options for a higher price than the cost of the hedge he was buying, and the higher the better . . . Goldman’s behaviour is no more reprehensible than Starbucks charging three bucks for a shot of coffee in a cup of milk.”
Ah, but what about that terrible language? Calling clients “muppets”? Man is a tribal species, and in the modern world the firm can be that tribe, immensely protective of its own and surprisingly indifferent to the welfare of outsiders — except insofar as that welfare is necessary to the well-being of the firm. Note also that Goldman is exceptionally tribal, to the extent that employees are forbidden to use the first person singular in any presentation: it was always and only “we”.
In this sense, it is not so very unlike the medical profession, the original butt of Shaw’s observation that “all professions are conspiracies against the laity”. No organisation would view with anything other than horror the prospect of “valued” customers hearing what its employees might say about them behind their backs — and that would certainly be true of those working for the sainted National Health Service.
Like all the grand finance houses Goldman has an impressive patina of respectability One illustration will suffice, provided by a friend who worked for many years in a cardiac unit. One day it admitted a monstrously fat woman. Her heart was giving out under the strain of pumping blood throughout her improbably vast bulk. For a couple of days the cardiac team did its best, but the woman — let us call her Mrs Jones — expired.
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The next day my friend asked the head of the unit if he knew when Mrs Jones was to be buried. “On Monday,” he said, paused, and then continued, “and on Tuesday . . . and on Wednesday.” Everyone collapsed in giggles.
Now, imagine the consequences if that had been recorded and played back to the family of the “client”.
Or take the advertising business. Its practitioners have a saying that cannot be repeated in full here. But it goes: “All clients are . . .” and the missing word has just one syllable. The word “client” is one that can itself be misunderstood. Greg Smith was not some old-school merchant banking adviser with a few big corporate clients with which his firm had an exclusive relationship. What he calls “clients” were trading counterparties who would be every bit as predatory, at least in their desire to sniff out a quick profit, as Goldman itself. These are not little old ladies with their savings engaging Goldman (it does not deal directly with the retail market), but highly sophisticated traders themselves who are under no illusion as to their role: fellow players at the same high-stakes poker table.
It’s true that among the trading counterparties who got well and truly stuffed by Goldman was Britain’s very own Royal Bank of Scotland (RBS); and it is sadly also true that lots of little old ladies who had their savings invested in RBS shares or funds run by those clowns in Edinburgh will have suffered financial loss. Is that Goldman Sachs’s fault? Did it give Fred Goodwin’s assemblage of would-be financial geniuses an offer they could not refuse? No: most of the whining comes from grown men as motivated as any other dealers to maximise their bonuses, but just stupider (and, possibly, even greedier) than their trading counterparties at Goldman Sachs.
Goldman itself, naturally, would not put it this way. Like all the grand finance houses it has an impressive patina of respectability, which manifests itself in elaborately constructed mission statements proclaiming its integrity in all things; and it will be immensely careful not to do anything that breaches securities regulations — that would mean prison for its executives and possibly closure of the entire firm. I can’t help feeling that Smith was duped by his own corporate mission statements into believing he was working for a combination of Save the Children and the national lottery’s good causes fund . . . and then he woke up. Or perhaps he actually believed his boss Lloyd Blankfein when he told this newspaper three years ago that the firm was “doing God’s work”.
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If there was a moment in which Goldman changed for the worse — in the sense of becoming much more driven by hunger for the quick buck — it was in 1999, when it switched from being a private partnership to a publicly quoted company. Yet Smith joined Goldman after that culture change; and it was all of five years ago that it was described — in the much quoted (and faintly disgusting) words of the journalist Matt Taibbi — as “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money”. Yes, he meant you, Mr Smith.
It is, of course, much more damaging in business to be seen as contemptuous of your customers than to be a mere blood-sucking vampire squid. On the other hand, I’m told that Goldman clients have been ringing up their contacts at the firm, pretending to be Miss Piggy. The Muppets’ Revenge: it’s as bad as it sounds.
dominic.lawson@sunday-times.co.uk