 This 10th year of Daily Tech News show is made possible by you, the listener, thanks to every single one of you, including Dr. X-17, Dustin Campbell, and Tim Deputy. Coming up on DTNS, why Silicon Valley Bank collapsed, why it isn't causing chaos yet, and Molly Wood explains why Silicon Valley is like this. Plus, is Samsung faking moon photos? This is the Daily Tech News for Monday the 13th of March? I forgot what month it was, 2023 in Los Angeles, that's how I'm married. From lovely Cleveland of the Ohio, I'm Rich Trafalano. And coming from the D.C. area, boy Chris Ashley. And I'm the show's producer, Roger Chen. Joining me is my good friend, climate tech investor and former tech journalist, Molly Wood. Welcome to the show! Thank you, what a delight to be here. Yay! It's good to have you. We have got lots of excellent insights to share with you folks today. Let's start with the quick hits. Wall Street Journal sources say Amazon and Rivian are in talks to end their exclusivity deal. Right now, the agreement calls for Rivian to sell all of its electric vans to Amazon. Amazon reportedly told Rivian that it only needs about 10,000 vans this year, and Rivian would like to sell delivery vans to other customers. An Amazon spokesperson did say that the company remains committed to buying 100,000 vans from Rivian by 2030. Amazon is also Rivian's largest shareholder. It has a 17% stake in the company, as well as a seat on Rivian's board of directors. Microsoft confirmed to IGN that it will not have a booth on the show floor at E3 in Los Angeles this June. Don't fret though, the company still showed some support for E3. Sanga will be co-streaming our event as part of E3 Digital. Nintendo already announced it will not be at the event. No word from Sony officially yet. They're like that employee that just doesn't want to come into work. We'll do the digital. We previously told you that Google was testing removing news content from Canadian viewers in advance of the possible passage of Canada's Online News Act, a.k.a. Bill C-18. You can check out our February 23rd episode if you want the full explanation of that bill. But essentially, it requires an agreement to be made before linking to news. On Saturday, Meta responded saying it would end access to news content for Canadian Facebook and Instagram users if that bill were to become law. Meta says links to news make up less than 3% of its content, similar to what it did in Australia before Australia passed a similar law. This bill passed Canada's House of Commons in December and the Canadian Senate is considering it now. Radio Service TuneIn rolled out an interactive map feature called TuneIn Explorer to its iOS and Android apps. TuneIn Explorer has been available on the web since last month and can access more than 100,000 local AM and FM radio stations from almost every country in the world, including WRUW FM if you search over Cleveland. You click on the radio tab at the top of the TuneIn mobile app, then zoom in to find a specific region or type in a specific location or station into the search bar at the bottom left-hand side. Filters can surface music genres like classical rock, hip-hop, the things you'd expect, plus news, sports and podcasts, and you can also search by language. Another advance for Mastodon and the Activity Pub protocol, WordPress and Tumblr's parent company, Automatic, has purchased the Activity Pub for WordPress plugin and recruited its developer to work for WordPress. That plugin lets readers follow a WordPress blog on their preferred Mastodon server or actually any other Activity Pub service, Frendica, PixelFed, etc. Replies to the posts can then become blog comments. Tencrutch notes that Automatic is also testing support of the AT protocol. That's the one being used by Project BlueSky. And that is the QuickHits. Alright, well Samsung unveiled a 100x space zoom feature back in 2020 with its S20 Ultra phone all the way many, many years ago. It was a different time. It showed off the ability to take highly detailed photos of the moon in a lot of its marketing material. Back in 2021, InputMag accused Samsung of fake, detailed moon photos taken on the Galaxy S21 Ultra. At the time, Samsung claimed no image overlaying or texture effects are applied when taking a photo, but that it does use some AI to detect the moon's presence and then offers a detail enhancing function by reducing blur and noises. Well, on Friday, Reddit user iBreakPhotos did a little experiment to prove Samsung was faking details in the moon photos. First, they took an intentionally blurry photo of the moon. They displayed the blurry photo on a computer screen and took a photo of that with the Samsung S23 Ultra, which created a more detailed photo of the moon. iBreakPhotos claims the results goes beyond pixel upscaling or loss data correction. So the question is, when does AI enhancement turn into a fake photo? I really like those photos that you can take of the moon with the Samsung S23 Ultra. My brother has that. This story is so near and dear to my heart because he is always bragging about his moon photos. And I'm like, oh, I want to get