All-In E120: Banking crisis and the great VC reset

Banking Crisis & Regulatory Response

• The group discussed the timeline of recent bank failures: Silvergate, SVB, Signature Bank, First Republic (rescued), and Credit Suisse (rescued by Swiss government)

• Root causes identified include:

  1. Poor bank risk management
  2. Fed's rapid rate hikes
  3. Biden administration's spending and delayed inflation response
  4. 2018 Dodd-Frank deregulation

• Chamath emphasized the need for better real-time supervision of banks by regulators, suggesting dashboard monitoring systems

• The Fed created a new facility allowing banks to borrow against underwater assets at par value, effectively kicking the can down the road for one year

The Great VC Reset

Major developments indicating a venture capital reset:

• Founders Fund splitting their $1.8B fund into two $900M funds, led by Peter Thiel
• Stripe taking a 50% valuation cut
• Tiger Global marking down private portfolio by 33%
• Y Combinator shutting down their growth fund and laying off 17 employees
• Sequoia's returns for UC Berkeley showing minimal returns since 2018

The group agreed this indicates:

• A hard reset in valuations
• Clean-up period needed for cap tables
• Opportunity in current market due to lower valuations
• Strong founders focusing on product vs previous era's "theatrics"

Science Corner: Room Temperature Superconductors

Friedberg detailed a recent breakthrough in superconductor research:

• Could enable massive efficiency gains in power transmission (15% loss currently)
• Applications in maglev trains, infinite battery storage, and more efficient processors
• Recent controversial paper claims room temperature superconductivity achievement
• If verified, could transform multiple industries and boost productivity

The episode concluded with discussion of how quantum computing could accelerate superconductor research by enabling better molecular modeling.