ROBERT SIEGEL, host:
More now on the company that Mr. Paulson is leaving to become Secretary of the Treasury, Goldman Sachs. Tom Easton, the chief financial writer for The Economist, joins us from New York City. He's written about Goldman Sachs and, Tom Easton, I guess you should begin by defining what this is, it's a Wall Street investment banking firm that went public a few years ago.
Mr. TOM EASTON (The Economist): Yes, it went from being a highly successful, highly secretive investment partnership into a highly successful, highly secretive, publicly traded investment firm. And very few people really understand how Goldman does what Goldman does. I mean, it is the mystery on Wall Street.
There is no more exciting moment every quarter than when Goldman unveils its earnings. First so that all its competitors can see how much money it makes, and generally it makes more than they can possibly imagine. And secondly if there's any clue to how they made all the money that they did and that always leaves as many questions as answers.
SIEGEL: Give us a measure of how successful Goldman Sachs has been in recent years.
Mr. EASTON: Goldman Sachs's return on equity is upwards of 40 percent which is just a staggering number and even in the depth of the recent market slide, its return on equity never went below ten percent and these are just terrific numbers. People who go to Goldman and achieve what is known in the firm as a participating and managing directorship become richer than people can possibly imagine every becoming. I mean this is the most successful, to be hired by Goldman, to succeed at Goldman, to rise at Goldman is to be on one of the most extraordinary career tracks in the history of the world.
SIEGEL: There's a fact in your piece in The Economist about Goldman Sachs that is stunning. It's about the interviewing process that goes on before people get hired and there's a vice chairwoman of the firm who, you write, was interviewed 150 times before she was hired.
Mr. EASTON: You know that is thought to be a record, but no one is quite sure whether it really is a record because there's a possibility that other people have been interviewed even more intensely. I mean this is, you know, Goldman doesn't do everything right. It makes a lot of mistakes. And Goldman doesn't hire everyone who's particularly bright. Lots of other firms do as well.
In fact, when you have a firm that does so many interviews to hire someone the possibility is that great people will be knocked off in the process or, in fact, great people won't put up with it and they'll just go to another firm. So there's plenty of talent in other places.
That said, Goldman has long been legendary for the intensiveness of their recruiting process, for the thoroughness of their interviews and for the bear hug that you get once they want to hire you. I mean you will be deluged by telephone calls once they decide that you are the person that they want. You will be called by everyone in the division that you are going to. If it looks dicey, Mr. Paulson himself, notwithstanding the 20,000 employees that Goldman Sachs already has, will telephone you and try to get you to come and the result is even if they didn't intend to go there initially when the first offer came, they tend to go there anyway because the seduction process is just so overwhelming.
And now as you also saw in my piece, working there is not easy. I mean once you go to Goldman it is an extraordinary commitment of your life. People at Goldman return emails all night long, I mean if you send a, if they get a voicemail or they get an e-mail, they are expected to send a response and the method that they use in Goldman Sachs for emails is you can send an e-mail simultaneously to ten, 20, 30, 40, 50 people and they are all expected to respond and you are expected to respond to them.
Mr. Paulson himself, every quarter, goes through a long voicemail to all employees about how the quarter did, and there's a special function I think on the Goldman voicemail things that prohibit you from deleting Mr. Paulson's comments until you have listened to them in their entirety. So this is a firm that requires unbelievable self-engagement.
SIEGEL: Given the mystery that is Goldman Sachs, does it ever occur to financial writers in New York that there might conceivably be an Enron problem there? That is, a business so complicated run by such smart people that to our astonishment, maybe it doesn't make any sense if you actually knows what goes on there.
Mr. EASTON: I would say that occurs to people on a minute by minute basis and the only thing that would make you feel better about that is, A) it sells at, what, 13 times earnings. Enron sold at 99 times or 100 times earnings. Now if people really thought that Goldman could consistently make the money that it is making today, it wouldn't sell at 13 times earnings, it would sell at 20 times or 25 times or 30. So there is skepticism about Goldman.
Now in terms of making it up, the Wall Street firms deal with Goldman every day and they question it and, you know, there is some sort of notion of counter party accountability going to lease with them. They do put out voluminous financial filings, but you know, in other ways, you're right, I mean, there is a concern there.
SIEGEL: Mr. Easton, thanks a lot for talking with us.
Mr. EASTON: You're welcome. Thank you for having me on.
SIEGEL: That's Tom Easton, who is chief financial writer for The Economist, talking with us about Goldman Sachs. Henry Paulson, the head of Goldman Sachs, has been nominated to be the next Secretary of the Treasury.
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