Here's a really good post that was sent to Bloggingstocks.com by Peter Cohan. Send us in your views by using the 'Press here to comment on this story' button below.
'What separates the winner (like Goldman Sachs) from the losers (such as Morgan Stanley) in this year's Wall Street money-making game is the way information flows among decision-makers. The winning firm encourages vigorous information flow and intense debate about decisions across different levels of the organization. The losing firms shoved decisions from the top down the throats of traders who executed them.
This came to mind in reading a story about Morgan Stanley's recently departed co-president in The Wall Street Journal. Cruz reportedly 'set a tone in which she didn't welcome dissent once higher-ups made decisions about trades. Communication broke down among some of the key decision makers involved in vetting the mortgage trades'. The lack of communication contributed to Morgan Stanley's decision to make a largely unhedged bet on Collateralized Debt Obligation (CDOs) - one that cost it $9.4 billion in write-downs.
By contrast, as I discussed on CNBC, Goldman encouraged debate between its CFO and COO and a then-lowly proprietary trading desk. This debate led to the successful decision to bet heavily on a decline in the ABX which helped Goldman generate $4 billion in profits - more than offsetting the $1.5 billion to $2 billion worth of losses from its CDO holdings.Like Stanley O'Neal, Morgan Stanley's John Mack also suffers from Goldman envy. But they both misunderstood Goldman's secret sauce - it wasn't so much the proprietary trades as the process of debate that led to those money-winning bets. And that's an advantage that any competitor will find hard to copy'.
Source - www.bloggingstocks.com (Courtesy of Dealbreaker)
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