Silicon Valley Techno-Utopianism

i’m just sort of imagining when 22 year old recent stanford grad Alex A. Founder gets his $10 million seed round from sequioa he gets a little orientation folder that says congrats on becoming a founder! for office space, think about dogpatch. you’ll need somewhere to put this $10 million - call my guy so and so at svb, he’ll hook you up.
don’t forget to have a nice celebratory dinner - try house of prime rib. if you need a reservation, just call my concierge who will set you up. congrats and welcome to the big leagues!

https://www.youtube.com/watch?v=MBXrU3WzKJg

you’ll need somewhere to put this $10 million - call my guy so and so at svb, he’ll hook you up.

― 龜, Monday, March 13, 2023 11:36 AM (three minutes ago) bookmarkflaglink

people on twitter are saying that some venture funds required their portfolio companies to bank there

i just dont think this kind of concentration at one bank would just sort of happen

none of these people are very smart

Twitter right now:

A bunch of people who have been given the world’s friendliest regulatory, tax, and interest rate environment and used it to “innovate” apps of indentured servitude telling people they openly view as their inferiors that they need to bail them out. https://t.co/90zaylVvgb

— Ben Miller (@benwritesthings) March 13, 2023

re fdic risk management one of the mysteries of this situation is why these companies didnt have the normal insurance for their deposits above 250k

apparently Y Combinator recommended SVB to their investment portfolio companies so uhhh

https://www.ycombinator.com/blog/urgent-sign-the-petition-now-thousands-of-startups-and-hundreds-of-thousands-of-startup-jobs-are-at-risk/

looking at the nytimes front page rn and it’s got big “my t-shirt that says the US banking system is safe is raising a lot of questions already answered by my t-shirt” energy

it's almost as if making more money out of existing money without an additional exchange of goods and services is maybe something we should think more deeply on

uh oh charles schwab

jfc

From the Wall Street Journal's explanation of why Silicon Valley Bank failed:https://t.co/zEImEu6Bmp pic.twitter.com/Xbr86bEepf

— Brian Merchant (@bcmerchant) March 13, 2023

"i'm not saying..." what people who are saying say when they're about to say something.

i knew it was gay and black people's fault thank you dow jones

when 12 non veteran white guys meet four times a year they can really concentrate on stopping this sort of stuff

“ in the most vibrant sector of innovation in our economy.” - citation needed

i just dont think this kind of concentration at one bank would just sort of happen

― lag∞n, Monday, March 13, 2023 8:43 AM (two hours ago)

it isn't that much of a problem that all these tech startups were at SVB, it's that apparently SVB's customers were mostly tech startups. Like, if you ran a restaurant and almost all your customers worked at the same company, because "relationships," and then that company moved its office 50 miles away. ... sucks for your restaurant.

it's almost as if making more money out of existing money without an additional exchange of goods and services is maybe something we should think more deeply on

Teddy Roosevelt, 1910: "No man should receive a dollar unless that dollar has been fairly earned. Every dollar received should represent a dollar’s worth of service rendered — not gambling in stocks, but service rendered."

i'm up for a little speculation and loans and such

My understanding of the existence of Islamic finance is that it is designed to comply with sharia prohibitions on usury (ie. paying interest). It would be interesting to compare banking stability under such regimes with the interest-based model more common outside the Muslim world.

"labor theory of value" --karl marx

the thing is that the SVB investments weren’t even that usurious or anything, they were just chasing better rates on stable bond investments afaict?

obviously like any business they’re chasing more money on top of the overhead of keeping the store open but it wasn’t like they were loan sharking

The prohibition on usury under sharia means paying *any* interest.

Islamic law considers money as a measuring tool for value and not an asset in itself. Therefore, it requires that one should not be able to receive income from money alone. Interest is deemed riba, and such practice is proscribed under Islamic law. It is haram, which means prohibited, as it is considered usurious and exploitative.

https://www.investopedia.com/articles/07/islamic_investing.asp

various christian groups have at times banned earning interest too tho never as wildly as in the muslim world

this thread is starting to get creepy idk

just because money is made up doesn't mean we shouldn't be trying to make it more fair, not less fair

even though historically that hasn't been like a huge success

that's all i have to say on this topic i know nothing about and find eye glazingly boring, you're all welcome

on this: what, if anything, is preventing a perfectly liquid bank that has some low-interest t-bills worth 80$ on a face of $100 now borrowing against those through this program, and putting that back into higher yield t-bills and just pocketing the difference? https://t.co/zBy7ad2jZh

— sclv (@sclv) March 13, 2023

that specific question is answered in today's levine.

