New shows, new music, new movies, keeping up with pop culture sometimes feels like a full-time job. Thankfully, over at pop culture happy hour, it's literally our job. We break down what's actually worth watching, listening to, and pretending you already knew about. So the next time someone says, did you see that?
You can say, yeah, obviously. Follow NPR's pop culture happy hour wherever you get your podcasts. This is Planet Money from NPR. In the 1970s, professional orchestras started holding blind auditions.
So if you were a young cellist or whatever, you'd play your audition behind a curtain or a screen so that theoretically, the hiring people would evaluate you solely on your musical ability. I mention this because it sounds a lot like the thing that Iba Masood wanted to build. Just instead of evaluating cellists, she wanted to evaluate software developers. The idea is that, you know, could we use your existing work to really determine your overall quality of code and your overall quality of work?
And so that was the research that I was doing. And I felt very strongly about this too because I'd never had the pedigree that most Silicon Valley founders have, frankly. Iba grew up in the UAE and Pakistan where her family's from. She was the first in her family to finish college.
And this kind of software developer evaluation idea, it had earned her a last second interview at maybe the most prestigious incubator in Silicon Valley, a program called Y Combinator or YC. So she and her co-founder, they scramble to get flights to the US, they go to the interview, they leave the interview and wait. We're actually, we're at the mall because we're buying five dollars shirts from Old Navy that say California because I'm like, hey, if nothing, I can at least sell these shirts back home to make some money. Very smart.
And that's when we get the phone call that we got into YC. This was a huge deal. It meant Iba would get mentoring from important people and startup lectures from experts and seed money for her new company. It was $120,000.
And I remember just crying. It felt like life changing money. Anyway, so we had a really short period of time to open a bank account and do everything. Everybody at Y Combinator told Iba there was this one bank that deals with this all the time, Silicon Valley Bank.
So we went to SBB, we opened up the bank account and I just remember we were so happy. Like we were really elated just at the fact that we had this business entity in America because it just seemed so impossible. Now this, of course, was the moment that would eventually drag Iba Masoud and her company, Tara Ai, into the second biggest bank failure in US history. It's worth mentioning though that before starting this startup Iba had been working as a financial and risk analyst.
Anything about Silicon Valley Bank that like raised a flag for you or anything like us? So I'm someone that is, you know, my day to day is really involved in product development, in interviews and hiring and supporting our team. And I've never had the time to pour through liquidity ratios for SBB or to look at their financials deeply. I mean, it's just not a priority.
Yeah, plus she says this was the United States. Why would she need to worry about an entire bank collapsing and maybe pulling her entire industry down with it? Hello and welcome to Planet Money. I'm Kenny Malone and sometimes you hear these stories about an airplane that suddenly knows dives.
Everybody on board thinks this is it. And then it levels out and everything is fine. Well, an entire industry just went through that. For about 72 hours, Iba Masoud, along with a huge chunk of her fellow tech startup founders, thought they had lost absolutely everything to a bank collapse.
Now for now, things have stabilized. But because this doesn't seem contained to one bank, like, you know, just look at Signature Bank and Credit Suisse and First Republic, we wanted to understand the core of financial panic. Today on the show, we go inside that Silicon Valley Bank run that happened just two weeks ago. And we get a close up look from the people who experienced it to find the lessons you can only learn when you think the entire world is ending.
The timeline of the Silicon Valley Bank run, the SBB run, is equal parts fuzzy and precise. It's impossible to get a clear picture from just one person. And so today we're going to talk to a few different people, walk through the beats of this from the early rumblings to the full stampede to people making hard decisions, and then the aftermath. It's hard to say exactly what started Silicon Valley Bank spiral.
Maybe it was SBB's announcement that they liquidated a bunch of their assets on Wednesday, or maybe it was when Tech Insider, Peter Thiel's investment fund advised its companies to pull their money out of the bank. But what we know for sure is that by the time markets opened at 9.30am on Thursday, the bank's stock was dropping. And by Thursday afternoon, the fuzzy whispers of a much bigger problem at SBB were spreading across Silicon Valley. Yeah, let me open it up.
