This past week, Silicon Valley Bank (SVB) was closed by banking regulators. Let’s understand the basics of how this happened and why it matters to the tech industry.

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SHOW NOTES:

HOW CAN A BANK WITH SO MUCH MONEY SHUT DOWN?

Banks never hold all the money that they have on the books as deposits
Banks manage a portfolio of investments
Banks try and manage the portfolio within certain ratios
Banks have regulations

LEVERAGE, INTEREST RATES, RISK, TIMELINES, COMMUNICATIONS and PANICS

Basics Part I - Systems built on Trust, Regulations to Enforce Actions
Basics Part II - What is SVB?, Deposits vs. Investments, Leverage, Interest Rates
Higher interest rates increases the risk of existing investments
Valuations vs. Valuations on Paper
Insurance, Diversified Portfolio
Cloud Analogies - Single vs. Multi-Cloud, Shared Resources Risks, Profitability of a Service, Best Practices vs. Practicality, Rising Costs (or Shortages)

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Understanding How a Bank can Fail 39:15 Share

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Understanding How a Bank can Fail