All-In PodcastE120: Banking crisis and the great VC reset
CHAPTERS
- 0:00 – 1:35
Besties banter, dinner stories, and JCal’s caps-lock persona
The episode opens with playful banter about a recent dinner, running jokes about “all caps,” and the show’s community-driven nicknames. Jason sets the tone: humor alongside serious commentary, acknowledging that their growing audience changes how messages land.
- •Dinner recap and inside jokes about ‘caps lock’ and ‘panic alerts’
- •Acknowledgement that the show has grown beyond initial expectations
- •Framing the pod as both informative and comedic
- •Foreshadowing that last week’s SVB discussion/tweets drew backlash
- 1:35 – 5:39
JCal’s statement on SVB tweeting: intent vs. causing panic
Jason explains why he spoke loudly about the banking situation and why he doesn’t view it as an apology or a victory lap. He argues he was describing events already unfolding and reflects on how to communicate responsibly on a larger platform.
- •Jason describes firsthand fear: payroll risk, deposits fleeing, and ‘movie-like’ surrealism
- •Distinguishes jokes/imagery from the seriousness of the underlying message
- •Says he’d adjust style (e.g., fewer all-caps/Mad Max memes) but not substance
- •Sets up the episode’s goal: timeline, causes, outcomes, and solutions
- 5:39 – 9:55
Timeline and scapegoating: why VCs weren’t the cause
Sacks walks through the week’s sequence and argues critics are scapegoating VCs and public commentators for a crisis driven by balance-sheet realities. He emphasizes the run was visible before their tweets/podcast and that multiple bank events prove it’s systemic.
- •Five bank failures/near-failures in a week: Silvergate, SVB, Signature, First Republic backstop, Credit Suisse
- •Core mechanism: unrealized losses from rapid interest-rate hikes
- •Stress reveals weakest risk managers first, but vulnerabilities can be broader
- •Timeline defense: tweets/pod came after SVB receivership and runs were underway
- 9:55 – 14:48
Different bank failures, same stress: liquidity vs. confidence crises
Friedberg distinguishes between the mechanics behind different institutions’ trouble, cautioning against lumping them together. He explains how cherry-picked media clips can catalyze panic even at large global banks, and points to supervisory gaps.
- •SVB/Signature/Silvergate framed as classic liquidity crises (duration mismatch)
- •First Republic framed as balance-sheet parking/solution rather than identical failure mode
- •Credit Suisse framed as panic/speculation amplified by a clipped shareholder interview
- •Regulatory oversight failure: duration mismatch was ‘knowable’ months earlier
- 14:48 – 22:08
Root causes debate: COVID shock, inflation, rate whiplash, and deregulation
The group steps back to discuss how pandemic-era shutdowns and stimulus set the stage for inflation and rapid tightening. They debate who bears responsibility, with Sacks outlining a multi-party blame framework and warning against simplistic narratives.
- •COVID shutdowns as the ‘cannonball’ causing second/third-order effects
- •Inflation and delayed Fed response leading to aggressive tightening cycle
- •Dodd-Frank loosening and a two-tier confidence problem for regional banks
- •Sacks’ blame list: bank management, Fed hikes, Biden spending/transitory claims, 2018 dereg, ESG/wokeness distraction, and (incorrectly) VCs
- 22:08 – 27:40
VC conflicts and SVB: incentives, disclosure, and fiduciary expectations
Friedberg argues the VC critique is most relevant to SVB due to intertwined incentives (loans, deposits, LP relationships) and weaker disclosure norms in private markets. Sacks agrees conflicts should be disclosed but rejects broad claims that VCs ‘caused’ the run.
- •Potential conflicts: SVB as LP, cheap credit lines, and ‘directing’ deposits to SVB
- •Private markets vs public markets: weaker related-party disclosure standards
- •VCs as ‘adults in the room’ for young founders managing large cash balances
- •Sacks: conflict disclosure is valid; blaming depositors broadly is not
- 27:40 – 31:55
The Fed’s emergency facility: par lending, hidden losses, and ‘kick the can’ risk
Friedberg explains the new Fed backstop that lends against underwater securities at par, effectively creating a buyer/lender of last resort. He warns it may create arbitrage incentives and simply defer the system’s loss realization into the future.
- •Mechanics: banks pledge bonds bought at $1 now worth less; Fed lends at $1 valuation
- •Scale estimate: ~$2T in unrealized losses outside the top 4 banks; additional $1–$2T at top 4
- •Incentive: banks may swap old low-yield assets for higher-yield ones using Fed loans
- •Concern: problem reappears when one-year loans come due unless rates fall materially
- 31:55 – 51:17
Reforms and product ideas: real-time dashboards, transparency, and a ‘bank vault’ model
Jason proposes separating ‘vault’ custody from ‘banks’ that take risk with deposits, arguing customers want safety more than yield. The group discusses regulator visibility, whether the public should see risk dashboards, and the tradeoffs with lending and credit creation.
