Gustavo Ballvé on November 3rd, 2011
Corporate Governance, Diversified financials, Food for thought, Home, Industries, Mental models, Portfolio Management, Risk management

According to this article by Andrew Ross Sorkin (author of “Too Big to Fail”), that’s the line MF Global insiders used when questioned why they went along with Jon Corzine’s trades: “He was from Goldman Sachs”. Thus Mr. Corzine, former Goldman Sachs CEO and recently-defeated candidate for the post of governor of the state of New York, guided MF Global to a very public, very messy bankruptcy. What’s worse, it has just been confirmed that hundreds of millions of dollars of client money may be missing.

“Culture eats strategy for breakfast”: if that was MF Global’s risk management culture, not even the world’s most powerful, accurate, on-time risk management systems – programmed and run by the world’s best minds – could save them. Because “he was from Goldman Sachs”, because of the “Goldman halo effect”, bad decisions were overlooked, too much risk was piled on, and a market shakeout took the firm down.

We wrote just days ago, regarding the “key people” aspect of an investment or company (or whatever): “Ultimately, in investments or revolutions, it’s all about the key people (…) – it’s vital to understand their real motivations, aspirations, personalities and incentive/moral systems. Not what they say it is, what it really is.” (we added emphasis for this post). Finding out about a given company’s true culture (which tends to emanate from its key people anyway, at least over time) is just as difficult and time consuming, and as we can see in this example, just as important.

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