They’re the great match-ups of our time. The Yankees versus the Red Sox. Macs versus PCs. And perhaps, Google versus Goldman Sachs.
That last duo was the subject of a debate at The Economist’s Buttonwood conference in in Midtown Manhattan yesterday. Serial entrepreneur, academic, and vice president of innovation and research for Singularity University Vivek Wadhwa took the side of Silicon Valley, with Google as its exemplar. Nobel Laureate and Yale University professor Robert Shiller spoke for Wall Street and in particular Goldman Sachs -- even though the firm was described by the emcee, tongue-in-cheek, as the "giant vampire squid."
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The question: Where would you advise an accomplished, idealistic graduate with a degree in physics, engineering or mathematics to hypothetically spend his or her career: Wall Street or Silicon Valley?
In a show of hands before the debate, about two-thirds of the audience were ready to steer that graduate to Googleland, prompting Wadhwa to remark, “I thought this was going to be hostile territory." Shiller quipped, “Are we sure this is The Economist conference?”
Shiller spoke first, saying that right now, both finance and the people who work in it are unjustly maligned. He said his brilliant, idealistic students don’t want to go into finance because it has a bad reputation. “That’s wrong,” he said. “Finance is the place you can make your mark on the world. It has to be a personal commitment, because you won’t get credit for it. . . But you will know inside that you have made things happen on a bigger scale than you could at Google.”
Shiller’s argument, in essence, was that every human activity of any significant scale has to be financed. (Wadhwa would later disagree.) “You cannot do good for the world by yourself,” Shiller said. “Most important activities have to have a financial basis. They need a financial basis so they can last over the centuries.” Financiers with principles, he says, serve a vital economic purpose. “When you study finance you are studying how to make things happen,” he said. “That has to matter more than getting into Google and programming some little gimmick.”
Wadhwa began by launching into the myriad recent sins of the financial industry: credit default swaps, a housing bubble, and widespread economic meltdown, for starters. He contrasted those debacles with the many promising initiatives from Google, in addition to its search capabilities: Google Maps; a driver-less, and potentially accident-free, car; and Google Loon, an attempt at bringing broadband internet access to the most remote areas. “Google is changing the dynamics of cities, changing the dynamics of life,” Wadhwa said.
Wadhwa then boldly expanded his argument to encompass pretty much all technology, anywhere. Between robots, nanotechnology, and increased computing power, he said we are on the verge of solving “the grand challenges of humanity.”
“Would you rather have your children engineering the financial system creating more problems for us, or having a chance of saving the world?” he asked. “It’s a binary thing. I can’t believe I’m even having this debate.”
Shiller, perhaps inspired by Wadhwa’s expansiveness, claimed that when Google is working on projects such as its driver-less car, it was acting like an investment banker.
He also said innovation isn’t limited to Silicon Valley, and that financial innovation, aside from causing global economic crises, can also have very positive outcomes. He cited the creation of the insurance industry, which somewhat softens the blow of natural disasters in countries that have fully-developed insurance markets. The mortgage, he said, is an important and useful financial innovation that makes widespread homeownership possible.
Wadhwa countered that recent financial innovations, such as PayPal and crowdfunding, have been more likely to come from Silicon Valley than Wall Street. He also claimed that the costs of starting a company have become so low that investment bankers are hardly needed to support them. “If we cut the supply of bankers to the financial services industry for the next 30 years we would do just fine, thank you,” he said.
Gregory Ferenstein, a writer for TechCrunch and one of the moderators, then asked if there was any good in the great majority of the finance industry. Wadhwa answered a flat no. Shiller was more nuanced. “It’s a technical system,” he allowed. “And some people who merely trade… they don’t look good at all. But it’s part of a system that overall brings us modern civilization."
That argument seemed to carry the day. By the end of the conversation, a clear majority of the audience was still choosing Google over Goldman. But just a few had switched their allegiances to Goldman Sachs. Apparently, all it took was a reminder that, yes, the financial industry does do some useful things. Even if those things are limited to, say, selling shares in Google.