uncompromising determination to achieve excellence in everything we undertake. Though we may be involved in a wide variety and heavy volume of activity, we would, if it came to a choice, rather be best than biggest.5 We stress creativity and imagination in everything we do. While recognizing that the old way may still be the best way, we constantly strive to find a better solution to a client’s problems. We pride ourselves on having pioneered many of the practices and techniques that have become standard in the industry.
6 We make an unusual effort to identify and recruit the very best person for every job. Although our activities are measured in billions of dollars, we select our people one by one. In a service business, we know that without the best people, we cannot be the best firm.
7 We offer our people the opportunity to move ahead more rapidly than is possible at most other places. Advancement depends on merit and we have yet to find the limits to the responsibility our best people are able to assume. For us to be successful, our men and women must reflect the diversity of the communities and cultures in which we operate. That means we must attract, retain and motivate people from many backgrounds and perspectives. Being diverse is not optional; it is what we must be.
8 We stress teamwork in everything we do. While individual creativity is always encouraged, we have found that team effort often produces the best results. We have no room for those who put their personal interests ahead of the interests of the firm and its clients.
9 The dedication of our people to the firm and the intense effort they give their jobs are greater than one finds in most other organizations. We think that this is an important part of our success.
10 We consider our size as an asset that we try hard to preserve. We want to be big enough to undertake the largest project that any of our clients could contemplate, yet small enough to maintain the loyalty, the intimacy and the esprit de corps that we all treasure and that contribute greatly to our success.
11 We constantly strive to anticipate the rapidly changing needs of our clients and to develop new services to meet those needs. We know that the world of finance will not stand still and that complacency can lead to extinction.
12 We regularly receive confidential information as part of our normal client relationships. To breach a confidence or to use confidential information improperly or carelessly would be unthinkable.
13 Our business is highly competitive, and we aggressively seek to expand our client relationships. However, we must always be fair competitors and must never denigrate other firms.
14 Integrity and honesty are at the heart of our business. We expect our people to maintain high ethical standards in everything they do, both in their work for the firm and in their personal lives.
The emphasis on the principles helped distinguish the firm, and over the years, most successful interview candidates were very familiar with them. The principles guided thousands of interactions each day—interactions that put the firm’s reputation and partners’ capital at risk.11 One senior partner said, “As a small firm, we passed on our shared ideals and culture in an avuncular style. Everyone sat next to someone who was very experienced and had been there a long time. We were very small, concentrated in a few offices around the United States, so it was easy to do … Every boss I ever had worked harder than I did … This is a really good business and it’s also a pleasant place to work, if you select the right people on the way in.”12 Goldman’s principles also provided a way to substantiate the firm’s trustworthiness in the eyes of clients and potential candidates.
The principles, combined with actual strategic business practice and policy decisions (such as not representing hostile raiders, as I discuss later), created for Goldman a powerful “good guy” image—both internally and externally. In 1984, a Morgan Stanley banker even publicly conceded that the principles and resulting practices made clients perceive Goldman as “less mercenary and more trustworthy than Morgan Stanley.”13
The ultimate fate of the Water Street Corporate Recovery Fund provides a good example of Goldman’s sensitivity to the potential impact of its strategic business decisions on the firm’s reputation after the principles were written. In 1989, two Goldman partners convinced the management committee to commit as much as $100 million of the firm’s money toward starting Water Street, a fund that bought controlling blocks of distressed high-yield junk bonds. The fund began soliciting outside investors in April 1990, with the goal of raising $400 million. Within a few months, Goldman had raised almost $700 million and stopped accepting investments. The partners were willing to give Water Street four years to see whether it could produce an annual return of 25 percent to 35 percent.14 However, several corporate executives and large money-management firms complained to Goldman that the fund was a “vulture” investing business, claiming it was in direct conflict with the firm’s reputation for acting at all times in the best interests of clients. The executives were particularly concerned that the fund was also being run by someone who was actively involved in Goldman’s corporate finance advisory business. The dual roles would potentially allow the Water Street Fund to access confidential information from investment banking clients that it could use to benefit its investing. Nine of the twenty-one Water Street investments were in current or former clients. Even though the fund was making a lot of money for Goldman, the management committee, advised by John L. Weinberg, shut it down. At the time, investing clients who bought stocks and bonds also were threatening to boycott Goldman’s trading desks because of their concern about potential conflicts (although many discounted that would actually happen). John L. was concerned that clients thought the fund violated Goldman’s number one principle. According to partners I interviewed, the firm’s decision to shut the fund down sent a powerful message, internally, especially considering how profitable the fund was. Many clients at the time also felt it sent a powerful message differentiating the firm from the principles of its competitors.
Best and Brightest
Goldman’s corporate ethos, its common value system, John L. called “the glue that holds the firm together.”15 Goldman executives were conscious of sustaining this culture when recruiting and tried to hire the best of the best, but not just for their intelligence, drive, or experience. The partners looked for people who fit a certain profile: people who had all the requisite skills and knowledge, were hardworking and driven, and also espoused a value system consistent with Goldman’s.16 New hires were immersed in the Goldman culture and encouraged to apply their preexisting values and principles in a business context.
Goldman was not known as the highest payer on Wall Street for entry-level positions, and yet talented people often prioritized working for Goldman. Interviews revealed that they were attracted by the allure of partnership and the feeling that the firm’s culture of putting clients’ interests first and being long-term greedy was different from the other firms on Wall Street. They pointed to the principles and the firm’s actions and policies, along with stories and lore that reinforced this differentiation.
Although many firms had high hiring standards, they did not as regularly send senior executives to college campuses to interview potential recruits. In the 1980s and 1990s, this was a critical part of a Goldman executive’s job, an outward expression of the company’s passion and culture. It was one of the roles of a culture carrier—someone who always put the firm and clients first, had the right priorities, cared about the firm’s reputation, and put the firm’s principles and long-term goals before short-term profits.17
Whitehead described Jimmy Weinberg, brother of John L. Weinberg, as “one of the most important culture carriers … He was an advocate of team play, no internal ugly competition, service to customers, putting the customers’ interests before the firm’s interests and all of those good things that make a partnership.”18 In a speech to the partnership, a partner stated, “Hiring the right people is the most important
