Leaders Within

Hello, I hope that you had a great weekend!  The NBA Playoffs have always meant that Spring is here to me. 
 
I’ve now run a few different organizations, ranging from a private company to a non-profit to a political entity.  Each has required different qualities and attributes.  I’ve gotten better at some things and probably worse at others, but I’ve seen or been a part of hundreds of success stories.   

This week on the podcast I interview Keith Ferrazzi, one of the pre-eminent thinkers and authorities on helping both individuals and organizations succeed.  You might know Keith as the author of the #1 bestselling books “Never Eat Alone” or “Who’s Got Your Back?”  By day, he runs a firm helping teams organize and run better according to research, experience and principles of co-elevation. 
 
Keith and I were connected by a mutual friend, which is fitting given that Keith first hit the public scene by pushing people to get out there.  “It’s not about networking, it’s about true authentic relationships,” Keith says.  “Relationships power your success . . . building your network isn’t about getting things out of other people.  It’s about investing in people and deepening authentic relationships.”  Having now spent time with Keith, he has a phenomenal depth to him where he actually cares about people and producing positive change in the world. He wants to help.    
 
Keith experienced success early. “When you have momentum in life, grab it. Having a podium is not something you should look askance to.  It’s a gift and a blessing.  That can include even having that small podium within your company.  I know young people who are loved in their company, but because they want to do something else they shun that success.  Having success under your belt can always be pivoted into other success.  But running away from momentum into something else that you’re interested in can be a real missed opportunity.” 
 
Keith’s work has migrated over time to be very team-focused.  “We’ve overindexed in leadership and underindexed in teamship,” is how Keith puts it.  It’s less about individuals and more about networks. 
 
“Leading without authority is the key.  When we work in networks, not just our direct reports, is how we create disproportionate change in the world.  If you’re in marketing, it’s not just what your marketing does it’s also about your relationship with the sales organization and the product organization.  You need to partner with your head of sales and head of product to drive revenue and become a chief growth officer as opposed to just thinking about the brand.” 
 
Right now, Keith is focused on helping organizations navigate remote and hybrid work cultures.  “We’ve been looking at this since 2010 and no one cared.  But then 2020 happened.  We spent $5 million researching and published 30 to 40 studies.  One aspect of work culture is connectedness and bonding . . . we’ve been measuring these qualities for 20 years.  In the pre-pandemic world connectedness was measured at 2.8 from a zero to 5 as determined by answers to questions like, ‘I deeply care about all members of my team and they all care about me.’  During the pandemic, you’d imagine this bonding score went down and it did, to 2.3.  One CEO started engineering practices that would accelerate the connections in his team while they’re remote.  What if every week you have a check-in discussion, not just in 1s and 2s, but the whole group?  Then the score goes up.  We’ve identified 5 practices that if a team adopts them, bonding goes up to 4.4, better than it was pre-pandemic.”  Keith challenges organizations to adapt and evolve.  “We’re a bit lazy in thinking the only way to breed collaboration, innovation and relationships is old ways of working.” 
 
Keith wants to make people and organizations who are doing great things work better themselves.  It’s a beautiful mission.  It reminds me of what I’d like to see Forward do in terms of unleashing our potential to solve problems and innovate.  Can we get people there?  We can if we grow and get better each day – and if we operate in networks. 
 
For my interview with Keith, click here.  For Keith’s books and teachings, click here.  To check out Forward click here – we have events in your area upcoming, including SF and LA this weekend! 

Forward on the Road

 Hello, I hope that you are having a great week. 
 
Last Friday I spoke at the University of Pennsylvania.  I also met with Forward leaders and volunteers in Philadelphia – it was an inspiring group.  “We need more choices in our leaders” was a common sentiment.  They were gearing up for their first ever statewide convention in Gettysburg in May. They were also choosing delegates to attend the first Forward national convention that runs from June 22nd – 25th in Denver. 