On Thursday afternoon, in her home office in San Jose, Iba Masoud gets this jargony but direct Facebook message from a friend. This is what messages me, let's see. Thursday, 12.44pm. Hope you don't have your money in SBB.
Might be a liquid. Oh, that's it. That's all I got. What does that mean?
What does he know? What was Iba supposed to do exactly? And honestly, she was so busy she didn't even see that message until an hour later. Now around the same time, about 45 miles north of Iba, a different startup CEO named Jordan Husney, was settling into an exclusive tech event, which was sort of unusual for him.
My Thursday will go down to my own recollection as one of the most San Francisco Bay Area tech days I've ever had. Jordan's company is called Parable. It is a remote working platform he created in 2015, and one of his early investors was this influential fund called SV Angel, which is why Jordan's Oh Crap moment about the Silicon Valley Bank, it happened while he was at this invite-only tech summit, the main speaker of which was Barack Obama. I showed up a couple hours early to the event just because I wanted to sit up front like an aid student, and I was really interested in listening to the speakers, and it's not common for me to be invited into a room with folks at that caliber.
And while Jordan was waiting, his phone is buzzing, stories about Silicon Valley bank stock dropping, news that SBB needed to raise equity to help buoy itself. I wanted help in understanding what that meant because I felt a feeling about my stomach like, oh, this could be really bad, but I don't know how bad and I'm not a banker. Now Jordan notices sitting next to him is a pretty big deal tech person. You won't say exactly who, but normally Jordan stresses about bothering a person like this because big deal tech people, they probably assume everybody that talks to them is just going to hit them up for money.
But in this case, Jordan turns to this person. And I said, can I ask you a question? What's your read on this SBB? And all of a sudden, like two rows of people leaned in.
I just saw a whole bunch of heads kind of lean in when I asked the question. And this individual said to me, are your assets there? How exposed are you? And I said, well, we're fully exposed.
And he said, like, without hesitation, he was like, get everything out now. Jordan's stomach drops. The interlopers start weighing in. The person immediately to my left was a founder goes, oh, thank God, I don't have my money in SBB.
And then the person to the left of me all of a sudden starts furiously some typing on their phone. The thing about a bank run is it's impossible to know the exact tipping point. You know, if some people pull their money out of Silicon Valley bank, like, that's fine. If more and more and more start pulling out, that is less and less and less fine.
And for Jordan, for lots of people, Thursday afternoon feels like the moment there is a run on Silicon Valley bank. You just enter that moment of free fall where you start to think, oh, this is a serious problem. The moment that you know bank run is happening, you're smart enough to understand like, there's only one way to stop a bank run. And it's if people don't pull their money out.
Yeah, it's classic game theory. It's classically prisoner's dilemma, in that case, where if I stay the entire system benefits, if I leave, it benefits myself and my employees. And what feeds into that are two things. What's likely to happen in the world?
And what is the risk to being wrong? And the risk to being wrong in this case was losing almost everything. And my incentive to save the bank is not great. And my incentive to save the other companies and the investors in that moment is not great.
And it doesn't seem practical. It doesn't seem like that's even within the realm of possibilities. Given the information that I had, it was clear that with everybody else saying it out, just like I heard a buffalo, we all had to run. Jordan and his head of operations have an understanding.
In an emergency, forget email, forget Slack, go straight to text message. And when it goes to text, that's the bat phone. Did you say bat phone? Bat phone.
Like the phone you pick up and goes directly to Batman. That's right. The mayor of Gotham City picks up the bat phone. Yeah, the red phones.
And I sent a text saying, we have to mitigate risk at SBB. Like I propose we move our money out is what I said. Transfer initiated millions of dollars. This is happening all over the tech industry.
On Thursday and even on Friday, everybody is having their own. This is a bank run moment. And because this is the first truly online bank run, people are dramatically initiating wires or transfers from anywhere. And we're here to talk about longevity, aging, dogs.