- •Proposal: pay explicit fees for custody/payment rails instead of subsidizing via deposit risk-taking
- •Friedberg: regulators should have real-time, software-based supervision dashboards
- •Debate: public disclosure vs regulator-only transparency to avoid bank-run dynamics
- •Sacks: depositors can’t evaluate bank balance sheets; consumer protection is central
- 51:17 – 54:35
Practical guidance for founders: ICS sweeps, FDIC limits, and treasury management pitfalls
They close the banking segment with actionable steps startups can take now to reduce single-bank exposure. Sacks cautions against startups building bond ladders and prefers liquid, T-bill-backed money market funds managed by major institutions.
- •Insured Cash Sweep (ICS) products to spread deposits across insured accounts
- •Questioning whether the $250k FDIC limit is outdated for businesses
- •TreasuryDirect and short-duration government debt as an option for large treasuries
- •Sacks: avoid duration mismatch; prefer liquid T-bill money market funds over DIY ladders
- 54:35 – 1:01:18
Great VC reset: Founders Fund split, Stripe haircut, Sequoia scrutiny, Tiger write-downs, YC pullback
The discussion shifts to venture capital’s repricing: smaller funds, down rounds, reported underperformance, and retrenchment from late-stage strategies. The besties frame it as a multi-year cleanup akin to prior cycles, with tougher LP constraints ahead.
- •Founders Fund splits a large fund into two smaller vehicles (signal on deployment/valuations)
- •Stripe’s reported ~50% valuation cut impacts portfolio marks and LP expectations
- •FOIA-revealed Sequoia/UC disclosures spark debate about J-curve vs impairment
- •Tiger’s major write-downs and YC cutting its growth-stage team indicate late-stage reset
- 1:01:18 – 1:06:18
J-curve vs impaired vintages: returns timing, DPI realities, and LP constraints
They debate whether the Sequoia/UC story is simply early-fund math or a sign of deeper impairment. Friedberg emphasizes DPI and time-to-return metrics, warning that many LPs may be effectively sidelined if distributions don’t arrive on schedule.
- •J-curve concept: early fees and unmarked assets depress early fund values
- •Friedberg’s benchmarks: ~5–7 years to call 90% capital and to reach 1x DPI (typical)
- •Risk that recent vintages are not just ‘early’ but structurally impaired
- •Implication: LPs may be unable to recommit, even if new opportunities look attractive
- 1:06:18 – 1:08:16
Builder’s market returns: MVP-first founders, milestone-based funding, and post-hype discipline
Jason describes a shift back to product execution over hype, referencing his Founder University program and early checks for MVP progress. The group argues the era of ‘credit for work not done’ is ending, creating stronger signal for real builders.
- •More pragmatic founders emerging from layoffs; stronger customer/product focus
- •Milestone-based funding model returning after frothy years
- •Hype-era artifacts criticized: theatrics, whitepapers, absurd valuations
- •Optimism: real value creation continues despite lower asset prices
- 1:08:16 – 1:24:57
Science Corner: room-temperature superconductors, promise vs controversy, and commercialization hurdles
Friedberg gives a practical explainer on superconductivity, why zero resistance matters, and the transformative applications if room-temperature superconductors become real. He covers the recent controversial Nature paper, replication concerns, and the role of academia/tech transfer in commercialization.
- •Superconductors: zero resistance; major implications for grids, computing, maglev, and energy storage
- •History: low-temperature superconductors → liquid nitrogen era → search for room-temperature materials
- •Hydrides and the Dias claim: room temperature at lower (but still high) pressure; replication debate
- •Tech transfer basics: university-owned IP, typical single-digit equity/royalty deals, large variance by school
- 1:24:57 – 1:30:04
DeSantis, Ukraine spending run rate, and fiscal politics wrap-up
The episode closes with a quick political detour: Sacks argues DeSantis criticism is tied to Ukraine skepticism, and they debate the scale of US spending. Jason underscores fiscal responsibility as a key upcoming election issue before the besties sign off.
- •DeSantis ‘peaked’ narrative attributed to his stance on Ukraine support
- •Ukraine spending framed as massive and comparable to past war commitments
- •Macro link: war spending, debt, inflation, and banking stress
- •Wrap-up plugs, All-In Summit logistics, and show sign-off banter
