Silicon Valley Way
Last week I was convinced the world had turned on its axis. Tuesday proved it true as atmospheric river #12 arrived on the 21st! Even numbers are flipped!
The first day of spring brought another day of weather havoc while my generator (whose permit arrived from the county after atmospheric river #11) inched closer to my home. Out of its box, six feet from where it will be placed, it sat. No plumber. No electrician. Just a unit sitting ironically by the mongo tree that went down on the neighbor’s side last week while torrential rain and wind-whipped air kept the workers at bay. And oh — that root ball is at least 12” around…. Don’t let the photo aperture fool you!
But the county must protect us, just like all the other powers that be and the silly examples I’ve cited in past posts. I am convinced IT has run amok, and while the regulators and everyone else takes ever more control, inch by inch, things become ironically less safe.
Down here, you need permits, an arborist, and a host of other approvals to take down a tree that is dead and destined to fall. Too bad if it crushes a person, a home, or a car. The trees need protection! And so, it was ironic to read this article on the first day of spring during the twelfth crazy storm of the season. Its focus: how SVB became a single point of failure.
There is a ton being written about this fiasco, and while the Fed assures us the system is safe, SVB was failing in front of God and everybody. But the biggest failure, was not paying attention to the info coming out of our industry’s risk systems, and regulators who decided stress tests weren’t needed. And why was it OK for a bank to pretty much force a venture capital beneficiary to keep its capital in said bank? How is that even legal in a regulated industry?
Everyone who has been raised in Silicon Valley knows that while we are a people who love to innovate and foster cultures of disruption, the region is also home to way too many people who behave like sheep. Do you show up at the right meetups? Are you part of the right incubator? Do you know a big name (fill in the blank) from Stanford or venture capital firm A, B, or C, or work with Wilson Sonsini — the right law firm?
Are you cash flow–positive? (So yesterday… unless cash and banks are drying up!?) Do you scale through losses with other people’s money as long as you can? Do you drive a Tesla and wear Loro Piana Men’s Summer Walkers or wear the Cucinelli T-shirts that make Vince or James Perse so pedestrian? Do you attend the right parties in Atherton? Do you live in Atherton? And so on and so forth…
You see the Bay Area has become a one-industry town, just like gambling is to Las Vegas, films are to Hollywood, cars are to Detroit, and finance is to London and New York. It is inbred, filled with self-importance and self-congratulatory backslapping, and about seeing and being seen. And that is the biggest lesson of all. Because regulators can’t prevent any of this, just like they whiffed on SVB and its hubris and the hubris of those it attracted. That is what this article so aptly captures.
I had my own experiences with SVB and ran. This is not about being disgruntled. We just chose not to play by their rules and felt another bank of the same size, one that is also at risk but that took a customer-first culture and is still standing, was the way to go. Frankly I don’t wish bad on anyone, but what happened to SVB couldn’t have happened to a better group. That bank was awful.
So, what are the lessons here?
• Pay attention to the fine print and the information. Twenty-plus years ago, we were one of the first organizations to say data applied equals info, info applied equals knowledge, and knowledge applied leads to wisdom. But applied is the operative word. The data, info, and knowledge was out there. Wisdom failed. Said another way, providing the best information in the world doesn’t mean it’ll get used. Predictive and prescriptive analytics and proverbial bullhorns need to be part of the package. Why weren’t any of the big three in risk shouting from rooftops about this potential meltdown?
• Don’t keep deposits in one basket. There’s a saying about spreading the wealth for a reason. If a bank forces you to keep capital in as a condition, run — don’t walk — away.
• Follow your heart — not the sheep. It’s easy to feel left out when Pets.com is getting billion-dollar valuations, as was anything else with a dot.com suffix, and after that, search, social, mobile, SaaS, DaaS, PaaS, and every other term has you changing your boilerplate to sound “with-it” to investors. Skip it.
• Accept that sometimes it’s ok to be smaller, profitable, and a little old-fashioned. You will sleep better.
• And, oh — about those engineers, sales, marketing, and product people you couldn’t find? Established firms get the last laugh with each tech cycle. They’re becoming available in droves.
Remember, they’re going to start businesses like green sprigs after a fire, so hook them into your brand and onto your platform and be better than SVB and the bro-culture. Be an incubator, a funder, a place to innovate. There are models for doing it and it doesn’t have to be the Silicon Valley way. Let’s make it the data, information, and analytics way.