I remember, in the 2000s, the top industry destination was unabashedly finance. In some ways, this is a bad thing. Finance is a derivative of the overall economy and political environment; the value of stocks, bonds, vehicles, etc. are derived from a real life project, like a company or a toll bridge. Top minds will always endeavor to create, and thus was born mortgage backed securities, new derivatives, active ETFs, and so on. But I always thought that the smartest and brightest were better off creating tangible new products or services.
In that sense, technology has always been an area that attracted young and active minds. And with the emphasis less on the hardware and cables (as it was back in 2000) and more on software, companies are born over conversations and can have a real impact on the world, as Eric Poirier writes in his Techcrunch contributions (he’s CEO of an investment management software company named Addepar).
However, this is where I stop agreeing with Eric. He believes that the speed of industry change and social impact drives new graduates to flock to the technology world. As cynical as it sounds, the third factor is: MONEY. I don’t mean to sound pessimistic about the human race, or question the intentions of the entrepreneurs. In fact, I’m glad that a portion of the motivation is money; it means that they want to be properly compensated for their ideas and their efforts. In a way, money is a great way for society to reaffirm a new startup’s vision, saying “yes, we support that.” More often than not, money is the third motivator (below social impact and speed of change), and it can help keep a gifted entrepreneur on task and not self-deluded.
It’s important to emphasize that money is a contributing factor because Eric makes broad implications about the finance industry having to keep up with the tech world. His argument for banks are changing the way they do business is because “the future leaders of finance have been weaned during the Information Age… if a design is bulky and inefficient, it’s time to blow it up and develop something simpler.” What drives an established, huge financial behemoth like a bank is profits. Exchanges are moving to automated trading from floor trading because of cost and reach. Banks are creating automated branches because maintaining a staff and real estate is expensive. And traditional financial institutions investing in startups for a good return is just that, they’re investing in startups for a good return rather than making a commentary about the business model. Financial institutions don’t make changes because a design is not pretty, they make changes to make more money.
Eric is right about how the technology world is pushing the financial world to change faster. Technology is not only improving the quality and speed of financial services, but even filling the spaces finance firms have left behind, such as lending to small businesses. But the financial world is concerned with the bottom line; the tech world is filled with startups who are focused on the above top line growth (like bookings). Viewing the financial world through rose-colored lens is a grave mistake.