Part IThe Story
Five Sachses in a Caption
On June 14, 1932, in the Court of Chancery of Delaware, the Chancellor ruled on a motion. The motion was dull. The caption above it was not. It began with two plaintiffs, Eddie Cantor and Benjamin F. Holzman, and then ran on like a family Bible read aloud at a deposition: Arthur Sachs, Walter E. Sachs, Howard J. Sachs, Samuel Sachs, Harry Sachs, Waddill Catchings, Sidney J. Weinberg, Henry S. Bowers, Grant Keehn, Ernest W. Loveman, Samuel W. Anderson, individually and as present or past co-partners doing business under the firm name and style of Goldman Sachs & Co. The surname appears five times before an outsider's name breaks the sequence. The fourth of them belonged to an eighty-year-old man who had retired four years earlier, who now spent his days in a hotel on Fifth Avenue, and who had built his whole career on one temperamental conviction: that a partner's first job was to keep the partnership's capital from walking out the door.
The complaint was a derivative suit on behalf of stockholders of the Goldman Sachs Trading Corporation, a closed-end fund the firm had launched in December 1928. It charged that the defendants, acting as directors, had "wilfully and recklessly squandered and wasted" the corporation's assets "in the sum of many millions of dollars." None of the individual defendants lived in Delaware, so the plaintiffs did what the statute allowed. A sequestrator was sent to seize whatever shares the partners held in Delaware corporations. Stock certificates registered to Samuel Sachs were, in the formal and literal sense, taken into custody. The defendants were granted leave to appear specially, for the narrow purpose of asking that the seizure be undone.
Nothing about that morning was the case Samuel Sachs would have wanted history to argue. He was the conservative one: the partner who wore a thin alpaca office coat on the hottest days of a Manhattan summer, who distrusted counterparties at first sight and was relieved when their deals collapsed, and who sent a cable to his son in the middle of a financial panic that a quarter-century later still read like a family motto. He did not design the Trading Corporation. He had stepped back from active partnership in 1928 and become what the newspapers called a special partner, which meant his name stayed on the letterhead and his money stayed in the firm while his judgment, by agreement, went home.
But the name did not go home. That was the thing about the name. It was the one asset no partner could withdraw, and it is the asset the rest of this story keeps returning to. It was spelled wrong at an immigration desk in 1848, and fused to another family's name by marriage. It was mispronounced by most of the twentieth century. It was dragged through a Delaware sequestration order and later through a Senate subcommittee's report, and it outlived every person in that 1932 caption. Samuel Sachs said it zox, to rhyme with box. The firm says saks.
He spent fifty years teaching the house to protect what it had. What it could not protect was the one thing he had brought to it.
By the Numbers
Samuel Sachs and the House He Joined
1882Year Sachs entered Marcus Goldman's commercial-paper business; the firm became M. Goldman and Sachs
$100,000Firm capital after Sachs joined, with paper turnover reaching roughly $30 million a year
$1.6MFirm capital by 1898, two years after joining the New York Stock Exchange
1906Year of the Sears, Roebuck IPO, Goldman Sachs's entry into equity underwriting
$50,000Sachs's 1924 gift to Harvard, the institution that shaped three generations of his family
83His age at death, March 2, 1935, of heart disease
$58.28BGoldman Sachs revenue in 2025, ninety years after his funeral
A Room Already Rented
The story of Samuel Sachs starts before he was born. It starts with a friendship between two Bavarian Jews in a synagogue classroom in Würzburg, and with a rented room in Philadelphia that one of them occupied before the other.
Marcus Goldman was born Mark Goldmann on December 9, 1821, in Trappstadt, in the Kingdom of Bavaria. He was the son of Wolf Goldmann, a farmer and cattle dealer. His paternal grandfather had been called Jonathan Marx until 1811, when Bavarian Jews were permitted surnames and he chose Goldmann. So the family name was about a decade older than Marcus himself, an administrative fact that a grandfather had turned into an aspiration. Marcus taught school in Bavaria. At the Würzburg synagogue he met Joseph Sachs, and the sources settle on the same word for what followed: lifelong friendship. In 1848, the year revolutions spread across the German states, Goldmann left from Frankfurt am Main for America. Someone in American immigration processing changed his name to Marcus Goldman. One n was gone, and nobody asked him.
In Philadelphia he rented a room in a boarding house. Joseph Sachs had rented that same room before him.
That small fact deserves attention, because the arrangement it describes recurs through three generations. A Goldman settles into a space a Sachs has already measured. Later a Sachs settles into the business a Goldman has already built. The two families shared lodgings, then children, then a door on Pine Street, then a ledger, and finally, in Brooklyn, a cemetery.
Marcus peddled from a horse-drawn cart, then kept a clothing store on Market Street. He courted Bertha Goldman, who was eighteen, a Jewish immigrant, and no relation despite the surname. One account says he could not afford flowers and brought her a bunch of radishes. The radishes are the kind of detail families keep because it flatters the ending. In 1869, at Bertha's insistence by one telling, the Goldmans moved to New York and a Murray Hill brownstone, and Marcus hung out a shingle on Pine Street in lower Manhattan. The firm's own lore puts the office in a one-room basement next to a coal chute. Stephen Birmingham's account of it has a stool, a desk, a young apprentice, and a part-time bookkeeper who spent his afternoons working at a funeral parlor.
