The Prof G Pod with Scott Galloway

Special Episode: Silicon Valley Bank Goes Bust

8 snips
Mar 11, 2023
The dramatic collapse of Silicon Valley Bank unfolds as the second-largest bank failure in U.S. history, sparking panic among customers and venture capitalists. Discussion centers on the bank's poor investment strategies and systemic risks that this failure presents. There's a deep dive into government bailouts and the hypocrisy surrounding intervention in economic crises. Speculations arise around potential acquisitions in the tech banking sector, and there's a call for balanced reforms to protect smaller banks and reassure anxious entrepreneurs.
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INSIGHT

Mismatch Durations

  • Financial institutions typically fail due to mismatched durations, not poor performance or fraud.
  • This happens when they invest in long-term assets while borrowing short-term, creating vulnerability.
INSIGHT

Concentrated Customer Base

  • The rapid interest rate hikes and concentrated customer base significantly contributed to SVB's collapse.
  • A small group of VCs triggered the bank run by advising their portfolio companies to withdraw funds.
ANECDOTE

Personal Stake and VC Reactions

  • Scott Galloway and Prof G Media banked with SVB, highlighting the widespread impact of the collapse.
  • Younger VCs seemed more panicked and advised pulling funds, while older VCs appeared less concerned.
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