Open Book: Goldman's Success Story

Editor's note: This was originally published on Nov. 19, 2008. It has been updated with a recent video interview by TheStreet.com's Gregg Greenberg.

Individual investors have learned some painful lessons in self-reliance in recent weeks and have many reasons to ask: "What's going on?"

In particular, they may well ask, "What are the major Wall Street firms really like and what do they really do -- and why?"

The Partnership is a candid, inside look at Goldman Sachs (GS Quote), how it became the power that it is, and why it acts the way it does.

Leadership and the achievement of leadership in business have long been the focus of my interest: Why and how do certain organizations rise to leadership and stay there?

Video: Charles Ellis says Goldman Sachs' first ever quarterly loss as a public company has nothing to do with the end of the firm's vaunted partnership or high profile departures. To watch the video, click the player below:

During three decades with Greenwich Associates, consulting on competitor business strategies with all the leading investment banking and securities firms in America, Europe, and Asia, I knew that Goldman Sachs was more driven and more determined to achieve market leadership than any other firm. While other firms' talented people worked hard and wanted to improve, Goldman Sachs people worked harder and for much longer hours and were much more clearly determined to be the best. I wanted to understand why.

When other firms started early -- by 8:30 -- Goldman Sachs has been going full tilt since 7:00 and would work later into the night and work over the weekend plotting competitive strategies.

Why?

While other firms had impressive "presentation" offices, Goldman Sachs' offices were somewhere between modest and shabby. They flew coach and ate lunch at their desks. While other firms craved affirmation and compliments, Goldman Sachs only wanted to know where they were weak, making mistakes, or missing opportunities -- so they could correct errors and improve competitive position. I wanted to understand why.

In dozens of private meetings every year over those three decades, working with a series of senior executives, I saw an astonishing consistency in every market, in every product line (investment banking, bond dealing, stock brokerage, foreign exchange, commodities, and derivatives) -- a calm, steady, relentless determination to find ways to become the best -- and stay there. I wanted to understand -- and was sure others would want to understand -- why?

Why were Goldman Sachs people so persistently different in their competitive determination, so modest about past achievements, and so unrelenting and focused on doing better? What brought them so close together -- almost tribal -- and what kept them committed for over 75 years in the long, hard climb from disaster to global leadership?

I knew the firm had been a near failure after the disaster of Goldman Sachs Trading Corporation and had struggled to survive the Depression and World War II. I'd heard of feisty, short, seventh-grade dropout Sidney Weinberg whose compelling personality made him "Mr. Wall Street" and the firm's domineering charismatic leader. But I also knew that such dominating leaders were usually followed by decline or, perhaps, a period of consolidation. They seldom leave behind them firms determined to advance and build and gain even greater strength. But that's what happened at Goldman Sachs. Understanding why would be important -- and the best way to develop an accurate, rigorous understanding was clear: Learn the real story from those who had lived it -- and produce a major book.