Tech Won't Save Us - Everyone Hates VCs After the SVB Collapse w/ Jacob Silverman

Episode Date: March 23, 2023

Paris Marx is joined by Jacob Silverman to discuss the collapse of Silicon Valley Bank, how it’s part of a larger crisis in the tech sector, and why it’s turning people against the industry’s venture capitalists.Jacob Silverman is a journalist and the host of The Naked Emperor, a new CBC podcast. Follow Jacob on Twitter at @SilvermanJacob.Tech Won’t Save Us offers a critical perspective on tech, its worldview, and wider society with the goal of inspiring people to demand better tech and a better world. Follow the podcast (@techwontsaveus) and host Paris Marx (@parismarx) on Twitter, and support the show on Patreon.The podcast is produced by Eric Wickham and part of the Harbinger Media Network.Also mentioned in this episode:Jacob wrote about the lessons from the Silicon Valley Bank collapse in the Globe and Mail.Paris wrote about how the SVB collapse should be a radicalizing moment against venture capitalists.A video circulated about Jason Calacanis bragging about SVB offering him favorable banking services.A screenshot shows a founder complaining about Chase closing his bank account because his company doesn’t have a physical office, saying SVB never required one.Peter Thiel’s Founders Fund told its portfolio companies to pull their money out of SVB before its collapse.SVB’s President pushed for Congress to reduce regulations and oversight on banks like SVB as it grew.Support the show

It didn't just begin with Silicon Valley Bank a week or two ago. It was these other banks. And before that, it was all these crypto companies that were failing or that were outright frauds, including like Celsius 3AC and Terra. Like, I think we're actually in the larger picture seeing kind of a breakdown in banking, perhaps because VCs made a lot of bad bets. And some of these companies were outright criminal operations. And the

effects are starting to radiate through the VC and financial world. Hello and welcome to Tech Won't Save Us. I'm your host, Paris Marks. This week, my guest is Jacob Silverman. Jacob is a journalist who's written for The New Republic, The Baffler, and many other publications discussing crypto, venture capitalists, and really so much more. He's also been on the show several times in the past. And if you do like this interview, he's also the host of a new podcast on CBC called The Naked Emperor, digging into the collapse of FTX and everything that has gone on with that. So if you're interested in this podcast, I think you're going to like that one as well. I was really happy to have Jacob back on the show because with the collapse of Silicon Valley Bank in the past couple of weeks, it just seemed obvious that we had to discuss this. And Jacob seemed like the obvious person

to have on to dig into it with not only to discuss, you know, the aspect of this, that is the bank collapse part of it. And of course, we also extend this into the difficulties and collapse of Silvergate and Signature Bank, which were tied into the crypto ecosystem and what all that tells us, but also what the reaction of the venture capitalists in Silicon Valley have told us about this industry, about the model that they were built on, and about where all of this goes next. Because for a long time, these venture capitalists wanted us to see them as the people driving us into the future, right? The people creating all of these amazing tech products that were going to change the world and that were going to improve

everything. And clearly, they have not delivered on that. Now, they have turned to the right, as Jacob and I discussed on the last podcast that he appeared on. And they are actively working to make the world a worse place, not only through their companies and technologies, but also through the political system as well. And so this collapse also gives us a further opportunity to reassess how we see those people, their impact on our world, and to try to ensure that they don't have so much power over technology and the process of tech development into the future, because the incentives that are driving them are clearly not the ones that are oriented toward making a better

world for everybody. Now, this was a great episode. We gave it a little bit of time between, you know, the actual collapse of Silicon Valley Bank and when we recorded this so that we can have a better idea of what had actually gone on before recording it. I'm also on the road at the moment. So I recorded this in a hotel in New Zealand. So hopefully there isn't too much background noise and things like that. And it still sounds good for you. And so with that said, if you do like this conversation, make sure to leave a five-star review on Apple Podcasts or Spotify. You can also share it on social media or with any friends or colleagues who you think would learn from this episode. And if you do want to support the work that goes into making the show so I can have these conversations with fantastic critics like Jacob, make sure to join supporters like Jay from Providence, Rhode Island, Thomas in Charleston, South Carolina, and Charlie Francoise from Paris by going to patreon.com slash techwon'tsaveus and becoming a supporter.

Thanks so much and enjoy this week's conversation. Jacob, welcome back to tech won't save us. Thanks for having me. Absolutely. It's always fantastic to have you on the show to, you know, talk about anything related to the tech industry with you. And with the collapse of Silicon Valley Bank, I thought it would be a great time to have you on not only only to discuss what happened with this bank, but also what it tells us about the broader kind of venture capital industry and the powerful people in the tech industry itself, especially after our last conversation where we dug into David Sachs and a lot of these people, their histories, their backgrounds, and what we should be learning from that. So I think it will be a really good conversation to follow on to what we were talking about before. And so I wanted to start with just kind of getting the facts on what actually happened. So let's start at the most basic kind of level. What was Silicon Valley Bank? And why did so many people in the tech industry want to have accounts with that particular bank? It was a local bank in some sense, but it was a pretty big one. The 16th

largest bank in the US, I believe. We don't have as many banks as we used to since 2008. There's been a lot of consolidation, but it's certainly catered towards the market and its title, Silicon Valley. The bank, I think, started in the early 80s, but had grown with the tech industry, especially with the startup kind of ecosystem, to use an annoying phrase, over the last, say, 30, 40 years. There's an interesting little video going around of Jason Calacanis, who we can talk about, but was big in all this, or wants to think he was. He's on some sort of panel, and it's very chummy. He's clearly in a comfortable environment. And he starts talking about this is within the last few years, I think, how when he wanted to buy a new house, Silicon Valley Bank sent eight people over to see him. And, you know,

he was so flattered by the attention and that sort of thing. That's just one anecdote. But it seems to be kind of the modus operandi of the bank, which is that they really catered towards Silicon Valley moguls and the would-be moguls at startups. And that was everything from when you raised a big round of funding, you would want to put it in Silicon Valley Bank because supposedly they would cater to you. Or if you were a rich guy whose companies kept money in Silicon Valley Bank, like Jason Calacanis, then they would move heaven and earth to get you a nice mortgage and make you feel good about it. Even their offices, I mean, they have them all over the country, but they're supposed to be pretty, pretty luxe for a bank.