The business was commercial paper: IOUs, short-term promissory notes. In the mornings Goldman walked Maiden Lane among the jewelers and the leather dealers of the district known as "the swamp," bought their notes at a discount, and tucked them into the band of his tall silk hat. In the afternoons he carried the hat uptown to the commercial banks and sold the notes at a small markup. Lisa Endlich recorded the saying that a banker's day could be measured by the altitude of his hat. Working alone, Goldman moved as much as $5 million of paper a year. By the standards of the German-Jewish banking houses of 1869 this was nothing. J. & W. Seligman & Co. already had $6 million in working capital and was underwriting railroad bonds. Goldman was a broker of other men's promises, carrying them in his hat.
Joseph Sachs, the friend who had rented the room first, became an educator by one set of records. Another account calls him a saddlemaker. I could not reconcile the two, and the uncertainty may be fitting: in the second generation the Sachs family would produce a schoolmaster, a pioneering neurologist, and a banker, so a father who was both a craftsman and a teacher would not be out of character. Joseph Sachs and his wife Sophie Baer had a son named Samuel, born July 28, 1851, in Maryland. Baltimore is the city most accounts give.
The Son-in-Law Problem
Here is the biography in its most compressed form: Samuel Sachs married the boss's daughter and got his name on the door.
That compression is accurate, and it is also the reason he is so rarely studied on his own terms. He is a founder by marriage, a man who appears in the Goldman Sachs story as a hyphen. Even the dates resist him. One standard reference gives his marriage to Louisa Goldman, Marcus's youngest daughter, as 1882. Another gives 1879. Their eldest son, Paul Joseph Sachs, was born in November 1878. So 1882 cannot be the wedding year. It is the year Sam Sachs joined his father-in-law's firm, and the two events have merged in the records, as such things tend to in a family where marriage and partnership were close to the same act.
The marriage was also the second of its kind. Louisa's older sister Rosa had already married Sam's older brother Julius. Two Goldman daughters married two Sachs sons. The friendship from Würzburg was turning itself into kinship, and the kinship was about to become a balance sheet.
Before banking, one account has Samuel at work as a bookkeeper at fifteen and later running a small business in boards, glass, and mirrors. If that is right, he had spent years learning how fragile inventory is before he spent his life learning how fragile credit is. When Marcus Goldman invited him in, the old peddler was sixty and still the only partner, carrying the business in his own hat and his own name. One account notes that the firm's $100,000 of capital, after Sachs arrived, was all the senior partner's. Sachs brought a name and an appetite for work. Goldman sold his own notes to him the way he sold them to the uptown banks, at a modest markup. To fund Sam's partnership, Marcus lent his son-in-law the capital to buy in, so the new partner was in debt to the old one from his first day.
The firm became M. Goldman and Sachs, and the volume of paper reportedly reached $30 million a year. In 1885 Marcus brought in his own son Henry and another son-in-law, Ludwig Dreyfuss, and the firm took the name it would keep, give or take a comma, for 114 years: Goldman, Sachs & Co. In 1894 Sam's younger brother Henry Sachs, known in the firm as Harry, came in. In 1896 the firm joined the New York Stock Exchange. By 1898 capital stood at $1.6 million, sixteen times what it had been sixteen years earlier.
For a long stretch, by one count almost fifty years, every partner came from the intermarried families. Another source names Henry S. Bowers in 1912 as the first partner from outside the founding family. Both cannot be fully true. My reading is that the first describes the founders' instinct and the second the date the instinct gave way.
The family partnership was not sentimental. It was a technology. In a period before credit ratings, before the S.E.C., before the agencies that would be required to grade every issuer of commercial paper after the Penn Central collapse of 1970, the only reliable credit instrument was character, and the most auditable character was one you had eaten Sabbath dinner with for thirty years. Marrying your partner's sister was due diligence. It was also cheap, and it was also a trap, though nobody in 1885 had reason to see that yet.
When Marcus stepped back in the 1890s he left the firm to two men, his son Henry Goldman and his son-in-law Samuel Sachs. The firm's own published list of senior partners shows them sharing the role from 1893 to 1914. Another reference lists Sachs alone as chairman from 1894 to 1928. The two accounts disagree about where Sam Sachs stood between 1914 and 1928, at the head of the table or at its side. The disagreement says something about the man. With some leaders, nobody has to ask who was in charge.
Alpaca and Shirtsleeves
Every serious history of Goldman Sachs eventually reaches the same contrast and describes it through clothes.
