In Silicon Valley, greed is good
Silicon Valley deal-making is free from the regulatory pressure of traditional
Talented young people who want to change the world go into the tech industry, and those who just want money go to Wall Street. Right? Colin Fan, co-head of investment banking at Deutsche Bank, says it’s the other way round these days. He may have a point.
Fan is the angry manager who can be seen in a recent viral video explaining to traders at Germany’s biggest bank that they have to act as though they lived in a glass house, and that cussing and boasting were out. Here’s what he said when a Financial Times interviewer asked him whether the new culture of caution and moderation was driving traders away:
“Some people are purely financially driven and they’re going to less regulated spaces, maybe it’s tech, maybe it’s hedge funds; we wish them well. These are people that probably won’t fit into the new banking environment anyway.”
The question of whether Silicon Valley is the new Wall Street is contentious. Veteran tech commentators, who have seen the industry evolve over the years, hold opposing views. Galen Gruman calls modern tech the “evil twin” of banking; Dan Gillmor of The Atlantic says tech has a long way to go before it hits the same lows. Regardless, Silicon Valley and Wall Street are increasingly mentioned in the same sentence because of a few areas in which they have run up against each other.
The first is competition for talent. Both the banks and the tech companies are after top-notch programmers, and are willing to offer big salaries, just to start: One Silicon Valley start-up recently offered $250,000 plus equity to engineers — more than twice the industry’s average salary — to keep them away from Wall Street. A growing number of top business graduates are flocking to tech companies, too.
The ostensible motivations are to make a difference or drive innovation, but in many cases the newer industry offers better pay and working conditions than the overregulated banks can. In any case, these newly minted MBAs will perform Wall Street-like work such as marketing and finance.
Tech companies don’t poach working bankers to write code, either. These professionals are needed to form in-house mergers and acquisitions teams to help bypass Wall Street banks. Adrian Perica, Apple’s head of mergers and acquisitions, used to work for Goldman Sachs, and so did Twitter Chief Financial Officer Anthony Noto.
Silicon Valley deal-making, whether by tech companies themselves or by powerful venture capitalists, is free from the regulatory pressure of traditional banking. That means, among other things, the freedom to trade insults the way Wall Street rivals did in the “Liar’s Poker” era. One of the VC industry’s biggest stars, Marc Andreessen, recently called activist investor Carl Icahn a liar and a slanderer. It’s hard to imagine a Wall Street bigwig using that kind of language today.
There are other obvious similarities between Wall Street in its 1990s heyday and today’s tech, including a culture of male dominance. Microsoft Chief Executive Officer Satya Nadella’s recent advice to women who feel their pay is unfairly low — trust the system and good karma will catch up to you — wasn’t well-received, but I doubt a banker who made similar comments would have been let off as easily.
Then there’s the open contempt for rules shown by companies such as Uber and Airbnb. The former has been accused by the Better Business Bureau of quoting one price to passengers and then charging a higher one, and in Berlin it has dropped its per-mile rate below cost to dodge a ban by city authorities and keep operating while it lobbies for the rules to be changed.
Gillmor wrote that “Silicon Valley isn’t in the same ballpark as Wall Street when it comes to systemic corruption and manipulation,” claiming that bankers “rigged the economy with the help of their well-compensated allies in Washington.” The tech industry is quickly catching up: Google is the eighth-biggest U.S. lobbying spender this year, and Uber has hired President Barack Obama’s former campaign manager.
Google and other U.S. Internet giants are now often seen as ambassadors for the U.S. government, just as Goldman Sachs and its peers were until recently. The public is still willing to cut tech companies some slack because they make a visible contribution to changing our lives and because tech geniuses are more fun than buttoned-up financiers.
That doesn’t mean, however, that the public roles of the two money-flooded industries won’t be reversed someday. If banking regulation succeeds in turning Wall Street into a citadel of responsibility, populated with prudent, friendly and politically correct moralists, freewheeling tech sharks could become universally hated villains. Civic-minded young people would then go into banking to help keep the national economy healthy, and money-grubbers would take their oversized egos to the West Coast. That is, until tech is regulated, too. The author is a Berlin-based Bloomberg View contributor.