So hope you all are excited about the conversation. At the South by Southwest conference in Austin, Texas, startup founder Celine Holliwah and venture capitalist Laura Deming are being interviewed on stage. Deming is answering a totally normal tech question, but like keeps checking her phone. Also quick apology, waiting to do a wire transfer out with a whole SBB situation.
So that's why I'll be checking my phone every once in a while during the panel. So Paul, do that comes up. Yeah, if you notice the anxiety that's emanating from us too, it has to do with the fact that Silicon Valley is as of this morning is melting down. We're in the car.
We're speeding. This is around, I want to say, two-ish p.m. We're speeding. This again is IBA Masoud, former risk analyst, now current bank run participant.
And her, this is a bank run moment, having some time around 2.15 on Thursday. And what IBA knew was this. Her company's only bank account was with Silicon Valley Bank. And so if she wanted to wire money out, she needed a whole new account at a new bank, which was why she was speeding to and now arriving at a Bank of America.
And it's raining, it's pouring rain. I'm drenched and I get into the branch. I'm like, I need to open a bank account urgently because I am worried there is a bank run. That's what I'm ever saying.
I was like, it's a Silicon Valley bank. And I need to make sure that our company exists in the next few days. What did the receptionist say when you said that? Let's get you to 20 minutes.
An account manager meets her and asks for ID. You have a dig around in her bag and IBA had just become a US citizen. And she pulls out her phone to show a photo of her brand new passport. Which I was very proud to show them.
So that was the first time I ever used my American passport. To try to open a bank account during a bank run. Yes. And then she said that, oh, ownership.
How much ownership do you have? Like you're opening an account for your company. You need to own at least 25% to do this on the company's behalf. And I said, I don't have 25% ownership for sure.
And so at that point, I'm thinking, okay, what do I do? I can't get our investors here. And by the way, my husband, he's also our co-founder and CTO. And luckily enough, say that I both together met the threshold.
But my husband had a dental procedure. And so, and I called say it while he was at the dentist, mouth open, obviously. And just like, get here now, taking over, you have 10 minutes. During a bank run, your husband had chosen to go to the dentist, though.
We did talk about it after. And we were like, should we have just not done the dentist thing? And that's what I'm saying. It's like, there's so many regrets afterwards.
Because it's like, oh, you know, like, should we just let tooth decay happen? Should we not worry about the root? I don't know. Like, it's just so many questions.
Say it rushes out of the dentist. Meanwhile, Ibha has her operations manager standing by waiting for the new bank account so she can wire money out of Silicon Valley Bank. Once say it gets to Bank of America in eight minutes, the bank manager hands them the paperwork for their new account. I took a picture of the account number and routing number, like, underlined it.
And I was like, why are two here? And she did. Panic in 2023 is fast and confusing. It's dozens and dozens of Facebook and WhatsApp messages.
It's emails from investors with conflicting advice and a tsunami of takes on Twitter. But it is also insular because on Thursday, this was the biggest story for Silicon Valley startups. But other people also had money in Silicon Valley Bank. When I tried going into my account, it was like locked, but I didn't think anything of it.
I was like, maybe they're going undergoing maintenance. Paris Chandler is 3000 miles away from Silicon Valley in Boston, where she runs a small startup called Black Tech Pipeline. It's a job board, a newsletter, a recruiting platform. And it's basically just her.
She doesn't have big investors or networks in Silicon Valley, but Silicon Valley Bank did have a branch in Boston. And Paris appreciated that SBB took her seriously. I love them because I literally met with them in person. If I wanted to grow my business or had ideas for my business, I could literally go on a call with them and we'd brainstorm together.
And they would help me. I could literally be like, hey, let's go grab lunch. Hey, let's go grab drinks. They basically were treating you like some hundred million dollar company.
Right. I felt like Beyonce with them. On Thursday, Paris, like most of us, had no idea this bank meltdown was happening. In fact, while everyone else was pulling money out of Silicon Valley Bank, Paris was trying to get in touch to put money in.
She'd just been awarded a $10,000 grant, a huge deal for her. Like she's got $60,000 in the bank. The thing was she needed some paperwork to get that $10,000 wired over. But her account is acting a little weird because she's at the middle of a bank run.
