It's hard to follow this story and not see how corrupt and hypocritical the top tier VCs are. Unfortunately it doesn't seem like using inside info to precipitate a bank run is illegal.
Why do people think VCs are libertarians? Most of them are Democrats! So are most major tech CEOs. Political contributions are publicly recorded if you want to see where any individual stands…
And when did VCs rail against “bailouts” in the past?
There is a pretty big difference between being a mainstream capitalist and being a libertarian.
"Why do people think VCs are libertarians? Most of them are Democrats!"
You seem to:
1. presume those two categories are mutually exclusive. They aren't.
2. Many of the libertarian values on the economic side, held by many in the VC/PE space regardless of political affiliation, means that just like Rand herself, they espouse -by action if not by word- "privatize gain, socialize risk" pretty much by rote.
Anyone shocked by this either isn't looking, hasn't been in this business very long, or is the person mentioned in the Steinbeck quote (paraphrased here for contextual re-appropriation) "the rubes see themselves not as an exploited set of growth-hackers and disruption-monkeys, but as temporarily embarrassed billionaires."
And to them railing against bailouts while asking for them now (from the above article):
“Where is [the chairman of the Federal Reserve, Jay] Powell? Where is [the Treasury secretary, Janet] Yellen? Stop this crisis NOW,” tweeted the venture capitalist David Sacks – the same David Sacks who is a friend of Thiel and Musk, and who has previously heavily criticised “special-interest corruption” and bank bailouts. Bill Ackman, a billionaire hedge fund manager and Donald Trump supporter that has in the past complained about attempts by the government’s Securities and Exchange Commission to regulate one of his investment funds, performed some spectacular mental gymnastics over the weekend, calling on the FDIC to “guarantee all bank deposits”.
I've got no love, nor much respect for venture capitalists, but I don't see that wanting, or expecting, to get your money out of a bank account to be corrupt or hypocritical. Equity bailouts, TARP relief funds, debt guarantees... those are entirely different stories.
I also don't blame them for whining and complaining, likely anyone would do the same. The Fed sometimes has to make tough decisions, complying with everything that VCs want just reduces any faith or respect markets have for the Fed and its officers.
>I've got no love, nor much respect for venture capitalists, but I don't see that wanting, or expecting, to get your money out of a bank account to be corrupt or hypocritical.
Of course we all want that, the issue is that there are long-established, clearly-defined rules for how much of your account is protected that somehow don’t apply to the rich.
For you or I it’s $250,000. Need more to be whole? Too bad, suck it up, that’s the law. But VC accounts? 100% recovery sir, sorry for the trouble!
>I also don't blame them for whining and complaining, likely anyone would do the same.
Except until last week most of these guys were crowing about PERSONAL RESPONSIBILITY and living with your choices and how handouts and bailouts were evil in response to workers and consumers asking for anything
Curiously though, when it became about their money, suddenly it’s GOVERNMENT HELP
People are getting too caught up in the 250k limit.
Most bank failures result in all depositors being made whole - even over the limit. Normally by regulators “hinting” that a larger bank should acquire the failing banks assets whole.
FDIC exists to create faith in the banking system - no to just enforce a rule book on how deposit insurance is structured. The goal is for FDIC to never have to pay out in the first place - FDIC’s existence prevents the bank run from starting.
The obvious conclusion to the 250k limit (splitting deposits between banks) doesn’t really do anything to actually reduce risk in the banking system, or risk to FDIC. Splitting deposits like this is artificial behaviour that doesn’t have any real benefits to overall stability of the economy.
>People are getting too caught up in the 250k limit.
Because you're engaging in the classic Hacker News behavior of a narrow technical point that misses the larger context.
People aren't upset about the mechanics of the FDIC. People are upset that time after time the rich make blunder after blunder after blunder and time after time are protected from their own idiocy and hubris in circumstances where everyone else would be left to rot. The same people who, when the shoe is on the other foot, gleefully lecture everyone else about choice and consequences and patronizingly tell them to learn about better personal finance habits.
You're describing the biology of an individual tree and missing the forest. You've filled this discussion with many comments all missing the bigger picture of what's going on and why people are angry about this. You can't analyze events in a vacuum.
And you're describing putting money in a bank as a "blunder," "idiocy" and "hubris." Which is where rational people will likely take exception with your viewpoint.
A bank that had a rather cavalier approach to a particular class of risks that the founders and VCs benefited from personally (mortgages, personal loans and other wealth management services at highly discounted rates).
We're talking about a BANK here -- state & federally regulated, licensed, accredited -- not some equity investment. Bank depositors should not have to vet a risk profile before opening an account. Do you know the primary risks of the banks you do business with? Which industries they make the most loans to? What investments they've made? Do they hold the minimum deposit reserves, or more?
> People are upset that time after time the rich make blunder after blunder after blunder and time after time are protected from their own idiocy and hubris in circumstances where everyone else would be left to rot.
I actually think this has created a precedent that will protect deposits of over $250k at small banks. Which is not the domain of poor people, but also not necessarily that of billionaires. So this whole fiasco has created protections that more-or-less ordinary people may well benefit from.
Plus, although $250k is a lot for an individual, it isn't necessarily a ton for a business. For example, I once encountered a small software company of about four people, funded by "friends and family" investors (mostly immigrants), that had about $500k in the bank. The employees were solidly middle-class, and the founder was maybe on par with your typical dentist.
So I don't view this as only a bailout for billionaires, because I think bank failures can affect anyone with a little money.
However, I will grant you -- or volunteer -- the following comparison: Compare this rescue, to what hasn't been done for the residents of East Palestine. That situation is a little different, because the railroad can surely pay for it, so there's no need to consider passing any liability through, say (by analogy) to the railroad industry as a whole. If the executive and judicial branches had been as swift to act in that case as the FDIC, Fed, and Treasury have been in this case, then the people of East Palestine would have been evacuated immediately to comfortable digs, their houses bought for their pre-accident market value, and Norfolk Southern sued to pay for it all.
So while I think the right thing was done in this case, and think it will even benefit fairly-ordinary members of the upper-middle-class, I will grant you that the little guys too often do get steamrolled.
Hmm I think having a limit probably does make things marginally safer. If you can have $250k in 4 bank accounts or $1MM in 1 bank, it's far less likely that all 4 of those banks would go out of business at the same time vs 1 bank. This decreases the likelihood that the FDIC would have to payout. Also having a limit in theory should force depositors to consider the safety of who they're banking with.
It makes things marginally safer for you as a depositor because of how the FDIC insurance is structured. But it doesn't meaningfully reduce the FDIC's risk as the deposit insurer:
1000 businesses, 10 (same size) banks
Scenario A: each bank has 100 depositors, each storing 100% of their deposit with the bank
Scenario B: each bank has 1000 depositors, each storing 10% of their deposit with the bank
In both scenarios the total amount deposited at each bank is the same. The risk to FDIC if an individual bank fails is actually higher in scenario B. But the deposit insurance limit rules push us towards scenario B.
What makes you say they’re corrupt? The only accusation I’ve seen is that Thiel removed his money after the bank stopped processing his transactions, but that doesn’t seem nefarious to me
The obvious chain of events is payments not being processed, Thiel gets on the blower, receives inside information which causes him concern, removes his money while he still can.
To me as a low information armchair expert it seems bizarre that Thiel could move money out while SVB was having trouble moving money at all.
The profits from tech are available to investors via the stock market. Meanwhile, no taxpayer money is being used to clean up the failure of SVB and prevent the contagion from spreading.
Member banks pay for it _by law_. And those member banks get that money either by charging customers for it or by reducing what they provide in returns on investment.
It may not be coming from income taxes, but it's definitely socializing the losses and I would argue it's effectively coming from the taxpayers.
