Customer Reviews

The Partnership: The Making of Goldman Sachs

5 star:		(12)
4 star:		(2)
3 star:		(4)
2 star:		(3)
1 star:		(3)

 

 

Fascinating book, but the fact that it weighs in at nearly 700 pages shows that the editor was absent or lax. There's incredible repetition. For example, in one long paragraph, we learn that Goldman Sachs believed that "recruiting was the most important thing we could ever do." Moreover, "Recruiting people of exceptional talent...is vital to the success of any professional firm." We get the point, and don't need it belabored for eight sentences in the same paragraph. Examples like that abound.

The lousy editing is also seen when Ellis introduces characters in passing, without giving a sense of where they come from, or what their titles are. It would have been nice to have had a simple list of the senior partners or managing partners throughout the years.

It also would have been nice to have a glossary. Ellis is good at explaining that obscure financial instruments are complex--yet apparently they're so complex that even he doesn't understand them, because he sure doesn't explain them.

All of which leads to a question: Did any editor actually read the manuscript?

In his massive history of Goldman Sachs (over 700+ pages), Mr. Ellis gives a glowing and comprehensive history of the the investment bank. He writes as the insider he is (a former consultant to the firm) and is not as critical of Goldman Sachs as he could be. Founded nearly 150 years ago, he traces the firm's roots and growth, its downturns (the Depressions and the 1970's) and it re-intervention of itself repeatedly. The financial carnage of the past month is not covered obviously, but Goldman Sachs new survival has its origin in its 2007 decision to get out of the mortage business before the current crisis.

Why does Goldman Sachs still have a $40 billion market capitalization while Lehman and Bear Stearns have become extinct? Charles Ellis answers that question and more in his latest book, The Partnership, as well as giving the reader an insider's view of what gave Goldman Sachs such an advantage. Like McKinsey & Company in consulting, Goldman Sachs walks the talk in hiring the right people and creating a culture that rewards long-term success.

This book takes an honest look at some of Goldman Sachs' missteps along the way, such as Long Term Capital Management, but also the considerable focus and discipline demonstrated in avoiding the easy short-term buck that seems to consistently blow up in our faces. Need I say more than AAA rated insured sub-prime derivative instruments?

It remains to be seen what the impact of the current financial crisis will be on Goldman Sachs. Regardless, this book shows why the death of investment banking may be a bit premature.

Charlie Ellis writes in his usual substantive yet engaging style. If you're looking for a great read with some very useful takeaways, I highly recommend reading this book.

I picked up The Partnership to try to understand what Charles Ellis rightly calls the "global juggernaut" that is Goldman Sachs. Goldman operates "with almost no external constraints in any financial market it chooses, on the terms it chooses, on the scale it chooses, when it chooses, and with the partners it chooses," Ellis writes in his dry study of the world's most powerful financial firm.

Ellis has been granted extraordinary access to Goldman's partners, including two former Treasury secretaries, a former undersecretary of State and a former chairman of the New York Federal Reserve. Ellis is the highly regarded founder of Greenwich Associates, a consulting firm that advises large institutional investors (and employs several Goldman alums). Opening up to an insider like Ellis was a smart move on Goldman's part, perhaps, but not for the poor reader who shells out $40 for this tome. It's as though Tiger Woods had commissioned his caddy to tell the story of his life.

As a result, despite the personalities behind Goldman, The Partnership is remarkably lacking in personality. Readers hoping to learn about the firm's modern reach and influence -- as I was -- have to slog through years of corporate history. Ellis doesn't have the narrative flair of William D. Cohan or Michael Lewis, and Goldman itself seems like a soulless place, where ambitious men sacrifice marriages and children in the hopes of someday joining the ranks of making partner and earning a fortune.

The view from competitors might have helped here by providing some much needed drama from those who have the scars from their battles with Goldman over the years. But there's no sense of fun or drama in The Partnership, only cold relentless striving, and the book reads like an official corporate history. Even the scandal involving British publisher Robert Maxwell whom Goldman helped embezzle money from pensioners, becomes an example of how Goldman skillfully used its influence to make problems go away.