We met at a tavern in Philadelphia.  One of the organizers quipped, “The taverns of Philadelphia have been very important to American democracy.” 
 
There are groups like this getting together in states around the country, from Colorado to South Carolina to Oregon to everywhere in-between.  Forward now has over 40,000 volunteers. The public calendar for Forward has almost 50 events – from signature gatherings to strategy sessions to rallies for Ranked Choice Voting – in April alone.  I will be speaking in San Francisco and Los Angeles next weekend to catalyze support for our registration efforts in California.  I’m also speaking in Seattle and Raleigh in May with more events on the way. 
 
At every event, I’m blown away by the nature and energy of the people who are there, eager to take us toward a better, brighter future. 
 
It’s exciting seeing the movement grow – more and more Americans realize that our current political system is not designed to advance meaningful solutions or even to allow most of us a choice in our elected representatives.  
 
At a national level, a Biden vs. Trump rematch in 2024 seems increasingly likely, even as a majority of Americans aren’t happy with either of those options.  As these pieces fall into place, the desire for a new approach will only grow. 
 
I am pumped to be touring the country leading up to the convention in June, which should be an epic gathering.  A literal rockstar just said that he would be joining us in Denver.  It will be genuinely historic. 
 
If you’ve been interested in Forward, now is the time to get involved.  Find your state chapter here.  Make a donation here – every bit counts.  Pick up some swag, which serves a couple goals at the same time. 
 
And please do come see me and the gang on the road!  It’ll be great to see you.  

On Work

Hello, I hope that you had a great weekend.  I went down to Philadelphia and met with some awesome Forward leaders and volunteers there as well as a large group of students at UPenn.

This week on the podcast I interview one of my favorite journalists, economics reporter for the Atlantic Derek Thompson.  Derek recently came out with a book of essays, “On Work: Money, Meaning, Identity” which is incredibly timely given the arrival of generally useful Artificial Intelligence. 

Derek writes, “[T]echnology could exert a slow but continual downward pressure on the value and availability of work – that is, on wages and on the share of prime-age workers with full-time jobs.  Eventually, by degrees, that could create a new normal, where the expectation that work will be a central feature of adult life dissipates for a significant portion of society . . . Technology creates some jobs too, but the creative half of creative destruction is easily overstated.  Nine out of 10 workers today are in occupations that existed 100 years ago, and just 5 percent of the jobs generated between 1993 and 2013 came from “high tech” sectors . . . our newest industries tend to be the most labor-efficient: they don’t require nearly as many people to produce the same value.” 
 
I personally think that AI will be extraordinarily disruptive in particular to repetitive, rules-based white-collar work, which comprises about 20% of all jobs in the U.S. economy.  Think everything from call center workers to management consultants. 
 
Interestingly, Derek argues that our response these past years has been to expect more of work than ever.  He says, “We now expect community, purpose, fulfillment – many of the things we used to ask of our religion – from our work.” 
 
He calls this new religion ‘Workism.’  “Workism is three things.  First, it is the belief that, in a time when religion is in decline, more people, especially the elite, are turning to work to provide everything we have historically expected of organized religions.  Second, it is the irony then, in a time of declining trust in most institutions like politics and religion, we expect more than ever from the companies that employ us; and that, in an age of declining community attachments, the workplace, has, for many become the last community standing.  Third it is a mixed blessing.  The gospel of labor creates devoted workers and extraordinary achievements, giving purpose, building routine, and filling time.  But our devotion to work can also leave a wake of anguish, with many of its adherents feeling overextended, exhausted and empty.” 
 
It’s quite a proposition by Derek, yet it rings true.  Many people do want a sense that a career is a calling as much as a way to pay the bills. I think that our preoccupation / obsession with work threatens to blind us to large-scale secular changes because we moralize on an individual level instead of applying it to a community or industry.  Work disappearing?  It must be that you’re not looking hard enough on your quest for fulfillment.  Derek correctly points out that not that long ago, virtually no one thought of work in this way; it was more a means of survival. 
 
