2023-05-09: Uninteresting and Ranty
Attention conservation notice: most of this is either very boring or a rant. I sure know how to sell them, no?
Things that are neither a rant, nor are unquestionably uninteresting
BBC: Why The Wicker Man has divided opinion for 50 years. It sure seems like it was meant to divide opinion. It’s an odd movie. I like it, but it’s an odd movie.
Perhaps Lionel Messi is not headed to Al-Hilal(?). Or maybe he is and we aren’t supposed to know it yet. I would really like to still see him in a more competitive league, but he certainly wouldn’t make nearly as much money in MLS, or even at Barca, as he would in Saudi Arabia.
The average Canadian is in the UP:
In Vox: BuzzFeed’s Jonah Peretti and Gawker’s Nick Denton on why the 2010s digital media boom went bust.
Ashley Belanger: Pornhub shocks Utah by restricting access over age-verification law. I am surprised that they were surprised.
Matt Tait makes an argument for the utility of the British Monarchy. I’m not sure I buy it, but I’m not sure that Charles isn’t the right monarch for our times; he’s been a prince about as long as one can be before becoming king, angered 3/4 of the world by divorcing an icon, he’s a philanderer but apparently not serially, has a modern environmental sensibility in that he cares but not so much that he will wildly change his own life, he tries to be plugged in but is vaguely oblivious, and the modern world doesn’t quite fit him. I don’t actually mean this in a cruel sense; I do actually think a vague sense of not fitting into the world is relatable in its way.
The Phil Converse Memorial:
The Least Interesting Thing You Will Read This Month
Understanding that no one cares about my Fantasy team, I just want to note that at this point in my life, I only play one money league in Fantasy Baseball. Among the players on that team are:
Jose Altuve
Brandon Woodruff
Robbie Ray
Corey Seager
Oneill Cruz
Giancarlo Stanton
Eloy Jimenez
Adam Wainwright
Johnny Cueto
I also picked up Mason Miller back when it became apparent he had a gig. I mean, yeah: some of those guys are at least somewhat injury-prone, but it’s hard for me not to think that someone hates me.
Ranting about Bank Collapse
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I was going to leave the SVB/Signature/First Republic thing alone, but there are some things in my informational feed that seem…kind of dumb.
So, Balaji made that really stupid bet that he has since settled that I don’t really get; he says he is trying to call attention to a coming crisis in fiat money. There were folks who thought be might be trying to pump and dump or something along those lines, but Bitcoin has bounced around in the same 27-31K range it’s been in since the mid-March bump. Balaji has been a full-throated Galt’s Gulcher for years now, so the argument isn’t exactly stunning, but it is spectacularly historically illiterate. And it has to be, since we can see that governments that invested more in their economy in the wake of the crash recovered quickly, and, separately from that, those countries that abandoned the gold standard earlier also suffered milder recessions that were shorter in duration. We can even see some of this in the US-specific experience that Balaji seems to want to focus on in the ramifications of the Supreme Court—more out of touch with popular opinion then that now—invalidating chunks of the First New Deal and not really coming to heel on that front until threatened by Roosevelt’s Court Packing plan (which has some traction in some quarters in dealing with the consternation around the current Supreme Court—and I’m not just noting that because David Faris kicked my ass a couple weeks ago in the aforementioned fantasy league). The consensus among people much smarter about this than I am is that the response—the non-response—of the Hoover administration (which, in the main, Balaji presumably supports), shows up all over the economic record in horrible ways; and, honestly, this is more a See Spot Run level of being able to read the historic record, not something especially esoteric. I believe we both think that Smoot-Hawley and other similar actions internationally was a bad idea.
The aggregate of this is very much a “Libertarian(ish)ism can’t fail, it can only be failed” argument. The “ish” is important; a guy who seems to find lots of common ground with fucking Moldbug is not exactly shining the light of liberty at all times (though this flirtation, too, is not unique among American thinkers of the Libertarian right—and, particularly, is embedded in many of their political and cultural institutions.
Okay, let me briefly switch out of rant mode. In terms of the actual story here, the Fed’s report of the failure of SVB is fascinating:
The Federal Reserve Board on Friday announced the results from the review of the supervision and regulation of Silicon Valley Bank, led by Vice Chair for Supervision Michael S. Barr. The review finds four key takeaways on the causes of the bank's failure:
Silicon Valley Bank's board of directors and management failed to manage their risks;
Federal Reserve supervisors did not fully appreciate the extent of the vulnerabilities as Silicon Valley Bank grew in size and complexity;
When supervisors did identify vulnerabilities, they did not take sufficient steps to ensure that Silicon Valley Bank fixed those problems quickly enough; and
The Board's tailoring approach in response to the Economic Growth, Regulatory Relief, and Consumer Protection Act and a shift in the stance of supervisory policy impeded effective supervision by reducing standards, increasing complexity, and promoting a less assertive supervisory approach.
"Following Silicon Valley Bank's failure, we must strengthen the Federal Reserve's supervision and regulation based on what we have learned," said Vice Chair for Supervision Barr. "This review represents a first step in that process—a self-assessment that takes an unflinching look at the conditions that led to the bank's failure, including the role of Federal Reserve supervision and regulation."
The Fed is not a notably introspective institution, so this level of self-criticism almost has to mean that we’re going to see more oversight (score one for Balaji?), probably paired with an increase in deposit insurance. Yes, the banks will pay for that coverage and yes, they are going to pass that onto us in fees and, yes, those fees will disproportionate affect the less affluent clients.
