Once the poster child for how to succeed in business, Wall Street has fallen on hard times recently—at least in terms of its image. In a recent interview with David Rubenstein for Bloomberg, Morgan Stanley CEO James Gorman offered a refreshingly unvarnished take on why that is:
"The facts are that, absent the Great Depression, the Great Recession that we all went through, Wall Street had a large part to do with, if not the major part to do with it. A lot of the synthetic-type products that were created gave rise to putting a level of risk into the financial system, that turned out to be systemic risk, that led to massive failures of institutions, which led to taxpayers having to bail out the remaining institutions. It's not surprising that the public and the taxpayer would have such a negative reaction to those that caused this to happen."
While Gorman—a McKinsey alum who talked in a different portion of the interview about getting started by scrubbing toilets in college—was responding to a question about Wall Street's general image among the population at large, it's important to recognize that that image is also pervasive among the people that Wall Street firms are hoping to recruit to continue their recent growth. Which makes his response to the next question Rubenstein asked all the more interesting:
Rubenstein: "Why is the image not better?"
Gorman: "It's hard to love money unless you have it. Being attracted to Wall Street as a concept is not something most people just naturally gravitate to. Folks gravitate to new technologies, they gravitate to consumer services that obviously, palpably make their lives better, they gravitate towards entertainment. You gravitate towards the things that you can viscerally feel and touch; the flow of capital is not one of those things. So in many folks' minds, it gets back to 'where does it cause problems?' And what we haven't done as good a job of [as an industry] is articulating why capital is what takes these incredibly innovative little companies, as they once were, like a Facebook, like an Apple, like a Google, and creates capital to let them grow and become these incredible success stories."
Extend the scope of that answer beyond simple PR, and it reads as a very clear articulation of the difficulties that established companies everywhere face in trying to attract talent. In short: sure, they can offer prestige and good salaries, but that alone isn't enough to capture the imagination of a generation that is seeking meaning and fulfilment in their careers. (For an admittedly shallow visual representation of that, consider the difference in optics of the two men in expensive suits conducting this interview vs the t-shirt and sneakers culture evident in this interview with Mark Zuckerberg.)
As such, it’s no surprise to see a surge of young talent that might otherwise have been prime fodder for the banking world heading for tech firms and the startup realm. After all, who could pass up the opportunity to make their mark on a growing company, play a tangible role in building something from nothing, and even do good while doing so? (Plus, y'know, stock options).
While Gorman suggests that better messaging is the answer, the financial industry's poor reputation isn't skin-deep; it can't be fixed with cosmetic touches like better marketing and branding—especially when it comes to enticing the next generation of talent. The financial crisis wasn't solely caused by banks, but the behavior of people within banks leading up to the crisis—institutionalized behavior that rewarded short-term thinking and maximizing profits over concepts such as doing right by clients and investors—represents the polar opposite of the kind of culture that study after study tells us millennials are looking for.
Without systemic change around culture, it’s hard to envisage a scenario where the financial industry manages to position itself favorably against any of the "incredible success stories" that Gorman cites—especially in an environment where the appetite for rolling back the legislation put in place to check some of the industry's worst instincts seems to be growing by the day.