In Sil­i­con Val­ley, greed is good

JoongAng Daily - - Opinion & Perspective - Leonid Ber­shid­sky

Sil­i­con Val­ley deal-mak­ing is free from the reg­u­la­tory pres­sure of tra­di­tional

bank­ing.

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.

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