Samuel Sachs wore the alpaca coat. It was thin and formal, a garment for keeping up appearances in heat that would have excused almost anyone, and it suited a man whose instinct, in William D. Cohan's account in Money and Power, was to build on what had already worked and to protect the capital already in hand. Henry Goldman worked in his shirtsleeves, liked trading railroad and utility bonds, usually made money doing it, and spent his partners' risk tolerance more freely than they always liked. He was six years younger than Sachs, born in Philadelphia in 1857, and he had left Harvard without a degree. Family lore blamed poor eyesight. At least one historian suspects the real reason was that a second-generation German Jew did not feel wanted there. He was not a man who stayed where he felt unwanted.
— Henry Goldman, as he would tell his nephew Walter Sachs (recounted by William D. Cohan)Money is always fashionable.
He said it to Walter Sachs, Samuel's son, his own nephew. It is hard not to hear an argument across the generations in that. The uncle was telling the boy that the father's carefulness was a matter of style, and that style changes while money does not.
Sachs's reply, if it can be called that, survives in his son Paul's words, describing the family's satisfaction when a deal with an unfamiliar counterparty fell through:
— Paul J. Sachs, on a deal the firm abandoned (recounted by William D. Cohan)From the very first moment, [we were] disturbed by the moral[ity] of these men and while I do not deny that the business might have proved satisfactory enough, we are as a matter of fact glad to have seen it fall through.
The construction of that sentence is worth reading slowly. The business might have proved satisfactory enough. Paul concedes the money and still prefers to have lost it. No Goldman ever said anything like that, and the Sachses may have said it more than once. The firm's tension between growth and preservation, between the shirtsleeves and the alpaca, was not mainly a disagreement about strategy. It was a disagreement about what a banker owes the people across the table, and on Pine Street it was argued across the dinner table first.
Cohan suggests that this tension was written into the firm's DNA from then on. The phrase is a cliché. Here it is also nearly literal, because the people holding the opposing positions shared blood and shared grandchildren. When Sachs and Goldman disagreed about a railroad bond, they were disagreeing in front of the same nieces and nephews.
Pricing What Cannot Be Touched
The one innovation that gives Samuel Sachs a real claim on financial history, and not only on its letterhead, was a problem of measurement.
At the turn of the century, investment-grade American finance meant railroads. A railroad had track, rolling stock, and land you could appraise, so a bond against it had something solid behind it. The great houses priced securities against book value, the liquidation value of the physical stuff. That made sense in an economy of steel and timber. It made no sense for a mail-order company in Chicago whose value lay in its catalog, its distribution system, and the habits of millions of farm families who had never been inside a bank.
In 1906 Goldman Sachs took Sears, Roebuck public. The relationship came through Henry Goldman's personal friendship with Julius Rosenwald, one of Sears's owners. The deal was syndicated with Lehman Brothers, through a friendship with Philip Lehman that the sources assign sometimes to Henry Goldman and sometimes to Samuel Sachs. Cohan calls Lehman Henry's best friend. The encyclopedia entry calls him Sam's longtime friend. The disagreement may be the most honest description of how the house actually worked: a relationship belonged to whichever brother-in-law needed it that year. General Cigar went public the same year. Woolworth followed in 1912, and Continental Can after that. In 1911 the Goldman-Lehman partnership refinanced and incorporated Studebaker.
The method that made these deals possible was to price a company on its earnings and not its assets, using a price-to-earnings multiple in place of book value. That let the firm raise capital for retailers and other businesses with few hard assets. In plain terms, Goldman Sachs persuaded investors to pay for a future. The bet was that the American consumer economy was a better credit risk than the American railroad economy, and the bet was correct.
It is tempting to give the credit to Henry, the shirtsleeves man, the bond trader, the friend of Rosenwald. He deserves much of it. But one older account adds a detail that belongs to Sachs's temperament: these new-industry securities were at first hard to sell and became profitable only after Goldman, Sachs persuaded companies to adopt stricter accounting and auditing procedures. The innovation needed both men. Pricing on earnings means trusting the earnings, and trusting the earnings means requiring someone to verify them. Henry's appetite brought in the clients. Sam's caution produced the audit. The P/E ratio was an act of imagination that worked only once it was disciplined.
Sachs's own territory was overseas. From 1887 the firm had a relationship with the British merchant bank Kleinwort Sons, which opened the way into international commercial finance, foreign exchange, and currency arbitrage. With Harry Sachs running things in New York, the older account says, Samuel took special responsibility for expansion abroad and built contacts through Kleinwort. While his brother-in-law was capitalizing Chicago, Sam was in London making sure Chicago's paper could be sold there. Offices opened in Boston and Chicago in 1900. A firm whose founder had carried its inventory in a hat now reached across an ocean.
My Boy, You Come Home
Walter Edward Sachs, Samuel's third son, was born May 28, 1884, in Manhattan. He finished Harvard College in 1904, put up with a year of Harvard Law, and joined Goldman, Sachs & Co. in 1905 as a clerk, moving from office to office doing whatever menial task the partners gave him. He was the boss's son and was treated as an errand boy, and this was clearly deliberate.
