Goldman Sachs at 150: Part 1 – Beginnings (1869)

Historical Context & Origins

• The firm originated in the post-Civil War era, a period defined by massive innovation (transcontinental railroads, telegraphs, land-grant colleges) that established the U.S. as a global economic power.
• Founder Marcus Goldman, a 48-year-old German-Jewish immigrant and former street peddler, established the firm in 1869 in a basement office at 30 Pine Street in New York.
• Goldman began by buying commercial paper (promissory notes) at a discount from local merchants, specifically jewelers and tanners, and reselling them to larger bankers to provide liquidity.
• The founding strategy relied on "intellectual capital" and ingenuity rather than just financial capital, focusing on helping clients thrive to ensure the firm's success.

Strategic Partnerships & Evolution

• In 1882, Marcus Goldman invited his son-in-law, Samuel Sachs, to join the firm; in 1885, his son Henry Goldman also joined.
• Leadership was defined by the "yin and yang" dynamic between Henry Goldman (the daring, expansionist trader) and Sam Sachs (the conservative, cautious banker).
• This internal tension allowed for calculated expansion into new areas while avoiding reckless exposure to powerful competitors like J.P. Morgan.
• By the 1890s, the firm had grown into one of the largest commercial paper dealers in the country through the four-partner structure.
• After being blocked from underwriting railroad bonds by established giants, Henry Goldman pivoted to underwriting retail companies, a sector previously considered too risky for public offerings.

Innovations & Market Firsts

• Goldman Sachs pioneered the underwriting of non-utility retailers, successfully floating major companies such as Sears (1906), F.W. Woolworth, and Macy's as public entities.
• Henry Goldman developed the first Price-to-Earnings (P/E) ratio formula, linking company value to earnings rather than just capital assets; this metric remains the industry standard.
• The firm introduced preferred stock and the concept of multiple earnings to valuation practices in the late 19th and early 20th centuries.
• Through alliances with Philip Lehman (Lehman Brothers) and the London bank Kleinwort Sons, the firm underwrote 114 issues for 56 new public companies.
• The firm expanded into European financing for new American offerings, leveraging Sam Sachs' connections.

Cultural Continuity & Legacy

• The firm's survival and adaptation over 150 years are attributed to a culture that embraces innovation while maintaining caution and a focus on client success.
• A consistent "co-partnership" model distinguished the firm from other Wall Street entities, utilizing diverse personality types within the leadership structure.
• Leadership maintains that while the firm's operations have become "unrecognizable" from its 1869 origins or its 1999 state, the core values of serving clients and applying ingenuity remain unchanged.
• By 1913, the firm's influence was cemented when Henry Goldman was cited by Walter Sachs as one of the two men (along with architect Cass Gilbert) responsible for F.W. Woolworth's 60-story headquarters, the tallest building in the world at the time.
• Marcus Goldman died in 1904 at age 82, leaving a firm that had transitioned from a niche commercial paper dealer to a major investment banking innovator.