He also observes that losing a job often takes a massive psychological toll on individuals - akin to the death of a loved one - and that most don’t make positive use of idle time.  Time use studies show a lot of watching TV and surfing on the computer for jobless men in particular.
 
I wrote in the War on Normal People, “Here’s the fundamental problem: we need work more than work needs us.” If work is our current faith, it’s not going to take excellent care of us in an era of new technologies of unprecedented power.  What will we do with the time that we have? 
 
For Derek’s new book, click here.  For my interview with Derek on topics like remote work and creativity, click here.  For the War on Normal People, click here.  To fuel a change in our politics so that it addresses modern issues like AI, check out Forward’s new website here; we are making a fundraising push so please consider donating today! 

What’s Our Problem?

Hello, hope you had a great weekend! 
 
Last week I signed an Open Letter to pause the deployment of new generative AI tools for 6 months and discussed the topic on CNBC.  Technology is speeding up in a way that will impact all of us and our government is way behind the curve. 

Then, the news came out that Donald Trump was indicted by a New York grand jury, the first ex-President to have criminal charges brought against him in our nation’s history. 
 
Why do our politics feel so backwards?  For a compelling perspective, I sat with Tim Urban, who runs the very popular blog Wait But Why and came out with a new e-book on the topic, “What’s Our Problem?  A self-help book for societies.” 
 
Tim proposes that our usual left-right politics misses an important dimension - whether we are using our higher mind or primitive mind.  He cites 4 levels of thinking: Scientist (seeking facts), Sports Fan (values the contest), Attorney (arguing a side), and Zealot (defeat the enemy).  The two higher levels are rational and constructive.  The lower two levels are more concerned with being proven right and arguing for their tribe than having any positive outcome. 

The problem in Tim’s view is that our politics have been overcome by the lower levels, where polarization has turned things into a good vs. evil struggle as opposed to the higher levels that are genuinely interested in policies and solutions.  “Polarizing people is a good way to win an election, and also a good way to wreck a country.”  Tim catalogs how low-rung politics have become more pronounced on both sides, where every day is an ideological battle instead of a conversation, and details how social media supercharges this dynamic. 
 
If this sounds familiar, the Forward Party is doing all we can to reward higher-rung politics via Ranked Choice Voting and other reforms while discouraging lower-rung extremism. 

What does Tim think is our way out?  Tim recommends that we stop saying things we don’t believe, start saying what we really think with people we know well, and eventually work ourselves up to saying what we really think in public.  These acts would help break up the enforced tribalism that degrades many of our conversations. 
 
There is MUCH more to Tim’s work, including a brief history of humanity and how each party has evolved over the past number of years.  I highly recommend it. 
 
Tim wrote the book because he’s deeply concerned that we are heading toward a precipice and are not equipped as a society to address modern challenges. “More technology means higher stakes” is how Tim put it.  He’s right.  Let’s help our country rise to the occasion and activate the higher levels of our politics before it’s too late. 
 
For my interview with Tim, click here.  For Tim’s book click here.  To check out how Forward is improving our politics in your state, click here. 
 
Forward is making a fundraising push – please consider donating today!  

The Last Election

 
Hello, I have some very exciting news: I co-wrote a political thriller, “The Last Election,” that will be published on September 12th! 

Last year, I interviewed the Atlantic columnist and author Stephen Marche on his non-fiction book, “The Next Civil War.”  It was a sobering conversation; I found that Stephen and I shared many of the same concerns about American democracy and society coming apart as institutions struggle. 
 
A few months later, Stephen and I were discussing ways to work together. How could we get out more of these ideas to the public?  We agreed that stories are the best and most powerful way for people to understand something.  We would tell a story that everyone would get and could access. 
 