I love my readers, and yesterday one of them more or less immediately emailed to ask, about the Fed’s Bank Term Funding Program: “Can I get in on this? Specifically, can I buy a controlling interest in a bank, and then buy a bunch of long dated treasury instruments at $80, and exchange them for $100 immediately?” Great question! The answer is no. Here is the termsheet for the BTFP:

paywalled for me, but it's basically being large enough that someone would let you negotiate reasonable terms over a long period, right?

just funny numbers here, but stay with me:
- I buy bonds that mature in ten years and pay 4%
- The interest rate pops up to 7% on bonds at some later date
- I take out a loan using my bonds as collateral at a 5% interest rate to buy the new 7% bonds

I'm pushing back my maturity date and have a lot more contractual things in play, and I've now basically spent my money plus I have to make an interest payment on the loan. I've dug myself into a hole for ten years

(I'm never going to get terms that good and nobody's going to loan me a ton of cash because I'm an individual investor, and for me, the amount of money I'm going to make would change only a small amount)

Levine’s bottom line here makes the whole wrapup here sound basically obvious:

But in the modern world — of more pervasive financial markets and more sophisticated accounting and faster-moving information — the banks and their customers were unable to ignore those losses. So the Fed stepped in and said: Look, we are best positioned to ignore those losses, so we will. The service that the Fed is providing to the banking system here is ignoring that rates went up when it values banks’ bonds. That service is incredibly valuable. Historically banks’ retail depositors provided it, but now only the Fed can.

It sounds like SVB's main problem was concentrating their depositor-base in the hands of a particularly skittish and herd-like group - the inbred world of VCs and tech startups.

https://t.co/cQQrueYpj0 pic.twitter.com/zQXNFnQlz1

— Abe (@LikeAndBlock) March 12, 2023

lol

that dude attempting to "clarify" his point (it's about bias!) is a minor case of posting through it

both those systems are pretty fucked up in multiple ways

btw I had to stay late the day before thanksgiving at work one year because I managed a website that included an app that let farmers pay loans

IT'S ABOUT BIAS

yeah, everyone is pretty clear on being biased against tech venture dipshits

most people aren’t! a lot of the population is neutral, sees them as kind of quirky types who made it rich, or actually see that shit as aspirational

I have no idea what the breakdown is but it’s probably nearly even thirds among people I talk to daily irl

Those people aren’t on Twitter roasting this guy and his friends, though. They’re probably generally fine with bailing out Peloton For Aquarobics.

is that the new underwater basket weaving

idk exactly how popular silicon valley is but its def less popular than it used to be, the media coverage has gotten definitively more critical, and people are dicks to them on twitter

at one point long ago the main platforms for startup news were tech crunch and whats the other one which were basically just posting startup pr, then the companies that made it big and went public were greeted with fawning profiles in the mainstream business media, and that was pretty much how it went, these days all the big outlets cover tech much more seriously and theres tons of other writers out there making it their job to really know about this stuff, some parallels ro coverage of wall st pre and post 2008

anyway it makes them sad, oh well

there's the serious critical coverage, but there's also the fact that tech is synonymous with corruption and bias to anyone who watches fox news.

the 'keep Big Tech out of our Facebook' crowd

also the valley just hasnt had any real big hits in a long time wheres the new googles baby its all terrible shit like uber, and then titans like facebook are faltering too

and then theres the more general shift towards the sentiment that the economy as a whole is a scam

Biden’s rescue of ‘pro-Democrat’ SVB clients slammed: ‘They’re looking after their own’ https://t.co/8ywqYMs9W0 pic.twitter.com/XlgPlEaHcx

— New York Post (@nypost) March 13, 2023