Did Social Media Really Bring Down Silicon Valley Bank?

The rapid collapse of Silicon Valley Bank – a huge $209 billion institution – is now being blamed on social media. Even if you’ve never taken a university economics class or ever read a single page of The Wall Street Journal, there’s something about that statement that should strike you as downright ludicrous.

And, yet, that’s exactly the story that banking insiders are trying to foist on us. Instead of focusing on the bank’s flawed business strategy, its lack of diversification beyond the tech industry, and just plain bad management, they are trying to tell us that social media helped to bring down the bank.

As soon as rumors about Silicon Valley Bank started appearing on Twitter, the story goes, then it was already too late. The misinformation, the disinformation, and the conspiracy theorists took over from there. It was enough to cause panic and provoke even worse rumors about a potential bank run. What chance did the bank have then, faced with people across social media speculating about the crisis while uploading breakfast photos to Instagram or tweeting about their favorite TV shows at night?

Did social media really bring down silicon valley bank?

While the more economically astute among us realize that the rising interest rate environment and a deteriorating economy is what ultimately did in Silicon Valley Bank, it’s easy to see why social media is getting the blame. Let’s be honest here: social media is the perfect scapegoat here because it has largely lost the trust of the public. Not a week goes by without another data leak, another social media scandal, or another report detailing all the potential ills of social media. Social media is what wrecked our elections, and social media is the home of disinformation, misinformation, and deep fakes. Heck, you can’t even trust TikTok these days, because it’s under the control of the Chinese.

So social media now gets blamed for everything these days. No wonder top banking industry insiders found that social media made for a convenient scapegoat here. For many, it’s entirely plausible that Silicon Valley tech companies might be responsible for the collapse of a Silicon Valley Bank. And, in an era where Twitter is being held to the fire by both Democrats and Republicans, it somehow seems easy to blame a platform controlled by Elon Musk for this debacle. If Musk hadn’t bought Twitter, we’d still have SVB, right?

Social media and the speed of bank runs

This is not to let social media off the hook here, though. There is one valid point that banking insiders are making, and that’s the speed of a bank run has now increased dramatically in the social media era. The classic bank run from a hundred years ago took days or even weeks, and it involved actually showing up in person and demanding money from the bank teller. These days, everything takes place online – including the ability to move money around bank accounts instantaneously. It’s almost as easy as sending a tweet, to be honest.

The lesson here is simple. Top industry executives should stop blaming social media for all the ills out there, and start taking responsibility for their actions. Trying to blame a bank collapse on Facebook or Twitter is ludicrous. It’s like trying to blame an arson fire on innocent bystanders watching a building go up in flames. The senior management team at SVB needs to step up and acknowledge that they completely, totally screwed up. Yes, Mark Zuckerberg and Elon Musk are easy fall guys, but for once, Silicon Valley tech platforms are not to blame.