Wall Street Talent Is Moving to Silicon Valley
venturebeat.com
venturebeat.com
They did a study at harvard, and they figured out that MBA's flock to the wrong industry right before it dies. It was bonds, equities and then silicon valley in the 90s.
It was an interesting anecdote which I have heard often, but now am certainly curious enough to try and dig up that article/study.
edit: The author seems like an accomplished person, and I don't want to paint in the tech v. finance differences, but to highlight what camp she is from, take a look at the first sentence describing Mor Assia:
Mor advised Israel’s global telecommunications billing giant, Amdocs, to choose the right verticals for diversification in their technology acquisitions and launched offerings like Billing for Dynamic Pricing to create new growth opportunities.[0]
I mean, sure, I parse JSON data to codify the new web standard leveraging agile tooling like visual basic to fast-follow with a GUI interface which is deployed into our cloud based infrastructure to track the IP address, but I wouldn't write that down in the 2nd sentence of my biography.
[0]https://www.iangels.co/team/mor-assia/
edit: I can not find the video clip. My memory is that the study was done by Harvard Business School, and it found that MBAs were categorically picking the wrong industry. The examples cited by the speaker, I am 90+% confident it was pg restating it, were going to wall street to trade bonds with Michael Milliken right before he went to jail, Silicon Valley right before the bubble burst and one other which I would guess to be real estate or M & A post KKR, but that is just complete conjecture. Don't take my word for it, and I don't want to misquote PG quoting some study, but I am fairly confident for what it is worth.
I remember him saying Business Schools are good at making MBAs that help you run a business well. They should do that and leave cultivating entrepreneurship to folks like YC. But I see that argument in line with this article's data. These MBAs are trained to get things like M&A right, so getting them onboard might be the right thing to do and does not necessarily indicate another crash.
Here is him talking about MBA's whipping their meek rent-a-programmers during the interview[0] which is the best I can do. If anyone remembers what video it is in, or better yet, actually knows the (i believe harvard business school) study, would be super interested.
It's this kind of quick buck thinking around simple, non-inventive iterations on existing models that are actually killing the Valley. The Valley should be for big ideas and wild bets. Not bets on people to do your laundry for you.
These Wall Street/finance people need to pack up and go back east.
(1) This was the idea behind Long Term Capital Management (LTCM). We all know how well that worked out.
Also, comedic if you think that LTCM was well run. They were sniffing their own flatulence and getting high on their own supply. They employed two Nobel laureates and based their model on those laureates....whose work ended up being completely flawed. How many people use Black-Scholes today? Zip (if they have a clue). You really should read "When Genius Failed" if you think they ran a good business.
I'm also a fan of punctuated equilibrium and cladogenesis as opposed to evolution over millenia. But maybe that's just me.
I'm not trying to diminish the effect (for better or worse) Uber is having on transportation market. It's big and it's because of them. But it's not because they were innovative in some way.
I think these sentences directly contradict one another. The reason probably has to do with the idea of what it means to be innovative. There is more to innovation than technology. Marketing can be innovative, and so can fine art, political campaigns, movie stuntwork, and business methods.
It could be.
Innovative is supposed to mean "featuring new methods/ideas, original". My comment about Uber uses that understanding. But the term has been completely devaluated by marketing now. Seeing what kind of projects get grants under EU's Innovative Economy Programme, "innovation" now means simply doing stuff with the Internet or mobile phones, since they're ~20 years old. You want to build an app? That's innovative. You want to build a website? That's innovative. It doesn't matter that your product is just a clone and does things the same way everyone else have been doing for the past 20 years. It's on-line, therefore innovative.
That said, this post is about people in the Valley making big bets. Not finance people thinking that they can build a better mouse trap for 12 basis points.
"Hey, US government bonds have this bizarre, persistent price premium over equally reliable governments. So we can short the former to buy the latter."
... and then it turned out there was a very good reason for that premium: when people panic, they'll buy up US bonds, not Italian ones, which will destroy any short position, and be catastrophic if overleveraged.
I'm not sure what better management could have done about that, besides, "hey, don't bet the house on this".
Self-driving cars are just the icing on the cake. Matching travel intent to rides is most of the value, especially when you combine multiple riders into the same vehicle.
I live in a European capital. I have been calling cabs by SMS to address for 15 years now. I write starting address, end point and receive in sms the number of the cab and in how many minutes it will be at my door.
Can you point the fundamental difference with Uber?
Supply and demand in realtime is not an issue, since my town is oversupplied on cabs so a crunch rarely arises. The worldwide network with deep liquidity is useless when we are talking about local service. Those third tier city china drivers will have hard time giving a hand in London if a crunch arises.
Uber is just a gypsy cab with a polished app. Everything else is just in the works.
1) Keeping a record of driver and passenger ratings (disincentivizing bad behavior on both sides)
2) Streamlined complaint resolution process
3) Remote monitoring of the ride to see if they took an unnecessarily long route
4) Payment being handled behind the scenes so you can just get in and out without stopping to pay (plus not having to do the tipping dance for Americans)
5) Getting updates as the car gets closer
6) (once at scale) Pairing people together on similar journeys to save money (UberPool/Lyft lines).
7) (not sure if the system you refer to had this) The destination already being loaded on the nav when you step in.
8) Edit: plus, apparently they collect a ton of data about rides to estimate where requests are most likely to be and encourage drivers to be there
The fact that I can use uber anywhere in the UK or US and have a cab of a particular size and luxury spec, within 10 mins, billed to my card with no messing with cash is incredible.
