Malcolm Gladwell, in the New Yorker, contemplates the history of the famous firm laid out in Charles Ellis’s The Partnership: The Making of Goldman Sachs, and connects the current Wall Street debacle to the wrong kind of leadership.
The rags-to-riches storyâ€”that staple of American biographyâ€”has over the years been given two very different interpretations. The nineteenth-century version stressed the value of compensating for disadvantage. If you wanted to end up on top, the thinking went, it was better to start at the bottom, because it was there that you learned the discipline and motivation essential for success. â€œNew York merchants preferred to hire country boys, on the theory that they worked harder, and were more resolute, obedient, and cheerful than native New Yorkers,â€ Irvin G. Wyllie wrote in his 1954 study â€œThe Self-Made Man in America.â€ Andrew Carnegie, whose personal history was the defining self-made-man narrative of the nineteenth century, insisted that there was an advantage to being â€œcradled, nursed and reared in the stimulating school of poverty.â€ According to Carnegie, â€œIt is not from the sons of the millionaire or the noble that the world receives its teachers, its martyrs, its inventors, its statesmen, its poets, or even its men of affairs. It is from the cottage of the poor that all these spring.â€
Today, that interpretation has been reversed. Success is seen as a matter of capitalizing on socioeconomic advantage, not compensating for disadvantage. The mechanisms of social mobilityâ€”scholarships, affirmative action, housing vouchers, Head Startâ€”all involve attempts to convert the poor from chronic outsiders to insiders, to rescue them from what is assumed to be a hopeless state. Nowadays, we donâ€™t learn from poverty, we escape from poverty, and a book like Ellisâ€™s history of Goldman Sachs is an almost perfect case study of how we have come to believe social mobility operates. Six hundred pages of Ellisâ€™s book are devoted to the modern-day Goldman, the firm that symbolized the golden era of Wall Street. From the boom years of the nineteen-eighties through the great banking bubble of the past decade, Goldman brought impeccably credentialled members of the cognitive and socioeconomic Ã©lite to Wall Street, where they conjured up fantastically complex deals and made enormous fortunes. The opening seventy-two pages of the book, however, the chapters covering the Sidney Weinberg years, seem as though they belong to a different era. The man who created what we know as Goldman Sachs was a poor, uneducated member of a despised minorityâ€”and his story is so remarkable that perhaps only Andrew Carnegie could make sense of it.
Read the whole thing.