The next spring his father took him to Europe as his secretary. Walter sent cables, carried dispatches, and drafted letters for his father's signature. When the senior partner sailed home that summer, Walter stayed in Paris, on sanctioned leave from the firm, working unpaid in the offices of two French banks. In early 1907 he moved on to Berlin. It was a common apprenticeship for the sons of banking patriarchs at the time: learn the trade in the old capitals, in the old languages, in houses where your name meant nothing. At the end, his father had promised, there would be a trip around the world.
Then came the Panic of 1907. Trust companies failed, call money went to absurd rates, and the commercial-paper market, the original Goldman business, froze. Samuel Sachs cabled his son in London: My boy, you come home and go to work.
It reads as eight words of a father's love and a senior partner's arithmetic in the same sentence, and it may be the plainest statement of his philosophy that survives. You do not bring capital home in a crisis. You bring people home.
Walter's full-time career began on January 2, 1908. He was given commercial paper to sell to banks in New York, Philadelphia, and Hartford. He came home on the first day with all of it unsold and concluded that he must be a failure. He went on to a career at the firm that lasted more than half a century. One obituary headline gives his partnership as starting in 1910, and the family records say 1928. He was credited with guiding the firm through the Depression, retired to limited partner in 1959, and died in Darien, Connecticut, at ninety-six, on August 21, 1980. For a while in between he was married to an actress, Mary Williamson, in a house on East 80th Street, which is not where the cable would have predicted the story going.
The first day matters more than the rest. Walter came home with the paper, not the paper with Walter, and on the evidence he went back the next morning with it. Sam Sachs had built an institution in which the heir's first experience was a failure at the most basic job the founder had done, carrying other men's promises from one door to another and finding a buyer. Marcus Goldman did it with a silk hat. His grandson tried with a briefcase and failed. That was the training.
The Year the Name Was German
In 1915 J. P. Morgan & Co. was organizing a $150 million bond issue for Britain and France. Wall Street was expected to take part. Henry Goldman refused to let Goldman Sachs participate, and he did it publicly, voicing support for Germany at a moment when much of New York was arranging its sympathies, and its future business, around the Allies.
The rest of the partnership supported the Allies. Samuel Sachs supported the Allies. For two years the senior partners of the firm were on opposite sides of a world war, while the Kleinwort relationship Sachs had built in London became an embarrassment instead of an asset. In 1917, after the United States entered the war, Henry Goldman resigned. He recognized, in the dry wording of the record, an irreconcilable difference of opinion. Accounts differ on how bitter the break was. The firm's own history says he left under growing pressure from the other partners. Within the family, versions diverge, which is what happens when the people telling the story are also the people in it.
The paradox is close to unbearable, and the reason for writing about it at all. The firm had been founded by Bavarian Jews who changed their names at the immigration desk. Its working language at home had been German. Its heirs trained in Berlin. And in 1917 it was the most American-sounding partner, the Allied partner, the man in the alpaca coat, who stayed with the institution, while the son of the founder walked out over loyalty to the country the founder had left. Henry Goldman stayed devoted to Germany for sixteen more years. He bought a yacht for Albert Einstein. He helped fund the Stern–Gerlach experiment in quantum physics. He paid $175,000 for a Frans Hals portrait in 1916, and he later bought a Stradivarius for the young Yehudi Menuhin. With six other New Yorkers he endowed a $150,000 chair in German Art and Culture at Harvard, the university he had left without a degree.
In 1933, on his annual trip to Berlin, he saw the antisemitism of the new regime turning into institutional brutality. He never went back. Until his death in 1937 he worked to help German Jewish intellectuals and refugee children reach the United States. The Nazis confiscated the yacht he had given Einstein.
When Henry left, the Sachs family took full control of the firm. Harry Sachs is listed as senior partner from 1917 to 1921. Two men who had shared one office for more than two decades, and who had married into each other's families twice over, no longer spoke as partners. The firm kept both their names, because the name was the one thing nobody could take out.
A Short Leap From the Banking House
Paul Joseph Sachs, the eldest son, failed the Harvard entrance examinations in 1895. He passed German, French, and history, and failed Latin, Greek, mathematics, and science. One art historian later called it a humiliation that rankled him for years. He spent the next year being tutored intensively, studying under a poster that read I must, I will, I can, and he got in.
At Harvard he studied the fine arts under Charles Eliot Norton, whose course on the history of the fine arts in connection with literature was the first of its kind in the country. As a child he had toured Europe's great museums with his father, which is a side of Samuel Sachs the business histories never mention: the cautious banker leading his eldest son through the Louvre. Paul spent summers at the firm. After graduating in 1900 he joined it, becoming a partner soon after by one account. A Harvard professor offered him an assistantship that paid $750. His father declined to supplement the salary.
That refusal is Samuel Sachs in a single decision. He would pay for his son's education and his son's apprenticeship, and he would not subsidize his son's departure. The firm needed sons. Paul went to the firm. He also, in his own later account, vowed never to give up the idea of an eventual professional career in art.
