2017 Editorial Board


Matthew Zipf


Anamaria lopez


Design editor

Theresa yang 

Marketing Director

Huhe yaN

arts editors

michelle huang

charly voelkel

lead web editor

poorvi bellur

Managing Editors

amanda kam

dimitrius keeler

shambhavi Tiwari 

karen yuan

Copy Chief

Maggie Toner

Senior Editors

vivian casillas

audrey deGuerrera

brian gao

belle harris

melissa ho

jahan nanji

sheena qiao

bani sapra

nina zweig

Copy Editors

sahana narayanan

song rhee

Silicon Implant

Protestors, slogans, police ­– Wall Street has not seen this kind of exuberance in a long time. The city’s past and present financial powers now meet on Wall Street in the shadow of the World Trade Center memorial – what is a symbol of American strength and unity in the face of mortal terror is now home to discontent and protests.  The message shouted in Zuccotti Park and disseminated through the web may not be entirely coherent, but the anger and discontent harbored by many citizens of the most capitalist nation in the world indicates a jarring loss of faith. This movement is more than an indictment of individuals or institutions, but rather it is symptomatic of the city’s failure to maintain a balanced, innovative, and competitive economy.

What became clear in the recession is that New York’s economic model, with a disproportionately large share of income stemming from the maintenance and growth of the financial and service sectors, is unsustainable. In the aftermath of the 2008 financial crisis, it has been widely acknowledged that the financial sector can be catastrophically vulnerable to exogenous shocks in demand – perhaps to the most widespread extent since the beginning of the “greed is good”, “masters of the universe” era. But it is not enough to merely introduce more regulation in order to prevent reckless gambling of assets by rogue bank managers, or to protect consumers from fraudulent institutional practices, or to protect institutions from fraudulent consumers, or even to fundamentally alter the incentives of management. Even with all these reforms, the tangled global web of financial firms, governments and general consumers, will inevitably amplify even the smallest wobble in global capital markets. In a larger, ever-shifting global marketplace, financial stability for the City of New York requires a turn to a much more balanced economic composition – one that relies on countercyclical, or at least non-procyclical, industries as an insurance policy so to speak.

In 2007, financial sector workers collected 35.9 percent of New York’s income, even though the sector accounted for only an eighth of the city’s jobs. In fact, New York has historically collected more in employment-related taxes from the finance industry than from any other – 30 percent of the total in 2006. During the crisis, two-thirds of the fall in city tax revenue is ascribable to the financial sector. Of the $1.9 billion to which this amounted, about three quarters were due to the securities industry alone. These jaw-dropping figures do not even address the impact of job loss.

This strongly contrasts with the lessons of Stanford and MIT, which have been integral in transforming their respective locales into nationally recognized, innovative powerhouses. Companies started by Stanford graduates created over 250,000 new jobs in Silicon Valley between 1960 and 1990. In Massachusetts, by 2009, over 1.1 million jobs had been created by MIT-alumni-founded companies. The resilience of these cities and industries in the face of the widespread recession provides a glimpse of the future toward which New York must shift towards.

What would this future look like? Most importantly, a shift towards such a composition depends on a heavy focus on entrepreneurship in fledgling industries like alternative energy and biotechnology, which have tremendous innovative growth potential. By definition, the successful act of entrepreneurship – risk-taking with the expectation of profit – creates jobs and combats negative economic fluctuations.  In general, national entrepreneurial activity tends to rise during downturns in the business cycle, and increases in entrepreneurial activity are strongly correlated with decreases in unemployment. This is perhaps naturally intuitive; in a recession, workers are forced to compete for fewer jobs, driving down wages, and thus, there is a high supply of cheap labor. Furthermore, the job scarcity encourages the vulnerable (those who are unemployed or facing job insecurity) to begin ventures – this is the “nothing to lose” effect.  And while investors may be more risk-averse during a downturn, the reduction of costs associated with starting a new firm may cancel out at least some of their aversion, as a lower investment on a given venture means a higher return in the event of success. Investors willing to shoulder this risk expect higher profits, and by definition investors are more willing to make these educated gambles than others. Overall, then, a downturn is the most favorable time for embarking on and investing in a risky venture.

