Wall Street Stars Join Silicon Valley Gold Rush

One of the country's largest banks, Morgan Stanley, is losing its chief financial officer to Google in the most visible example yet of the flow of talent from Wall Street to Silicon Valley.

Ruth Porat, Morgan Stanley's chief financial officer since 2010, has been one of the most powerful women in a financial industry that has struggled to promote and hold on to its female executives. She is going to Silicon Valley while it is facing its own issues about gender balance.

Porat is following in the steps of other big names from the bastions of East Coast power who have recently decamped to the ascendant technology industry on the West Coast. Former White House spokesman Jay Carney said last month that he was joining Amazon.com, and former Obama aide David Plouffe joined Uber last year.

But Silicon Valley has been drawing much of its most valuable new talent from Wall Street. A top banker at Goldman Sachs, Anthony J. Noto, moved west last year to become the chief financial officer at Twitter.

Less than a decade ago, Wall Street firms were the premier destination for young college graduates and talented executives. More recently, though, the financial industry has been struggling to keep growing as it faces a raft of new regulations and a lack of public confidence as a result of the financial crisis.

Silicon Valley, on the other hand, is experiencing a period of blockbuster growth that has created dozens of billion-dollar startups practically overnight.

"Smart people go to where they feel there is the most growth," said Robert Reffkin, who left Goldman in 2012 after seven years to found a startup, Compass, that is focused on real estate.

At the Massachusetts Institute of Technology, a top source of young recruits, only 10 percent of undergraduates went into finance in 2014, compared with the 31 percent who took jobs on Wall Street in 2006, before the financial crisis. Software companies, meanwhile, hired 28 percent of MIT graduates in 2014, compared with 10 percent in 2006.

Similar trends have been evident at the other top training grounds that have long fed the upper ranks of Wall Street. At Harvard Business School, for example, the percentage of graduates going into finance dropped to 33 percent last year from 42 percent in 2006, while the numbers going into technology jumped to 17 percent from 7 percent.

Wall Street is certainly not hurting for talent. It remains the top destination at many business schools and is still one of the most selective industries for hiring. Last summer, Morgan Stanley had 90,000 applicants for roughly 1,000 entry-level summer jobs.

Porat's move, meanwhile, is one in a long list of instances in which Wall Street has served as a training ground for the leadership ranks of other industries. Most famously, Goldman has produced two Treasury secretaries during the last two decades. Porat was on the short list of people being considered for deputy Treasury secretary in 2013, but she eventually asked for her name to be withdrawn.

In the last few years, though, Silicon Valley has strengthened its case as the new center of economic gravity in the United States. Established companies like Google and Apple have grown rapidly at the same time that startups like Uber and Twitter have flourished.

Reffkin said that when he was at Goldman, as chief of staff to the bank's president, "it became clear that we are in the middle of a software revolution."

"I want to be a part of that," he added.

The economic strength of the technology industry adds to the lifestyle differences - including a relaxed dress code, better weather and a more freewheeling culture - that have long attracted young employees to startups. Compare that with Wall Street, where new legislation has increased the emphasis on hierarchical decision-making and standardized processes.

"Just the thought of walking into a tall building in a suit or high heels and going to meetings where you're discussing a regulated industry where it's increasingly difficult to innovate - most of the people I talk to don't find that prospect appealing," said Martha Josephson, a partner in the Palo Alto, California, office of Egon Zehnder, an executive recruiting firm.

As the movement between industries has taken hold, it has often built on itself. When Marissa Mayer became Yahoo's chief executive in 2012, she hired Jacqueline D. Reses, a former Goldman banker, as the company's chief development officer. Reses' job, in essence, was to help Yahoo recruit new talent and to find promising companies to buy and team up with.

She has led Yahoo's dozens of acquisitions, including the $1.1 billion purchase of Tumblr and the $640 million purchase of Brightroll. Naturally, she brought in many of her own to help.

"I have hired people out of Wall Street, primarily because it was a peer group that I was very familiar with," Reses said.

The most noticeable departures from Wall Street have been the high-level banking executives like Porat and Noto, who have taken their financial expertise to companies that were started by programmers.

But the more troubling trend for Wall Street banks is the lower-ranking programmers who are opting to head west at a time when banks are more dependent than ever on software and technology.

At Goldman, for instance, the number of high-level programmers-cum-bankers - what the firm calls "strats" - has risen 43 percent since 2009. These are the employees who are most likely to be lured away by a Facebook or Google.

The startups, meanwhile, are not just stealing talent from Wall Street. Many of them are also trying to build companies like the payment processors Square and Stripe, which could eventually siphon business from the financial industry.

@ 2015 New York Times News Service