The story of Goldman Sachs being “at war” with itself is pretty standard “I’m mad I’m not getting my way” so I will savage someone in the press type stuff.
What is interesting is the struggles of Marcus, Goldman’s consumer facing bank face.
Why has Marcus struggled?
It begins with the concept of “core competencies.” Goldman is an investment bank. Consumer banking is an entirely different thing.
Not having a background in consumer banking, Goldman had to acquire GreenSky® as a way to accelerate their entry into the consumer market.
But the GreenSky investment was a good acquisition because:
* GreenSky doesn’t really maintain direct relationships with its customers. They are a middle man.
* The acquisition was too expensive.
* As mentioned above, GreenSky and consumer banking are outside of Goldman’s normal business.
This matters because:
* No customer = no business. Even if there is a lot of revenue on the books.
* The overinvestment in GreenSky meant that to make the acquisition valuable, Goldman was going to need outsize returns in the consumer business. Acquisitions are notoriously difficult to pull off in the best of situations, this wasn’t the best of situations.
* Goldman’s lack of expertise in consumer customer acquisition meant that they were going to be at a disadvantage in every partnership deal they made.
Ultimately, the lesson here is that any strategy that doesn’t increase your power is likely to fail.
In this case, we see that Goldman started a consumer banking arm with:
* No customers and no real expertise in gaining them.
* No increased power suppliers or partners because they were only bringing their money to the party at a time that it was still relatively easy for businesses to acquire money in the credit markets or with investors.
* No strength over their competition because all of their competition in the consumer banking space had years and decades of relationships that it was unlikely Goldman would be able to overcome.
Check out the article and let me know what your take is…