Nathan Tankus had a summary back in mid-March that I found helpful at the time, which summarizes its first major point as “Bank money is money unless it is not money.” Which is true—and more helpful to understanding what’s going on than you might expect.
I will also point at two pieces from Dan Davies’ Substack:
I don’t have the expertise to contest almost anything he’s saying in either piece, so am just noting them here.
Changing things up again, I do think the more elementally critical folks have a point. Edward Ongweso Jr. writes about The Incredible Tantrum Venture Capitalists Threw Over Silicon Valley Bank:
And yet you still saw famous venture capitalists like PayPal co-founder and Elon Musk buddy David Sacks begging the Federal Reserve to force a merger or a bailout, then insisting he was not asking for a bailout while again asking for a bailout. This may have seemed a bit strange considering Sacks’ previous disparaging of handouts (specifically to Ukraine) and reactionary vitriol for liberalism itself. But then again, Sacks is a longtime associate of investor Peter Thiel, who believes in free markets but not in competition—in capitalism so long as the rules are attuned to satisfy his own interests first and foremost. It was Thiel’s Founders Fund, by the way, that helped kick off the bank run that sank SVB in the first place.
Where is Powell? Where is Yellen? Stop this crisis NOW. Announce that all depositors will be safe. Place SVB with a Top 4 bank. Do this before Monday open or there will be contagion and the crisis will spread.
— David Sacks (@DavidSacks) March 10, 2023
Sacks’ podcast co-host Jason Calanacis worked a bit harder for it and spent days posting incessantly that there must be a bailout or else the entire economy would die. Over and over and over and over and over and over and over again, Calanacis prostrated himself without shame and fomented hysteria about a bank run—probably making the very banking contagion he was warning about more likely.
I WATCHED PEOPLE TELL ME SVB WAS FINE, THEN FRB WAS FINE… WHILE MORE INTELLIGENT/CUT THROAT FOLKS WERE WIRING OUT OF BOTH PLACES — THIS IS THE PRISONERS DILEMMA
— @jason (@Jason) March 12, 2023
Who knows if the hysteria made the difference, but on Sunday, the FDIC announced it would be backstopping SVB and providing full access to all depositors to their funds on Monday. The VCs could rest their Twitter thumbs.
It would be easy enough to simply dismiss these tweets as the ravings of idiots, but it was actually instructive, a glimpse into how reckless venture capitalists are in pursuit of something they want, so long as it doesn’t bear any risk to them.
Let’s tack Molly White onto that:
A little less than a year ago I made some venture capitalists very angry when I made an offhand remark in an episode of Crypto Critics’ Corner: “I mean, I would probably argue that venture capitalists are not good for society regardless of what they’re investing in.” I am always surprised at how controversial a statement that is, and how much it attracts the kind of “not all venture capitalists!” sort of reaction that’s usually reserved for criticism of cops and landlords.
I am feeling particularly secure in my opinion on the investor class after the shitshow we just witnessed, where a relatively small group of venture capitalists and various other financiers did not, let’s say, cover themselves in glory.
When it became apparent to this small group of very powerful, very wealthy individuals that Silicon Valley Bank — the bank used by much of the Silicon Valley startup ecosystem — was on shaky footing, they had a choice to make. They could remain calm, urge the founders of companies they’d invested in to do the same, and hope the bank could weather the storm. Or, they could all pull their money out, urge their founders to do so also, and hope that they or their companies were not the ones left standing in the teller line when the liquidity dried up.
Faced with the choice between the more communal, cooperative choice and the self-serving, every-man-for-himself choice destined to end in a bank run, it should be no surprise which option they picked. As the Titanic sank, they were the ones pushing people out of the lifeboats.
And then Ed Zitron:
This isn’t a case where - as some venture capitalists would have you believe - the Fed somehow hoodwinked innocent bankers. The collapse of Silicon Valley Bank was created by a combination of abysmally short-sighted investment decisions (namely a portfolio that consisted of low-rate, long-term treasury bonds that lost value the minute the Fed raised rates), the deliberate removal of stress tests that would have prevented the bank from making such stupid decisions, and then exacerbated by a large-scale prisoner’s dilemma where every single party chose to turn on their friends.
The Valley may pretend to be a united front fighting for innovation, but in the one situation where that unity had any value, they all turned on each other and pulled their money at once. They then had the temerity to pull together a meaningless “statement of support” two days after the bank run had begun, calling the situation that they all caused “deeply disappointing and concerning.”
Being a little fairer than I might be usually, I realize that this was likely an impossible situation for everybody involved. The more panic that grew, the more necessary it was to yank your money, which in turn made the panic grow. But people like Peter Thiel who chose to exacerbate this panic should - but likely won’t - be held accountable for creating a situation that endangered the entire startup ecosystem.
Yes, this is all criticism of a group of people from a group of people you would suspect would be critical. The only reason I even bother with something like this is that I’ve been…adjacent, I guess…to this ideological and technological community. Certainly not in it—they never would have had me. The lot of them—Balaji, Jason, Thiel, Sacks, Ackman, and the others—are infinitely richer and more famous than I am; I think most people would find most of them smarter in some essential sense. But working in technology and data (and, on occasion, ideas) with a lot of people who have some Californian combination of libertarian thought and cosmopolitan leftism. In widely different combinations, yes, but that kind of politics. And, irrespective of how much smarter they are than I am, they have a massive blind spot that most of us know we need to correct for: they think what is good for them is good, full stop.
And, this shouldn’t be surprising, but it seems Twitter amplified all this.
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