Capital Commerce

Wall Street And Silicon Valley: Not That Different After All

September 18, 2009 RSS Feed Print

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Daniel Gross of Slate says: East Coast financial suits bite the government hand that feeds them, while West Coast cleantech gurus, with their "wide-eyed hucksterish world-changing idealism," are happy to accept hope and change.

It's simple enough to explain why the finance guys are so skeptical.

Having saved the banking system from failure and taken a significant ownership stake in the system, the government is now interested in telling banks how much they should pay employees, how much leverage they should use, and how aggressive they should be in modifying mortgages. And since such proposals would influence profitability, Wall Street detests them.

Now the Silicon Valley guys--is it really the case that, as Gross puts it, what they really care about is "changing the world," and if government funding is needed to do that, all the better?

I think the much simpler explanation is that these guys know good opportunities when they see them. If Obama (or probably another Democrat) got in the White House, it would mean $150 billion in free money to their industry—without the big strings attached like the financial sector is getting. Even Republicans have supported subsidies for clean energy.

The subsidies are far from a side benefit—they're a reason to act. Anybody with lots of cash planning a green startup in the past few years could make a fair bet that they would be part of Washington's favored class.

Compared to the East Coast people, from a sheer moneymaking standpoint, the cleantech guys look like the smarter profiteers right now. And you can believe they wouldn't be too happy if Washington started making demands like executive compensation requirements along with their subsidies.

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very high personal income tax brackets on ASTRONOMICAL incomes (like we used to have), the East Coast (Wall Street) guys would not have ever gotten the kind of money that induced them to risk destruction of the financial system of the world. And YOUR government would not have had to spend YOUR trillions to right the ship (again).
Likewise, the Silicon Valley guys would not be kissing up as much to whomever would give them "$150 Billion in free money" (from YOU via the government) to do possibly-dubious green projects.
We have this fantastical notion that if we don't provide billion-dollar personal income magets (by way of low taxes at the high end) to a few "entreprenuers", that nothing worthwhile will happen in society. The truth is that free enterprise actually worked better back in the days of tax rates as high as 91%, and that low taxes have brought you the S&L crisis of the 80s, the tech-stock bubble of the 90s, the housing crisis, the oil crisis (at $145/bl last year), and the likes of everything questionable from Enron to "Girls Gone Wild". It probably also is a contributing reason for why millions of jobs left America---to temporarily feather the personal nests of whomever shipped them out. Why do we insist on staying blind to this obvious cause-effect relationship?

Muser of NM 1:12PM September 18, 2009