Thus was born “The Last Election,” a novel starring Mikey Ricci, the campaign manager of an insurgent third-party presidential candidate and Martha Kass, a journalist who gets a hold of some material that could determine the future of American democracy. The story proceeds from the launch of the fledgling new campaign for fourteen months through Election Day and the swearing in of a new – or is it the old? – administration. 
 
I’ve written a few things, but I’m no novelist. Stephen, happily, has produced both fiction and non-fiction and had a bunch of research from “The Next Civil War,” that appears in “The Last Election.”  We also had my campaign manager Zach meet with Stephen to give him nitty-gritty details and stories from what it’s actually like on the trail.  I’m proud of the result and can’t wait to share it with you and the world. Hopefully it will both entertain and prepare you.   
 
If this sounds like something you’d enjoy, please do pre-order your copy of “The Last Election” and use the special discount code LASTELECTION for 30% off at the publisher’s website. Stephen and I will be pre-signing every copy that is pre-ordered here. 
 
Here working to make sure that the next election isn’t actually the last one,

The Future of Work

Hello, I hope that you’re doing great.  I was in Arizona last weekend for a big Forward Party event which was a blast.  We have scheduled events for San Francisco, Los Angeles, Seattle, Raleigh and more coming up so keep an eye out!    
 
This week on the podcast I welcome back Kevin Roose, tech reporter for the New York Times to talk about AI and the future of work. 
 
Now, as you likely know I have very strong feelings about the future of work.  My 2020 presidential campaign was built around the fact that automation and AI are going to gobble up tons of American jobs. 
 
Since 2020, the labor force has actually shrunk by about 2.4 million workers:

It is a mystery why the labor force has shrunk; some are early retirees. Some are urban workers who have relocated someplace else and are doing something that doesn’t register as a job. Some are parents – particularly women – who have decided to focus more on their family. 
 
Now, with ChatGPT, more knowledge work is being replaced. “A project that used to take 8 hours now takes 40 minutes” is the way one friend who runs a high-end consulting company puts it.  “I’ll probably fire half of my people in 6 months.” 
 
Another friend said to me, “I have to put in a half-hour of deep thinking to figure out the right prompt to feed the AI, but then after that I just got rid of a task that I was going to pay someone else to do.” 
 
Another entrepreneur said, “I wrote a press release in less than 5 minutes. I fed the AI, got a template and then edited. It was a breeze.” 
 
Unrelated to AI, tech companies have laid off more than 100,000 workers in a reset as their stock prices have gone down. One of the difficult truths is that a significant percentage – probably 20% - of workers in most large organizations are largely irrelevant to how that organization will perform. 
 
Indeed, a lot of the headwinds have been caused by higher interest rates that have forced businesses – tech, banks, real estate, everyone – to have to generate real returns instead of taking free money and lending it, spending it, or basking in a sky-high stock price built on a rosy future. 
 
The transition to more remote work is doubtless a force toward automation. If someone is remote, their job is one step closer to being replaced. The return to office work is highly uneven. Workers prefer remote or hybrid work and are making career decisions accordingly. Unfortunately, eventually so will employers.   
 
For years now, the proportion of repetitive manual and repetitive cognitive jobs in the economy has been falling relative to high-end cognitive jobs.  Repetitive jobs comprise 44% of jobs in the economy.  This week, a University of Pennsylvania study suggested that AI will impact about 80% of all workers to some extent. 

Kevin says in his book “Futureproof” “Be Surprising, Social and Scarce” and “Don’t be an Endpoint.”  In our interview this week he comments, “I think work will get more social. At least, that’s the hope.” 
 
I’ll confess to being pessimistic. The firms and CEOs I know are chomping at the bit to set AI loose in a way that most don’t understand.  What’s ironic is that the impact will be most sharply felt in the most efficient environments first. The future of work promises to be a shrinking number of people in extraordinarily high-end jobs atop the AI and increasing numbers on the outside looking in. Limitless work can be done by AI, but who will that work benefit, and how will the average person experience the change? Any positive answer would require a rapid advancement of our society in a compressed time frame. 
 