He kept the vow. In 1911 Edward Waldo Forbes, director of Harvard's Fogg Museum, invited him onto the museum's visiting committee. Paul wrote to his wife that the invitation was an opening wedge and that he had his foot in the door. In 1915, at thirty-six, he accepted the assistant directorship of the Fogg, at first without a salary, and left Wall Street. Forbes later admitted that he had seen money in Paul Sachs: connections to Jewish alumni and patrons, to the banking community, and to Paul's own funds. Paul recalled that a great many people on the Street considered him a damn fool. An English colleague wrote that he had always known Paul was fond of "queer things" but had never imagined him hiding in a musty museum among Egyptian mummies.
Paul, for his part, described the move as a short leap from the hallowed atmosphere of the banking house to the construction of a correspondingly rarefied space in the museum.
Between 1921 and 1948 he taught a year-long graduate course at the Fogg, among the first of its kind in the United States, that trained 338 students in every part of museum work, from connoisseurship to running the heating system. Its graduates went on to staff more than a hundred American museums and seventy universities. Alfred Barr, the first director of the Museum of Modern Art, took it. So did H. W. Janson, whose History of Art became the standard textbook, and Perry Rathbone, who ran the St. Louis Art Museum and then the Museum of Fine Arts in Boston. American museums grew from about 600 to about 2,500 between 1910 and 1939, and many of the people sent to run them had learned how from the eldest son of Samuel Sachs. Paul insisted that museum professionals had to be guided by high standards of morals, whatever the values of their benefactors.
Look again at that phrase and at Paul's earlier sentence about the men whose morality had disturbed the family from the very first moment. The Sachs conscience, the willingness to walk away from a deal that might have proved satisfactory enough, did not stay at the firm. It left in 1915 for Cambridge, Massachusetts, and got written into the professional ethics of the American museum. "I am conscious, in this field," Paul wrote to Bernard Berenson in 1927, "of having something that is truly my own to give."
In 1924 Samuel Sachs gave Harvard $50,000. The Brooklyn Daily Eagle reported it under a headline about $100,000 from New York bankers. It was a gift to the institution that had once failed his son.
What the Trust Did to the Name
Waddill Catchings joined Goldman Sachs in 1918, in the vacuum Henry Goldman left. He was not a Goldman and not a Sachs, and within a decade he held the largest single stake of any partner in the firm. Henry Bowers had been the first outsider to share in the profits in 1912. Catchings was the first outsider to own the place, in the practical sense that whoever has the most capital at risk sets the house's appetite. He is listed as senior partner from 1921. During the 1920s the firm took major interests in Merck in 1919 and General Foods in 1922. The war, the departure, and the newcomer had turned the house from a family into something closer to a bet.
Samuel Sachs retired in 1928, at seventy-seven. The obituary says he became a special partner. In December of that year, months after the conservator left the room, the firm launched the Goldman Sachs Trading Corporation, a closed-end investment trust of the kind the late 1920s produced in quantity, built on leverage and supported by the firm's reputation. Within a year came the Crash. The trust collapsed, amid accusations of share-price manipulation and insider trading. Sidney Weinberg replaced Catchings as senior partner in 1930, moved the firm back from trading toward investment banking, and spent the next thirty-nine years rebuilding the name. He was eventually called "Mr. Wall Street."
In 1932 came the Delaware caption, with both Samuel Sachs and Sidney Weinberg in it. The young man who would repair the name and the old man who had protected it were listed together as defendants in the record of its damage.
I don't want to make Samuel Sachs a prophet. Nothing in the record shows him warning against the Trading Corporation, and nothing shows him protesting it. The record is what the clothes suggest: an old man stepped back, and the next generation tried on a different coat. It is fair to point out that the structure he spent decades defending, a partnership whose capital belonged to people who knew one another and whose risk was their own, was the structure the trust escaped. A trust sold to the public spent the public's money under the founders' name. The first great disgrace of Goldman Sachs came from the first serious attempt to stop being a family firm.
The pattern did not end with him. Sidney Weinberg's son John later shared the senior partnership, and he and John Whitehead wrote down fourteen business principles in 1976, which in effect wrote down the dinner-table argument. Gus Levy, the trader, gave the firm its best-known self-description, "long-term greedy," and the partners reinvested nearly all their earnings in the house. That is the alpaca coat put into financial terms. The partnership lasted until May 1999, when, after decades of debate, the firm went public at $53 a share. The public bought 12.6 percent, and 221 former partners kept 48.3 percent. Eleven years later the S.E.C. accused the firm of marketing a synthetic C.D.O. called Abacus 2007-AC1 to investors while a hedge fund betting against it had helped choose the bonds inside it. Testimony before the Financial Crisis Inquiry Commission indicated that the hedge fund had first approached Bear Stearns, whose C.D.O. chief, Ira Wagner, turned the deal down because a short investor choosing the collateral was an inherent conflict. Goldman Sachs settled in July 2010 for $550 million without admitting or denying wrongdoing. In 2020 it paid $2.9 billion over its 1MDB bond underwriting in Malaysia, and its Malaysian subsidiary pleaded guilty.
Paul Sachs might have recognized Ira Wagner's instinct: being disturbed by the moral[ity] of these men and glad to have seen it fall through. By then nobody at the firm named Sachs was in a position to say it.
