Wall Street moneymakers want to move young wolves out of Silicon Valley

2024 Author: Seth Attwood | [email protected]. Last modified: 2023-12-16 15:55

Over the past century, no one has usually doubted which business group in America has the greatest influence on official Washington. Of course - the largest US banks, which are commonly called "Wall Street".

Many of them are influential shareholders of the US Federal Reserve System, and since the Fed controls the entire financial network of America, it is obvious that the Federal Reserve and Wall Street control everything, including official Washington.

Of course, there are other business groups as well. For example, those related to the military-industrial complex (MIC), civilian industry, services and trade, etc. Still, in relation to the Wall Street banks, they occupied a subordinate position in the post-war decades. Financial capitalism has long been established in America, and with such a model, there can be no other hierarchy. Monetary power at the top.

However, at the beginning of the 21st century, some shifts began to be observed in the established model. America began to enter the era of "digital transformation". Before our eyes, a “digital society” is being formed, which is based on information and computer technologies (ICT). In building a digital society, hi-tech companies play a decisive role. These are the developers of computers, software, artificial intelligence, companies working in the fields of the Internet, nanotechnology, robotics, electronics, etc. Transformations cover all sectors of the economy and all spheres of human life - personal, family, public.

The financial and banking sector is also involved in transformations. And here a very spicy situation arises. Developers of new technologies for this area (they are usually called financial technologies) are discovering that they can manage banks, insurance companies, investment funds, and financial markets just as well (or even better). High-tech companies are tempted to move banks and other financial institutions aside and to control and manage the world of money and finance themselves. Recently, Nathaniel Popper, a New York Times reporter for financial technology, released his latest book, Digital Gold: Bitcoin and the Real Story of Losers and Millionaires Trying to Reinvent Money. He described how "high tech guys" are storming the world of money. Popper captures the new balance of power in America today: “Overhauling the storage and transfer of money can take financial intermediaries out of the game as such. So many in Silicon Valley are hoping to take over some of Wall Street's core business.”

American ICT companies are most often associated with Silicon Valley, located on the shores of the San Francisco Bay in California. Every year, several hundred new "start-ups" (venture projects) are launched in the valley. Silicon Valley is a kind of state within a state that emerged in the post-war period. The valley has a special atmosphere, its own ideas about business, politics, ethics. Valley dwellers have always considered themselves a special caste, standing above the millions of the rest of America.

During last year's presidential campaign, Silicon Valley, with few exceptions, opposed Donald Trump. Back in March 2016, The Huffington Post announced a closed meeting of IT industry leaders, attended by Apple CEO Tim Cook, Google co-founder Larry Page, founder of Tesla, SpaceX and X.com Elon Musk, Napster and Facebook creator Sean Parker …Allegedly, it was then that a consolidated decision was made that Silicon Valley would support Hillary Clinton and "slow down" the Republican candidate. The only exception was the founder of PayPal (runs the largest debit electronic payment system) Peter Thiel, who supported Trump from the very beginning.

The IT company was alarmed by the Republican candidate's promise to deal with the indiscriminate immigration that deprives American citizens of jobs. Recent surveys show that 37% of those employed in Silicon Valley companies are "fresh" immigrants (that is, excluding the children of immigrants). It's no secret that America's scientific and technological potential is supported by importing the best brains from around the world. Fortunately, the regime for obtaining a work permit in the United States for non-residents is not very strict, especially in specialties that require high and highest qualifications. And among the unique specialists of Silicon Valley, the share of non-residents is apparently even higher than 50%. In addition, "imported" specialists help curb the growth of wages in the IT industry as a whole.

Those companies in the industry that had foreign branches were also wary. They were alarmed by Trump's warning against Apple. Trump offered the computer and smartphone maker to return its overseas production facilities to America. Even though Trump has promised to cut income taxes for American businesses from 35% to 15%, Apple's return to America would almost double the price of its products.

Since winning the election, Trump has made numerous attempts to mend relationships with Silicon Valley companies. For example, he created an expert economic council of leaders from leading American companies. Its official name is the Forum on Strategy and Politics, and its unofficial name is the Business Council under the President. The Business Council at the time of its establishment in mid-December included 16 entrepreneurs. Among them are two people from Silicon Valley. This is Elon Musk and Uber co-founder Travis Kalanick. It was noted that the list of possible participants in the Strategy and Policy Forum includes the names of other people from Silicon Valley: the co-founder of Google and the CEO of Alphabet Inc. Larry Page, chairman of the board of directors of Alphabet Inc. Eric Schmidt, Amazon founder and CEO Jeff Bezos, Microsoft CEO Satya Nadella.

