Tech Bros Take Bank Victory Lap After ‘Pants Pissing’ Freakouts

Photo Illustration by Thomas Levinson/The Daily Beast/Reuters/Preshdineshkumar
Photo Illustration by Thomas Levinson/The Daily Beast/Reuters/Preshdineshkumar

Jason Calacanis, a prominent venture capitalist and host of the All-In tech podcast, spent most of Sunday morning panicking about the collapse of Silicon Valley Bank, warning his nearly 700,000 Twitter followers that they should be “ABSOLUTELY TERRIFIED RIGHT NOW” and that the situation could “SPIRAL INTO CHAOS.”

By that night, following the federal government’s pledge to secure the assets of all depositors in the now-defunct bank, Calacanis was taking a victory lap, tweeting about how he successfully “rang the fire alarm” and calling his critics “ungrateful.”

Calacanis and his podcast co-hosts, including self-described “populist” David Sacks, are some of Silicon Valley’s most influential mouthpieces, at times touting their connections to the likes of Elon Musk and Peter Thiel. Calacanis and Sacks were also some of the loudest voices spreading panic following a catastrophic bank run on SVB, and among the most visible celebrators of the Biden administration’s intervention. Other investors echoed the cheerleading, praising Silicon Valley (also known as themselves) for its collaboration and resilience.

The panic-tweeting—and subsequent back-patting—struck many as obnoxious, if not irresponsible.

“Taking an undeserved lap for irresponsibly panic screaming and all-caps pants pissing is a novel approach,” tweeted tech journalist Kara Swisher in response to one of Calacanis’s tweets, “but I would doubt anyone in real power in DC paid mind to one bit of the Ozymandias, King of Kings — Look on my Works, ye Mighty, and despair — nonsense of some tech bros.”

Or, as UC Davis professor Martin Kenney put it to The Daily Beast: “I would keep my mouth shut and count my blessings that I got bailed out by the taxpayer.” (The Biden administration has insisted that taxpayer funds will not be used.)

In response to a request for comment, Calacanis said: “I come from a family of NYC firefighters and was taught that if you see a fire, you pull the fire alarm.”

The trouble at Silicon Valley Bank started many months ago, as the Federal Reserve began raising interest rates. The increases squeezed many venture capital and tech firms, a core clientele of the bank; some of those customers began withdrawing their cash. For SVB, the decline in deposits was a problem. Its executives had decided to lock up many of the bank’s assets in long-term investments, which it now needed to sell at a loss.

“They were so desirous of profits,” venture capitalist Chamath Palihapitiya said on the All-In podcast on Saturday, of the bank’s misguided strategy. “Somewhere along the way, the risk folks at SVB just made a really large miscalculation. They basically went and bought 10-year risk in order to pay back money that could be called on a daily or weekly basis.”

Once SVB sold its investments, it was forced to announce that it had taken a huge loss: nearly $2 billion. That caused panic, and many powerful members of the startup community urged their portfolio companies to withdraw their assets. The frenzy started in private Silicon Valley Slack channels Thursday morning, according to The Wall Street Journal, then quickly spread to social media as start-up founders started pulling their funds.

In short order, there was a full-fledged bank run, with depositors requesting some $42 billion from the bank in a single day.

"We had to tell all our companies, even though we knew it would lead to the contagion, that they gotta protect themselves. Their money gets locked up, they can't make payroll, they go down. They go under… It's a prisoner’s dilemma," said Duncan Davidson, founding partner of Bullpen Capital, in an interview with CNBC on Monday.

Kenney, the UC Davis professor, said venture capitalists were probably right to pull out their money and advise their startups to do so, too. But fomenting broader hysteria wasn’t exactly helpful.

“They made the right business decision: If the theater is on fire and you panic first, that’s the best business decision for you,” he said. “For society, the panic is catastrophic.”

“And that’s sort of what happened,” he added. “A bunch of them panicked and headed for the exits, some of them yelling fire after they were out the door.”

After a dramatic customer flight that quickly wiped out nearly $10 billion of the institution’s market value, the government took control of the bank. Almost immediately, formerly libertarian venture capitalists started begging for a bailout.

Calacanis, for example, tweeted in 2019 that no one—from banks to airlines to students—should get bailouts, because they “remove accountability.” Yet over the weekend, he was one of the loudest voices pushing for the Biden administration to throw SVB a lifeline, tweeting that the president and Treasury Secretary Janet Yellen “MUST GET ON TV TOMORROW AND GUARANTEE ALL DEPOSITS UP TO $10M.”

Sacks, who opposed COVID stimulus checks and called the idea that the American government was obligated to help fund Ukraine’s defense against Russia “pure entitlement,” asked that same government to help him out Sunday, tweeting: “Where is Powell? Where is Yellen? Stop this crisis NOW. Announce that all depositors will be safe.”

In response to a request for comment, Sacks directed The Daily Beast to two of his tweets. In one, he asserted that “It’s never wrong to exercise your free speech rights as an American to wake up government officials to a problem, particular when those officials ultimately agree and take action.”

In the other, he noted that he had not tweeted about SVB until it was “already in receivership and runs on other banks had begun.”

“Those tweets were to urge the actions the Fed took on Sunday night and then support them,” he added.

And support them he did. By Sunday night, after the Biden administration announced it would secure all depositors’ assets, the VC class had turned to cheering themselves for a job well done.

“And just like that, crisis averted. So easy to do and so unnecessary to ever have this outcome in doubt,” Sacks tweeted.

“Inspiring to watch everyone in action supporting our companies and founders and showing leadership in the VC community,” wrote Altimeter Capital partner Meghan Reynolds. “Work is far from over but I’d get in the trenches with this team through anything.”

Backlash to those comments, and the bailouts in general, seemed to catch some members of the tech community by surprise. “My main learning from the SVB take firehose is that very few [people] outside of tech view funded early stage founders as scrappy underdogs instead of the bourgeois,” wrote one software engineer at the defense technology startup Anduril.

The industry’s de facto spokespeople, including the All-In podcasters, may not have helped that perception.

Read more at The Daily Beast.

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