> To put it more plainly, for the past 10 years venture capitalists have had near-perfect laboratory conditions to create a lot of money and make the world a much better place. And yet, some of their proudest accomplishments that have attracted some of the most eye-watering sums have been: 1) chasing the dream of zeroing out labor costs while monopolizing a sector to charge the highest price possible (A.I. and the gig economy); 2) creating infrastructure for speculating on digital assets that will be used to commodify more and more of our daily lives (cryptocurrency and the metaverse); and 3) militarizing public space, or helping bolster police and military operations.
> Ruined housing market & transit systems, wagged war on labor law, accelerated the militarization of public space & the border, and intensified gambling.
VCs funded businesses that exacerbated problems in those sectors. So this is more of a critique that VCs caused problems, not chiding them for not providing solutions.
But sure, corporate social responsibility is a concept that has long predated the current ESG trend. We once had a society that at least paid lip service to noblesse oblige.
A problem is that when a rich individual or a for-profit corporation donates money or otherwise engages in charity, there's a very loud contingent of writers who will respond that the individual or corporation should've never been able to accumulate such money, that charity is a scam to protect the rich, and what we should do is raise taxes on everyone to provide these things for everyone via government.
It's important to understand that noblesse oblige was transactional: it staved off the masses from revolting and even generated some good. When charity puts a target on your back, folks won't engage in charity.
As with so many other issues in the modern climate, all of that hinges on people assuming that the opinions of some wonk or columnist scold really matters to the majority of people. And refraining from simply because of fear of finger-wagging from scolds, is cowardice.
I don't think it's an assumption at all; the opinions of the masses are shaped in large part by the media they consume. While few might read Salon or the New Yorker, it is passed around elite circles and it makes its way to CNN and MSNBC as well as reality shows and TikTok influencers.
They don't fear scolds; they fear pitchforks and, more realistically, _taxes_. You can call it cowardice but it's entirely rational.
Not only that but it’s a failure of the city zoning laws to allow enough construction. They would have loved to fund more housing if the city allowed it
I've become so disillusioned with the tech industry over the past several years...just so much hubris and smugness and obnoxious "tech bros" who publicly pontificate on all sorts of unrelated topics with absolute certainty. Nothing but useless and unprofitable money-making schemes like crypto/blockchain/NFT/metaverse garbage/yet_another_delivery_or_rideshare_app. Looks like this year we get AI and foundation models.
Why are we complaining about the VCs when this isn’t their fault? If you want people to blame, it’s Newt Gingrich and Bill Clinton for repealing the Glass Steagall Act. The exuberance and recklessness of the 90s is now haunting us, just like with Reagan’s deficit spending. This not being mentioned in over a dozen articles points to the failure of the mainstream media yet again, and they wonder why no one trusts them anymore.
Dodd Frank obviously is not good enough. If I were to guess, it was drastically weakened by lobbyists.
people are just pointing out what they see as hypocrisy, that's it. I don't follow these people on twitter so I have no idea if that's the case or not.
Hypocrisy? Banks have already proven their recklessness time and time again. Glass Steagall was enacted to prevent yet another Great Depression. Unless all the VCs are fintech bros, I don’t see anything hypocritical.
The focus should be why Dodd Frank was watered down and neutered including placing the blame where it belongs. Most of the VCs in this case were just customers.
As I understand it SVB is insolvent primarily due to incompetence, the actual actions they have taken: take deposits and buying US treasury bonds are every day activities for a bank. There are no exotic derivatives or off balance sheet special purpose vehicles. It's hard to regulate that away.
And yet nobody knows who the fools running the bank were. We don't have their names all over the news. It's as if SVB was run automatically, with no humans at the helm.
The rich really get to destroy lives without consequence.
The most compelling piece of the puzzle to me (an engineer) is the notion of stress testing as part of regulation.
SVBs problems didn't appear overnight. With each rate hike they were a bit worse, but had they been forced to act earlier rather than later it would have helped a lot. Regular stress tests would have performed that function.
And why are VC being blamed? Because apparently the lot of them can push their portfolio companies all into a single bank without doing basic business risk management like requiring fdic sweeps or audits of the svb balance sheets.
> You don’t have to guess that Dodd Frank was weakened by lobbyists
I keep reading: "by lobbyists", "by Trump"...
But googling less then 5 seconds shows "Congress cut burdens for smaller and mid-sized banks in 2018". So blame Google ?
Or congresspeoples being more stupid then suicidal lobbyists ? I thinked elected officials should be kind of smart filter not a bucket for throwing money...
For context, this rollback is actually a compromise. Jeb Hensarling of Texas lead a contingent that wanted to roll back Dodd-Frank entirely but it didn’t have the votes in the Senate because it was split more evenly between parties.
Dodd-Frank has been unpopular with conservatives since it passed. So what the lobbyists did was convince small town democrats to cross parties and vote for the bill saying it would strengthen small banks. And maybe it did! We haven’t seen a small bank failure since it passed and a few typically fail every year.
But it also let bigger regional banks off the hook.
> If you want people to blame, it’s Newt Gingrich and Bill Clinton for repealing the Glass Steagall Act.
Sure, and we should blame Hammurabi while we're at it.
SVB was the case of a bank being stupid and not hedging against its risks. And why should they? Even if you massively mess up, there's a high probability the Fed does something to manipulate the market so you end up being just fine.
As long as you aren't the worst 1-3 positioned banks - you'll be fine.
The problem is the Fed and the incentives it creates by allowing banks to enjoy profits in good times but almost never suffer losses in times of incompetence.
> Sure, and we should blame Hammurabi while we're at it.
You're right about the Fed Reserve, but Clinton and Gingrich were in power just a little over 2 decades ago. We can now add Trump to the roster since he had a direct hand in weakening Dodd Frank
> Why are we complaining about the VCs when this isn’t their fault?
I wouldn’t be so sure. VCs didn’t tell the bank how to invest their deposits, but they caused some of the conditions for the illiquidity and they instigated the bank run.
Why were so many startups concentrated at SVB? VCs recc’d it to their investment companies.
Why did SVB’s liquidity dry up last year? VC funding dried up last year when interest rates rose.
How did the run on the bank accelerate so fast? VCs directed their investment companies to divest at the same time.
Why was SVB the first bank to be affected by the interest rate rises? Only about 7% of SVB’s deposit dollars were FDIC insured, compared to 40%+ of other banks of comparable size. And previous answers.
> If you want people to blame, it’s Newt Gingrich and Bill Clinton for repealing the Glass Steagall Act.
You want to blame people that haven't been relevant in a quarter of a century? We've had a lot of people in Congress and several Presidents since then who deserve the blame for not updating legislation if that's the issue.
The funniest thing about this weekend was watching Jason Calacanis descend into what appears to be some sort of religious paroxysm, speaking in tongues, screaming at the sky about the ruinous portends he read in his tea leaves, gnashing his teeth and rending his garments.
Now that the blood prophecy of 100,000 americans doing a universal bank run has not come to pass, he’s positioned himself as a messiah that tweeted us all back into god’s good graces.
> Now that the blood prophecy of 100,000 americans doing a universal bank run has not come to pass, he’s positioned himself as a messiah that tweeted us all back into god’s good graces.
Without the government's actions over the weekend, bank runs probably would have happened, and they still might.
Yes and it's in the fed's playbook to secure as much of the deposits as they can as quick as they can. This is exactly what they did and that's something that can take a few days. None of these tweets did anything to change that.
This is not part of the normal playbook. If it was, it would not involve special announcements and a speech by the President. The normal playbook for this happens multiple times per year at small regional banks and it barely registers on the news. This is special.
The government did what the VCs recommended. Maybe not because of the tweets, but it still happened because what the VCs recommended was actually the right thing for the government to be doing! The systemic risk identified by the VCs is real!
