The utopian momentum of a community’s response to disaster
When disaster strikes, we see a range of responses. Rebecca Solnit in A Paradise Built in Hell tries to untangle a mystery: why a surprising number of people fondly remember the hours and days after a crisis. For people suddenly shorn of their identities and the attendant hierarchies and social status, she emphasizes the power of collective work toward a common purpose, that we can temporarily ignore our quotidian duties while we work together to get society running again.
In the same way that the constrained play of a video game offers structure to minds laden with to-do lists and obligations, disasters force us all to focus, to narrow our sights and thinking on fixing what’s broken right in front of us. Solnit’s perspective is one of hope, of the transcendence of people in a moment of trial toward a more collected — and collective — existence.
Of course, transcendence is hardly the only response to crisis, and arguably not even the most likely one. Solnit’s vision requires latent bonds of trust within a community, such that no one will take immediate advantage of situational weaknesses. It also assumes that action is the default instinct for most people, such that when disaster comes, everyone will learn what to do and then do their part.
Without trust, communities can rapidly disintegrate in moments of tension. Neighbors turn on neighbors, seeking to right past wrongs in a moment of chaos. Without action, that utopian momentum described by Solnit’s interlocutors may never start, and instead devolve into blame and argumentation. Interestingly, the scale of a community seems invariant to its ability to organize relief: a handful of homes can fall into discord just as a large metropolitan region can rally together. Solnit argues forcefully against cynicism, since cynicism itself can flag and even unwind the response to a crisis. We think the worst will happen after a disaster precisely because we expect the worse to happen.
Last week, the sudden run on Silicon Valley Bank resulting in its rapid receivership by California banking regulators acting in concert with the FDIC is the rare stress test to check the performance of the broader tech community in a moment of doubt. The crisis went beyond a cloud data center outage or a term sheet that somehow got spiked, and offered a broad-based crisis for the most solutions-oriented people to solve.
To Solnit’s observational credit, there was indeed a palpable feeling of transcendence as everyone came together to triage and solve challenges. Startup CEOs, CFOs, finance teams and their investors rapidly identified critical timelines: when payroll needed to be processed across multiple countries, how those financial flows worked and when they were timed, as well as what steps needed to be taken to ensure that no employee would go without their paycheck. In less than 48 hours from the first inklings of a crisis last Thursday, nearly all of Lux’s startup leaders had identified the stakes and had outlined plans as the weekend arrived.
As a community, everyone in tech quickly learned the intricacies of FDIC insurance, receiverships, G-SIBs, and the potential regulatory responses to the situation. There’s rightly not a lot of collective wisdom latent in the heads of innovators on the benefits of different checking accounts (I personally am not familiar with a startup that succeeded because they chose the right bank account), but expertise was developed extremely rapidly when the moment demanded it.
When it came time to pitch regulators and DC officials over the weekend for why depositors should be made whole, the community responded with careful vigor. Petitions were circulated, elected officials were offered evidence, and the context of small businesses trying to make payroll and wider contagion fears were highlighted. By Monday, SVB’s bridge bank had reopened for business, writing loans and wiring paychecks, while a certain sense of relief and warmth emanated across America’s innovation clusters (and its vineyards).
Responding to any crisis is messy. People lack immediate situational awareness, there aren’t playbooks to use, and all potential actions have to be taken while under heavy pressure not to make mistakes. There are dozens of moments permanently etched in the history of the internet of people making the wrong decisions, uselessly pontificating, rudely criticizing others and otherwise not joining the response in a helpful way. Yet, in a community of tens of thousands of leaders, that’s not all that bad of a ratio. Not everyone can look terror in the eye and keep on moving.
The immediate crisis has abated, and treasury resiliency is the new order of the day. The heart-pounding and stomach-churning trauma of the bank run is now mostly in the rearview mirror. And now we enter the next phase that Solnit so carefully sketched: the deepened connections between people who have gone to battle for each other and the fonder memories that will stay indelibly in our minds in the years ahead. Everyone at once is okay: the memes have already started to flow.
An artfully intelligent ode
In the land of innovation’s glow,
A beacon once, now laid low,
Silicon Valley Bank, we mourn,
The hub of dreams so brightly born.
With open arms, thou didst embrace,
The fearless minds, that sought to race,
To conquer worlds and forge anew,
The limits of what man could do.
The weekend past, thy walls did fall,
And echoed cries of loss through hall,
A somber tale, now etched in time,
Of once-great heights, a fall sublime.
But let us not forget, the good,
The dreams thou nurtured, as one should,
The lives enriched, the world remade,
By Silicon Valley Bank’s fair trade.
~ GPT-4 via OpenAI.
CHIPS on U.S. shoulders forces chips into Korea’s pockets
Last week in Commerce’s CHIPS contortions, I talked about the nonsensical limits of the U.S. government’s new CHIPS Program, which has $52.7 billion appropriated by Congress to fund America’s resurgence in semiconductor fabrication.