And they had one on Sand Hill Road, the sort of epicenter of Silicon Valley venture capital. So I think it's worth seeing it as like the house bank of Silicon Valley, both materially significant and really culturally central, too. Yeah, no, I think that makes a lot of sense. And I certainly remember the Calacanis video, and I'll put a link in the show notes for people who want to check that out to see, you know, how gushing he was about this bank and how he was describing, you know, how because he was a rich guy, these bankers really went after him, wanted to make sure that they had his business, wanted to make sure that he felt like he was treated well. And of course, you know, one of the things that I've read since this bank went down is that, you know, they would go after people like Calacanis and give him all of this preferential

treatment because then when he funds a new company or a new startup or whatever, the kind of recommendation is going to be, okay, you're getting this money from me. Now you should go open an account at Silicon Valley Bank. And so there was kind of a pipeline from a lot of these powerful venture capitalists in the industry to send all these companies into the bank and get them to open their accounts there. And they, of course, also made it easy for a startup that, you know, might not really have all their ducks in a row to still get a bank account and credit cards and all those sorts of things, right? Yeah, there is that pipeline, exactly as you said. I mean, there's a term portfolio companies. So if you're a venture capitalist, you have portfolio companies that you've invested in, that's who

you've given money to. And everyone apparently told their portfolio companies to put their money in Silicon Valley Bank. And then in the last couple of weeks, everyone told them to pull them out. I mean, there was reporting specifically that Founders Fund, Peter Thiel's VC fund, was telling its portfolio companies, take your money out. So, yeah, it was this network, the social and business pipeline. You know, there's also another screenshot going around on Twitter of some startup founder. He's complaining that JPMorgan Chase is closing his bank account because he has no physical address for his business. And someone says, well, that's standard in banking, actually. And then he says, well, Silicon Valley Bank didn't need one for seven years. I mean, needs to be verified, but seems to be the kind of thing that was going on here where it's like, no address, no problem. Like this is startup land. We'll take your money. There are a lot of ways in which they seem sloppy

with all that money that they brought in when interest rates were low in the last few years, and there was just tons of outside capital flowing in. Yeah, that sounds about right. And so, you know, you discussed there how, you know, the bank and how a lot of these people pulled money out of the bank. The reporting I saw suggested that people in the Valley very quickly pulled about $42 billion out of Silicon Valley Bank ahead of March 10th, when the bank finally failed. And as you say, went from being the 16th largest bank in the United States to the second largest ever bank failure in the United States. So what actually happened to cause this bank to collapse

in such a spectacular way? I think some of that is still being figured out in some ways. But you know, there's some core things that people have pointed to, and certainly banking experts who know more than I do about that side of things. But for one thing, it seems the bank, like a lot of companies, I'd say, but certainly in the tech world, didn't really account for, hey, interest rates are going to rise, free money isn't going to be here forever, which was kind of the experience for the last 10 plus years, or really since 2008, which was that it was really easy to borrow money or the federal government was bailing everyone out at every turn. And you didn't have to pay a lot of interest on loans. So the bank had a lot of money coming in.

Apparently, usually they would buy into more sort of short-term securities and financial products. And then they decide, hey, we can squeeze out a little more profit if we make a big bet on long-term bonds. And this was one of the big mistakes that they made. I think they didn't have really many positions hedging against this or sort of a sense mistakes that they made. I think they didn't have really many positions hedging against this or sort of a sense of risk management, which is something that you hear a lot these days in Silicon Valley and in crypto. The little corner I've been covering lately is just like complete lack of risk management. So what happened was, I think it was a combination of some bad bets that they made when interest rates were low and lack of diversification of their business. They weren't making a lot of loans. They were making loans to the winery

industry or the wine industry. That was sort of a side program for them. And they had this high net worth individual business where the Jason Calacanis of the world could borrow money or get help with various things in their financial lives. But anyway, so you have these long-term bonds, interest rates go up, things start going south in the wider tech economy, then in tech banking, I would argue, even before Silvergate. And some of these companies start pulling out and their stock starts plummeting. They need money. They need to be more liquid. They sell some of those long-term bonds at a huge loss of almost $2 billion. And that's really when things start unraveling. But a bank doesn't necessarily have all of its deposits on hand. There's something called fractional banking. But of course, they hope to be able to get liquid quickly when depositors start to run on the bank. But it's very hard to

just simply come up with $70 billion or whatever the case might be. Yeah, no, absolutely. And you mentioned Silvergate there. I'll come back to that in just a second. But as you're discussing, Silicon Valley Bank put money into these long-term investments. And one of the things that I read was that they weren't really kind of reassessing or reevaluating the value of those investments as interest rates were changing and the market was changing. And so there was kind of this immediate change as it sold them at a loss that spooked a lot of people as it needed to come up with capital. You mentioned before that, you know, there are stories that Peter Thiel told Founders Fund and the portfolio companies of Founders Fund, his venture capital firm, to basically pull their money out of Silicon Valley Bank. There are stories that

a number of venture capitalists were doing something like this. Can we kind of pin this on Peter Thiel? Or is this kind of a larger phenomenon that's going on there? Yeah, I mean, as tempting as it sometimes is, I wouldn't solely pin it on him. But you know, he is obviously influential. But he also is sort of more publicly known than, you know, honestly, some guys who are probably richer and more influential, at least in tech. But still, of course, he's a powerful force. And if he starts telling his companies to pull out, I'm sure that spreads. The reporting and sort of the kind of open source intel gathering we might do of all these people screaming their heads off on Twitter and elsewhere

seems to indicate that like, this was sort of a social hysteria in some ways, like the bank had problems. And I mean, like, you know, bank runs seem to follow some sliver of bad news, perhaps. And so you can point to some other things like the bank seems to have known for a while that they had some issues. There was this meeting of 40 CFOs with the bank of sort of big customers, perhaps they started getting a whiff of things there. Executives were selling their shares before all this, bank executives. I wouldn't say it's just Founders Fund or Peter Thiel, but it was this very social thing going through WhatsApp groups and Slack chats and stuff like that. And obviously publicly on Twitter and people watching the market

