Published yesterday in the New York Times’ Op-ed section, Greg Smith’s letter on why he chose to resign from his mid-level executive position at Goldman Sachs has a lot of people talking. Some people (i.e. Lloyd C. Blankfein) are miffed that Smith aired the firm’s dirty laundry in such a public forum; others (i.e. the rest of the world) are indignant in the face of Wall Street’s perseverant culture of corporate greed and profiteering. And at least one prominent figure has had the guts to follow Smith’s example, penning a very-public rebuke of the Empire’s deteriorating culture of oppression and murder. Hats off to you, Darth Vader.
Nestled quietly amidst Smith’s disgruntled haranguing and charged language ( “the environment now [at Goldman Sachs] is as toxic and destructive as I have ever seen it.”) are a few kernels of prophetic wisdom:
It astounds me how little senior management gets a basic truth: If clients don’t trust you they will eventually stop doing business with you. It doesn’t matter how smart you are… Make the client the focal point of your business again. Without clients you will not make money. In fact, you will not exist.”
Whether or not you believe Smith’s bronze medal in table tennis impugns his credibility, I think he makes a good point: the financial industry has forgotten that it is a cog in the wheel of a productive society. In his 2010 Op-ed piece entitled “Hegel on Wall Street” J.M. Bernstein uses philosophy to explore the basis for the same corporate culture that Smith decries in his letter:
What makes self-interested individuality effective is not its self-interested motives, but that there is an elaborate system of practices that supports, empowers, and gives enduring significance to the banker’s actions. Actions only succeed as parts of practices that can reproduce themselves over time.
Bernstein argues in favor of a “world-interest” as a necessary counterpart to the banking sector’s practice of placing profit maximization above all else. In fact, he goes so far as to argue that if Wall Street truly understood its role within greater society, it would welcome stricter regulations.
What market regulations should prohibit are practices in which profit-taking can routinely occur without wealth creation; wealth creation is the world-interest that makes bankers’ self-interest possible.
In other words, thinking up increasingly complicated ways to make banking execs rich is a decidedly unsustainable business practice. Firms like Goldman Sachs would do well to remember that without the effective allocation and growth of capital, those who rely on their services (Smith’s clients, Bernstein’s industry, society as a whole) would cease to function, essentially driving them out of business.
So as Blankfein and co. bluster about internal studies, client satisfaction and a firm commitment to Dodd-Frank regulatory measures, perhaps we should all turn to Yoda for guidance:
“Self-interest is the path to the dark side. Self-interest leads to anger. Anger leads to hate. Hate leads to Occupy Wall Street.”