The founders' names stayed on the door through all of it. In 1882 a peddler's son-in-law had given the firm a name. By the 2010s the name was what a nervous public meant by Wall Street.
The Partnership: The Making of Goldman Sachs, Charles D. Ellis's history of the firm, is the place to follow those threads further, from the Einstein yacht onward. What none of the institutional histories can fully account for is the founder whose temperament went into the firm while he himself drifted from the center of its story.
Salem Fields
Samuel Sachs died early on Saturday, March 2, 1935, of heart disease, in New York. He was eighty-three. The Jewish Telegraphic Agency's notice called him a banker and a philanthropist and listed his causes: Montefiore Hospital, where he had for a time been a director; Bellevue and Allied Hospitals; and the Federation for the Support of Jewish Philanthropic Societies. He was survived by his widow, Louisa, who lived until 1949; by Paul J. Sachs, professor of fine arts at Harvard; and by Arthur and Walter Sachs, partners of Goldman, Sachs & Co. His daughter Ella Sachs Plotz had died in 1922. The records cannot agree on the year she was born.
The funeral was private, at ten o'clock on the morning of Monday, March 4, at the Hotel Pierre, at Fifth Avenue and Sixty-first Street, where he and Louisa had lived. A family that began in America in a boarding-house room in Philadelphia, rented first by one Bavarian friend and then by the other, ended its first chapter in a hotel suite overlooking Central Park. In a sense both were rented rooms.
The body was taken to Brooklyn for burial, to Salem Fields Cemetery.
Two years and one month later, on April 4, 1937, Henry Goldman died at seventy-nine. He had left the firm in 1917 over a war, had kept faith with Germany until Germany broke it in 1933, and had spent his last years getting children out of Berlin. They carried him across the river as well, to Salem Fields.
Part IIThe Playbook
Samuel Sachs left no memoir, no letters to shareholders, and almost no quotations. One cable to a son survives, and the rest of what he believed has to be read from what he did: whom he married, what he refused to pay for, what he wore, what he gave away, and what happened once he left. The principles below are inferred from that record and from the people closest to him: his sons, his brother-in-law, his father-in-law, and the institution that kept his name. They are not lessons in caution as such. They describe how a conservator works inside an expansionist institution, which is a harder and less celebrated job than founding one.
The principles
- 1.Install the brake at the same rank as the engine.
- 2.Price the future, then audit it.
- 3.Treat kinship as a credit instrument, and know when it expires.
- 4.Borrow your rival's balance sheet.
- 5.Train the heir at the bottom, abroad, and unpaid.
- 6.In a panic, recall people before capital.
- 7.Walk away from deals that are satisfactory enough.
- 8.Let the irreconcilable partner leave whole.
- 9.Don't subsidize the exit, and expect to lose some anyway.
- 10.Your retirement is a risk event.
- 11.Wear the coat.
Principle 1
Install the brake at the same rank as the engine
Goldman Sachs did not become a great firm because Henry Goldman was bold, or because Samuel Sachs was careful. It became great because for more than two decades the bold man and the careful man held equal rank, shared the senior partnership, and could not overrule each other. When Henry wanted to trade railroad bonds with partnership capital, he had to persuade a peer, not override a subordinate. When Sachs wanted to walk away from a deal, he had to answer to someone who thought money was always fashionable.
Most organizations do something different. They put the risk function under the revenue function, as a compliance department that reports to the people it is supposed to restrain. Then they act surprised when the brake gives way. The Goldman-Sachs arrangement put the brake in the name on the door. Its worst period, the Trading Corporation of 1928–29, came right after the brake retired and the engine, now Catchings, held the largest stake with nobody of equal standing to oppose him.
⚖
Two Temperaments, One Partnership
The founding tension, as the record describes it.
| Dimension | Samuel Sachs | Henry Goldman |
|---|---|---|
| Dress | Thin alpaca office coat, even in summer heat | Shirtsleeves |
| Risk posture | Preserve Build on past successes | Expand Trade bonds with partners' capital |
| Territory | Overseas, through Kleinwort Sons | Domestic clients: Sears, Studebaker |
| World War I | Allied | Pro-German; refused the 1915 Anglo-French issue |
| Exit | Retired to special partner, 1928 | Resigned 1917 |
| Signature line | "My boy, you come home and go to work." | "Money is always fashionable." |
Tactic: Give your most conservative senior leader formal parity with your most aggressive one (shared title, shared veto, shared equity) instead of a reporting line beneath them.
Principle 2
Price the future, then audit it
The Sears, Woolworth, and General Cigar offerings depended on a conceptual change: valuing companies on earnings rather than book value. That made capital available to retailers whose real assets, catalogs and customer habits and distribution, never appeared on a liquidation appraisal. It was an imaginative act, and in 1906 an unproven one.
The less-quoted half of the story is what made it work. These securities were hard to sell at first, and they became profitable only after the firm persuaded the companies to adopt stricter accounting and auditing. A multiple of earnings is only as good as the earnings. A firm that sells investors a future has to make the present verifiable. That second step is the Sachs contribution, and most people who imitate the first step skip it.
