About 2 years ago, a mini-banking crisis eventually caused several mid-sized banks to become insolvent and fail: the most notable being Silicon Valley Bank (SVB) and First Republic Bank (FRB). It was a classic bank run—too many deposits fleeing at the same time and not enough capital liquid to cover each departing customer—which was exacerbated by the speed of online banking. Once it was evident that the bank would fail, questions were hanging over how much the FDIC would insure depositors’ losses, but fortunately for all those impacted, they were all made whole by the FDIC, with entire accounts repaid well beyond its stated $250k insurance limit.
It was that interim period that I found interesting, in how different folks who were affected by SVB’s shutdown reacted to the drama each passing day. In Silicon Valley, where lots of startups banked with SVB, people either expected the FDIC to make things whole, stick with the stated insurance limit, or find some sort of compromise. Some even made it a point to preemptively split their savings manually across multiple accounts, to make sure that they’re covered1. In a way, this myriad of responses mirrors how much trust people had in the banking system; some took the stability of financial institutions completely for granted, others were a couple of steps removed from stuffing money2 under the mattress, and most fell somewhere in between.
These reactions were actually defined by how much people trusted the underlying institutions. It’s not a surprise that those who experienced unstable financial systems—whether from political instability, economic turmoil, systemic corruption, or a dozen other ways that destabilize banks—tended to be a lot more cautious about how their money is stored, and set up elaborate structures that guard against banking failures. Framed from another angle, the lack of trust here is an implicit tax; the entrepreneur or banking customer is forced to spend time and energy to guard against banking risks, in place of directing that attention to progress or more valuable endeavors.
Back in the year 2025, we’re in a political period where this implicit trust in foundational institutions is being systematically questioned, and actively undermined. The cliché rings true: trust takes a long time to build, but only a moment to break. This asymmetry guarantees that whatever institutions are replaced won’t start with the same amount of credibility and implicit trust as what came before them. The cost then is redirected time and energy; not only do people naturally dislike change, but they’ll spend effort on either navigating the changes or remaining suspicious of the entire thing.
So the cost of eroding financial, political, and social systems isn’t just replacing existing norms with something potentially better. The tax on change is the resources that participants divert away from more productive areas, towards simple self-preservation and protection. It often manifests in the form of shadow systems: shady yet critical alternatives to the formal banking system, parallel governance structures that work around political processes, social hierarchies that can turn on a dime with social media. Operating thus without an environment of trust is bringing down the modus operandi to the lowest levels, where nothing can be taken for granted and progress is fleeting.
They have good company in at least one NBA superstar who did the same thing.↩
Or crypto wallet keys since this was very much the techie crowd.↩