very closely, I think too, once the stocks start falling. In that way, you know, it really reveals a lot about the VCs, I think, and how they operate. And that's something we could certainly talk about. But I think that that social and kind of networked component of it, it was a hysteria in some ways, an old fashioned kind of like, let's all lose our minds over the same thing and not really think level headed and then pull our money out as fast as we can. And in a lot of ways, that's not that different than like a 19th century small town bank run. really kind of made it worse and made it much difficult for them to respond and be able to kind of figure something out as all these people were kind of pulling their deposits and moving them to other banks. Another thing that came up as well is that the CEO of this bank was pushing for deregulation after the 2008, I believe it was called the Dodd-Frank laws in the United States

that kind of put some more requirements on a lot of money. And under the Trump administration, those regulations were ultimately passed, which meant that Silicon Valley Bank didn't have the scrutiny and the oversight that probably could have prevented something like this. You know, there are a lot of boxes to check, which is that like, you know, there's risk taking by the bank. There's there's sort of perhaps a lack of oversight. There's deliberate undermining of existing regulations under the Trump administration,

which was heavily lobbied for by Silicon Valley Bank. If you want to lay blame, there are many sort of factors and institutions and people you can point to. I mean, obviously, like the woke thing is ridiculous. But besides that, yes, there's definitely blame to go around. I mean, the head of the bank was part of the San Francisco Fed. Like, there's just sort of the typical forms of kind of corruption or revolving door politics, undermining of regulation, arrogance on behalf of the holders of capital, and then bad decision making and other things like that. So I think some of the details maybe are particular to VCs and to Silicon Valley and how they bank and how they conduct their finance. I mean, one thing I do hear some people saying is like, why are they all over the FDIC limit? While some banks do operate that way or cater towards those kinds of accounts, from my understanding,

there are what are called treasury management programs. And you can have an experienced CFO or a bank manage your money so that you don't have $15 million in an FDIC account with $250,000 insurance threshold. There are these things called cash sweep accounts, which I've been learning about in recent weeks. It's a commonly offered product in this kind of world where basically, if you have millions of dollars and you're some sort of corporate entity, a bank or some sort of financial custodian will insure that money and spread it among FDIC insured accounts. So like, there are ways to handle this stuff. I do wonder, you know, kind of what else was going on there? And why weren't these kinds of what seem, at least from my understanding, to be pretty routine potential programs or mitigation efforts, like why weren't

they doing that stuff? And obviously, I think that contributes to the sort of crazy call for bailouts and the all caps tweets by Jason Calacanis and the Armageddon predicted by David Sachs and Joe Lonsdale doing promoted tweets, asking for a bailout, all this kind of stuff. There seemed to be a lot of money on the table that they could lose if the FDIC did its traditional 250K limit. And people steeped in the regulatory sphere could talk about whether that's a good thing to go above that limit. But I think these people were scared that their model was threatened and unraveling. And maybe they had also been pretty irresponsible by not having these basic like cash management programs to ensure they wouldn't be in such jeopardy. No, definitely. And, you know, we'll come back to the VCs in just a

second. But it was shocking to see like, it was something like 90% of the deposits at Silicon Valley Bank were uninsured, meaning that as you you're saying, they were over the Federal Deposit Insurance Corporation's $250,000 limit that they'll cover on a bank account. So you had all these accounts with massive balances, and Silicon Valley Bank wasn't doing any of the usual tactics that some of these other banks would be doing to ensure that you're kind of reducing the risk of having so many uninsured deposits. I believe it's the number two bank in the country in terms of percentage many uninsured deposits. I believe it's the number two bank in the country in terms of like percentage of uninsured deposits. The other one is one of the Mellon banks in New York. So yeah, it clearly is also like an unusual bank in some ways. I think

that has to be accounted for, especially when these people are predicting wider collapse. I mean, obviously, there's some stuff going on beyond Silicon Valley Bank, but it also had its own kind of unique model and its own unique recklessness, perhaps. Yeah, definitely. And before we get to the response and what regulators did to this, and of course, how the VCs reacted, I also wanted to point out that it's not just Silicon Valley Bank that has been having some trouble recently. In the news has also been Silvergate and Signature Bank.

Do you want to give us a bit of information on what was going on with them and how they fit into this bigger picture? Yeah, Silvergate and Signature were really essential to the crypto banking ecosystem. Sorry, it's that ecosystem word again. But crypto companies really need fiat on-ramps and off-ramps. Every company needs banking access sort of to the mainstream financial system. But, you know, that's a difficult thing sometimes for crypto companies, for reasons you might guess. And these banks really catered to them. Silvergate at one point, I don't know the exact numbers for Signature, but Silvergate was really a crypto-focused bank. Signature had a larger purview and then kind of brought in crypto business. But Signature at one point had something like 1600 crypto clients.

And they were all in these what I call kind of bank within a bank or sort of there were these networks that these settlement platforms that both these banks ran. One was called the Silvergate Exchange Network and one was called Signet. And one, you know, belonged to each bank. What my understanding, at least, I think this is like one area where we need to learn more or maybe I'll try to write an article or something, but it seemed to act as almost like an internal marketplace within each bank where your 1600 crypto clients

could do a lot of business with each other. And then if they need to sort of interface with the mainstream banking system, that would then just sort of become Silvergate money or signature money, and then go to the wider banking system, which I mean, that leaves potential for money laundering, it leaves potential for just not being able to track what's going on, I think. And I think that was one issue. I mean, it's been cited in some lawsuits, and I think you're going to see it cited in potential government filings that these private settlement platforms made it a lot more opaque what these banks were doing.