Why are you attributing this action to VCs grandstanding on social media, rather than, you know, government regulators and private analysts doing their job? That's just being distracted by the dog and pony show.
> Why are you attributing this action to VCs grandstanding on social media
I'm not attributing it to that.
I'm merely pointing out that the government is doing what the VCs were calling for, because it was clearly the correct move.
VCs ask the government to do a thing and people mock them and say it's a crazy thing to do. Then the government does that thing (whether or not they did it because VCs wanted it is entirely immaterial to my point) and you don't see the same people saying the government was doing a crazy thing.
Personally, I don't even know if the VCs were asking for such a crazy thing, but the way VCs like Calacanis went about asking for it were certainly unhinged and histrionic, undignified and deeply revealing, which is what TFA is all about. It was a "mask off" moment.
As far as I can tell Calacanis was just using all caps, and he was warning about a real risk that probably would have caused more banks to fail as early this morning, which is hardly insanity.
He was going about it in a manic way, and certainly while this observation into social behavior is in the eye of the beholder, it is hardly uncontroversial to label tweeting in full caps as off-putting alarmist behavior.
Since 2013 there have been 71 banks fail according to the FDIC's bank failures in brief Infograph. Those 71 banks had assets totaling 23,399.20 million (or 23 billion). SVB had asses totaling 209,000 million (209 billion).[1]
Where are the 500 banks again and again every year over the last decade?
Why shouldn't they. The fact that there were no serious or lasting consequences after 2008 and bailouts made the message clear. "Act poorly and if you are big enough/connected enough, we'll make sure you don't face consequences." The effects may have hurt some people, even some innocent people, but the long term effects of not holding people responsible is far worse society in the long run.
If a child is never allowed to face the consequences of their actions they will never learn.
Why? If you have more than the insured $250k in there you knew that was a possibility. Sure it sucks, but life is unfair, and now other people have to make up the cost.
The government wants it to not be a possibility. Bank accounts are meant to look safe.
If government didn’t make it clear they were stepping in here, what do you think would have happened first thing Monday morning? Every small/medium business would have seen the writing on the wall and moved their funds out of small/medium banks and into the handful of “too big to fail” megabanks. Stepping in and making up the cost prevents contagion.
The 250k limit is somewhat of a red herring. If every depositor split their funds up to stay under the 250k limit, it doesn’t actually change the overall risk profile for the FDIC.
But only few banks offer the same rates as SVB did.
So you can get that risk-free extra 2% on your deposit up to 250k, or up to hundreds of millions, and the government will just pay in fine. That opens up new area of business imho.
Why not? Putting all your company's money into a single bank in return for great loan terms and additionally below-market terms on your home financing is accepting risk. It's a great decision if everything goes right, you save a lot of money, both as a company and the CEO personally. It's a problem if it goes wrong, just as all investments are.
I don’t entirely agree - the depositors enjoyed higher interest rates from SVB’s risky behavior. If they face no consequences, then it will encourage institutional depositors to continue flocking to whatever bank is offering the most irresponsible interest rate.
We need to balance letting the depositors suffer with causing a system wide run, so I think the FDIC/Fed choice was reasonable, but I would have rather seen them, say, guarantee uninsured deposits, less the interest of those deposits earned over the past 18 months.
You seem fairly mixed up about who would face which consequences from a bunch of bank runs vs what happened here with the management replaced and shareholders wiped out but depositors backed up.
If there's any ground for further actions against the management of the banks, I'm fully supportive of that, but a bunch of bank runs would've hurt everyone but them more than them.
If depositors lose money, it would be likely to result in runs on other banks. The mission of the FDIC is to prevent that sort of thing. Deposit insurance is not their mission, it's just a means to an end. When it fails to suffice, other actions will be taken to achieve the mission, like we saw this weekend.
But even if other bank runs didn't happen, there would be another consequence that I'm sure you wouldn't like either. People would understand that there are now two tiers of deposit safety: small banks where depositors might lose money above $250k if the bank fails, and "too big to fail" banks where that wouldn't happen (because they can't fail!). Everyone would move their deposits to the "too big to fail" banks, which would make those banks even bigger and more powerful.
It would have been worse than that by Y Combinator's estimation. 100,000 only gets into the number of small business and startup jobs that would have been affected.
> In the Y Combinator community, one-third of startups with exposure to SVB used SVB as their sole bank account. As a result, they will fail to have the cash to run payroll in the next 30 days. By that measure, we can estimate that payroll-related furlough or shutdown will impact more than 10,000 small businesses and startups. If the average small business or startup employs 10 workers, this will have an immediate effect of furlough, layoff, or shutdown, affecting over 100,000 jobs in the most vibrant sector of innovation in our economy.
I wonder if that extrapolation (going from 1/3 of YC startups that used SVB only used SVB to the 37,000 total small businesses/startups that use SVB) is anything close to accurate.
I do like that the same people who in the last few months have cut 10s of 1000s of jobs with nary a word, or responded to criticism of such with essentially "it's business, cry more", are now suddenly deeply, deeply concerned about the welfare of their employees and golly gee whiz just want to be able to make payroll to help them!
Obviously the VC pyramid scheme created by the ‘tech bros’ and the VCs like YC, Lightspeed, and the rest of them had to crash hard in 2022 and now with the interest rate hikes decimating the chronically unprofitable startups that are still trying to raise money and SVB was the straw that destroyed it all.
Quite a hilarious ending to see the panic and the collapse of the complete pyramid scheme. We are not even done yet since there will be more market moving news this week to completely vaporize them into pieces.
There were 2 groups this weekend. The first group whined hysterically, like JasonC, GarryT (and YCombinator). Not only whined, but showed a strong lack of moral character (asking the public to bail out their private 1% bank accounts).
The other group built (like Mercury Bank) and innovated to reduce future situations like this.
Kudos to the second group.
Shame on the first group. It's sad their whining got rewarded.
Disclosures: I am an investor in a number of startups that had >$250K in uninsured deposits SVB, but I was still against the bailout b/c I think it just made America weaker in the long run. A 10% haircut would have been fine. I am also a tiny tiny investor in Mercury.
VCs are a convenient scapegoat but if you look at what actually happened, this is the fault of bankers and bank regulators.
Are we supposed to blame people for putting money in a bank that had a solid track record since the 1980s, and didn't have any regulatory red flags? Are we supposed to blame VCs for not knowing about the bank's investment problems when the regulators who were supposed to know about them didn't know either? Should we blame founders for taking banking advice from their funders and boards of directors?
Are we supposed to forget that the era of easy money the article dislikes was created by the Fed, and that the duration risk on long-term securities that doomed SVB was also realized because of the Fed's reaction to its previous mistakes?
We should blame everyone, including the government, for this mess.
When people like the author single out VCs and rant about AI being a boondoggle it's clear they just don't like or understand tech. Tech has been the space program of our generation.
We now carry devices in our pockets that put more information at our fingertips than entire civilizations could access throughout all of human history. Mobile payments have enabled entrepreneurial capitalism in impoverished parts of the world. Anywhere we are, we can get a map of our location and directions to anywhere we want to go.
The scale and technology that makes remote work even possible for much of the population didn’t even exist a decade ago. Some pieces existed but they never would have scaled the way we needed them to. If you didn’t lose your job during the pandemic, you ought to be grateful to the major cloud providers for the fact that your video conferencing software was able to function while you and almost everyone else were piling onto it. You should also be grateful there were multiple delivery companies able to bring you groceries and restaurant food when you weren’t allowed to leave the house. I know restaurants are grateful for the delivery services — so many more would have gone out of business if in-person transactions were the only way to sell their product!
Anyone who owned a total market index fund in the past decade has benefitted massively from the success of big tech, including most pension funds, university endowments, and many individuals. The creation of wealth has been enormous in scale and enormously socially beneficial.