one so I can see why they do it because it did make me consider buying one. But also I do not care. And the pantheon of deep fakes, this couldn't be lower on my priority list. Well, that's the thing, right? This is going to be everything. This is going to be not just the moon. So I get why people are bad at Samsung because they're marketing it so heavily of like, we could take a picture of the moon. But it's really, they trained their data set to recreate the moon if it sees a moon like photo in a way that's plausible. That's going to happen to everybody. You're going to be able to train this thing on your friends and family so that every picture of your friends and family looks great too and not blurry. This is the world we live in now. The thing that I find amazing about this is how deep these conspiracies can actually run in something so simple. Like on the face of you like, ah, who cares? But when you look at the testing that they actually did taking photos, using tripods, using a $3,000 camera to take a picture of the moon to compare it to what Samsung is doing. I couldn't have been laughing harder when I was reading about this article. Yeah, I mean, I feel like Samsung's initial denial or at least clarification like back in 2021 is like just to delay people from doing the exact same thing. Because like it does like all of these algorithms, whether it's like face smoothing or beauty filters that they put on by default on selfie cameras or it's we're going to paste on a picture. The awesome picture of the moon over your terrible picture of the moon that you took at night handheld with a 250 millimeter zoom is like the idea that this is just shortening intention. Right. Like the it's not about like the the truth of the moon. It's your intention is to take an awesome photo of the moon that you can share on social media and people go, the moon that looks great. I love that it's over your house. That really, it really is not the crime. It's the cover up here. If Samsung had just said everybody knows what the moon looks like. And so when you take a photo, we will overlay a more detailed version of the actual moon. Nobody's messing with the moon landscapes. We're going to use some overlays of the actual moon to make your moon photo look better than everybody would be like, cool. It's really hard to take a picture of the moon. Thanks, Samsung. They did say that they said they add a detail enhancing function. This is not clear. That's exactly what they're doing. Like, like the like, first of all, like the idea that like you could reduce blur and like maintain like that in and of itself tells me. That's already like a if you're if you're interested in photographic truth, let's just tug on that string to even think it's possible. Like the idea that like we're reducing blur, which is like an inherent part of the capture, which means your shutter speed was too slow. And your hand was shaking too much because you're at an extreme zoom and you took a picture of the moon and it's all blurry. That reduction of itself like is removes the kind like you're approximating the moon at that point, even if it's not like this wholesale replacement, which it seems like a clear. Also, we know what the moon looks like. It's easy to train an engine to recreate the moon. And then it's going to look like what it looked like when you took the picture. You're going to look at the real sky. You're going to look at your picture and go like, oh, yeah, that looks pretty much the same because the moon doesn't change a lot. If they start adding things into like real life photos, like wait, that person wasn't there. That those trees didn't exist. Then I think we've got a bigger problem, but I don't think they're going to be able to do this with everything. Which I guess makes this worse because it's like, and then they're marketing this like they have something special when it's really just something that any company that has some AI could do to be fair. Yeah, but you have to be able to zoom a lot to even get to that. I mean, I do think they do still have something special in terms of that absurd zoom. That absurd zoom is absurd and it's amazing. And the fact that then after that you have to like add on some known moon characteristics to make it look all the way like the moon is is like the blue cheese with the wings. Right. Like Samsung is still the only one giving you the wings. Sure. Or the blue cheese or the blue cheese. To be fair, they said, hey, this is just AI. We ain't adding no overlays. We're not doing a thing. You just taking the picture and we're touching it up a bit. So I wish we had that right now. I was wishing we were on zoom right now because I can't. I forgot that my face looks like this person. Like I'm ready for AI. Yeah, it's just intention shortening. You intend to look good on your teleconferencing call. Whatever system could get me closer to there, whatever system can get. Like, and again, this is if you turn off the, you know, there are features that you can turn off the detail improvement or scene optimizer is what it's like. Yeah, yeah, you could just turn that off. And then