The dark side of tech: 3 ways Silicon Valley has gotten more unsavory than Wall Street
To say Wall Street has an optics problem is a massive understatement.
The number of Americans who think Wall Street does more harm than good outnumbers those who don't by a ratio of nearly 2-to-1, and that's across political affiliations and racial groups, according to a recent survey conducted by Marketplace in conjunction with Edison Research.
Now, there is certainly good reason for Wall Street's bad reputation: Americans are still feeling the effects of the financial crisis, and it doesn't always seem that the industry has learned from its mistakes.
But let's not forget that old idiom about the devil you know being better than the one you don't.
Indeed, America's loathing for financial firms might be surpassed only by its love for Silicon Valley: In one 2014 study, the technology industry rated second only to the military among institutions Americans trust. And a more recent study of public perception of Fortune 500 firms found that virtually all tech companies enjoy high favorability — even while mired in scandals.
Is public trust in tech deserved?
While focusing on the problems with Wall Street is certainly important in order to protect consumers, one danger is that such scrutiny distracts from the unchecked growth and influence of other industries — and the tech industry in particular.
In fact, recent data suggest that Silicon Valley's shiny reputation belies a quiet but steady accumulation of power, sometimes at the expense of public good: By these measures, tech has already surpassed Wall Street.
Big tech firms avoid billions of dollars in taxes.
When you think about companies that use tax loopholes, financial firms naturally jump to mind: There's the so-called "hedge fund tax break" on carried interest, for example, which lets some fund managers pay a 20% capital gains rate in situations when they arguably should pay 39.6%.
But a recent study suggests tech companies — not Wall Street firms — may benefit the most from loopholes in U.S. tax code, and specifically an allowance for businesses to set up overseas operations that let them avoid taxes.
The report found that half of the 10 largest tax avoiders — ranked by dollars stashed overseas — are big tech companies, with Apple topping the list. Microsoft comes in third place and Google is in seventh place, according to the researchers.
These are huge sums of money we're talking about: According to the report, Apple alone has avoided paying more than $65 billion in U.S. taxes, completely legally.
Just for a sense of scale, the Congressional Budget Office estimated that closing the carried interest loophole would save about $17 billion over ten years.
As for Wall Street? Citigroup was the biggest offender among big banks, coming in 14th.
Silicon Valley now spends twice what Wall Street does on lobbying.
The five largest tech firms now outspend the five largest banks on lobbying efforts by a ratio of about two to one: $49 million compared with less than $20 million, according to Center for Responsive Politics.
That marks a big shift that has occurred over the last decade.
And there's evidence tech firms are getting their money's worth.
For example, this past July, a promising bi-partisan bill to combat revenge porn was mysteriously delayed. One theory about the sudden reversal? Vice's Sarah Jeong reports that the bill would have introduced liability against search engines like Google for posting revenge porn in their search results.
Diversity problems at tech companies make Wall Street look practically woke.
None of the activities described so far are illegal.
In fact, some argue that companies have an obligation to shareholders to minimize the firm's tax liability and maximize profits by whatever legal means available.
What's a lot harder to excuse, on any level, is Silicon Valley's ongoing failure to address discrimination against minorities and women — which is illegal — despite compelling research that suggests diverse companies outperform.
The financial industry certainly has a diversity problem, too, and one survey found that only about 6% of Wall Street analysts are black or Hispanic. But some financial companies, like JPMorgan Chase, have done better on certain measures of diversity, and hire about 13% black and Hispanic first-year analysts.
Meanwhile, technical workers at big tech companies are only 3% Hispanic and 1% black.
Female software engineers are also disproportionately rare in the tech industry, with only 20% of such jobs going to women. Even financial firms do better, with women accounting for about 25% of software engineers in finance.
And Facebook CEO Mark Zuckerberg recently defended his board, after tech industry leaders called out board member Peter Thiel for his support of Republican presidential nominee Donald Trump: In an internal message, Zuckerberg encouraged employees to "create a culture that says it cares about diversity" by being open to different political views.
In short, actions speak louder than words.