VCs made all those good things possible and if we also get dog-walking services and NFTs of monkeys that's a small price to pay.
> Are we supposed to blame people for putting money in a bank that had a solid track record since the 1980s
YES! The $250K limit was literally in 100pt font (https://twitter.com/breckyunits/status/1635356025175027712). Amounts above that were at risk! Instead the government just ignored that, on a whim. This wasn't even in the fine print!
Can you explain to me now what rules I can and cannot pay attention to? I can't.
Only 60% of deposits in the US are insured and many other businesses are doing the same thing in many other banks right now! Would people be screaming about VCs if a different regional bank that serves a different business community failed for the same reason (which could totally still happen this week)?
If the government didn't step it they would be ignoring the purpose of the FDIC. The purpose of the FDIC is to protect the banking system from runs and systemic risk. Deposit insurance happens to be the normal mechanism for doing that. When the FDIC realizes that $250k insurance is not enough to stem systemic risk, should they just forget about their mission and let the world burn?
FDICs remit is maximal recovery for depositors and stability for the system, not just 250k and a pat on the back.
250k is the absolute least a large depositor can recover in the event of a failure. Holding more than that is not some moral failure we should be crucifying businesses.
The first person to pull money out of a failing bank is always going to get blamed, but they didn't do anything different than the others who pulled money.
What was Thiel supposed to do, keep quiet about the problems at the bank and hope nobody else noticed? Then some other guy can be first to withdraw and take the blame, while Thiel gets soaked? Or maybe nothing happens, and the bank takes on even more deposits and fails even more spectacularly a year from now, and then people blame Thiel because he knew back in 2023 and didn't tell anyone?
I'm fairly certain that's how a bank run operates, and what we have here is a bank run. Each individual person who withdraws isn't to blame, but it's the collective actions that cause the problem. In fact, all that is needed to cause a bank run is just the idea / notion of instability. Once it gets into people's heads that something is unstable, it will be made to be so, even if all that was needed was calmness. Probably hitting the panic button wasn't the best move.
Ok, what would you do if you were a board member of a number of companies and you found out that the bank they were using was financially unsound and couldn't process normal withdrawals?
No sympathy for the VC's or SVB, but they had me up until:
>a startup ecosystem and venture-capital apparatus that are too unstable, too risky, and too unmoored from reality to be left in charge of something as important as the direction of our technological development
So who should be in charge? Legislative committees? Government bureaucracies? Yeah, those should work :)
Letting people face the consequences of their venality? Now we're getting warmer.
I don't know if you should knock government investment in technological development, seems to have worked pretty well for COVID vaccines, space shuttle for the Moon, and brutally convenient murder machines
> So who should be in charge? Legislative committees? Government bureaucracies? Yeah, those should work :)
These actually have a pretty great track record of, specifically, setting the direction of technological development. Often in a way that's more of a "here's what we want; now, private industry, go do it and we'll offer you X in return" rather than specifying the minutia, to be clear, but it's absolutely not a crazy notion. And I don't just mean NASA or the US MIC (DARPA, notably), but things like postwar Japan's heavily-government-directed R&D efforts and research-pooling initiatives, or Germany's skating-where-the-puck's-headed moves on renewable energy R&D and manufacturing back in (IIRC) the late 90s and early 00s. That we ought to rely on public efforts to direct technological development, at least to some significant degree, isn't obviously a bad idea.
My post wasn't abstract. I'm just not interested in going example-for-example when my point was never "this literally always works and nothing else ever does", which is the point you seem to wish I'd advanced.
> So I presented three counter-examples.
To what end? The thing you scoffed at and dismissed remains not obviously a bad idea.
You're right: it's worse than abstract. You said it has an excellent track record, but now you refuse to provide any facts. It's not "going example-for-example" -- it's called honest debate.
Trading anecdotes isn't going to produce a statistical analysis of approaches to innovation in an HN thread. Meanwhile, this is mainstream macro/IPE shit: government-driven technological innovation has a pretty damn solid track record, and I pointed to several specific and oft-cited cases to demonstrate this, out of a large field.
This does not mean it always works out well, but the benchmark for "damn solid" in this space is very very far from "perfect", in much the same way that an excellent batter in professional baseball still fails to get on base more than half the time—your line of attack here is just as baffling as someone countering "Joe's a solid clean-up hitter" with "yeah but look at this list of times he struck out!" It's omitting the context of what constitutes good in the space—meanwhile, he's near the top of the league in RBI. Continuing to trade anecdotes about times Joe hit a home run or times he hit an easy pop-fly to center field is just pointless noise, entirely beside the point.
That's why I keep pushing back that what you're trying to do here isn't even relevant to the point I was making, which point is quite far from being controversial, incidentally. I don't think both of us posting Amazon links to books covering the successes and failures of government-lead tech initiatives when I am not denying that plenty of failures exist in that space in the first place, is productive. If that's the way you want this to go, just pretend I've posted a series of links to mainstream macro, IPE, and tech and econ history textbooks in response to each of your (probably mostly valid!) "counter-points", because that's what I'd do, but it doesn't seem like a valuable exercise when I'm not even denying that examples of failures of these kinds of initiatives exist.
Cover it in a blizzard of words: that's a good tactic. Let's go over them:
> your line of attack here is just as baffling as someone countering "Joe's a solid clean-up hitter" with "yeah but look at this list of times he struck out!"
Yes, but "Joe" has OPS numbers (which are more meaningful than the outdated RBI number, incidentally). What are your big Planning home runs?
Your "specific and oft-cited cases" are vague and not specific, on the level of "hey, Japan and Germany!" While mine are actually specific disasters.
"which point is quite far from being controversial," -- I think you mean in Ivy League faculties and scholarly journals, not in actual business publications.
It's simply not the case that it's appropriate to sarcastically dismiss the notion of government-directed technological innovation as necessarily a bad idea. That's all. I did assume some familiarity with e.g. the Japanese Economic Miracle & MITI such that they didn't need to be mentioned by name, nor the successes and contributions of NASA and DARPA specified, nor links to reporting on German renewable initiatives decades ago provided... but I think that points to a gap in familiarity with the topic that is precisely the source of disagreement here, and addressing that would be the best way to reach a point of being able to have any kind of useful exchange.
So it's the sarcasm you object to? I guess that's all you've got.
"the Japanese Economic Miracle & MITI" -- yes, in fact I'm quite familiar with those. After the country was destroyed and a new society was being built, it was hardly possible not to hit a home run. Opportunity was everywhere you looked. How's it done since 1990? You haven't addressed that.
As for DARPA & NASA: you're half right. DARPA did help guide the Internet towards TCP and away from OSI. Note that the "industrial planners" in the US and in Europe were on the wrong side of that one, all the way. The French had Minitel, which was actually a pretty good idea, and then frittered it away.
As for NASA: the shuttle was a master class in how to waste money, so I don't think you want to point at that. And both NASA and DARPA were consistently opposed by nearly everyone on the left end of the ideological spectrum, It's only after you see how they turned out that you can manage to hold them up as shining examples. At the time I'm sure you'd have been opposed.
So drop the snobbery. I know the history better than you do.
> So drop the snobbery. I know the history better than you do.
Then stop pretending to be confused when I allude to cases that ought to be extremely familiar to anyone who's read up on this topic?
And stop making plainly-crap lines of argument like "it's hardly possible not to hit a home run" when a country is rebuilt after being destroyed when that's just... extremely not true, and the Miracle is such a big deal precisely because it's remarkable (though not unique—I'll go ahead and pre-empt the attack against a thing I didn't claim, given the tone of this exchange), and it's interesting and comes up all the time because it points to limitations of various simplistic models of what should work and what should not (like, say, the notion of government direction of technological development being categorically a bad idea). How has Japan done since 1990? What, is your argument that government-driven technological direction in the 60s and 70s is a key factor in the later malaise, rather than its being mostly irrelevant to that phase? Even if it was, my point was never that "this approach cannot possibly go wrong"! This is a narrow piece of the puzzle. You're not engaging with the substance, you're just casting about for gotchas. So what?