This week, South Korea — home to one of the largest fabricators with Samsung — fired back with its own industrial policy, announcing a whopping $420 billion in private sector investments into critical strategic industries like chips and AI coupled with significant tax subsidies and regulatory reforms to encourage further growth. The bulk of that announcement comes from Samsung, which will invest $230 billion across a cluster of home-grown fabs, which the government has declared the world’s largest chip-making region.
The CHIPS act has forced South Korea both to invest more in chips and to shore up its tense relationship with Japan. Despite both being U.S. defense alliance partners, Japan placed sanctions on the export of semiconductor materials and other manufacturer products to South Korea in 2019 in response to a Korean court’s decision requiring Japanese companies to reimburse victims of slave labor during Japan’s occupation of Korea. This week, South Korean president Yoon Suk-yeol traveled to Japan to resolve that dispute and others, the first time in 12 years for the leaders of the two countries to meet.
Chips may be the new oil, but oil is still oil
Finally in countries reopening ties, a major news story that got flushed by SVB news this past week was the announcement of a Chinese-negotiated agreement to normalize relations between Saudi Arabia and Iran, transforming the long-running hostility between the two regional powers and upending the traditionally American-led diplomatic model for the Middle East. The Atlantic Council put together a great package of views on this historic milestone.
China, which relies heavily on imported fuels, clearly wants to see less tension in the Middle East to keep the oil flowing East. Like so much of China’s overseas diplomacy, economic leverage offers a powerful force for compromise by all parties, who must consider the upsides of China’s voracious and often lavish financial appetite against the desire to continue centuries-long disputes.
While America has lost credibility in the region due to its wars over the last two decades, it has more specifically lost leverage given the shale boom and more recently the passage of the Inflation Reduction Act, which paints a path for America to wean itself (however slowly) off the teat of oil wells. The Middle East sees its future, and it’s one in which the U.S. just doesn’t care as much as it once did.
Two “Securities” Podcasts: Chatphishing and GPT-4 first impressions
It’s clearly AI week, what with the launch of both OpenAI’s GPT-4 and the semi-public launch of Anthropic’s bot Claude (named for information theorist Claude Shannon). We wanted to talk about all the dynamics in AI and what’s happening globally, and so we have two great podcast episodes to listen to.
Josh Wolfe and I talk through our most recent Lux quarterly LP letter, riffing on open cultures, reconsideration of established truths and loss aversion, the online furor over induction stoves, Lux’s concept of “inner space, outer space and latent space”, the future of ChatGPT and the rise of what Josh dubs “Chatphishing”, the potential terrorism of 21st century Luddites, and finally, macro dynamics and why the chaos of the next two years will lay the foundation for the entrepreneurial striving in the decade ahead.
Meanwhile, Grace Isford and I talked about GPT-4 and what’s new, its new frontiers of performance, the increasingly impenetrable black box OpenAI is establishing around its company and processes, the company’s competitive dynamics with big tech, and much more.
🔊 Listen to “First impressions of OpenAI’s new GPT-4 AI model”
- Our scientist-in-residence Sam Arbesman recommends Sarah Iles Johnston’s just published book, “Gods and Mortals: Ancient Greek Myths for Modern Readers.” From the introduction: “… if my readers have some sense of the harsher realities of such things as disease and hunger in antiquity, the wilder natural environment that Greek women and men confronted and the tighter social constraints under which they lived, then the myths will resonate more fully.”
- Peter Frankopan, who wrote a celebrated and influential history titled The Silk Roads: A New History of the World will shortly be releasing his new global tale, “The Earth Transformed: An Untold History.” He previews the thesis in a thoughtful new essay in the FT, “Apocalypse then: lessons from history in tackling climate shocks.”
- Sam recommends Steve Mould’s video on “Handmade holograms are really weird.” And I can confirm: yes, they are very weird.
- Michelle Boorstein and Heather Kelly have a prophetic investigation in the Washington Post about how a non-profit organization sleuthed gay priests in the Catholic Church by spending millions of dollars to acquire reams of mobile phone app data and then triangulating data points across Catholic locations to identify likely homosexual members of the clergy. As the Biden administration gets closer to some sort of resolution on TikTok’s privacy violations, the story is a reminder of the challenge of privacy with always-connected, always-tracking mobile devices even from non-state actors.
- A trio of writers at Bloomberg Businessweek have an absolutely fascinating whodunit about how Pras Michél got caught up in an international money laundering operation at the center of U.S.-China relations in The Fugee, the Fugitive and the FBI. Guo Wengui, who is at the center of the story, was arrested in New York City on Wednesday.
- Finally, the leaderboards of major global financial hubs have been upended, with Hong Kong losing its obvious place in the pecking order of Asian markets and London continuing to suffer the medium-term consequences of Brexit. After losing Arm’s IPO to New York, there is now further pressure being heaped on companies to move out of the City. Will it all come down to New York and Singapore?
That’s it, folks. Have questions, comments, or ideas? This newsletter is sent from my email, so you can just click reply.