Silvergate, I think, went bankrupt more the old-fashioned way because a lot of its customers did, and it was heavily worked with FTX and was famously caught up in that. You know, I think there is potentially a lot of liability for these banks if authorities determine that they facilitated like FTX's fraud, for example, or some of these other potential frauds like Celsius. And Signature is a little different because it's New York based. It's a little bigger. It wasn't really a crypto focused bank, but it had as kind of a big crypto practice. Barney Frank was famously involved with the bank and kind of paid off by them very shamefully, I would say. And there is a meme or sort of idea going around in crypto circles that signature has been unfairly targeted,

and that the bank was solvent and didn't really need to be seized by the government. From my understanding, the reasons at least has expressed so far behind the seizure are both the banks seem to be financially in trouble, but also perhaps something's related to its crypto business and potential criminal investigations. I don't know. I don't want to excuse the authorities automatically, but there's this assumption or even in the VC world that this stuff like kind of all began yesterday. And I think that's what we need to take away from the Silvergate and the signature stuff was like it didn't just begin with Silicon Valley Bank a week or two ago. It was these other banks. And before that, it was all these crypto companies that were failing or that were outright frauds, including like Celsius 3AC and Terra. Like, I think we're actually in the larger picture

seeing kind of a breakdown in banking perhaps because VCs made a lot of bad bets and some of these companies were outright criminal operations and the effects are starting to radiate through the VC and financial world. That's a fascinating way to put it and to see this in a know, in a much bigger

picture and to link it to everything else that has been going on the past, you know, 12 months or so, right? As these companies have been continually collapsing and larger dominoes seem to be constantly falling. And when we look at Silvergate and Signature and, you know, how they were key kind of links for the crypto ecosystem to move into the kind of regular banking system, the fiat money world. Does their collapse create further problems for crypto companies, even after we've seen all the collapses of companies like FTX and things like that, too? Yeah, absolutely. Like, I think these are slow motion dominoes for crypto in some ways, or sort of like a lot happens all at once. And then there's maybe a couple weeks of quiet. But, you know, the FTX story certainly isn't over. And I think there are going to be more indictments, probably more people pleading guilty from the FTX world. But also, everyone did business with FTX and Alameda, and there are potentially other companies involved. And whether in a criminal sense or just financially dependent, like they had all these hedge funds that had their assets on FTX. Or like, I interviewed Kevin O'Leary, the Shark Tank guy, Mr. Wonderful. He had his

endorsement money on FTX. Like, I think it was mostly crypto, millions in crypto. Now he's suing to get it back. So like, it takes time sometimes for the second and third order effects, I think, to be felt, or to see to really find out who owes whom. And, and some people go bankrupt quicker than others. Some people can arrange emergency financing, and some can't. And those kinds of things take time. I'm not saying it's all kind of attributed to FTX. But you know, that is, of course, like the biggest that we've seen so far. Then in terms of what they can do without these fiat ramps, not much, I think. I mean, it's all going offshore. You saw these huge printings of stable coins in the last few weeks, Tether, this other one, TUSD, Binance made a billion dollars purchase worth of Ethereum and

Bitcoin. So it seems like they're sort of pumping the market with stablecoins. And then even Coinbase, which is supposed to be the regulated above board US entity, even though it's always suing the government and it's always losing money, they're talking about moving offshore. And then there's a general talk of, hey, we might have to do our banking offshore by a lot of these companies, or perhaps in some friendly European jurisdictions. So it's a big problem, I think. The crypto industry will say it's just a blip, or they'll say that there's a government kind of conspiracy against them. I actually think they're right. I mean, I think the Biden administration in some sense has a larger strategy. I don't know how coherent it is, but they don't want

this stability in the banking system. And that's where like the industry disagrees, I guess, but they don't think that they're a source of instability. But just look at the last year. You know, it doesn't matter that crypto has rallied a bit in the last few weeks, like the last year has been one of disaster. So the Fed and other supposedly responsible custodians of the capitalist and Wall Street order, they kind of want to push crypto out of the way and say, like, you've had your chance, you've done some damage, you know, go to the Caribbean. Jacob, I think you've taken the complete wrong lesson from all of this. According to Balaji Srinivasan, you know, all these collapses mean we just need to put all of our money into Bitcoin.

I mean, it's insane, you know, and like, I don't know, I was doing some media stuff the other day, and someone was asking about this short term rally right now of Bitcoin. And like, it's just they, I don't know, the bag holders, they get so excited. And it's like, dude, you've been through this before. And I haven't even been covering this as long as you like, don't you know, I mean, of course, their money's on the line. And they always want to say that, like, you know, the next bull runs just around the corner or something like that. I mean, and Balaji is a special case because he's basically a right wing extremist. But yeah, like I don't know.

One thing I think we've seen is like we've been through this and like the retail numbers are not coming back. People have lost their money. Like there are still some loud names out there, but crypto hasn't proven itself. Where's the use case? Like, why would I want to do that except for like the crazy speculative promises of a Balaji type guy? No, exactly. I, you know, obviously I completely agree with you. You're speaking to friends here. Before we get into the broader venture capital kind of response to this, just a final question on, you know, the whole Silicon Valley collapse and the signature collapse as well. The Fed, Jerome Powell,

Treasury Secretary Janet Yellen, the FDIC, they all came out within days of the Silicon Valley Bank collapse and said, there's all this concern around uninsured deposits and things like that, but depositors will be getting their money back and they will set up the facilities to ensure that that is able to happen so people wouldn't be losing money. How does that actually work? You know, is this a bailout? What does this mean for, you know, the people who had their money in Silicon Valley Bank? I believe it comes from an FDIC fund that basically comes from sort of fees assessed on the banking industry. But, you know, there is a lot of talk about whether it constitutes a bailout. I think most informed minds say, look, it is certainly anyone from like Joe Wiesenthal to David Diane or some of those folks that or Francesca Coppola, who I like the fees or the

costs do get passed down to consumers or taxpayers in some way. And it is a guarantee that your money will be there, even if you left it in funds, in accounts over the FDIC threshold, knowing that that was a risk. And even if your banker buddies took huge risks with that money, or acted irresponsibly in general. So it has to sound like a bailout or to me or some kind of saving measure, where the cost is ultimately born, you know, that stuff usually flows downhill, of course. So as to why, like it does arguably calm markets, as they say, it seems like a very neoliberal response. It is kind of a rhetorical victory for what these guys who call themselves

the innovation class. But I think it was also just seen as a short term risk, probably that the Biden administration didn't want to take. Yeah, absolutely. And, you know, even though they kind of saved this bank from total collapse, you know, they're still kind of looking at what they're going to do with it if you're going to sell it to some bigger bank and what have you. But we can still see that there are consequences coming with that, right? We just saw the other day that Credit Suisse is being sold to UBS, I believe.

