Prof G Markets: SVB’s Collapse, the U.S. Banking System, Venture Catastrophists, and What’s Next

Catastrophism

Venture capitalists often play a dual role during crises, oscillating between constructive engagement and fearmongering. Scott Galloway highlights how figures like Ron Conway and Reid Hoffman worked behind the scenes to stabilize the situation with Silicon Valley Bank, while others resorted to alarmist tactics on social media 1. This behavior, termed "venture catastrophism," is driven by the attention economy, where being loud and provocative can be monetized.

It appears these individuals get some sort of reward from being catastrophists, from being incredibly loud, even if it creates more systemic risk to the system.

--- Scott Galloway

Ed Elson criticizes this approach, pointing out that venture capitalists had the resources to address the crisis without resorting to panic 2.

   

Banking Dynamics

The interaction between venture capitalists and banks during financial instability reveals a complex dynamic. Scott Galloway notes the emergence of two tiers of venture capitalists: those who act as responsible citizens and those who thrive on chaos 3. This division is evident in the differing responses to the Silicon Valley Bank crisis, with some VCs advocating for stability while others may benefit from turmoil.

There's two tiers of VC's developing... venture capitalists who are citizens... and those whose interests are aligned with chaos.

--- Scott Galloway

The role of government in these scenarios is also contentious, as some VCs criticize governmental intervention while simultaneously relying on it during crises 4.