1 00:00:04,360 --> 00:00:12,319 Speaker 1: Welcome to tech Stuff, a production from iHeartRadio. He there, 2 00:00:12,320 --> 00:00:15,880 Speaker 1: and welcome to tech Stuff. I'm your host, Jonathan Strickland. 3 00:00:16,000 --> 00:00:19,800 Speaker 1: I'm an executive producer with iHeartRadio, and how the tech 4 00:00:20,239 --> 00:00:25,759 Speaker 1: are you. I don't frequently dedicate Monday episodes to the news, 5 00:00:25,840 --> 00:00:27,880 Speaker 1: but I feel like this time I kind of have to. 6 00:00:28,080 --> 00:00:32,360 Speaker 1: So last Friday, I was in the Atlanta airport and 7 00:00:32,440 --> 00:00:34,959 Speaker 1: I was getting ready to board a flight to Austin, 8 00:00:35,080 --> 00:00:38,800 Speaker 1: Texas so that I could participate in an iHeartMedia panel 9 00:00:38,880 --> 00:00:43,040 Speaker 1: discussion at south By Southwest, which went really well. But 10 00:00:43,080 --> 00:00:45,560 Speaker 1: that's neither here north Air. So there I am in 11 00:00:45,600 --> 00:00:48,159 Speaker 1: the airport. I'm just sitting at the gate waiting for 12 00:00:48,240 --> 00:00:51,000 Speaker 1: my zone to get called, and I hear a little 13 00:00:51,040 --> 00:00:54,760 Speaker 1: bit of a hubbub, perhaps even occur fuffle, not a 14 00:00:54,800 --> 00:00:58,480 Speaker 1: full blown commotion, but something is definitely going down right, 15 00:00:58,560 --> 00:01:02,560 Speaker 1: like there's some chat going on, and I had my 16 00:01:02,600 --> 00:01:05,520 Speaker 1: earbuds in I was listening to podcasts. At that point, 17 00:01:05,560 --> 00:01:08,240 Speaker 1: I popped my earbuds out just to find out, you know, 18 00:01:08,319 --> 00:01:10,720 Speaker 1: being snoopy, what the heck is going on? And I 19 00:01:10,840 --> 00:01:16,959 Speaker 1: hear a bunch of very well dressed people speaking in hushed, 20 00:01:17,120 --> 00:01:20,720 Speaker 1: concerned tones. And I could tell that there was something 21 00:01:20,720 --> 00:01:22,840 Speaker 1: that was going on and it had to do with money, 22 00:01:22,920 --> 00:01:24,959 Speaker 1: but that was about all I could figure out. So 23 00:01:25,959 --> 00:01:29,000 Speaker 1: I pop out my phone to check for the news 24 00:01:29,040 --> 00:01:31,240 Speaker 1: to see if there's something that's come up that I 25 00:01:31,240 --> 00:01:34,280 Speaker 1: should be concerned about. And I'm looking at the headlines 26 00:01:34,280 --> 00:01:37,440 Speaker 1: and I don't see anything immediately that leads me to 27 00:01:38,000 --> 00:01:41,560 Speaker 1: real concern. But whatever it was that was happening must 28 00:01:41,600 --> 00:01:46,639 Speaker 1: have been pretty bad. These folks were clearly agitated, maybe 29 00:01:46,680 --> 00:01:50,120 Speaker 1: not quite at panic level, but not too far from that. 30 00:01:50,680 --> 00:01:52,960 Speaker 1: And then after I scoured the breaking news some more, 31 00:01:53,040 --> 00:01:56,000 Speaker 1: I finally figured it out. These folks were really important 32 00:01:56,040 --> 00:01:59,240 Speaker 1: people who work in the tech sector. They were on 33 00:01:59,240 --> 00:02:02,840 Speaker 1: their way to the tech conference portion of south By 34 00:02:02,880 --> 00:02:08,079 Speaker 1: Southwest like that's their world, and a bank that has 35 00:02:08,120 --> 00:02:12,160 Speaker 1: been a pivotal component in the tech and startup industries 36 00:02:12,720 --> 00:02:16,760 Speaker 1: had just collapsed. So today we're going to talk about 37 00:02:16,880 --> 00:02:22,200 Speaker 1: Silicon Valley Bank or SVB and what happened there, because 38 00:02:22,280 --> 00:02:24,880 Speaker 1: it does end up having an impact on the tech sector. 39 00:02:25,160 --> 00:02:28,640 Speaker 1: And it also was the second bank collapse in a week, 40 00:02:28,919 --> 00:02:31,240 Speaker 1: and then after that there was a third one, which 41 00:02:31,240 --> 00:02:34,160 Speaker 1: will cover at the end of this episode. So I 42 00:02:34,280 --> 00:02:38,799 Speaker 1: mentioned Silvergate Bank collapsed last week. So this was a 43 00:02:38,880 --> 00:02:42,000 Speaker 1: real estate bank or a bank that mainly dealt with 44 00:02:42,040 --> 00:02:45,160 Speaker 1: like real estate loans and that sort of stuff back 45 00:02:45,240 --> 00:02:48,799 Speaker 1: in southern California, but had jumped over to become a 46 00:02:48,840 --> 00:02:52,960 Speaker 1: bank in the crypto space. Around twenty fourteen. They had 47 00:02:53,000 --> 00:02:56,120 Speaker 1: their own crypto exchange, and they served as sort of 48 00:02:56,320 --> 00:03:01,200 Speaker 1: a bridge between the world of you know, US dollars 49 00:03:01,400 --> 00:03:04,800 Speaker 1: and then cryptocurrencies, or the way I often think about it, 50 00:03:04,800 --> 00:03:06,639 Speaker 1: even though I know it's ridiculous to think this way, 51 00:03:06,680 --> 00:03:09,000 Speaker 1: I think of it in terms of real money and 52 00:03:09,080 --> 00:03:12,880 Speaker 1: digital money. It's all digital, none of it's real. So 53 00:03:13,120 --> 00:03:16,400 Speaker 1: I realized this is just you know, a bias talking 54 00:03:16,480 --> 00:03:20,400 Speaker 1: in my head. Anyway. Silver Gates issues hit when some big, 55 00:03:20,440 --> 00:03:24,320 Speaker 1: big customers cryptocompanies in fact, like I'm not talking about 56 00:03:24,440 --> 00:03:26,880 Speaker 1: like a person, I'm talking about an entire company that 57 00:03:27,320 --> 00:03:30,799 Speaker 1: has a corporate account with Silvergate. Well, some of these 58 00:03:30,840 --> 00:03:34,200 Speaker 1: big customers were withdrawing lots and lots of money from 59 00:03:34,200 --> 00:03:40,640 Speaker 1: silver Gates accounts, and Silvergate had already been on rocky 60 00:03:40,680 --> 00:03:45,000 Speaker 1: ground when FTX collapsed late last year, and on top 61 00:03:45,040 --> 00:03:47,400 Speaker 1: of that, the US government was starting to look into 62 00:03:47,520 --> 00:03:50,080 Speaker 1: Silvergate to see if maybe there was anything hinky going 63 00:03:50,120 --> 00:03:53,680 Speaker 1: on with silver Gate, and whether there was stuff going 64 00:03:53,720 --> 00:03:55,800 Speaker 1: on or not. And I have no reason to believe 65 00:03:56,160 --> 00:03:59,880 Speaker 1: that hinkiness of any nature was happening. It doesn't really 66 00:04:01,080 --> 00:04:03,960 Speaker 1: matter in the long run, because the perception that there 67 00:04:04,000 --> 00:04:08,920 Speaker 1: could be trouble spooked a lot of customers of Silvergate 68 00:04:08,960 --> 00:04:12,240 Speaker 1: and they decided to pull their funds out in case 69 00:04:12,680 --> 00:04:16,800 Speaker 1: an investigation might uncover something that could lock up their money. 70 00:04:17,160 --> 00:04:19,719 Speaker 1: So there was a run on the bank at Silvergate, 71 00:04:20,240 --> 00:04:23,800 Speaker 1: and Silvergate did not have enough funds to cover all 72 00:04:23,880 --> 00:04:29,280 Speaker 1: the withdrawal requests, and as a result, it ultimately shut down. Now, 73 00:04:29,440 --> 00:04:34,039 Speaker 1: Silicon Valley Bank has some similarities to Silvergate in that 74 00:04:34,200 --> 00:04:39,360 Speaker 1: what led to svb's collapse was also ultimately a run 75 00:04:39,400 --> 00:04:42,359 Speaker 1: on the bank. So your classic run the bank happens 76 00:04:42,680 --> 00:04:46,400 Speaker 1: when customers lose confidence in a bank or a savings 77 00:04:46,440 --> 00:04:49,000 Speaker 1: and loan company in the case of it's a wonderful life, 78 00:04:49,520 --> 00:04:52,880 Speaker 1: or maybe there's some external financial pressure that convinces customers 79 00:04:52,880 --> 00:04:55,280 Speaker 1: they need to pull all their money out. Maybe they 80 00:04:55,279 --> 00:04:58,919 Speaker 1: don't have a loss of confidence in the bank itself, 81 00:04:59,240 --> 00:05:03,800 Speaker 1: but other economic conditions make people convince that they need 82 00:05:03,920 --> 00:05:07,320 Speaker 1: access to cash right, like, it's a liquidity problem. Again, 83 00:05:07,680 --> 00:05:11,600 Speaker 1: the cash and wealth are two different things, so it'll 84 00:05:11,640 --> 00:05:15,039 Speaker 1: get kind of muddled as we talk about this. But 85 00:05:16,080 --> 00:05:18,919 Speaker 1: the thing that happens is customers will rush to the 86 00:05:18,960 --> 00:05:21,720 Speaker 1: bank to retrieve their cash, to pull all their cash out. 87 00:05:22,480 --> 00:05:24,719 Speaker 1: They might think that that would be safer in their 88 00:05:24,720 --> 00:05:26,800 Speaker 1: hands than rather in a bank that could potentially be 89 00:05:26,880 --> 00:05:31,239 Speaker 1: in trouble. But the problem is banks typically they don't 90 00:05:31,320 --> 00:05:34,200 Speaker 1: have all of their customers money, Like the money you 91 00:05:34,320 --> 00:05:38,360 Speaker 1: deposit in your bank is not necessarily at your bank anymore. 