On May 26th, Ruth Porat, the current CFO of Morgan Stanley, will take over the finances of Silicon Valley’s tech giant, Google. Porat is leaving a 28-year career at Morgan Stanley, where she most recently controlled the finances of the immense financial services firm. This announcement comes on the heels of Google’s CFO since 2008, Patrick Pichette, announcing his retirement, so he can spend more time with his family.
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Both Porat and Pichette made names for themselves as ingenious Chief Financial Officers in the wake of the financial crisis. For his own part, Pichette helped guide Google through the rough patches of the Great Recession to what is now arguably a very comfortable position for the company that changed the game of internet searches. Similarly, Porat took over the CFO seat at Morgan Stanley five years ago and has since led the once collapsing corporation on the road to recovery. This shared track record in hard times makes Porat a natural replacement for Pichette, but is tech the right place for someone who spent almost three decades at Morgan Stanley?
Why Finance?
Despite the banker title, Ruth Porat has a long established history of mixing finance and technology. While working in the financial sector, she was heavily involved in helping several tech companies go public in the early 1990’s such as Priceline.com Inc., eBay Inc., and amazon.com Inc. Porat earned her stripes at Morgan Stanley as a successful technology banker prior to rescuing her employer from the brink of financial collapse. The move back to Silicon Valley may look and feel natural for Ruth Porat, but it also touches on a bigger issue: the fight between Finance and Tech for top talent.
Too Much of a Good Thing
Google is just one of many tech companies I expect to hand pick more of the Finance sector’s greatest minds moving forward. This would be a wise move for companies like Microsoft and Apple, because they keep stockpiling more and more cash. Since the housing market crash of 2008, investment banks have also been hoarding record reserves of cash. Right now, both sectors are putting their best minds to work, making sure that today’s cash becomes tomorrow’s security. Seen from another angle, both sectors have no idea what to do with all of their cash. With heaps of liquidity building up, it is easy for both Tech and Finance to draw in the world’s most talented individuals to figure out its best use. The race is to see which side can crack the cash puzzle first.
Tech’s Advantage
When comparing the two sectors there is a distinct advantage a company like Google will have over company like Morgan Stanley in using up cash reserves: creative freedom. Financial institutions are heavily regulated and must think very creatively inside the box, because they are almost constantly under investigation. This seriously limits creative thinking when solving the problem of overly abundant cash. It’s also a problem a technology company like Google doesn’t face. In fact, Google has plenty of potentially profitable ideas it can develop with all of its cash, like self-driving vehicles. Ruth Porta knows how to direct the funds of a large, multinational, highly regulated company in order to turn a great profit. Set her mind loose in deciding which intellectual properties and concepts Google should invest in next and a stock valuation like Google’s current excess of $500/share may seem low in the future. Wall Street should keep a close eye on Silicon Valley, because it may be where their best people end up.
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