Where Wall Street and Silicon Valley Differ

By
Sahm Adrangi, unabashed money-maker.
Sahm Adrangi, unabashed money-maker. Photo: Paul Bruinooge/Patrick McMullan

In this week's business issue, I have a profile of Sahm Adrangi — a young hedge-fund manager who has gotten incredible results by fusing a research-based long-short model to modern social media tools. (Which amounts to tweeting about stocks he feels strongly about instead of trying to move them from the stage of the Ira Sohn conference, basically.)

I had an enjoyable time interviewing Adrangi — not least because he was unaccompanied by a PR minder, a rarity in this day and age (especially for a guy with little verbal filter who throws around words like cocksucker). But one chunk of our conversation that didn't make it into the piece came to mind this weekend, as I was reading The New York Times Magazine's excerpt of Dave Eggers's new book The Circle, a fictional look at a Silicon Valley megacompany. And it struck me as perfectly illustrative of the cultural divide between Wall Street and the tech world.

The passage that didn't make the piece came when Adrangi and I were talking, over dinner, about the line of thinking that says that activist investing (in the Carl Icahn, Dan Loeb, David Einhorn mold) can be good for the world, in that it roots out corruption and makes companies run more efficiently. Adrangi has a bigger claim to this moral high ground than most — his Chinese fraud shorts, which made him millions in 2010 and 2011, actually did shine a light on illicit practices and probably saved investors a lot of money they would have otherwise lost.

But Adrangi wasn't buying the line. In fact, he called it "delusional" that a few hedge-fund managers — including Bill Ackman, who described his Herbalife short campaign as "patriotic" — are cloaking their money-making efforts in the language of philanthropy.

"Activist investing helps shareholders make more money," Adrangi said. "Is that good for the world? I mean, it’s good to have efficient markets. Is that good for the world? If some pulp company, like, sells off one of its assets but retains another and is able to provide cash to shareholders, does that really move the needle in overall social good?"

At the end of the day, Adrangi said, his mandate was simple: Make as much money as possible for his investors. "Exposing frauds is a good thing," he said. "The work we did was very much in the good. Were we doing it for that reason? No, we were doing it to generate returns for our investors."

This kind of talk — the kind you always hear among investors behind closed doors but rarely in the open — is maddening on one level. It's the same profits-above-all ethos that creates situations like last week's hilariously tone-deaf defense of Jamie Dimon on CNBC. But on another level, it's a perfectly honest summation of the financial industry's value system. Making money is the teleological goal of the industry; any humanistic benefits that result from the pursuit of that goal are a pleasant side effect.

Compare that attitude to the one found in Silicon Valley, where even the baldest profit-making ventures are made to sound like charity work. For example, the Eggers excerpt in the Times magazine, which gets much wrong about contemporary Silicon Valley but gets right the valley's desperate need to cover its capitalistic ambitions with the patina of do-gooderism. Here's the Circle's fictional CEO, giving a pep talk to employees about a new miniature camera in the making:

Folks, we’re at the dawn of the Second Enlightenment. I’m talking about an era where we don’t allow the majority of human thought and action and achievement and learning to escape as if from a leaky bucket. We did that once before. It was called the Middle Ages, the Dark Ages. If not for the monks, everything the world had ever learned would have been lost. Well, we live in a similar time, when we’re losing the vast majority of what we do and see and learn. But it doesn’t have to be that way. Not with these cameras, and not with the mission of the Circle.

In the past year, I've met several Silicon Valley hotshots who don't talk like this — venture capitalists who speak of fiduciary duty and founders who emphasize the importance of making good on a business plan. But many, many do. Money is subtext in the start-up scene, but the surface presentation is always about changing the world. (I'll never forget hearing Jack Dorsey tell an exhibition hall full of entrepreneurs at TechCrunch Disrupt that the start-ups they were building made them the rightful heirs to the legacy of Gandhi and the Founding Fathers.)

There's some truth to Silicon Valley's claims of world-changing (Facebook has changed the world, for better or worse), but for each Facebook, there are a thousand payment-processing start-ups and food-delivery apps that were created by founders hoping to get rich, who have hidden those ambitions under a concocted mythology of humanitarian change in order to convince the public, and perhaps themselves, that what they're doing isn't simply profit-seeking.

I think this rhetorical practice accounts for some, if not most, of the current suspicion about the tech sector. It's not just that our new Silicon Valley overlords are reaping massive profits and changing the social and economic fabric of the places they live — it's that they're doing it while pretending to be in the Peace Corps. And sometimes, as Adrangi's interview shows, it's refreshing to hear someone drop the façade and call a money-focused venture what it is.