In the current issue of Fortune Magazine, I read an article on the success of Goldman Sachs (coincidently, ranking #10 as America’s Most Admired Companies). The new CEO, Lloyd Blankfein, is tasked with continuing the positive momentum. The article mentions that Goldman has outshined its competitors the “way few companies ever do”. Specifically, while other companies confessed to billions of dollars of losses amid the collapse in the mortgage market, Goldman’s revenues famously grew, jumping 22% to a record $46 Billion as profits hit a record $11.6 Billion”. Furthermore, their 2007 bonus pool of $20.2 Billion dollars could buy Bear Stearns. Needless to say, they are doing well in a time others are desperately looking for cash.
What I found interesting was that, as one competing money manager stated, “how can you be right so much?” This was especially interesting since some of Goldman Sachs alums are in powerful positions (Hank Paulson- Treasury Secretary, Joshua Bolten- White House Chief of Staff, Jon Corzne- NJ Governor, Robert Zoellick – head of World Bank, etc..) Goldman has the potential access to information that others do not; therefore, they can make better decisions. Is this wrong (insider information)? Their competitors could also have access to this information as well, through their own alumni association? So is Goldman just better at what they do (with or without this information) or is there something more to it? When individuals can benefit from incentives that are in the eight figures, I just wonder how much skill and intelligence really factors into it.
Article: http://money.cnn.com/2008/03/02/news/companies/mclean_goldman.fortune/index.htm
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