Why get a bad rap for working on Wall Street when billionaires are being minted in Silicon Valley and hailed as digital heroes?
Wall Street lives and dies by its ability to quickly and smartly manipulate data to come up with the latest financial product, high-speed stock trading strategy, or algorithm for hedging risky derivatives. But just as the technology edge becomes more important, Wall Street is facing a big slump in its profits and reputation. That makes it harder to recruit promising technologists.
Now, some Wall Street giants—including American Express, JP Morgan Chase, Capital One, State Street, Goldman Sachs, and Bank of America— have backed the FinTech Innovation Lab, an attempt to create an ecosystem of financial technology startups in the New York area. The baby “fintech” companies could provide important innovation to the larger firms while making connections with potential customers and gaining insight from them.
After banking deregulation took off in the 1990s, it became “exciting and sexy to say you were working on Wall Street,” says Bruce Bachenheimer, clinical professor of management and director of entrepreneurship at Pace University. Money and prestige helped lure top academic talent, including mathematicians and computer scientists, to hedge funds.
But that changed beginning with 2008 and the financial meltdown. “The perception of working on Wall Street went from positive to negative,” Bachenheimer says. Wall Street reached its latest low this week when a Goldman Sachs executive resigned and publicly excoriated the company’s ethics in a New York Times op-ed.
Instead, Silicon Valley, Boston, and other hotbeds of high tech suddenly look like the most attractive places to be. With the recent spate of Web-company IPOs, technology startups could also be a faster ticket to wealth than Wall Street, where bonuses fell 14 percent last year, continuing a multiyear slide.
“Perceptions of desirability are very important in entrepreneurship,” Bachenheimer says. “[Technologists] want to go where the action is and want to be doing cool stuff.”