Has your view of Silicon Valley changed in the last 72 hours?
Given the events over the past weekend, has your views on how SV is run on the business side changed?
He makes the case that one factor of many in the success of SV was people played iterated games with the same people, which effectively built trust. Now the companies and stakes are so huge that it can be worth it to break that trust sometimes because the benefits of a single win (billions of dollars) can dwarf the downsides.
It’s an insight that makes sense to me and something I wouldn’t have considered otherwise.
No, and Im not sure why it would unless you are willing to paint broad swaths of people with the same brush. IMHO, there are still a bunch of ambitious and talented people. Most of them with good intentions, many of them smart, but all human.
To be honest, I didn't even see that many examples of bad behavior. Some bank managers took some big risks and an unlikely event blew up in their face. Some CEOs and VCs panicked, but I would too.
I dont particularly care for the account holder bailout, but I get it. Whisper "contagion" and people panic after 2008.
If anything, what I learned over the last 72 hours is how much resentment and bitterness has been brewing. It is a pretty amazing level of outrage for something with so little relevance for most people.
I may not be fully informed (please comment if that's the case), but it seems like there were really only a couple of instigating factors:
1) SVB invested too heavily in long-term bonds, which reduced their ability to maintain liquidity. In particular, with the inverted yield curve, the recent increase in interest rates seems to me to have made it more likely that these long-term bonds were going to be underwater either way
2) Peter Thiel (allegedly?) instigated a run on the bank by advising people to pull money, partially(?) due to reports that they lacked sufficient liquidity
I don't see the depositors being at fault here. In so far as the depositors had accounts in excess of the FDIC insured limits, first, it seems really difficult for companies to have a sufficient pool of liquid cash in an account somewhere such that they can pay payroll from it. Second, I have read accounts of startups being lent funds from SVB, but with the requirement that the funds be kept in SVB as well. SVB was the de facto choice, from how it sounds, so I don't blame the startups for going with what was a proven good solution... even if it was later proven not so good.
Also, it seems like the FDIC is doing the right thing. All of the insured funds are covered, and it seems like they're also covering all of the deposits in excess by liquidating the assets at a loss, which the bank's shareholders will eat.
Overall, it doesn't seem like a good situation, but we seem to have avoided a train wreck, at least from where I'm sitting. I may be missing things, and I don't have much experience in finance.
There's a Silicon Valley I see on the news and Twitter that I've still never once seen in real life.
I moved to SF in 2008, and it was the most magical place on the planet. I met amazing people everywhere I went... smart, interesting people who just wanted to make cool things. I loved every second of it.
And it's still that way to me. And I say this as a person who's been to my share of fancy VC parties. Sure, things have changed a bit, but the greedy, out of touch caricature of SF I see online doesn't match what I see in person.
Even during the past 72 hours, I got dozens of texts and emails from people checking to see if my company was okay and asking if they could help. Everyone I know is genuine, hard-working, passionate, curious and kindhearted.
It's become clear the pervasive impression is that people in SV are rich, out of touch and barely work. Maybe that's true and I just don't know that version of SV. But I think the Musks of the world have won the perception game, and we're all going down with them.
Pre-SVB: Silicon Valley is full of self-interested organizations and people building things that, at times, result in wider societal benefit.
Post-SVB: Same.
It feels to me like the whole startup economy is essentially built on making regular people take enormous risks with their lives.
R&D used to be quite conservative and limited, true, but conducted by deep-pocketed companies or governments. Now people are encouraged to take the risks themselves, live a precarious life funding round to funding round, encouraged by a massive but distant carrot most people never even smell.
SVB feels like another part on this play. It reads to me like their business model barely made sense - but so what? It would pay while the music is playing, and if it fails, the bag holders are the same start-up hopefuls.
I totally think there is a niche for startups, and people who are well-suited to work there, but not at the levels we are seeing. Anyone who can hold a broom is told to set up an "Uber for cleaning" or whatever, and that's not a good idea.
No. I already thought SV has a greater than average concentration of irresponsible “move fast and break things” types. Eventually the adults adults will always have to take over to avoid a disaster.
I think that a lot of societal ills can be chalked up to "low interest rate phenomena." Silicon Valley has had a decade to play with free money. What do they have to show for it? Smartphone CRUD apps, subsidized gig workers, influencers and child consumers. Let's keep raising interest rates.
The last 72 hours validate the view that Silicon Valley isn’t capable of taking leadership in fixing the problems it creates, and that we’ll have to rely on Washington to set the rules.
Yes. I learned that the VC industry, at the company management level and even at the venture capital management level, had a very poor understanding of banking. Some crazy percentage of VCs used one particular small regional bank for their funds, they told their portfolio companies to do the same, and everyone even banked their personal accounts with the same bank. Somehow, an entire industry was unaware that you need to manage and diversify counterparty credit risk - even when you are dealing with banks. It's amazing to me that this could happen. I can understand why startup founders might not be aware of banking risks, since banking is not expected to be their expertise and they might have been children the last time a major bank went under. But how did the VCs miss this? This would have been the equivalent of a nuclear detonation in their industry, had the government not bailed them out. I guess we could charitably think of this as part of the process of the VC industry maturing and become a larger part of the economy. Now they'll hopefully better diversify their banking relationships, and the banking industry and regulators also got a much needed shot in the arm regarding the obvious uselessness of the "250k FDIC insurance" backstop during even a minor banking crisis.
Pre-SVB: SV was full of some really smart people, many of whom didn't realize their skills and experience don't translate to other areas (eg pretty much anything to do with crypto) combined with some salesmen, some of whom are snake oil salesmen. Together they are more and more resembling the rest of Corporate America with performative cultures, privatizing their own luck, often having unearned bravado and increasingly perverting government to rig the game.
