SVB: An Inside Job

Because the best time to buy is when there is blood in the street, and you’re holding the knife.

SVB: An Inside Job

Because the best time to buy is when there is blood in the street, and you’re holding the knife.

By Samson Williams & George S Pullen, MilkyWayEconomy

The time to buy is when there is blood in the streets”- Nathan Rothchild, a 19th Century British financier, and member of the Rothchild banking family.

Fast forward to the 21st Century, in 2023, the best time to buy is when you know WHEN there will be blood in the streets. How could anyone know when there would be blood in the street? Simple. Wield the knife. In this instance, the “knife” is data. And the sharks of venture capital (VC) are, well, the sharks of venture capital. As in the case with all top predators, if you cannot find the best deals alone, sometimes you’ve got to get together, form a pack, and hunt. The following describes the hunt that was, is, and continues to be the 16th largest US bank that is Silicon Valley Bank (SVB) “crisis.” Because it's really not a debacle or crisis, it's a fire made by predators to flush out the game…not for the hunt but for the feeding frenzy of deals that will flow as freely as does the startup blood in the street this week.

Step 2 - Engineer a Crisis

Step 1 is actually to analyze the data that gives a cabal of Sharks the competitive edge they are looking for to eat their brethren. Similar to that scene in the Big Short, where the stripper says she has five mortgages and Mark Baum (played by Steve Carrell) is like short everything! In retrospect, there are always those clear signs of not a systemic vulnerability but institutional opportunity.

The data point that sealed the second biggest bank failure in US History, after the collapse of Washington Mutual in 2008, was executed two years ago during the height of the pandemic. Two years ago, SVB took tens of billions of dollars from its venture capital clients and plowed that cash into longer-term bonds, confident that interest rates would stay steady at near zero. That was the canary in the coal mine to anyone looking at the data. We’re not going to debate if it was ill-advised to assume that interest rates would stay at historic lows or not have a Chief Risk Officer (CRO) for the last 10 months. Instead, we’ll just appreciate that the actual rate of inflation can be seen in every dozen eggs or gallon of milk you buy, and you don’t need a CRO to figure out how that may impact your investment portfolio.

Also, remember, in this scenario, don’t think like a entrepreneur, employee, regulator, or even human. Think like a top predator, take no prisoners, Shark. And what do sharks love more than a feeding frenzy? What they love most is when they’re first in line to the frenzy. Data is what helps sharks know that a) a feeding frenzy is possible and b) roughly when it starts because, in a digital era, data is the basis of information. Information is the cornerstone of communications and how one initiates viral economics.

To put it in simpler terms, Sharks identified the data that clearly showed that SVB was vulnerable to attack. Summoning up the spirit of 1980s Carl Ichan or 2021 WallStreetsBets, these sharks circled their thumbs and got on Slack and Signal channels, well-worn from crypto pump and dump schemes, and started a whisper campaign. What was the whisper? “Pull your money out of SVB; we are.”

Step 2 was leveraging the data you learned in Step 1 and then initiating the crisis you need to flood the streets with opportunities and Founder’s blood.

Step 3 - Be Sharks With Thumbs

Thumbs are today’s economic weapons of mass destruction. From Elon Musk to WallStreetsBets, no other body part has as much potential to create, sustain, alter, or destroy markets than thumbs. Sharks know this and have evolved thumbs. With these thumbs, Sharks have created and pushed the narratives integral to viral economics that create the feeding frenzies. Sharks desire. In Signal and Slack channels, as well as on Twitter and even the rare Clubhouse event, Sharks are doing the equivalent of yelling fire in movie theaters crowded with Founders, startups, and small business owners already struggling with inflation, wages, and globalization. Sharks who hedge and want to gobble up deals in a bloody street need this. Why do the Sharks need this? Simple. VCs have been sitting on mountains of cash since mid-2021, when they failed to deploy funds, close SPACs, and otherwise "earn" their 2%.

Now, come Monday, March 13th, we will see true March Madness, as startups and Entrepreneurs struggle to make Friday, March 18th payroll and figure out how to unlock their cash that is now being held by the FDIC’s trustee. Why Sharks love this is because, by Wednesday, March 15th, Founders and startups (many who VCs have already invested in) will be desperate for the very cash that VCs pulled out of Silicon Valley Bank (SVB), which caused the “crisis.” The streets will flow with enough blood to enable Sharks range to swim freely, gobbling up 50% to 70% discounted deals that could only be possible if there was a “crisis” of cash. If you’re a Founder, beware of the Ides of March cause the Sharks with thumbs will be using them to wield knives and predatory terms.


No bank should be too big or too complex to fail, but almost any bank is too big to liquidate quickly, particularly in the midst of a crisis.” Hank Paulson, a 20th Century Chairman and Chief Executive Officer of major investment bank Goldman Sachs and Former United States Secretary of the Treasury.

Under no circumstances should taxpayers bailout Silicon Valley Bank or the VCs who caused this crisis of risk acceptance. After all, it was SVB’s acceptance of the risk associated with their 2021 billion-dollar bets on long-term bonds that put them in this situation. It was also the data risks that SVB accepted that set the trap for this bank run, as it sought to out maneuver the other Sharks who make up the venture capital ocean. The irony of this latest “banking crisis” is that it will make banking, specifically startup and investment banking, safer for future generations. Why? Because Sharks have broken the golden rule of Sharks, "to never use data to hunt your own." Now though, with Sharks demonstrating not only their desire but willingness to mine data to cannibalize their own startups and institutions alike, risk management behaviors, risk analysis, and industry data analysis will change and evolve to combat this new insider threat.

Moral of this “crisis”? Three things: Almost any bank is too big to liquidate quickly, particularly in the midst of a crisis. Sharks will always be Sharks. Knowing that Startups and Founders should act and plan accordingly. And last but not least, if the US and Space Force do not want to get lapped in innovation and the only race that matters (the new Space Race with China and Russia), Uncle Sam must act immediately to ensure that Spacepreneurs do not suffer a debilitating capital gap due to the Shark’s engineered crisis.

About the Authors

Samson Williams and George S. Pullen are the founders of MilkyWayEconomy, a Washington, DC based think tank that specializes in understanding the economic foundations of the Fifth Industrial Revolution and the Space Economy. In addition to writing, researching, and being investors in 5thIR companies, Samson and George are adjunct professors at the University of New Hampshire School of Law and instructors at Columbia University in NYC. Additionally, George is a Marine (retired) and guest lecturer at the National Defense University.