Following the Great Panic of 2008, Goldman's power and influence gained it much attention, not all of it from admirers like Ellis. Goldman has emerged as the preeminent investment bank and it used its position and the weakened state of its competitors to grow even stronger. For a firm that has such influence at the top reaches of our government, this raises a troubling question of whether Goldman is too powerful, too entwined with policymakers that some cynically refer to it as Government Sachs.

Bottom line: For finance professionals or managers and business consultants, The Partnership might offer up some interesting insights into what makes a successful organization and how it deals with inevitable failures, conflicts and mistakes. But this isn't the book for the general reader who wants to understand why the world wouldn't be any better off without Goldman in it.

Please note, I do not attempt to review the full substance of this book, yet.

Only twenty-three pages into this book, it is readily apparent that Mr. Ellis is a terrible writer. Mr. Ellis begins the book with the story of the original Goldman Sachs partnership and its familial underpinnings. So poorly written, I was force to read, and reread, passages to understand relationships as simple as father-son, that Mr. Ellis could have easily made clear.

The very same mistakes were made during the introduction of Lehman Brothers. And again when discussing the split between the two firms.

I will forge on because I am interested in the story. And I will post a proper review when/if I am able to finish.

But be warned - Mr. Ellis is a TERRIBLE writer. And Penguin Publishing, please hire a capable editor.


Also, please note that The Economist (my main reason for buying the book), Business Week, Time, NY Times Book Review, Financial Times, Boston Globe, and Bloomberg all gave very good to great reviews. I now wonder if these people read the book. I am disappointed in each of them.

Anyone looking for dirt on Goldman Sachs is not going to find much here. Another reviewer described this book as a group memoir of senior GS partners; it's clearly intended to convey the management principles and ideals of Wall Street's most powerful firm.

Researchers into the internal behavior of the financial superpower will find the book essential as a reference; profiles exist of all the major executives and their relationships within the firm. And while some readers would probably appreciate a little harder-nosed view of the players or their actions, there is some advantage to a general history that presents motives sympathetically: would-be muckrakers need to understand that oftentimes bad motives are buried beneath perfectly righteous ones.(1)

However, the book suffers from the absence of many things that would be of intense interest to readers:

+Goldman Sachs partners/managers have been appointed to an immense number of extremely important governmental and quasi-governmental positions: treasury secretary, manager of federal rescues of the financial services industry, or (as an example of a quasi-governmental position) president of the NYSE. "Ascent to heaven" for GS staff far exceeds that for other firm. Why is this so and what is the impact?

+GS staff like John Thain have moved on to top positions at other major financial firms, in some cases with controversial results. Thain is not discussed very much at all, despite being both extremely recent(2) and implicated in the collapse of Merrill Lynch (to be fair, Ellis finished the book before Thain's conduct at ML became a news item). Given the extreme and vaunted prestige of GS personnel, this is a significant omission.

+GS has had an important effect on the nature and structure of US (and some non-US) business. The effects of regulatory change on merger and acquisition (M&A) activity is occasionally and helpfully mentioned in the book, but it is always treated as an exogenous change to the business ecology. This seems unduly naïve.

+Accounts of actual business activity is relinquished for extremely repetitive, adulatory, and excessively abstract discussions of management/investment philosophy. It's frustrating, because the anecdotes don't really illustrate the points they were introduced to make.

While Ellis clearly spent a tremendous amount of face time accumulating interviews and even relationships with GS partners, it seems clear that he didn't really understand any of the controversial aspects of finance. It's an odd flaw in the book, although a very commonplace one: amid a sea of facts about personnel, major shifts in the markets, and institutions, a frustrating lack of strong intellectual grasp of the actual mechanisms of finance.


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(1) "Muckrakers"--investigative journalists who expose odious motivations of firm managers. A good thing, absolutely; but it's difficult to do well. For example, actually confirming that a certain action by a party was bad (as opposed to merely "selfish" or unseemly) is often harder work than the author is willing to undertake.

(2) The vast majority of historical accounts, particularly histories of things still in existence, provide more detail for more recent events and less detail for earlier ones. This is especially true for corporate histories, for obvious reasons.

