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Go West, Young Bank Bro

Kevin Roose | February 22, 2014 | Lifestyle Story City Life National

Antonio García-Martínez still remembers the feeling of drowning. It was the spring of 2008, and he was a 32-year-old programmer at Goldman Sachs. His job was writing and pricing investment-grade credit default swaps, the kind of exotic derivative that had just blown up Bear Stearns and would soon lay waste to another venerable investment bank, Lehman Brothers.

García-Martínez had been at Goldman for three years, and he was used to working hard. Fifteen-hour days were typical, and the resulting stress had plagued him with a litany of health problems, including hives and a short bout of irritable bowel syndrome. Then Bear Stearns collapsed, and the sensation that the levees were breaking became inescapable. "Everyone was scared for their lives," he says. "The credit spreads were blowing up, and it seemed pretty clear that something big was going on."

For months, García-Martínez had been angling to leave Goldman, which was shedding staff and seeing its profits vanish with the mortgage market. But the economic turmoil had left him with few options. Banks weren’t hiring, and his attempts to land a job at a rival firm had flopped.

Luckily for him, there was one area of the country where companies still wanted to hire talented programmers, and they didn’t much care if an applicant’s last job had involved creating sketchy investment vehicles. That spring, after seeing a New York Times article in which a Silicon Valley ad-tech startup boasted that it would triple its payroll over the next year, García-Martínez decided to apply for a job on the Peninsula. The startup, Adchemy, flew him across the country for an interview. A week later, he was negotiating his offer from the Goldman trading floor. “Everyone else was still paddling the oars, and I was inflating the life vest,” he says. “Tech in the Bay Area was my savior.”

In the six years since García-Martínez fled Wall Street for the greener pastures of the Valley, an unprecedented number of his peers have followed him. Bankers, traders, quants, and all manner of other Wall Street workers have been abandoning the finance industry in increasing waves ever since the crisis of 2008. They come to the Bay Area for many reasons. They’re convinced that the Street’s go-go days are behind it. They crave an easier lifestyle. They seek more excitement than can be found in the hum of an orange and black Bloomberg terminal. And, astoundingly, they’re betting that there’s an even bigger payday in store.

Roughly 31,000 people moved from New York to California in 2012, according to census statistics—the largest one-year migration since 2006. It’s impossible to know how many of those were Wall Street transplants, but a perusal of data provided by employees of tech firms suggests that it was a substantial chunk. More than 1,200 of Google’s 47,500 current employees formerly worked for one of the top 10 global investment banks, according to LinkedIn. The top banks also incubated at least 750 current Apple employees, 175 Facebook employees, and 260 Yahoo employees. Travis Kalanick, chief executive officer of the ferociously expanding Uber, has said that between 10 and 15 percent of his hires come from the financial services industry, with a full 5 percent coming from Goldman Sachs alone.

Peter Hébert, the cofounder of Palo Alto–based venture firm Lux Capital and a refugee from Lehman Brothers during the first dot-com boom, says that he’s bowled over by the increase in finance workers who are moving to the Bay Area in search of work. In the last two years alone, his firm has witnessed a marked increase in the number of résumés from bankers, he says. “When you get down to the college level, people who normally would have gone into the combine—you know, investment banking and consulting—are going into startups instead."

It’s easy to understand why a small migration, or even a medium-size one, would have happened after the financial Armageddon of 2008. Banks were laying off thousands of employees, and bonuses for many of those who remained were cut to nearly nothing. Workers on Wall Street were still expected to put in 80- to 100-hour weeks, but they were doing so at less lucrative firms, in an industry whose profits were threatened by a surge of demand for new regulations and a global market slowdown.

What’s more surprising, now that Wall Street has recovered much of its steam and the stock markets are near an all-time high, is that workers are still choosing tech over finance. Some of this is simply because that’s where the jobs are. In the next three years American tech firms are expected to hire 504,000 new workers. By comparison, finance and insurance companies will add only 370,000 new jobs.

