Antitrust enforcers and Pete Buttigieg step up on the Jetblue-Spirit merger. Plus Silicon Valley Bank falls apart, Google gets spanked, Elon Musk tries to intimidate the FTC, and how to regulate AI.
On the SVB disaster, this may hurt a lot of people. I was CEO of a start-up (sold it a couple of years ago) and here's what's happening to all the start-ups with money there. In most cases, if that's their bank then it's all their money. Every day there's money coming in, money going out, the financial river of the company flows through the bank.
When you're growing a start-up you're focused on your company. Employees, product, marketing & sales. Money is what you have to keep all that running. But you're not looking at where it's kept, you're not focused on investing the reserves, you're focused on your company.
What's happening now? Companies are worried if they can cover payroll. 250K is not enough if you have say 100 employees. And along with payroll there's marketing expenses because if your marketing campaigns get paused, then your inbound leads dry up. And there's the million other things from rent to restocking the kitchen.
If your credit cards are frozen, then when Google charges you for click ads, it fails. When it fails Google pauses your ad campaigns. There are likely numerous companies that are seeing their ad campaigns get paused right now at Google, Facebook, Amazon, etc. And every day more.
And payments come in via wire transfers. So customers are sending more money in to SVB where it will be frozen. So not only is there not enough money to cover expenses, but income is getting locked up too.
And all the employees at those companies are now wondering if they'll get paid. And if so, when. For employees that live paycheck to paycheck, saying "don't worry, in a week or two it'll all be straightened out" doesn't help. They have rent due tomorrow and the credit card payment is already past due.
Even if SVB is purchased and is open for business Monday morning with full coverage for all depositors, it'll have had a negative impact. For every additional day that goes on the damage increases. And the repercussions will spread out first through the start-up ecosphere and then with less impact to the economy at large.
Speaking of AI, I was recently automatically added to various AI powered chat groups LinkedIn has created, based on my "skills" hashtags or interests. (Of course I unfollowed all of them after seeing they involve AI writing.)
I'm sceptical of central bank digital currencies since it lends too much credence to cryptocurrencies. If we want to make a public bank (like the Postbank in Germany) it would be better to just do that, either by allowing the central bank to accept deposits or find another suitable entity to run the bank (like the postal service as in Germany). The potential for abuse and money laundering are enormous and I think competition between regulated banks works mostly okay.
That said, there's a bunch of financial services we should expect our government to offer us. One of the SVB customers is a payroll company called Rippling and now there's a risk they can't pay their customers payroll. There's a lot of deserved scrutiny of tax preperation companies that do what tax authorities should be doing by themselves (making it easy to report and pay tax) but less scrutiny of payroll companies that do just the same but for payroll. In the Faroe Islands they made a system where all wages are paid directly to the tax authorities who then handle withholding and pays the remainder out to the employee. This is especially helpful for people who have multiple jobs but also for people who have big wage swings over the year.
But alas, it's often too hard to report and pay taxes and so the taxman is a party to a payroll company struggling because their bank struggles, regardless that the taxman could just do the job of the payroll company in the first place (namely withholding taxes and paying the money to the employees bank account).
The obvious kicker is that the Faroese system was created since the country is so small. With 50K people you just can't afford to have a payroll mafia and so calculating and paying taxes must be simple. It's only in much bigger countries we can afford to complicate things.
You watched that clown show of a Twitter Files hearing and all you are concerned about is a misunderstanding by Taibbi? Good grief. I'm glad you were reassured by the accuracy of what the Dems had to say.
On ML (Machine Learning) a fundamental thing to keep in mind is that no one knows how these programs are making their decisions. It's not that the companies know and are keeping it a secret. It's not that if they opened up the code you could figure it out.
Fundamentally ML is a form of alchemy. You mix the potions together and magic results. In the case of ML they feed in billions of data points and the program from that calculates the parameters that most often deliver the "correct" result. How do you look at the value of 10 million parameters, across multiple iterations to be able to say and individual's gender has this impact on the final result.
You bring up problems it's critical we answer. And having systems that provide answers that sound very persuasive that are total bullshit is a gigantic problem. But the solution is not to look at how a ML algorithm is making a particular decision. That's not possible with where the technology is today.
To avoid a rapid monopolization of the banking industry, we need to have FDIC insurance increased to infinity on all accounts. Because I'll tell you what I would be doing tomorrow if I was still CEO of my company - I would be moving all our money into one of the too big to fail banks.
I wouldn't wait to see how it plays out elsewhere. I wouldn't review the financial reviews of the mid size bank I was at. Even if the FDIC announced tomorrow that they're going to work on increasing the limit. Don't care - be safe tomorrow.
Because money is life. I have every employee depending on me. I have every customer depending on us to still be in business tomorrow. And I have zero advantage in staying in a mid sized bank (they're all equally fucked up.)
Anyways, without the FDIC increasing the limit expect the mid sized banks to go the way of state chartered banks as the money all moves to the safer bank.
Good idea on AI; wild idea to have people and companies take responsibility for the messes they make.
Whenever I get to a site that uses the word "Moreover" to begin a paragraph (awkwardly) I assume it was written by a bot :).
When I helped a neighbor write essays for her GEDs, I immediately knew she had copied from one of those sites :). This is my AI detection!
