If Tech Is the New Finance, What Is The ROBB - Return on Bad Behavior

Tech is the new finance was originally a boast. A sign that Silicon Valley and all of its geographical and ephemeral precincts or aspirations had eclipsed Wall Street and the culture of greed.

But those who mouthed this with a combination of glee and schadenfreude - the Stanford MBAs, the techies with their 'Revenge of the Nerds' fantasies and anyone else harboring resentments of those seemingly more facile but less ethical Masters of the Universe are in for a surprise. Because with that title and territory goes a behavioral burden whose cost is often greater than its benefits.

In fact, tech has displayed an uncanny willingness to embrace precisely the sort of disdain for norms and values that earned finance the opprobrium for which it is now best known.

From Uber's truculence to Facebook's violations of personal privacy and on to various VCs espousal for why Silicon Valley should secede from California and/or the United States, tech is acting out in ways that belie its traditional self image as a benefactor rather than despoiler. Everyone has reasoning for why this behavior is 'strategic' rather than merely self-indulgent or entitled.

The reality is that there are plenty of people in finance - or who used to be in finance - who can explain in great detail why the return on bad behavior is not financially sustainable. JL

Christopher Mims comments in the Wall Street Journal:

“Tech is the new finance,” cliché among insiders, who perhaps don’t realize all the ways in which that is true. Finance, after all, is full of companies with powerful incentives to behave badly, regulated by equally powerful government bodies designed to keep them in check.
Tech has always been a cage fight among the companies involved. Microsoft spent decades being famously combative, until it was humbled by a near breakup of the company by the Justice Department. And anyone who thinks—as Uber executive Emil Michael proposed last week, before apologizing—that digging up dirt on journalists is a novel tactic has a short memory. In 2006, in a bid to identify a leak’s source, Hewlett-Packard hired private investigators to obtain the phone records of journalists and the company’s own board members, which is a federal crime.
But even by these standards, Uber is something special. It is the logical endpoint of the gradual transformation of the tech industry into something new. The emphasis of early tech companies was on being an enabling force, on improving life first and perhaps changing the world in the process. The emphasis of the tech companies being built now is much more zero-sum. Whom do we need to destroy in an effort to enrich ourselves and our investors, and what is the best vehicle for creating a consumer need that will facilitate that quest?
“Tech is the new finance,” is by now cliché among insiders, who perhaps don’t realize all the ways in which that is true. Finance, after all, is full of companies with powerful incentives to behave badly, regulated by equally powerful government bodies designed to keep them in check.
Now that the dust has settled and we’ve all had time to digest the litany of consumer-privacy problems engulfing Uber, it’s time to look at why this is happening, and how it will transform both Uber and the wider tech industry.
Let’s start with an educated guess about why Uber faces so many privacy problems: It isn’t a priority for a company growing at a pace almost unprecedented in the history of startups. Uber was founded four years ago, and it’s now in 230 cities spread across 50 countries. A rumored, forthcoming $1 billion round of financing would peg its value at $30 billion.
Uber owns almost no physical infrastructure and has an unremarkable app that is little different from those of a half dozen competitors. And yet it might soon reach $10 billion a year in revenue, according to a slide deck recently published by Business Insider in what feels like a successful attempt to change the subject.Internal documents from Uber published by Business Insider, and later confirmed to Business Insider by Uber, outline the company’s criteria for hiring. They include traits like “fierceness,” which Uber defines as “do whatever it takes to make Uber a success.”
Here’s what it takes to make Uber a success, apparently: Enter new markets without asking regulators for permission, then build enough of a customer base to make classifying the service as a traditional taxi company politically expensive for regulators. Tell investors who want to put their money in the company that they are banned from investing in its competitors. Aggressively recruit drivers from competitors, while also interfering with those drivers’ ability to make a living by ordering and canceling rides. Collect information on all Uber rides and users in a “God View” dashboard that is accessible to Uber’s salaried employees and was, at least until last year, displayed by Uber’s marketing staff at launch parties.
Yet Uber is thriving. Despite the attention of U.S. Sen. Al Franken, head of the subcommittee on Privacy, Technology and the Law, who sent a letter to Uber Chief Executive Travis Kalanick demanding Uber outline its privacy protections, there is no federal law that forbids any of the company’s alleged transgressions. There isn’t even a federal law mandating the company take the same care with user data that companies such as Facebook and Google , after confronting their own privacy disputes, have been forced to follow.
So, really, why should Uber care about privacy? It’s doubtful the wave of current bad press will impede the company’s growth. For a company like Uber, privacy is just friction—one more thing that could slow its ascent. Protecting privacy requires hiring additional engineers, creating guidelines, enforcing them, auditing your own company—all things Uber didn’t have time for until bad press brought the company up short.
But what gets lost in all the histrionics over Uber’s bad behavior is that Uber is exactly what Silicon Valley has been unconsciously striving to create all along. As valuations have climbed ever higher, and investment has poured into startups at an ever faster rate, it was inevitable that a company prepared to redefine “win at all costs” would arise.
I reached out to Uber for comment and they referred me to a recent blog post on their efforts to strengthen their privacy practices, which acknowledges that Uber’s “business depends on the trust of” its riders and drivers, but they declined to say more.
As venture capitalist Fred Wilson wrote, “[Uber] is about the best execution I’ve witnessed in a long long time. But I am not in awe of how they conduct themselves. And I wonder if the two are connected at the hip. Can they lose the swagger without losing the execution?”
I’d like to argue that a company doesn’t have to be like Uber to experience its success. But the evidence is that tech has changed. As more tech companies in name only emerge—think of all the food, infrastructure and other startups for which tech is merely an enabler—they are subject to the same savage market forces that shape every industry they attempt to disrupt.
The days when we could just trust the geeks to have more or less our best interests in mind are gone. And the rest of the tech industry should fear this new era, because Uber and companies like it are already bringing a level of scrutiny to tech that it hasn’t experienced previously.
If tech is truly the new finance, its leaders might want to ask their counterparts on the opposite coast how they like the scrutiny they are subject to.