It is hard to imagine that it has already been a week since the start of the tumultuous events that led to the FDIC taking over Silicon Valley Bank, and coming to the rescue of the depositors. The rancor that has followed the takeover has been sobering and should be a wake-up call for Silicon Valley — but it won’t be because SV has become a loose collection of competing self-interested factions.
SVB’s failure also exposed Silicon Valley to the harsh reality: the larger world hates the tech industry and what it has come to represent. The outsized nature of the success, matched by the outsized bravado and machismo of its fake prophets, has eroded all goodwill for one of the most critical sectors of the US economy. As I pointed out earlier,
“Whether politicians and media like it or not, the technology sector is one of the few engines of growth that we have in the US. The long-term war with our new geopolitical rivals will continue to be fought on the technology front. I can understand that the general population, populist politicians, and media have faint regard for Uber-rich tech giants, blowhard billionaires, and the lack of empathy and morality in emergent technologies — but that’s missing the forest for the trees.”
A big reason for this growing apathy is that the industry is starting to be represented by voices that lack the empathy to understand the real world and the emotional impact of the intersection of technology and society. We have to stop the loud few hijacking and become the face of technology. I have been critical of loud and shrill voices on social media, which have caused long-term damage with their selfish rantings.
As I told NBC News’ Dave Ingram, “There are certain voices on social media that are loud and shrill, and they don’t speak for tech. All of the actual problems that we experienced over the weekend as a community were taken care of by people who were not on Twitter.”
- Here is my article for The Spectator, reinforcing the importance of the bank, and why we needed the Fed to help the depositors.
- I was on the Big Technology Podcast with host Alex Kantrowitz and fellow guest Chris Tolles discussing The fallout of Silicon Valley Bank’s failure.
This is excerpted from issue#3 of my twice-a-month newsletter.
Just a random thought, but if “tech” means social media, then that’s hardly competitive with anything. Just a way to try to be a billionaire. I follow manufacturing and production. Tech there just quietly tries to make things more sustainable, efficient, productive–all good things mostly forgotten by both tech bros and politicians (until quite recently).
I have no sympathy for libertarian billionaires who want to stick it to kids duped into an expensive semi-quality university education and then plead to be bailed out of a hubris-filled bank failure. Somewhere the lack of morality is appalling.
I do think Silicon Valley misunderstands/misjudges how (and why) people are starting to hate the tech sector.
Much may be unfair and the reality is somewhere between where tech/Silicon Valley sees itself and where others do, but I suspect it’s somewhere nearer the way everyone else sees tech/silicon valley.
Laws matter, except for the tech cos that ignore/break them.
We all get moving fast and breaking things but the complete disregard for the law seems to be the norm in the quest to hyperscale.
There’s undoubtedly innovation that will help the West compete with China. Unfortunately, it seems most of those that SV venerates are Uber/WeWork/etc and all the other cos that are a tech sheen over an old business model which I guess might be profitable, one day!
For all the smart, compassionate, and intelligent people in tech, the ones that are seen as ‘leaders’ (albeit it likely self-appointed) seem to largely care predominantly for themselves. Either they’re the grifters (those of the SPACs, etc) or the ‘let them eat cake’/’one rule for thee another for me’ libertarian crowd.
VCs/their cos didn’t do basic good banking things (overnight money market sweep accounts?), were oblivious to SVB’s issues (the short case/reports have been floating around for months) and then started the bank run, publicized how smart they were for pulling, acted in their own self-interest (rather than in Silicon Valley’s or Tech’s or the ecosystem’s or whatever) after spending years telling everyone about ‘trust’ and the importance of the ecosystem/etc.
Sadly, Tech is basically what Finance in the 00s was (and I say this as a someone in finance); successful and important to the economy, but had done well for too long and so much hubris. So much!
– In finance, Banks had huge year-end bonuses to pay themselves vs shareholders, funds had and ever crazier fee structures, etc. Tech has stock-based comp to pay themselves vs. shareholders, and VCs the ability to mark to make believe.
– Finance was seen (and in some parts still is) as a rent-seeking business trying to screw people in the 2000s for its own benefit. That’s what tech is seen as outside the Valley after years of pushing ads, harvesting data (and then failing to keep it secure), etc.
It’s been said for long enough that if something is free then you’re the product – you can’t (brazenly) treat people as the product, then expect them to care.