that does turn that off and then all your selfies will look like the barbarous reality that is at least my face. So like there is it like an opt out also. And again, it's just like tell me that we're going to make your photos of the moon look awesome. Like I almost I like I do wonder how what the extent of this was right. Like it's like, hey, if you take a picture of the Eiffel Tower probably going to stink. But you know, like, again, that's a fixed that's a fixed quantity. That's a let's something like we have amazing photos of you're not going to take that amazing photo. But we can paste that into what what they're missing is what's really needed, which is the opposite of this because, you know, they need to say, OK, I'm on a zoom call at work, but I'm in the shower. I need to remove all of me coming out of the shower and just have me at the desk, you know, instantaneously, of course, so they're looking at it in the wrong direction. We do just have to embrace it. I want to live in a world where this is my biggest scandal. How do I get there? I could would have thought that that Rich, Chris and Molly were using machine learning because they look so great today. But if you agree, let them know in our Discord, which you can join by linking to a Patreon account at patreon.com slash D T N S. Have you all heard of Silicon Valley Bank? Yeah. You probably heard something about it. But in case you missed Friday's D T N S or you haven't been glued to CNBC or maybe you're like, yeah, I heard about it. I need a refresher. Let's catch you up. We're going to tell you how this happened, what the US has done about it and get Molly's thoughts on what this means for Silicon Valley. So Silicon Valley Bank, I'm going to call it SVB for short is the bank for about half the US tech sector, very roughly speaking. SVB made conservative investments. I think that's misunderstood. These were too conservative. That's the problem. Bonds and mortgaged back securities and not the bad mortgage back securities from 2008. These were long term, low yield investments. The kind of thing that let's say just if you hold them for 20 years, you get a 1% return very safe, very conservative, but very long term and deposits are short term. If you put money in the bank, you pull it back out again all the time. Businesses do that at least a couple of times a month for payroll, if not a whole lot more. If businesses continue to generate revenue, get regular rounds of funding from investors, those deposits are going to grow even with the constant in and out. But if interest rates rise, funding starts to decrease. Revenue might also start to decrease. And if that happens, those deposits get smaller. What the bank does in that case is usually caches out some of its investments. It's capitalization, if you've heard that word, to cover the withdrawals. What SVB ran into is that those rising interest rates meant that they had to take a loss on those long term investments that they had. Because if I can buy a bond today that gives me a 5% interest rate, why would I pay full price for one of those dusty old SVB bonds that only gives me a 1% interest rate? If they had to sell them at a discount, they lost money on them. Even with the losses, SVB can still cover its withdrawals. It was just going to lose money and that's not going to look good on the balance sheet and the shareholders are not going to like that because the bank needs to be profitable. So it had a plan. It would sell more stock. The plan was to take the money from the stock sale, cover the loss from selling the bonds and invest some of that money in short term securities with a higher payout. That way they're positioned better for the future. Shareholders get to see a profit, deposits are covered, everybody wins. Except announcing a stock sale made some people assume things were worse than they seemed. That caused the stock price to drop. That meant you couldn't get people interested in buying the stock. That made people even more worried as the stock price dropped and investors including Peter Teal's Founders Fund, Union Square Ventures and Co2 Management started advising clients to pull their deposits. Once too many deposits are pulled, the bank runs short on cash. You've probably seen it's a wonderful life, you know the rest. Except SVB CEO Greg Becker is no Jimmy Stewart. That stock sale collapsed. They couldn't sell the stock and as you found out Friday within a day the state of California had stepped in to take over the bank and hand it over to the FDIC. That's where we were Friday. Now adding a little bit to this panic on Sunday, regulators in New York closed Signature Bank. Signature was used widely by companies involved in cryptocurrencies and a lot of those began withdrawing deposits after SVB went down. You got all that. That brings us to Monday, which I've just checked is still today. A lot of uncertainty over the weekend. Here is where we are now. All depositors at SVB and Signature Bank will have access to their full deposits. Back and forth we've got clarification. That is going to happen. The FDIC of course only ensures deposits up to $250,000 