So there's still kind of a contagion effect that is going on here. Well, yeah. And I think one thing just real quick worth noting, maybe I didn't answer before, but like, you know, so basically people are getting their money back, like shareholders in the bank and like sort of the leadership of the bank, they're basically gone or wiped out, but the CEO will be fine because he sold all the stock. But, you know, the billionaire depositors, the head of VC funds will be made whole. And there'll be very little interruption. There might be some payroll missed here or there. I mean, maybe some companies will experience real financial distress, but mostly the FDIC has done this before, maybe not always at this scale. You know, they set up a new banking entity and there's almost no interruption from Friday to Monday, last Friday to Monday of this week, I think, or when this originally

happened and kind of business proceeds. So it's not like a lot of the money is going to disappear, like in say the FTX bankruptcy, for example, where they're still looking for money and customers won't be made whole for a long time if ever. So that's also, I think, what gets at me with some of the bellyaching from some of these people is like, they got their bailout and they got really quick with minimal interruption. As for the Credit Suisse stuff, you know, I think it's important to kind of keep a broader eye on these things like First Republic Bank that people are talking about seems to have problems and they're looking for a buyer. I mean, the big banks are going to get bigger from this. It's unfortunate. I've had people tell me just from various lines of work,

one of them was a legal firm, but they moved their accounts from First Republic to, I think it was JP Morgan, you know, one of the biggies. So you're going to see more of that kind of thing. But Credit Suisse has had problems for a long time. As anyone could tell you, like a lot of these banks are corrupt in a certain way, like Deutsche Bank, which has been on the ropes for a long time. So my worry is that this, of course, gets politicized and used by kind of the wrong people to either, yeah, push like Bitcoin maximalism or push like the entitled VC attitude or choose your ideology, I suppose. Everyone can find one in here. Yeah. And, you know, I think it's an important clarification to make, right,

that this money isn't gone, that people had access to it again very quickly. And the biggest disruption is that some of these people are kind of switching around their banking relationships, maybe opening accounts with JP Morgan and some other banks. And as you say, the collapse of Silicon Valley Bank being still the 16th largest, but one of the smaller banks in the United States is one of the effects is kind of scaring some people off of more regional banks and getting them to go with the bigger banking players, making them, you know, even bigger, and I guess, you know, further encouraging that idea that they'll be too big to fail. But you know, you mentioned they're the venture capitalists, and we've talked about them a bit so far, but I think it's important to dig into their actual

response to this and what that tells us about them and the broader tech industry. So after Silicon Valley Bank collapsed, David Sachs was tweeting, where is Powell? Where is Yellen? Stop this crisis now, in all caps. Announce that all depositors will be safe, because as we've been saying, you know, there was a lot of uninsured deposits at this bank. Jason Calacanis, meanwhile, was sending out a number of tweets in all caps, one of them saying, on Monday, 100,000 Americans will be lined up at their regional bank demanding their money. Most will not get it. This went from Silicon Valley insiders on Thursday to the middle class on Saturday. Main Street finds out Monday. And really, a lot of people saw these tweets kind of as a warning

from the Silicon Valley venture capitalists, right? Save us or we'll ensure that there'll be much bigger consequences. So what do you make of this response that people like Sachs and Calacanis and many other of the VC class on Twitter had to this bank collapse? I mean, I've been pretty clear on Twitter that I found some of it kind of despicable and just shameless and embarrassing for them, I think. But, you know, they got what they wanted. Even when I thought like, wow, this might work against you. This is so alienating. And certainly some policymakers are seeing this, even if they're not just reacted to tweets. But it worked. I think it's very frustrating. It is revealing. And sometimes it's good to sort of have the scrim

of respectability ripped away. And then like, you see what these people are actually like, not that we really had to wonder with some of them. You know, it's worth noting, perhaps that like Silicon Valley Bank actually had a lot of private equity money. It had some other businesses, but yeah, but the Silicon Valley VCs were a huge part of it and probably the biggest besides private equity. And they're certainly the most publicly visible. And, you know, there's been a larger cultural or sort of social media shift in recent years where the VCs have kind of tried to celebritize themselves a bit. I mean, there was a period when VCs were celebrated, perhaps, as captains of industry unto themselves, visionaries picking out the next winners and seeing into the future,

however you want to kind of pump them up as those masculine tech visionaries. But their arrival on the social media scene, especially more in the last couple of years, and very much so since Musk took over Twitter and established his war room of David Sachs and Jason Calacanis and some others, all of whom are valuable Twitter users, things have really changed. I mean, like, at least in the circles I run in, people don't seem to like these guys. There's been a lot of attention about them. And again, it is useful in some ways, but the entitlement does seem off the charts. It is, I think, very alienating. They don't really apologize for anything they say.

They're kind of sore winners where they still complain or say like this should have happened sooner. There was a tweet like that from David Sachs. David Sachs is a top DeSantis supporter. I believe he's going to have a position on his fundraising committee or the financial side of his 2024 presidential campaign. And he's already donated a lot of money to DeSantis. All these guys are pretty much in on DeSantis, Calacanis, possibly Biden. So like, there's a very political backdrop here. So of course, they're not going to be happy about getting what

they want. They're going to still complain about the Biden administration and kind of bellyache their way through this and complain that we all made fun of them and yelled at them over the last few days, even though, frankly, they deserved it. So that's, I guess, how I feel about like the social media and kind of cultural playing field. I think being a little more serious and seeing a little more broadly, like, you know, and I asked some of these questions on Twitter, it might be a wake up call for some of these guys. I mean, some of them have said like, oh, this is radicalizing for us, because you all hate us. But maybe ask like, why? Why do a lot of people seem to resent VCs? And it's pretty simple. Like, they're arrogant, the apps and other products they make when they don't fail 90% of the time don't seem necessarily that useful. You know, their main invention in the last