Tactic: Whenever you ask someone to pay for intangible future value, insist in the same document on the reporting discipline that makes the present auditable.
Principle 3
Treat kinship as a credit instrument, and know when it expires
Two Goldman daughters married two Sachs sons. Marcus Goldman's son, two sons-in-law, and eventually his grandsons joined the firm. For decades the partnership drew from inside the intermarried families. In an era with no credit ratings, no securities regulator, and no audited disclosure standard, this was the best trust technology on offer. You knew your partner's character because you had watched it at dinner for twenty years.
But kinship carries its risks with it. The 1917 rupture was a family rupture, and it was harder to manage because of the family. The answer was not to abandon kinship but to add outsiders deliberately (Bowers in 1912, Catchings in 1918) once the family could no longer supply both the capital and the judgment the firm needed. Bringing in Catchings fixed one problem and created another, which is the subject of Principle 10.
Tactic: Use dense personal trust to build early, and decide in advance which signal, whether a capital need, a succession gap, or a values split, will tell you the family model has run its course.
Principle 4
Borrow your rival's balance sheet
Goldman Sachs did not do its first big underwritings alone. It did them with Lehman Brothers, a firm that came out of Alabama cotton and retail, through a friendship with Philip Lehman. Neither house could carry Sears or Studebaker comfortably by itself. Together they could. The sources disagree about whose friend Philip Lehman was, Henry's or Sam's, and that suggests the relationship belonged to the firm.
The syndicate was a way to get scale without capital. It let a small house, insignificant next to the Seligmans in 1869, reach the deals of the century by sharing them. It also limited the firm's exposure to a single bet, which suited Sachs.
Tactic: When an opportunity exceeds your balance sheet, co-lead it with a peer you trust instead of either passing or stretching your own capital past what is prudent.
Principle 5
Train the heir at the bottom, abroad, and unpaid
Walter Sachs's education was designed to strip away the advantages of his name. He started as a clerk running between offices. Then he was his father's secretary in Europe, then an unpaid intern at two French banks, then a trainee in Berlin. When he finally joined in earnest, his first assignment was the founding trade, selling commercial paper to banks, and on his first day he failed at it.
The design made sense. An heir who has only ever been deferred to cannot tell real respect from the respect owed to his surname. An heir who has carried paper around Hartford and come back with it unsold knows what the firm actually sells. Walter went on to help steer the firm through the Depression and stayed connected to it for more than half a century.
Tactic: Put successors, whether family or anointed, in a role where their name carries no weight and failure is likely, before they are allowed into a role where their name carries all the weight.
Principle 6
In a panic, recall people before capital
"My boy, you come home and go to work." The Panic of 1907 put the commercial-paper business, the firm's origin, under acute strain. Sachs's response, as recorded, was not a letter about positions or reserves. He cabled a person. He cancelled the trip around the world he had promised. A crisis was a staffing problem first.
The instinct shows up again and again in the firm's later history. Partnership culture, the reinvestment of earnings, and "long-term greedy" all treated human capital committed to the house as the scarcest resource. Money can be raised in a crisis, though expensively. Trusted judgment in the room cannot.
Tactic: Write your crisis playbook around who has to be physically present and decision-ready within 48 hours, not only around liquidity.
Principle 7
Walk away from deals that are satisfactory enough
Paul Sachs's account of the abandoned deal is the most revealing document the Sachs family left. The business might have proved satisfactory enough, and the family was glad to see it collapse anyway, because the people on the other side had disturbed them from the first moment and every later meeting confirmed it.
That is a rare position, because it gives up a profitable outcome on the basis of a judgment about character. Ninety years later, a head of a C.D.O. desk at Bear Stearns took the same position on what became the Abacus structure and refused to let a short investor choose the collateral. Goldman Sachs did the deal, earned roughly $15 million, and later paid $550 million to settle. Whether Paul Sachs's instinct still lived at the firm is a question the 2010 settlement answers, though not in the firm's favor.
✕
The Walk-Away Test
Two moments in which a counterparty's character was the deciding variable.
| Moment | Economics | Character signal | Decision |
|---|---|---|---|
| Sachs-era deal (recounted by Paul Sachs) | "Might have proved satisfactory enough" | Disturbed "from the very first moment" | Glad it fell through |
| Abacus 2007-AC1, Bear Stearns | Paulson & Co. brought the deal | Short investor choosing collateral | Declined |
| Abacus 2007-AC1, Goldman Sachs | About $15M paid to the firm | Same | Executed; $550M settlement |
Tactic: Give at least one senior person explicit authority to kill a profitable deal on character grounds alone, and record when they use it, so the instinct becomes institutional memory.
Principle 8
Let the irreconcilable partner leave whole
In 1915 Henry Goldman publicly refused to join the Morgan-arranged Anglo-French bond issue. The firm did not split, sue, or rename itself. It endured two years of open disagreement among its senior partners. When America entered the war in 1917 and the difference became unworkable, Henry resigned, and the record describes the resignation as recognizing an irreconcilable difference of opinion, not as a purge.