> So it's the sarcasm you object to? I guess that's all you've got.
Look, I'm done. You're not reading or posting in good faith, if that's what you've taken away from this.
> My debut at @Slate: Venture capitalists are parasites who couldn't be trusted with the financial institution that held up their industry, let alone the direction of our technological development. Euthanizing them is imperative if we want a better world.
I probably wouldn't tweet out language about "euthanizing" "parasites" but maybe I just have a better grasp of history than the author.
There are good critiques of everyone involved in this elsewhere, I have no idea how a reasonable person could conclude this is the one that should be posted and shared.
> Remind me why, exactly, these guys have so much control over technological innovation?
Oh, it's be because tech companies need money to operate, and when they ask people for some of their money, the people who give them the money demand input over how that money is used. Hope that answers your question.
What is this drivel doing on the front page of HN?
It's one thing to criticize venture capitalists for promoting libertarian ideologies on one hand, and then instantly turning around and asking the federal government to bail out their portfolio companies' bank accounts on the other hand. It's OK to make fun of them too. To paraphrase the late J. K. Galbraith, in the US we see socialism in action mainly when private jets start descending on Reagan national airport, their passengers seeking federal handouts.
But the OP crosses the line into silly territory and keeps going past the line, with nonsensical statements such as "[the troubles at SVB] are emblematic of a startup ecosystem and venture-capital apparatus that are too unstable, too risky, and too unmoored from reality to be left in charge of something as important as the direction of our technological development." Left in charge? Of our technological development? That's not even wrong.
What ended up happening was right, and I am glad things are looking up now. The depositors had to be made whole and Fed in my opinion did the right thing in the end given the choices.
But I have never seen the VC community so vocally begging for instant government intervention for anything else in my life.
These VCs would be first ones to tweet about how the government agencies are a bloated mess, a revenue sink, an archaic institution that needs to sold for parts.
But when there was a fire in their backyard, they did not "innovate", "disrupt", or "take initiative". They hounded the government like entitled brats, to fix the mess which was in no small part their own doing.
> These VCs would be first ones to tweet about how the government agencies are a bloated mess, a revenue sink, an archaic institution that needs to sold for parts.
That's often the truth. The government does a lot of bad things, and a lot of regulations are bad. When someone complains about the government it doesn't mean they also oppose the good things the government does, and it doesn't mean they oppose the concept of government.
Most VCs and major tech CEOs are Democrats. Look at their political contributions.
You do not set up shop in blue California districts, and not donate to Democrats. I do not think this necessarily correlates to the community actually being left wing. They actively lobby for reduced taxes, deregulation, and reduced worker rights.
When the pandemic struck, there were a good bunch of them who couldn't wait to move to Texas or Florida.
They also lobby for government subsidies and other market interventions they view as beneficial to them. Most are economically liberal only as far as it is useful to them.
I'll also bet that SV executives and VCs overwhelmingly donated to Democratic presidential candidates and other Democratic candidates out of state. It's not just buying favor with California politicians.
> But I have never seen the VC community so vocally begging for instant government intervention for anything else in my life.
Yup that's what we got to see this weekend - that SV libertarian "we'll take care of it ourselves" ethos.
Will claim nonstop about how society and the system just gets in the way and slows them down. Will break any rule to make more money claiming they're being helping and it's fair because they don't need back stops or safety nets just leave them be and they'll stay out of the way.
And yet the min their excess profits were at risk, they were literally begging the government to step in and save them.
Every single time I've ever seen a group claim it's fine to let them be exempt from rules of society because they'll handle their own problems, it turns out to be complete bs - because as soon as things get tough, they start asking for "society" to step in a save them.
Simply from my own life experience, every one whose ethos is eliminate regulations and oversight always turns out to a hidden "privatize profits and socialize losses".
Every single time a group claims "we don't need the support of X system or regulation we'll take care of it themselves if it happens" - it always ends up being "we didn't think we'd ever need the support that's why we wanted to cut it, but now they we're the ones in a bad situation please give us the support". It's always a lack of empathy and believing fate doesn't apply to them.
Crypto's frequent "Code is law. Oh no wait, were being screwed, code isn't law, let's fork the system."
"Don't bail them out anyone who asks for a bailout is an idiot and deserves to be punished. No we need bailouts now to keep our returns.!"
"Get rid of banking regulations they just are overhead and block innovation. Oh no, were about to destroy the economy by being reckless in the exact ways those regulations were meant to prevent."
There is a reason that every success group of humans have evolved into a society with social benefits being prioritize with individual benefit. Anyone who thinks a society can function solely by ignoring and not regulating societal impact of actions is incredibly naive.
>Anyone who thinks a society can function solely by ignoring and not regulating societal impact of actions is incredibly naive.
In this case market failure would be the intended feedback mechanism. There's also the larger context of years of artificially cheap credit to consider. Lastly, there are malign incentives around banks buying treasury bonds, thereby loaning cash to the gov.
I agree. Changing the rules in the middle of the game isn't Hoyle. Not sure that the conclusion, "we need more power in the hands of capricious referees" follows.
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[ 7.3 ms ] story [ 178 ms ] thread"No handouts, unless they are for me."
And when did VCs rail against “bailouts” in the past?
There is a pretty big difference between being a mainstream capitalist and being a libertarian.
You seem to: 1. presume those two categories are mutually exclusive. They aren't. 2. Many of the libertarian values on the economic side, held by many in the VC/PE space regardless of political affiliation, means that just like Rand herself, they espouse -by action if not by word- "privatize gain, socialize risk" pretty much by rote.
Anyone shocked by this either isn't looking, hasn't been in this business very long, or is the person mentioned in the Steinbeck quote (paraphrased here for contextual re-appropriation) "the rubes see themselves not as an exploited set of growth-hackers and disruption-monkeys, but as temporarily embarrassed billionaires."
And lest you think he's the only libertarian VC: https://www.newstatesman.com/quickfire/2023/03/silicon-valle...
And to them railing against bailouts while asking for them now (from the above article):
“Where is [the chairman of the Federal Reserve, Jay] Powell? Where is [the Treasury secretary, Janet] Yellen? Stop this crisis NOW,” tweeted the venture capitalist David Sacks – the same David Sacks who is a friend of Thiel and Musk, and who has previously heavily criticised “special-interest corruption” and bank bailouts. Bill Ackman, a billionaire hedge fund manager and Donald Trump supporter that has in the past complained about attempts by the government’s Securities and Exchange Commission to regulate one of his investment funds, performed some spectacular mental gymnastics over the weekend, calling on the FDIC to “guarantee all bank deposits”.
I also don't blame them for whining and complaining, likely anyone would do the same. The Fed sometimes has to make tough decisions, complying with everything that VCs want just reduces any faith or respect markets have for the Fed and its officers.
Of course we all want that, the issue is that there are long-established, clearly-defined rules for how much of your account is protected that somehow don’t apply to the rich.
For you or I it’s $250,000. Need more to be whole? Too bad, suck it up, that’s the law. But VC accounts? 100% recovery sir, sorry for the trouble!
>I also don't blame them for whining and complaining, likely anyone would do the same.
Except until last week most of these guys were crowing about PERSONAL RESPONSIBILITY and living with your choices and how handouts and bailouts were evil in response to workers and consumers asking for anything
Curiously though, when it became about their money, suddenly it’s GOVERNMENT HELP
Most bank failures result in all depositors being made whole - even over the limit. Normally by regulators “hinting” that a larger bank should acquire the failing banks assets whole.