Paris doesn't know this and calls Silicon Valley Bank customer service. I think I waited like 30 minutes and then hung up and then I decided to call back and I got on the 15 minutes after, but it was like everything was peachy and like everything's totally fine. Just go on your account and you know, you didn't detect like any panic in this SBB representatives voice or anything like that. No, they're always so nice.
Like they sound really happy. So that is impressive. Yeah, Paris gets her paperwork figured out, goes on with her day, ends the day even with a movie and an Instagram review of that movie. So we saw screen.
Was it good? There's like 10,000 screen movies that can only get so much better, you know what I'm saying? But it is while Paris is scrolling on Instagram that she first sees a headline. Venture firms are advising portfolio companies to move money out of SBB.
Um, I was like, why is that happening? SBB? Like I love SBB. What's going on?
A full on background, of course. And at the end of the day, on Thursday, SBB's stock price had dropped 60%. It dropped even further Friday morning. Trading was halted before markets even opened.
Word was clearly spreading that SBB was in trouble. But if you were privy to all of this early and were able to transfer your money out, disaster averted. Good morning from San Francisco, everybody in this situation. First thing Friday morning, Jordan Husney, the CEO from earlier, the one with the bat phone, sent this video to his employees.
A couple of you had written mediums this morning asking it to Silicon Valley bank situation affects us. And I wanted this individual update to everybody. It was running through the end. And who was the intended target of the video?
It was actually only employees when I recorded that video. Oh, only employee. And the first video I recorded it, you know, a few minutes past eight in the morning on Friday, Pacific time was that SBB is under serious financial strength and that we believe that we have mitigated the situation. As in, they were on top of this.
They transferred money yesterday. They should be okay. SBB going out of business was not on my thing. Go sheet for 2023.
So we had to come up with a mitigation plan last night and this morning and we're in the middle of executing it. So that video came out around eight AM on Friday in the 90 minutes that followed two key things happened. Number one, Jordan and his colleagues noticed, oh, no, the money that we moved yesterday, it hasn't actually moved yet. And that was an awful feeling.
And then news broke that the FDIC had frozen the assets. Reducing breaking news. Bank regulators have seen Silicon Valley bank in the largest bank failure since the Great Recession. I just remember interpreting that wording as, oh, God, we're screwed.
And then you record the second video. And then I record the second video. Good morning, everybody. I'll post a link to the press release if you hadn't caught it from Silicon Valley bank, but the US regulators actually ceased operations of the bank this morning.
You sound rough in that video, man. I felt rough. It is one of the worst videos that a CEO can record for people that have given you their blood, sweat and tears, which is we don't know how it happened, but we just ran out of money. I don't know what this means.
Our plan is we're working with our current investors to see if I can get basically an emergency line of credit for us to continue to make payroll, etc. I recognize that this was not the Friday news that you all wanted. During the bank run, people had tried to take at least 42 billion dollars out of Silicon Valley bank. Now we don't know how much actually got out, but what didn't get out was either frozen or didn't exist at all, like in Jordan's case, and also in Iba Masud's case, who's why you're never went through either.
And the problem is the bank accounts are only insured up to $250,000. Lots of these accounts at Silicon Valley bank had millions and millions of dollars. After the break, what you learn when the plane stops crashing? Hey, it's Erica Bares, Planet Money became a record label, and now we have real final records featuring our one and only artist, Ernest Jackson.
So this is your album cover. Yeah, it's a day, but it looks like me in the 70s. Ernest gets a cut of the sales. We made a limited amount, only 500.
You can bust out your record player, hang it up as art. It's a Planet Money Records record. You can order them now on n.pr slash shop, Planet Money. It's Friday evening.
Silicon Valley bank has officially collapsed, taken over by the US government, and no one has any idea what happens now. Paris Chandler, who banked with Silicon Valley bank because they made her feel like Beyonce, is now freaking out because of that big $10,000 grant she got. Like that $10,000 has theoretically already been sent and is headed to her SBB account. So I was like, what happens if that account closes?
