Ingolv T Urnes: The Goldman Memoirs – The Great Finale

    On Trust, Speed and Risk (Management)

    Reading about Goldman in the popular press in the nineties and the noughties, you may have thought this is a big gambling operation. Although there were missteps (but fewer than most comparable institutions made), I think part of the secret sauce was dialling up and down the balance between empowerment and controls which enabled Goldman to take advantage of new opportunities faster than most.At front of house, staff were given a lot of freedom and the ability to act as entrepreneurs. Behind the scenes risk management was most of the time very effective.

    Appearing in front of the Firms Commitments Committeeor Investment Committee were among the most intense moments of my time at Goldman. To embark on large or tricky projectswith potential for conflicts or reputational risk, or to commit the Firms capital,you would have to answer to the committee. This could – if you had to come back – take weeks, but it could also take hours.

    Agility defined?We were advising an acquisition. It was Friday morning, the deal was signed a month ago and completion (when you ‘pay’ a few hundred million dollars) was the coming Monday. There was only one small $50 million dollar problem. A local bank the customer had insisted on using part of the financing – they had been involved for a month – could not get their lending committee together because two members were skiing. Goldman mobilises its machinery, approvesand provides a $50 million dollar loan overnightthe deal completes (and Goldman takes another little fee).

    Lessons for 2021: You can be agile and minimise risk at the same time if the best/most senior people are actively involved in risk management.

    KYC Goldman Style: Vetting clients using former FBI agents

    As Know-Your-Customer (KYC) and anti-money laundering regulation started to emerge in earnest in the nineties,vetting your clients obviously became more important, but for Goldman it also became exponentially more complex given the size of its geographical reach and service portfolio.

    At the time, I thought the firm was just taking it too far. Goldman had hired a team of investigators led by a former senior FBI agent in New York. When you are in the business of financing leveraged buy-outs, particularly outside the US, you come across a fair share of gutsy entrepreneurs with interesting connections.

    My sources tell me that yourpotential client has had dealings with organised crime in [country in southern Europe] droned the former FBI agent on the conference calls with the Investment Committee. While at the time, by heart sank – the deal was dead, and I was not pleased to see the same deal done by one of our European competitors – with age comes wisom. In retrospect I see how right Goldman was in its approach.

    Lessons for 2021: Walking away from potential projects is ‘living’ your business principles and is sticking to your strategy

    Important people only speak to important people, are you important?

    Sellingat Goldman was interesting. Supposedly one of the commandments of one of the heads of IBS (Investment Banking Services) – in essence the sales men and women – was: ‘Important people only speak to important people, are you important?Important here was not celebrity-importance but whether you had something meaningful or strategically relevant to communicate.

    As the Firm grew, I observed two stands which today still make a lot of sense. One was the growth of industry groups, dedicated teams delivering ‘all’ services to a vertical. The other was the introduction of Super League clients: Each account manager’ basically had a very small group of clients – maybe as few as 5 or 10 potential and existing clients that he or she looked after.

    The result? A small number of important’ (strategically relevant) relationships and participation in a large number of big transactions.

    Lessons for 2021: To really understand your customers you must have a sharp focus, you can’t serve them all

    ‘Doing God’s Work’I think‘enabling people to succeed is better’

    The media was rightly having a field day ridiculing Lloyd Blankfein, CEO of Goldman at the time,for proclaimingthat banks [Goldman] serve a social purpose and are doingGod’s work.”

    Times have changed. If in the nineties and noughties it was sufficient to get smart, hard-working people to work all night to bethe best and winning and making lots of money – that formula does not work now.

    At psKINETIC, the purpose is not to do God’s work. Our purpose is simply to enable people – our customers, partners, staff and the community around us – to succeed. Everyone defines success differently; to us it is about the journey of learning new skills, designing and building systems that free up people to do the most meaningful, most satisfying work.

    Personally, I worry that too few people are given a fair chance to succeed in life. I have been incredibly lucky: I learned important lessons during 10 years at Goldman. I have been lucky to team up with an incredible bunch of people at psKINETIC. I am grateful for the trust that clients have placed in us. I am excited that as psKINETIC continues to grow, we will be able to have a bigger positive impact on people and the community around us. In 2020 we were proud support a charity supporting students from disadvantaged backgrounds to access top universities. In 2021 we’re increasing our investment in community contribution initiatives.

    Ingolv T. Urnes
    Chairman of psKINETIC

    Notes

    For more on Goldman Sachs and the business principles see

    https://www.goldmansachs.com/our-firm/history/moments/1979-business-principles.html

    For more on psKINETIC and our values see https://pskinetic.com/about-us/about-pskinetic/

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    The Goldman Memoirs

    Under the hood of one of the most prestigious investment banks in the world…from one of their own

    The Goldman Memoirs

    Under the hood of one of the most prestigious investment banks in the world…from one of their own