People outside of “Silicon Valley”, meaning VC-funded technology startups, have an often hilarious and rosy view of it. To hear them tell it, a tech job means free massages whenever you want, access to futuristic computing technology, interesting problems to solve, and enough money to retire by age 40. That is not what the technology industry really looks like, even in the hot-shit “unicorns” and the West Coast megaliths. The pay is sub-adequate given the level of talent involved and the extreme job insecurity, early retirement is usually involuntary, and boring work tends to pile up not because it can’t be automated, but due to mismanagement and political intrigue. Of course, it’s not very useful for me to go on about how much the VC-funded software industry sucks. People who’ve been in it, for more than two years or so, will agree; and those who haven’t reached that conclusion, at some point, will.
Why does the software industry have such a terrible culture? It’s easy enough, and certainly comforting, to blame “the VCs”. It’s always appealing, when a class of people is that highly paid, seems not to share one’s values, and appears to be in one’s way, to argue that one could do better without them. Could we? Not unless we understand what ruined this particular crop of venture capitalists– if, even, they’re the ones who deserve the blame.
I’ve written about the Damaso Effect. It is, I would argue, the most important sociological insight about Silicon Valley that has been made in the 21st century. According to the Damaso Effect, the technology industry’s woes exist because technologists (programmers, engineers and scientists) are a colonized tribe, and because the colonizing culture sends its worst people over: those who failed in the mainland, for some reason. I’ve argued that technology has been colonized by “the mainstream business culture”, but what is that culture? Mostly, for good and bad, it’s finance culture: Wall Street.
There’s good and bad to be said about Wall Street. For one thing, the ethics on Wall Street are actually way better than in Silicon Valley. Wall Street ethics, by the standards of the corporate world in general, are average at least. This surprises people, but the ethical issues surrounding the banks usually come from their sheer power and importance. If the bankers do something unethical, it ends up in the New York Times and there’s often jail time involved. If VCs or founders do something unethical, it silently ruins a few careers. VC-funded technology just isn’t important enough to attract the kind of scrutiny that is put on the banks. Trust me, though, when I say that in every ethical measure– diversity, meritocracy, fair treatment of third parties– the VC-funded startups are far worse. It’s not even close. It’s not just about the quality of people, but also the incentive structures. Bankers actually care enough about their careers and reputations not to do anything stupid, while a techie will trash a person’s career and life over the smallest grudge. VC-backed founders don’t care about doing the right thing, because they expect their companies to be dead, or sold for billions, inside of 5 years. Bankers know that a reputation for honesty is an important asset in a long career. Techies lie about their companies, their products, and the job positions into which they’re hiring prospective talent, all the time. To their credit, most of the technologists themselves— the programmers, engineers and scientists– are typically honest to a fault. Their aversion to dishonesty is a consequence of this group’s general desire to avoid “being political”, even when it’s necessary. The problem is that, in the colonial dynamic that characterizes the VC-funded world, this set of people has no power.
Understanding finance culture
I’ve worked in finance as well as technology. So the first thing that I’m going to say is that “Wall Street” is more diverse than Silicon Valley. The VC-funded world has the same juvenile, fratty monoculture whereever you go. It doesn’t matter if you’re in San Francisco, Brooklyn, or Miami. The important decisions are made by the same small set of people. Finance, on the other hand, is very diverse. There are hedge funds where the average age is over 50, and others where it’s under 30. Unlike the Valley, where a woman pretty much can’t be made a founder unless it’s a fashion startup, there are women-led trading desks that deal in extremely technical products. So, I can’t talk about “finance culture” with authority as if it were monolithic, because it’s not. It’s much bigger and much more diverse, and all I can speak about are general patterns.
Techies generally avoid finance, based on a perception that it’s money-driven (which it is, but so is tech) and unethical (see above) and that programmers have low status in financial firms (which is quite variable). Focusing on the last of these points, it’s true that, traditionally speaking, programmers have often been low in banking’s status hierarchy. As it’s often depicted, traders outrank quants, and quants outrank quant developers, and quant developers outrank “I.T.”, meaning regular in-house developers. In some firms, this is true and, in those, programmers often scramble to reinvent themselves as quants as fast as they can. In others, it’s not as true. Most of the best-performing financial firms are those that go out of their way to avoid having that kind of status hierarchy, especially as technical skills become more important with each passing decade. Not all successful financial firms are progressive, nor vice versa, but there seems to be a positive advantage in having a technology-driven culture. If you want the best programmers, you can’t put everyone who writes code at the bottom of a hierarchy.
This essay doesn’t require a focus on the best of finance culture, because the people who do well in finance generally don’t end up in Silicon Valley. The quant funds aren’t where VC-funded founders come from. Those people are making too much money to dance on their hats for VCs. Overwhelmingly, the people moving from finance into technology are coming from the least progressive financial firms, in which the 1980s hierarchy still holds and to be a programmer is still a low-status job. So, when those people become founders, what attitudes should we expect them to have?
Cost center life
Intelligently-managed firms, in finance as well as technology, recognize that the programmers are important. Others don’t, and finance’s negative reputation among programmers comes from them. In the shitty financial firms, programmers (and, to a lesser degree, quants) are viewed as a cost rather than a profit center. This isn’t news, nor is it shocking, and the slow decline of the organizations that think this way is exactly what they deserve. Those less progressive companies are slowly losing air, and this means that they’re cutting jobs. Job cuts are common in finance and often not a big deal, but there is an aura of “musical chairs” around certain categories of non-technical people. Where do they go, if there are no jobs for them on the Street? While they’d like to move to private equity, many can’t make that switch and fall down a couple levels into venture capital. If they’re lucky, they become VCs. If they’re not lucky, they become founders, grab a few million dollars (with many strings attached) and start bossing nerds around. Of course, their attitude toward technical people– that they’re a cost center– is one that they take with them.