Trump also took another action - he invited a narrow circle of entrepreneurs to have a heart-to-heart talk. The meeting was attended exclusively by people from Silicon Valley: Peter Thiel, Tim Cook, Facebook COO Sherrill Sandberg, Jeff Bezos, Alphabet representatives (owns Google) Larry Page, Sergey Brin and Eric Schmidt. There were leaders of such large companies as Intel, Oracle, Microsoft, Cisco and others. Also present were the head of Tesla Motors and Space X Elon Musk and the CEO of IBM Ginny Rometti, who, literally the day before, had joined Donald Trump's expert economic council. Trump tried not to irritate the giants of the IT industry and even promised them most favored nation treatment. In America, they make no secret of the fact that the largest corporations do not pay gigantic sums to the treasury, leaving profits from foreign operations in other countries and offshore. US-based multinationals currently hold $ 2.4 trillion in profits offshore. US media have estimated that the 11 technology companies represented at the December 15 meeting at Trump Tower in New York accounted for about $ 560 billion, or about ¼ of the total. Particularly distinguished were Apple, which has about $ 200 billion abroad, and Microsoft ($ 108 billion). Why, Wall Street bankers are cunning guys, but even they do not hooligan with tax evasion. So, Goldman Sachs has the amount of profits deposited in offshore areas is estimated at $ 28.6 billion.

At that meeting, Trump said that the hidden savings can be returned home, limiting himself to paying tax at a rate of only 10% (instead of the required 35%). Experts estimated this "gift" from Trump at $ 140 billion. It seemed that after that the ice of hostility towards Trump on the part of businessmen from Silicon Valley began to melt. However, the melting was short-lived.

One of Trump's first decrees after he took over the White House was to ban immigrants from several countries from entering the United States (decree dated January 25). The decree rocked Silicon Valley. CEOs of large IT companies reacted immediately, writing an open letter to the president in early February, sharply criticizing the decree as stalling innovation in the American economy, as it is largely driven by immigration. “The Immigration Ordinance is a rejection of the principles of fairness and predictability that have powered the US immigration system for more than 50 years … Finding, hiring and maintaining the world's best talent is becoming much more difficult and costly. The decree interferes with current business processes and threatens to attract talent and investment to the United States,”the letter said. It was also pointed out that the children of immigrants in the United States have founded more than 200 successful companies, including Apple, Kraft, Ford, General Electric, AT&T, Google, McDonald's, Boeing and Disney.

The indignation of Silicon Valley is understandable: it is being deprived of its main source of innovation - foreign specialists. The costs of the IT business will also increase significantly, since at the expense of cheap specialists from abroad it was possible to keep wages for American workers at a relatively lower level. The Huffington Post bluntly names the main reason for the discontent in Silicon Valley: the tightening of the procedure for issuing the H-1B visa, which IT companies actively used to hire cheap foreign labor. The establishment of limits on this visa should spur the growth of wages for both Americans and their foreign colleagues working in Silicon Valley. That is, Trump's decree jeopardizes the financial well-being of Silicon Valley. Well-being is already shaken. A few days after the decree was issued (January 31), the capitalization of the five largest technology companies included in the S&P 500 index fell by $ 32 billion - these losses that infuriated the "creative guys" in the valley. Throughout February, the Silicon Valley boycott of Trump intensified. All new high-tech companies are joining the letter of appeal. Even an ardent supporter of Trump, Peter Thiel, had to publicly condemn the president's decision. And Travis Kalanick announced his resignation from the President's Business Council. In Silicon Valley, the forgotten slogan of California's separation from the United States has already been revived. Most of the residents of this state with a population of 40 million people are on the side of Silicon Valley, if only because the valley provides a significant share of the state's budget.

It must be said that Trump managed to agree on normal "cooperation" with Wall Street quite easily. He is surrounded by several people from Goldman Sachs Bank, including Treasury Secretary Stephen Mnuchin and Gary Cohn, who chairs the President's National Economic Council. A decree was signed amending the Dodd-Frank law, passed in 2010 and strengthening control over the banking system by financial regulators. Trump's decree, which provides for the relaxation of bank regulation, has been greeted with enthusiasm on Wall Street.

And now Silicon Valley is throwing the glove to the president. Probably, the "tech guys" from the valley are confident in their abilities and have no doubts that they can bring the war with Trump, behind whom Wall Street stands, to victory. However, by all appearances, someone is also behind the "technological guys", but more on that next time.