SVB and Spirit/Jet Blue deal. Two stories related to artificially low interest rates, and what happens when the FED changes policy.
On the SVB disaster, this may hurt a lot of people. I was CEO of a start-up (sold it a couple of years ago) and here's what's happening to all the start-ups with money there. In most cases, if that's their bank then it's all their money. Every day there's money coming in, money going out, the financial river of the company flows through the bank.
When you're growing a start-up you're focused on your company. Employees, product, marketing & sales. Money is what you have to keep all that running. But you're not looking at where it's kept, you're not focused on investing the reserves, you're focused on your company.
What's happening now? Companies are worried if they can cover payroll. 250K is not enough if you have say 100 employees. And along with payroll there's marketing expenses because if your marketing campaigns get paused, then your inbound leads dry up. And there's the million other things from rent to restocking the kitchen.
If your credit cards are frozen, then when Google charges you for click ads, it fails. When it fails Google pauses your ad campaigns. There are likely numerous companies that are seeing their ad campaigns get paused right now at Google, Facebook, Amazon, etc. And every day more.
And payments come in via wire transfers. So customers are sending more money in to SVB where it will be frozen. So not only is there not enough money to cover expenses, but income is getting locked up too.
And all the employees at those companies are now wondering if they'll get paid. And if so, when. For employees that live paycheck to paycheck, saying "don't worry, in a week or two it'll all be straightened out" doesn't help. They have rent due tomorrow and the credit card payment is already past due.
Even if SVB is purchased and is open for business Monday morning with full coverage for all depositors, it'll have had a negative impact. For every additional day that goes on the damage increases. And the repercussions will spread out first through the start-up ecosphere and then with less impact to the economy at large.
Speaking of AI, I was recently automatically added to various AI powered chat groups LinkedIn has created, based on my "skills" hashtags or interests. (Of course I unfollowed all of them after seeing they involve AI writing.)
https://www.socialmediatoday.com/news/linkedin-launches-collaborative-articles-powered-by-ai-to-help-boost-memb/644148/
So, the FTC asking to know the names of reporters Twitter is talking to, is just a normal practice for government agencies in the land of the free?
I'm sceptical of central bank digital currencies since it lends too much credence to cryptocurrencies. If we want to make a public bank (like the Postbank in Germany) it would be better to just do that, either by allowing the central bank to accept deposits or find another suitable entity to run the bank (like the postal service as in Germany). The potential for abuse and money laundering are enormous and I think competition between regulated banks works mostly okay.
That said, there's a bunch of financial services we should expect our government to offer us. One of the SVB customers is a payroll company called Rippling and now there's a risk they can't pay their customers payroll. There's a lot of deserved scrutiny of tax preperation companies that do what tax authorities should be doing by themselves (making it easy to report and pay tax) but less scrutiny of payroll companies that do just the same but for payroll. In the Faroe Islands they made a system where all wages are paid directly to the tax authorities who then handle withholding and pays the remainder out to the employee. This is especially helpful for people who have multiple jobs but also for people who have big wage swings over the year.
But alas, it's often too hard to report and pay taxes and so the taxman is a party to a payroll company struggling because their bank struggles, regardless that the taxman could just do the job of the payroll company in the first place (namely withholding taxes and paying the money to the employees bank account).
The obvious kicker is that the Faroese system was created since the country is so small. With 50K people you just can't afford to have a payroll mafia and so calculating and paying taxes must be simple. It's only in much bigger countries we can afford to complicate things.
You watched that clown show of a Twitter Files hearing and all you are concerned about is a misunderstanding by Taibbi? Good grief. I'm glad you were reassured by the accuracy of what the Dems had to say.
On ML (Machine Learning) a fundamental thing to keep in mind is that no one knows how these programs are making their decisions. It's not that the companies know and are keeping it a secret. It's not that if they opened up the code you could figure it out.
Fundamentally ML is a form of alchemy. You mix the potions together and magic results. In the case of ML they feed in billions of data points and the program from that calculates the parameters that most often deliver the "correct" result. How do you look at the value of 10 million parameters, across multiple iterations to be able to say and individual's gender has this impact on the final result.
You bring up problems it's critical we answer. And having systems that provide answers that sound very persuasive that are total bullshit is a gigantic problem. But the solution is not to look at how a ML algorithm is making a particular decision. That's not possible with where the technology is today.
How much of this big data is available for fair use? How many copyrights might have been violated here? I'm surprised there aren't any lawsuits, yet.
To avoid a rapid monopolization of the banking industry, we need to have FDIC insurance increased to infinity on all accounts. Because I'll tell you what I would be doing tomorrow if I was still CEO of my company - I would be moving all our money into one of the too big to fail banks.
I wouldn't wait to see how it plays out elsewhere. I wouldn't review the financial reviews of the mid size bank I was at. Even if the FDIC announced tomorrow that they're going to work on increasing the limit. Don't care - be safe tomorrow.
Because money is life. I have every employee depending on me. I have every customer depending on us to still be in business tomorrow. And I have zero advantage in staying in a mid sized bank (they're all equally fucked up.)
Anyways, without the FDIC increasing the limit expect the mid sized banks to go the way of state chartered banks as the money all moves to the safer bank.