There has always been a simmering dispute between those deeply associated with the Silicon Valley technology crew, which views itself as creating new industries and jobs that drive the American economy, versus the Wall Street set.  The very public Carl Icahn / eBay Inc (NASDAQ:EBAY) dispute has ignited heated passions just like a good Yankees / Red Sox playoff game would do.  Now enter Menlo Park, CA technology fixture Reid Hoffman, who stoked the flames with a new letter published on Linkedin.

carl icahn ebay

Words not often heard on Wall Street: “Strong platforms take years to realize their full potential”

Hoffman emphasizes that Carl Icahn is focusing on short term results at the expense of long term growth, a charge frequently leveled against Wall Street.  “To me, what’s most interesting about this story is the light it sheds on the clash of values between Icahn’s Wall Street world and the culture of Silicon Valley,” said Hoffman, a partner at Greylock, the well known Silicon Valley venture capital fund and co-founder of LinkedIn Corp (NYSE:LNKD). “Innovation comes from long-term thinking and iterative execution. Strong platforms take years to realize their full potential,” words not often heard on Wall Street.

Making a charge directly at the typical short term activist hedge fund strategy, Hoffman wrote: “Icahn is determined to manufacture consent for a spin-off, then a sale, so he can make a quick profit on that PayPal premium. If you believe that it takes more than a few caustic letters to shareholders and a quick trade to deliver compounding returns to investors over time, Icahn’s argument loses much of its zing.”

Payment processing require synergies as stand along profit margins “will likely start trending to zero”

A former PayPal executive vice president, Hoffman makes the point that as competition in the payments sector intensifies, profit margins “will likely start trending to zero. As that happens, controlling major commerce platforms will become even more important to payments players, because they’ll still be able to create value by building valuable ecosystems on top of them.”

Then Hoffman attacks Carl Icahn’s tactic of going after the eBay board in a series of seemingly personal attacks, saying Carl Icahn didn’t provide a compelling explanation for why PayPal would be better off split from eBay.  Then he makes the key point: “at precisely the moment when everyone else in the payments industry is looking for convergence opportunities, Icahn has invested energy into attacking the integrity of eBay board members Marc Andreessen and Scott Cook, and the leadership abilities of eBay Inc (NASDAQ:EBAY) CEO John Donahoe. In a series of letters, he has insisted Marc Andreessen bulldozed the rest of the board of directors and unilaterally orchestrated a transfer of Skype to Microsoft that benefited Andreessen’s own firm to the detriment of eBay.

Icahn’s “Classic market exploitation”

“Icahn should know better; these types of decisions are made by the entire board of directors,” Hoffman wrote, then called Carl Icahn’s tactics “classic market exploitation. And while market exploitation can lead to a quick buck in a quick trade, it creates less value over time than more fundamental approaches that rely on strong leaders executing carefully considered plans to build lasting assets.”

Hoffman conclude saying that “Icahn’s stock in trade is trading stocks. Silicon Valley’s stock in trade is creating powerful products and platforms. The former approach creates short-term returns. The latter approach creates economically productive ecosystems that spawn industries, jobs, products, and services that benefit society at large, and compounding profits for long-term shareholders.”  A more concise characterization of the Silicon Valley / Wall Street fight could not have been written.