10 years is probably undermining the labor market through the gig economy. You know, now that they're on Twitter, and we can see how they live, they're all kind of jerks, and not very personable. And they think that they're the innovator class, as they call themselves, and the visionaries to kind of lead whatever the new capitalist order. And of course, now, a lot of them are moving to the right and getting very politically active. So like, of course, a lot of people don't like them. Yes, they have a constituency, just as Elon Musk does. But like, there's no humility there or even just questioning like, why might you guys be upset with this? Or even like a strategic questioning of like, maybe we should think about why we're hated. And that's one thing I did say on Twitter, like, I'm overgeneralizing perhaps, but like people in Hollywood and finance, a lot of

them do have kind of what I call the requisite cynicism about what they do. They don't necessarily have the changing the world attitude. I mean, you know, you can find exceptions or there's certainly people in Hollywood who are so full of themselves and think it's the most important thing in the world. You know, and there are a lot of shitty people in both of these industries. But they might not tell you like, hey, private equity is so important. Or they might say like it generates wealth or something like that. People in tech still think that they have that sense of manifest destiny and that you should

be grateful. And that's where the cultural divide is ultimately rearing its head here, I think. Yeah. I think a very important point. And I would just say that, you know, just to remind people, if they do want to know more about the politics of some of these people, they can go back to the last episode that we recorded together, where we kind of really dug into that, right, especially on David Sachs and some of these other folks. Just to build on what you were saying there, like one of the things that stood out to me from what these venture capitalists were tweeting about, you know, in the immediate aftermath of the Silicon Valley bank collapse, you know, beside wanting to save all their deposits and whatnot, was that there was a real kind of narrative focus on making this seem like their desire to save the bank and save the deposits in the bank was not about them, the rich people of Silicon Valley, the venture capitalists, the David Saxon, Jason Calacanis of the world. You know, Mark Cuban was tweeting that, and I quote here, the tragedy of SVB is that it's not the wealthy taking the hit. It's the thousands of companies who borrowed from SVB and were required to keep their cash in SVB. Those entrepreneurs and their employees and vendors

are feeling the pain, unquote. So there was a real focus on saying, this is not about us rich people who are getting hit. This is about the workers. And we need the government to step in to save all these deposits so that workers can get their paychecks. And then there was also an attempt to kind of frame it as though this is really not a venture capitalist problem. You know, David Sachs tweeted, quote, VCs who passed on a warning to their portfolio companies did their duty to serve their founders, nothing to be ashamed of, end quote. So what do you make of how they were really trying to frame this? You know, obviously, a lot of people in tech are very skilled PR people. That's part of the reason why they've been so kind of seen so positively, I guess, over the past decade, besides,

you know, their companies gaining immense value. But what do you make of that response that they had? So I think that the it's fake populism of the kind that we've seen from kind of like the wealthy right in recent years in one form or another. You know, think of the app makers. For one thing, of course, a lot of it was born out of self-interest and a certain amount of recklessness. I also think that these guys think that they are the center of the world and the companies they invest in support are truly, I think they do believe this, are truly kind of the center of the economy and the most important thing that one can be doing, besides the fact that they need to make enormous returns on them. And that way, I find it disturbing. And also, I think it's, of course, very selective, too, because the tech industry just laid off thousands of employees and almost celebrated itself for doing it and talking

about a lot of CEOs have said Elon is doing a good job by cutting Twitter down to size and showing the company can still run on a skeleton crew, which it can't really, but it is. So workers' rights don't ever really figure in the Silicon Valley calculus. So when I'm hearing them now, even about like six-figure salaried employees, you know, it sounds like crocodile tears and like nonsense. I do think it's a great opportunity to raise these larger questions about like, well, what is VC good for? And do we want to play the role that it does or the role that it thinks it does in kind of innovation and investing in new companies and all that sort of thing? Like, I don't need to recapitulate how the US federal government, in some cases, the DOD has been essential to so many tech advances or personal tech advances. But like, we know that narrative. But maybe there's a reason to go back to that and say, you know, the guys who are VCs, they have a lot of money at their disposal, but they're not

necessarily good at what they do, or the most efficient at what they do. And perhaps we shouldn't be happy with how they do it and kind of the politics and political economy they've produced over the last 20 years. I think it has been pretty harmful. I'm happy you brought up that point about, you know, the workers and how they are pretending to, you know, be supportive of these workers in the industry, even at the same time as they've been, you know, supporting Elon Musk in cutting workers at Twitter and looking at broader layoffs, you know, across the industry. And one of the things that really came up to me as I was looking at some of, you know, what these people were saying, you know, especially as you say, you know, there's been

kind of this turn against the venture capitalists. It's been a very revealing moment for them. I saw Bill Ackman was saying that the failure of Silicon Valley Bank could, quote, destroy an important long-term driver of the economy. The head of Y Combinator, Gary Tan, was saying that, quote, if the government doesn't step in, I think a whole generation of startups will be wiped off the planet. And even Larry Summers, the economist, was saying that there would be huge consequences for the U.S. innovation system if this bank was allowed to collapse and, you know, all the depositors weren't protected. But then, you know, as we're thinking about the role of the venture capitalists and what they have done, you know, what the industry as a whole has done and the kind of companies that they have funded over the past decade or so, maybe it doesn't seem so bad if there's a hit to that kind of innovation economy or a hit to some of these startups to kind of force this industry and these people at the top of it to really reconsider how this all

works. Yeah, I think it does present such a stark contrast in these last couple weeks that it just, at least, and again, I try not to go too much from my own internet bubble, but I mean, the level of self-regard, it seems among these VCs, who at least claim and some of them really do seem to believe that they're somehow inventing the future and the end this part of this heroic innovator class. And then most people who I think don't, I mean, you can also just kind of look at what the industry has produced in the last 10 years. I think I said something about gig economics being the kind of main innovation. You know, 60% or more of Americans live paycheck to paycheck. I think most people, their needs are really material and also social and political. And

Silicon Valley has just been unable to solve those things from a purely kind of technological and economic approach. Silicon Valley has always tried to see itself as sort of separate from or above politics somehow. But, you know, if people don't have healthcare, you can't really in-event your way out of that, which is why also sort of relatedly, I find it kind of offensive or obscene that we see these life extension startups from Teal or Sam Altman or someone like that, or at least invested in by them, where, you know, most people are just struggling to get everyday health care.