92 00:05:39,080 --> 00:05:42,520 Speaker 1: At least, banks don't have everybody's money all at the 93 00:05:42,520 --> 00:05:46,960 Speaker 1: same time because banks are businesses, and as a business 94 00:05:47,040 --> 00:05:49,320 Speaker 1: they need to make money. And the way that banks 95 00:05:49,360 --> 00:05:53,400 Speaker 1: make money, the way they generate wealth, is that customers 96 00:05:53,480 --> 00:05:56,880 Speaker 1: deposit money into a bank. The bank then takes these 97 00:05:56,880 --> 00:05:59,760 Speaker 1: deposits and starts to loan out some of that money 98 00:05:59,880 --> 00:06:04,120 Speaker 1: to other people who pay the loan back with interest. 99 00:06:04,680 --> 00:06:08,039 Speaker 1: So over the long haul, your money is safely stored 100 00:06:08,080 --> 00:06:10,920 Speaker 1: in the bank and the bank is making money through 101 00:06:11,160 --> 00:06:15,279 Speaker 1: interest through its loans, and everybody's happy. But you know, 102 00:06:15,320 --> 00:06:18,640 Speaker 1: banks have lots and lots of customers. Under normal conditions, 103 00:06:19,040 --> 00:06:21,120 Speaker 1: there wouldn't be very much of a problem. If you 104 00:06:21,160 --> 00:06:23,120 Speaker 1: decide to go to your bank and close out your 105 00:06:23,120 --> 00:06:26,680 Speaker 1: account and withdraw all of your money. Normally that would 106 00:06:26,680 --> 00:06:30,479 Speaker 1: be fine because there are tons of other customers. There's 107 00:06:30,520 --> 00:06:32,839 Speaker 1: lots and lots of money in the bank. There's plenty 108 00:06:32,839 --> 00:06:35,240 Speaker 1: of it in there for the bank to send you 109 00:06:35,240 --> 00:06:39,680 Speaker 1: your cash and close out your account. So as long 110 00:06:39,720 --> 00:06:41,960 Speaker 1: as the bank is keeping a careful tally of where 111 00:06:42,000 --> 00:06:46,599 Speaker 1: all those dollars are ultimately going and earmarking where they're 112 00:06:46,680 --> 00:06:50,040 Speaker 1: meant to be, everything's fine and you can just skid 113 00:06:50,080 --> 00:06:53,120 Speaker 1: at all. Depending on how active the bank is in 114 00:06:53,320 --> 00:06:56,760 Speaker 1: loaning out cash, you know, if a lot of people 115 00:06:56,839 --> 00:06:59,520 Speaker 1: come in to do the same thing, there could be 116 00:06:59,560 --> 00:07:02,840 Speaker 1: a serious shortfall. Right. If it's one person closing out 117 00:07:02,839 --> 00:07:07,200 Speaker 1: their account, that's nothing, but if it's say sixty percent 118 00:07:07,279 --> 00:07:11,440 Speaker 1: of your customers, that is a huge issue. And you 119 00:07:11,520 --> 00:07:14,240 Speaker 1: get into the statement that you'd hear in It's a 120 00:07:14,240 --> 00:07:17,240 Speaker 1: wonderful life, you know, Oh, well, the money's not here. 121 00:07:17,720 --> 00:07:21,240 Speaker 1: It's a Joe's house that's right next to yours. George 122 00:07:21,240 --> 00:07:23,680 Speaker 1: Bailey would say, shout out to Shay who made me 123 00:07:23,720 --> 00:07:29,000 Speaker 1: watch that movie. So, if the bank's customers include large companies, 124 00:07:30,120 --> 00:07:33,600 Speaker 1: like companies that depend upon massive bank accounts in order 125 00:07:33,640 --> 00:07:38,640 Speaker 1: to do stuff like pay employees, like that's the payroll account. 126 00:07:39,120 --> 00:07:42,280 Speaker 1: Things can get really really bad, right if there's a run, 127 00:07:42,400 --> 00:07:44,720 Speaker 1: Like if a company says, you know what, I don't 128 00:07:44,920 --> 00:07:48,200 Speaker 1: trust that this bank is going to be able to 129 00:07:48,240 --> 00:07:51,680 Speaker 1: stay in business. I've got hundreds of millions of dollars 130 00:07:51,680 --> 00:07:53,920 Speaker 1: in there. I need to pull it out. That's going 131 00:07:54,000 --> 00:07:55,920 Speaker 1: to be a massive hit to that bank, and it 132 00:07:56,000 --> 00:07:59,080 Speaker 1: ends up perpetuating the very problem that you're worried about 133 00:07:59,080 --> 00:08:02,120 Speaker 1: in the first place. So that's the too long, didn't 134 00:08:02,160 --> 00:08:05,560 Speaker 1: listen version of this story. Like you technically know what 135 00:08:05,640 --> 00:08:08,120 Speaker 1: happened to Silicon Valley Bank at this point, there was 136 00:08:08,160 --> 00:08:11,360 Speaker 1: a run on the bank. SVB could not cover all 137 00:08:11,360 --> 00:08:15,840 Speaker 1: the withdrawals. The us FDIC had to sweep in and 138 00:08:15,880 --> 00:08:18,680 Speaker 1: shut things down and take over. But there is a 139 00:08:18,720 --> 00:08:21,560 Speaker 1: lot more to this story, So hopefully you're going to 140 00:08:21,600 --> 00:08:23,320 Speaker 1: stick with me for the long run, and we're going 141 00:08:23,360 --> 00:08:26,120 Speaker 1: to cover the whole thing. So let's start by talking 142 00:08:26,120 --> 00:08:29,600 Speaker 1: about where Silicon Valley Bank even came from in the 143 00:08:29,640 --> 00:08:32,920 Speaker 1: first place. So we could go way, way way back, 144 00:08:32,960 --> 00:08:35,760 Speaker 1: but let's just start with the late seventies. You know, 145 00:08:35,920 --> 00:08:39,120 Speaker 1: disc goes on the decline. New wave is gearing up 146 00:08:39,160 --> 00:08:42,320 Speaker 1: to take over. A little movie called Star Wars changed 147 00:08:42,400 --> 00:08:46,640 Speaker 1: both film and merchandising forever. And a couple of casual 148 00:08:46,720 --> 00:08:49,079 Speaker 1: poker players came up with an idea for a bank 149 00:08:49,120 --> 00:08:52,280 Speaker 1: that could play an integral part in the blossoming Silicon 150 00:08:52,640 --> 00:08:57,160 Speaker 1: Valley landscape. Keep in mind the seventies, that's when we 151 00:08:57,320 --> 00:09:02,559 Speaker 1: just start seeing the very earliest stages of the Silicon 152 00:09:02,760 --> 00:09:06,480 Speaker 1: Valley flourishing, you know, that's when we started to see 153 00:09:06,480 --> 00:09:12,760 Speaker 1: the hobbyist community end up turning into the personal computer community. 154 00:09:13,120 --> 00:09:17,240 Speaker 1: It was an exciting time, and stuff was changing incredibly rapidly. 155 00:09:17,280 --> 00:09:20,920 Speaker 1: It seemed like the whole world was obeying Moore's law 156 00:09:21,280 --> 00:09:24,400 Speaker 1: at that point. All right, Well, one of these two 157 00:09:24,640 --> 00:09:29,280 Speaker 1: poker buddies was Robert Madeiras, a man from Kansas who 158 00:09:29,320 --> 00:09:32,600 Speaker 1: had moved to California to attend Stanford where he studied 159 00:09:32,640 --> 00:09:35,920 Speaker 1: civil engineering. Then he joined the Navy and served for 160 00:09:36,000 --> 00:09:38,600 Speaker 1: three years, and after that he pursued a degree at 161 00:09:38,600 --> 00:09:42,360 Speaker 1: Harvard Business School, and then after that he got into 162 00:09:42,480 --> 00:09:45,840 Speaker 1: a real estate company and moved back to California and 163 00:09:45,960 --> 00:09:49,840 Speaker 1: ultimately became a consulting professor back at Stanford, and there 164 00:09:49,880 --> 00:09:54,240 Speaker 1: he was encountering students who were facing very similar challenges. 165 00:09:54,320 --> 00:09:58,640 Speaker 1: These were students who had compelling ideas for a tech 166 00:09:58,760 --> 00:10:03,040 Speaker 1: based business, but how would they secure funding. They didn't 167 00:10:03,240 --> 00:10:08,160 Speaker 1: have the collateral needed to get big loans to start 168 00:10:08,160 --> 00:10:12,079 Speaker 1: a business. The tech business is a challenging one to 169 00:10:12,160 --> 00:10:15,400 Speaker 1: jump into. It has a lot of upfront costs that 170 00:10:15,440 --> 00:10:19,680 Speaker 1: are pretty darn high. And this was before the venture 171 00:10:19,920 --> 00:10:25,720 Speaker 1: capital community had really become a thing. So who was 172 00:10:25,760 --> 00:10:29,280 Speaker 1: going to make the risk of loaning money out to 173 00:10:29,880 --> 00:10:34,280 Speaker 1: these small startup businesses that could potentially become huge but 174 00:10:34,400 --> 00:10:37,840 Speaker 1: you don't know for sure. Most of the established banks 175 00:10:38,160 --> 00:10:41,800 Speaker 1: weren't interested in taking on that kind of risk. Robert 176 00:10:42,080 --> 00:10:46,800 Speaker 1: or Bob as he was often called, met Bill Biggerstaff, 177 00:10:47,160 --> 00:10:50,720 Speaker 1: a man who worked for Wells Fargo, so who had 178 00:10:50,760 --> 00:10:54,439 Speaker 1: a lot of experience in the banking industry. These two 179 00:10:54,559 --> 00:10:57,560 Speaker 1: lived in the same area. They were playing tennis together. 