Wall Street should be afraid of Ruth Porat. And very afraid of Google

US Outlook

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The Independent Online

Ruth Porat’s move from Morgan Stanley to Google is a coup for the IT crowd, even if her close ties to California via her alma mater Stanford University made it a little less surprising than at first glance. Besides, who wouldn’t want to swap New York for California, especially after the winter they’ve had in the north-east?

However, there might be much more to the British-born Ms Porat’s appointment than simply an offer of guaranteed sunshine and a short drive to work.

A contract reported to be worth something like $70m (£47m) over the first two years helps, but how about the chance to poach an entire industry? Not just any old industry either. How about all of Wall Street?

It might sound far-fetched but consider how most of Wall Street makes its money. A huge amount of its business is the somewhat mundane world of financial administration, while more opaque things like investment research and analysis remain a highly lucrative sideline.

There are undoubtedly many good research analysts, but even good ones make bad calls and very few of them are cheap. The business of shelling out huge sums for what amounts to little more than an educated guess is long overdue a makeover.

The complex algorithms that have been the hallmark of Google’s growth are already an increasingly important part of Wall Street. Many hedge funds and trading platforms are run by similar technology. It is not hard to believe that computer-generated research would have just as much chance of making good buy or sell calls as human-generated research.

But that’s the top end of finance. The bottom end is actually where the megabucks are made and where almost all of Wall Street’s administration could be done more cheaply by Google. So who wants to bet that Google isn’t casting its beady eye over Wall Street’s money-making machine? Not me.

If Google thinks it can transform the car industry by creating driverless vehicles, which look increasingly unlike science fiction and increasingly like reality, then it can look at what the finance industry does and say: “We can do that better.” It’s not hard to believe that Silicon Valley’s army of programmers are smarter than their Wall Street opponents.

If those are the plans then Ms Porat is the perfect appointment. Not only is she an experienced technology boffin, having run the tech banking division at Morgan Stanley prior to getting the chief financial officer job, she also knows the finances of investment banking down to the last cent. Where the money is made, how it is made … and how Google might break the banks.

A quick read of Google chief executive Larry Page’s statement on her appointment might have revealed more than he intended. “I look forward to learning from Ruth as we continue to innovate … as well as invest in a thoughtful, disciplined way in our next generation of big bets.”

Big bets? There’s no bigger casino than Wall Street.

On top of her potential to revolutionise banking at every level – investment, trading, retail and asset management – she brings Google some much-needed diversity while reducing the number of women in important positions on Wall Street to just a handful. Isabelle Ealet, co-head of global securities at Goldman Sachs, becomes the highest-profile female executive on Wall Street.

According to research by New Financial, a London-based think-tank, women represent just 8 per cent of executives in investment banking – the lowest rate of gender diversity out of 220 companies in 11 financial sectors. Morgan Stanley had two female executives on its 15-member board. Now it has one; Ms Porat’s replacement being, of course, a male investment banker.

Gender diversity in tech is no better than it is in finance, but at least in Ms Porat, Marissa Meyer of Yahoo! and Sheryl Sandberg of Facebook, the tech industry has three high-profile women in roles that are shaping the industry. If Ms Porat’s appointment at Google ends up transforming finance, the women-led revolution has only just begun.

I’ll pass on Warren’s buffet: it’s a merger of food dinosaurs

American food is a surprisingly expensive hit-or-miss affair. It’s either delicious or repulsive, with very little in between. This week’s merger between Heinz and Kraft creates the third-largest US food producer, although arguably it’s largest horrible food producer.

For all of his virtues, and he has plenty, Warren Buffett is no connoisseur. Earlier this month he told Fortune magazine that his diet is like that of a six-year-old. “My body is one quarter Coca-Cola,” he said, as he confessed to drinking five cans of secret-recipe sugar solution per day. He supplements his dietary intake with Utz Potato Stix, a bit like the old salt and vinegar potato sticks all British children of the 80s remember, plus chocolate ice-cream.

OK, the arch-investor is 84 and still appears to be going strong. Can’t be his diet.

Heinz is owned by Mr Buffett’s Berkshire Hathaway and the Brazilian private equity group 3G, and the merger with Kraft unites some of the worst brands in the American food industry. Mr Buffett might be nostalgic for processed cheese that comes in a can or Oscar Mayer hot dogs, but American consumers, thankfully, are becoming less so.

Several Kreinz – surely that’s what it will be called – brands are finding less space on kitchen shelves and more space on “things you should not eat” lists. Brands like Kool-Aid, Cheez Whiz and Cool Whip are food dinosaurs even if they still sell billions-worth every year. Whatever Kreinz has contributed to American life, it’s not unreasonable to add a significant contribution to poor health to the list.

Perhaps the merger will result in an overhaul of ingredients and quality, on top of the usual “synergies” – merger and acquisition speak for redundancies. Even if they stop using high-fructose corn syrup and hydrogenated trans fats, it’s hard to see some of these brands doing anything other than drift into dollar store obscurity, with or without Mr Buffett’s money. There’s a limit to how much junk he can eat, too.

From an investment point of view, this deal makes good sense – even if, from an investment point of view, there are much better bets in food production. Mr Buffett might have been better advised to stick with what he knows rather than what he eats.