per depositor and that only covered about 10% of SVB's deposits. So the FDIC announced it would ensure the rest of the deposits above that $250,000 threshold without using taxpayer money. A big political question there. Essentially it sounds like the FDIC will sell off the bonds at a loss to raise cash. That would hurt stockholders and some debt holders, but depositors won't lose anything. Kind of a big deal for this whole bank thing. Whatever other money it needs will come from the Federal Deposit Insurance Fund and a special assessment will be made from all banks who pay into that fund to cover that amount. So other banks will be paying into that. The FDIC also announced a bank term funding program that offers better terms for one year loans to help any other banks that may struggles as we potentially see more and more ripple effects from this. So it's stockholders of SVB and U.S. banks will end up paying, not taxpayers, at least directly. Alright, so that's where we are now. Molly Wood has covered tech for a couple of decades, is working in the venture capital sector right now. Molly, I don't know if you saw Ben Thompson's Stratechery post, but he posited that a lack of trust within the Silicon Valley community played a part here with the run on the bank. Why do you think we saw this? Yeah, I mean, millions of pixels, millions of characters have been spilled already and will continue to be spilled, I think, on the causes. There were many, you know, as you laid out, there was sort of the structural financial part of this. There was a huge communications failure by Silicon Valley Bank in terms of how it communicated and announced its equity raise and the fact that it had sold some of these assets at a loss. That I think contributed to that lack of trust. And then you do have the rumors that were flying around over the weekend were wild. And up to and including, you know, conspiracies by crypto bros and investors angry about the reaction to the FTX situation and the collapse of the Silvergate Bank wanting to, on some level prove that, hey, your traditional defy or your traditional financial system isn't so hot either. I know that I'm on Tom show, so I'm like going to play a little bit cool. I don't buy those rubors at all. However, there is a grain of truth to everything. And one of the grains here is that there is I think a sense in the valley that is certain, you know, there's this sort of like wing of this community. That's really into libertarianism and not trusting institutions. And the more you talk about crypto and the more you talk about decentralized finance as an alternative. And the more you try to say the existing financial system is corrupt or untrustworthy or they loan out more than they have, you know, in hand with some of those things are true. You can pretty easily start to chip away at a fundamental trust in a bank. Yeah. And then when you have that combined with just the Twitter brain thing, it's pretty easy to trigger a run, maybe arguably way, way too easy. I could buy that, whether intentionally or unintentionally, there was an undermining of trust in Silicon Valley Bank because there's an undermining and trust in all institutions going on right now. And that when they do a slightly unfortunate thing, but but a very reasonable response that there would be a crime of opportunity there, right? Peter Thiel and others can just jump on like, hey, everybody pull it out because this thing's going down and then that causes it to go down. Right. And to be clear, the purchase of, you know, yes, on the one hand, all Silicon Valley Bank did was buy government paper, the safest stuff in the world, 10 year bonds, mortgage backed securities. A bad move, apparently. It was it was a pretty criminally bad move, actually, because at the time that they bought like, it was pretty clear to every it's been clear for at least a year that interest rates were going to go up. Now, I don't I think this system is suffering from a macroeconomic shock about how fast interest rates have risen, but that was not a surprise to anybody. So to have bought 10 year bonds that in some cases had a like less than 2% yield without putting into any into place any financial mechanisms to hedge against an interest rate rise was definitely banking malpractice and there were had, you know, a couple years back there were regulations that would have probably stopped it from doing that and those were removed. So there's like, there's a lot of kind of banking industry mistakes that are real. And then there is this, again, constant undermining of not only every institution but specifically banking like if you look at the people who are true believers in crypto, the core of that true, true belief is that banks can't be trusted. And things move fast. This this might have moved. It may have been the intention of somebody to erode the reputation and they ended up taking down a bank by accident because of how quickly things can move now compared to 2008 even right. I've seen actually some good comments to the effect that like a big, a big driver here a big factor is just mobile. Just the fact that you