180 00:10:57,679 --> 00:11:01,160 Speaker 1: They're the ones who went into together on a poker 181 00:11:01,200 --> 00:11:03,080 Speaker 1: game that had a lot of movers and shakers and 182 00:11:03,080 --> 00:11:07,160 Speaker 1: Silicon Valley in it, and Bob decided to bend Bill's 183 00:11:07,240 --> 00:11:12,360 Speaker 1: ear about this idea that Bob had and essentially Bob's 184 00:11:12,400 --> 00:11:15,400 Speaker 1: idea was to create a financial institution, to create a 185 00:11:15,400 --> 00:11:18,760 Speaker 1: bank that primarily existed as a way to loan money 186 00:11:18,800 --> 00:11:22,560 Speaker 1: to startups and help get these concepts off the ground, 187 00:11:22,720 --> 00:11:25,200 Speaker 1: and in return, you know, they would end up getting 188 00:11:25,200 --> 00:11:27,800 Speaker 1: money and interest in all that sort of stuff. So 189 00:11:27,920 --> 00:11:31,440 Speaker 1: it was a key piece that was missing early in 190 00:11:31,480 --> 00:11:34,920 Speaker 1: the days of Silicon Valley. And around this time, another 191 00:11:34,960 --> 00:11:38,120 Speaker 1: important thing was happening. The Reagan administration in the United 192 00:11:38,160 --> 00:11:42,079 Speaker 1: States was easing off of regulations that otherwise would make 193 00:11:42,080 --> 00:11:45,839 Speaker 1: it challenging to start a new bank. So the thought 194 00:11:46,080 --> 00:11:50,280 Speaker 1: was that if you ease off on regulations, then more 195 00:11:50,480 --> 00:11:56,000 Speaker 1: local banks can form. People can actually make banks in 196 00:11:56,040 --> 00:12:02,199 Speaker 1: their local communities. These banks will support that local community 197 00:12:02,320 --> 00:12:06,560 Speaker 1: through loans, So you start to have money funneling into 198 00:12:06,679 --> 00:12:11,080 Speaker 1: communities and allowing those communities to grow by easing off 199 00:12:11,120 --> 00:12:13,760 Speaker 1: on the regulations that otherwise would make it difficult to 200 00:12:13,880 --> 00:12:19,400 Speaker 1: establish a bank. So the regulatory environment changed. Bob recognized 201 00:12:19,440 --> 00:12:22,160 Speaker 1: a need in the tech space, and Bill had the 202 00:12:22,200 --> 00:12:26,599 Speaker 1: banking experience. Plus Bill was apparently really really good at networking, 203 00:12:26,800 --> 00:12:29,240 Speaker 1: and he had already built up some strong connections throughout 204 00:12:29,240 --> 00:12:32,840 Speaker 1: Silicon Valley. You had the Stanford connections with the students 205 00:12:32,840 --> 00:12:36,560 Speaker 1: who were eager to start up their businesses fresh out 206 00:12:36,559 --> 00:12:40,120 Speaker 1: of school, I mean for ages. These tech colleges have 207 00:12:40,240 --> 00:12:44,920 Speaker 1: also acted kind of like incubators for tech startups. Now, 208 00:12:44,920 --> 00:12:47,880 Speaker 1: this was not an overnight effort. It actually took around 209 00:12:48,000 --> 00:12:50,920 Speaker 1: three years from the time they started talking about it 210 00:12:51,360 --> 00:12:54,040 Speaker 1: to when they were able to secure a charter for 211 00:12:54,080 --> 00:12:57,480 Speaker 1: their bank. So now we're up to nineteen eighty three. 212 00:12:57,559 --> 00:13:01,840 Speaker 1: Tom Cruise has the iconic risky business hit theaters, ensuring 213 00:13:01,840 --> 00:13:04,120 Speaker 1: that countless people over the years will copy his lip 214 00:13:04,120 --> 00:13:07,559 Speaker 1: singing style. While wearing tidy whiteis and a half unbuttoned shirt, 215 00:13:08,520 --> 00:13:11,720 Speaker 1: Bonnie Tyler was singing Total Eclipse of the Heart, the 216 00:13:11,760 --> 00:13:14,559 Speaker 1: song that was originally intended for a musical about vampires. 217 00:13:14,559 --> 00:13:17,680 Speaker 1: That's totally a real thing, look it up. And then 218 00:13:18,520 --> 00:13:23,800 Speaker 1: Bob and Bill brought on a third founder for the SVB. 219 00:13:24,240 --> 00:13:26,640 Speaker 1: This was a guy named Roger Smith who came from 220 00:13:26,720 --> 00:13:29,480 Speaker 1: the banking world as well, and Roger joined just as 221 00:13:29,520 --> 00:13:32,920 Speaker 1: the bank received its charter and became known as Silicon 222 00:13:33,280 --> 00:13:36,319 Speaker 1: Valley Bank. We got a lot more to talk about, 223 00:13:36,480 --> 00:13:49,880 Speaker 1: but before we get to that, let's take a quick break. Okay, 224 00:13:50,200 --> 00:13:54,520 Speaker 1: So Silicon Valley bank establishes itself in nineteen eighty three. Now, 225 00:13:54,520 --> 00:13:58,720 Speaker 1: at that time, the phrase Silicon Valley wasn't nearly as 226 00:13:58,880 --> 00:14:02,120 Speaker 1: well known as it is today. There were a lot 227 00:14:02,160 --> 00:14:05,360 Speaker 1: of startup tech companies that had Silicon in their names, 228 00:14:05,960 --> 00:14:10,199 Speaker 1: but it's not like Silicon Valley had really taken hold 229 00:14:10,280 --> 00:14:14,000 Speaker 1: in culture yet. So in many ways, the founders were 230 00:14:14,080 --> 00:14:16,920 Speaker 1: lucky that things went the way they did, or you 231 00:14:16,960 --> 00:14:20,920 Speaker 1: could argue they weren't lucky. Maybe they actually helped forge 232 00:14:21,160 --> 00:14:25,880 Speaker 1: the reality of Silicon Valley because now tech companies had 233 00:14:25,920 --> 00:14:29,880 Speaker 1: a bank that would cater to them that welcomed their business. 234 00:14:30,320 --> 00:14:32,960 Speaker 1: Tech startups that had previously found it difficult to secure 235 00:14:33,040 --> 00:14:36,640 Speaker 1: loans through traditional banks had another option. Now this didn't 236 00:14:36,720 --> 00:14:40,840 Speaker 1: mean that SBB gave out loans to absolutely anyone. They 237 00:14:40,880 --> 00:14:45,040 Speaker 1: still evaluated them, but they were much more likely to 238 00:14:46,120 --> 00:14:48,480 Speaker 1: grant a loan out to someone who seemed to have 239 00:14:48,520 --> 00:14:53,080 Speaker 1: a really strong idea and helped fund those early tech 240 00:14:53,200 --> 00:14:56,800 Speaker 1: companies in Silicon Valley. And of course we all know 241 00:14:57,480 --> 00:15:03,280 Speaker 1: that the tech industry would explode and grow to gargaguin proportions, 242 00:15:03,920 --> 00:15:07,440 Speaker 1: and SVB would grow along with the rest of the industry. 243 00:15:07,880 --> 00:15:12,120 Speaker 1: Along the way. It helped fuel countless startups, some of 244 00:15:12,120 --> 00:15:16,600 Speaker 1: which would grow in turn, and others would, of course 245 00:15:16,680 --> 00:15:20,880 Speaker 1: unfortunately flounder and fail, and more established tech companies would 246 00:15:20,920 --> 00:15:24,480 Speaker 1: continue to bank with SVB and use massive accounts to 247 00:15:24,520 --> 00:15:27,720 Speaker 1: handle stuff like payroll. So, as you might imagine, the 248 00:15:27,760 --> 00:15:30,800 Speaker 1: payroll account has to be really, really really large for 249 00:15:30,880 --> 00:15:33,800 Speaker 1: some of these tech companies. And then you had like 250 00:15:33,880 --> 00:15:37,720 Speaker 1: venture capitalists who were using the bank to help fund 251 00:15:37,840 --> 00:15:42,280 Speaker 1: their investments. And all of this was sort of this 252 00:15:42,400 --> 00:15:48,160 Speaker 1: mutually beneficial relationship, a symbiotic relationship, but one in which 253 00:15:48,520 --> 00:15:54,880 Speaker 1: if any party were to suffer disproportionately, it would ultimately 254 00:15:55,000 --> 00:16:00,240 Speaker 1: hurt the others in it as well. That's foreshadowing, all right. 255 00:16:00,320 --> 00:16:05,360 Speaker 1: So how do we go from a bank that is 256 00:16:05,440 --> 00:16:09,680 Speaker 1: a financial pillar for much of the tech industries, really 257 00:16:09,720 --> 00:16:13,600 Speaker 1: of the startup industry in particular, but for established companies too, 258 00:16:14,080 --> 00:16:16,720 Speaker 1: how do we go from that to a bank that 259 00:16:16,800 --> 00:16:20,400 Speaker 1: collapses in a matter of a couple of days. Well, 260 00:16:20,400 --> 00:16:23,280 Speaker 1: while there are some overlaps with silver Gate, this one 261 00:16:23,320 --> 00:16:25,800 Speaker 1: didn't have anything to do with crypto, but it had 262 00:16:25,840 --> 00:16:29,880 Speaker 1: a lot to do about interest rates. So if you're 263 00:16:29,960 --> 00:16:32,680 Speaker 1: lucky enough to never have had to worry about interest rates, 264 00:16:33,680 --> 00:16:36,760 Speaker 1: I'll give you a quick explanation. An interest rate is 265 00:16:36,840 --> 00:16:42,200 Speaker 1: the amount that's paid on top of a sum of money. 266 00:16:42,720 --> 00:16:45,640 Speaker 1: So we mostly talked about this in the form of loans. 