Only on Wall Street is a $1 billion quarterly profit a cause for layoffs.
And speaking of layoffs, just yesterday, Borders booksellers declared it was going out of business, meaning the loss of over 10,000 employees nationwide. Silicon Valley player Cisco Systems joined the party, too, announcing 6,500 layoffs.
If you're keeping track, that's over 17,000 jobs lost in a day and a half.
Now, the Borders story surprises nobody. Bookstores are rapidly going the way of land lines, incandescent lightbulbs, newspapers, and DVDs. Electronic readers, the Internet, and plain old American dumbing-down have all contributed to rendering brick-and-mortar purveyors of reading materials obsolete. Some business pundits actually even blame Borders for not jumping on the e-reader bandwagon more aggressively, like Barnes & Noble has done. But the smart money has said for a while that America, the birthplace of pop culture, cannot sustain two major national bookstore chains. Executives at Borders finally agreed.
Things aren't nearly as dire at Cisco, even though the common thread of playing catch-up runs through both companies. What took generations of cultural evolution to destroy the market for printed books - as witnessed by Borders - only took the warp-speed of technological obsolescence a decade or so to begin wreaking havoc on huge Silicon Valley corporations that didn't even exist a generation ago. Caught up in the technology sector's backwater of badly-timed product launches and missed opportunities, Cisco is just the latest flickering networking star to need a time-out to regroup. Industry watchers aren't planning on drafting the company's obituary anytime soon, but Cisco's retrenchment represents a cautionary tale in America's newest powerhouse industry that keeps all its players on its toes.
So at least the layoffs at Cisco and Borders make sense.
Bordering on the Ridiculous
According to its own press release, at the end of the second quarter, Goldman Sachs ranked first in worldwide announced mergers and acquisitions. The firm continued its leadership in equity underwriting, as well as worldwide equity, equity-related offerings, common stock offerings, and initial public offerings.
Whew - I'm no financial wizard, but that seems to be an awful lot of stuff to brag about, doesn't it?
Yet the Wall Street Journal bluntly spells out Goldman's $1 billion profit as a crisis:
"Goldman Sachs Group Inc. reported second-quarter net earnings of $1.09 billion, significantly lower than expectations, as difficult markets led the Wall Street bank to reduce risk taking to the lowest levels in five years. The per-share earnings of $1.85 were 42 cents below the consensus expectations of analysts, only the fifth profit miss in Goldman's 12 years as a publicly traded company."
Gasp! The horror!
Correct me if I'm wrong, but a $1 billion profit is still a profit, right? Yet apparently on Wall Street, a $1 billion profit can be a bad thing. That by itself should provide sufficient proof that running companies to wow shareholders is a bad idea.
Since when have stock analysts usurped corporate boards, executives, and industry professionals? So a group of smug economic whiz-kids crunched some numbers and came within spitting distance of each other for Goldman's quarterly profit? Why can't the profit forecasters be wrong? Why does Goldman feel the urge to placate them? And if the profit forecasters are so smart, why doesn't Goldman axe the executives who were responsible for missing the "consensus expectations," instead of 1,000 of their hapless underlings? It's like feudal England all over again, only now with a bunch of ninnies from Ivy League economics programs running around crowing, "off with their heads!"
By way of a disclaimer, if you read the fine print, you'll see where Goldman claims to be posturing itself for protection against certain risks in the financial environment. Since the profit everyone expected them to make came in under-budget, so to speak, it's possible to infer from the numbers that Goldman may be heading into murky economic waters. Ostensibly, then, sacrificing 1,000 workers now will translate into jobs saved in the future if some of the gambles Goldman has been taking aren't as profitable as they have hoped. Kind of an interesting statement to be making, though, considering many Goldman executives are liberal Democrats. This doesn't exactly sound a note of confidence in President Obama's economic agenda, does it?
What "Too Big To Fail" Means in a Democratic Republic
Still, academic pragmatism aside, perhaps I'm not a good capitalist, but I simply can't see the long-term benefit to society from such a narrow-minded, money-centric business philosophy. Sure, maybe Goldman has 1,000 more workers than it needs, but senior management doesn't even try to disguise their disdain for their personnel by separating the two announcements of disappointing the industry's analysts and, oh yeah, a meager $1 billion PROFIT. It's almost like Goldman is embarrassed that it didn't have the foresight to fire a thousand folks before the analysts found out how disappointing the quarter was going to be.
To make matters even goofier, it's not even like Goldman actually creates anything, except more wealth for people who've already got it. They make money from money. Granted, there's a place for that in our society, and the elite high-net-worth people who benefit from this type of industry ostensibly help keep our economies going and our political machines well-oiled. But speaking of political machinery, didn't Goldman recently receive some taxpayer bailout money? To what extent can their current profiteering be credited at least in part to the largess of the American taxpayer?
I can appreciate that with the mess they've helped cause in Greece, along with their other sordid financial escapades in, oh, say, the mortgage meltdown, insider trading, Libya, and securities trading kickbacks, Goldman Sachs executives may be getting desperate to appease the only people left who will still talk to them at dinner parties; namely, the same greedy bottom-feeders who like to leech every last penny out of their investments: stock market players. But seeing as how they're supposed to be too big to fail, might they be bending over backwards appeasing the wrong constituency?
While all this has been going on, non-institutional investors - ordinary taxpayers, mostly - have been pulling their money out of Wall Street, having already become uncomfortable with the risks in our economic environment, unconvinced they're able to play on a level playing field with cozy big-name brokerages, and disenchanted with the industry's recent reliance on bailouts.
Goldman may not care that it's losing the confidence of the American public.
But we do, don't we?
Talk about risk!