I ran for President on this in 2019 and 2020.  Did I think it would be here in 2023?  We don’t have that much time to evolve.

For my interview with Kevin click here.  For my book on automation and the workforce ‘The War on Normal People’ click here.  To move our government forward so that it can start to tackle this challenge in earnest, check out Forward.  

Silicon Valley Bank, Tech and Politics

Hello, I hope that you’re doing great!  I was in Arizona this weekend for a Forward Party event, which was phenomenal.  I also was on Bill Maher on Friday in a wide-ranging conversation – check it out if you can. 

On the podcast this week I discuss Silicon Valley Bank and its aftermath with CNBC Contributor and Big Technology writer Alex Kantrowitz.  “All anyone could talk about in tech last week was Silicon Valley Bank.”     

It wasn’t that long ago that people nearly universally felt like technology was a positive force in the world.  Last week told a different story. “It was a gutcheck moment that folks in tech realized that there were a lot of people really rooting for them to fail,” Alex commented.  “There’s a sense that if the bank had just been called something like Santa Clara Regional Bank it would have been much less political.” 

He’s right. Today in America just about everything gets politicized. In 2011, I started a non-profit, Venture for America, to train aspiring entrepreneurs in Detroit, Cleveland, Baltimore, New Orleans and other cities.  At the time, entrepreneurs were regarded as builders, innovators, and job creators. 

Now, 12 years later, some of the most prominent entrepreneurs in the country are objects of controversy, and there’s a palpable sense that developments in technology have been cause for concern more than celebration. 

Our kids and teenagers are anxious and depressed, in part because of social media.  Our public discourse has been splintered into a thousand different realities giving each of us more of what we want to hear.

AI Is developing at a rate that is almost unfathomable.  It may subvert human agency, as well as disrupt millions of jobs.  We could barely comprehend ChatGPT-3 and now its successor GPT-4 is here in quick succession. 

Tech giants and intermediaries sell and resell our data for hundreds of billions of dollars a year, and we don’t see a dime of it. 

As Tristan Harris puts it, “We have primordial brains, medieval institutions, and godlike technologies.”  Tech is getting smarter, and we are not. 

In this environment, it’s little wonder that, when the tech ecosystem was on the line with Silicon Valley Bank, there was some hostility. 

“I want technology to be part of the solution,” Alex says.  “Maybe the recognition of the skepticism will lead to something positive.”  We can only hope. And maybe we can help make it happen.

For my conversation with Alex click here.  To try to speed up our institutions to address the challenges of this era, check out Forward.  

The Aftermath of Silicon Valley Bank

Well, that was more nerve-wracking than it had to be. On Sunday, the FDIC, Treasury Department and the Fed stepped in to guarantee Silicon Valley Bank depositors.  They did the same for Signature Bank, which was similarly going through a crash as people withdrew their money. 

Of course, the blamegame commenced. Dems blamed Trump for deregulating the banks. Republicans blamed Democrats for not properly overseeing regional banks, or for bailing them out. 

The term ‘bailout’ is not an accurate description of what happened. It suggests that the bankers are still there and are fine. That’s not the case – management has been fired and the shareholders zeroed out. What happened was that depositors over $250k – the vast majority of customers – could take their money out. This is very different than what happened during the financial crisis; “Backstopping” would be more accurate.

Anyone who was not for guaranteeing deposits doesn’t understand what would have happened next. There would have been a crisis of confidence in a whole shlew of regional banks as everyone pulled their deposits and put them in JP Morgan Chase, Bank of America, Citigroup and the top tier of too-big-to-fail banks.  People and businesses were already doing that over the weekend.  The confidence problem would have overtaken the whole financial sector and turned into a massive conflagration that the Feds would have had to step into, only the horse would have been out of the barn.  There were also the thousands of companies and tens of thousands of workers who would have been bankrupted or laid off through no fault of their own.  Backstopping depositors was categorically the right thing to do. 