This, I think, explains how technologists have been driven out of their own industry. Technologists have always had to answer to finance. A merger or an IPO can’t happen without the banks’ say-so. Technologists and the financiers, at some point, had a deal along these lines: we’ll build the product, you decide our bonuses. This played to the technologists’ middle-class earnestness, and their desire to put their heads down, do great work, and be fairly rewarded. It also gave the upper hand to the financiers: venture capitalists, Wall Street, and corporate acquirers. Over time, the “technology” industry became less technological and more marketing-obsessed.
If it had been competent financial professionals who’d moved into the Valley to manage its money problems, I think that the outcome might have been more positive. A successful hedge fund manager might not understand machine learning or Haskell, but she’d probably be inclined, by experience, to know how to hire smart people and get out of their way. She’d understand that making programmers second-class citizens will lead to shitty programming and that, while some established banks can afford that because their businesses are relationship-driven, technology companies can’t. However, said hedge fund manager wouldn’t dream of moving into the Valley. It’s the failed financiers who make that transition. And where does it lead us?
Ultimately, I believe that the best business people focus on the performance of the operation, while the worst ones focus on control. The talented ones focus on making more winning bets than losing bets, but accept risk and avoid sacrificing quality, performance, and morale just to have more control; while the untalented ones become obsessive micromanagers hell-bent on making sure the peasants know that they’re peasants. I don’t think that this aspect is finance-specific, but management-specific. Effective managers recognize that their teams have come up with ideas that they didn’t have, and that keeping their people creatively enabled is important. Ineffective managers, with painful histories of failure, a willingness to blame others for their problems, and the social status to get away with doing so, turn into distrustful, vengeful bean counters.
When you have someone who failed out of finance or management, has a chip on his shoulder against past and future underlings, and is more likely than not to come from a declining company in which programmers are undervalued… what you get is, well, exactly the sort of person who becomes a founder or VC amid the current Sand Hill Road climate. It shouldn’t be surprising that programmers have been made second-class citizens in their own industry. It should seem inevitable.
Where should one go?
In 2008, I left Wall Street to try out a startup (more than one) and ended up in the VC-funded world. Gigantic fucking mistake. I wouldn’t advise it to anyone. I don’t have a burning love for finance, but my career would be way ahead of where it is, had I stayed on the finance side of things. VC-funded tech (including ex-startups whose cultures were shaped by VCs) is a loser’s game. Sure, the software industry has a great need for intellectual talent, but its leadership is of such low quality (even in beloved companies that show up on peoples’ “Big 4” lists) that such talent is wasted. If I could go back to 2008 and tell my 25-year-old self anything, it’d be to stay in finance and not give this tech startup shit a moment’s thought. It’s called “the dream” because it ends as soon as you wake up.
For an individual, I’d say that a person choosing between a quant role in finance, versus an engineer position in the startup, should take the former. The pay is better and the jobs are better: you’re treated as an adult, rather than having to waste brain space on “user stories” and “scrotum ceremonies”. Finally, you have much better odds of becoming a founder (or a VC, if that’s what you want) after 10 years in finance (and making the right contacts) than after 10 years hopping around the startup world, from one loser engineering position to another. The startup world bends over backward in order to recruit the hordes of (mostly young, untrained, and mediocre) programmers that it needs in order to implement its vision, but the truth is that engineers are second-class citizens. I’ve been in discussions where a CEO sneered, “I’ll quit before I give an engineer 0.5 percent”.
I don’t dislike finance. If I could move back into it on the right terms, I would. I don’t find most of what financial professionals do, on a day to day basis, to be wrong or unethical. Moreover, while there are infrequent high-profile incidents of banks being unethical to customers and the public, the startup people and VCs have a stream of frequent low-profile incidents of screwing over their own people. Banks don’t go out of their way to ruin the reputations of, say, departing employees in the way that techies do. Bankers protect each other, which is something programmers never learned how to do.
All of this said, it’s a bit disheartening to come to the realization that I have, which is that a young person entering the technology world, rather than finance, is making a mistake. I’d love to be able to say something different. In 2007, the unambiguous best career option for a young person coming out of college was finance. It wasn’t even close, and startups weren’t on the map. I knew complete idiots who were 25 and making $500,000 per year in private equity. Then 2008 happened, the financial job market tanked, and it still hasn’t recovered. Many academics and economists decried finance’s mid-2000s strangehold on top talent and hoped that the Crash of 2008 would steer young talent toward Silicon Valley. To its credit, the Crash did move many people from finance into technology, but it didn’t happen in the right way. Quantitative, tech-friendly hedge funds kept their programmers, while non-technical soft players (the sorts of people who actually caused the crash) moved into technology– and in the top ranks. The idiots who were nudged out of real private equity called in some favors and became VC-backed founders. As a result, the Valley got sloppy founders, sloppy management, sloppy HR, sloppy culture, and in the end, sloppy product. And now, here we are: it’s 2015, and the programmers and scientists are second-class citizens– treated as cost centers rather than profit generators– in the world that they built. Finance hasn’t recovered to its pre-2008 levels, but technology has lost its soul as well, and the destination career for a talented young person is probably still Wall Street.
It doesn’t need to be that way. Technology can, and should, be fixed. However, it’s full of people with the wrong attitudes, especially at the top levels, and fixing this industry is going to require driving them out.
