03/20/2012 02:46 pm ET Updated May 20, 2012

Greg Smith's Warholian Week

Greg Smith's Warholian week is (happily) ending. He has had his moment; unless he has more revelations, greater literary skills and a continuing desire for the spotlight, he will submerge again into the sea of humanity with the rest of us. He will become obscure, a footnote, a raised eyebrow at a cocktail party. Oh, that Greg Smith. This will undoubtedly make the folks at Goldman, Sachs & Co. very happy. This will confirm their most effective defense: not that the firm did not behave as Smith describes -- the we're-still-super memo from Blankfein and Cohn was widely derided -- but that Smith simply had no right to step out of line. He was a nobody. He had not ascended to the status of a somebody, like a managing director, despite the grandiose "executive director" title, which by itself suggests some attempt to paper over careerist tensions down in the ranks at Goldman. No one reported to him. He was barely real. In the meme heard all over town, and all over the blogosphere: He'll be quickly forgotten. He was angry about his crappy bonus and his diminishing expectations. He had taken the money for 12 years. He did not have the stripes to bitch. He was an outlier, a whiner, a cipher. He was not a player.

At the very least, this leaves a sense behind of life inside these massive hierarchical and bureaucratic organizations.

In his Times piece, Smith clearly tried to combat the notion that he was nobody, which explains, in part, the odd college-application-like summation of achievement: Stanford, Rhodes finalist, ping-pong. He was an equity derivatives geek, after all (though some made fun of him for having to learn the business at Goldman, as opposed to, say, high school). The firm had used him to recruit. What Smith may not have foreseen is that that very attempt to make himself real -- after all, his charge against the firm was not legal but ethical, and ethics is a matter of individual judgment -- worked against him. Many of the skeptics took the opportunity to speculate freely about this unassuming Greg Smith figure -- even the name has a kind of Goldmanite uniformity -- and his motivations, often to his detriment. Why did he do it? And yet, despite the usual reporting and his photograph in The New York Times, we don't know much more about him than we did from the op-ed. Nor should we. Let's hope he doesn't ruin that with a 60 Minutes tear-fest or a morning with the girls on The View.

That notion that this was all about Smith, which he began and which the punditocracy who mostly followed, obscures his message. There were exceptions. Frank Partnoy in March 16's Financial Times offers a sharp, sophisticated take on the notion of clients (which the paper then flattened out to "Goldman's 'muppets' need treating like true clients" in the headline). "What does it mean to be a client?" he asks. "Mr. Smith's letter used 'client' 20 times. Mr. Blankfein and Mr. Cohn also used the word several times. But there are clients, and there are clients. Both Mr. Smith and Goldman stretch the word to cover not only true client relationships in which the bank owes a fiduciary duty as an adviser but also pseudo client relationships in which the company is a market maker, trading with counterparties at arm's length."

This is exactly right. As a number of pundits have said, "clients," however defined, are regularly insulted or caricatured (privately) in a variety of businesses. You don't think that "clients" aren't referring to Goldmanites as thugs, monsters or creeps in meetings or over dinner, even if they're loyal relationships? How often do vampire squids come up? It's all in the nature of the intermediary relationship, which can be fruitful for all, but which, when it breaks down, can turn venomous, paranoid and dangerous. It's also been going on for quite a long time; The New York Times' Floyd Norris quite rightly whisks us back to the tapes on the now mostly forgotten case where Procter & Gamble and Gibson Greetings successfully sued Bankers Trust for misleading them on, yes, derivatives. But you can travel even further back in time, to the first tulip broker who sold a bunch of bad bulbs and cried, "Caveat emptor." Some of this has to do with the sheer complexity of these instruments, which set up lots of informational and valuation asymmetries (often, as Smith suggests, designed in); but that's been going on forever too (complexity being relative: see subprime mortgages), which explains the traditional fixation on transparency. But in our world there are complexities piled upon complexities, and in firms where intermediaries jostle with principles, and are driven by shareholders and drawn on by vast sums, the rules of the road grow murky. (Smith may have been trying to conduct himself based on Goldman ideals taped next to his computer; that's commendable, if laughable, no matter what you think of the history of the firm.) This brings us to the argument embedded in Goldman's Abacus case. How do you define a "sophisticated investor"? And how can you treat one?

Partnoy touches on the prevailing "Orwellian doublespeak" when it comes to the term clients. "Goldman's leaders talk uniformly about the importance of serving clients, but the firm's salespeople know who is a client and who is a mere counterparty. They also understand which institutions are unsophisticated and they apparently are not afraid to say so." Perhaps that's where Smith, a salesperson, ran into trouble. His ethics were simply inadequate to the reality that most other salespeople learned to master. At some point, he refused to countenance the doublespeak. This may well be to his credit, or not, but it's a large and growing regulatory and legal problem for the rest of us. The rules, to say the least, shouldn't be made by salespeople or, for that matter, by traders.

Here's what it comes down to: If you believe that the world is Darwinian, then Smith is a fool. If you believe that loyalty to friends and firm is everything, then Smith is a traitor. If you believe that no one acts out of unconflicted altruism, then Smith is either bitter or vengeful. And if you believe in the inevitability of power and title, then Smith can be dismissed because he quite literally doesn't matter. But if you believe all that, you're missing the point.

This post was originally featured on Robert Teitelman is editor in chief of The Deal magazine.