Silicon Valley greed in the long and short term

By Francisco Dao , written on January 29, 2013

From The News Desk

In the 1987 movie "Wall Street," corporate raider Gordon Gekko gives a now famous speech in which he proclaims, “Greed, for lack of a better word, is good. Greed is right, greed works.”

That mantra both captured the spirit of the “me generation” of the 1980s, and would prove to be a prophetic look at the driving philosophy and behavior of the generations that followed. As a nation, we’ve embraced Gekko’s brand of greed as the foundation of capitalism, but the idea of greed as always being good is incomplete.

Greed should properly be viewed as two distinct types; long term greed and short term greed. Long term greed builds. Short term greed extracts. Long term greed seeks continued growth and sustainability. Short term greed seeks to take advantage of bubbles. Long term greed considers successive generations by investing in infrastructure and education. Short term greed maximizes fast gains while sacrificing the future. Long term greed operates under the assumption that you’ll be there to reap what you sow. Short term greed operates under the assumption that you’ll have taken the money and run by the time the consequences come due.

By all measurements except one, long term greed is superior. But long term greed is also harder. It takes patience and we've become a society hell-bent on immediate gratification. This is the one “problem” with long term greed, and it is a perceived flaw that outweighs all of its benefits in our society that has become obsessed with overnight results.

As I look around Silicon Valley today, or more appropriately the Internet space, I see mostly short term greed. Of course Amazon, Google, Apple, and Microsoft play the long game, as do a handful of exceptional entrepreneurs such as Elon Musk, but the vast majority of investors and entrepreneurs are operating under the rules of short term greed. Not only is this unhealthy, but perhaps most egregious is how this group has convinced themselves that they are either playing the long term greed game, or that all greed is simply good.

Let’s compare the current tech ethos to Wall Street, our favorite short term greed whipping boy.

Claim No. 1 -- "Wall Street is a transactional mirage that doesn’t actually make money..." The vast majority of startups don’t make money either and many of them don’t know how they’ll ever make money.

Claim No. 2 -- "Wall Street doesn’t create jobs..." Actually, Wall Street employs thousands of people for as long as they can ride the stock market or whatever financial vehicle they’re betting on. This is much like all the startup companies that create jobs for only as long as their funding lasts.

Claim No. 3 -- "Wall Street doesn’t actually produce anything but exists on the buying and selling of others..." How many Web startups are marketplaces of some type that don’t produce anything and make money off the buying and selling of others? And while we’re at it, what exactly does Foursquare produce again?

Claim No. 4 -- "Wall Street always ends with someone else left holding the bag..." How many tech startups are founded with the idea that Google or Facebook will buy them and be left holding the bag?

My point is not to defend Wall Street but to show how much the short term greed ethos has infected the world of tech. And as I pointed out above, short term greed is not a good thing. Short term greed is ultimately unsustainable because without the long term investment in the future, without the drive to build instead of simply extract, the infrastructure of any ecosystem, whether we’re talking about just the technology space or the nation as a whole, will eventually decline.

When I look back on the Silicon Valley in which I grew up, a Silicon Valley where Intel and Apple were startups, I see a generation whose brand of long term greed built an empire of technology. These days I mostly see self proclaimed “world changers” practicing short term greed looking to cash out and leave someone else holding the bag. If Silicon Valley wants to rediscover itself as a place where the finest engineers literally invent the future, as opposed to a place where people mail boxes of underwear, then we must recognize the difference between long term and short term greed and return to the long term ethos.

It turns out Gordon Gekko was only half right. Long term greed is good, he was correct about that. But short term greed is not, and this is a distinction we must understand. To paraphrase the end of Gekko’s speech, “Long term greed, you mark my words, will not only save Silicon Valley, but that other malfunctioning corporation called the USA.”

[Illustration by Hallie Bateman]