How Warren Buffett Makes Goldman Sachs Look Good

When Goldman Sachs' reputation as 'honest brokers' started being shredded by their real and perceived actions leading up to, during and after the 2008 economic crash, they had to do something. Fast.

And they did. To show their commitment as citizens, they introduced 10,000 Small Businesses, a $500 million investment "to help create jobs and economic opportunity in the United States."

To be fair, this is a good thing.  Investment is always good - particularly in small businesses.

But don't mistake Goldman's largesse for pure-play money - either their own or others.  According to their materials, the "investment" includes:
  • Practical business and management curriculum
  • Access to capital
  • Critical support and consulting services.

And while that's good, too, they don't specify how much investment goes into each category.

But, they do bring Big Name guests.  Like Warren Buffett.

Buffett, you may recall, saved Goldman's bacon when the crash occurred by lending the firm $5 billion in 2008 when they needed a cash infusion.  That was one seriously good investment for Buffett's Berkshire Hathaway Corporation as it netted Berkshire a $5.64 billion payback less than three years later.

Buffett took a lot of grief from that decision - not least at his annual shareholder meetings. Because Buffett, whose reputation he keeps sterling, was suddenly seen as complicit in helping the company that had become the poster child for greed.

Now, that's in the process of changing.

The 10,000 Small Businesses initiative has graduated its first class of 30 small business owners - and they come from New Orleans.

It's a PR move that can only bring good reactions.  After all, it's Goldman Sachs helping New Orleans which is still recovering from the Hurricane Katrina aftermath - all being fronted by Warren Buffett giving words of encouragement and advice.

That's no small thing.  Buffett is known for making his corporate purchases based as much on the target company's management - and particularly its senior executive team - as he is on the numbers they produce.  Because Buffett always keeps the management team intact.  After all, they created the success. 

Why would he want to get rid of them?

(Full disclosure: One of my client companies was purchased by Berkshire Hathaway.)

Whether Goldman Sachs will ever completely recover its reputation in the eyes of the wider public is still an open question.  But, for the moment, the feel-good factor is there and they're moving in the right direction.

At least as far as small businesses are concerned.

(Originally published on Technorati.)