The Partnership - Charles D. Ellis

There are few really classic books in finance - Le Fevre's "Reminiscences of a Stock Operator", Peter Bernstein's "Capital Ideas" and perhaps half a dozen others at most. Outside of these the books tend to fall into one of two camps - "how to for dummies" books written by the several hundred people who have failed to internalise the irrefutable truth that there is no free lunch into their thinking and behaviour let alone their writing. The rest are works by various do gooding preachers who suffer not only from this condition but, arguably worse, try to occupy some unjustifiable moral high ground without mandate while seeking to exploit the market in books in the very ways they rile against.

Charles D. Ellis' "The Partnership: the Making of Goldman Sachs" is a genuinely remarkable finance book and joins the ranks of the top tier mentioned above. The quality of this work is unsurprising if we consider the breakthrough which Ellis most famous work - "Investment Policy: How to Win the Losers' Game" - the first seriously useful book on sound institutional investing - represented. There his uncanny knack of combining thorough conceptual understandings with street toughened practical experience was poured into well written, compelling prose in a manner yet to be surpassed.

So it is with The Partnership. For a start, the scope of the work is immense covering the more than a century's development of today's preeminent investment banking and financial services firm. To the reader at least, the detail of characters, accounts of events and interpretation of the strategic and commercial motivation of the myriad unfoldings is no less intense, painstaking or informative when dealing with the late eighteenth century than with the FDC a matter of months ago.

The breadth is equally staggering covering, necessarily, the development, conceptual underpinnings and means by which Goldman Sach's profited from as well as managed risk within every major financial innovation, product and transaction type over the last 120 years or more. What is invaluable here is that while numerous of the events are well known (the 1907 crash, that of 1987, the inside trading cases of the mid 1980s, the dotcom bubble and bust etc), Ellis provides the view, the exposure and the response of one firm to these events personalised through discussion of the responses of the key actors at Goldman Sachs.

For students of management and organisational theory the book is pure gold as well. Problems of creating, maintaining and growing a global behemoth, recruiting the best people on a sustained basis, managing ego and arrogance while retaining innovation are all dealt with. Analysis of the leadership styles, successes and failures, succession winners and losers are given a warts and all treatment throughout.

Are there genuine surprises? Yes. To me at least. One is the conclusion that in a competitive market where sooner or later all participants are using the same theory, the same practices, where product life is extraordinarily short and differentiation is close to impossible on any sustained basis, the key to competitive advantage lies in recruiting and training.

Another is the slightly puritanical streak which runs through the firm's culture and history. Another is just how many strongly successful leaders at Goldman Sachs were (and are) democrats or signatories to "soft" social policy - Rubin, brilliant risk arbitrageur and eventual adviser to Clinton is probably the standout here.

The book is a must and absolute testament to the excellence of "Charlie" Ellis. Is he biased? He is absolutely a fan - of that there is no doubt. But rather than sycophantic adoration, Ellis is an admirer of success and excellence. The three themes I drew from his analysis were the crucial significance of unremitting commitment to clients, constant internalisation and management of risk and ability to continually adapt through making the toughest of decisions.

The one thing Ellis does not make perhaps as explicit as it is in the Goldman Sach's story - though it lurks on every page - is the more than century long deployment of a relentless but carefully managed aggression which has been key to success.

Where is the editor? This reads like a student essay trying to make it as long as possible (the word 'very' used 3x in one paragraph on page 140) same paragraph..."we met many interesting people and interesting families". No wonder this book is 742 pages. On top of the fact that this guy glorifies everything Goldman does. STAY AWAY from this book.

It's disappointing that the book is poorly written and poorly edited. There is much interesting information about the history of the firm but, because of various writing and editing deficiencies, the book is hard to read. For example, the writer starts mentioning a person as though we know who they yet there is no previous mention of him. He starts talking about Henry Goldman as though we know who is, yet no where is it mentioned that he is Marcus Goldman's son. Many sentences are so eliptical that one has to read them two or three times to understand what the writer intended. In addition, decades of time pass in the story and we get little information about what happened during that period. Many of these problems would have been helped with good editing. Sorry this important story is not better told.

A bit repetitive on some points, and way too much of a PR puff piece than a critical history of an important firm. Read this in tandem with cohan's money and power and have a more balanced view of the firm overall. There are some important management perspectives gained, so a worthwhile read overall, but still disappointing.