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The Real Smartest Guys In The Room. Compulsive, Fascinating, Damning
on 4 May 2011
Try to get past the snake on the cover and the subtitle - there's nothing lazy or simplistic about this book. It's an amazingly complete look at an institution that says an awful lot about modern capitalism and how we got into this mess.
The most striking thing about the book is how much of it there is - almost 700 pages in the print edition. Mr Cohan has done a lot of research, interviewed an awful lot of people and come up with a lot of new facts. It's not for the faint-hearted - as a finance nerd I enjoyed reading for hours on how Goldman turned the subprime situation from a disaster to the foundation of global financial dominance, but many will have less patience.
The first half of the book covers the earlier history of the bank, and I'll confess I skimmed some of this. Mr Cohan uses this to build up to the central theme of what makes Goldman different from other banks; then, covering the period from 1998 on, the story changes gear and it becomes clear what we're hearing is based on verbatim accounts from interviews (and a lot of material that was subpeonaed by the US Congress).
Crucially, Mr Cohan has the skill to appreciate two things - in my experience it's rare for people to get both : just how good Goldman Sachs are at what they do; and just how few people outside the bank benefit from what they do. There's something deeply depressing about the maths genius (who found the Math Olympiad "laughably easy") who now spends his days building models to help good traders exploit suckers. Mr Cohan's refusal to follow the cheap sneer route makes the book actually all the more damning about our financial system.
Another of Mr Cohan's books "House of Cards" - covering Bear Stearns - makes an ideal companion to this book, covering as it does the *worst* of the investment banks, and the first to go under. If I had to define one thing about Goldman that defines it as a model of effectiveness it would be its trust in its people and hence its willingness to listen to relatively junior people, like those who picked up on the subprime meltdown and were allowed to build a bank-saving position. At the same time, the top men (and they were all men) at Bear were distracted by politicking and went under.
Yet even Goldman's skills were not enough, and the account of the rescue of the US financial system - as seen from inside its biggest beneficiary - are a compelling look at who controls our economy.
Mr Cohan writes well, has a nice sense of humour, and clearly a huge appetite for hard work. He bends over backwards to ensure he has the "Goldman line" on many of the accusations thrown at the bank, but shows no signs that I detected of having been "captured". If you read this book, you'll come away with a great sense of what makes a strong financial institution, but also a graphic account of how we created the environment where trading skills and political connections - rather than wealth-creating innovation - make a person fabulously rich.