While the downturn may encourage entrepreneurship on the whole, it is not clear that the increase in entrepreneurship that may be expected will align in the direction of high-technology, high-innovation production industries. In fact, the entrenchment of Wall Street culture and the perception of New York as a finance city – rather than a manufacturing city or innovation center – probably does the most to limit the number of startups in these fields.

New York has all of the attributes necessary to foster the technological entrepreneurship necessary to balance its finance-heavy economy, and it holds unique advantages that, if leveraged properly, can provide for optimal positioning for a new firm in any of these fields. In addition to its deep integration into the world economy and established position as the literal and figurative center of trading between markets, it posseses perhaps the most important ingredient of the mix: intellectual capital. There is no denying that the sheer size of profits in the financial industry means that the marginal stake a firm has in hiring decisions is enormous; this means that  companies have a strong incentive to attract the best and the brightest workers. Similarly, with such high terms of monetary compensation, the best and the brightest are enticed to enter such a lucrative industry. The hiring practices of the top firms in the New York finance scene routinely focus on the top students of elite universities; many young graduates hired are skilled in mathematics, computer science, engineering, and the natural and physical sciences. These workers are drawn to Wall Street by the money and lifestyle cocktail of New York, but just as often it seems that the opportunity to work with the best and brightest – many of whom are of course currently employed in financial services – is an enormous draw as well. With a similar combination of incentives, there is no doubt that these students could be enticed to go to work at high-tech ventures based in the city.

In 2010, New York-based startups received $1.88 billion in venture capital, third behind Silicon Valley’s $8.51 billion and New England’s $2.54 billion. For 2011, New York is projected to surpass Boston in venture capital funding for startups, demonstrating that ample seed funding exists. At the very least, the emergence of ‘Silicon Alley’ as a recognized player in the computer- and internet-focused side of the tech startup field is a good sign. According to a study conducted by PricewaterhouseCoopers, New York is also ranked highest among cities internationally for ease of doing business, entrepreneurial environment, and research done in universities; these, in addition to the aforementioned intellectual capital attracted to the city, are some of the most critical secondary factors to foster growth in the high-tech industry.

But in spite of these positives, growth remains slow and obstacles remain. The costs of doing business in New York are among the highest in the country, simply due to the high concentration of business and inflated real estate, utilities and labor costs. It is important to provide even stronger incentives for high-tech ventures. Potential policies include targeted (not indiscriminate) tax breaks and subsidized education that focuses on the hard sciences, engineering, and entrepreneurship.

The most important obstacle remains the cultural hegemony of Wall Street. While the benefits of capital and skill that Wall Street and other services bring are certainly necessary to the financing of any risky tech venture, as long as the incentives remain so skewed, it will be difficult to entice skilled graduates to enter those ventures.  Since the financial crisis, the legislatulegislative failure to introduce necessary regulation to rebalance incentives seems to have left the profits and popularity of Wall Street more or less intact. No one wants to cripple the industry – in fact, the existence of financial institutions is integral to capital allocation and the promotion of new industry, and will be especially important to a transition of such a great magnitude. If the enormous profits and unwarranted risk-taking were reined in to a sustainable economic equilibrium, the unbalanced dominance of the industry would decline, freeing up intellectual and monetary capital to concentrate on what seem to be the industries of the future. This is what Wall Street is best suited for and should focus on: make possible the brilliant dreams and vibrant visions of the ingenious American entrepreneur by identifying potential in ideas, concepts, and products suited to long-term growth instead of short-term gain. When innovative enterprise is successful, living standards are improved for all Americans and often the world; the direct reward in the form of profit for investors and financiers is, of course, even greater.

The city has begun to take positive steps, like the New York Bioscience Initiative, which provides funding to existing startup incubators and builds new lab space. The biggest government initiative was declared in 2008: a $100 million partnership between the city and a yet to be selected university to build a cutting-edge engineering and applied sciences campus. These are good starts, but the most important problem – the lack of incentives – remains to be tackled. Until taking risk in high-tech industries is as exciting and attractive to experienced entrepreneurs and fresh graduates as a cushy job in the financial sector, New York will continue to vacillate between boom and bust, ever teetering at the mercy of exogenous market forces. But if the growing dissatisfaction with Wall Street is channeled into well-thought, and useful regulatory and municipal policy-making, there may indeed be hope for seeing one more rebirth of a city consistently known for reinventing itself – this time of a technological Mecca and a city of the future.

Didactic Deceit