The Fourteenth Banker Blog

April 28, 2010

The Fabulous Fab, a Goldmanesque Fractal

Filed under: Uncategorized — thefourteenthbanker @ 10:21 AM

The hearings today were great theater.  Several Senators referred to the fact that 4 or 5 other CEOs should have been sitting with Lloyd Blankfein.  Who are they?  Was Goldman on trial or was the system on trial?  I submit that the system was on trial, and, while I did not catch all the testimony, I’m afraid the trial was not prosecuted as well as it might have been.

I found Blankfein to be the most competent witness I heard.  He argued that investors were informed and knew the risks they were assuming.  He defended the soul-less transactional approach that pervades industry today.   He knew some things and did not know the things that he was not supposed to know.  Wasn’t his confusion regarding how to respond to the questions about the release of Tourre’s emails priceless?  I don’t think it ever occurs to Lloyd to consider what the right thing to do might be.

The unasked question is, “how does such a culture comes to exist?”  Why do employees engage in renegade actions, if they were such?   Didn’t Lloyd say how strong the ethics are at Goldman?  So the basic argument is that “ethics are strong, maybe my people didn’t do enough due diligence, and by the way, we’ll throw this kid under the bus.”

I can promise you these elements exist at Goldman:

  • You are defined by what you do
  • If you don’t produce, you are out
  • Do not question the prevailing thought process
  • You may violate certain portions of the Code of Ethics so long as your manager and team benefit and these violations are on the unspoken, unwritten “approved violation” list.    Generally these will make lots of money for the firm and yourself.
  • Do not rock the boat
  • Do not mention “that which must not be named”

Lloyd had a certain amount of congruence.  He was quite at peace with who he is.  He is very intelligent and can navigate the shoals of rationalization, compartmentalization, and objectivism to be congruent with his world view even when his words are slippery.  They are slippery in a way that makes perfect sense to him.  The problem is that within Goldman, every other employee has their antennae up.  The are listening to to the spoken word, cueing off the non verbals, seeing the consequences for others, and making the most rationale decision they can based on all that they see.  The rational decision if you are an employee of Goldman, is to cut the corners you are supposed to cut.  You will figure them out quite quickly by watching others.    If you do all they do, and a little more, maybe you can name yourself the Fabulous Fab.

Tourre is a Goldmaneque Fractal.   He and the organization have a simple and recursive definition and appear similar at all levels of magnification.

The reason the Senators said 4 or 5 other CEOs should be up there, is that they know intuitively that Goldman is a fractal of the greater financial system we have today, diagram below.

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9 Comments »

  1. Who is the name that shall not be named?

    Comment by Samuel Jones — April 28, 2010 @ 12:14 PM | Reply

    • It is an allusion to common myths from literature and movies. Most recently I recall it’s prominence in M. Night Shyamalan’s The Village and in the Harry Potter series character Lord Voldemort. Basically I’m using it to represent the culture of fear that prevents good people within and organization from speaking out. Generally that manifests as having to ignore something, not discuss something, or not call something by its name. In fact, if you put a name on something, it can draw a strong emotional reaction. That’s why the Senators kept using the words “bet” and “bookie” yesterday. But they were firing for effect. I’m talking about naming the truth.

      Comment by thefourteenthbanker — April 28, 2010 @ 7:22 PM | Reply

  2. Do you think that his “informed” investors were operating under a similar set of elements, and that this was a reason why they were willing to bet long in this instance?

    Comment by RonM — April 29, 2010 @ 12:09 AM | Reply

  3. “How does such a culture come to exist?”

    Great question! It is at the heart of the matter and describes WHY these guys (at Goldman, the other financial institutions, and also in most of corporate America) see themselves as always right and noble/righteous in their quest.

    Your 6 points above are accurate. They insure perpetuation and survival of the organism AS IT IS. Of course this is the intention – and the goal! Notice how the culture allows only positive feedback in support of the mission. Anything else is perceived as being inappropriate; in fact the culture will not tolerate it or the person who holds the opposing view. No wonder CEO’s can claim NOT to have heard or been aware of real “problems”. The culture is not set up to allow the truth to be seen in the light of day.

    However, the core/root issue is in a culture’s tolerance of the opposites. Rogue activities are not discouraged and are done on an individual or semi-individual level. Simultaneously, rouge activities are not encouraged! Cultures that support this kind of conflict are corrupt. The ultimate perversion begins right here – the synthetic value system is born.

    Sadly, corporate culture hasn’t changed much. I opted out after having spent most of the 1980’s and early 1990’s in corporate America (non financial industry) building sales and marketing teams. Your 6 points were as true then as they are now. Yes, I was a “producer” defined by my many accomplishments (check off points 1 and 2 above). I just couldn’t keep my mouth shut or go on a rogue mission that might compromise the integrity of the team!

    In closing, I believe that corporate culture would benefit the most from the dynamics of collaboration. Points 4 through 6 could not exist in an environment grounded in openness. Getting to the truth of any matter is a process and not a destination. Collaboration facilitates the accomplishment of goals; it produces an organic/genuine value system which is shared and supported by all – for the good of all.

    Comment by Susan Marie — April 29, 2010 @ 1:02 AM | Reply

  4. Susan Marie, and all, it appears to me that all the talking heads, on both (or all) sides, are leaving out human nature. I haven’t read “Animal Spirits” yet, so don’t know if the group think tendency is addressed there, but anyone who has ever been part of any group, from a scout troop to a high school clique, has observed this kind of behavior. What I find surprising is how many people find it surprising.

    Comment by Sandi — April 29, 2010 @ 2:46 AM | Reply

  5. Nice website; I admire your guts in setting it up, and appreciate the perspective of an ‘insider’.

    “Fractal” is a great metaphor; it appears that this particular fractal has a crystal structure created under a huge weight of hypocrisy, aggression, and predation. Each of those can be good when balanced with other qualities; it was the absolute lack of balance that I found very striking in those hearings.

    But your point that it ‘doesn’t ever occur to Lloyd to consider what is the right thing to do’ seems to be more Achilles heel than formula for long term success. His incapacity to even comprehend the questions dealing with what we might call ’emotional content’ was chilling. Clearly, he can master the technical data. Emotions, not so much.

    Comment by readerOfTeaLeaves — April 28, 2010 @ 10:52 PM | Reply

  6. This just crossed my virtual transom and I just had to giggle – from the man who brought us, “depends on what “is” is”, and “I did not have sex with that woman!!”

    http://www.businessweek.com/news/2010-04-29/ex-president-clinton-skeptical-goldman-violated-law-update1-.html

    talking about Goldman:

    “I’m not at all sure they violated the law, but I do believe that there was no underlying merit to the transaction and that’s what I think we need to look at,” he said yesterday about the Securities and Exchange Commission suit filed earlier this month alleging Goldman Sachs misled investors in a mortgage-linked investment.

    (Sandi here) And this is just the problem, is it not? It isn’t about what’s LEGAL, dammit, it’s about what’s RIGHT. And that is exactly the thing they all tap-dance around. Fred Astaire couldn’t do better.

    Comment by Sandi — April 29, 2010 @ 2:52 PM | Reply


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