Goldman Sachs is busy automating banking – basically substituting classic banking jobs with engineers. This makes sense as banks mainly process information which often can be done at a lower cost with less mistakes by automated systems.
Original article plus synopsis with examples and questions below:
Traders are out, computer engineers are in, as Goldman Sachs goes digital
At its height back in 2000, the U.S. cash equities trading desk at Goldman Sachs’s New York headquarters employed 600 traders, buying and selling stock on the orders of the investment bank’s large clients. Today there are just two equity traders left. Automated trading programs have taken over the rest of the work, supported by 200 computer engineers.
Here the examples for trading:
At its height back in 2000, the U.S. cash equities trading desk at Goldman Sachs’s New York headquarters employed 600 traders, buying and selling stock on the orders of the investment bank’s large clients. Today there are just two equity traders left. (…) Goldman Sachs has already begun to automate currency trading, and has found consistently that four traders can be replaced by one computer engineer, Chavez said at the Harvard conference. Some 9,000 people, about one-third of Goldman’s staff, are computer engineers.
Investment banking:
Next, Chavez said, will be the automation of investment banking tasks, work that traditionally has been focused on human skills like salesmanship and building relationships. Though those “rainmakers” won’t be replaced entirely, Goldman has already mapped 146 distinct steps taken in any initial public offering of stock, and many are “begging to be automated,” he said.
Consumer lending:
Goldman’s new consumer lending platform, Marcus, aimed at consolidation of credit card balances, is entirely run by software, with no human intervention, Chavez said. It was nurtured like a small startup within the firm and launched in just 12 months, he said. It’s a model Goldman is continuing, housing groups in “bubbles,” some on the now-empty trading spaces in Goldman’s New York headquarters: “Those 600 traders, there is a lot of space where they used to sit,” he said.
Revenue per employee has gone up, meaning that Goldman can share the pie with a smaller number of people. One third of them are now engineers (average salary at Goldman is 500.000 USD).
Interesting questions might be here:
What exactly is the value created by these people for their customers and wider stakeholders?
And looking at market rates for employment, what part of the salary might be a proper reflection of the skillset of these people and what part is more related to quasi-oligopolic market power like network effects or regulatory protections?