Their whole experience is as frictionless as possible. I don't much care for some of the attitudes conveyed by uber personnel but I wouldn't discount their achievements.
If you can't see the value created by each of these companies, I kinda have to wonder how much you ever get out of your house. Even just the amount of consumer surplus generated by Uber -- not driving home drunk, and not having to wait for a completely unreliable cab company -- is massive. Classifying what they're doing as nickels and bulldozers is so short-sighted it's a little hard to understand as anything other than simple sour grapes.
The social trust and fabric of society stuff is kind of too funny to even lampoon, but the first half is important: if you can generate consumer surplus by breaking the law, what exactly does that say about the law, and on whose behalf it's working?
It's funny because you probably grew up in a civilization and take it for granted.
> if you can generate consumer surplus by breaking the law, what exactly does that say about the law, and on whose behalf it's working?
It doesn't say anything. You can create consumer surplus breaking any law if you're willing to dump externalities elsewhere, on parties you don't count as consumers. A thief can for sure create consumer surplus by distributing stolen money among friends. So can the owner of a factory enrich the city by dumping toxic waste into a river, driving his costs down but poisoning people downstream.
No, I'm pretty sure that the civilization I grew up in isn't predicated on taxi monopolies for existence.
> You can create consumer surplus breaking any law if you're willing to dump externalities elsewhere, on parties you don't count as consumers.
Go ahead and name the victims of these externalities, without counting the previous rent-seeking oligopoly Uber is displacing.
I didn't imply that. We must have misunderstood each other. So which of the following you disagree with:
- trust between people and organizations forms the fabric of society
- fabric of society is sort of important to a functioning society
- breaking the law and getting away with it damages the trust in the rule of law
> Go ahead and name the victims of these externalities, without counting the previous rent-seeking oligopoly Uber is displacing.
A lot of drivers and small companies which don't go around breaking laws for profit. Because that taxi market was all just "rent-seeking oligopoly" is bullshit. Sure, there were a lot of entrenched interests, but there were also a lot of others, some with very similar model to Uber, app included. Also consumers who depended on some unprofitable features of taxi networks that were forced by law in exchange for partial monopoly.
And if you go above just pure profit motive, then it's about society. About the very idea that you're to follow law when conducting your business, or else you'll face punishment. That there are rules to the game and that the government will enforce them successfully. Also, seeing how Uber is such an inspiration for startup world, don't you think we can expect more companies trying to ignore other laws as well? And not every ignored law will be the one you'd be happier without.
Hydrogen fuel cells, if practical, would be worth massive investment, but folks who would use them seem to have decided that lithium ion batteries would make more sense and are making a $5 billion investment in that.
There are a lot more smaller companies pursuing small ambitions, but that makes sense: a small company doesn't have the resources to tackle a capital-intensive problem without first demonstrating that it is a somewhat-reasonable bet.
So we all gravitate towards making a web app to do laundry quicker. However since there is no real competitive advantage to whose web laundry app is better, coders are actually the commodity used by the business/marketing to a race to the bottom of who can raise the money the fastest, do the best viral marketing and creating a cult of persona in the tech press.
I don't mean to be negative but I just want to make a point that it is up to ourselves to learn a new skill-set if we want to solve bigger problems vs. carping about scruples-less businessman exploiting coders whose skills due to agile, coding bootcamps and improved programming toolchains are getting increasingly commoditized.
"Soifer has long studied the proportion of Harvard MBAs who pursue careers in finance; when more than 3 in 10 head for Wall Street, it's time for investors to sell, he says."[1]
I used to work on Wall Street. I left because of this issue writ large. There are quite a few pieces of research claiming this trend is a negative indicator.
I took a Masters CS class some time ago, and for our final class project, not knowing anyone else in the class, I got lumped in the "leftover" group with a working engineer and a Wharton MBA student. We meet up the day before the project is due to integrate each of our individual pieces together into a final submission and the MBA candidate shows up empty handed. Turns out he had spent his time trying to "schmooze" the answers/code out of the professor and the TA, who, to their credit, had stood firm. Guess who spent that entire night writing that dolt's portion of the project from scratch.
And sadly, off the backs of those like you MBAs flourish.
I was once in a group for a university project when we had to implement this piece of software for a real world client. There was software that needed to be built, and documentation that needed to be written, as well as content that needed to be provided, e.g. weekly meeting diaries one is required to do in such university projects. Everyone else in the group had difficulty writing working, useful code, and progress was slow, even when I thought it was an easy project. A few days before the first milestone deadline, I sat down and finished the thing in an afternoon. And so, for the rest of the semester in that class all we had to do was the paperwork, and naturally that wasn't my job because I saved everyone so much time.
Sometimes BS needs to be written...that's when it's useful to have people who's best to do that kind of thing in your group.
It was this: https://en.wikipedia.org/wiki/Comparative_advantage
That said, I think the relationship network is a huge advantage too. Reminds me of a story about, if memory serves me well, an economic university student, who was bad at learning but good at throwing parties (with lots of vodka). It was in Poland around the fall of the Soviet Union. The guy apparently got very successful because through his parties, he befriended a lot of people people who later graduated and became directors of private and national enterprises.
And that is how the MBA learnt a very important life lesson about the most efficient way to get work done.
The End.
I'm not holding my breath.
...and when I think about where the 'talent' is in the financial world, it's on the technical side and all of those people are still there.