The Janitor's Boy and the Blind Man's Bet
The letter arrived in the spring of 1937, shortly after Henry Goldman's death at eighty years old, and it came from a man who had once been known around the Goldman Sachs offices simply as "Boy." Sidney Weinberg — an eighth-grade dropout who had started at the firm as a janitor's assistant, brushing the partners' boots for three dollars a week — wrote to the Goldman family expressing his sympathy for the loss of the man he considered one of the geniuses behind the firm's success. It was an act of almost unbearable irony: Weinberg, who would go on to run Goldman Sachs for nearly four decades, earning the epithet "Mr. Wall Street" and advising presidents from Roosevelt to Kennedy, was mourning a man whose name had been systematically erased from the firm's institutional memory. Henry Goldman had been forced out of the partnership he had built into a national powerhouse — forced out not because he had failed, but because he had refused to abandon his convictions about Germany during the First World War. He was, by the time of his death, nearly blind, estranged from the Sachs family, and largely forgotten by the institution that still bore his surname.
And yet it was Henry who, in the 1920s — already expelled from the firm, with no financial stake in its future — had mentored Weinberg, advised him to return to Goldman Sachs where "the opportunity lay," introduced him to valuable contacts, coached him to negotiate his commissions from 1.8% to 33%, and recommended him for the corporate board seats that would become the foundation of Weinberg's legendary influence. Henry Goldman built the machine, trained the man who would run it, and was written out of the story. The firm kept his name on the door and removed everything else.
This is the pattern of Henry Goldman's life: the visionary whose vision is adopted and whose person is discarded. He pioneered earnings-based valuation when Wall Street understood only asset-based lending. He dragged investment banking away from railroads and toward the consumer economy. He helped design the Federal Reserve. He made Goldman Sachs into Goldman Sachs. Then he was erased — by his partners, by history, by the firm itself.
By the Numbers
Henry Goldman's Goldman Sachs
1869Year Marcus Goldman founded the firm at 30 Pine Street
$10MSize of the Sears, Roebuck IPO Goldman underwrote in 1906
$1.6MFirm capital by 1898 (~$47M in today's dollars)
1913Year Goldman advised on Federal Reserve Act design
1917Year Henry was forced to resign over pro-German stance
40+Years Weinberg, Henry's protégé, led the firm after Henry's departure
A Peddler's Son on Pine Street
Marcus Goldman arrived in the United States in 1848, a twenty-seven-year-old Bavarian Jew from Trappstadt fleeing the economic desolation and political upheaval of the March Revolution that was convulsing the German states. He was the son of a cattle merchant, which in Bavaria at that time meant something closer to subsistence than prosperity. He settled in Philadelphia, where he worked as a peddler, then a shopkeeper, then — through the particular alchemy of immigrant ambition meeting the chaos of post–Civil War commerce — a trader of commercial paper. The product itself was humble: merchants' promissory notes, essentially IOUs that small businessmen used to bridge the gap between production and payment. Marcus Goldman would travel Lower Manhattan each day, purchasing these notes from merchants at a discount and reselling them to commercial banks at a profit. He kept the notes tucked inside the band of his top hat, a sartorial detail that has calcified into myth but which also captures something essential about the nature of the enterprise — the entire Goldman banking house, at its founding in 1869, was one man, one hat, and whatever paper fit inside it.
By the time Marcus moved his family to New York and opened a one-room office at 30 Pine Street in 1869, Henry was twelve years old. The boy grew up immersed in an environment where finance was not abstract but physical — notes you could touch, relationships you had to cultivate face to face, trust built over handshakes and repeated dealings. In 1882, Marcus brought in his son-in-law Samuel Sachs as a junior partner. Three years later, in 1885, Henry Goldman and his second brother-in-law Ludwig Dreyfuss joined, and the firm adopted the name that would outlast all of them: Goldman, Sachs & Co. By 1896, the partnership had secured a seat on the New York Stock Exchange. By 1898, its capital stood at $1.6 million — roughly $47 million in today's dollars — and Goldman Sachs was the nation's largest dealer in commercial paper.
Marcus Goldman was, by all accounts, a man of diligence and accuracy, a reliable intermediary whose reputation rested on the pedestrian virtue of always being right about who would pay their debts. Henry, his youngest child, was something else entirely.
