Gordon Gekko is but a distant blip in the rear-view mirror for this generation’s best and brightest. In lieu of Wall Street, today’s top graduates are flocking to Silicon Valley and other top technology hubs in droves, drawn in by visions of challenging the status quo with world-changing apps and the opportunity to make a real, lasting impact in the world. Talk of the “Silicon Valley vs. Wall Street Talent War” continues unabated — and popular wisdom suggests that you need to be anchored in Silicon Valley to do meaningful work these days.
While it’s an increasingly common narrative, is it accurate? In a word, no. The “Us vs. Them” mentality that this debate often takes is misleading; the reality is that there is an increasing opportunity for seemingly disparate sectors to unite through the budding opportunities and innovations in fintech.
Before digging into that, though, let’s look at some relevant statistics that fuel the “Silicon Valley vs. Wall Street” debate.
All Roads Lead To Silicon Valley?
The technology sector is experiencing a renaissance that rivals even the frenzied, dot-com-driven heights of the late 1990s and early 2000s. The rate of graduates flocking to technology has steadily increased on an annual basis — as has the number of students enrolling in STEM fields.
The rate of MBAs from the nation’s top universities who go into finance, on the other hand, has been shrinking on an annual basis, even as the sector has largely recovered from the 2008 crisis. Consider, for instance, that 27 percent of graduates from Harvard Business School entered finance in 2013 — a lower rate than during even the depths of the recession in 2008 and 2009.
These numbers obscure the broader marriage between finance and technology, which can be evidenced in the massive growth of investments in financial technology, or fintech; according to a recent Accenture study, global investment in fintech ventures topped $12 billion in 2014 — more than three times the $4.05 billion invested in fintech companies in 2013. This is indicative of the financial service industry’s increasing adoption of emerging technology, fostering a greater interdependence between the tech and financial services industries.
With this in mind, the question shifts to what financial services institutions can do to attract more of the young talent that has recently gravitated toward Silicon Valley startups, and how they can harness the momentum of fintech in particular.
It’s Not About The Money
Simply put, the tech sector is where millennials feel they can make the most impact. It’s where innovation happens and outside-the-box thinking is part of the current zeitgeist. Be it transitioning from an Ivy League campus to the Google campus or joining an up-and-coming startup with a chance to become the next big thing, the tech sector has clearly surpassed finance as the more appealing career path for many graduates of top institutions, even if the average tech salary falls short of those offered by most financial institutions.
Working at a Silicon Valley startup allows people to have a direct impact and “own” results in a meaningful way, whereas Wall Street is traditionally more bureaucratic.
This last point is not to be overlooked. While salaries and associated financial options remain a major recruiting tool, there has undoubtedly been a change in the way talented graduates are approaching the job market.
More than salary, they want to be impactful: a part of building something new, or changing the fundamental nature of a given process. Financial services is generally seen as one of the more traditional, if not lucrative, industries within the broader market — but it’s rare that you see the words “innovative” or “agile” mentioned in context with a large financial institution in the way that you do with a Google, Apple, Facebook or any host of small startups.
This is not meant to say that the key for financial services institutions looking to lure back talent is simply a matter of changing their Casual Friday policies (a practice Wall Street has almost universally rejected, anyway). It’s more a matter of changing the way organizations are structured and operated, and encouraging more agility in terms of technology adoption and an openness to changing long-tenured processes. Technology is and has always been a critical enabler of finance.
Financial institutions are thus increasingly focused on shifting the perception that they are change-averse and embracing the “try and fail and try again” ethos that has permeated Silicon Valley and other high-tech hubs. Working at a Silicon Valley startup allows people to have a direct impact and “own” results in a meaningful way, whereas Wall Street is traditionally more bureaucratic.
When Two Become One
The coming years will see a deepening of the relationship between finance and tech — and a broader acknowledgement that you don’t have to be based in Silicon Valley to do interesting and meaningful work.
The writing is already on the wall. Consider the uptick in traditional financial institutions like J.P. Morgan, Fidelity and T. Rowe Price increasingly participating in high-profile funding rounds for fast-growth private tech companies in addition to (and often in place of) traditional venture capital firms. The rate of IPOs has slowed in recent years, so it makes sense that mutual funds and other institutional investors are increasingly turning to private technology companies as a means to boost returns for investors.
There’s also an increasing trend of Silicon Valley companies that are changing consumer-facing financial services processes and working with, not against, banks to do so. This is most notably happening in the lending, payments and crypto-currencies spaces, with companies like Prosper and Coinbase.
The future leaders of finance have been weaned during the Information Age. They’re an on-demand group accustomed to seeing immediate results. If a change is needed, it can and will be made. If a design is bulky and inefficient, it’s time to blow it up and develop something simpler.
This isn’t the first instance in which financial services have been more change-averse than other industries; just 30 years ago, it was unthinkable that floor trading would be automated (anybody remember the Open outcry system?). Today, you’re hard-pressed to find a floor broker at many of the major exchanges. Likewise, it’s hard to imagine that Wall Street existed before the advent of Bloomberg Terminals — but there was once a time when traders were indeed forced to price bonds with pencil and paper, and trade exclusively over the phone.
The same type of conversations are happening in finance today, and they are becoming louder and louder. A new generation of investors and brokers has penetrated the ranks of financial services organizations, and I expect a similar sea change from the world we’ve known for the past 20 years.
There’s a tremendous opportunity present for those financial institutions willing to push back against the “Us vs. Them” mentality currently ascribed to Silicon Valley and Wall Street, and instead embrace meaningful partnerships where the hoodies and the suits work together in a more impactful, transparent way that fosters increased adoption of new technology.
There’s no doubt that the times are changing; those who are quicker to recognize and adapt to this new reality will be the ones to come out on top.