Does it go back? Does it get lost? And these are questions I was asking on Twitter and people were like, it's gonna get lost. Yeah.
Oh my god, it was horrible. So Paris is trying to call SBB customer service. No luck. She gets in touch with some company associated with a grant and they're just confused.
Like they didn't understand that I the bank that I assigned as grand to go to is closed. Like what's gonna happen to my money? Like they're like, what's closed? What do you mean?
Yeah, they didn't get it. And I was like, SBB is like closed and they didn't know what SBB what like they didn't understand. I'm like, oh my god, I'm gonna lose this money. Like I need the money.
Paris lays down on the couch. Today has been a day fires up Instagram again. My business bank, it got shut down by the government today. I can't move my money because the federal government is trying to figure out what they're gonna do.
I guess like, I don't know, I don't know. I'm stressed. Eventually, Paris does hear from somebody about her grant. The grant then got restricted because SBB was a vendor of theirs or something.
And so the grant ended up getting locked. Oh no. Yeah, they're like, you have to wait for the grant until this gets lifted. Okay.
The $10,000 grant was a big deal for Paris. But for a company her size, she was actually pretty safe here. She had about $60,000 in the bank, which is a small enough amount that every cent would be covered by FDIC insurance eventually. But on the other hand, any amount over $250,000 could just evaporate.
It could be gone. And so for bigger companies with millions and millions of dollars locked up at Silicon Valley Bank Friday and then Saturday become a more existential crisis. In an apartment in New York, there is a kind of end of the world last meal happening. Over a bottle of wine with some dinner and just being okay with things that we know may end.
Isa Watson founded a social messaging startup called Squad. She was sitting with a few founder friends. And you know, when I tell you that we were hanging out this weekend and like practically just like crying together and being like, you know, this might be the end of the world, but I love you. It sounds dramatic, but that was the level of emotions going on.
Isis Company has seven employees, she has more than a million dollars locked in a Silicon Valley bank account. And she's now watching her company sort of shut down piece by piece. It starts with declined payment alerts. These are from companies that help run her software.
So she switches those expenses to a personal credit card, a few thousand dollars here, a few more thousand there. And then there's the biggest expense for most startups payroll paying the human beings who work for you. You know, my CTO has a family of four in Maryland. I have a woman on my engineering team who was a single mom based in Indiana.
You know, I have to pay my United Healthcare premiums every month. And their kids rely on our ability to fund those healthcare premiums. And so my biggest concern first was for my employees. Payroll's not like you're not going to put payroll in your credit card or something.
No, my payroll every month is six figures. So I don't I don't have a six figure limit on my credit card. So I would be able to do that. But one of the things I did do was I pulled up the report of my 401k to figure out what would be the timing for me to require for me to pull out enough money on my 401k to run payroll, because that was kind of my backup plan.
I mean, how quickly would that zero out your entire retirement? Like in one month. Yeah. Yeah.
All the way across the country back in California, if a messude is also trying to figure out how to keep paying her employees, and she's just thinking back on the week about, you know, literally running to a bank, interrupting her husband's dental appointment, not moving fast enough to actually get her company's money out and possibly losing everything. One of the first things that came to my mind was my mother would keep some amount of money under her mattress. This was back growing up in the UAE and Pakistan. And my parents and my family just we didn't have money growing up.
And so I guess in some way I was just thinking back to why didn't I just, you know, do basic principles, which is have some money under my mattress? Like literally under your mattress? Literally. Like I don't even know in the literal sense, or like it's just the opening question.
Why hadn't you done those things? Yeah, and it's really interesting because when you're operating as a founder, there are certain infallible principles that you just believe in. Like I'll give a really good example of this, right? I've operated in developing economies and developed economies.
So when you're in a developing economy, there's medium trust in the banking system, medium trust in the government. So for me, operating developing economy was more like I would always have these things in the front of my mind versus I feel like being in America, it was more like if people with hundreds of millions of dollars are banking with S.B. And if all of our investors are banking with S.B. It's just it's not even a question.