So, the problem is now solved right? 

Not quite. 

Silicon Valley Bank went bust largely because it bought Treasury Bonds that paid about 1.1% and then interest rates shot up to 4.5%, rising more quickly than many expected. SVB should have either bought shorter-term bonds or hedged the interest rate risk.  They didn’t. So their bonds sunk in value, causing liquidity concerns and then some of their customers ran for the door. 

What are the odds that another bank did the same thing as Silicon Valley Bank, buying low-interest bonds without hedging, perhaps not to the same extreme, but enough to reduce their value and viability? 

Probably 100%. Hedging risks costs money. Stretching in this way gooses the bank’s earnings in that quarter. There are going to be a bunch of bond revaluations at a lower level as more banks come clean. 

By the way, big tech companies have already been through a similar revaluation.  When interest rates were essentially zero, people would pay anything for growth.  You say you’re going to be huge in 10 years?  We’ll bid your stock price to the moon! 

But now, if you’re getting paid 5% on your money risk-free in bonds, that company’s future growth is worth less to you relatively speaking.  It’s going to big in 10 years?  Well, 5% compounded over 10 years is 62.8%, so you’re going to have to grow a lot faster than that for me to want to take the risk of buying your stock.  Tech got revalued and started shedding workers – over 100,000 at last count. 

You know what else is going to get revalued in a huge way? Commercial real estate. Midtown Manhattan office buildings remain 50% unoccupied as employees continue to work from home. Many of these buildings have periodic loan repayments and refinancing.  What are they worth now? No one knows for sure. If you valued them at current cash flow from tenants, many would be worth less than the loans on them.  It would be like owing a million dollars to a bank on a mortgage on a house that now is worth $800,000.  You would just let the bank take the house. You’re going to see a lot of this in the months ahead; commercial landlords are going to give the keys to the bank and banks will take losses.  

You are also seeing very low homebuying volumes and many fewer transactions as buyers have sticker shock on higher mortgage payments and sellers are reluctant to take a lower price than their house was worth just a few months ago.  Low inventory plays a role here too – it’s a brutal environment if you’re trying to get into the housing market for the first time. 

We have had an era of zero interest rates for essentially fourteen years, from 2008 - 2022. The quick shift to 4.5% or higher will be too much too quickly for a lot of firms and businesses that fed on the cheap money but no longer make sense and can’t generate high enough real returns.  There will be large-scale revaluations and a ton of pain as it gets sorted out. 

Who’s to blame? The truth is that we are in uncharted territory. The last time inflation rose to a point where the Fed had to raise interest rates like this to cool the economy like this was in the 70s – which led to stagflation, a very rough economic period and a banking crisis. Finance has grown exponentially since then. 

I am incredibly relieved that the Feds stepped up and averted a budding crisis of confidence for the time being.  But this crisis will take many forms - and is just beginning. 

Warren Buffett famously said, “Only when the tide goes out, do you see who’s swimming naked.”  Silicon Valley Bank isn’t the only firm to have its trunks off.  It’s just the first to surface. 

Larry Hogan

Hello, I hope that you’re doing great!  I was in Austin at SXSW this weekend, and next weekend I’m in Phoenix for a big Forward Party event!  I’m also briefly in LA for Bill Maher on Friday. 

The news came out last week that Larry Hogan, former governor of Maryland, decided not to run for President as a Republican in 2024. 

I was mildly surprised; I had dinner with Governor Hogan last year and he seemed like someone who was strongly considering running for President and figuring out his path.  He was tired of the back-and-forth politics and wanted to improve things. 

In another era, Larry Hogan would have been very appealing; he was the outgoing two-term Republican governor of Maryland, a deep blue state.  He had approval ratings above 70%.  He won support by governing in a practical manner and showing up to any neighborhood, including traditional Democratic constituencies. 