But finance pros are also streaming to tech because of the very nature of the jobs that are on offer. At one time, the companies that defined Silicon Valley became famous by building fantastic new products, whether networks or hardware or awe-inspiring iThingies. Now, many of the hottest startups in the Bay Area bear the distinct mark of Wall Street’s profiteering impulse. Some are payments companies, like Square and Stripe, that make money by serving as financial middlemen and shaving cents from each transaction. Others, like Standard Treasury and LendUp, provide traditional banking and brokering services with a tech-age interface. Still others, like Uber, are starting to engage in loan practices. (Last year, Uber started a vehicle-financing program that secures car loans for UberX drivers at lower interest rates than they would be able to get on their own.) All of these companies have benefited from the salesmanship and confidence instilled in young Wall Street workers. “It’s no longer semiconductor companies being built,” Hébert says. “Where the money is abundant is in areas like consumer Internet, and the skill sets you need for that kind of company are being gregarious, extroverted, and hardworking.”

Saad Siddiqui is one of these Wall Street refugees. A former investment banking analyst at RBC Capital in New York, he left finance in 2012 to take a position at Cisco. He’s now at Informatica, a big-data software company in Redwood City, where he does corporate development and venture capital deals. He makes more now than he did on Wall Street—which is saying something, given that most first-year bank analysts make between $120,000 and $140,000—but he says that lifestyle, not money, is what“one of my friends used to work for brought him west. Now, living and working in Silicon Valley, he goes hiking on the weekends, takes boxing and tennis classes in his spare time, and has lost the 40 pounds that he gained while banking.

“People are willing to take big pay cuts,” Siddiqui says. “I can’t tell you how often I get a call from a banker friend in New York, begging me to find him a job out here.”

Siddiqui was nervous at first about packing up and moving to California. And some aspects of Bay Area life took getting used to. (He was confused, in particular, by the way his new office emptied out by 5:30 p.m.) But like many other bankers who have made the leap to tech, he found plenty of company once he arrived. Around him at work were all manner of former financiers, and more were on the way. Within a month of his move, eight of his friends from New York—mostly finance dropouts—had joined him in Silicon Valley. After some initial cultural adjustments, the bankers all made the Bay Area their home—with new jobs, new apartments, and new signifiers of status to set them apart as special.

“One of my friends used to work for J.P. Morgan in New York, and he’s now at Google,” Siddiqui says. “He’s a total chick magnet. He walks around with Google Glass on, and girls go crazy."

While laid-back, libertine San Francisco has always lured its share of fed-up corporate drones from back east, this generation is drawn to the Bay Area for vastly more mercantile reasons. There is a perception right now that tech can provide a quicker path to riches than Wall Street, where new hires are expected to put in several years of grueling grunt work before being moved up the ladder. Fred Ehrsam, a young Goldman Sachs currency trader, sensed an opportunity in late 2012 to skip the dues-paying phase of his career altogether. He quit his job, telling his bosses that he was “going out to California to work on some technology stuff.” Several months later, after joining up with a new business partner who was enrolled in Y Combinator, Ehrsam became a cofounder of Coinbase, a Bitcoin wallet startup. His timing was impeccable—Bitcoin prices spiked soon after, and last December, Coinbase raised $25 million in a funding round led by Silicon Valley mega-firm Andreessen Horowitz.

“There’s been a myth perpetuated where people think, ‘I need to go into consulting, banking, finance, law, or medicine to make a consistently reasonable amount of money,’” Ehrsam says. “People are now realizing that’s not the case.”

Of course, Ehrsam’s experience is an outlier. The failure rate for startups is much, much higher than for Goldman traders. But the possibility of becoming one of the success stories has kept financiers coming to San Francisco in droves. If you go out in the Marina or the Mission on a Friday night to a bar with beer pong tables in the back and Jäger bombs on the menu, you’ll see them: an army of well-scrubbed 25-year-olds, mostly male, fist-bumping and talking about restricted stock units. These are the new tech elite, and they’re here to get rich.