The Eye That Couldn't See and the Mind That Saw Everything
Henry Goldman was born on September 21, 1857, in Philadelphia, the youngest of Marcus and Bertha Goldman's children. He was, from early life, afflicted with severe astigmatism — a condition that would worsen over the decades until he was nearly blind, and that shaped his character in ways that are impossible to fully untangle from his intellectual gifts. He attended Harvard briefly but withdrew without a degree, whether because of his eyesight or temperament or both. The sources are vague on this point, and Henry himself does not appear to have explained it publicly. What is clear is that the experience left him with neither a credential nor a grievance — he simply moved on, returning to the family business with the particular intensity of a young man who has decided that the conventional path is not for him.
His granddaughter June Breton Fisher, who wrote the only full biography of Henry Goldman —
When Money Was in Fashion — describes him as a man who was chronically underestimated. The astigmatism made him appear unfocused, even dim, to those who confused visual acuity with intellectual acuity. But Henry was, in Fisher's telling, "an excellent listener and an adaptive student" — phrases she also uses to describe Sidney Weinberg, as though the quality that defined Goldman Sachs at its best was not brilliance but receptivity, the capacity to absorb information that others filtered out.
Henry joined Goldman Sachs in 1885 and spent two decades learning the commercial paper business from the inside. He traveled. He visited companies. He talked to merchants and manufacturers and retailers — not the railroad barons and steel magnates who dominated the financial imagination of the Gilded Age, but the men who sold things to ordinary Americans. He developed an almost preternatural sense for the difference between a business that owned valuable assets and a business that generated valuable earnings, and he understood — long before Wall Street did — that the second was more important than the first.
When Marcus Goldman died in 1904, Henry and Samuel Sachs became co-senior partners. The firm was prosperous but provincial, still primarily a commercial paper house. What happened next would transform not only Goldman Sachs but the structure of American capital markets.
The Ketchup Revolution
The insight that made Henry Goldman's career — and that, in a real sense, invented modern investment banking — can be stated simply: a company does not need to own a railroad or a steel mill to be worth financing. It needs customers.
This was, in 1906, a genuinely radical idea. The prevailing orthodoxy on Wall Street held that a company's value was determined by its physical assets — its factories, its land, its inventory, its machinery.
J.P. Morgan and his peers financed railroads and heavy industry because these enterprises had tangible collateral: if the company failed, you could seize the tracks. The commercial paper business that Marcus Goldman had built operated on a similar logic, just at a smaller scale — the merchant's inventory and receivables were the implicit backing for the note.
Henry Goldman looked at the new mass-retail enterprises that were transforming American consumer life — Sears, Roebuck & Co., F.W. Woolworth, Continental Can, United Cigar Manufacturers — and saw something the old guard missed. These companies didn't have railroads or blast furnaces. What they had were customers, brand recognition, distribution networks, and — crucially — earnings. Reliable, growing, predictable earnings. Henry argued that a company should be valued not on the liquidation value of its assets but on its capacity to generate future profits. This was the intellectual foundation of what we now call the price-to-earnings ratio, and Henry Goldman was among the first financiers to build an entire underwriting practice around it.
Just keep in mind... Money is always in fashion.
The first test of this thesis came in 1906, when Henry underwrote the initial public offering of United Cigar Manufacturers — a company that made nothing so glamorous as a locomotive, whose value resided entirely in its ability to sell cigars to Americans in enormous quantities. The IPO emphasized future profitability over asset values, and it worked. Investors bought in.
But the deal that truly announced Henry Goldman's arrival was Sears, Roebuck & Co. The $10 million IPO of Sears was, at the time, the largest public offering of a retail company in American history. It was also a deeply personal transaction. Henry had cultivated a close friendship with Julius Rosenwald, the visionary who had transformed Sears from a watch company into the dominant mail-order retailer in the country. Rosenwald — himself a second-generation German-Jewish immigrant, a man who would eventually give away the equivalent of billions in today's dollars to Black schools across the American South — understood what Henry understood: that the American consumer economy was the great engine, and that whoever financed it would control the future of American capital.
The Sears IPO was a bet on American consumption itself. And Goldman Sachs, a firm that had started with promissory notes in a top hat, was suddenly in the business of making that bet.
