Waiting for crumbs from your table*

Wall Street Banquet, 1928. Diego Rivera, Mexican (North wall, Courtyard of the Fiestas, Ministry of Education, Mexico City, Mexico)

The ever thoughtful Frank Pasquale at Concurring Opinions looks at recent news:

Two resignation letters rocked Wall Street and Silicon Valley this week. Greg Smith elegized a once-great Goldman Sachs, now reduced to “ripping eyeballs out” of clients. (The industry sure has changed since the 90s, when the goal was to rip off the whole face of the client. I guess Dodd-Frank is working.)

On the West Coast, James Whittaker explains “Why I Left Google.” His complaints are more measured than Smith’s: “The old Google made a fortune on ads because they had good content. It was like TV used to be: make the best show and you get the most ad revenue from commercials. The new Google seems more focused on the commercials themselves.” Whittaker laments that the company has become obsessed, Ahab-like, with the social web’s whale, Facebook.

On one level, it’s not fair to compare the companies: the engineers at Google have contributed far more to society than finance’s “money-massagers.” Goldman represents the terminal phase of a liquidationist capitalism unmoored from social value. But its culture did not rot overnight. Rather, legal and material factors accelerated decay. Silicon Valley’s managers and regulators should take notice: the same process could happen there.

And has some advice:

Both of these industries depend on trust—from clients, users, governments, and many other stakeholders. Goldman will likely never be able to earn that trust back. The lessons from its decline are clear. Treat all sides of a transaction fairly. Make sure some third party can truly audit the company and give frank advice on whether its business model is sustainable. Offer some account of what the company is doing for the economy as a whole, and not just for ephemeral stock values.

Unfortunately, Whittaker’s letter suggests that Wall Street values may be infecting innovators. We can see it in business analysts who casually hypostatize shareholders or dismiss innovation beyond core competencies. We also see it in the parade of privacy violations chronicled weekly by the tech press. Firms like Google, Facebook, and other Silicon Valley giants should consider whether they want to end up as reviled as Greg Smith’s former firm.

Corporations can no longer be judged simply by how much money they make. Goldman’s cardinal sin was spinning profits out of power, not productivity. As regulators judge aggressive moves toward consolidation and data collection in Silicon Valley, they should ensure that its flagship firms aren’t following the same disastrous example.


*Title from the U2 song of the same name.