Streetwise — Chapter 17: Succession

1. 1. John Thornton's absence from Goldman Sachs after 9/11 damaged his internal reputation and led Hank Paulson to want him out.
2. 2. Hank Paulson created three new vice-chairmen—Cohn, Steel, and Kaplan—effectively moving them aside to focus on the next generation.
3. 3. Cohn was asked to fix the equities division, which he found bloated and inefficient, with overlapping roles and a facilitation mindset.
4. 4. Cohn merged equities with FICC, streamlined roles, and instructed traders to make money independently of IPO fees, improving P&L and reducing head count.
5. 5. John Thornton's ambition clashed with Hank Paulson's desire to remain CEO, leading to Thornton's departure in 2003.
6. 6. Enron's apparent success in energy trading was actually a massive fraud, which Goldman could not replicate and which caused concern before its collapse.
7. 7. The Sarbanes-Oxley Act, passed after Enron and WorldCom, introduced useful reforms but also increased compliance burdens, pushing companies to stay private longer.
8. 8. John Thain, despite being an excellent operator, was seen as stiff, entitled, and unwilling to work late, which hurt his standing at Goldman.
9. 9. After Thornton's departure, Cohn took over his board seat and was later made co-president, becoming the likely successor to Paulson.
10. 10. Cohn was not in a hurry to become CEO, expecting Paulson to remain for many more years, possibly long enough for a younger successor.