The Lehman Alliance and the Outsiders' Table
Henry Goldman did not do this alone. His most important collaborator was Philip Lehman, the head of Lehman Brothers, another German-Jewish firm that operated at the periphery of the Protestant banking establishment. The Goldman-Lehman partnership was a strategic alliance born of shared exclusion: in the early twentieth century, the major underwriting syndicates were controlled by firms like J.P. Morgan and Kuhn, Loeb & Co., and while Kuhn Loeb was itself a Jewish firm, the hierarchy of Wall Street was rigidly stratified. Goldman Sachs and Lehman Brothers were too small, too focused on commercial lending, and — in the case of Goldman — too associated with retail commerce to be taken seriously as underwriters by the establishment.
Philip Lehman was, like Henry, a second-generation patriarch who had inherited a family firm and was determined to make it into something larger. Lehman Brothers had been founded as a cotton brokerage in Montgomery, Alabama, in 1850, by three Bavarian immigrant brothers; by the time Philip took the helm, the firm had migrated to New York and was looking for ways into the lucrative underwriting business. Henry and Philip recognized that they needed each other — Goldman's commercial paper distribution network and client relationships, Lehman's capital and commodity-market connections — and they formed a partnership that would endure for decades, co-underwriting IPOs for dozens of the new consumer companies that Henry had identified as the future.
The international dimension was equally important. Henry forged a relationship with Kleinwort Sons & Co. of London, a British merchant bank that gave Goldman Sachs access to the foreign exchange markets and transatlantic lending that the established American firms controlled. The Kleinwort connection allowed Goldman to offer its clients something no other firm of its size could: international distribution for their securities, and access to European capital for American growth.
What Henry was building, in effect, was a shadow financial system — a parallel network of underwriting, distribution, and lending that served the parts of the American economy that the establishment ignored. Railroads and steel were Morgan's domain. Retail, consumer goods, and manufacturing were Henry Goldman's.
The Philosophy of Future Earnings
It is worth pausing on the intellectual substance of Henry Goldman's innovation, because its implications extend far beyond a single IPO or even a single firm. The shift from asset-based valuation to earnings-based valuation was not merely a technical adjustment in how securities were priced. It was a philosophical revolution in how Americans understood the nature of economic value.
Under the old regime, a company was worth what you could touch — the physical plant, the inventory, the land beneath the factory. This made sense in a world of heavy industry, where the means of production were expensive, durable, and relatively easy to appraise. But it was catastrophically inadequate for evaluating a company like Sears, whose "assets" were a catalog, a mailing list, and the trust of millions of American households. The physical infrastructure of Sears — its warehouses, its sorting rooms — was unremarkable. What was remarkable was the relationship between the company and its customers, and the cash flow that relationship generated.
Henry Goldman saw this clearly. His argument, as articulated through his underwriting practices, was that the future matters more than the present — that a company's ability to generate earnings over time is the true measure of its worth, not the resale value of its machines. This is now so fundamental to how we think about investing that it is difficult to recover how strange and dangerous it sounded in 1906. Henry was asking investors to buy not a thing but a promise. Not collateral but confidence.
The historian Eli Cook, in his study of Henry Goldman for the German Historical Institute, described him as a man who "helped change the American economy by shifting investment banking away from railroads and heavy industry and toward mass-retail establishments" and "pioneered an approach to capital valuation that focused not on physical assets, but on future earnings." This is the kind of summary that makes a complex transformation sound inevitable. It was not. It required a man willing to stake his reputation — and his firm's capital — on a theory that the most powerful people on Wall Street believed was nonsense.
The Federal Reserve and the Inner Room
In 1913, Henry Goldman was consulted by members of President Woodrow Wilson's cabinet on how the new Federal Reserve System should be constituted. As William Cohan writes in his history of Goldman Sachs, the government officials "mostly followed his lead." This is an extraordinary detail that tends to get lost in the larger narrative of the Federal Reserve's creation — a story usually told through the lens of J.P. Morgan, Nelson Aldrich, and the famous secret meeting at Jekyll Island. But the architecture of the institution that would come to govern American monetary policy bore the fingerprints of a commercial paper dealer from Pine Street.