FDIC exists to create faith in the banking system - no to just enforce a rule book on how deposit insurance is structured. The goal is for FDIC to never have to pay out in the first place - FDIC’s existence prevents the bank run from starting.
The obvious conclusion to the 250k limit (splitting deposits between banks) doesn’t really do anything to actually reduce risk in the banking system, or risk to FDIC. Splitting deposits like this is artificial behaviour that doesn’t have any real benefits to overall stability of the economy.
Because you're engaging in the classic Hacker News behavior of a narrow technical point that misses the larger context.
People aren't upset about the mechanics of the FDIC. People are upset that time after time the rich make blunder after blunder after blunder and time after time are protected from their own idiocy and hubris in circumstances where everyone else would be left to rot. The same people who, when the shoe is on the other foot, gleefully lecture everyone else about choice and consequences and patronizingly tell them to learn about better personal finance habits.
You're describing the biology of an individual tree and missing the forest. You've filled this discussion with many comments all missing the bigger picture of what's going on and why people are angry about this. You can't analyze events in a vacuum.
I actually think this has created a precedent that will protect deposits of over $250k at small banks. Which is not the domain of poor people, but also not necessarily that of billionaires. So this whole fiasco has created protections that more-or-less ordinary people may well benefit from.
Plus, although $250k is a lot for an individual, it isn't necessarily a ton for a business. For example, I once encountered a small software company of about four people, funded by "friends and family" investors (mostly immigrants), that had about $500k in the bank. The employees were solidly middle-class, and the founder was maybe on par with your typical dentist.
So I don't view this as only a bailout for billionaires, because I think bank failures can affect anyone with a little money.
However, I will grant you -- or volunteer -- the following comparison: Compare this rescue, to what hasn't been done for the residents of East Palestine. That situation is a little different, because the railroad can surely pay for it, so there's no need to consider passing any liability through, say (by analogy) to the railroad industry as a whole. If the executive and judicial branches had been as swift to act in that case as the FDIC, Fed, and Treasury have been in this case, then the people of East Palestine would have been evacuated immediately to comfortable digs, their houses bought for their pre-accident market value, and Norfolk Southern sued to pay for it all.
So while I think the right thing was done in this case, and think it will even benefit fairly-ordinary members of the upper-middle-class, I will grant you that the little guys too often do get steamrolled.
1000 businesses, 10 (same size) banks Scenario A: each bank has 100 depositors, each storing 100% of their deposit with the bank Scenario B: each bank has 1000 depositors, each storing 10% of their deposit with the bank
In both scenarios the total amount deposited at each bank is the same. The risk to FDIC if an individual bank fails is actually higher in scenario B. But the deposit insurance limit rules push us towards scenario B.
To me as a low information armchair expert it seems bizarre that Thiel could move money out while SVB was having trouble moving money at all.
It may not be coming from income taxes, but it's definitely socializing the losses and I would argue it's effectively coming from the taxpayers.
> Ruined housing market & transit systems, wagged war on labor law, accelerated the militarization of public space & the border, and intensified gambling.
https://twitter.com/bigblackjacobin/status/16353042104211496...
But sure, corporate social responsibility is a concept that has long predated the current ESG trend. We once had a society that at least paid lip service to noblesse oblige.
It's important to understand that noblesse oblige was transactional: it staved off the masses from revolting and even generated some good. When charity puts a target on your back, folks won't engage in charity.
They don't fear scolds; they fear pitchforks and, more realistically, _taxes_. You can call it cowardice but it's entirely rational.
People in the Bay Area seem to live in buzzword land.
Dodd Frank obviously is not good enough. If I were to guess, it was drastically weakened by lobbyists.
The focus should be why Dodd Frank was watered down and neutered including placing the blame where it belongs. Most of the VCs in this case were just customers.
SVB had two other problems that would not be identified simply by looking at minimum amounts: duration risk and lack of liquidity.
And yet nobody knows who the fools running the bank were. We don't have their names all over the news. It's as if SVB was run automatically, with no humans at the helm.
The rich really get to destroy lives without consequence.
What are you really excoriating them for though? Destroying some capital? No one’s lives have been destroyed behind this mess
He’s already being painted as bogeyman, even before anyone has proven that he has done anything wrong.
SVBs problems didn't appear overnight. With each rate hike they were a bit worse, but had they been forced to act earlier rather than later it would have helped a lot. Regular stress tests would have performed that function.
https://www.bloomberg.com/news/articles/2023-03-13/svb-failu...
https://fortune.com/2023/03/11/silicon-valley-bank-svb-ceo-g...
https://www.foxbusiness.com/politics/liberals-blame-trump-si...
And why are VC being blamed? Because apparently the lot of them can push their portfolio companies all into a single bank without doing basic business risk management like requiring fdic sweeps or audits of the svb balance sheets.
They came off as clowns this weekend.
I keep reading: "by lobbyists", "by Trump"...
But googling less then 5 seconds shows "Congress cut burdens for smaller and mid-sized banks in 2018". So blame Google ?
Or congresspeoples being more stupid then suicidal lobbyists ? I thinked elected officials should be kind of smart filter not a bucket for throwing money...
Mike Crapo Republican of ID was the sponsor in the senate.
House roll call: https://clerk.house.gov/Votes/2018216
Here is Trumps tweet on the subject. https://twitter.com/realDonaldTrump/status/99925823211057971...
For context, this rollback is actually a compromise. Jeb Hensarling of Texas lead a contingent that wanted to roll back Dodd-Frank entirely but it didn’t have the votes in the Senate because it was split more evenly between parties.
Dodd-Frank has been unpopular with conservatives since it passed. So what the lobbyists did was convince small town democrats to cross parties and vote for the bill saying it would strengthen small banks. And maybe it did! We haven’t seen a small bank failure since it passed and a few typically fail every year.
But it also let bigger regional banks off the hook.
Sure, and we should blame Hammurabi while we're at it.
SVB was the case of a bank being stupid and not hedging against its risks. And why should they? Even if you massively mess up, there's a high probability the Fed does something to manipulate the market so you end up being just fine.
As long as you aren't the worst 1-3 positioned banks - you'll be fine.
The problem is the Fed and the incentives it creates by allowing banks to enjoy profits in good times but almost never suffer losses in times of incompetence.
You're right about the Fed Reserve, but Clinton and Gingrich were in power just a little over 2 decades ago. We can now add Trump to the roster since he had a direct hand in weakening Dodd Frank
I wouldn’t be so sure. VCs didn’t tell the bank how to invest their deposits, but they caused some of the conditions for the illiquidity and they instigated the bank run.
Why were so many startups concentrated at SVB? VCs recc’d it to their investment companies.
Why did SVB’s liquidity dry up last year? VC funding dried up last year when interest rates rose.
How did the run on the bank accelerate so fast? VCs directed their investment companies to divest at the same time.
Why was SVB the first bank to be affected by the interest rate rises? Only about 7% of SVB’s deposit dollars were FDIC insured, compared to 40%+ of other banks of comparable size. And previous answers.
Now that the blood prophecy of 100,000 americans doing a universal bank run has not come to pass, he’s positioned himself as a messiah that tweeted us all back into god’s good graces.
Without the government's actions over the weekend, bank runs probably would have happened, and they still might.
The government did what the VCs recommended. Maybe not because of the tweets, but it still happened because what the VCs recommended was actually the right thing for the government to be doing! The systemic risk identified by the VCs is real!
I'm not attributing it to that.
I'm merely pointing out that the government is doing what the VCs were calling for, because it was clearly the correct move.
VCs ask the government to do a thing and people mock them and say it's a crazy thing to do. Then the government does that thing (whether or not they did it because VCs wanted it is entirely immaterial to my point) and you don't see the same people saying the government was doing a crazy thing.