267 00:16:45,640 --> 00:16:49,640 Speaker 1: I mean there's you know, like bank account interest rates too, 268 00:16:49,680 --> 00:16:53,520 Speaker 1: which goes to the opposite direction. But with loans, you know, 269 00:16:53,600 --> 00:16:56,440 Speaker 1: you have the amount that you borrowed, and the interest 270 00:16:56,520 --> 00:16:58,760 Speaker 1: rate is the amount on top of what you borrowed 271 00:16:58,760 --> 00:17:02,720 Speaker 1: that you will pay back to the lender. So we 272 00:17:02,840 --> 00:17:05,760 Speaker 1: usually think of this as percentages. Actually we think of 273 00:17:05,760 --> 00:17:09,200 Speaker 1: it an annual percentage rates or APR. So this tells 274 00:17:09,240 --> 00:17:11,480 Speaker 1: you how much of a percentage of the amount you've 275 00:17:11,480 --> 00:17:15,600 Speaker 1: borrowed on top of that you're going to be paying back. Right, So, 276 00:17:16,240 --> 00:17:18,720 Speaker 1: if interest rates are low, folks are more eager to 277 00:17:18,760 --> 00:17:22,080 Speaker 1: take out loans because they're not paying as much on 278 00:17:22,080 --> 00:17:25,200 Speaker 1: top of the loan amount itself. It is less expensive 279 00:17:25,240 --> 00:17:27,840 Speaker 1: to take out a loan. You keep more of the 280 00:17:27,920 --> 00:17:31,920 Speaker 1: money that you make using that loan to do whatever 281 00:17:31,960 --> 00:17:34,520 Speaker 1: it is you wanted to do, assuming that you know 282 00:17:35,240 --> 00:17:37,560 Speaker 1: it was being put forth in a way where it 283 00:17:37,560 --> 00:17:39,800 Speaker 1: was going to generate revenue. Otherwise, what you think of 284 00:17:39,800 --> 00:17:42,320 Speaker 1: it is it's a way to manage debt. You don't 285 00:17:42,440 --> 00:17:44,400 Speaker 1: go for a loan that has a high interest rate 286 00:17:44,840 --> 00:17:46,560 Speaker 1: because that means you're going to be owing even more 287 00:17:46,600 --> 00:17:50,560 Speaker 1: money in the long term. So this encourages stuff like investments. Right. 288 00:17:50,640 --> 00:17:54,160 Speaker 1: A person might take out a loan to invest money 289 00:17:54,160 --> 00:17:57,359 Speaker 1: into a project if there's a low interest rate on 290 00:17:57,400 --> 00:18:00,199 Speaker 1: the loan because they might believe, Hey, this project's to 291 00:18:00,200 --> 00:18:02,960 Speaker 1: pay out big time, and then I could pay off 292 00:18:03,000 --> 00:18:05,920 Speaker 1: the loan, I can pay off the interest, I could 293 00:18:05,920 --> 00:18:08,399 Speaker 1: pass go collect two hundred dollars. I'm in the clear. 294 00:18:08,520 --> 00:18:14,040 Speaker 1: I've made a profit. But when interest rates go up, well, 295 00:18:14,119 --> 00:18:17,040 Speaker 1: it becomes much more expensive to secure a loan. Right, 296 00:18:17,160 --> 00:18:19,919 Speaker 1: You've got to pay more on top of the loaned amount, 297 00:18:20,000 --> 00:18:22,399 Speaker 1: and that cuts into whatever profit you might realize with 298 00:18:22,480 --> 00:18:24,680 Speaker 1: your projects. So even if your project is a success, 299 00:18:25,720 --> 00:18:27,240 Speaker 1: you're not going to make as much money because you 300 00:18:27,320 --> 00:18:29,520 Speaker 1: got to pay that interest rate back to the lender. 301 00:18:30,400 --> 00:18:34,600 Speaker 1: So this kind of dampens down the enthusiasm to invest 302 00:18:34,680 --> 00:18:37,800 Speaker 1: in projects. Right. I mean, some of these projects might 303 00:18:37,880 --> 00:18:42,400 Speaker 1: take a long time to start realizing a revenue. In fact, 304 00:18:42,480 --> 00:18:45,560 Speaker 1: some of them may have no business plan to speak of, 305 00:18:45,720 --> 00:18:49,280 Speaker 1: and that the real plan isn't to make money as 306 00:18:49,320 --> 00:18:52,880 Speaker 1: a business, but to hopefully get gobbled up by some 307 00:18:52,960 --> 00:18:56,480 Speaker 1: bigger fish for a large payout. But all of these 308 00:18:56,480 --> 00:18:58,680 Speaker 1: things can take time, and meanwhile, you know, you've got 309 00:18:58,680 --> 00:19:01,480 Speaker 1: your loan payments at that interest rate on top of them, 310 00:19:01,680 --> 00:19:04,000 Speaker 1: and that could be a real buzzkill, so it can 311 00:19:04,119 --> 00:19:08,280 Speaker 1: really slow down investments in the space. But for a 312 00:19:08,280 --> 00:19:11,520 Speaker 1: really long time, interest rates in the US were super 313 00:19:11,600 --> 00:19:14,520 Speaker 1: duper low, and you know, more recently they were super 314 00:19:14,600 --> 00:19:19,080 Speaker 1: duper duper low, and you might think, oh, super low 315 00:19:19,080 --> 00:19:21,720 Speaker 1: interest rates, that means way more loans, and a bank 316 00:19:21,800 --> 00:19:24,199 Speaker 1: specializing in loans to the tech sector was going to 317 00:19:24,200 --> 00:19:28,080 Speaker 1: see a whole lot of business. And often that would 318 00:19:28,080 --> 00:19:32,919 Speaker 1: be true, except recently you were in a tech sector 319 00:19:33,080 --> 00:19:40,399 Speaker 1: where companies, including venture capitalist companies, were just flush with cash. 320 00:19:40,440 --> 00:19:43,719 Speaker 1: There was very little need for loans because everyone already 321 00:19:43,720 --> 00:19:46,679 Speaker 1: had the cash on hand to make investments. So, like 322 00:19:46,760 --> 00:19:49,880 Speaker 1: venture capital companies, they might invest in companies that then 323 00:19:50,000 --> 00:19:52,800 Speaker 1: go public, and as part of going public, the venture 324 00:19:52,800 --> 00:19:57,280 Speaker 1: capitalists they get paid out, so they realize a huge 325 00:19:57,320 --> 00:20:01,600 Speaker 1: return on that initial investment. So now they've got way 326 00:20:01,600 --> 00:20:04,719 Speaker 1: more cash than they did before, they don't necessarily need 327 00:20:04,800 --> 00:20:07,400 Speaker 1: to go and secure a loan for their next investment. 328 00:20:08,280 --> 00:20:13,800 Speaker 1: So SVB actually mentioned this in their ten K report 329 00:20:13,840 --> 00:20:17,080 Speaker 1: a few weeks ago. This is a straight quote from 330 00:20:17,080 --> 00:20:21,280 Speaker 1: that report. Quote. Much of the recent deposit growth was 331 00:20:21,400 --> 00:20:25,360 Speaker 1: driven by our clients across all segments obtaining liquidity through 332 00:20:25,520 --> 00:20:32,480 Speaker 1: liquidity events such as IPOs, secondary offerings, SPAC fundraising, venture 333 00:20:32,600 --> 00:20:38,000 Speaker 1: capital investments, acquisitions, and other fundraising activities, which during twenty 334 00:20:38,040 --> 00:20:40,879 Speaker 1: twenty one and early twenty twenty two were at notably 335 00:20:41,119 --> 00:20:45,520 Speaker 1: high levels end quote. So in other words, ain't no 336 00:20:45,560 --> 00:20:48,520 Speaker 1: one going to get a loan? They are all flush 337 00:20:48,640 --> 00:20:54,159 Speaker 1: with cash. So SBB saw bank accounts swell with deposits. 338 00:20:54,200 --> 00:20:58,280 Speaker 1: The deposit amount was growing with SVB, but the needs 339 00:20:58,320 --> 00:21:02,879 Speaker 1: for loans were dropping. So you gotta remember a bank 340 00:21:03,080 --> 00:21:05,600 Speaker 1: is a business. If the bank is not issuing as 341 00:21:05,640 --> 00:21:10,000 Speaker 1: many loans, how then does it make money as a business. Well, 342 00:21:10,560 --> 00:21:15,680 Speaker 1: SVB started to purchase stuff like treasury bonds and government securities. 343 00:21:16,320 --> 00:21:19,800 Speaker 1: These payout at a rate where it's you know, you're 344 00:21:19,840 --> 00:21:23,160 Speaker 1: able to redeem them for more than what it costs 345 00:21:23,160 --> 00:21:25,600 Speaker 1: to buy them, but it takes time for them to mature. 346 00:21:25,920 --> 00:21:28,200 Speaker 1: If you try to cash out early, you get way 347 00:21:28,280 --> 00:21:30,639 Speaker 1: less for them than if you held onto them for 348 00:21:30,680 --> 00:21:35,879 Speaker 1: the whole time. Silvergate had previously poured a lot of 349 00:21:35,920 --> 00:21:38,879 Speaker 1: money into these and part of silver gates crisis was 350 00:21:38,920 --> 00:21:42,160 Speaker 1: that it was selling off its assets for way less 351 00:21:42,160 --> 00:21:45,600 Speaker 1: than what had been planned, just to cover the withdrawals 352 00:21:45,640 --> 00:21:48,320 Speaker 1: that were happening at the time, and the cascade meant 353 00:21:48,359 --> 00:21:52,359 Speaker 1: that the bank was unable to remain solvent. While SVB 354 00:21:52,560 --> 00:21:57,040 Speaker 1: catered to a different, more established clientele, it suffered a 355 00:21:57,160 --> 00:22:00,240 Speaker 1: very similar fate. At the end of twenty twenty two, 356 00:22:00,560 --> 00:22:04,800 Speaker 1: SVB held on around one hundred and twenty billion dollars 357 00:22:04,840 --> 00:22:08,280 Speaker 1: worth of securities. Now it gets more complicated than that. 358 00:22:09,320 --> 00:22:12,120 Speaker 1: There are different types of securities, and a bank has 359 00:22:12,160 --> 00:22:15,960 Speaker 1: to say what type of security it's investing in when 360 00:22:15,960 --> 00:22:20,919 Speaker 1: it doesn't so there are held to maturity or HTM securities. 361 00:22:21,520 --> 00:22:24,160 Speaker 1: Those are ones that, as the name suggests, you hold 362 00:22:24,200 --> 00:22:26,880 Speaker 1: onto until they mature, at which case then you can 363 00:22:26,880 --> 00:22:31,520 Speaker 1: sell them off. But in the meantime they're on your accounts. 