For García-Martínez, who became a true creature of tech after leaving Goldman Sachs (he has since worked at Facebook and is now an executive at an ad-tech company called Nanigans), the sudden rush of interest from former bankers with no technical experience is worrisome. “It seems strange,” he says. “Computer science has always been the last refuge of scoundrels and heretics. I once heard somebody say, ‘Be wary when the pretty people show up.’”

Page two: Why Wall Streeters keep taking Silicon Valley's bait.

I’ve spent much of the past four years interviewing entry-level Wall Street bankers for a new book, Young Money: Inside the Hidden World of Wall Street’s Post-Crash Recruits. More than once, I’ve sat on a barstool next to a 23-year-old banker, just a year or two out of college, who was wondering if it was too late to make the leap to Twitter or Facebook. And I think I’ve put my finger on a reason that many young financiers are itching to get out of finance and into tech. It has to do with risk.

One of the biggest misunderstandings about Wall Street culture is that finance is filled with cavalier risk-takers. In fact, while some of the bets made by Wall Street firms in the lead-up to the financial crisis turned out to be catastrophically risky, Wall Streeters themselves are some of the most risk-averse people on the planet.

Go to an elite college campus during recruiting season, and you’ll see what I mean. At Harvard or Princeton or Penn, a certain set of self- assured juniors and seniors are planning to work in areas where blazing one’s own trail is required: politics, film-making, nonprofit activism. And then there is a different group, filled with students who are very smart in an all-purpose way, but who are anxious about straying far from the institutional path that they’ve followed since nursery school. These people don’t know what they want to do as a career, but they do know that they want to put a prestigious name on their résumé, work in the company of other people with high SAT scores, make good money (or really good money, as the case may be), and buy themselves a few years to figure out the rest of their life.

For decades, banks—and, to a lesser extent, management consulting firms like McKinsey & Company—had a lock on this group. By handing out job offers early (in some cases, during the first month of senior year) and by making applying for a spot as easy as dropping a résumé into a box, Wall Street firms turned themselves into halfway houses for the timid elite—the first step toward a career of influence and power, but without the risk of it all falling apart.

That changed in 2008, when the risk profile of being a banker increased dramatically. With massive rounds of layoffs, firms going under, and a shifting regulatory landscape, the path from first-year analyst to senior partner began to narrow. You could go to Harvard, work at Goldman Sachs for two years, and still end up well behind your peers who had followed less conventional trajectories. A new realization began to set in for junior bankers: Perhaps staying in banking—not bootstrapping an early-stage startup or working at Google—was the risky move.

Of course, a leap of faith is still required. Even in the post-crisis financial sector, Wall Street workers have a much greater chance of getting rich by staying put than by leaving for tech—an industry in which vast numbers of companies fail every year, and where the sudden bursting of a previously unseen bubble could derail everyone’s plans overnight. “If you take 10 guys, the odds of those 10 guys making a couple million each in finance are much higher than one of them selling a company for $100 million,” says Michael Karp, chief executive officer of the finance recruiting and consulting firm Options Group.

And yet, the Wall Streeters keep taking the bait—in part because the bait comes to them. Several years after the financial crisis, executives from Facebook, Google, and other large tech companies began putting on recruiting open houses in New York for young financiers, often compiling the guest lists by scouring Bloomberg terminals and LinkedIn for the email addresses of first- and second-year bank analysts. The emails that they sent often contained little more than a place and a time to meet, but that was enough. Wall Streeters aren’t dumb—they know how to tell a shrinking industry from a growing one—and they were interested in what Silicon Valley was offering.

"I just emailed a bunch of people at Wall Street firms and said, ‘I’ll have a table at such-and-such restaurant, come out,’ and I got, like, 50 people,” one tech executive tells me.

It’s easy to grasp their enthusiasm: For status-conscious young people, working in tech holds a lot of the same appeals as Wall Street. It’s fast-paced, cerebral, and filled with similarly ambitious, pedigreed people. But tech has an additional layer of psychic benefit. Unlike bankers, tech workers generally feel that they are part of a larger movement—that their paychecks come with a side of purpose. As I spoke to Wall Street underlings about their tech envy, what I heard, time after time, was that Silicon Valley is a place where people do meaningful work. Tech companies bring new things into being, rather than serving as financial intermediaries who simply take a cut of every transaction that passes through their hands. And, unlike banks, they have cachet. A 2013 survey conducted by the consulting firm Universum ranked Google and Apple as the first and third most-coveted workplaces in America among young professionals; JPMorgan Chase, the highest-ranking Wall Street bank on the survey, only managed sixth, and that was the highest it had ranked in years.

