Tuesday, April 27th, 2010

Goldman Sachs Self-Evaluations Contain Grotesque Bonus-Grubbing

ENSIGN, REALLYThe Senate sub-committee hearing on Just How Evil Is Goldman Sachs, ongoing for a few hours now, is numbing and ridiculous and unintelligible. Alternately I have the impression that the people asking the questions and the people giving the answers have no idea what they're talking about. The constant use, by the questioning politicians, of the idea and model of "gambling" in relation to what Goldman Sachs does is somewhat disturbing. Goldman Sachs is, at heart, a math organization. What happens there is that thousands of incredibly bright math-oriented folks are modeling and running numbers constantly, and when the numbers seem worthwhile, choices are made. It's like gambling only if you were playing blackjack with shoe composed of several thousand decks of cards with a dozen people counting cards and running probability numbers for you. John Ensign is particularly a moron, it seems to me. ("In Las Vegas people know the odds are against them," he said. "On Wall Street they manipulate the odds while you're playing the game… much more dishonest.") This is grandstanding and, to say the least, not helpful. What did strike me as interesting in the documents released by the Senate were the performance reviews. They are pretty absurd.

These are from end of year 2007. Here is self-review filed by Daniel Sparks, a Managing Director at Goldman:

I delivered the best performance of my career this year to the firm. I led a great team through an incredibly volatile and challenging market, we had to change business approaches dramatically and constantly, we levered the firm's support, and we didn't just survive – we excelled. Below I have listed significant contributions and accomplishments.

No, how do you REALLY feel about yourself? And when MD Joshua Birnbaum filed his own self-review, his only criticism of himself was essentially that no one would listen to him and he should have insisted about how he was right more often: "As a leader with significant experience quantifying and managing a wide range of mortgage risks, I could have spoken even louder and tried to piece together something to support my assertion that other areas were quite long and in need of incremental hedges."

And MD Michael Swensen:

It should not be a surprise to anyone that the 2007 year is the one that I am most proud of to date. I can take credit for recognizing the enormous opportunity for the ABS synthetics business 2 years ago. I recognized the need to assemble an outstanding team oftraders and was able to lead that group to build a number one franchise that was able to achieve extraordinary profits (nearly $3bb to date).

You can see the Goldman thing poking through-"Though this extraordinary year is attributable to a total team effort, my commercial contributions over the past year are numerous."-but even while they make nods toward emphasizing teamwork and the group, the big boys just can't stop sucking up for extra bonus cash. They're so unanalytical and so unforthcoming, it makes a joke of the company's intense review structure-and that to me, reflects more poorly on them than the emails with swearwords in them. (OMG swearwords! In a work email! Can you imagine? Oh right you can.) I know it's pretty common corporate practice, this sort of horn-blowing-and it's probably much worse at other finance firms!-but to me, it just seems sad and pitiful.

23 Comments / Post A Comment

roboloki (#1,724)

i'm good enough, i'm smart enough and, gosh darn it, people like me.

KarenUhOh (#19)

"The dance itself was a success."

And one thing I'd like to point out is that the system worked. Everybody played an important role here.

brad (#1,678)

if i may take a moment to comment about myself. in the year of our lord 2007, no one shone brighter or sailed straiterer than i. the toilets on the 5th floor had never gleamed with such radiance- beckoning radiance. my five man, hand-assembled team created golden opportunity upon golden opportunity for the staff of Goldman to produce more golden opportunities.

brad (#1,678)

i'd like to apologize for this post as it is stupid.

Take that apology back!

Truly. "Radiance-beckoning radiance" is a thing of beauty.

C_Webb (#855)

It should not be a surprise to anyone that these asshats write this badly. I am in need of an incremental hedge* to forget I ever read them.

*NO clue what this means.

roboloki (#1,724)

it's code for long, slow strokes.

Mindpowered (#948)

So what's "3bb"?

Big Bucketfuls? Bag O'Boobs? Big Billions? Bon-Bons?

nicole (#2,443)

oh i hope its bon bons!

Screen Name (#2,416)

Speaking of Sparks and Swensen, ran across this from 2007:

"Dan Sparks and two underlings, Josh Birnbaum and Michael "Swenny" Swenson, placed what were in effect giant bets against the US mortgage market at the start of the year and watched their winnings tick higher and higher as the rising numbers of mortgage defaults spiralled into a worldwide financial crisis… The trio themselves are in line for bonuses of about $10m apiece from a record bonus pool at Goldman of about $19bn. "They are very embarrassed that their names have come out," said a company source."


Based on those self-review excerpts, I find it difficult to believe the ability to feel "embarrassment" is a trait either one possesses in any significant measure.

kneetoe (#1,881)

Two things: Politicians grandstand. They can't help it. So don't blame them.

Second, yes, I will over-simplify the crap out of this: these guys with their fancy numbers and their models and etc. brought the world economy to the absolute brink of the abyss. I am so over, and have been for a long time, the notion that there are these amazing experts out there who know what they are doing. Any complex system will fool the experts every time.

the teeth (#380)

I'll take this whinging seriously just as soon as you lead your group to build a number one franchise that is able to achieve extraordinary profits (of nearly $3bb to date).

As a commenter in 2009, I relied too heavily on boner jokes and semicolons. Please do not consider me for a bonus.

Ben Garbe (#3,316)

Of course their self-evaluations read like this…

I would say though, that inside any giant operation your self evaluations should mostly be self serving and self aggrandizing. Most big organizations punish employees who are reflective and introspective on eval's. It's kind of sad, but years later when you look to move elsewhere within the company you can find an old, honest, reflective self evaluation can haunt you. Better to put in writing only how awesome you are. It's an organizational failure, but not hard to understand other reasons besides just being asshole bankers that self evals would be over-the-top.

But it's possible to mix that sort of horn-tooting with a heavy dollop of passive aggression :"While we built a number one franchise that achieved extraordinary profits, more might have been accomplished. Our $3bn represents only 85% of the total profit that might have been earned. Our five major competitors were able to split the remaining 15% among them… We might compare this with Petey's fixed income group down the hall…."

PinkPundit (#155)

It's not just math. Sometimes it is betting. And selling a boatload of crap to Bear Stearns and then shorting the stock is thuggery. High-end, high-IQ thuggery, but it's not vector autoregressions either.

atlasfugged (#4,481)

Goldman Sachs is NOT a math organization. As a clever (if I do say so myself) math-oriented person, who makes a living doing math-oriented things, I wanted to scream when I read that. Goldman hires a handful of relatively bright math-oriented guys and gals to work as quants and dream up statistical models, which from an applied mathematician's perspective, are hardly innovative or particularly complex. The rest of the Goldman's employees, outside of the support staff, are nothing more than hard-charging, well-pedigreed MBA types. Can we please, for fuck's sake, put to rest the myth that investment banks are some kind of bastions of erudition and innovation, and that throw their halls walk only geniuses?

atlasfugged (#4,481)

*through their halls

Mindpowered (#948)

Hear, Fucking Hear.

Perhaps if Mr. Tourre, had known a bit of the hard stuff, he would have known how monstruous his mounstruosities were. Still, given the general ethics, he would have sen the on to le Banque Boche anyways.

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