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Goldman Sachs has more than 9,000 employees in technology, more than all the Internet giants including Facebook and Linkedin. Why does Goldman Sachs need so many technical staff and what are these employees doing specifically?
Goldman Sachs has deep scientific and technological origins
As early as the early 1980s, as the Cold War gradually came to an end, the U.S. government reduced funding and support for basic science. Many academic elites in physics and mathematics have switched to Wall Street. The Goldman Sachs Quantitative Strategy Group accepted the first batch of such quant (Wanke, a group of physicists and mathematicians who used mathematical models to analyze financial markets), among which Emmanuel Deman is one of the most famous quant. He joined Goldman Sachs at the age of 33. He spent nearly 20 years as a managing director of Goldman Sachs and led Goldman Sachs' Quantitative Strategy Group. He mentioned in the book "The Broad Guest" that as early as the early 1980s, Goldman Sachs had developed a friendly user terminal in the C language to help bond and options traders and sales quickly integrated various valuation models given Trading price.
Institutional Services and Trading Departments have the greatest need for technology
At present, Goldman Sachs's business is divided into four major sections: Investment Banking, Institutional Services, Trading and Asset Management. Agency Services accounted for 45% of 2015 revenue. The Trading Department contributed 16% of 2015 revenue but contributed 34% of operating profit, both of which are significant from the perspective of revenue and operating profit. On the one hand, Goldman Sachs relies on a global service platform to provide services to institutional clients, ranging from simple margin financing to complex derivatives trading. Such front-end services must maintain real-time and secure communications with exchanges; at the same time, The securities loaned or held by the agency service department and the transaction department need to be timely aggregated into Goldman Sachs' own risk control system to ensure that the risk control department grasps the company-level risk exposure. This is a middle-office and back-office business and requires the company to have immediate data updates and mirroring between data centers in different offices. It also needs to ensure real-time alarms when transaction risks occur. The two departments of the agency service department and the transaction department are also the departments with the highest requirements for science and technology.
Although the assets management department (18% revenue) is not Goldman Sachs's strength, it also has certain requirements for science and technology. However, the system and software of the traditional asset management industry are pre-customized, and the custodian bank can also provide certain back-office services. Therefore, the investment in technology research and development is not very important. The Investment Banking Department (21% revenue), which is responsible for the listing and issuance of securities marketing, is a labor-intensive business with the lowest requirements for science and technology.
Overall, Goldman Sachs’ internal science and technology needs are reflected in three major areas:
First, the global network infrastructure. Ensure the smooth operation of the entire group's IT system, security, reliability, redundancy, emergency plans for a variety of natural disasters and man-made disasters. This also includes the smooth flow of systems with major global exchanges.
Second, the risk control system. As a market maker, Goldman Sachs owns a large number of securities and has exposure to many asset classes and industries. Goldman Sachs's risk control department needs real-time risk control to ensure that all position information is complete, timely, and can predict risks in advance through VARs and more complex risk exposure models, and hedging or reducing positions. All this requires the assistance of the science and technology department.
Third, the cooperation between the technology sector and the quantified sector will generate revenue. Goldman Sachs’ long-established Quantitative Strategy Group has many programmers and data analysts, who work side-by-side with traders, design financial derivatives that meet customer needs, or develop quantitative strategies.
Although Bitcoin has already cooled down, Blockchain technology is still the focus of Goldman Sachs, because its trading information is known across the entire network as features that are not easily tampered with can be used to reduce transaction costs in certain financial markets, such as US stock and real estate markets. In areas related to consumer finance, Goldman Sachs not only makes strategic investments, but also invests significant R&D costs internally to launch new products.
Looking at Goldman Sachs’ talents from the recruitment position
As of September 16, a total of 95 hiring positions were held on the official website of Goldman Sachs. Analyzing the information can lead to many conclusions. First of all, there are 38 jobs in Bengaluru, India, accounting for 40% of the total jobs, and 12% in Warsaw, Poland. Only 20% of jobs are in New York headquarters. This shows that Goldman Sachs, like most IT companies in the United States, places most of its remote outsourcing operations in countries with low technical talents such as India and Eastern Europe. In addition, Goldman's risk control headquarters is located in Salt Lake City, Utah, where labor costs are low. With nearly 2,000 employees, Goldman Sachs is the fourth-largest office in Goldman Sachs. Many of its online recruitment positions are Salt Lake City. The earliest recruitment information on the Goldman Sachs website was in mid-May and it was nearly 4 months ago. Assuming 10 months each year is the peak season for hiring, then the annual job vacancy for Goldman Sachs is between 230-300 people, corresponding to the total number of IT personnel for more than 9,000 people. Liquidity is still relatively low.
Careful study of these recruitment positions can even capture the current business focus of Goldman Sachs. The Consumer Finance and Technology Department has recruited nearly 15 positions at its New York headquarters, covering everything from front-end to data architecture. This shows that Goldman Sachs is advancing strongly in the field of consumer finance. In the coming year, it is very likely that new products will emerge and formally enter the field of consumer finance and financial digitization. Technology Risk This team also recruits nearly 8 people in Dallas and India, and is responsible for network security. Goldman Sachs is also recruiting employees in the network infrastructure in India and Salt Lake City, Utah, USA. In addition, business portals such as asset management platforms, high-net-worth individual customers and institutional customer services are also recruiting technical talents related to front-end customer interaction interfaces.
The prospect of work automation
When it comes to automation of work, I believe that the current number of Goldman Sachs employees will continue to remain high. In the long run, a large part of Goldman Sachs' business will not be replaced by machines. First, the financial industry is still essentially a relationship-winning industry. There will be no fundamental change in the business model through tie-in trading. Second, Goldman Sachs increasingly depends on a global internal platform to provide services to institutional customers, as well as trading and risk control systems, but also determines that Goldman Sachs needs to ensure that a large number of conventional types of IT staff to maintain the global network system. The only trend is to move jobs outward to countries such as India and Eastern Europe. Third, the biggest impact on machines and quantification is the purchaser institutions that the United States makes active investments and the brokerage services that serve the buyer institutions. The form of this kind of business is mainly impacted by the outflow of customer funds, and non-procedures can complete work more quickly.
The most affected by machine automation are the floor traders of the major US exchanges. All in all, Goldman Sachs, as a leader in the investment industry, has great interest in financial science and technology, not only because of its prospects, but also because of the needs of day-to-day operations, it is also a rainy day to ensure that they will not be disadvantaged in the upgrading of technology.
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