“If you go out and say, ‘I work for Goldman Sachs,’ there’s a stigma around that,” says Sameer Syed, a former JPMorgan Chase investment banker. “My friends used to joke when they introduced me to people. They’d say, ‘This is Sameer. He takes your money.’”

Now, Syed works as the director of business development at Genesis Media, an ad-tech startup in New York. Shortly after making the jump into tech, he began organizing roundtable discussions for other bankers interested in making a move. He secured a room at a coworking space in downtown Manhattan and invited ex-bankers working in tech to give tips for getting a job at a startup. He capped attendance at 40; 110 people signed up.

“When I came out of school, banking was the place to be. But now you have startups making a lot of money, and these kids are looking at that and saying, ‘That sounds fun,’” Syed says. “Once you hear that other people have made the transition, you realize there is a way.”

For most Wall Streeters moving into tech, getting comfortable with a pay cut is part of making the leap. Blue-chip university graduates can still expect to make a low six figures as first-year finance hires. Few tech firms can match that in cash, and many of the stock options given out to new hires are ultimately worth nothing. But financiers who have come to terms with a slightly lower pay grade generally say that the trade-off is worth it. “I get to wear a hoodie every day,” Syed says. “And I don’t get beat up on by my boss.”

Of course, working in tech isn’t as rosy as it can sound from the cubicle farms of Lower Manhattan. Many workers moved from New York banks to Silicon Valley tech firms in search of a more socially respectable profession, only to discover that in San Francisco, tech workers had become the villains. As picketers gathered outside Twitter’s headquarters and protesters stopped Google buses in the streets in recent months, it was entirely likely that some of the people inside had been targeted by Occupiers in New York just a few years earlier.

And although the popular image of startup life is of coddled twenty-somethings spending their days playing air hockey, dining on the company dime, and commuting in luxury shuttles, the reality can be much tougher. In fact, one of the reasons that ex–Wall Street workers are desirable at tech firms is that they’re used to grueling conditions. Their tolerance for dog-like hours and punishing deliverables has made them a vaunted commodity for a maturing, money-filled industry in which mergers and acquisitions have become nearly as important as coding and design. “They’re used to pain and agony,” says Kim Taylor, co-founder of the New York education tech startup Ranku. “They know how to handle pressure and get excited to wear jeans.”

In a sense, Silicon Valley in 2014 is like Wall Street in the ’80s. It’s the obvious destination for the work-hard-play-hard set, those well-coiffed strivers looking to get ahead while living in a kind of privilege bubble that’s insulated from the criticism flung its way by outsiders. When I moved to the Bay Area from New York in 2012, after I’d finished the bulk of my book reporting, I expected to find a culture radically different from the one I’d left—yoga raves and locavores where banker bros and bottle service had been. Instead, I found that San Francisco and Manhattan were almost culturally indistinguishable. Wharton graduates got drunk at dive bars on Polk Street, paid $2,000 a month for cramped studio apartments, and were feared and loathed by the locals. White men with fancy pedigrees still composed a social overclass, but now their business cards said Google Ventures, not Goldman Sachs. It was as if Murray Hill—the noxious New York neighborhood where high-rises are stuffed with young bankers—had packed its collective suitcases, flown to SFO, and moved into SoMa.

“Silicon Valley used to be about the acceptance of all these random outcasts and misfits. It’s become much more of a mainstream—dare I say—profession,” says Hébert, the former Lehman Brothers banker now running a venture capital firm. “It’s no longer considered off-track to go work at a startup after you graduate from college. It kind of is the track.”

Page three: Goldman Sachs fights back against the tech onslaught.

