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Comeuppance

Wednesday, August 20th, 2014

https://www.flickr.com/photos/cheezepix/4933836639Tech currently has a high profile for arrogance, not to mention chauvinism and bigotry, with Google, Apple and Facebook are its most public whipping boys.

However, their comeuppance came with the intense media focus that will likely force them to at least put some effort into cleaning up their respective acts.

Not like their psychological brethren on Wall Street.

And while tech has a modicum of excuse that stems from age—its frat house culture has gotten worse as entrepreneurs have gotten younger—proven by the numbers, i.e., more women entered tech in the 1980s than do today—Wall Street has none.

The investment banking world has always been a bastion of white, male elitists; and hardcore harassment—an old boys group that didn’t give a damn what anybody thought.

Arrogance has been synonymous with investment bankers for decades, so seeing it kicked in the teeth by upstart tech arrogance was exhilarating.

Google’s Larry Page created his own acquisition yard stick,

The toothbrush test: Is it something you will use once or twice a day, and does it make your life better? …The esoteric criterion shuns traditional measures of valuing a company like earnings, discounted cash flow or even sales.

Page, for example, is looking for “usefulness above profitability, and long-term potential over near-term financial gain.”

Potential and usefulness are esoteric concepts to most bankers and “long-term” isn’t even in their vocabulary.

Bankers are fine with the hard stuff revolving around money, but are often useless on human side.

But often, when big tech companies are looking to grow through acquisitions, it is the culture and vision, not the earnings and revenue, that are of paramount importance.

Of course, investment banks need to lose a lot for it to really start mattering, but it looks like they are.

The acquiring company did not use an investment bank in 69 percent of American technology acquisitions worth more than $100 million this year, according to Dealogic.

All I can say is that it couldn’t happen to a more deserving group of guys—their comeuppance was a long time coming and it’s hitting the only place they might notice—their bank balance.

Flickr image credit: Chris Hartman

Wall Street Entitlement

Tuesday, January 27th, 2009

What a joke. Bloomberg offers up information on which bankers are foregoing salaries and how bonuses are being set up.

For example, Steve Black and William Winters, who head up JPMorgan Chase’s investment banking unit, will forgo cash and stock bonuses in 2008, accepting only 700,000 stock options each.

“The stock will be awarded based on future company performance and must be held for five years, the bank said. The JPMorgan stock appreciation awards were priced at $19.49, the average of the high and low price of trading on Jan. 20, according to Bloomberg data. Shares of JPMorgan fell 21 percent that day and have since climbed to $24.28.”

I love the ‘only’. I just checked and the stock is up another 22 cents.

That means that even if the stock is no higher in 5 years they would still reap a little more than 3.5 million dollars.

Let’s not all cry at once.

There’s a reason that all those hotshot MBAs want to work on Wall Street. It’s because they believe, with reason, that they’ll make low seven figures within a year, two if they’re slow.

The attitude is blamed on Wall Street culture, but it goes further than that.

It goes back to their individual MAP and the deeply seated belief that they deserve it—they are entitled to that compensation; and that MAP certainly isn’t reserved for the new grads, it permeates all levels.

It’s not that they call themselves ‘Masters of the Universe’—it’s that they believe it.

Big problem since MAP is only changeable from the inside out. MAP is also sneaky and will pretend to change and then revert to its normal pattern when no one’s looking.

That means that we, the people, and we, the politicians, better have longer memories going forward than we’ve had in the past.

(Richard is traveling and will return next week.)

Image credit: flickr

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