The Economist

The EconomistJuly 21 st 2018 Finance and economics 55

1

L

AME-DUCK periods can last for only so

long. It was clear beforehand that a

Goldman Sachs earnings call this week

would be packed with questions about

succession. When would the chief execu-

tive Lloyd Blankfein step down? (He had

said in March he was leaving but gave no

date.) What would his departure mean for

the firm’s other over-achievers? Several

had already decamped including Harvey

Schwartz the bank’s co-president and co-

chief operating officer. Left as heir-appar-

ent was the man he had shared both jobs

with David Solomon but with no hint of

when his elevation would take place.

On July 17 th Goldman ended the specu-

lation by confirmingthe choice ofMr Solo-

mon as CEOand sayingthat he would take

over in October earlier than predicted.

Quarterly results presented that day by

Martin Chavez the chief financial officer

who is thought to be in his own succession

battle to replace Mr Solomon beat fore-

casts. Still the share price sagged. Analysts

cited fears about whether low figures for

compensation and profits from invest-

ments and lending could be sustained. In-

vestors mayalso have been left wondering

what the new management line-up means

for Goldman. Bucking the practice among

big banks to have their bosses on the line

during earnings announcements neither

Mr Solomon nor Mr Blankfein found time

to make their way to the phone. Mike

Mayo an analyst at Wells Fargo voiced a

common reaction in a report entitled

“Whyno new CEOon the call?”

The awkward announcement was an

appropriate coda to the Blankfein era. He

became chief executive of what was wide-

ly regarded as the pre-eminent financial

firm in 2006  months after Jamie Dimon

was appointed to the top job at JPMorgan

Chase which then looked less steady. Mr

Dimon has since steered his firm to a posi-

tion of strength; by contrast Goldman has

too often seemed close to faltering.

Though Goldman did well during the

financial crisis that sometimes seemed at-

tributable not to skill alone but also to

timely interventions by a government that

included formerGoldman employees. The

firm’s political connections and machina-

tions—whether real or merely imagined—

earned it the sobriquet “vampire squid”

from Rolling Stone magazine. That tickled

not onlythe OccupyWall Streetcrowd but

the Wall Street crowd. Many of Goldman’s

competitors adopted it with glee.

The post-crisis era was not as controver-

sial for Goldman but it was not as success-

ful either. Its share price has lagged behind

those of Morgan Stanley Bankof America

and JPMorgan Chase in the past five years.

Part of the blame lay with the declining

profitability of fixed-income trading the

once-lucrative somewhat mysterious op-

eration that had propelled Mr Blankfein to

the top job. Investment banking pros-

pered; and in 2016 Goldman started an in-

novative digital retail bank Marcus. But in

other respects the firm was slow to adapt

to changingcircumstances.

That fed persistent rumours that Mr

Blankfein was on his way out. But results

were never truly dire and his humorous

self-effacing style won him fans not only

among employees but among clients and

in government. A wistful note sent out

afterthe announcement to employees was

hardly an enthusiastic take on retirement.

“Today I don’t want to retire from Gold-

man Sachs but bymyown perhapsconvo-

luted logic it feels like the right time.”

His successor came to Goldman the

long wayround. Earlystops included three

major financial firms: Irving Trust Drexel

Burnham Lambert and Bear Stearns. None

still exists. Irving was bought in 1988 and

the other two went bankrupt—each no

doubtleavingitsscars. AtGoldman Mr Sol-

omon has moved up through investment

banking not as a polished salesman but as

a tough manager. He is expected to central-

ise authority that has been dispersed

amonga large management committee.

Much is being made of the new man’s

hobby: spinning discs under the stage

name DJ D-Sol. This is taken by some to

suggest that he is interesting young at

heart and perhaps even cool none of

which remotely matters. But it may repre-

sent something important: a boss who

likes people to dance to his tune. 7

Goldman Sachs

White smoke over

West Street

NEW YORK

Anewboss fora grand franchise

Songs of Solomon

C

HEERS erupted from Calais to Cannes

when Kylian Mbappé a 19 - year-old

striker thumped in France’s fourth goal in

the World Cup final on July 1 5 th. Among

the smuggest onlookers were the accoun-

tants at Paris Saint-Germain Mr Mbappé’s

club. He was already a prized asset before

the tournament having broken the record

for goals scored bya teenager in the Cham-

pions League Europe’s premier-club com-

petition. CIES Football Observatory a re-

search organisation reckoned then that his

club could charge € 190 m ($ 223 m) for him.

But an electrifying World Cup with four

goals has surelyincreased his value.

That at least is how the transfer market

usually responds to international tourna-

ments. According to 21 st Club a consultan-

cy each time a player found the net in the

World Cup and European Championship

tournaments in 2004 - 16  his price went up

by on average 13 %. After the 2014 World

Cup James Rodríguez whose six goals for

Colombia made him the top scorer earned

a reported € 80 m move to Real Madrid.

That was twice what 21 st Club estimated

he was worth from his career record.

The club soon realised it had overpaid.

Mr Rodríguez struggled and ended up

loaned to Bayern Munich. Indeed 21 st Club

has found that though a footballer’s goals

for his club in the previous season predict

his future impact those at an international

tournamentdo not. Thatshould notbe sur-

prising. A World Cup lasts five weeks and

featuresplentyofmismatched teams; a do-

mestic season is eight months of tough

games. Mr Mbappé’s four World Cup goals

are a less useful indicator than the 47 he

scored in his two most recent club seasons.

Could Mr Mbappé net a spectacular

Football transfers

Winning moves

Talentscouts are paying less attention to

the World Cup

Buyer beware

Source: 21st Club

*World Cup or European Championship

†Joint-highest scorer

Highest goal-scorer at major football tournaments*

who subsequently transferred €m

0

20

40

60

80

2004 06 08 10 12 14 16

Estimated worth Transfer fee

Rooney

Podolski

Güiza

Villa

Mandžukić

Rodríguez

Morata†