Post-SVB: Not much has changed.
There is a ton of misunderstanding about SVB. Some think we're bailing out billionaires. We're not. There's a lot you can criticize the governemnt for. This isn't one of those situations. SVB didn't manage its risk and fell out of compliance with its debt ratios. The government stepped in, dissolved the bank, paid out the depositors and the shareholders are at the back of the line. And it cost the taxpayers nothing.
I've long been convinced Peter Thiel is awful in pretty much every way. I hope this gets investigated because there's a reasonable suspicion that Thiel created a run on SVB, either intentionally or just accidentally. Why? Who knows.
Anyone who knows a thing or two about history would know that boom and bust is baked into SVs DNA. People were asking the same questions 20 years ago when the dot-com bubble went bust.
Pre-SVB Peter Thiel: True example of the best of the hacker mindset!
Post-SVB Peter Thiel: Dark and selfish example of the worst of the hacker mindset.
Yes, the panic was pretty crazy. I realized that much of these people are actually anxious, insecure personalities who are scared of losing their significance.
The petition here on HN sealed that view.
Nope. Been here for a couple cycles. As #6 says, "All of this has happened before. All of this will happen again."
The weirdest part is how many people think depositors should actually take a haircut, or that is should be on the depositor to prove the financials of their chosen bank for bankruptcy risk.
Not really a view of Silicon Valley though, unless people making said comments are from Silicon Valley.
I always suspected SV was full of awful, selfish, classist hypocrites. But now I have it confirmed.
Hopeful: maybe a chapter has closed in terms of the shenanigans from recent years like "crypto" and not-very-meaningful "disruption". Tech is good when it's building cool things that end up making the world better, not BS stuff.
Nope! But I’ve been around for a little bit. Welcome to the other side of the mirror, folks.
No, it’s wrong for people to lose their money when it’s in the bank. Deposits should be better protected and maybe banks need more regulations to prevent this sort of thing. I don’t know the solution but we need innovative banks like SVB.
My friends shared their disappointment over the fact that Silicon Valley Bank (SVB) will no longer be an option for their small startup businesses. They had positive experiences with SVB, finding them supportive when needed, and non-predatory on fees. Additionally, they were impressed with SVB's recent improvements to their online banking and app. One of them is now faced with finding a new bank that can understand small startup cash flows and provide helpful connections. They expressed feeling a bit bummed about the situation.
Nah. The days of SV innovation were mostly a meme at this point, and the collapse of SVB simply puts a fine point on it:
Big corporate rules all, sees all, owns all.
Kinda like NYC screw-you-pay-me but with a faux niceness.
Not at all. if my money in svb.. would have ran to pull it out.
too many armchair expert not understand issue effect people who not gamble money but victim of just having deposit.
main issue bankers did not hedge risk of inflation. why helping start ups survive losing all they cash is going to change my mind?
and this country waste tens of billions on bloated bureaucracy government. but a dime to people who will do innovation is bad? disagree
Silicon Valley has always been boom/bust like Florida Real Estate. Remote working is the bigger threat this time, why come back in SV?
No. Bank insolvency follows irresponsible cadres where trust does not bind, but rather, greed. SV is full of some of the greediest folks masquerading under the hip pretense of tech leadership. If anything, this brings me hope that SV will have to face the music and build real trust, something that involves the class they exploit, the users.
SVB on its own? Not much. But SVB coupled with the layoffs is making me feel very uneasy about the tech sector.
I know tech's seen bad days before (e.g. the dotcom bubble), but that was before I got into the industry. All these bad headlines are definitely making me worry about my own prospects for sure.
no. VCs primarily fund stupid ideas and make choices based on emotion and ego and not common sense. they also have strong ideas about where markets and trends are going which are at best based on analyst reports and cocktail reception chatter. so the end result is always disappointment. occasionally they gambled right. what should happen is that they should fund a wider variety of businesses in more markets and not just focus on one specific type of startup.
Not sure if “changed”, but I feel like a lot of what happened was nit really warranted and more of a self-fulfilling prophecy unfortunately. Just stay calm and keep on creating real value.
Nope. Finance in search for trends and potential trends in search of finance breeds systems of conformity in a race condition based on bad feedback mechanisms.
Nope. If you look at the whole cycle going back to Shockley nothing seems too odd to me, yet anyway - I'm still open to changing dynamics.
If you go back and read books like Hackers[0] or The Soul of The New Machine[1] even the cast of characters is weirdly similar. That piece of geography seems to really strongly attract both the Founder and Venture Capitalist personality, who really are misfits most other places.
I suspect the chaos of the last few days is healthy for the system overall because it makes it look risky and possibly not even a payoff. That's not the way it looked 3 years ago.
As a result I suspect people who hang around will build even cooler stuff than we've seen in the previous 3 years.
[0] https://www.amazon.com/Hackers-Computer-Revolution-Steven-Le...
[1] https://www.amazon.com/Soul-New-Machine-Tracy-Kidder/dp/0316...
I have more confidence than ever that silicon valley won't destroy humanity :)
only in the sense that they were incrementally confirmed/validated
Why is SV different than anywhere else with regards to recent events?
No, SV has always been Gomorrah, vs. SF's Sodom.
California is a vast cesspool.
Like the titans of Atlas Shrugged, they showed how willing they were to burn it all down for everyone else in order to win.
Well played.
No
Imho it'll take very slowly for it, as the impacts are really distributed across the entire country: accelerated its inflation and hyperinflation