Since 2013 there have been 71 banks fail according to the FDIC's bank failures in brief Infograph. Those 71 banks had assets totaling 23,399.20 million (or 23 billion). SVB had asses totaling 209,000 million (209 billion).[1]
Where are the 500 banks again and again every year over the last decade?
[1]https://www.fdic.gov/bank/historical/bank/
If a child is never allowed to face the consequences of their actions they will never learn.
If government didn’t make it clear they were stepping in here, what do you think would have happened first thing Monday morning? Every small/medium business would have seen the writing on the wall and moved their funds out of small/medium banks and into the handful of “too big to fail” megabanks. Stepping in and making up the cost prevents contagion.
The 250k limit is somewhat of a red herring. If every depositor split their funds up to stay under the 250k limit, it doesn’t actually change the overall risk profile for the FDIC.
So you can get that risk-free extra 2% on your deposit up to 250k, or up to hundreds of millions, and the government will just pay in fine. That opens up new area of business imho.
We need to balance letting the depositors suffer with causing a system wide run, so I think the FDIC/Fed choice was reasonable, but I would have rather seen them, say, guarantee uninsured deposits, less the interest of those deposits earned over the past 18 months.
If there's any ground for further actions against the management of the banks, I'm fully supportive of that, but a bunch of bank runs would've hurt everyone but them more than them.
But even if other bank runs didn't happen, there would be another consequence that I'm sure you wouldn't like either. People would understand that there are now two tiers of deposit safety: small banks where depositors might lose money above $250k if the bank fails, and "too big to fail" banks where that wouldn't happen (because they can't fail!). Everyone would move their deposits to the "too big to fail" banks, which would make those banks even bigger and more powerful.
https://twitter.com/jason/status/1634771851514900480
It did lead me to a really interesting article about audience capture and how it twists “influencers” into saying and doing outlandish things though!
https://gurwinder.substack.com/p/the-perils-of-audience-capt...
I have been noticing this for a while without putting it in clear writing, and I'm glad someone did!
> In the Y Combinator community, one-third of startups with exposure to SVB used SVB as their sole bank account. As a result, they will fail to have the cash to run payroll in the next 30 days. By that measure, we can estimate that payroll-related furlough or shutdown will impact more than 10,000 small businesses and startups. If the average small business or startup employs 10 workers, this will have an immediate effect of furlough, layoff, or shutdown, affecting over 100,000 jobs in the most vibrant sector of innovation in our economy.
https://www.ycombinator.com/blog/urgent-sign-the-petition-no...
Quite a hilarious ending to see the panic and the collapse of the complete pyramid scheme. We are not even done yet since there will be more market moving news this week to completely vaporize them into pieces.
The other group built (like Mercury Bank) and innovated to reduce future situations like this.
Kudos to the second group.
Shame on the first group. It's sad their whining got rewarded.
Disclosures: I am an investor in a number of startups that had >$250K in uninsured deposits SVB, but I was still against the bailout b/c I think it just made America weaker in the long run. A 10% haircut would have been fine. I am also a tiny tiny investor in Mercury.
Are we supposed to blame people for putting money in a bank that had a solid track record since the 1980s, and didn't have any regulatory red flags? Are we supposed to blame VCs for not knowing about the bank's investment problems when the regulators who were supposed to know about them didn't know either? Should we blame founders for taking banking advice from their funders and boards of directors?
Are we supposed to forget that the era of easy money the article dislikes was created by the Fed, and that the duration risk on long-term securities that doomed SVB was also realized because of the Fed's reaction to its previous mistakes?
We should blame everyone, including the government, for this mess.
When people like the author single out VCs and rant about AI being a boondoggle it's clear they just don't like or understand tech. Tech has been the space program of our generation.
We now carry devices in our pockets that put more information at our fingertips than entire civilizations could access throughout all of human history. Mobile payments have enabled entrepreneurial capitalism in impoverished parts of the world. Anywhere we are, we can get a map of our location and directions to anywhere we want to go.
The scale and technology that makes remote work even possible for much of the population didn’t even exist a decade ago. Some pieces existed but they never would have scaled the way we needed them to. If you didn’t lose your job during the pandemic, you ought to be grateful to the major cloud providers for the fact that your video conferencing software was able to function while you and almost everyone else were piling onto it. You should also be grateful there were multiple delivery companies able to bring you groceries and restaurant food when you weren’t allowed to leave the house. I know restaurants are grateful for the delivery services — so many more would have gone out of business if in-person transactions were the only way to sell their product!
Anyone who owned a total market index fund in the past decade has benefitted massively from the success of big tech, including most pension funds, university endowments, and many individuals. The creation of wealth has been enormous in scale and enormously socially beneficial.
VCs made all those good things possible and if we also get dog-walking services and NFTs of monkeys that's a small price to pay.
YES! The $250K limit was literally in 100pt font (https://twitter.com/breckyunits/status/1635356025175027712). Amounts above that were at risk! Instead the government just ignored that, on a whim. This wasn't even in the fine print!
Can you explain to me now what rules I can and cannot pay attention to? I can't.
If the government didn't step it they would be ignoring the purpose of the FDIC. The purpose of the FDIC is to protect the banking system from runs and systemic risk. Deposit insurance happens to be the normal mechanism for doing that. When the FDIC realizes that $250k insurance is not enough to stem systemic risk, should they just forget about their mission and let the world burn?
250k is the absolute least a large depositor can recover in the event of a failure. Holding more than that is not some moral failure we should be crucifying businesses.
Instead we had whiners and panic peddlers get their 100% the dishonest way.
I would much rather have everyone take a couple % haircut than reward that kind of behavior.
It does seem that VCs are not just a convenient scapegoat, but a big part of the story.
What was Thiel supposed to do, keep quiet about the problems at the bank and hope nobody else noticed? Then some other guy can be first to withdraw and take the blame, while Thiel gets soaked? Or maybe nothing happens, and the bank takes on even more deposits and fails even more spectacularly a year from now, and then people blame Thiel because he knew back in 2023 and didn't tell anyone?
>a startup ecosystem and venture-capital apparatus that are too unstable, too risky, and too unmoored from reality to be left in charge of something as important as the direction of our technological development
So who should be in charge? Legislative committees? Government bureaucracies? Yeah, those should work :)
Letting people face the consequences of their venality? Now we're getting warmer.
or https://www.technologyreview.com/2011/07/25/192832/lessons-f...
I don't know what "space shuttle for the Moon" means. Can you explain?
These actually have a pretty great track record of, specifically, setting the direction of technological development. Often in a way that's more of a "here's what we want; now, private industry, go do it and we'll offer you X in return" rather than specifying the minutia, to be clear, but it's absolutely not a crazy notion. And I don't just mean NASA or the US MIC (DARPA, notably), but things like postwar Japan's heavily-government-directed R&D efforts and research-pooling initiatives, or Germany's skating-where-the-puck's-headed moves on renewable energy R&D and manufacturing back in (IIRC) the late 90s and early 00s. That we ought to rely on public efforts to direct technological development, at least to some significant degree, isn't obviously a bad idea.
https://www.amazon.com/Fifth-Generation-Edward-Feigenbaum/dp...
Or how about the US?
https://www.technologyreview.com/2011/07/25/192832/lessons-f...
and https://en.wikipedia.org/wiki/Solyndra
So I presented three counter-examples. If you prefer to stay on an abstract plane, I think I'm out.
My post wasn't abstract. I'm just not interested in going example-for-example when my point was never "this literally always works and nothing else ever does", which is the point you seem to wish I'd advanced.
> So I presented three counter-examples.
To what end? The thing you scoffed at and dismissed remains not obviously a bad idea.