The connection between Goldman Sachs and the Federal Reserve Bank of New York, established during this period, would prove to be one of the most durable and consequential relationships in American financial history. It is the foundation upon which every subsequent Goldman Sachs leader — from Weinberg to Whitehead to Rubin to Paulson to Blankfein — would build the firm's unique proximity to government power. The revolving door between Goldman Sachs and the Treasury Department, which would eventually earn the firm the nickname "Government Sachs," was not an accident of the late twentieth century. It was part of the original architecture, and Henry Goldman was its first architect.
One of the founding partners of the firm, Henry Goldman, was asked by the Cabinet members who would create the Federal Reserve system in 1913 how he would go about doing it, and they mostly followed his lead.
The Panic and the Department Store
The financial panic of 1907 — a cascading bank run that nearly destroyed the American financial system before J.P. Morgan personally organized a private bailout — was a crucible for Henry Goldman. The crisis demonstrated both the fragility of the existing order and the opportunity that lay in its reconstruction. As banks failed and credit evaporated, the consumer companies that Henry had been financing proved remarkably resilient. People still needed to buy things. Sears still shipped catalogs. Woolworth still sold goods at five and ten cents. The earnings streams that Henry had identified as the basis for valuation turned out to be more stable, in a crisis, than the asset bases that the old guard had relied upon.
The panic also created opportunity. Companies that had been reluctant to go public — wary of Wall Street, suspicious of bankers — now found themselves in need of capital that their traditional sources could not provide. Henry Goldman was ready. In the years following the 1907 panic, Goldman Sachs underwrote a series of IPOs for consumer-facing companies that collectively reshaped the American equity market. The firm brought Woolworth public. It brought Continental Can public. It helped finance the Studebaker Corporation, the automobile manufacturer — a bet on a technology that most Wall Street firms still regarded as a novelty.
Each of these deals followed the same logic: find a company with strong earnings, a growing customer base, and a product that Americans were buying in increasing quantities. Ignore the balance sheet. Read the income statement. The good ones know more — this was Henry's philosophy, the idea that deep knowledge of a business's operations and earnings power was worth more than any amount of collateral.
The War That Ended Everything
And then he destroyed it all — or rather, he refused to pretend to be something he was not, which amounted to the same thing.
When the First World War broke out in August 1914, American opinion was divided but increasingly pro-Allied. The financial establishment — led by J.P. Morgan, which served as the purchasing agent for the British and French governments — threw its weight behind the Allies. Goldman Sachs, like most Wall Street firms, was expected to participate in the financing of the war effort: Anglo-French loans, Liberty Bonds, the entire apparatus of wartime finance that would make the American banking system the de facto treasury of the Entente.
Henry Goldman refused. His ancestral homeland was Germany. He had deep ties to German culture, German intellectual life, German business — the Kleinwort connection notwithstanding, much of his professional network ran through Frankfurt and Berlin. He spoke German. He read German philosophy. He collected German art. And he believed, with a stubbornness that his partners found increasingly intolerable, that Germany was not the villain that American propaganda made it out to be.
This was not a private opinion. Henry expressed his pro-German sympathies publicly, openly opposing the firm's involvement in Allied financing and U.S. Liberty Bonds. The other partners — particularly the Sachs family, who were aligned with the Allied cause both out of conviction and commercial self-interest — were appalled. The firm's American business interests were at stake. Clients were watching. In a war-fever atmosphere where German-Americans were being harassed, their businesses boycotted, their loyalty questioned, the senior partner of one of Wall Street's most prominent firms was publicly siding with the Kaiser.
In October 1917, Henry Goldman resigned from the partnership. The official story was that he left voluntarily. The reality, as Fisher and others have documented, was that he was pushed out — forced to choose between his convictions and his firm, and choosing his convictions. It was, depending on your perspective, either an act of extraordinary moral courage or an act of extraordinary self-destruction. Perhaps it was both.
The Sachs family now controlled Goldman Sachs completely. The Goldman family's participation in the firm that bore their name was effectively over. To this day, the two families are not on speaking terms.
The Blind Collector and the Physicist
What happened to Henry Goldman after 1917 is one of the stranger codas in American financial history. He did not fade into obscurity so much as migrate into a parallel universe — one of art, intellect, and the increasingly fraught politics of German-Jewish identity in the interwar period.