could do this online you could trigger a bank run with your thumbs. Yeah, that is carried out electronically and that it that it happens so fast that it's before in some cases like the tweet got sent if you're in my neighborhood and don't have good Wi-Fi. Yeah. Oh, go ahead, Chris. No, go ahead. How did VCs view SVB when, you know, because essentially in the smallest nutshell, they're doing the same things right there looking for businesses to invest into just obvious completely in different standards. How did they typically view this bank in the first place? I mean, SVB, I think this is one of the other big surprises actually was that the community and high profile members of the community did not come out with messaging to rally around Silicon Valley Bank faster and louder because this, like Tom said, it's a bank that services fully half of the tech sector firms, investment firms have their money there, individual venture capitalists have their money there, everybody in the Valley at some level directs a founder to work with them because it's the kind of bank that offers like a whole staff full Oh God, I said stack. Am I? It's okay. It's okay. They do provide a whole collection of services that are in some cases sort of specifically tailored to this industry like nobody else in some cases is going to give you a mortgage with equity in your startup that doesn't have any revenue as collateral. And I'm not saying that Silicon Valley Bank did that to a new responsible degree that we know of but it was a part of an ecosystem where usually if you have a conversation with just a banker at Bank of America, for example, and you're like well I'm building this startup and the total addressable market is this and I have this much funding coming in and they're going to be like, no thank you. You don't get a mortgage. But that's not what the crazy thing is that's not what brought them down. It was the bonds. No, not in the slightest. I'm just saying that's the relationship like when you look at how deep SVB goes in the in this industry. Yeah, and think they rally. You would think that they would rally and the impact of losing this bank and losing access to those kinds of like specific sector tailored services which, by the way, if they exist at other banks, or they exist on Friday they don't today is going to be a massive it's going to have a huge impact. It made me think like just reviewing how fast everything moved that a lot of times we think of communications as kind of ancillary to the business or like like a like a cherry on top of your kind of your business operations and and thinking about that. I mean, in this specific case as like an existential way to to keep like a run on a bank going like that, like, kind of says forever change like how I, I'm hoping that this is a revelation to banks either that like that communication is not just like this is our press release but like, in real time we need to stay on top of this be in contact with kind of this larger investment community for that kind of rallying effect I think will be a lesson going forward for sure. I think one of the interesting things here too is that the lesson that the FDIC is trying to teach is that will keep the depositors covered, but the stockholders and the people who have debt are not going to win if you let a bank fail. We'll see if that that lesson sticks go ahead Chris I'm sorry. No, it's okay. No, because that's a very important point. I was just going to say that the one thing that concerns me is, you know, not what's happening now but you know there's some great ideas out there that are going to require money to get going. So, you know, are the VCs going to just say, you know, this is as usual for us, even though, you know, we've lost a great resource, or are we just going to see a lot of innovation start to stifle because they can't get their stuff off the ground. Yeah. Yeah. I mean, I think that ripple. There is a lot of relief right now about this fed backstop. There are going to be a lot of political ripple effects, rich alluded to that already that you know because the thing is like, in many, many, many, many, many cases, the depositors that we're talking about our small businesses, you know I saw a tweet that that said, it might be better if we call them start ups or small businesses instead of smart ups because start ups because they are many of those businesses will be saved by this action. And also many venture capitalists who had money in this bank of more than $250,000 will also be saved by this rescue package and everybody knows that a fund that is built on bank fees means probably higher fees to consumers in the end. There's going to be sort of like that political ripple effect, which will affect this industry. There will be changes in the availability of banking, and then also the sphere, which I mean I have to tell you like I know this all too well that there is a there is like a naked sweaty panic that you can smell from coming from Silicon Valley right now in terms of like the economy. And so a lot of things are going to freeze up like Chris to your point, a lot of companies are not