• Goldman Sachs secretly controls the world, if you believe conspiracy theorists. Even commentators without tinfoil hats sometimes get carried away when describing this titanic investment bank. Rolling Stone once accused it of having “engineered every major market manipulation since the Great Depression”, adding for good measure that it was “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money”.
• In our cover package this week we tell a different story. A firm famed for its swagger has started to sag. It has given up on a plan to build a big consumer bank; booked one of its worst quarterly results for a decade; and attracted a probe by the Federal Reserve. It is not yet in trouble, but under its short-fused boss, David Solomon, it has lagged behind its American peers half the time.
• Its pedestrian performance suggests several lessons. The real action in finance is now outside regulated banking, where new stars rule, such as Blackstone in private markets, BlackRock in index funds and Citadel in investing and trading. It is hard for old-style Wall Street firms to compete in winner-takes-all digital markets, where PayPal and Amazon have far more clients. And it is striking how the stagnation of globalisation has shrunk Wall Street’s horizons. Goldman gets much less of its growth from foreign revenues than it did when it listed in 1999. Indian and Chinese rivals have bulked up and are often stronger than any foreign firm on their home turf.
• Perhaps Goldman can recover its swagger, by managing assets better or pioneering new technology to cut its exorbitant labour costs. But there is something uniquely hard about reforming elite firms whose unwritten code is that they are smarter than everyone else. If the squid is to avoid becoming a squib, it needs to learn how to be self-critical.

Edit By
Zanny Minton Beddoes
Editor-in-chief