364 00:22:32,000 --> 00:22:35,320 Speaker 1: Whether the market values go up or down. They have 365 00:22:35,440 --> 00:22:37,560 Speaker 1: to stay there on your accounts until it's time for 366 00:22:37,600 --> 00:22:40,879 Speaker 1: them to be sold because they have matured. Now to 367 00:22:40,920 --> 00:22:42,640 Speaker 1: get into the real nuts and bolts of all this 368 00:22:43,160 --> 00:22:46,440 Speaker 1: would require a finance podcaster type that ain't me but 369 00:22:46,800 --> 00:22:50,440 Speaker 1: just know that some securities are HTM and some are 370 00:22:50,960 --> 00:22:54,680 Speaker 1: you know, you can sell whenever you like, but they 371 00:22:54,760 --> 00:22:58,600 Speaker 1: are subject to the fluctuations of market value, which means 372 00:22:58,720 --> 00:23:01,200 Speaker 1: at times they can be worth less than what you 373 00:23:01,280 --> 00:23:06,680 Speaker 1: paid for them. Previously, SBB had put a lot of 374 00:23:06,800 --> 00:23:12,280 Speaker 1: its assets into the HTM style of securities. However, as 375 00:23:12,359 --> 00:23:16,680 Speaker 1: long as everyone remained chill, SVB would have been fine. Right. Yes, 376 00:23:16,760 --> 00:23:18,880 Speaker 1: it had poured a lot of its money into these 377 00:23:18,960 --> 00:23:23,560 Speaker 1: long term securities, which meant that it was all tied up, 378 00:23:24,000 --> 00:23:27,480 Speaker 1: and that meant that they didn't have as much money 379 00:23:27,520 --> 00:23:30,280 Speaker 1: in their and their vault. You could think of it 380 00:23:30,359 --> 00:23:31,639 Speaker 1: that way. They didn't have as much money in the 381 00:23:31,680 --> 00:23:35,960 Speaker 1: vault to cover everybody's accounts. But again, if everyone had 382 00:23:35,960 --> 00:23:38,800 Speaker 1: stayed chill, things would have been okay. The only thing 383 00:23:38,800 --> 00:23:41,159 Speaker 1: that would really upset the apple cart would be something 384 00:23:41,200 --> 00:23:44,560 Speaker 1: like interest rates going up significantly or a run on 385 00:23:44,600 --> 00:23:48,320 Speaker 1: the bank. And then the interest rate went up significantly. 386 00:23:49,160 --> 00:23:52,040 Speaker 1: Now the reason for that was that the US federal 387 00:23:52,080 --> 00:23:55,800 Speaker 1: government was trying to counteract inflation. And again, this gets 388 00:23:55,840 --> 00:23:57,920 Speaker 1: super in the weeds and it's kind of beyond a 389 00:23:58,040 --> 00:24:01,600 Speaker 1: tech podcast, but we'll give the super oversimplified explanation. So 390 00:24:01,840 --> 00:24:08,760 Speaker 1: when demand is high but supply is limited, prices go up. Right, Like, 391 00:24:09,440 --> 00:24:13,800 Speaker 1: if everybody wants eggs, but there's only you know, enough 392 00:24:13,840 --> 00:24:16,360 Speaker 1: eggs for twenty percent of the people there, those egg 393 00:24:16,400 --> 00:24:19,640 Speaker 1: prices go way, way, way up. Everybody wants them, there's 394 00:24:19,680 --> 00:24:23,640 Speaker 1: not enough for everybody, and the market settles this out 395 00:24:23,720 --> 00:24:28,120 Speaker 1: by making them ridiculously expensive. Basic laws of supply demand, Right. 396 00:24:28,960 --> 00:24:32,040 Speaker 1: But if costs keep going up, then you have a 397 00:24:32,080 --> 00:24:35,639 Speaker 1: problem with inflation on your hands. That the purchasing power 398 00:24:35,840 --> 00:24:40,000 Speaker 1: of your money decreases and it requires more and more 399 00:24:40,000 --> 00:24:43,720 Speaker 1: and more money to buy basic stuff. And even if 400 00:24:43,720 --> 00:24:46,640 Speaker 1: you are really careful with your cash, if suddenly your 401 00:24:46,680 --> 00:24:50,000 Speaker 1: cash buys less because of its purchasing power, there's not 402 00:24:50,080 --> 00:24:53,119 Speaker 1: much you can do as an individual. So what the 403 00:24:53,280 --> 00:24:58,520 Speaker 1: government does is it adjusts something called the federal funds rate. 404 00:24:58,920 --> 00:25:02,560 Speaker 1: When banks lend money to other banks, they do so 405 00:25:02,720 --> 00:25:07,120 Speaker 1: using the federal funds rate. This rate, in turn influences 406 00:25:07,160 --> 00:25:11,680 Speaker 1: the interest rates that banks use on their loans. So 407 00:25:11,720 --> 00:25:14,320 Speaker 1: if you turn the dial on the federal funds rate, 408 00:25:14,359 --> 00:25:17,879 Speaker 1: this kind of trickles down through the rest of the 409 00:25:17,920 --> 00:25:22,600 Speaker 1: banking and loan industry. All right, So by cranking up 410 00:25:22,720 --> 00:25:25,879 Speaker 1: the federal funds rate, the interest rates across the board 411 00:25:25,960 --> 00:25:28,600 Speaker 1: start to go up, and that means it gets more 412 00:25:28,640 --> 00:25:32,560 Speaker 1: expensive if you want to borrow money, So that discourages 413 00:25:32,560 --> 00:25:36,520 Speaker 1: people from borrowing money, which also means it discourages people 414 00:25:36,600 --> 00:25:42,080 Speaker 1: from spending that borrowed money on stuff. That means demand 415 00:25:42,160 --> 00:25:44,960 Speaker 1: starts to go down because people are holding onto their 416 00:25:45,000 --> 00:25:47,960 Speaker 1: cash right, they're not spending it as readily. So as 417 00:25:48,000 --> 00:25:52,800 Speaker 1: demand goes down, prices go down. So hiking up the 418 00:25:52,840 --> 00:25:56,280 Speaker 1: interest rate convinces folks to go without. That in turn 419 00:25:56,359 --> 00:26:00,240 Speaker 1: means the price for goods and services drop and we 420 00:26:00,520 --> 00:26:04,280 Speaker 1: end up sidestepping some inflation problems. We're all in this together, 421 00:26:04,359 --> 00:26:07,639 Speaker 1: in other words, all right back to SVB. So the 422 00:26:07,680 --> 00:26:11,440 Speaker 1: interest rates go up, investment companies start to clamp down 423 00:26:11,600 --> 00:26:16,520 Speaker 1: on investments. Startups still need money to operate, but now 424 00:26:16,680 --> 00:26:20,560 Speaker 1: venture capitalist sources are dried up because they don't want 425 00:26:20,600 --> 00:26:24,439 Speaker 1: to overextend themselves. They don't want to borrow money with 426 00:26:24,520 --> 00:26:27,960 Speaker 1: the interest rate being so high, So now startups are 427 00:26:28,000 --> 00:26:32,040 Speaker 1: starting to have to dip into their own reserves in 428 00:26:32,119 --> 00:26:37,960 Speaker 1: order to cover operating costs. So SVB has funds in 429 00:26:38,040 --> 00:26:40,960 Speaker 1: its vaults, but it's also heavily invested in these securities 430 00:26:41,280 --> 00:26:44,520 Speaker 1: and it's not supposed to touch those for several more 431 00:26:44,600 --> 00:26:48,320 Speaker 1: years because they haven't matured yet. So as companies begin 432 00:26:48,400 --> 00:26:51,119 Speaker 1: to withdraw more and more money just to cover costs, 433 00:26:51,680 --> 00:26:55,200 Speaker 1: SVB with seeing its reserves depleted. Now, this could still 434 00:26:55,240 --> 00:26:58,200 Speaker 1: have been salvageable if there had not been a run 435 00:26:58,240 --> 00:27:01,320 Speaker 1: on the bank, but when you've got big companies that 436 00:27:01,400 --> 00:27:04,399 Speaker 1: are depending on money being there so that they can 437 00:27:04,440 --> 00:27:08,600 Speaker 1: do stuff like make payroll, stakes are pretty darn high. 438 00:27:08,640 --> 00:27:12,760 Speaker 1: So more and more customers were concerned that they wouldn't 439 00:27:12,800 --> 00:27:16,200 Speaker 1: be able to operate if they didn't withdraw all their 440 00:27:16,240 --> 00:27:18,919 Speaker 1: money because they were worried about what might happen to SVB. 441 00:27:19,440 --> 00:27:22,720 Speaker 1: So for SVB to cover all these withdrawals, they had 442 00:27:22,760 --> 00:27:25,479 Speaker 1: to start selling off some of those securities. But these 443 00:27:25,560 --> 00:27:29,119 Speaker 1: securities weren't mature yet, so they were selling them at 444 00:27:29,160 --> 00:27:32,880 Speaker 1: a pretty massive loss. In fact, that loss was nearly 445 00:27:32,960 --> 00:27:38,320 Speaker 1: two billion dollars. However, it gave SVB liquidity, right. They 446 00:27:38,359 --> 00:27:41,600 Speaker 1: suddenly had cash where they could cover withdrawals at least 447 00:27:41,600 --> 00:27:44,399 Speaker 1: for a short time, even though the business itself was 448 00:27:44,400 --> 00:27:49,600 Speaker 1: taking this massive loss in the process. Then Silvergate goes 449 00:27:49,640 --> 00:27:54,920 Speaker 1: belly up and investors freak the heck out. Now, mind you, 450 00:27:55,640 --> 00:28:01,480 Speaker 1: the issues at Silvergate were different from SVB. I mean, yes, 451 00:28:01,720 --> 00:28:06,520 Speaker 1: SVB and Silvergate both were dependent upon securities, but silver 452 00:28:06,680 --> 00:28:11,080 Speaker 1: gates problems were largely due to its involvement in the 453 00:28:11,080 --> 00:28:15,160 Speaker 1: crypto world. That was not something that was a big 454 00:28:15,160 --> 00:28:20,120 Speaker 1: concern for SVB. But the big players, you know, entities 455 00:28:20,119 --> 00:28:23,000 Speaker 1: that had hundreds of millions or even billions of dollars 