Are Silicon Valley and Wall Street Headbutting Each Other?

kim kardashian

Techcrunch’s recently published article suggests that a recruiting war between Silicon Valley and Wall Street is a common narrative in today’s age. Which industry shall prevail? Will the traditionally bureaucratic, money-laden, too-big-to-fail financial institutions outperform the creative, technologically empowered, casual wearing class of innovators, or will the latter continue to draw most of the graduating talent?

However ubiquitous the tale may be, there is no legitimate reason for the two disparate industries to stand in one another’s way. In fact, author Eric Poirier believes not only can there be but there probably should be, for both sectors’ interests, a mutual, long-lasting relationship.

Before getting into why it is important for such a harmony to exist, let’s see which sector is actually gaining more traction and why.

As the digital revolution unfolds before our eyes, it is hard to deny the generational movement towards it, and statistics do a good job of backing it up. Melissa Korn of the Wall Street Journal noted that business school graduates from top institutions have adopted a different outlook for their future careers. It is no longer customary for Harvard business school graduates, for instance, to pursue jobs in financial services.

The most recent economic crisis, coupled with demanding work schedules, likely impacted decisions to move to tech. In 2013, the trend reached an all time high with 18 percent of HBS students landing jobs in the tech sector, a six percent increase from the year before. Another anomaly presented itself with a mere 27 percent of Harvard MBAs taking placements in finance.

It is a troubling occurrence for Wall Street, and it is not particular to any one branch of finance. Investment banks only recruited five percent of the 2013 HBS class, private equity firms claimed 10 percent, and the combined share of hedge funds and investment management is well below the highest mark from 2011, which was noted at 12 percent.

The pleasantries of job security and non-working weekends are important to millennials, but that is not the main pull for Silicon Valley start-ups. What captures their interest is the romantic notion that their work allows them to “preserve their creative autonomy” and inspire changes that turns the world into a better functioning and more efficient place without harming anyone or anything in the process. It definitely stands in contrast to Wall Street’s rigid, process-driven environment, separating what works from what does not. The current generation, as Poirier explains, embrace the “try and fail and try again” mantra that pervades the hubs of innovation.

Millennials are a distinct breed insofar as they believe in idealism and its attainment. A 2014 Deloitte survey revealed that 6 out of 10 millennials chose their jobs according to the company’s sense of purpose. The same study also highlighted that 12 percent cited “own personal gain” as a leadership priority. Despite finance jobs extending median base pay salaries well into the six figure range ($150,000 for a Stanford MBA graduate), it falls short of rewarding, or better yet, validating an individual’s efforts. Money does not buy the appeal, in this case.

Just because there is an increasing wave of creative, high profile talent in the technology industry does not mean Wall Street has remained stagnant. Financial institutions are still recruiting prospects raised in the digital revolution, so ultimately there will be an injection of the willingness to change operations and processes. Institutions have also ushered in their own internal restructuring to promote a perception that is unmistakably different from the long-held views portrayed as overfilled trading floors featuring frantic brokers yelling out stock prices.

Poirier mentions that now it is typical for traditional institutions like J.P. Morgan and Fidelity to participate in a series of funding rounds for private tech companies. Additionally, an Accenture study showed last year’s investment in financial-technology ventures tripled from $4.05 billion to $12.2 billion.

The shift in the financial institution’s agenda to emerging technologies signifies the importance of creating a strong relationship between the two industries.

“Fintech is empowering new competitors and start-ups to move into parts of the banking business but, paradoxically, it is also helping banks to create better, more convenient products and services for their clients,” said Julian Skan, Accenture managing director overseeing the FinTech Innovation Lab London. “It is also leading to increased cooperation between traditional banks and innovative start-ups and technology businesses in a way that can result in totally new business models and revenue streams.”

Regardless of the different career paths of the up-and-coming generation, both sides are coming together on behalf of the realization that they need each other. Thus, the debate of war should be dropped, and one should only dwell on the possibilities of future partnerships.


Photo Credit: Via Flickr/graphink

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