In September 2004, R. Martin Chavez sold his tech startup and promptly moved to a beach house on New York's Fire Island.
But retirement did not go as planned
He returned to Goldman Sachs
Chavez's progressive influence is slowly chipping away from Goldman's devilish image manifest via the Great Recession and assimilation to ruthless Wall Street tactics. Furthermore, Chavez is using his Silicon Valley savvy to revolutionize Goldman's trading technology.
How Chavez Is Transforming Goldman's Culture
Chavez has been successful in revamping and safeguarding Goldman's trading software. But his imprint goes beyond that of a traditional CIO -- his presence has been transformative on various fronts, particularly Goldman's image.
After the 2008 financial crisis, Rolling Stone , among other anti-Wall Street sympathizers, felt that called Goldman Sachs was "a great vampire squid wrapped around the face of humanity," run amok with "plutocrats who wore their power on their sleeves."
Instead of being notorious for secrecy and reliance on back-room dealings-- inevitably at the expense of common society-- Chavez is pushing for Goldman to be perceived as a benevolent tech-company alongside the Googles and Facebooks of this world.
On a personal level, Chavez's canon deviates from the button-down culture of Goldman lore-- he seeks to eradicate the cutthroat culture that turned Goldman into "the most vaunted, feared, and secretive company on Wall Street".
Chavez is openly gay, proud of his Latino heritage, and loves showing off the Japanese tattoos on his arms. He routinely uses his marriage and surrogate son as a talking point, and urges colleagues to embrace a culture of openness. Such a culture, he calculates, will begin to chip away the negative imagine Goldman has built over the years.
In addition, Chavez has pressured Goldman to embrace social issues as a transformative selling point. For instance, he urged Goldman's human resources department to expand benefits to gay partners prior to the Supreme Court's legalization of gay marriage. Also, he has pushed CEO Lloyd Blankfein to speak out in support of gay marriage.
A Need for Change: Beyond Culture
The 2008 financial crisis led to regulations that have forced banks to become less opaque, and instead, more tech-savvy and efficient. As such, focus has shifted from the traditional center of power -- trading desks-- toward programmers and engineers. Mr. Chavez is the crux of this transition.
Per Silicon Valley creed (where sharing is the golden-rule), Chavez has pushed for Goldman to share more of its data and software with clients through a project called Marquee. Essentially, Marquee provides clients with access to sophisticated trading data hitherto unaccessible unless gathered directly from a Goldman employee.
The Symphony program, another one of Mr. Chavez's project, eases communication channels amongst Goldman employees. Traditionally, big banks rely on expensive data terminals like those sold by Bloomberg L.P. These services cost around $20,000 a year, and many banks have expressed discontent over Bloomberg's invasive habits -- it was revealed that they were using data from the terminals to accumulate information about bank employees.
Goldman's hope is that banks will slowly ease off Bloomberg's systems and instead opt for Symphony, which is positioned to be more than just a messaging service. In particular, programmers will be able to use Goldman's open source software to build new apps -- i.e., for trading-- with Symphony.
Furthermore, because of the crisis, Wall Street faced declining revenue and rising costs, giving Chavez leeway to standardize and automate Goldman's trading operations. Automation has helped Goldman comply with the Dodd-Frank reform, which was implemented to make trading less opaque and easier for regulators to track.
Goldman's Massive Trading Errors -- All the More Reason to Recruit Chavez
Goldman's trading mistake in August, 2013 was eerily similar to Knight Capital's $450 million trading glitch from 2012.
Goldman's mistake was the result of a system programming error that set incorrect price limits in a number of ticker symbols to options exchanges around the country. Knight's mistake was also a system programming error that sent algorithms buying high and selling low.
Both programming errors highlight the folly of complex, high-speed computer software meant for finance: faulty systems have the ability gravely disrupt market equilibrium.
Knight Capital's trading error meant bankruptcy, and ultimately, the end of its existence. Such tragic fate highlights the inherent risks of financial software systems.
Experts assert that companies aren't paying close enough attention to "what's under the hood of their computer programs," laying the seeds for malfunction, and eventually, costly trading errors.
After their scare, Goldman brought Chavez on board to prevent these trading errors, and restructure what's "under the hood".
For Those Interested: A Brief History
Chavez started working for Goldman's commodities and energy brokerage unit in 1993. At the time, Gary Cohn (president and COO of Goldman), Lloyd Blankfein (CEO), and Harvey Schwartz (CFO) worked in the same division alongside Chavez.
At first, Chavez worked as a senior energy "strat" -- someone who creates models for pricing and risk management. But four years later, Chavez quit Goldman and became the head of Credit Suisse's energy-derivative business.
Three years later, Chavez left Credit Suisse and founded Kiodex, a commodities risk-management software company. He sold Kiodex in 2004, and enjoyed three months of retirement.
Then his old friend Gary Cohn (president and COO of Goldman) called, and convinced Chavez to become a managing director in the equities business at Goldman.
Fast-forward a year, and Chavez is both a managing partner and co-chief operating officer of equities trading. Thankfully (for Goldman's sake), when the financial crisis hit, Chavez was back at Goldman, spearheading the bank's effort to calculate and track its performance during the economic collapse.Because of Chavez, Goldman weathered the storm with greater success than most rivals.
