A number of hedge funds went bust at the time by

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that the worst was over. A number of hedge funds went bust at the time by getting the timing of this return to calm extremely wrong. Having the right investing thesis is only half the battle; knowing when to put the idea into practice is arguably more important. And the beauty part was, the more Wise Clients Goldman could line up behind the short, the more long-dated volatility would go down. But the strategy backfired significantly in the summer of 2010, when there was a huge short squeeze—a lot of people got wind of these positions and all started buying at the same time. On Goldman’s second quarter earnings call on July 20, 2010, CFO David Viniar would offer a mea culpa: “As a result of meeting franchise client and broader market needs, we had a short equity volatility position going into the quarter. Given the spikes in volatility that occurred during the quarter, equity derivatives posted poor quarterly results.” The real question though, is this: Was this trade formulated primarily in the service of clients, as Viniar says? Or was it being driven by Goldman Sachs’s and other Wall Street banks’ desire to implement a proprietary bet? I would argue the latter. It was in the context of pondering this type of question—of whether the firm saw its customers as “clients” or “counterparties”—that I attended the exclusive Goldman Sachs leadership program called Pine Street. Based on Jack Welch’s pioneering Crotonville Management Development Center at General Electric, Pine Street started during the Hank Paulson era as a way to ensure that the leadership and cultural tenets of the firm weren’t diluted after Goldman Sachs went public. In the beginning, the series of seminars was reserved for managing directors, but later VPs and even select clients were allowed to attend. I took the president of my largest client. At Pine Street, thought leaders such as Bill George, the former CEO of Medtronic turned Harvard Business School professor, the author of Authentic Leadership , and a Goldman Sachs Board member, talked about how leaders are meant to behave. A scientist talked to us about the Stanford marshmallow experiment—the one where children were left alone in a room with a marshmallow. Some gobbled up the marshmallow; others waited and then ate it; still others waited until the tester returned to the room. The subjects were tracked over the next forty years, and the researchers found that the ones who had delayed gratification the longest ended up growing into leaders; the little piggies, not so much. It occurred to me that back on the trading floor I was seeing more little piggies and instant gratification than I was seeing under the old Goldman model of “long-term greedy.”
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——— Right about this time, I was experiencing some volatility in my personal life. On March 15, 2009, the equity market hit rock bottom, its lowest point in the crisis. Coincidentally, that was also the day that my three-year relationship with Nadine hit rock bottom. We broke up. I had felt it coming for a while, and increasingly knew in my heart that we probably were not meant to be together in the long run. We
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