This does not mean it always works out well, but the benchmark for "damn solid" in this space is very very far from "perfect", in much the same way that an excellent batter in professional baseball still fails to get on base more than half the time—your line of attack here is just as baffling as someone countering "Joe's a solid clean-up hitter" with "yeah but look at this list of times he struck out!" It's omitting the context of what constitutes good in the space—meanwhile, he's near the top of the league in RBI. Continuing to trade anecdotes about times Joe hit a home run or times he hit an easy pop-fly to center field is just pointless noise, entirely beside the point.
That's why I keep pushing back that what you're trying to do here isn't even relevant to the point I was making, which point is quite far from being controversial, incidentally. I don't think both of us posting Amazon links to books covering the successes and failures of government-lead tech initiatives when I am not denying that plenty of failures exist in that space in the first place, is productive. If that's the way you want this to go, just pretend I've posted a series of links to mainstream macro, IPE, and tech and econ history textbooks in response to each of your (probably mostly valid!) "counter-points", because that's what I'd do, but it doesn't seem like a valuable exercise when I'm not even denying that examples of failures of these kinds of initiatives exist.
> your line of attack here is just as baffling as someone countering "Joe's a solid clean-up hitter" with "yeah but look at this list of times he struck out!"
Yes, but "Joe" has OPS numbers (which are more meaningful than the outdated RBI number, incidentally). What are your big Planning home runs?
Your "specific and oft-cited cases" are vague and not specific, on the level of "hey, Japan and Germany!" While mine are actually specific disasters.
"which point is quite far from being controversial," -- I think you mean in Ivy League faculties and scholarly journals, not in actual business publications.
"the Japanese Economic Miracle & MITI" -- yes, in fact I'm quite familiar with those. After the country was destroyed and a new society was being built, it was hardly possible not to hit a home run. Opportunity was everywhere you looked. How's it done since 1990? You haven't addressed that.
As for DARPA & NASA: you're half right. DARPA did help guide the Internet towards TCP and away from OSI. Note that the "industrial planners" in the US and in Europe were on the wrong side of that one, all the way. The French had Minitel, which was actually a pretty good idea, and then frittered it away.
As for NASA: the shuttle was a master class in how to waste money, so I don't think you want to point at that. And both NASA and DARPA were consistently opposed by nearly everyone on the left end of the ideological spectrum, It's only after you see how they turned out that you can manage to hold them up as shining examples. At the time I'm sure you'd have been opposed.
So drop the snobbery. I know the history better than you do.
Then stop pretending to be confused when I allude to cases that ought to be extremely familiar to anyone who's read up on this topic?
And stop making plainly-crap lines of argument like "it's hardly possible not to hit a home run" when a country is rebuilt after being destroyed when that's just... extremely not true, and the Miracle is such a big deal precisely because it's remarkable (though not unique—I'll go ahead and pre-empt the attack against a thing I didn't claim, given the tone of this exchange), and it's interesting and comes up all the time because it points to limitations of various simplistic models of what should work and what should not (like, say, the notion of government direction of technological development being categorically a bad idea). How has Japan done since 1990? What, is your argument that government-driven technological direction in the 60s and 70s is a key factor in the later malaise, rather than its being mostly irrelevant to that phase? Even if it was, my point was never that "this approach cannot possibly go wrong"! This is a narrow piece of the puzzle. You're not engaging with the substance, you're just casting about for gotchas. So what?
> So it's the sarcasm you object to? I guess that's all you've got.
Look, I'm done. You're not reading or posting in good faith, if that's what you've taken away from this.
> My debut at @Slate: Venture capitalists are parasites who couldn't be trusted with the financial institution that held up their industry, let alone the direction of our technological development. Euthanizing them is imperative if we want a better world.
I probably wouldn't tweet out language about "euthanizing" "parasites" but maybe I just have a better grasp of history than the author.
There are good critiques of everyone involved in this elsewhere, I have no idea how a reasonable person could conclude this is the one that should be posted and shared.
[0]: https://twitter.com/bigblackjacobin/status/16353028722913812...
That kind of anger and _hate_ has become much more acceptable. Reasonable? No. Mainstream? Yes.
Oh, it's be because tech companies need money to operate, and when they ask people for some of their money, the people who give them the money demand input over how that money is used. Hope that answers your question.
It's one thing to criticize venture capitalists for promoting libertarian ideologies on one hand, and then instantly turning around and asking the federal government to bail out their portfolio companies' bank accounts on the other hand. It's OK to make fun of them too. To paraphrase the late J. K. Galbraith, in the US we see socialism in action mainly when private jets start descending on Reagan national airport, their passengers seeking federal handouts.
But the OP crosses the line into silly territory and keeps going past the line, with nonsensical statements such as "[the troubles at SVB] are emblematic of a startup ecosystem and venture-capital apparatus that are too unstable, too risky, and too unmoored from reality to be left in charge of something as important as the direction of our technological development." Left in charge? Of our technological development? That's not even wrong.
But I have never seen the VC community so vocally begging for instant government intervention for anything else in my life.
These VCs would be first ones to tweet about how the government agencies are a bloated mess, a revenue sink, an archaic institution that needs to sold for parts.
But when there was a fire in their backyard, they did not "innovate", "disrupt", or "take initiative". They hounded the government like entitled brats, to fix the mess which was in no small part their own doing.
That's often the truth. The government does a lot of bad things, and a lot of regulations are bad. When someone complains about the government it doesn't mean they also oppose the good things the government does, and it doesn't mean they oppose the concept of government.
Most VCs and major tech CEOs are Democrats. Look at their political contributions.
When the pandemic struck, there were a good bunch of them who couldn't wait to move to Texas or Florida.
No, there were a few loud ones. Most of them stayed.
I'll also bet that SV executives and VCs overwhelmingly donated to Democratic presidential candidates and other Democratic candidates out of state. It's not just buying favor with California politicians.
Yup that's what we got to see this weekend - that SV libertarian "we'll take care of it ourselves" ethos.
Will claim nonstop about how society and the system just gets in the way and slows them down. Will break any rule to make more money claiming they're being helping and it's fair because they don't need back stops or safety nets just leave them be and they'll stay out of the way.
And yet the min their excess profits were at risk, they were literally begging the government to step in and save them.
Every single time I've ever seen a group claim it's fine to let them be exempt from rules of society because they'll handle their own problems, it turns out to be complete bs - because as soon as things get tough, they start asking for "society" to step in a save them.
Simply from my own life experience, every one whose ethos is eliminate regulations and oversight always turns out to a hidden "privatize profits and socialize losses".
Every single time a group claims "we don't need the support of X system or regulation we'll take care of it themselves if it happens" - it always ends up being "we didn't think we'd ever need the support that's why we wanted to cut it, but now they we're the ones in a bad situation please give us the support". It's always a lack of empathy and believing fate doesn't apply to them.
Crypto's frequent "Code is law. Oh no wait, were being screwed, code isn't law, let's fork the system."
"Don't bail them out anyone who asks for a bailout is an idiot and deserves to be punished. No we need bailouts now to keep our returns.!"
"Get rid of banking regulations they just are overhead and block innovation. Oh no, were about to destroy the economy by being reckless in the exact ways those regulations were meant to prevent."
There is a reason that every success group of humans have evolved into a society with social benefits being prioritize with individual benefit. Anyone who thinks a society can function solely by ignoring and not regulating societal impact of actions is incredibly naive.
In this case market failure would be the intended feedback mechanism. There's also the larger context of years of artificially cheap credit to consider. Lastly, there are malign incentives around banks buying treasury bonds, thereby loaning cash to the gov.
I agree. Changing the rules in the middle of the game isn't Hoyle. Not sure that the conclusion, "we need more power in the hands of capricious referees" follows.
What is your basis for this assertion? The words used don't even say they 'should be' made hole, but declare by fiat that it must happen.