SVB was run (at best) ineptly
– The liquidity mismatch (% in HTM, etc.) was insane, especially for a bank with one of the smallest % of insured deposits. Not to mention the rate of increase in HTM (it’s a multi-year decision that can’t be undone) during 2020 and 2021. Their job was banking, not tech, and EVERYONE in finance or investing (VCs!) should know that in the long-term Leverage + Iliquidity = Death. They willingly chose both…
– Its issues were known for months; exposure to VC world and underlying co cash burn/fewer raises, its HTM portfolio’s issues, etc. Sure VCs don’t speak to short-sellers or read their reports but there were even twitter threads about it!
– There’s a reason that no banks want their loan books (i.e. loans to the SV cos and people) but Apollo is interested. That’ll be…interesting!
You’re right when you say “all of the actual problems that we experienced over the weekend as a community were taken care of by people who were not on Twitter.”
But even that success is tainted outside the Valley; what everyone else sees is ‘we used our connections, $ and pull to secure a bailout for ourselves which did little to help anyone else’ and then folks taking victory laps for this (even if they don’t intend to).
SV/Fed/FDIC/Treasury can say it’s not a bailout but if tech has taught us anything over the last decade it’s that if something seems free, then we’re paying for it somehow….we just don’t know it it yet*
What we never (publicly) saw were the SV leaders trying to stop the bank run or douse that fire, or demonstrably stepping in to help their cos (with credit lines, etc – with some honorable exceptions here**) before screaming for a bailout.
Sadly, I think Ben Thompson’s probably right re. trust and SV’s lack of it in SVB and each other and it being a starker reflection of society as a whole.
Unfortunately, this might just be a symptom of trust being earned online (or via iMessage/whatsapp/etc) and thus more expendable rather than earned in-person.
We do in this case – the banks will just pass on the levy to everyone with a bank account through higher fees/etc. So no ‘official’ bailout, just a backdoor one to help silicon valley get all its $ from the rest of us.
** As an investor, they’re the ones you want to give money to (vs. the bailout crew on twitter). You find out so much more about people in times of stress.
Great stuff, as always.
In the wake of the collapse of “oil banks” in the early 1980s, the industry moved toward directed political control of the nation (and the world) through the Bush family, which fought wars for the protection of oil interests and subverted our institutions.
The collapse of SVB could be a similar moment for tech. The question is which tech will seek control, or whether both may seek it.
There’s the “we” tech of the Cloud Czars, which recognize that they depend upon human talent and seek to produce more of it. There’s the “me” tech of the PayPal mafia, who seek to restrict that knowledge in the name of avoiding competition. I think the latter would lose the coming global competition to China by destroying our primary advantage, which is our welcome to immigrants and indeed anyone who thinks differently.
Happy St. Patrick’s to all Irishmen, real or honorary. Remember that the day celebrates a diaspora, a forced emigration created by the British government, that now embraces the world with Jewish corned beef and green beer. The Irish won the famine. A lesson there for other oppressed people.
Dana,
Thank you for making that historical comparison. I am not sure the technology industry has the collective thinking and ability to come together for their own interests. The selfishness of companies is a feature, not a bug, and “winner take all” is the strategy encouraged from the beginning. The second point about “we” and “me” tech is very astute. Right now, the “me” tech is dominant. It is becoming a popular way to think among new founders and it is a challenge.
“ There are certain voices on social media that are loud and shrill, and they don’t speak for tech.”
Sadly, they DO speak for much of tech and of course—since it’s 2023 America—there’s plenty of demagoguery from “beleaguered” people looking at a minimum of six-figure incomes, and from politicians who want to show their Common Man Credit (despite Ivy League degrees and millions in current income).
Myself, I’m a startup capitalist by (pre-retirement) profession and a tech enthusiast by long practice (first electronics effort in the 1950s, ham & broadcast radio and FORTRAN in the mid-60s, owned a 16-bit PC in the early 80s, etc. And none of that makes me particularly sympathetic to people who’ve let a love of money—as either an investor or founder—overwhelm their sense of how tech can make the world a better, more fun and more life-giving place for all.
If we want to talk about how Tech has made the world a better place, let’s be honest about how it has also made it worse, how it’s part of our polarization & winner-take-all refusal to look at the externalities of our actions