We don't know if you've heard, but things are different in finance these days.
Platform technology has revealed itself to be just as effective at losing money as human beings and tech has fundamentally uprooted trading desks around the world. Bots and algos run the show, big FiSi firms are doing CDs and no-fee trading apps for smartphones. Truly, we are through the looking glass and no one is safe.
Goldman Sachs is on track to pay its employees the lowest of any year in at least the past decade, and executives warned that the trend will continue as software consumes more of the firm’s businesses.
The bank set aside 35% of its revenue for staff compensation and benefits so far this year, the lowest since at least 2009, according to an analysis of Goldman’s data.
Put another way, the average Goldman employee earned $246,216 for the first nine months of 2019, less than half the $527,192 at the same point in 2009. That figure is calculated by dividing the bank’s compensation pool by the number of workers.
This looks like a shocking figure, but it really isn't. It's easy to close your eyes and remember when Goldman was impervious to the bad mojo of the world, but those days are over. In fact, if you look at Goldman's recent past, 200 West Street has been more rocked by the sea change than anyone.
All the leaders are new, almost all the rainmakers we knew are gone and DJ D-Sol has gone full Stalin Politburo on his partnership group. Most of the stories you see about Goldman today are about big-name departures, Marcus and the AppleCard. While some of you were sleeping, the most well-paid group of premier talent on Wall Street has become a bunch of middle-aged big timers and a ton of kids being paid way less to create the future.
But now the guys running Goldman have a big question to answer: What if their vision for the future sucks? Saving a metric shit-ton of money on salaries now will definitely give you room to breathe while getting the AppleCard going, getting a stranglehold on the terrifying new landscape for tech M&A/IPOs, and making Marcus work. If David Solomon's Goldman [a cool hip i-bank that does some light trading just to keep it swaggy] is going to work, those things all have to kick on within the next three quarters. The WeWork IPO was a painfully instructive to all the Wall Street cool dads, DJ D-Sol included who got hit to the tune of $80 million. But what's to say that Marcus and AppleCard aren't just mini-WeWorks waiting to implode? Definitely not longtime Goldman ur-tech maven Marty Chavez who is leaving at the end of the year, or Goldman HR guru Dane Holmes, who is also now leaving at the end of the year to go run a tech company.
Goldman Sachs is still a $75 billion institution that sits astride an immense position of power in the global economy, and it has nothing but money to throw at figuring out what's next, so it's comical to think that there's a feeling of crisis anywhere in the firm. That said, it's going to be a while before things shake out and data like lower spending on salaries isn't greeted with some circumspect questioning of why Goldman Sachs isn't paying people like they work at "Goldman Sachs."