going to get funded in the near term. I think you're going to see a bit of a deep freeze across this industry for a little while and I don't know how long it's going to last and now you could also on the other hand you could argue that what this is doing and I don't mean to be callous but we do have a forest that's very very overgrown right because of this like zero rate environment there are a lot of things that exist now that wouldn't exist in a tougher economic environment. And a lot of that's going to get burned out faster than people expected. But if you have a good idea and a great business plan and product market fit. I think you're still going to get funded but it's going to be a lot harder. And somebody's going to take over for Silicon Valley Bank whether it's whoever buys Silicon Valley Bank or or something else. But but from what you're saying Molly it sounds like it won't be as easy. Who at whatever happens right. Yeah, exactly. It's a bit it's a it's a huge deal, even though there's even though those deposits are and by the way they always would have been it just would have taken time. People were always going to be able to get their money out. It's just that if you are in fact a small business. I mean imagine that you run a business and all of a sudden you only have access to $250,000 to run the whole thing. Imagine if I had to run payroll two days from now on March 15. Right. Thank goodness I'm not at Silicon Valley Bank. No, and you can't you can't get your money. So the it was the it was the time delta between the availability and the need that was really going to potentially put hundreds and maybe thousands of companies out of business but what's going to happen now is just going to be like a slower apocalypse. Yeah, we saw those headlines with Roku and Etsy, you know, having money tied up there that we're making the rounds. So, you know, I'm sure one of hundreds of examples. In fact, I think we have a pretty good example of some additional perspective on this in our mailbag time. Yes, we do. Allison Sheridan wrote in and said the explanation on DTS on Friday was appropriately from the perspective of tech startups. And at one point someone said FDIC will make the startups whole. I enjoyed this because we were wine tasting in Santa Barbara when the news hit. So the news perspective we saw was main bank supporting wineries closes. All of the same info you described but talking about how will wine tasting occur if the bank is closed. It's all a matter of perspective. Allison pointing out exactly what you were just saying Molly about its small businesses, whether they're startups or not. Absolutely. All right. And we were talking about Wings new drone delivery system on Thursday on DTS and Mark thinks Sarah hit on a solution to the drone recharging problem. He said she was talking about the challenges of recharging delivery drones and then she mentioned that it's similar to the EV car charging station problem. And that's the solution. Build drone recharging stations right into the EV charging stations, get the delivery and car companies to collaborate on the financing of our golden electrical charging for all. Sarah solved it. Look at that. Wow. That is so smart. All right. Well, before we get out of here, of course, we have to thank Chris, Ashley for always bringing the good stuff. Chris, thank you so much for being on the show. Where can people find out some of more of your great stuff? Oh, you can definitely find me and the boys on SMR podcast and then of course me and Rod on barbecue and tech and this week we took a little swing at doing some vegan barbecue. And everything you see on that picture is 100% vegan. And it's just no reason why you can't get some good barbecue for your people that don't eat meat. That was a good episode. Yeah, if you want, you want to hear the best description of jackfruit, go check out barbecue and tech BBQ and tech.com. All right, and thanks also to Molly would all it took was a banking crisis. Thank you so much for being here. What are you up to online these days, Molly? I have a sub stack. That's right. I've crossed over mollywood.substack.com. I'm still occasionally on Twitter at mollywood and mollywood pro on Instagram. Just doing my thing. And thanks to our brand new boss, Brian, who just started backing us on Patreon. Thank you, Brian for being with us. It's always good to have a new patron. That means we keep getting to keep doing the show. Brian is welcome. All the rest of the patrons welcome Brian in. And what is Brian going to get as a new patron rich? Well, he's going to get good day internet. That's our extended show. And we're going to be talking about Silicon Valley culture with Molly and Chris getting in on some of the on the ground perspective and some outside perspective stuff. More of the good stuff. You can also catch the show live Monday through Friday, 4 p.m. Eastern 2100 UTC. Find out more at daily tech news show dot com slash live back tomorrow with Patrick Norton. Talk to you then. This show is part of the frog pants network. Get more at frog pants dot com. Well, I hope you have enjoyed this program.