Mandis describes how all this changed because of the constant competitive pressure, the demand for growth and profit, and the occasional crisis. For example, 1994’s hundreds of millions of dollars in trading losses quickened the transformation of Goldman Sachs’s culture, as it required partners to dip into their bank accounts to recapitalize the business. Many partners chose to retire, considered a selfish move among those who remained. Scores of new partners were appointed, and the power dynamics of the partnership were disrupted.
In the resulting turmoil, Jon Corzine, then an aggressive trader, demanded and got the title of CEO. He pushed for global expansion and argued for taking the firm public. Goldman Sachs became a limited liability company, a move that gave partners less skin in the game and made the firm more hierarchical, with an executive committee that wielded considerable power. According to Mandis, the collegial culture of the firm was significantly damaged during the 1990s, a process that continued as Corzine was forced out in a palace coup and replaced by Hank Paulson in 1998, and the firm went public in 1999.
The Goldman Sachs IPO made its partners fabulously wealthy. It also eliminated the need for them to supply investment capital and assume risk. Meanwhile, the entry of commercial banks into investment banking, and the rise of trading relative to investment banking within the firm, created a sea change in the business. Goldman’s clients were now more likely to be private equity firms and hedge funds than to be corporations and mutual funds. These new clients viewed Goldman Sachs as a counterparty to their trades, not as a trusted advisor. The core of the business shifted from relationships to transactions. The firm, says Mandis, was becoming short-term greedy.
Mandis does a meticulous job of teasing out the effects that the changes in Goldman Sachs’s business have had on its culture and values during the past 20 years. He argues that its financial success notwithstanding, Goldman Sachs failed as a moral enterprise. In making decisions today, he says, the firm is guided not by its values but rather by what its lawyers judge legal. For its sympathetic yet unflinching study of a firm and an industry that has come to epitomize what is problematic about Western capitalism, What Happened to Goldman Sachs is hard to beat.
Most firms realize that they are failing only when their financial results collapse. By then, they are in deep trouble, and many are unable to learn from their mistakes and recover. In Brick by Brick: How Lego Rewrote the Rules of Innovation and Conquered the Global Toy Industry, David C. Robertson, practice professor at the Wharton School of the University of Pennsylvania, and Bill Breen, former Fast Company senior editor, tell the story of how Lego bucked the odds.
Robertson and Breen trace Lego’s rise from the decision of a carpenter to begin making wooden toys in the remote farming town of Billund, Denmark, in the 1930s to its current position as an iconic brand and a leader in the global toy industry. Unsurprisingly, the rise was not without its dips: By the mid-1990s, Lego had become a “heavy institution” that had lost its dynamism and sense of fun, according to the founder’s grandson, former company president Kjeld Kirk Kristiansen. Further, the growth potential of its portfolio of products was on the wane: The last of Lego’s patents had expired in the late 1980s and new technology was changing kids’ habits. When Lego’s leaders finally woke up, they were shocked to find themselves running an analog enterprise in a digital world.