The Blazing Speed of Business has Dangers

In today’s world, everything seems to be moving faster than ever. Technology has revolutionized how we do business, and its impact on valuations is remarkable. That same speed that allows companies to grow so quickly also allows mistakes to have a much more significant impact with less time for course correction. How do we adjust to the blinding speed of modern business?

Technology has completely changed the way that businesses are valued. Today, data-driven methods such as machine learning and artificial intelligence (AI) are used to assess a company or product's worth accurately. This means valuations can be calculated quickly and efficiently, enabling businesses to make decisions faster. For example, when OpenAI launched its AI platform, they were able to reach a billion customers in just 14 days due to the speed with which its technology allowed them to move.

Technology has also made it much easier for businesses to access capital at competitive interest rates. Banks and other lenders have been able to use big data analytics to assess risk more accurately than ever before. This means that they can offer businesses more competitive loan terms based on their real risk level rather than a less accurate assessment of risk based on traditional methods such as credit scores or past performance. As a result, businesses have access to capital at lower costs than ever before.

The acceleration of money transfers enabled by modern banking is reshaping how many businesses operate, from small mom-and-pop shops to large corporations. Business leaders no longer have to wait for payments to reach their bank accounts, as online banks allow capital to move quickly and securely.

Banks understand the importance of immediacy in a competitive market and provide more efficient payment systems that put their customers ahead of the curve with better cash flow management opportunities. Companies are making the most of this newfound access to instantly-available funds, allowing them to increase profits, improve decision-making abilities, and develop new ways to manage financial resources. Ultimately, modern banking has ushered in a new era of financial agility that has revolutionized how businesses operate.

The Dark Side of Moving So Fast

In this day and age of instant gratification and constant connectedness, it's easy to fall into the trap of believing that business should move as quickly as technology does. As business leaders, we must be aware of the risks of such a fast-paced environment and ensure that our organizations are prepared to adapt to ever-changing regulations, systems, processes, and procedures.

One critical risk of operating too fast is that it can lead to oversights or mistakes in decision-making. When decisions are rushed, there may not be enough time taken to consider all angles or consult experts on particular topics, which can result in decisions not being made in the organization's best interest. Additionally, rapid decision-making can create an environment where employees feel pressured to make snap judgments without fully understanding their implications or considering alternatives. This could cost the organization more than they expected in terms of time and resources.

Another risk associated with conducting business at a fast pace is that people may make promises they don't have the resources or capabilities to fulfill—which could damage relationships with customers or partners down the line. It's important to remember that no matter how enticing something might seem in the short term if you cannot realistically deliver on your promise, then you should not commit to it in the first place.

Take, for example, the recent meltdown at Silicon Valley Bank. After the initial COVID crisis, there was a lot of money in the economy, and venture capital exploded. There was all this money being raised by venture fund companies. The deposits at SVB were really, really high, but their loans did not grow as fast.

Someone at the bank tried to do what would traditionally be thought of as "the right thing" and put the money into government bonds. But interest rates went from 1.63% when they purchased half of their portfolio to 5.5%.

So then they're losing 3%, or 3 billion a year, which really made SVB go under. It started with the regulators at the Fed raising interest rates too fast. But then, interestingly, the same venture capital community that put their money in SVB were the ones that created a run on the bank.

SVB had a problem with too much concentration of deposits of the same type of client. Fifty percent of every venture-funded company in the US had their money in Silicon Valley Bank. So there was a lot of concentration, and that created a problem.

When one venture capital fund told their portfolio companies to get their money out, in twenty minutes, everyone else knew about it. Then they all went to get their money out. Silicon Valley Bank had $200 billion in deposits when the run started, and in one day, $40 billion was taken from the bank by their clients.

When people can move money with just a click, it creates an environment where things move faster than our thinking and ability to react. What we really need at this point is to adapt other regulations, systems, and processes or procedures to be able to recognize that.

Moving quickly is not necessarily bad; however, it must be done responsibly and strategically, considering how decisions will impact both short-term and long-term objectives. As businesses continue their evolution into faster-paced environments driven by technology, it is vital that leaders remain vigilant about recognizing potential risks associated with this change in pace and make sure their organizations are equipped with appropriate regulations, systems, and processes necessary for success in such an environment.

By being mindful of these risks while simultaneously taking advantage of new opportunities presented by technological advances, businesses can remain successful well into the future.