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Buffett, Goldman and the Past is Prologue?



April 20, 2010 – Comments (3) | RELATED TICKERS: GS , BRK-A , BRK-B

I'm currently reading The Snowball (slowly, it is very long) and as luck would have it, over the weekend I started getting into the chapters on Warren Buffett's dealings with Salomon Brothers, which clearly was interesting given what transpired Friday with Goldman Sachs (and Buffett's stake in it). And my goodness, what eerie parallels, including the motivation to bring on Buffett's reputation as well as Buffett's ability to make a deal that would help bolster a firm's reputation although in fact, he's actually getting a deal that would have little downside for him.

My reading last night went further into the Salomon Brothers mess that Buffett found himself embroiled in, as well as unsympathetic officials at the SEC dubbing Salomon "rotten to the core," a line that still resonated with me this morning. I mean, what might that sound like? Could a "vampire squid" be described thusly? (No offense to the actual vampire squids in the wild, of course.) Haha.

Then lo and behold, this afternoon I see The Corporate Library blog has a post today by Nell Minow, which also links to a video discussion of the Goldman situation that ends with the summation of... "rotten to the core."

Well I love synchronicity. ;) Although I guess you could also call it lucky timing having to do with my reading speed combined with whatever other often non-productive stuff I do with my spare time.

I find it interesting that the same things-- or at least eerily similar things -- happen over and over again and the lessons don't ever seem to get learned, despite the fact that most of us would wonder, why not? As for Warren Buffett, well, I have great respect for him (of course, and I've made that clear in many of my pieces). I do love that he often philosophizes on the ethics front, pointing out some folks might not metaphorically have all their important accessories when the tide goes out, seeks out great businesses, and so forth. But this kind of reminds me of why I freak out at the concept that some people might have unreserved, unconditional admiration for the decisions of others and maybe not question some decisions. Clearly even the smartest folks do make mistakes (of course, we are all human!). I know I do, sometimes boy, do I ever, but the assumption Warren Buffett couldn't make mistakes is a pretty faulty one. I have no idea whether this thing with Goldman will end up a tempest in a teapot or not; some people seem to be arguing that it will. But shades of things that have in fact transpired before -- where lessons should have been learned and some of the general themes seem painfully familiar -- are interesting to say the least. 

3 Comments – Post Your Own

#1) On April 20, 2010 at 9:36 PM, Bloefeld (< 20) wrote:

For the most part I agree with you. However at this point there are allegations of some sort of fraud and nothing more. 

 My assessment is that the charges are more politically motivated than any other single consideration.

 That being said, in 5 years either the government will have settled with GS or GS will beat them in court. The facts that are known do not I think rise to criminality or perhaps even poor judgement.

 Rather I think that business people often allow short term decisions to overwhelm their own moral standards. These seem to become more apparent when the poop hits the propeller, and go unnoticed when the party is going strong.



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#2) On April 20, 2010 at 10:41 PM, TMFLomax (89.62) wrote:


Points well taken, and true, these are just allegations at this point. And also, I do see the point these could be politically motivated (and of course, the SEC is out to improve its own reputation too).Then again, I'm not sure these folks at Goldman and a lot of the Wall Street firms have given much reason for people to trust after all that's gone on (and what went on in the past). Maybe I'm jumping the gun to draw too many comparisons but I guess we'll see.

I agree about the short-term decisions overwhelming moral standards and that nobody wants to be the "unpleasant" person who stands up and says something's wrong when the party's going strong (apparently a lot of the regulatory agencies didn't want to either for whatever reason, in some cases). Makes for big messes to clean up though and I really do think people need to start trying to make the ethical decisions to begin with, as difficult as those might be.

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#3) On April 21, 2010 at 4:31 PM, TMFLomax (89.62) wrote:

And maybe an interesting related note, an article by AP saying rivals smell blood.

Quote from an unnamed source in the article: "'People have been known to market against Goldman by saying things like: 'Look you never really are a client of Goldman. The only client of Goldman is Goldman,'" said a senior U.S.-based investment banker who declined to be named."

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