There is, I mean, call it a kind of insular coddled life while all these people live, but there is a great cultural gap and economic and material gap between how they live and how most of us live. You can even just look at San Francisco, too. I mean, of course, it has a lot of problems and kind of very visible social problems and poverty on the street. But the generalized response from the VC class has been disgust or flight or anger or any number of things, and not any kind of self-examination and very little sympathy or empathy on display and certainly not as a political policy or program. So I think that's why I keep going back to this idea, or at least for me, it's resonant as a sort of stock-taking moment of where do these people stand as a class, as a political and economic force, and how different it seems from where most of us are and from what really the sort of broader

public needs. Yeah. And it seems pretty telling that part of their response was not only, you know, we need to protect all depositors, even all of these uninsured deposits, you know, over the $250,000 limit on these bank accounts by really wealthy and powerful people like the venture capitalists, you know, David Sachs, Jason Calacanis, and many others. But then at the same time, you know, like we were talking about in our last conversation, they were also using this as a moment to kind of further play into these culture wars, you know, the right-wing narratives that they've been pushing for a really long time. And, you know, sorry to be quoting tweets at you in these questions, but, you know, David Sachs was saying that we've reached a point of political division

where it's fine to root for members of another tribe losing their bank deposits. And then Flo Crivello, who is a founder in the industry, in a tweet thread said, we're having actual, honest to God, hammer and sickle communists hating tech and actually wanting our heads on a spike. Now, I have to admit, I had a bit of a laugh on that one. I was like, oh, is he describing me? But, you know, that's just to say that, you know, all of these powerful people in tech are really kind of losing their minds over the fact that there's growing criticism of the industry. And especially at a moment where, you know, their bank collapses because they've engineered this bank run,

people are calling attention to the fact that, you know, these venture capitalists are really causing a lot of problems, not just in this industry, but in the wider economy. And they're always looking for ways to kind of justify their actions to say, we are the ones actually being targeted in all of this, even as they're the ones kind of perpetrating a lot of these harms that are existing in society. Yeah, I mean, certainly the victimization play seems to be the go-to move by the right wing in recent years, and also, you know, people who in elite and moneyed and political classes who are not victims, but it is a little hard to take seriously. And a lot of it does seem in bad faith. I would hope that some of these folks, even as they're horrified by the anti-tech sentiment

they see, or that people are, quote, rooting for them to fail, as one guy I saw said, they may be asked, like, well, why might these people hate us? You know, and there are practical strategic questions there, too. I mean, like, but even look at crypto, like crypto mass adoption is not happening. Retail trading and interest is down and has been down for over a year. And I mean, I don't need to list everything that's happened over the last year. But instead, what I see a lot in crypto or people still kind of in the industry and peddling it and true believers is that like, well, the rest of us just don't get it yet. Or like, there's still this sense of inevitability.

But I don't know, maybe this is just a bit of a consumer dead end that the industry wandered into. It doesn't mean no one will be using it, but it's not like the next billion person tech app or sector. But there isn't that kind of self reflection there. Like, I kind of made a joke on Twitter one day, like tech can't fail, it can only be failed. That seems to be the attitude that a lot of these guys have, why don't you see how important we are, and how important we are to the larger economy. And, you know, I think people appreciate their apps and messaging their friends and stuff. But there's also a well earned cynicism by now, and I think exhaustion with these folks and, in a sense that like, our lives aren't necessarily getting better. One of the other sort of tendencies

of the last couple decades, and Matt Chrisman had a good little summary of this on Chopper recently, but it's like just technologies of surveillance and coercion, as Matt said, like are going to be with us for the rest of our lives. And, you know, people are more wise to that kind of thing, too, that with the supposed convenience of Silicon Valley has come a lot of downside, a lot of bullshit, the surveillance culture, the coercion, economic inequality, gig economy, the wrong people getting rich and accumulating political power. And yes, we have like nice phones and slick apps to message our friends, but the scales seem a bit uneven at this point. And that's why I think it's

coming through here as well. Yeah. It's a bit depressing to think about how like many of these surveillance technologies that have been normalized, we just kind of expect that they're going to stick around now, but it does feel like, you know, we've been through this cycle enough times, you know, this cycle of hype of, you know, the tech industry and these founders and whatnot are going to change everything and improve so many things about society. And then they're not able to deliver and whatever kind of bubble they created in whatever part of the tech industry collapses. And then, you know, they just move on to the next one again and they make all these big promises and whatever. And then it collapses. And then we move to the next thing and on and on and on. Right. And meanwhile, these venture capitalists are profiting off of each one of these bubbles in most cases. But we're all kind of collectively stuck with the consequences of all these technologies that they've loaded onto us, promising that they're going to make our lives better when actually, you know, they're creating new systems of rentier capitalism. They're further degrading working rights and all these other things. And then they're just shocked to think that maybe people are finally getting fed up with what they're trying to sell us. Very much so. And yeah, rentier capitalism is the other trend we should point to the last couple of decades, which is just rent-seeking

intermediaries and forms of extraction from us. And there were some tweets during this whole thing about like, well, Etsy won't be able to pay its sellers. And it's some tweets during this whole thing about like, well, Etsy won't be able to pay its sellers. And it's like, okay, I am glad that the average home craftsman can sell something on Etsy. But like, to act like these platforms that at this point are basically rent seeking intermediaries are still this like thing we should be grateful for liberating force is just a little silly. And the other thing that you mentioned is just sort of this moving on from hype to hype. Obviously, the new thing is AI or generative AI or the seemingly many forms of AI that aren't even AI that we have. And I think you also indicated something, which is that VCs don't necessarily have to make successful companies to make money and then ride the next wave of capital that flows in. It might not be

as easy as it was the last decade with near zero interest rates, but VCs are generally in the business of risking other people's money and doing so very confidently and with little personal risks to themselves or even reputational. So that is one thing that I think from like a tech critic or journalist perspective, and probably from an informed consumer perspective might seem a little frustrating. It's like, we're just supposed to go along for the ride every time, knowing kind of how this plays out. But more than that, we are the test subjects. You know, we've seen that physically, quite literally with self-driving cars in our neighborhoods. And, you know, and Tesla's obviously not being ready for prime time. And then, and that kind of thing, like in our physical space where we live, and then,

you know, the ways in which every site experiments upon us or performs new types of data collection and surveillance and then sells that on to some other party. I mean, there's endless ways, of course, you know, no matter how many terms of service agreements we implicitly agree to, it's not what we signed up for. And when we talk about socializing the losses of a bank, which is basically what's happening here in one form or another, you know, I think that's also another very vivid and more material way that people understand this, that we're sort of paying for the risk and mistakes of this innovator class that doesn't really care about us. And it's very easy to see that when these guys are bickering on Twitter and being incredibly obnoxious and begging for money and then get that. Yeah, no, absolutely. And, you know, just to kind of pick up on your point around, you know, the founders making money, even when the companies they fund don't make money, like look at Uber,

for example, right? Uber has never really made money. Yet Jason Calacanis, one of his kind of things that made him a lot of money was his early investment in Uber. And, you know, he made a lot off of that, even though Uber has never profited. And, you know, if you think about what he's been saying about needing to protect workers and ensure that Silicon Valley Bank is made whole so that workers are paid, you know, all the money that he made off that was on really kind of making conditions worse for drivers, ensuring that they're exploited and underpaid and all those sorts of things. So you see how these people are making their money and how they have very little kind of ethics in going about these things. I just want to pick up on what you said there about the low interest rates. Now, obviously, as we've been talking about, Silicon

