A Mismatch of Short and Long-Term Interest
The relationship between Silicon Valley Bank, our attention spans, and our money.
Investing requires the ability to manage funds such that you are able to cover both your short-term needs and your long-term wants + needs. The tricky part is there’s no one perfect way to do it.
The case of Silicon Valley Bank and its failure/takeover is a great example of what happens when there is a mismatch between your short and long interests; you go bust!
What’s the real issue at hand?
What’s the root cause?
What’s the signal in all the noise of why and how it happens?
To me, the Silvergate unwind, Silicon Valley, and Signature Bank takeovers this past week and weekend are a microcosm of what’s wrong with society at the moment. It’s a signal that something is off.
It’s a warning sign that there is a greater need to pay attention. To seek the facts and not take the easy route. Pursue depth over quickness. Long-form over short and sweet.
It’s a tell-tale sign that what’s really wrong is a lack of truth throughout the entire system. There’s a need for proof of reserves.
Societally we suffer the same fate as Silicon Valley. There’s a mismatch between our interests. We’re watching a heavy pursuit of short-term pleasures (Tiktok) over our long-term interest (productivity) while seeking the easiest way to get things as instant as possible. There’s entirely too much focus on the short term without any real thought as to the ramifications of our decisions over the long run.
That’s the portfolio mistake that SIVB made. That’s the life mistake it appears most are making. If you invest in bonds with low yields for immediate gratification and ignore that when rates rise you won’t be able to satisfy investor demands. Then deposits leave. If you invest in instant gratification because it feels good, you won’t be able to fund the future you *expect* to have if things *unexpectedly* change.
The case of SIVB is a great example. One we’ve seen many times over. In an integrated world, money moves fast. So, if your interest is out of line and focused too far in the near term or too far in the long term, then you very likely won’t be ready for the challenges that are sure to arise.
Especially, if you don’t have a plan.