SVB, Chat GPT-4, Credit Suisse, or are we living in the end of times ?

In my still hopefully short life, I have already lived through many revolutions. And I mean really revolutions.?

The fall of communism, the rise of the Internet, the emergence of mobile telephony and the mobile internet.

The rise of web 2.0, smartphones, blockchain and web3, the summer of AI.

And I also lived through 3 global crises: the dotcom bubble in 2001, the 2008/9 crisis and Covid in 2020.

A lot of that for the last 35 years, comparing it to the life of a person living 150 years ago.?

But that another 2 (3?) revolutions would happen in 7 (!) days I would never have predicted. History is happening before our eyes.

But from the beginning- as a hobbyist historian I have to make a brief summary of the facts of these 7 days at the beginning.

1.Silicon Valley Bank

A week ago, maybe not the biggest, but considered a trusted institution in the tech industry, Silicon Valley Bank (SVB) declared bankruptcy. The bank had been one of the pillars of funding for the tech industry for over 30 years. First in California and then globally. And although it never became big and really hardly anyone had heard of it until its bankruptcy, it was banked by VCs and start-ups alike.

What do you mean they were banking? They were depositing money but also taking loans that were difficult to get elsewhere, after all start-ups are higher risk entities. VCs and start-ups used different banking products and the bank made money from it. Normal situation.

Until the era of low lending rates of the late 2000s came along.?

After the 2008/9 crisis, real estate became a suspect asset class. Equities largely did too, after all we don't know 'what's inside' a company and financial statements can be made up. Bonds at low rates are by definition a poor investment.

What's left for us - start-ups. Funds have plenty of cheap money and invest to the hilt. And then comes Covid. We are seeing trends that more and more human activity is moving online. Newspapers are writing (and probably rightly so) that digitisation has accelerated by 10 years in a year.

Governments are printing even more money during the Covid period. They are to support endangered industries like restaurants and tourism. You can see by the records of VC investments in 2020-21 that they have finally gone to VCs and in turn to start-ups.

And now we have the problem of the SVB bank. The bank received tons of cash from VCs and start-ups that did not need loans. The only investment option for the bank was low (at the time) interest-bearing bonds.

And suddenly we have war in Ukraine?(in the first place)-induced global inflation, central banks raise interest rates, bond rates go up and SVB is left with old low-interest bonds.

In this situation, SVB customers flip their deposits to banks offering better interest rates.

Or, worse still, they start burning their cash out at a rapid rate, because up to now they have been living not on profit but on adding more financing rounds. And these are suddenly not available on the market.

2.ChatGPT4

Literally 4 days after the bankruptcy of SVB comes the release of a new language model from OpenAI: ChatGPT4. How does it differ from ChatGPT3, about which there has been so much noise since the beginning of the year? It is much more efficient and faster, but above all it is multimodal.

What does this mean? It can create content not only from text, but also from images. A video that most of you have probably seen has flown around the Internet in three days: From a sketching and descriptions on a napkin, ChatGPT4 creates a complete website.

For years, the narrative has been repeated that AI will take away our jobs and replace many professions. ChatGPT4 itself has created a list of 20 professions it will displace. My profession, recruiter, is on that list, admittedly in last place, but it is there.

And maybe ChatGPT will also replace programmers.

Will this actually happen?

What spoke to me most was the fact that on the morning of ChatGPT's launch, I published an episode of my podcast in which Amit BenDor and I talked about the next step in the development of AI which would be multimodality. Amit predicted it would take months rather than years. And it took just a dozen days....

3.Credit Suisse

The day after the launch of ChatGPT4, one of the pillars of global investment banking- Credit Suisse, lost 30% of its value on the stock market in one day. I'll admit that I haven't had time to analyse this case in detail yet, but the bank has had a loss for 5 quarters and its shareholders in recent years have often been bizarre entities like family office Archegos, which collapsed in 2021.

4.What does all this have to do with each other and do we have the end of the world?

We seem to have finally got the end of speculative capitalism. We predicted the end of speculative capitalism 15 years ago, but the era of low interest rates, shady investors treated with due honour by the great of the world and, translated into the world of start-ups, the philosophy of "fake it till you make it" has apparently been going well in the 15 years since the last crisis.

Did SVB really collapse because of the mistakes of its management, or did it not really have an alternative to its investment policy?

Are we not used to, as I joke, 'serial entrepreneurs' who live from burning through one series of financing to the next?

Until the outbreak of war in Ukraine, did we not turn a blind eye to where the money was coming from? Let them be Soviet too.

And what does ChatGPT4 have to do with all this? It shows that if we don't start to have creativity in each area, to show our individualism, out of which should come the creation of real value for others and thus real profits then Chat number 4 or higher and higher will simply mow us down.

But no, there will be no end of the world.

?And those who expected lightning and thunder

Are disappointed.

And those who expected signs and archangels' trumps

Do not believe it is happening now.

As long as the sun and the moon are above,

As long as the bumblebee visits a rose,

As long as rosy infants are born

No one believes it is happening now.

Only a white-haired old man, who would be a prophet

Yet is not a prophet, for he's much too busy,

Repeats while he binds his tomatoes:

No other end of the world will there be,

No other end of the world will there be.”

Czeslaw Milosz

The painting illustrating this newsletter is ?Ambassadors” by Hans Holbein. Painted also ?in the end of times” at the breakthrough of medieval and renaissance times. What do the skull, the clocks, the crucifix, the floor symbolise in the painting ? Check it out :)

Podcasts this week:

Book recommendation this week focus on prediction as is our main topic:

Have a great weekend!

Maciej