456 00:28:23,080 --> 00:28:27,520 Speaker 1: in SVB started to pull out, and some fund management 457 00:28:27,560 --> 00:28:30,840 Speaker 1: companies started to tell their clients, hey, you probably want 458 00:28:30,840 --> 00:28:33,040 Speaker 1: to get your money out of SVB while you still 459 00:28:33,119 --> 00:28:36,720 Speaker 1: can before they run out of cash and things really 460 00:28:36,760 --> 00:28:41,600 Speaker 1: go south. That creates this panic, and it actually creates 461 00:28:41,600 --> 00:28:44,840 Speaker 1: the very problem that the companies were trying to escape from. 462 00:28:44,920 --> 00:28:48,800 Speaker 1: Right They were worried that everybody else was going to 463 00:28:48,840 --> 00:28:50,720 Speaker 1: do the thing that they were telling people to do, 464 00:28:51,040 --> 00:28:56,200 Speaker 1: Whereas if everyone had just chilled, then it's quite possible 465 00:28:56,240 --> 00:28:59,160 Speaker 1: that this collapse could have been avoided. But because everybody 466 00:28:59,240 --> 00:29:01,560 Speaker 1: was scared and they were all trying to get their 467 00:29:01,560 --> 00:29:04,520 Speaker 1: money at the same time, SVB was put into an 468 00:29:04,800 --> 00:29:09,880 Speaker 1: impossible situation. So over the course of last Thursday and Friday, 469 00:29:10,400 --> 00:29:13,320 Speaker 1: enough big players try to withdraw their money to that 470 00:29:13,480 --> 00:29:17,160 Speaker 1: forced SVB to shut down, and the FDIC swooped in 471 00:29:17,760 --> 00:29:20,320 Speaker 1: to try and salvage things, or really just to stop 472 00:29:20,360 --> 00:29:24,560 Speaker 1: things from getting way worse than they already were. Okay, 473 00:29:24,560 --> 00:29:27,640 Speaker 1: we'll explain more about that, but first, let's take another 474 00:29:27,720 --> 00:29:39,520 Speaker 1: quick break. All right, Now, let's finally talk about the 475 00:29:39,600 --> 00:29:44,360 Speaker 1: FDIC that actually stands for the Federal Deposit Insurance Corporation. 476 00:29:45,160 --> 00:29:48,440 Speaker 1: So this organization ensures deposits and most banks in the 477 00:29:48,520 --> 00:29:52,600 Speaker 1: United States. The word boast is important. Most banks are 478 00:29:53,000 --> 00:29:56,840 Speaker 1: ensured by FDIC, and the FDIC is there to provide 479 00:29:56,840 --> 00:30:00,320 Speaker 1: protection to customers and avoid a situation in which a 480 00:30:00,400 --> 00:30:02,920 Speaker 1: bank fails and then all the customer money goes up 481 00:30:02,920 --> 00:30:06,200 Speaker 1: and spoke right, That would be awful if you had 482 00:30:06,240 --> 00:30:11,000 Speaker 1: done nothing wrong, but you are suddenly pennyless because the 483 00:30:11,040 --> 00:30:14,360 Speaker 1: money you had deposited in a bank is gone, because 484 00:30:14,400 --> 00:30:18,080 Speaker 1: the bank itself is gone. That's why the FDIC exists. 485 00:30:18,680 --> 00:30:21,960 Speaker 1: It ensures the money you put in the bank so 486 00:30:22,000 --> 00:30:25,080 Speaker 1: that if the bank goes down, you still have that money. 487 00:30:25,160 --> 00:30:29,600 Speaker 1: The FDIC gives you your money, but there is a limit. 488 00:30:30,400 --> 00:30:33,840 Speaker 1: There's an FDIC limit on the amount of money it 489 00:30:33,920 --> 00:30:38,080 Speaker 1: can ensure her account, and that limit is two hundred 490 00:30:38,240 --> 00:30:42,760 Speaker 1: fifty thousand dollars in an account. Now, most of us 491 00:30:43,240 --> 00:30:47,000 Speaker 1: would consider ourselves incredibly fortunate if we happen to have 492 00:30:47,760 --> 00:30:49,920 Speaker 1: more than two hundred and fifty thousand dollars to put 493 00:30:49,960 --> 00:30:52,920 Speaker 1: into a bank. But when you're talking about tech companies 494 00:30:53,200 --> 00:30:57,200 Speaker 1: that are handling massive business transactions, a quarter of a 495 00:30:57,200 --> 00:30:59,240 Speaker 1: million dollars is just a drop of the bucket for 496 00:30:59,280 --> 00:31:02,480 Speaker 1: some of these companies. Going back to the example I 497 00:31:02,600 --> 00:31:05,200 Speaker 1: keep mentioning payroll being a huge one. Right, if you 498 00:31:05,280 --> 00:31:08,440 Speaker 1: are a sizeable company and you've got a big payroll 499 00:31:08,560 --> 00:31:10,880 Speaker 1: and you need to have a bank account to handle 500 00:31:11,120 --> 00:31:14,120 Speaker 1: the transactions, the amount of money that's going to go 501 00:31:14,160 --> 00:31:17,080 Speaker 1: into that account is going to be well in excess 502 00:31:17,080 --> 00:31:20,200 Speaker 1: of two hundred fifty thousand dollars, and anything beyond two 503 00:31:20,280 --> 00:31:24,880 Speaker 1: hundred fifty thousand dollars is uninsured. According to svb's own 504 00:31:24,960 --> 00:31:30,400 Speaker 1: regulatory filing earlier this year, about ninety percent of all 505 00:31:30,520 --> 00:31:35,960 Speaker 1: the deposits in SVB were uninsured. So that means like 506 00:31:36,040 --> 00:31:39,440 Speaker 1: ninety percent of the deposits were in accounts that exceeded 507 00:31:39,840 --> 00:31:44,600 Speaker 1: two hundred and fifty thousand dollars of FDIC protection, only 508 00:31:44,720 --> 00:31:47,520 Speaker 1: ten percent of deposits in that bank were in accounts 509 00:31:47,560 --> 00:31:50,560 Speaker 1: that held less than two hundred fifty thousand by December 510 00:31:50,560 --> 00:31:54,480 Speaker 1: of last year. That is incredible, right, So when the 511 00:31:54,600 --> 00:31:58,120 Speaker 1: FDIC stepped end, that is when I heard the other 512 00:31:58,160 --> 00:32:01,320 Speaker 1: folks destined to be on my flight to Austin, Texas 513 00:32:01,360 --> 00:32:05,120 Speaker 1: have their moment of panic. Presumably these were folks who 514 00:32:05,160 --> 00:32:10,040 Speaker 1: had accounts in SVB that were over this insured amount. 515 00:32:10,120 --> 00:32:13,240 Speaker 1: Whether they were personal accounts or part of business accounts, 516 00:32:13,280 --> 00:32:17,880 Speaker 1: I don't know, but that would be an enormous scary 517 00:32:18,000 --> 00:32:23,960 Speaker 1: prospect that you have massive, maybe millions of dollars in 518 00:32:24,040 --> 00:32:27,200 Speaker 1: this bank, and the bank has suddenly been seized by 519 00:32:27,280 --> 00:32:31,240 Speaker 1: regulators and only two hundred and fifty thousand dollars in 520 00:32:31,280 --> 00:32:37,880 Speaker 1: each account is insured. That could be a truly catastrophic loss. 521 00:32:38,000 --> 00:32:42,560 Speaker 1: Right to put it another way, SBB held one hundred 522 00:32:42,800 --> 00:32:46,440 Speaker 1: seventy three billion dollars in deposits at the end of 523 00:32:46,440 --> 00:32:50,280 Speaker 1: twenty twenty two. Total one hundred seventy three billion dollars 524 00:32:50,280 --> 00:32:54,479 Speaker 1: of customer money put into deposits in SVB. Of that, 525 00:32:55,200 --> 00:33:02,360 Speaker 1: one hundred fifty two billion was uninsured, so did one 526 00:33:02,440 --> 00:33:07,440 Speaker 1: hundred and fifty two billion dollars just plane disappear. Well, 527 00:33:07,760 --> 00:33:11,320 Speaker 1: SVB still held assets which can be liquidated to cover 528 00:33:11,440 --> 00:33:14,120 Speaker 1: some of the costs, but there was a lot of 529 00:33:14,200 --> 00:33:17,280 Speaker 1: uncertainty they didn't know, like how is the FDIC going 530 00:33:17,360 --> 00:33:20,560 Speaker 1: to handle this? How much of that unasured money will 531 00:33:20,600 --> 00:33:24,040 Speaker 1: be returned to depositors. On top of that, you still 532 00:33:24,040 --> 00:33:26,240 Speaker 1: had all these companies that needed to do stuff like 533 00:33:26,400 --> 00:33:30,640 Speaker 1: pay employees or make other big transactions, but their money 534 00:33:31,040 --> 00:33:33,040 Speaker 1: happened to be tied to accounts that were in a 535 00:33:33,120 --> 00:33:38,080 Speaker 1: shutdown financial institution, which totally throws a monkey wrench in 536 00:33:38,160 --> 00:33:41,600 Speaker 1: corporate operations. So you suddenly have these tech companies that 537 00:33:41,680 --> 00:33:43,320 Speaker 1: don't even know if they're going to be able to 538 00:33:43,360 --> 00:33:48,920 Speaker 1: do basic stuff like pay rent, pay employees. You know, 539 00:33:49,080 --> 00:33:55,560 Speaker 1: all the mundane, regular transactions are completely disrupted because the 540 00:33:55,600 --> 00:33:58,960 Speaker 1: financial institution at the heart of things has been seized. 541 00:33:59,760 --> 00:34:03,920 Speaker 1: That uncertainty bread a lot of fear, understandably, like even 542 00:34:04,000 --> 00:34:07,760 Speaker 1: people who weren't control of the money are scared. Like 543 00:34:07,760 --> 00:34:10,200 Speaker 1: if you work for one of these big companies, you 544 00:34:10,320 --> 00:34:13,440 Speaker 1: might wonder, am I going to get a paycheck this month? 