The Goldman Sachs Civil Suit

I usually don't like to get too far into disecting the news on this blog, but the decision to file a civil suit against Goldman Sachs for fraud is very unique. The firm brokered tons of deals where they sold complex CDOs filled with dangerous mortgages that would eventually default. What makes all this so incredible is that Goldman could create and sell these packages for huge money and have them all insured through AIG to hedge any potential risk. We know how that worked out for AIG. It's amazing how such a small percentage of your total business can take-down an entire company when things turn sour. Sure, Goldman also hurt for a few quarters in the heart of the meltdown but they have turned the corner quite easily since. AIG, on the other hand, needed a ton of money from the U.S. Government and still may not make it.

So, in the heat of the growing CDO/housing bubble, a few investors started investigating the possibility of shorting these securities and the firm allowed that too! They were essentially on both sides of a deal in which they knew at least one particpant was going to lose a lot of money. Being involved in the sale and the shorting of the same asset means one of your clients is going to make money and the other is going to get killed. It's a zero sum game. Goldman was so oblivious (or didn't care) in the beginning that they let the shorters cherry-pick the CDO's they wanted. These guys went after the most toxic of the group and made BILLIONS.

But, is Goldman really at fault here? There are definately some moral obligations that were not lived-up to in this scenario, but can you place the entire blame on the firm? I don't think so. Times were too good and large investors were willing to buy anything. You have to do some research and understand what you are buying. As a small-scale stock picker, I know how much due-diligence I do before spending any of my money on a company. I am sure the salesman were slick and the prospectus was glossy, yet I can't help but think there has to be some blame placed on the money managers looking to show-off big returns.

While it's not great to think about the pools of money the shorters made off betting against the American Dream, you have to applaud their intelligence and rebelliousness. These investors went against everything they read and heard on a daily basis and took the time to understand the asset and what comprised it. They saw a bubble and did not wait for it to pop.

The civil lawsuit could be a big turn. So many people are scrutinizing whether any sort of sustainable regulation was put in place since the financial crisis. The simple answer is probably not. Until the firms have to be completely transparant on every deal, especially complex combinations of debt, there will never be complete oversight. Now, at least, there is the possibility of financial penalties for being too good of a salesman (be it a deceptive saleman). The lawsuit may open the floodgates to many other civil suits. In the end, though, it will be business as usual for financial firms so large that they constantly have to come up with new forms of innovation to keep the revenue train moving forward.

Transition

I apologize to everyone for taking so long between posts. The last few weeks have been a time of transition for me as I moved to another position at my company. It occured to me there are a lot of business lessons to take away from periods of movement and the art of learning a new position. Here are the essentials:

Humble yourself. An ego has no place in a new job. You are making new friends and business contacts that need to respect you and your ability to function as part of a team. It takes time to earn the trust of those around you. Don't take that message as saying not to speak up and implement your ideas to make a process or product better. Simply use an extra amount of tact so you don't come off as a bull in someone else's china shop

Prepare to work on nights and weekends. You will naturally be slower than your predecessor at the new job, so understand that it will take extra time to finish a task. You need to use this time to prepare resources and study processes that will make you more efficient. Often, this will also be the time when you find problems with old systems and begin thinking of ways to optimize.

Ask questions. There is a certain understanding that goes along with being a beginner. Think of the breaks you allow a novice to a card game. The company hired or promoted you because they want to see you succeed. Understanding this basic thought should set your mind free to ask questions and seek help in excelling.

Don't loose your cool over a mistake. They are just going to happen and your focus needs to shift to correcting with minimal damage. It goes back to a general business principle: be proactive and not reactive. If there is a task you don't fully understand and no one around to ask than simply take steps to clot any damage that could occur. Your co-workers will understand, just be honest don't try to cover-up while digging yourself into a deeper hole.

Work as hard as you can. Most evaluators of future talent make a decision on the potential of new hires within weeks of starting. It is important to make that initial impression very positive and ensure that you are on the minds of the career-makers. It is certainly important to always work hard, but you first paycheck cycle could make a tremendous impact on your future.
Keep the ball moving forward and always put yourself in positions to succeed.

Be Productive

A lot of talk is devoted to the best way to be efficient and organized throughout the day. There are highly-paid professionals making money purely from teaching people to prioritize tasks and stop wasting portions of their time. For me, being productive is a personal idea and must be tailored to an individuals own ways of thinking and problem solving. With that being said, there are certain patterns used by successful people that must be examined and possibly integrated into your daily routine.

INC. profiled a few prosperous executives and entrepreneurs to see their strategies for executing the 'to-do list.' Let's look at a few highlights:

Jordan Zimmerman insists on daily phone calls. He has direct access to the heads of client companies and an understanding that they will take each other's calls to discuss strategy and progress in succinct conversations. Zimmerman also doesn't sleep and is routinely up at 3 AM to workout before starting his day (which he claims gives him energy for the day).

Kevin P. Ryan spends a great deal of time involved in HR for his company. He insists on doing a large amount of the hiring as he feels that the right people make his job that much easier. Ryan is in constant contact with his top executives and those identified as 'up-and-comers' both inside and outside the company in order to feel at-ease with delegation.

Barbara Corcoran makes her 'to-do list' for the next day before she takes of for the night using a rating system based on the importance of the task. This way, she hits the ground on the hard stuff in the morning and the day runs smoother. Corcoran also has a list of follow-ups assigned to people after each meeting to make sure that maximum time is spent executing as opposed confusion in responsibility.

Seth Priebatsch is most efficient during off-hours from work. He finds that large problems are much easier to solve when the office is empty and there is time to really think. Using the nights and weekends allow for his time to run smoothly when employees are demanding his attention.

Scott Lang always keeps large blocks of his day unscheduled. He likes to keep a cap at 50%, though admits that number can sometimes slip to 80%, to solve problems that come up during the day or be open for a last-minute client meeting or call.

While these are only a few examples, the major themes include the importance of exercise, keeping meetings to a minimum, and solving problems through unscheduled or open time blocks. Your productivity will always be based on the optimum use of your thoughts. Keep an open-mind and be on the lookout for ways to increase your efficiency but, remember, the goal is to always keep the ball moving forward any way you see fit.