How Silicon Valley Culture Led To A Bank Run Pt. 2

people gathered outside Silicon Valley Bank
Customers gather outside a shuttered Silicon Valley Bank branch.

For Part 1 of this two-parter, please go here

Friday, I outlined the culture part of Silicon Valley, which likely led in part to the collapse of Silicon Valley Bank.

That post was rather long because I wanted to relay my own experiences working in technology and go into some detail about some of their rather odd ideas. But really, I could have summed up Silicon Valley culture with one word: hubris.

I’ll let Zachary Carter explain in Vanity Fair:

It’s hard to imagine a deeper embarrassment for Silicon Valley. Tough-talking tech dudes who spent years celebrating the genius of free markets totally lost their minds in a bank panic, failed to coordinate a private rescue of their own sector, and then went whining to the federal government for a bailout. What’s worse, many of these guys—including SVB Bank CEO Greg Becker—lobbied Congress to eliminate tougher capital and liquidity regulations for banks like SVB, and got what they wanted. Becker’s testimony to the Senate Banking Committee (see p. 114) feels destined for the corporate hubris canon. Hailing “SVB’s deep understanding of the markets it serves, our strong risk management practices, and the fundamental strength of the innovation economy,” Becker declared that, “SVB, like our mid-sized bank peers, does not present systemic risk.”

The elites of the Valley are not viewing any of the Silicon Valley Bank failure as a sobering experience that is a cause for self-reflection because of course they are not. That would be unbecoming for the Masters of the Universe. A prime example of this is perhaps the most annoying venture capitalist on Twitter, David Sacks. Sacks did not seem to want to shut up as the news unfolded, and is full speed ahead with the hubris, even this morning, and is once again getting owned on social media.

I mentioned Friday that image and brand were perhaps the most important thing in the entire world to the Silicon Valley set, and part of that brand truly is they are the smartest people who have ever lived. And that normal rules do not apply to them. This…is something else. But a good example of that concept.

In the replies, was this:

Rules are for suckers and hurt the “innovation” which none of you non-Silicon Valley types seem to get. I guess.

Perhaps the most memorable quote from the SVB mess comes from tech journalist Eric Newcomer:

Indeed, because when extreme libertarianism is your stock and trade and that philosophy doesn’t work out, of course you demand the government bails you out. To be fair, this generally is what libertarians do.

But like so many people in power, Silicon Valley leaders generally did not feel much empathy for people losing their jobs. But when bad things happen to them, my goodness, there must be empathy for them, you ungrateful ingrates.

As the finance writer Heidi Moore points out in that Tweet, Silicon Valley is a rather white and male place to be. But what REALLY caused the Silicon Valley Bank failure? It was Wokeism! Because of course it was.

The Wall Street Journal, seeing an opportunity to make the anti-woke movement even more ridiculous and mean-spirited, decided that it wasn’t poorly managed risk and years of questionable business practices that caused this bank failure. Nope, it was the SVB board including in its ranks women, a Black guy, an LGBTQ person, and…two veterans? No, really, they raised this as a reason in an editorial.

“SVB’s board was 45% women, they also have 1 black, 1 LGBTQ+, and 2 veterans. I’m not saying 12 white men would have avoided this mess, but the company may have been distracted by diversity demands.”

Woo boy. If you refuse to accept responsibility for anything whatsoever, then you can blame the Black person. Or a gay person. Or ew ick those girls. Or the military.

While everyone is still sussing out what exactly happened at SVB, we can say for certain it was not wokeism. The board did indeed make some major mistakes in the hours leading up to the collapse. Goldman Sachs, for one, does not look great here.

In the heat of all the panic during that fateful weekend, some venture capitalists revealed for all the world to see what they are – people who view outright recklessness as a virtue in the pursuit of what they want (money and power) as long as they do not shoulder any of the risks. Silicon Valley is a world of outlandish hubris that is often backed by total bullshit. The examples are many, such as Elizabeth Holmes, the “world-changing technology” they hyped in the early 2000s that turned out to be the Segway, and any number of ridiculous promises by Elon Musk that never turned out to be real. They tend to run in herds, and some of them are extremely online and tend to be pretty emotional. This aspect of the venture capital culture was not good at all during the weekend of the SBV collapse, as their panic and rage on Twitter created a lot of confusion.

None of what I am writing should be taken as the words of a Luddite. Quite the contrary, I think we should promote innovation, and there really are technologies that have enhanced and enriched our lives. At the same time, Silicon Valley has forced changes to our laws and regulations that have hurt a lot of people economically, launched outlandish Ponzi schemes, and, well, I don’t have to tell you what social media has done to our brains and society.

Edward Ongweso Jr. has an excellent piece in Slate that asks, in light of how venture capitalists acted during the SVB failure and other debacles like the FTX scandal, why do these people have so much control over technological innovation? It is an excellent question, one that we as Americans should be asking. Should people who have such grandiose ideas about their knowledge, who often demonstrate contempt for any rules or regulations, who often seem dissociated from real life, and who have become the new model for supervillains be the ones in charge of all this? And by “all this,” I mean technology that has some potential for good but also great potential for negative effects on our lives and society in general. The risks to our economy posed by reckless tech bros are just part of the problem.

It is a very good question Mr. Ongweso asks. I think instead of sucking up to these people, the leaders who have at least some decency left in them should be taking a hard look at answering this question. Perhaps the failure of one of Silicon Valley’s iconic institutions will be the trigger for this to start.

The last word, again, goes to John Mellencamp.

2 thoughts on “How Silicon Valley Culture Led To A Bank Run Pt. 2

  1. New Rule: when banks lobby for deregulation, they should be regulated EVEN HARDER.

  2. What today is sold as “tech” generally isn’t:

    “I have an app that allows me to insert my self into an existing aspect of society and charge a fee.”

    Uber, DoorDash, all those dumb games that want to exploit your need to keep playing for a $fee, etc: they are not tech.

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