545 00:34:13,719 --> 00:34:17,560 Speaker 1: How long until I get my next paycheck? How much 546 00:34:17,560 --> 00:34:20,839 Speaker 1: money do I have to be able to cover expenses 547 00:34:20,960 --> 00:34:24,280 Speaker 1: until that paycheck gets to me. It's a big, big deal. 548 00:34:24,320 --> 00:34:28,120 Speaker 1: And again, it was affecting pretty much the entire tech 549 00:34:28,200 --> 00:34:33,120 Speaker 1: sector because so many companies were making use of this bank. 550 00:34:34,200 --> 00:34:37,920 Speaker 1: Now the US government has stepped up and essentially announced 551 00:34:37,920 --> 00:34:40,680 Speaker 1: a bailout that the government is going to cover the 552 00:34:40,719 --> 00:34:46,160 Speaker 1: money deposited in SVB, even the uninsured amounts of money. Now, 553 00:34:46,200 --> 00:34:48,200 Speaker 1: this was done in large part to try and stop 554 00:34:48,239 --> 00:34:51,600 Speaker 1: a more general run on banks across the country. Again, 555 00:34:52,600 --> 00:34:57,239 Speaker 1: banks are not inherently in danger of collapse. Some might 556 00:34:57,480 --> 00:35:01,120 Speaker 1: have overextended on securities in the wake of lower numbers 557 00:35:01,120 --> 00:35:04,640 Speaker 1: of loans, and they might also be a little worried 558 00:35:04,680 --> 00:35:08,280 Speaker 1: because of interest rates. But as long as people don't panic, 559 00:35:09,040 --> 00:35:11,839 Speaker 1: things can turn out okay in the long run. So 560 00:35:12,120 --> 00:35:14,080 Speaker 1: this was a big move to try and stop a panic, 561 00:35:15,080 --> 00:35:18,160 Speaker 1: specifically within the tech sector. Right. So another thing I 562 00:35:18,160 --> 00:35:22,480 Speaker 1: should point out is while SBB truly was a pillar 563 00:35:22,880 --> 00:35:25,920 Speaker 1: in the tech community, it wasn't the only one. There 564 00:35:25,960 --> 00:35:29,319 Speaker 1: are other banks that tech companies use for all these 565 00:35:29,360 --> 00:35:33,200 Speaker 1: different purposes. Right, It's not like everything all the eggs 566 00:35:33,200 --> 00:35:35,520 Speaker 1: were in this one basket. That's not the case. But 567 00:35:35,600 --> 00:35:39,080 Speaker 1: then the fear was, well, we saw what happened to 568 00:35:39,280 --> 00:35:41,760 Speaker 1: silver Gate, and then we saw what happened to SVB, 569 00:35:42,160 --> 00:35:44,680 Speaker 1: so that might end up happening to this other bank. 570 00:35:44,760 --> 00:35:49,640 Speaker 1: We use, let's proactively remove our money from there so 571 00:35:49,680 --> 00:35:54,879 Speaker 1: that it's safe before disaster strikes. But that in turn 572 00:35:55,000 --> 00:35:58,360 Speaker 1: becomes the disaster. Right Like, if you have people saying, 573 00:35:58,800 --> 00:36:01,759 Speaker 1: let's pull our all our money out now, then that 574 00:36:01,800 --> 00:36:06,879 Speaker 1: creates the very problem that you're trying to avoid experiencing. 575 00:36:07,600 --> 00:36:12,640 Speaker 1: So again it becomes this self fulfilling prophecy. Now, one 576 00:36:12,640 --> 00:36:15,440 Speaker 1: of the many reasons why the government has come in 577 00:36:15,480 --> 00:36:18,000 Speaker 1: to say they are going to cover all of these deposits, 578 00:36:18,000 --> 00:36:22,239 Speaker 1: even the uninsured ones, is also because not only did 579 00:36:22,280 --> 00:36:25,399 Speaker 1: we have Silvergate and SBB both fail within a week, 580 00:36:25,640 --> 00:36:31,640 Speaker 1: then on Sunday yesterday, Signature Bank collapsed. Signature Bank is 581 00:36:31,719 --> 00:36:35,280 Speaker 1: not based in California. It's a New York based bank. 582 00:36:36,120 --> 00:36:38,000 Speaker 1: It is a bank that starts with the letter S, 583 00:36:38,160 --> 00:36:40,680 Speaker 1: so that's something that has in common with the other two. 584 00:36:41,239 --> 00:36:44,960 Speaker 1: But yeah, yesterday, which was Sunday, March twelve, twenty twenty three, 585 00:36:45,000 --> 00:36:46,760 Speaker 1: for those of you who are listening from the future, 586 00:36:47,320 --> 00:36:53,080 Speaker 1: regulators stepped into closed down signature like Silvergate, Signature was 587 00:36:53,120 --> 00:36:56,279 Speaker 1: once focused primarily on real estate loans, just in the 588 00:36:56,320 --> 00:37:00,319 Speaker 1: New York area instead of California, but it had also 589 00:37:00,360 --> 00:37:03,880 Speaker 1: become a bridge into the crypto world, so it became 590 00:37:04,000 --> 00:37:09,440 Speaker 1: kind of one of these financial institutions that connects the 591 00:37:09,480 --> 00:37:13,000 Speaker 1: regular financial world with the crypto financial world. And like Silvergate, 592 00:37:13,560 --> 00:37:17,680 Speaker 1: the collapse of massive crypto entities like FTX and others 593 00:37:18,400 --> 00:37:22,000 Speaker 1: really pulled the rug out from beneath Signature and left 594 00:37:22,040 --> 00:37:26,080 Speaker 1: it unsteady. So the bank tried to find a buyer 595 00:37:26,200 --> 00:37:28,800 Speaker 1: this past week in order to try and remain in business, 596 00:37:28,880 --> 00:37:32,239 Speaker 1: but it just didn't happen, and again the government had 597 00:37:32,320 --> 00:37:38,279 Speaker 1: to step in. Regulators are assuring all customers of Signature 598 00:37:38,360 --> 00:37:40,480 Speaker 1: that they will also get their money back, even if 599 00:37:40,520 --> 00:37:42,960 Speaker 1: it was above the two hundred and fifty thousand dollars limit, 600 00:37:43,080 --> 00:37:46,719 Speaker 1: just with SVB, and again this is sort of a 601 00:37:46,840 --> 00:37:52,360 Speaker 1: preventive measure to try and avoid a more broad panic 602 00:37:52,440 --> 00:37:56,200 Speaker 1: in the United States. And in order to support that, 603 00:37:56,280 --> 00:37:59,320 Speaker 1: I want to stress the problems of these three financial 604 00:37:59,320 --> 00:38:05,360 Speaker 1: institutions are not universal across all financial institutions, and further, 605 00:38:05,480 --> 00:38:07,759 Speaker 1: it is a situation that gets worse if people all 606 00:38:07,760 --> 00:38:10,080 Speaker 1: try to pull their money out it becomes that self 607 00:38:10,120 --> 00:38:12,560 Speaker 1: fulfilling prophecy I was talking about, kind of like when 608 00:38:13,200 --> 00:38:16,080 Speaker 1: there was a fear that at the beginning of the 609 00:38:16,120 --> 00:38:18,000 Speaker 1: pandemic that you wouldn't be able to get toilet paper, 610 00:38:18,040 --> 00:38:20,319 Speaker 1: which caused people to hoard toilet paper, which meant that 611 00:38:20,360 --> 00:38:23,800 Speaker 1: you couldn't get toilet paper. That was the self fulfilling 612 00:38:23,840 --> 00:38:26,239 Speaker 1: prophecy of that moment. We're seeing the same sort of 613 00:38:26,280 --> 00:38:29,520 Speaker 1: thing with these banks. Now what this means all in 614 00:38:29,560 --> 00:38:32,600 Speaker 1: the long term, that's very hard to say. Right now, 615 00:38:32,920 --> 00:38:36,640 Speaker 1: Chances are a lot of companies are going to struggle 616 00:38:37,080 --> 00:38:40,000 Speaker 1: in the short term, particularly in the tech space and 617 00:38:40,080 --> 00:38:43,920 Speaker 1: specifically in the crypto space. The crypto world in particular 618 00:38:44,000 --> 00:38:48,200 Speaker 1: is facing even more uncertainty right now because regulators are 619 00:38:48,440 --> 00:38:52,719 Speaker 1: picking up the pieces of these established financial institutions in 620 00:38:52,760 --> 00:38:56,759 Speaker 1: the quote unquote real world, and now they're giving a 621 00:38:57,000 --> 00:39:00,400 Speaker 1: massive side eye to the crypto community. Like regulars were 622 00:39:00,400 --> 00:39:05,760 Speaker 1: already concerned about crypto, but the failure of regular banks 623 00:39:06,239 --> 00:39:10,040 Speaker 1: who were connected to crypto has made this a much 624 00:39:10,080 --> 00:39:15,120 Speaker 1: more relevant issue for regulators at the moment. For crypto 625 00:39:15,200 --> 00:39:19,200 Speaker 1: companies that we're hoping to continue to flourish without pressure 626 00:39:19,239 --> 00:39:22,320 Speaker 1: from regulators, I suspect things are going to change rapidly 627 00:39:22,360 --> 00:39:25,960 Speaker 1: over the next few months. We're going to see that 628 00:39:26,120 --> 00:39:31,320 Speaker 1: dreaded interference from regulators as a result of this. I 629 00:39:32,040 --> 00:39:34,319 Speaker 1: am being a little facetious when I say dreaded. I 630 00:39:34,320 --> 00:39:36,759 Speaker 1: mean like, there are people within the crypto community who 631 00:39:36,840 --> 00:39:40,520 Speaker 1: really really want to resist any sort of regulation. But 632 00:39:40,600 --> 00:39:45,480 Speaker 1: I would argue the lack of regulation has led to 633 00:39:47,360 --> 00:39:56,240 Speaker 1: situations being rife for scams, for crime, and for massive 634 00:39:56,280 --> 00:40:01,560 Speaker 1: amounts of fraud, and that this in turn stands to 635 00:40:01,600 --> 00:40:04,319 Speaker 1: be a more existential threat to the crypto community than 