Will banking ever regain its luster and slingshot the moneyed elites back across the country? It’s hard to say. There was a smaller migration of bank workers into tech during the first dot-com boom, and many of them went back to finance when their companies failed. If another bubble pops in Silicon Valley, the result could be similar.

Wall Street, for its part, is acting like the threat from tech is real. Recently, in an effort to keep their young employees happy and in their seats, big banks began relaxing their work hours—a step that many once saw as unthinkable. Goldman Sachs announced that it was requiring junior bankers to take Saturdays off unless urgent work intruded. JPMorgan Chase now requires young bankers to take one “protected” weekend each month, while Bank of America Merrill Lynch is encouraging four days of rest per month for its underlings. Credit Suisse and Citigroup, like Goldman, are enforcing the Saturday Sabbath.

These rules are meant to tip the lifestyle portion of the tech-finance competition back in Wall Street’s favor. If they do measurably improve banking life, they may stop some disgruntled financiers from packing their bags. But banks haven’t done anything to address the more pressing issue: They’re losing the next generation. At Harvard in 2007, 47 percent of undergraduates who had jobs at graduation were headed into finance; now, it’s roughly 15 percent. At Princeton, once considered a four-year layover on a first-class flight to Wall Street, a measly 11.5 percent of last year’s graduating class ended up in finance. Even at Stanford’s Graduate School of Business, the one place on campus where you’d expect to find budding financiers, Silicon Valley and Wall Street have basically flip-flopped: 32 percent of last year’s MBA class chose tech, while 26 percent went into finance; in 2011, tech employed only 13 percent of graduates, while Wall Street took in 36 percent.

“There are so many more employers out there that are in a position to absorb talent and to create attractive paths forward,” says Pulin Sanghvi, Princeton’s executive director of career services. Sanghvi, who used to run the career management center at Stanford’s business school, says that although banking remains a draw for some students, it’s no longer the default option. “The days when a single finance company would come to campus and hire [a sizable percentage] of the class, that’s changed for sure.”

I saw how dire the picture has become for Wall Street several months ago, when I sneaked into a Goldman recruiting session held on Stanford's campus. While Goldman isn’t hurting for applicants—it recently received 17,000 résumés for just over 300 junior investment banking spots—it has been forced to work harder to get the cream of the crop. Typically, Stanford is among Goldman’s biggest recruiting pools, a place where undergraduates and MBAs alike drool over the chance to work for a premier Wall Street investment bank. But on this night, it was as if Goldman had shown up with a scarlet B on its bespoke lapels.

At 7 p.m., the lights dimmed, and Goldman chief executive officer Lloyd Blankfein appeared in a pre-taped video before the 50-odd students gathered in a downstairs room at the Stanford Faculty Club. “We want to motivate people who are interested in serving something greater than their own personal interest,” Blankfein said, his voice backed by a cloying pop rock soundtrack. The students, mostly sophomores and juniors being courted for summer internships, looked bored. Some picked at mini–egg rolls on plastic plates. Others stared down at their leather portfolios or checked their Instagram feeds.

After the video, a recent Stanford graduate came to the front of the room to read a prepared speech about why he’d gone to work for Goldman. “I wanted to find an opportunity that would push me out of my comfort zone and help me develop a sound, more analytical thought process,” the Goldmanite said, with all the enthusiasm of a ficus plant. Gene Sykes, the co-head of Goldman’s global mergers and acquisitions department, came to the podium and talked extemporaneously for 20 minutes about all of the reasons that Goldman Sachs internships are great for Stanford students. “It’s like being in school again,” Sykes said, “but a school for business.”

At the end of his pitch, Sykes asked if anyone had questions about Goldman or investment banking in general. The room greeted him with silence. “Don’t be shy,” he said, then waited a few beats for a response. Nothing. “Well,” he said, “you’ll have plenty of time to address any specific questions you have about our program to the people around the room. Thank you all for being here, and good luck.”

A smattering of students stuck around for a few polite minutes to glad-hand and ask after business cards. The rest left to join their friends elsewhere on campus and dream about newer, shinier things.

Originally published in the March issue of San Francisco

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