What the partnership kept is the point: the name. Goldman stayed on the door, Henry kept his dignity, and in his remaining twenty years he did remarkable things, funding physics, rescuing refugees, buying instruments for prodigies. A disagreement over values had cost the firm a partner without costing it its identity.
Tactic: When a founding partner's values split from the institution's, negotiate a departure that leaves both parties' reputations intact, and do not let the separation become a fight over the name.
Principle 9
Don't subsidize the exit, and expect to lose some anyway
When Harvard offered Paul Sachs a $750 assistantship, his father would not top it up. The firm needed its eldest son, and Samuel Sachs would not pay for him to leave. Paul joined the firm. Ten years later he left anyway, for an unpaid post at the Fogg, while Wall Street called him a fool.
There is a second half to this principle, and Samuel Sachs presumably did not plan it. The son he could not keep took the family's ethical seriousness, the "high standards of morals," the willingness to walk away, into a new field and trained 338 people who went on to lead American museums. Talent that leaves on its own terms often spreads the house's values further than talent that stays reluctantly.
Tactic: Decline to fund a key person's departure, but if they leave anyway, invest in the relationship, because their new institution will carry your name into rooms you'll never enter.
Principle 10
Your retirement is a risk event
The sequence is stark. Samuel Sachs retired to special partner in 1928. Waddill Catchings, an outsider with the largest stake, was senior partner. In December 1928 the firm launched the Goldman Sachs Trading Corporation. In 1929 it collapsed amid accusations of manipulation. In 1932 a Delaware court was seizing Samuel Sachs's stock in a suit over directors who "wilfully and recklessly squandered and wasted" assets.
The lesson is not that Sachs could have stopped it, since the record is silent on that. It is that the departure of a conservator changes the risk profile of the institution at once, and the people who remain will feel it as a loosening. A retiring founder whose name stays on the door has not reduced his exposure. He has only given up control over it.
⏱
The Handoff
How a conservator's exit preceded the firm's first great disgrace.
1912
Henry S. Bowers becomes the first partner from outside the founding family.
1917
Henry Goldman resigns over World War I; the Sachs family takes full control.
1918
Waddill Catchings joins; by 1928 he holds the largest single stake.
1928
Samuel Sachs retires to special partner. In December, the Goldman Sachs Trading Corp. launches.
1929
The Trading Corp. collapses in the Crash amid manipulation accusations.
1930
Catchings is ousted; Sidney Weinberg begins a 39-year rebuild.
1932
Cantor v. Sachs: Samuel Sachs's Delaware-held stock is sequestered.
Tactic: Before stepping back, name a successor whose explicit mandate is preservation and give them veto power over any new vehicle that trades on the firm's name for at least the first two years after you go.
Principle 11
Wear the coat
It may seem trivial that the most-repeated detail about Samuel Sachs is his clothing. It isn't. A thin alpaca coat worn on the hottest days of the year is a public, daily, costly signal. It said that this partner's standards did not change with conditions. Counterparties, clients, and the shirtsleeved partner across the room could read it at a glance. Marcus Goldman's silk hat full of notes worked the same way: the hat was the inventory, and everyone could see how full it was.
In a business that runs on trust before any contract is signed, consistent visible conduct is a form of collateral. People knew what Samuel Sachs would do before he did it, and that made him easier to lend to, partner with, and follow. The coat was about predictability more than formality.
Tactic: Choose one visible, slightly costly habit that signals your standards don't shift with circumstances, and never drop it when conditions make it inconvenient.
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Part IIIQuotes and Maxims
In their words
— Samuel Sachs, cable to his son Walter in London during the Panic of 1907 (recounted by William D. Cohan)My boy, you come home and go to work.
— Paul J. Sachs, recalling his departure from Goldman, Sachs & Co. for the Fogg Museum (Harvard Magazine)A great many people on 'the Street' thought I was a damn fool and couldn't understand it.
— Paul J. Sachs, letter to Bernard Berenson, 1927I am conscious, in this field, of having something that is truly my own to give.
— The poster Paul J. Sachs studied beneath after failing the Harvard entrance exams, 1895I must, I will, I can.
Maxims
- The brake needs a title. A conservative voice reporting to an aggressive one will give way under pressure; one holding equal rank will not.
- Audit the future you sell. Pricing on earnings works only when someone insists the earnings can be verified.
- Kinship is collateral with an expiry date. Family trust builds firms quickly and breaks them badly; know beforehand what will mark its end.
- Syndicate the deal you can't carry. A friend's balance sheet is cheaper than overextending your own.
- Let heirs fail early. The successor who came home with the paper unsold understands the business better than the one who never carried any.
- Crises are staffing problems. Bring the people home first.
- "Satisfactory enough" is not enough. Character can be reason enough to leave money on the table.
- Let the dissenter keep his name. A dignified departure protects the institution's identity better than a purge.
- The founder's exit is a risk event. The day the conservator retires, the institution's appetite changes.
- The name is the only asset you can't withdraw. Protect it while you are present, because once you leave you no longer control it.
