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Last night I watched with morbid fascination as a group of talking heads on CNBC discussed the fall (and subsequent bankruptcy) of Lehman Brothers, the 158-year-old firm that survived the Great Depression, two world wars, and a devastating attack on the American way of life. Yet the investment back could not survive greed, nor its enslavement to the quarterly earnings cycle. Neither could Merrill Lynch, which agreed to sell itself to Bank of America, nor insurance giant AIG, which was scrambling to avoid a credit downgrade that threatened to put it out of business as well.
I watched the drama unfold and wondered if and when this tsunami unleashed by subprime loans and the subprime intelligence of our bankers would reach Silicon Valley. Unable to grasp the nuances of it all, I turned to Bill Hambrecht, one of the Valley’s legendary bankers and co-founder of Hambrecht & Quist, which took some of the largest tech players in the world public. (Disclosure: For a brief while I worked at H&Q Asia Pacific, one of the many offshoots of H&Q.)
H&Q was eventually sold to Chase, which is now part of JP Morgan. Bill went on to start W.R. Hambrecht & Co., a boutique investment bank that uses auctions to sell company stock — most notably those of Google in its IPO. Bill, to put it bluntly, has seen it all — the good, the bad and the ugly. So I stopped by his office in downtown San Francisco earlier this morning to talk about the economic disorder.
I was expecting to find him deeply worried; instead he was amazingly optimistic and, most importantly, wholly confident in the Silicon Valley way of life. Disruption will always prevail, he said, despite the current crisis, the rise of China and any of our backward government policies.
“I don’t think it will have much of an impact on Silicon Valley as an operating entity,” he remarked when I asked him how the current crisis would affect Silicon Valley. “What is going to be interesting is what happens to the underwriting/IPO market.” In other words, fewer underwriters will be focus on tech companies — unless they’re really big, he said. In other words, it’s just like old times, like back when he started H&Q.
I loved this conversation so much that I decided to share the entire 25-minute chat with you. Roll the tape.