Last winter, Bloomberg published a much-discussed account of belt-tightening in the brave new economy. Notable for featuring Wall Streeters, not Walmart greeters, the suffering depicted was sepia-toned. One poor soul described driving all the way to outer Brooklyn to buy discounted salmon, another the indignity of doing his own dishes, and a third dismissed his Porsche 911 Carrera 4S Cabriolet as “the Volkswagen of supercars.”
Among the lingering calamities of the financial crisis, the sorrows of young bankers don’t exactly cry out for remedy. This is not Les Miserables but the hardships of the haute bourgeoisie. Yet the afflictions of affluence are afflictions nonetheless, and this particular one can teach us an awkward but essential truth in the ongoing debate over income inequality—if we can only bear to listen.
Consider the inadvertent testimony of Greg Smith. Doubtless you have heard of Smith, who vaulted to fame last March with an op-ed in The New York Times published the day he parted ways with his long-time employer, Goldman Sachs. The piece reads like the précis for some revelatory work. During his 12 years at Goldman, Smith says he had seen the interests of the customer “sidelined” in favor of an approach that sees the bank “ripping their clients off.” Their trust is taken advantage of, their naïveté exploited, their ignorance scorned. Goldman is no longer the client-centered institution Smith joined after college, and blame is placed at the feet of the bank’s leadership, whom he accuses of having “lost hold of the firm’s culture on their watch.”
Given the anger directed at Goldman in the aftermath of the financial crisis, Smith knew that his op-ed would be greeted with some interest. Here was an insider who affirmed the bank’s bad behavior and promised to illustrate it, at length, if given the opportunity.
He was, of course—in the form of $1.5 million book deal. Published at the end of October, the attempted tell-all was widely panned for falling short of its promise. The criticism is not unfair, though the publisher shares blame for rushing to print a work that would have benefited from sharper focus and the self-criticism of sustained introspection. Why I Left Goldman Sachs is Greg Smith’s first book, and its 250+ pages were written in less than seven months. If it feels like a first draft, that’s almost certainly because it is, and all parties (except Goldman, perhaps) would have benefited from the careful editing that made the original op-ed an astonishing success.
But that does not mean the book doesn’t have an intriguing story to tell, if one that is also unintended. The chronicle form lends itself to the task of writing an inevitably personal book on extremely short notice, and while Smith might have done without the convenience, preferring instead to dwell on the conflicts of interests he spends too little time on in the book, he ends up presenting a timely self-portrait of a rich man in a much richer man’s world.
When he left Goldman Sachs, Greg Smith had been making in the ballpark of $500,000 for at least six years, and the book provides ample evidence of the consolations afforded the young bachelor by his considerable income. There are the fine restaurants Smith frequents (“we went to the Frisky Oyster in Greenport”), the premier sporting events he attends (“I was lucky to be courtside in Paris to see Rafael Nadal beat Roger Federer for his sixth French Open title”), and the fashionable neighborhood he moves into when he transfers to London (it “had become trendy because Gwyneth Paltrow and Chris Martin (of Coldplay) had moved there”). There is even the 30th birthday dinner he throws for himself and his then-girlfriend (“at Freeman’s, a place with a vintage speakeasy vibe”) for which Smith graciously picks up the tab (“[t]he bill came to over $3,000, but I was happy to do it—I like treating people”).
Smith never reveals how much he has salted away for hard times, but it is not enough to stave off a minor panic when the financial crisis hits. Faced with the possibility of post-Goldman penury, he describes not one but two instances of taking public transportation, noting as an aside that “[m]any Wall Streeters can spend north of $10,000 a year on taxis alone.” The accounts are rueful—“I saved sixty bucks”—but juxtaposed with his birthday largesse, which is subsequent to these accounts and conspicuously so, a central preoccupation of the book comes into relief. The problem is not having money, but not having nearly enough.
If you take a step back, this seems absurd. From the vantage point of most Americans, not to mention the broader world, Greg Smith is rich. Indeed, according to the U.S. Census Bureau, the median household income between 2006-2011 was in the range of $50,000, or roughly one tenth of what Smith was making during that time. But Smith is not most people, and he doesn’t have the luxury of stepping back without also stepping beyond his social world. That world includes people who are not only making double or triple what Smith made, but also individuals like Gary Cohn, the president of Goldman, who made just over $53 million in 2006, or more than 100 Greg Smiths.
As a financial matter, being rich in a much richer man’s world has a tendency to bury you in what Cornell economist Robert Frank calls an expenditure cascade. In a paper he co-authored with Adam Seth Levine, Frank starts from the curious fact that “aggregate savings rates have fallen even though income gains have been largely concentrated in the hands of consumers with the highest incomes.” He explains this by showing that that wealthy scale their consumption not by the expenditures of the broader public—a benchmark that would leave their bank accounts flush—but by the people at the very top of their social group. This is the time-honored tradition of keeping up with the Joneses, but when the Joneses can afford 100 times what you can, the race can lead you right of a cliff.
Still, while Smith’s need to make more money occasionally announces itself by way of some pressing financial concern—on same day the stock market bottoms out, Smith splits with his long-time girlfriend who had been “adamant that she didn’t want to work when she had kids”—he is well aware that his frustration has less to do with how much he actually makes than what that number says about him. Reflecting on the significance of “bonus day,” the day in December on which bankers meet with their bosses to discover the full amount they will make for the year, Smith admits that there is “an absurd amount of emphasis placed on these meetings. For many people, the session determined a person’s entire self-worth.” And yet, he continues, “however arbitrary the number handed down by the partner might be, there was also a real poignancy to the bonus meeting. Many people had spent the year working eighty-five-hour weeks, killing themselves for the firm. They expected something in return.”
By late 2011, Smith had come to expect more from Goldman than Goldman was willing to give him. At his last bonus meeting, he requested a promotion to Managing Director and a million dollar payout. Both requests were denied.
Smith does not disclose these details in his book—they were leaked by Goldman to discredit him in advance of its release—but they come as no surprise to anyone who reads it. They merely underscore the salient psychological fact of Greg Smith’s experience and the essential lesson of income inequality among the economic elite. Namely, that beauty is in the eye of the beholder, but wealth is a matter of whom you behold.