While pundits mull over the reasons and fallout of #SVB bank collapse, it's worth noting two things about the world we live in, highlighted (once again) by this event:
1.] Amplification: fuelled by social media, misinformation (including rumours, speculation, unverified opinions, doomsday predictions, et al) travels 100x faster than verified facts. This has real consequences because digital technologies make it easier to take action without allowing enough time for verification or thoughtful analysis. Going by the extent of withdrawal requests SVB faced on a single day, I would venture to guess this is the highest stress any bank of this size has ever faced in history even during a bank run. People could literally read a Twitter thread and move money while on their toilet seats - and many chose to do that.
2.] Diversification: at least part of trouble for SVB was its relatively non-diversified customer base of tech start-ups and VC's who all face similar market dynamics and who think and act alike. In an uncertain world where (mis) information travels fast and risk can arise/materialize anywhere while you bat an eyelid, it always helps to stay diversified.
#banks #socialmedia #digital #people #money