He also was a vocal critic of Donald Trump, leaving no ambiguity about his sense of the former President and current frontrunner.  “The people that try to whitewash Jan. 6 as if nothing happened are delusional. It was an assault on democracy.” 

In deciding not to run, Hogan wrote about avoiding a pile-up of candidates that might improve Trump’s chances. Indeed, it’s one of the main things increasing Trump’s odds, that more candidates will split the anti-Trump vote. Moderate governors considering a run include Chris Sununu and Chris Christie joining Nikki Haley. 

As one magazine put it, “Larry Hogan Won’t Run in 2024’s Imaginary GOP Moderate Lane.”  One prominent Republican interested in the race said to me, “A generic Republican can defeat Joe Biden.” My response was, “Sure, but a generic Republican can’t win your party’s nomination.” The energy in the Republican Party lies in the extreme that is still dominated by Trump. 

The problem that Larry Hogan faced was the reality that a presidential run by a reasonable moderate in a Republican primary was going to fall on deaf ears. Happily, Hogan recognized this. And he put the greater good above his own personal political ambitions. 

He also left the door ajar to run not as a Republican, but from outside the two-party system. “But, I mean, look, if you got to an election when the nominees were Biden and Trump and 70% of America didn’t want that, you wouldn’t rule it out, right?” Will we have a choice beyond the two parties? Personally, I think that Larry Hogan’s prospects are brighter outside of the two-party system than within it. The Republican Party is no longer welcoming to reasonable no-nonsense leaders like Hogan. But outside of those quarters, Americans are looking for people like him who care more about the country than themselves. 

Want to help the country move beyond the dysfunction? Join Forward in your area today!  

For my thoughts on Joe Biden and the Democrats, click here.  

Silicon Valley Bank

This past week, Silicon Valley Bank collapsed.  It happened very quickly – over less than two days. 

It is hard to overstate how shocking this is.  Silicon Valley Bank is – was – the 16th biggest bank in the country.  It had $212 billion in assets, making it the second-largest bank failure in U.S. history after Washington Mutual in 2008. 

This was not some easy-come-easy-go fly-by-night company – this was a genuine decades-old institution.  It had 17 branch offices where people used to go and, you know, bank. 

Thousands of companies held their cash in Silicon Valley Bank.  Roku reported having $487 million in cash there.  Camp Store reported having most of their cash at SVB – and is having an emergency weekend sale so it can try and pay its payroll on Monday.  One report said that 97% of SVB’s clients – mostly companies – had more than $250,000 in their accounts. The FDIC only insures up to $250,000 per client.  That means that Roku is now worried about whether it will get back $486.75 million.  There are thousands of companies in the same boat. 

The average American was unlikely to be invested in Silicon Valley Bank.  But the average American will be affected as thousands of businesses seize up and lay people off.  One investor said this was like “a bomb going off wiping out a generation of startups, including biotech companies.”  Imagine dozens of life-saving drugs that go undiscovered. 

Why did this happen?  Mismanagement.  The folks at SVB failed to account for rising interest rates reducing the value of their bond portfolio.  That miscalculation alone wouldn’t normally kill a bank.  But there was a rush for the door that drained their cash more quickly than most could have imagined.  Confidence is a powerful thing.  When you lose it in a fluid environment, you lose everything. 

That mismanagement does not extend to SVB’s clients.  It’s like blaming someone for going to eat at a restaurant chain and getting poisoned.  Their only sin was that they chose the wrong bank – which by the way was a massive bank and the industry standard. 

As I’m writing this, regulators and government officials are cobbling together a rescue plan.  Hopefully they will come in and restore confidence.  Companies like Roku and Camp will be able to go back to their businesses instead of freaking out about their bank.  Employees will keep their jobs.  Because that’s the main thing at stake here.  If Silicon Valley Bank can disappear virtually overnight, what is safe?