😱 9 lessons learned—so for the next panic, you don’t

It wasn’t the first, and it won’t be the last  ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ​ 9 lessons learned—so for the next panic, you don’t. ​ Today in 10 minutes or less, you’ll learn: ✔️ WTF happened to SVB? ✔️ Lessons learned watching the fall ✔️ The other threads of the spiderweb How do you never repeat the mistakes made in the past? You document them. I think panics and “the current thing” are like crack. We obsess on them. They fill our feeds. They dominate our minds. Then, somehow, they dissolve in the night. Which is good in theory, but bad in repetition. Here are the lessons I am taking away from the Silicon Valley Bank failure, because – spoiler – it wasn’t the first, and it won’t be the last. Life is going to get rocky in the coming years, so here is how to not lose your shirt when everyone else does. ​ WTF happened to SVB? I think this tweet about sums it up. ​ I was at Goldman in 2007-2009 when Lehman fell and we watched what’s called contagion spread across the banks. Banks fail when people don’t trust them to give their money back. They have overextended themselves, loaned out too much money (called credit) in bad decisions, and people don’t think they have enough cash to make good on their debts. It’s like when bookies come to beat up a gambler because they don't think he’s going to pay them back. Banks and credit rule our world. They are like a spider’s web. When you ping one thread, it ripples across the entire web and the spider comes to get its prey—or, in this case, any cash you had at the bank above the $250,000 FDIC limit. Silicon Valley Bank’s failure led to the entire banking sector falling 40-50-60% in the stock market. ​ But the bigger concern was a replication of 2008. In the ‘08 crisis, Lehman Brothers triggered a sell-off that led to the great recession. And it could have led to the banking industry failing entirely if the FED didn’t step in. Consumers lined up around banks desperately waiting to pull out cash…even my mom got in on the fun. ​ One thing is for sure: Everything happens faster today. In 2008, it took two weeks for Lehman to go from alarm bells ringing to $100 billion failure. In 2023, it took SVB 48 hours. If you were not where I was, aka on Twitter watching all investors panic, or at SXSW watching the same, or in a dark mahogany room talking to hundreds of investors and bankers to figure out who wasn’t wearing pants if the tide pulled out…then let me just say, you could smell the fear. But then the Fed and Yellen stepped in and said, “Friends, don’t worry. Your money is safe if you deposited there.” So VCs and startups everywhere got a glow up. ​ ​ Lessons learned watching the SVB fall #1: Smoke usually means fire. We had heard rumblings about Silicon Valley Bank for a while. But no one really paid attention. We heard rumors about FTX, too, but people kept their money in. Next time, move when you smell smoke. --------------------------------------------------------------- #2: Have two bank accounts. I spoke to no less than 10 founders who had to spend the weekend frantically opening up new bank accounts in an attempt to re-set up their operations. No single point of failure. --------------------------------------------------------------- #3: Sift through the noise. If you were getting advice from Twitter, that’s not great. Hive mind won’t help you. Create your list of people who are smart, calm thinkers and get to them during the next crisis. --------------------------------------------------------------- #4: The Government can actually move quickly. Getting the government to backstop the entire deposit base at SVB in essentially 72 hours was faster than I anticipated. That could be good, or it could be bad. Either way, we learned they can move fast when needed. --------------------------------------------------------------- #5: Keep a rainy day fund. I have about 482 friends in Austin with water stored, ammo stacked and a general prepper mentality. But how many people have cash available in the event of a panic? Might not be the worst idea. --------------------------------------------------------------- #6: Resist distractions. Can you influence the outcome? Can you prepare or prevent? If the answer is no, then give it no more thought. You’ll make more money and be happier when you continue to build rather than watching a fire you can’t stop. --------------------------------------------------------------- #7: Macro events can hurt micro humans, Too. I’ll never forget the time regulation changes killed one of my businesses almost overnight. You could have had a killer startup growing like crazy until it died because your money got taken at SVB. So, be aware: Where are you too heads-down to feel the boiling water until you realize you can’t get out? --------------------------------------------------------------- #8: You don’t want “cool” bankers. Boring works. ​ --------------------------------------------------------------- #9: I am ruminating on this quote from [Naval](=). “Someday, we will look back and realize that there were only two banks all along. ​ The Federal Reserve, the fully centralized bank, and all of its branches, and ​ Bitcoin, the fully decentralized bank, and all of its stepchildren.” In a world where the FED backs all deposits and banks, is there really a difference between banks? It’s an interesting question. ​ The other threads of the financial spiderweb Here’s what I’m watching: - If you thought tech layoffs were bad before, buckle up. They’ll get worse now. - S&P Global said Europe had the second-highest corporate debt default count last year since 2009. Which means European layoffs and less corporate spending. - The global real estate market is pulling back. Austin, where I live, has houses sitting for 2x longer than this time last year. And watch out for China—a big real estate shock there will ripple across the world. Want to do what I’m doing? - Hold your money in the most liquid traditional banks—emphasis on banks, not just one bank. Do not take unnecessary risks. - If you need money in your business, call every debt line. Get as much cash as you can, do it now, and be willing to make concessions. - Money is no longer a commodity like it was the past 15 years. Cash is now king again. - Keep your savings rate high, and diversify your income streams. ​ Question everything and don't confuse suggestions with laws. - Codie ​ ​ - New life goal: don't be [on Forbes](=)? - ​[How much $]( to buy your happiness? - Chat happens: [GPT-4]() dropped - ​[Law & Order]() STU (Sushi Terror Unit) - ND's attempt to [keep biz small]()​ --------------------------------------------------------------- Ready to become part of the Contrarian Crew? 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