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Wall Street and the Valley swapped pay
The old split
The old understanding was that Wall Street paid huge amounts of liquid cash every year with no enduring equity value, and the West Coast made people rich on paper with a payoff in some distant future.
Wall Street moves to equity
Those have started to flip. Many Wall Street firms have gone public, so people there are paid in RSUs and think like a firm. At the top end, they worry less about the carry in any one fund and more about the stock price and performance of the whole firm.
The Valley gets liquid
In Silicon Valley, companies stay private longer, which has created mature secondary markets, and the de facto yearly tender has become almost a parallel liquid marketplace. People are paid huge amounts of cash, as seen with the AI companies, venture firms getting acquired, and partners leaving their firms. The Valley is becoming more liquid and more mercenary, with people jumping from firm to firm, while Wall Street leans on RSUs and the long-term enterprise value of the firm.
Why did Wall Street firms go public?
Goldman Sachs held its initial public offering in 1999 after decades as a private partnership. Morgan Stanley had listed in 1986, and many other firms followed the same path. Going public let firms raise permanent capital and give employees stock that could be sold. Before that, partners had their own capital tied up in the firm.
What are RSUs and how do they work?
Restricted stock units are a promise to deliver company shares after a set period of employment. They typically vest in stages, often over four years. When they vest, the employee owns shares that can be sold, subject to company rules. The structure gives employees a reason to stay with the company until each date.
Why did Silicon Valley companies stay private longer?
Sarbanes-Oxley, passed in 2002, raised the compliance costs of being a public company. The JOBS Act of 2012 raised the shareholder count that triggers public reporting from 500 to 2,000 holders of record. Private funding also became easier to find, with large rounds available from crossover funds. Median time to IPO for venture-backed companies lengthened over the following years.
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