He amassed a distinguished collection of Renaissance and Baroque art, including works by Rubens and Van Dyck. His personal library included a copy of George Santayana's
The Life of Reason (1905), bearing the ex libris "Henry Goldman" — a philosophical work whose most famous line, "Those who cannot remember the past are condemned to repeat it," would acquire a terrible resonance in the decades ahead. He funded Germanic studies at Harvard, the institution he had left without a degree decades earlier. He cultivated friendships with luminaries of Weimar-era Germany, including
Albert Einstein and Thomas Mann.
The Einstein connection is particularly poignant. Both men were German Jews who had navigated the complexities of identity, assimilation, and belonging in societies that could turn hostile without warning. When the Nazis rose to power, Henry Goldman — who had spent his life defending Germany, who had sacrificed his career for his attachment to German culture — joined Einstein in outspoken denunciation of Hitler's atrocities against European Jews. The country he had loved had betrayed not only his people but the intellectual and cultural tradition that had defined his life.
He lived to see the beginning of that betrayal but not its fullest horror. Henry Goldman died on April 4, 1937, nearly blind, wealthy, and largely forgotten by the firm he had built. He was eighty years old.
The Inheritance of Erasure
The story of Goldman Sachs after Henry's departure is, in many ways, the story of his ideas triumphing without him. The firm nearly destroyed itself in the late 1920s when Waddill Catchings — a family friend who replaced Henry and who possessed none of his judgment — built the Goldman Sachs Trading Corporation, a closed-end investment trust that collapsed spectacularly in the crash of 1929. The
Trust had operated as something close to a Ponzi scheme, buying large blocks of shares and reselling them at inflated prices. It nearly bankrupted the firm and its investors. This was, in a sense, the precise opposite of Henry Goldman's philosophy: speculation masquerading as investment, asset manipulation instead of earnings analysis.
Catchings was ousted. And the man who saved Goldman Sachs was Sidney Weinberg — the janitor's assistant, the "Boy," the protégé whom Henry had mentored from the margins of exile. Weinberg inherited nine seats on American corporate boards and leveraged them with a genius for relationship-building that recalled Henry's own. He served on more than thirty corporate boards simultaneously. He advised presidents. He earned the title "Mr. Wall Street." He steered Goldman Sachs through the Depression, the Second World War, and into the postwar boom, overseeing the landmark Ford Motor IPO in 1955 and the underwriting of $300 million in General Electric bonds.
Weinberg's Goldman Sachs was Henry Goldman's Goldman Sachs, brought to maturity by a man who had learned the craft at Henry's feet. The emphasis on client relationships over transaction volume. The focus on earnings and growth rather than mere asset accumulation. The cultivation of political influence. The willingness to look at sectors that the establishment dismissed. All of this was Henry's playbook, executed by the student the master had chosen.
But Henry's name appeared nowhere in the firm's self-mythology. The official histories focused on Marcus Goldman the founder and Sidney Weinberg the savior, as though the three decades between them — the decades in which Henry Goldman actually built the modern firm — were a blank. You will rarely find a mention of him in the official history of Goldman Sachs, Fisher writes, with the restrained bitterness of a granddaughter who knows her grandfather has been robbed.
A Cigar in the Dark
There is one more detail worth holding onto. Henry Goldman was known, in his years of power and influence, for a particular gesture. He would chuckle, draw on his cigar, and remind his young protégés of his personal motto: Just keep in mind... Money is always in fashion.
The line is characteristic — simultaneously worldly and wry, a piece of practical wisdom wrapped in the cadence of a joke. It carries none of the grandiosity that you might expect from a man who reshaped American finance. It is the motto of a man who understood that the world runs on commerce, that commerce runs on capital, and that capital — unlike culture, loyalty, nationality, or love — never goes out of style. Money is the one thing that survives when everything else falls away.
Henry Goldman built a firm, lost it, mentored its future leader from exile, watched his ancestral homeland descend into barbarism, denounced the evil when it came, and died in the dark — his eyesight nearly gone, his name nearly forgotten, his ideas carrying an institution that no longer acknowledged him. The cigar smoke dispersed. The motto remained.
On a shelf somewhere in the University of California's library system sits a copy of Santayana's Life of Reason, its pages stamped with Henry Goldman's bookplate. The line everyone knows from that work — about those who cannot remember the past — appears in the first volume, the one on common sense. Henry Goldman's ex libris is in it. The firm he built preferred to forget.
