The Partnership | Charles D. Ellis

Summary of: The Partnership: The Making of Goldman Sachs
By: Charles D. Ellis

Introduction

Dive into the intriguing history of Goldman Sachs, one of the world’s leading financial institutions, in ‘The Partnership: The Making of Goldman Sachs’ by Charles D. Ellis. This summary takes you on a journey from Marcus Goldman’s humble beginnings as a Bavarian immigrant with no staff and little capital, through generations of family leadership, and touching upon the ups and downs the company has faced. Discover how Goldman Sachs revolutionized the investment banking industry, the importance of ethics and client service, and the firm’s ability to weather economic storms.

The Rise and Fall of Goldman Sachs

Marcus Goldman, a Bavarian immigrant, started his own business by purchasing and selling mercantile promissory notes. Over time, his business became the nation’s largest dealer in commercial paper, and by the 1890s had entered investment banking. With an eye for redefining and reinventing their business, Goldman Sachs entered a mutually beneficial partnership with Lehman Brothers. However, World War I led to a downturn in their relationship, and with America’s entry into the war, Goldman resigned, withdrawing his capital and creating a rift that still exists between the Sachs and Goldman families. Goldman’s departure ended the firm’s lucrative partnership with Lehman Brothers. The Depression and World War II proved to be tough challenges for the company. In 1927, the firm brought in Sidney Weinberg as partner. Hungry for growth, the firm created the Goldman Sachs Trading Corporation, which led them to invest heavily in the American Trust Company of San Francisco, ultimately leading to one of the century’s biggest financial disasters. Weinberg was tasked with restoring the firm’s financial stability and good name.

The Legacy of Weinberg at Goldman Sachs

Born and raised in Brooklyn, John Weinberg possessed a streetwise intellect and shrewd business sense that set the foundation for Goldman Sachs’s growth in the 20th century. Emphasizing integrity, honesty, and exceptional customer service, Weinberg maintained legendary interpersonal skills and made invaluable relationships with high-profile clients like Ford and General Electric. His determination paid off when he orchestrated the then-largest IPO in history, which opened doors for Goldman Sachs to become one of Wall Street’s most esteemed underwriters. Despite not benefiting much from the Ford deal, Weinberg’s leadership brought Goldman Sachs to the forefront of the financial industry, and his recruitment of top-notch talent contributed to the firm’s continued success.

The Unstoppable Work Ethic of Goldman Sachs’ Former CEO

The book discusses the life and career of Sid Levy, former Chairman of the New York Stock Exchange and Managing Partner of Goldman Sachs. Known for his exceptional mathematical abilities and tireless work ethic, Levy transformed the firm’s reputation by spearheading its entry into the “block-trading business.” Despite his tough exterior, Levy remained loyal to his employees and led by example, arriving at work at 7 a.m. and returning phone calls until midnight. His dedication to philanthropy was equally remarkable, as he served as an outside director for numerous corporations and donated generously to charity. Levy’s work ethic became the model for Goldman Sachs employees, who took pride in being driven to succeed like him. However, he was also opposed by senior management who preferred a focus on investment banking over trading. Levy’s story serves as a testament to the importance of hard work, perseverance, and loyalty.

Goldman Sachs: A Story of Crisis and Reputation Restoration

In 1970, Goldman Sachs faced a devastating loss when Penn Central, a major client, declared bankruptcy and sparked a lawsuit for $87 million. The firm was accused of failing to conduct due diligence and inform investors of the real value of Penn Central. Despite losing around $30 million and facing negative publicity, Goldman Sachs bounced back by agreeing to an SEC consent decree that regulated its future dealings in commercial paper and restored its reputation.

The Goldman Sachs Tradition

Goldman Sachs established a culture of exceptional client service and teamwork in the 1950s under the leadership of Ray Young. Known for his loyalty and straightforward approach, Young fostered an environment where salespeople were paid well and prospective hires were rigorously interviewed. In the 1970s, the company began an intensive training program to test employee commitment and improve sales skills. These efforts paid off, as Goldman Sachs emerged as a leading broker for many corporations. The book argues that steady pursuit of core beliefs, rather than dramatic events, drives significant organizational change.

Want to read the full book summary?

Leave a Reply

Your email address will not be published. Required fields are marked *

Fill out this field
Fill out this field
Please enter a valid email address.
You need to agree with the terms to proceed