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Behind SVB’s collapse were a whole lot of texts on messaging groups

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In a black-and-white photo from 1929, a crowd of men in suits and Fedoras and women dressed in cloche hats and fur-trimmed jackets wait outside a gate to withdraw their money.

Bank runs of the 1930s happened slowly, because we banked and communicated differently then. Hulton Archive/Getty Images

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It took less than 48 hours for Silicon Valley Bank to collapse. That’s thanks, in part, to the many online and messaging chat groups startup founders participate in.

Sara Mauskopf is in a lot of tech chat groups — on WhatsApp, Slack, Signal and Telegram. Some are small and just with industry friends; some are groups for tech moms and people who build parenting businesses. Mauskopf’s company, Winnie, matches child care providers and families. She’s also in a bigger WhatsApp chat full of founders.

“That one is a private group, but I’m just not allowed to say the name of the group,” she said.

Usually, Mauskopf said that these groups are full of run-of-the-mill chatter, gossip, humor and a little bit of business advice. But last week, the tone abruptly changed.

“It all happened so quickly, and I’m switching back between all these different apps,” she said.

Messages were coming in at lightning speed: Get your money out of SVB. It was hard to know how to react. By the time she went to pull her money out, SVB had shut down.

Word of mouth is how bank runs have always begun, according to Richard Grossman, who researches banking history at Wesleyan University. A rumor — true or not — creates chaos.

You might remember black-and-white images of “depositors lined up out in front of the banks,” he said. “The stories you’d see from the 1930s.”

Back then, we banked and gathered information differently. That means the fallout was slow and steady.

“The news would build up over conventional news sources and banks closed in a number of places over the course of weeks,” Grossman said.

Today, bank runs look different. With SVB, Grossman said more money was withdrawn in a handful of hours than during the banking crisis in 2008. 

It’s because of the ease and pace of how we share, said Jonah Berger, the author of “Contagious: Why Things Catch On.”

“So one person shares the information. It may make somebody else more likely to withdraw their funds, which makes the bank even more likely to collapse than it would have been otherwise,” he said. “And so once things like this get going, sometimes they’re difficult to stop because they become almost self-fulfilling prophecies.”

And these conversations morph into a feedback loop of confirmation bias. People are spreading the same rumors across different groups.

“The anxiety of possibilities can sometimes outpace the truth because people share it ’cause they’re anxious, and they wanna figure out whether it’s correct or not, and they’re fired up and they wanna take action,” Berger added.

“I was definitely feeling irrational, like, ‘Oh, my. We have to do something now’ — like panicky,” said Stella Garber, who runs the management software company Hoop.

Garber said she’s aware of the pitfalls of participating in these group chats. But she plans to stay in them. When the government announced it would protect SVB depositors, it was like being a part of a team.

“It was euphoric,” she said. “I got, like, probably 50 texts messages, DMs, all the same groups, that people were supporting each other.”

And the group chatter hasn’t stopped. Now, it’s focused on banking advice.

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