636 00:40:04,400 --> 00:40:08,040 Speaker 1: regulations would. I think regulations are a small price to 637 00:40:08,080 --> 00:40:11,480 Speaker 1: pay if you want the crypto world to continue. If 638 00:40:11,520 --> 00:40:13,759 Speaker 1: you don't want the crypto world to continue, yeah, get 639 00:40:13,840 --> 00:40:16,799 Speaker 1: rid of regulations. You'll self destruct, because we've already seen 640 00:40:16,840 --> 00:40:19,919 Speaker 1: it happen, not because of the intentions of the people 641 00:40:19,960 --> 00:40:23,000 Speaker 1: who are putting the community together, but because you'll find 642 00:40:23,040 --> 00:40:26,160 Speaker 1: opportunists who say, ah, I can leverage the lack of 643 00:40:26,200 --> 00:40:28,719 Speaker 1: regulations to make a huge amount of money at the 644 00:40:28,760 --> 00:40:33,360 Speaker 1: expense of everybody else. Ha ha ha. So yeah, I 645 00:40:33,600 --> 00:40:37,919 Speaker 1: have very little patience for this, because if you want 646 00:40:37,960 --> 00:40:43,160 Speaker 1: the crypto world to actually establish itself and flourish. I 647 00:40:43,200 --> 00:40:48,640 Speaker 1: think regulations are absolutely required. There have to be controls, 648 00:40:48,880 --> 00:40:52,160 Speaker 1: or else you have the situations we've seen in the 649 00:40:52,239 --> 00:40:55,440 Speaker 1: last couple of years crop up now. I think these 650 00:40:55,480 --> 00:40:58,680 Speaker 1: events have shown how there are some inherent weaknesses in 651 00:40:58,840 --> 00:41:02,720 Speaker 1: fueling the crazy world of VC investment in the tech space, 652 00:41:03,400 --> 00:41:08,120 Speaker 1: as well as the enthusiasm around the crypto space. But 653 00:41:08,680 --> 00:41:10,600 Speaker 1: I think a lot of us already had a hunch 654 00:41:10,719 --> 00:41:14,160 Speaker 1: that this world was always toying with massive risk. It's 655 00:41:14,200 --> 00:41:17,319 Speaker 1: not like that's brand new news to any of us. 656 00:41:18,520 --> 00:41:22,080 Speaker 1: It does serve as a reminder that we should always 657 00:41:22,719 --> 00:41:26,560 Speaker 1: use critical thinking when we're engaged in these kinds of activities, 658 00:41:27,120 --> 00:41:31,480 Speaker 1: that we should ask tough questions. That should include asking 659 00:41:31,520 --> 00:41:35,760 Speaker 1: tough questions of is it right for me to hold 660 00:41:35,800 --> 00:41:37,719 Speaker 1: off on pulling my money out so that I don't 661 00:41:37,760 --> 00:41:42,000 Speaker 1: make the problem worse? Or is it a case where 662 00:41:42,080 --> 00:41:43,879 Speaker 1: you really do have to pull your money out because 663 00:41:43,880 --> 00:41:46,840 Speaker 1: if you don't, the problem is everybody else has already acted, 664 00:41:47,239 --> 00:41:49,720 Speaker 1: and then you're left holding the bag. That's what everyone's 665 00:41:49,760 --> 00:41:55,520 Speaker 1: afraid of. And unfortunately, unless everybody kind of agrees on 666 00:41:55,560 --> 00:41:57,359 Speaker 1: the front end, like no, we're all going to be 667 00:41:57,840 --> 00:42:02,600 Speaker 1: cool and wait this out. It's kind of unavoidable. It 668 00:42:02,680 --> 00:42:07,440 Speaker 1: sort of comes into the prisoner's dilemma scenario where no 669 00:42:07,480 --> 00:42:10,680 Speaker 1: one has enough trust and everybody else to assume that 670 00:42:10,719 --> 00:42:12,759 Speaker 1: things will be okay, so they have to act in 671 00:42:12,800 --> 00:42:15,440 Speaker 1: self interest because they're convinced that everyone else is going 672 00:42:15,480 --> 00:42:17,400 Speaker 1: to do the same thing, and if you don't do 673 00:42:17,440 --> 00:42:20,239 Speaker 1: it first, you're going to be the one who is 674 00:42:20,360 --> 00:42:24,919 Speaker 1: left with no money because the bank went went under. 675 00:42:25,880 --> 00:42:28,040 Speaker 1: That's why the government is trying to step in and 676 00:42:28,440 --> 00:42:34,000 Speaker 1: stop all this from escalating. So, yeah, scary time, you know, 677 00:42:34,120 --> 00:42:38,759 Speaker 1: one of the many like scary moments in tech, in 678 00:42:38,800 --> 00:42:41,960 Speaker 1: tech finance really that I have seen. You know, it 679 00:42:42,040 --> 00:42:44,880 Speaker 1: kind of reminds me in ways of what it felt 680 00:42:44,880 --> 00:42:47,600 Speaker 1: like when the dot com bubble was bursting and we 681 00:42:47,680 --> 00:42:52,239 Speaker 1: started to see all the enthusiasm and hype that had 682 00:42:52,840 --> 00:43:00,359 Speaker 1: built up these these startup companies into overbloated, overfunded entity 683 00:43:00,560 --> 00:43:03,920 Speaker 1: and then how it all came crashing down. That was 684 00:43:04,080 --> 00:43:07,359 Speaker 1: very sobering. I think that we're in a similar moment now. 685 00:43:08,040 --> 00:43:10,040 Speaker 1: It'll be easier to say when we have more distance 686 00:43:10,080 --> 00:43:14,279 Speaker 1: from it, maybe like five years from now, we won't 687 00:43:14,280 --> 00:43:17,480 Speaker 1: even think about this, But at the moment it feels 688 00:43:17,520 --> 00:43:21,400 Speaker 1: like it's pretty big. Anyway, that's it for today's episode. 689 00:43:21,400 --> 00:43:25,640 Speaker 1: Hope that was informative and interesting to you. I think 690 00:43:25,640 --> 00:43:28,879 Speaker 1: it is really important to understand these things because again, 691 00:43:28,920 --> 00:43:32,880 Speaker 1: without the world of money, than all the tech stuff. 692 00:43:33,960 --> 00:43:36,319 Speaker 1: Not to quote the name of the show, but all 693 00:43:36,360 --> 00:43:39,600 Speaker 1: the tech stuff we talk about wouldn't exist. The money 694 00:43:39,640 --> 00:43:44,080 Speaker 1: has to be there for these things to even become reality. 695 00:43:44,560 --> 00:43:47,799 Speaker 1: So I think that it's an important note to get 696 00:43:47,840 --> 00:43:52,279 Speaker 1: an understanding of that. It also helps kind of keep 697 00:43:52,360 --> 00:43:55,880 Speaker 1: us in the right headspace when we're thinking about supporting tech, 698 00:43:56,480 --> 00:44:02,120 Speaker 1: because it really reinforces that we need to be responsible 699 00:44:03,160 --> 00:44:05,680 Speaker 1: and careful in the way we do that and not 700 00:44:05,880 --> 00:44:08,440 Speaker 1: just try and pounce on what we see as an 701 00:44:08,480 --> 00:44:11,840 Speaker 1: opportunity to print money. I think more and more we 702 00:44:11,920 --> 00:44:16,800 Speaker 1: see those kinds of flagrant investments where it's just it's 703 00:44:16,560 --> 00:44:19,400 Speaker 1: this thought that, oh, I'm going to see a hundred 704 00:44:19,400 --> 00:44:21,680 Speaker 1: times return on this investment, so that's why I'm pouring 705 00:44:21,680 --> 00:44:24,799 Speaker 1: money into it. I don't think that's always the most 706 00:44:24,880 --> 00:44:28,319 Speaker 1: healthy approach. It's not sustainable in the long run in 707 00:44:28,360 --> 00:44:31,759 Speaker 1: my opinion. But I also want to acknowledge I am 708 00:44:31,760 --> 00:44:35,759 Speaker 1: not a financial expert. I'm not an investment expert. I'm 709 00:44:35,800 --> 00:44:39,000 Speaker 1: certainly not you know, a millionaire. I'm nothing. I'm none 710 00:44:39,000 --> 00:44:43,200 Speaker 1: of those things. So it's very, very very possible that 711 00:44:43,320 --> 00:44:46,880 Speaker 1: I am in the wrong here. It's just kind of 712 00:44:46,880 --> 00:44:49,640 Speaker 1: my gut feeling. But we all know that gut feelings 713 00:44:49,719 --> 00:44:55,920 Speaker 1: ultimately have limited reliability, so just keep that in mind. 714 00:44:56,280 --> 00:44:58,160 Speaker 1: If you have topics you would like me to cover 715 00:44:58,200 --> 00:45:00,400 Speaker 1: in future episodes of tech Stuff, please each out and 716 00:45:00,480 --> 00:45:02,640 Speaker 1: let me know. You can do that by sending me 717 00:45:02,680 --> 00:45:04,880 Speaker 1: a message on Twitter. The handle for the show is 718 00:45:04,920 --> 00:45:09,160 Speaker 1: tech Stuff HSW or you can download the iHeartRadio app. 719 00:45:09,160 --> 00:45:11,640 Speaker 1: It's free to download, free to use. Just navigate over 720 00:45:11,680 --> 00:45:14,000 Speaker 1: to tech Stuff use that little search field. Go to 721 00:45:14,040 --> 00:45:16,719 Speaker 1: the tech stuff page. You'll see there's a little microphone icon. 722 00:45:17,000 --> 00:45:18,719 Speaker 1: If you click on that, you can leave a voice 723 00:45:18,760 --> 00:45:21,120 Speaker 1: message up to thirty seconds in length. Let me know 724 00:45:21,120 --> 00:45:22,879 Speaker 1: what you would like me to talk about, and I'll 725 00:45:22,920 --> 00:45:32,560 Speaker 1: talk to you again really soon. Tech Stuff is an 726 00:45:32,600 --> 00:45:38,120 Speaker 1: iHeartRadio production. For more podcasts from iHeartRadio, visit the iHeartRadio app, 727 00:45:38,239 --> 00:45:41,400 Speaker 1: Apple Podcasts, or wherever you listen to your favorite shows.