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The End of Silicon Valley (Bank)

stratechery.com

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Re: The End of Silicon Valley (Bank)

#41

Post by jonathan-adly »

nsmog767 wrote: post #2

>The federal government’s action is, in my estimation, the right thing to do for this moment in time. There will, though, be long-term consequences for fundamentally changing the nature of a bank: remember, depositors are a bank’s creditors, who are compensated for lending money to the bank; if there is no risk in lending that money, why should depositors make anything? Banks, meanwhile, are now motivated to pursue e…

Could get the best of both worlds with a small, but symbolic haircut. Like 95% back.

Now everyone knows that money in bank is not risk-free, and you limit any systemic fall out.

Re: The End of Silicon Valley (Bank)

#42

Post by kamaal »

SketchySeaBeast wrote: post #24
irusensei wrote: post #16

I have this innovative idea for business. Imagine you charge money from depositors for keeping their money in a big safe vault. No trading or lending their money. You just keep it safe.

So by keeping my money with you I lose spending power at a rate of your fees PLUS inflation? Where do I sign up?

Well in that case you must be ok with losing money that comes with the risk. Which many people surely are not ok with(Want bailouts).

Makes perfect sense to me. If you are ok with the risk of losing it all. You go in for an investment vehicle. Or you go in for a vault.

Re: The End of Silicon Valley (Bank)

#43

Post by colinjoy »

sebzim4500 wrote: post #15
nsmog767 wrote: post #2

>The federal government’s action is, in my estimation, the right thing to do for this moment in time. There will, though, be long-term consequences for fundamentally changing the nature of a bank: remember, depositors are a bank’s creditors, who are compensated for lending money to the bank; if there is no risk in lending that money, why should depositors make anything? Banks, meanwhile, are now motivated to pursue e…

>But that's not how it works! I would imagine the people advocating for a 'bailout' (using the most generous possible definition here) want this to become how it works. Like how in Germany the government guarantees every German bank balance. I have enough problems, I don't want to have to worry that my bank balance will disappear unless I spread it around in order to abuse a technicality.

> Like how in Germany the government guarantees every German bank balance

… up to the amount of 100k per customer, so less than the FDIC guarantee.

There are additional, voluntary, insurances given by groups of banks. These are also limited and customers are not legally guaranteed a payout.

Re: The End of Silicon Valley (Bank)

#44

Post by [deleted] »

koheripbal wrote: post #36
irusensei wrote: post #16

I have this innovative idea for business. Imagine you charge money from depositors for keeping their money in a big safe vault. No trading or lending their money. You just keep it safe.

That's just a waste of capital and leads to zero business investments. It's exactly what happens in crypto because it's deflationary, and it's the main reason there is no crypto economy beyond the price speculation.

[deleted]

Re: The End of Silicon Valley (Bank)

#45

Post by gonzo41 »

irusensei wrote: post #16

I have this innovative idea for business. Imagine you charge money from depositors for keeping their money in a big safe vault. No trading or lending their money. You just keep it safe.

You're talking about the gold standard, there's better things to do with gold. These crisis are like car crashes, they happen. But in the end, it's still fun to drive cars really fast, overloaded on wet, winding roads at twilight.

Re: The End of Silicon Valley (Bank)

#46

Post by orangepurple »

9034725985 wrote: post #40
trompetenaccoun wrote: post #26

Earlier quoted context omitted.

Limits were not "ignored", the companies simply have no other choice. The problem is systematic and by design. A medium sized startup/business handling only 25 million would need to bank with 100 different banks, obviously that's inconceivable in practice. And now look at some of the more prominent customers. Pinterest, Shopify, CrowdStrike Holdings, Beyond Meat, Andreessen Horowitz, Founder's Fund, Circle. The latte…

What would it take to formally increase this limit to USD 250 million for everyone?

Probably negative interest rates for customers

Re: The End of Silicon Valley (Bank)

#47

Post by coldtea »

SketchySeaBeast wrote: post #24
irusensei wrote: post #16

I have this innovative idea for business. Imagine you charge money from depositors for keeping their money in a big safe vault. No trading or lending their money. You just keep it safe.

So by keeping my money with you I lose spending power at a rate of your fees PLUS inflation? Where do I sign up?

Combine it with another novel idea: the gold standard.

Re: The End of Silicon Valley (Bank)

#48

Post by chernevik »

> "the answer will almost certainly be far more stringent regulation on small banks"

And that regulation won't look kindly on lending to anything new, different or weird.

A lending model like SVB's won't be supported by regulators.

Re: The End of Silicon Valley (Bank)

#49

Post by rexreed »

youngtaff wrote: post #7

This is one of the better articles written about the whole debacle… Also demonstrates VCs shortcomings (lack of diligence?) in the affair… which is probably why VCs are shouting about it and pointing fingers at others rather than examining their own failure in this

Maybe startups shouldn't blindly follow Silicon Valley recommendations and make their own decisions on operational matters like who they hire, where they bank, and what systems they use. There's too much groupthink and cult-following especially in the Silicon Valley venture community, where the investor's word is taken as Gospel to be followed to the letter. A bit of independent thinking goes a long way.

Re: The End of Silicon Valley (Bank)

#50

Post by the_af »

Out of curiosity, did anyone ever believe the "rainforest" metaphor for Silicon Valley, that entrepreneurs and investors were more interested in global/"community" success than their own individual wins, and that they wouldn't react egotistically when real money was at stake?

Stratechery asserts this was "probably true" in 2012 but not longer true, and that Uber was one of the first cases where short term/individual wins became more important, even if they destroyed trust.

I find it hard to believe this "let's all of us win together" was ever true.

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