Valley Bank was kind of hit because its business model was kind of built on these low interest rates and the expectation that they were going to continue and its investments were structured in that way as well. But these companies and these venture capitalists kind of got used to a 15 year period where low interest rates were the norm. That was how you built companies based on that kind of expectation. And now that is changing. And we're seeing a lot of troubles kind of across the tech industry as they try to, you know, reorient for this new reality of higher interest rates. What do you think this is ultimately going to mean for the tech industry and for the people who have based their entire business models and their entire conception of how they handle creating technology products and companies and startups and all that kind of stuff

based on low interest rates? Yeah, I think that's a good question. The way you presented gestures at how big this potentially is. I mean, and there are ways in which we can't necessarily predict yet, but I think it depends on a couple of things. Well, in general, yeah, money won't be as easy to come by, I think. I mean, some of these venture capitalists are still sort of playing with last year's funds or funds that they raised during the lower interest rate environment. I mean, one thing I've seen in crypto is just that like A16Z and Paradigm, I believe, still have a fair amount of money to invest because they raised more money during lower interest rate environments. But also, crypto provide this environment where you could get tokens as a VC and then cash out within months

rather than cashing out on a startup years later. He had sort of this faster rotation of that cycle. I think what might not necessarily like Levin or like brace the fall or something. I mean, there are all these huge sovereign wealth funds that I think some of them, I don't claim to know how they do their decision making, but like Middle Eastern sovereign wealth funds that I think some of them, I don't claim to know how they do their decision making. But like Middle Eastern sovereign wealth funds still have unbelievable amounts of money because we're still burning so many fossil fuels. So, you know, there might be some shift to try to, you know, get more money from the Saudis and Qatar and Singapore and these other sovereign wealth funds. But I think things here in the US will slow down. I think probably some startups will deservedly fail and maybe some funds will close. But I can't really

predict more beyond that. In a way, you would hope that it would create some kind of prudence or caution or that maybe there wouldn't be these vaporware trends of crypto or web3 and there would be more substantive pursuits from the tech industry knowing that they kind of have to husband their resources or save their bullets or whatever given the kind of leadership we see from them i don't think that necessarily will happen but you know you do also hear on twitter or elsewhere from people who are like hey there are still people under the traditional VC model trying to solve hard problems or do sort of more civic minded things. I still think that's not a brief for venture capital itself. And I think ultimately what I hope this kind of leads to is that maybe the model can be questioned.

It doesn't mean it has to go away. But it's weird even that venture capital had like pop culture presence that people know what this stuff is, or like who some VCs are, maybe through movies like The Social Network. Like these people shouldn't be famous. You know, I think that sets it up really well for my final question as well. Because when I was looking at the response to this, I kind of wrote that this is the opportunity for a further radicalization against the venture capitalists and the tech industry more generally, right? And the kind of ideas that they've been putting out there. And during this conversation, you've been talking about how the public more generally seems to be turning against tech and against these venture capitalists as they learn more and more about them and the impacts that they've had on the world

around us, right? What do you think the future is when we think about the relationship between the tech industry and the public? Because you said earlier that, and many people listening to the show will remember this, you know, there was obviously a period where looking at the tech industry, it was like they could do no wrong. There was all positive things that was coming out of it. People were really happy to buy into the narratives, but that seems to be really shifting. And Silicon Valley Bank and seeing the industry get bailed out in this way probably further changes those perceptions. So what do you think the future of that kind of public perception of the doubt or sort of nerd celebrity treatment that a lot of them did get over the last couple decades. You can mark certain milestones or hinge points over the last decade, I'd say. I mean, certainly the 2016 election, the general sort of changing attitudes towards Facebook especially. I think VCs may have to contend with their own entitlement once they

start realizing that like people don't sort of revere them by default, that what they do doesn't seem to be heroic. I mean, if they can make an argument for their efficacy and certain necessity in the chain of innovation and company building and technological development, fine. But there's so much myth making around, of course, around Silicon Valley, but around kind of venture capital and Sand Hill Road and these networks of people, of men that have seeded these new companies. I mean, going back to Shackley and all these other guys. And some of that will persist because a lot of this is very, as we've seen during this whole saga, like relationship driven. And some of it is, well, you better keep your money at this bank because I'm investing in you. Like there's ways

in which you keep something going, a form of nepotism almost. So, you know, the industry will be looking out for itself. I mean, that's the way it has the PayPal mafia will limp on, but you know, I don't think they're going to be playing heroes in a movies anytime soon. Yeah. I think there's a real kind of opportunity. You know, we've, we've had this more kind of critical turn toward tech for a while that has focused a bit on the CEOs. But I think it's interesting now to see if it's going to shift even further toward pouring more scorn on the venture capitalists in particular and their role in this whole ecosystem and making so much of this possible.

So it's going to be fascinating to see where it goes. Jacob, it's always great to talk to you about anything to do with the tech industry, to get your insights. I'll obviously be watching to see what you'll be doing next, what you'll be writing, because I'm always looking forward to what you're at. Thanks so much for taking the time to chat. Oh, I appreciate it. I love the show.

Thank you. Jacob Silverman is a journalist and the host of The Naked Emperor on CBC Podcasts. You can follow him on Twitter at at Silverman Jacob. You can follow me at at Paris Marks, and you can follow the show at at Tech Won't Save Us. Tech Won't Save Us is produced by Eric Wickham and is part of the Harbinger Media Network. And if you want to support the work that goes into making the show every week, you can go to patreon.com slash tech won't save us and become a supporter. Thanks for listening. Thank you.