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  1. The Staggers
13 March 2023

Silicon Valley Bank unmasks the hypocrisy of libertarian tech bros

They push for small government – until their companies are under threat.

By Emma Haslett

Say what you like about Peter Thiel – but luck has generally been on the Silicon Valley venture capitalist’s side. He is, after all, a co-founder of PayPal – which he sold for $1.5bn four years after its launch. He was the first person whom a young entrepreneur named Mark Zuckerberg approached in 2004, asking for investment for his new idea, the Facebook.

He was also the man whose venture capital fund, Founder’s Fund, happened to notice payment problems when dealing with Silicon Valley Bank (SVB) last week – spurring him to withdraw all of its funds from the bank by Thursday (9 March), just as the $42bn bank run that caused the second-biggest bank failure in US history kicked off, and a day before the Federal Deposit Insurance Corporation (FDIC) shut SVB, the country’s 16th-largest lender, down.

Other companies weren’t so quick: the crypto company Circle, for example, whose stablecoin USDC lost its dollar peg after it said on Friday (10 March) that it had $3.3bn stuck in SVB. Or the 200-odd UK start-ups that were said to be at “serious risk” from the collapse.

It was particularly unfortunate that this was happening to a sector that has historically rejected state interventions of any kind, railing against attempts at heavier regulation and insisting all its problems would be solved if only the government would just back off. Elon Musk’s behaviour at Twitter is a perfect example of the general attitude of Silicon Valley; when Zuckerberg came up with his mantra, “move fast and break things”, he didn’t just mean code.

Thiel himself is so committed to libertarianism that he has established an eponymous foundation to “defend and promote freedom”. He has also invested at least $500,000 into the Seasteading Institute, an organisation that wants to establish a series of tiny, ocean-bound nations, each run according to laws set by their founders. Larry Page, the co-founder of Google, has previously suggested a “limit” on laws to “some set of pages”. “When you add a page, you have to take one away,” he said.

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But stuck on a sinking ship this weekend, Silicon Valley found itself begging the state for help. “This is an *extinction level event*,” warned Garry Tan, the CEO of Y Combinator. “Where is [the chairman of the Federal Reserve, Jay] Powell? Where is [the Treasury secretary, Janet] Yellen? Stop this crisis NOW,” tweeted the venture capitalist David Sacks – the same David Sacks who is a friend of Thiel and Musk, and who has previously heavily criticised “special-interest corruption” and bank bailouts. Bill Ackman, a billionaire hedge fund manager and Donald Trump supporter that has in the past complained about attempts by the government’s Securities and Exchange Commission to regulate one of his investment funds, performed some spectacular mental gymnastics over the weekend, calling on the FDIC to “guarantee all bank deposits”.

By Sunday night (12 March), the Fed and the FDIC had complied, stepping in with measures to protect SVB’s depositors, while the Bank of England had helped to engineer a transaction in which HSBC bought the company’s British arm, which was still largely solvent, for £1.

The measures were, of course, the right thing to do to protect SVB’s depositors, most of whom were just trying to run their businesses. But given the criticism that state organisations have endured at the hands of Silicon Valley’s libertarians, it must have been tempting for Yellen et al to hover their fingers over the button marked “rescue” for just a little longer than was strictly necessary. Still, at least we’ve discovered the true nature of Silicon Valley’s freedom-loving leaders, who have proved how easy it is to lose one’s convictions when one’s riches are suddenly in peril.

Read more:

Who killed Silicon Valley Bank?

Inside the Silicon Valley Bank UK collapse

A reckoning for Silicon Valley

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