It's a given status quo. But when I can't tell you those on Thursday, I feel like I operated like a developing economy founder versus a developed economy founder. So it kind of went back to that level of operation. After this weekend of despair, distrust, bit of existential self reflection, the Treasury, Federal Reserve and FDIC announced on Sunday at 6 15 p.m.
Eastern time, a complete bailout of S.B.B. depositors. The FDIC was going to cover every single deposit at Silicon Valley Bank. They said it wouldn't be taxpayer money.
It would come from insurance fees paid by other banks. But all the money would be there. Once they made that announcement and I saw it in writing, whoo, honey, I could breathe again. Again, I saw Watson who had prepared to drain her 401k.
You know, I think for me, one of the things that I learned is the power of the echo chamber and kind of telephone effects in my industry. I think because our industry is a little bit homogenous. You know what I'm saying? The power of that was intense.
And I think that, you know, keep in mind, WAMU, when that bank run happened back in 2008, there was $17 billion of withdrawals in 10 days. But with S.B.B. it was $42 billion of withdrawals in two days. In other words, when the Silicon Valley echo chamber did a bank run, they super did a bank run.
In the end, thanks to the US government, the Silicon Valley Bank run and collapse was just a 72 hour nose dive that leveled out. Everybody in this story, they're a little shaken up, sure, but they're relatively fine. So you may recall Paris Chandler. Today has been a day.
Her $10,000 grants came through after a few days and Jordan Husney just like I heard of Buffalo and I saw Watson pulled out the report of my 401k. They now have access to their money. They can make payroll in time, keep their companies going. And if a messude, well, it also made payroll kept their company going.
But she also told us this story. So the bailout was announced on Sunday evening. The first day people could get their frozen money back was Monday morning. So Monday morning, we decided to go to the Silicon Valley bank branch.
The HQ opened at 10 a.m. So we're like, let's go all the way to Palo Alto, because it opened at 9 a.m. IBA was relieved, yes, that the FDIC has stepped in and said everybody's money is at the bank and safe. But to be extra safe, IBA wants to move a good chunk of her company's money out of Silicon Valley Bank.
She also doesn't entirely trust money wiring after it failed her during the bank run. And so she decides to go in person. At that point, we had decided that we would have our ops manager come in her car and us coming in hours. So at least we have two cars with two cashier checks in case, you know, being held at gunpoint.
That was that was a real fear. Wait, really? This is a story that keeps coming back to me, you know, just thinking about like getting a cashier's check from SAB kept reminding me how I was held at gunpoint when I was three years old in Karachi in Pakistan. Was it was a robbery?
Yes, it was a robbery. Oh my God. Yeah, I mean, look, the between Thursday and Monday, you know, it was a developing economy founder, right? Like that was the death of the modus operations.
And so that is the plan. They drive over into cars. This would let them take out their money in two different cashiers checks. So if somebody takes one of those at gunpoint, the company still has money left to operate from the other check.
And then it pulls up at the bank and it is complete order, a line of about a dozen people patiently waiting to talk to this incredibly well-dressed FDIC employee. Yeah, he looks very young. Can I say someone probably in his 20s, he's wearing a collared shirt, blue pants. And so when we talk to him, the first thing he says is, are you an SAB customer, we say yes.
And then he says something that frankly, like shocks me, he says Silicon Valley Bank is now one of the top two safest banks in the country because it is one of the only two banks in the country where 100% of your deposits are insured. Whoa, what do you think? A, seeing the line wasn't very long, B, hearing that from the FDIC agent, C, seeing that the online system was sort of functional, not fully functional. My confidence is definitely improving.
I'm feeling a sense of, just, I mean, I don't know, I haven't felt a strong sense of pride for a department in the government as I did for the FDIC at that point of time, just seeing the bank take over. To be fair, big FDIC fans maybe, but Iba did still transfer most of our company's money out of the new FDIC version of Silicon Valley Bank. Today's episode was produced by Alyssa John Perry with help from Dylan Sloan and engineered by Brian Jarbo. It was fact-checked by Sierra Juarez and edited by Jess Jang who is Planet Money's Acting Executive Producer.
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