SVB Crisis: Failing Banks, Living Your Life, and Finding Your Calling

For the millions of entrepreneurs in Silicon Valley, SVB represented the mothership of banking.

The global news has been dominated in the last couple of weeks by the failure of Silicon Valley Bank (SVB) and other banks and the rescue efforts by the United States government and large banks.

These events have triggered a palpable fear that we are in the beginning of a financial meltdown akin to the events that triggered the Great Recession of 2008.

While these fears appear to be subsiding, I want to tie together three seemingly different things, i.e., Silicon Valley Bank’s failure, the movie Living whose lead actor, Bill Nighy, was nominated for an Oscar this year, and a recent research article on Calling that appeared in the Administrative Science Quarterly.

The Real Failure of Leadership

First, SVB. For the millions of entrepreneurs in Silicon Valley, of whom I was one at the turn of the millennium, SVB represented the mothership of banking. It was THE bank to open an account with and deposit your angel and VC (venture capital) investments if you were an entrepreneur.

While this overspecialisation in tech startups and VCs may have been one of the reasons for its failure, it turns out that the real failure was of leadership.

Despite a nine-month period during which the Feds raised interest rates, SVB failed to diversify its investments away from “held-to-maturity” (HTM) government-backed mortgage bonds and US Treasurys, which have fixed returns, leading to $17 billion in losses by end-2022.

• SVB was especially exposed to interest rate increases because 75 percent of its debt portfolio was in these HTM securities, compared to six percent on average for other banks.

• When depositors got worried about these losses and tried to withdraw their money, SVB could not cover the $42 billion in withdrawal requests that took place in just one day.

• It then tried to raise money through a capital offering, which spooked the market and led to a free fall in its market cap.

To prevent a collapse in the banking sector, SVB was taken over by regulators.

SVB’s failure is a failure of leadership to look beyond the short-term and recognize the red flags. HTM securities were being shown in their books at purchase value rather than their market value, even as they lost value due to rising interest rates in the second half of 2022.

A greater failure was that of accountability for losing value. Even as the bank was failing, SVB’s CEO was paid a cash bonus of $1.5 million for 2022, on top of other compensation of $8.4 million. As financial woes escalated, the CEO sold SVB stock worth $2.2 million in late February 2023, and bonuses continued to be paid to employees, including on the day the bank collapsed.

In reviewing these events, it seems that SVB leadership may have cared more about their own greed rather than the good of their customers and investors.

Learning to Live

Which brings me to Living, a gem of a movie that was made last year. It’s a remake of Akira Kurosawa’s Ikiru, made in 1952, which in turn was inspired by Tolstoy’s Death of Ivan Ilyich. At the heart of Living is Bill Nighy’s subtle and masterful performance as a British bureaucrat who has spent a lifetime perfecting the art of doing nothing. One day, he receives news about his health that eventually leads to an epiphany.

He transforms his skill at pushing papers into a cause that means a great deal to him. It is a small kindness to a local community, a minor act of greater good, but it teaches us a major lesson – in caring for others, we bring meaning to our lives and redeem our fleeting existence.

One of the most moving scenes in the film is this one of the old man singing an old Scottish song that brings back memories of his childhood. The bureaucrat had discovered his calling and, in doing so, finally learned to live.

Finding Your Calling

Which brings me to this rigorous meta-analysis of management research on Calling and the Good Life, published online earlier this month in the top-ranked Administrative Science Quarterly.

How to live the good life has been a concern of philosophers and ordinary folks for several thousand years now. Aristotle talked of it in the Nicomachean Ethics where he distinguished between the hedonic life of pleasure and the eudaimonic life of meaning. Yama too talks of these two paths (preyas and sreyas) in his dialogue with Nachiketas in the Katha Upanishad. It is a concern that we come to at one age or another, one way or other.

We live a life of deep meaning and purpose when we find or create our calling. While we normally associate a calling with a religious or artistic life, management research over the past two decades has shown that our work can be a calling too.

Researchers distinguish between two kinds of callings at work – one that is focused internally, and another that is focused externally. Callings with an internal focus are about self-fulfilment without necessarily benefiting society. Callings with an external focus are about the greater good and pursuing a sense of duty, without necessarily involving self-fulfilment.

The meta-analysis concludes that pursuing a sense of calling at work is enriching even outside of work, because it spills over positively to the rest of our life.

Moreover, while callings are positively related to eudaimonic outcomes in work and life, such as meaning and well-being, they also improve hedonic outcomes, such as satisfaction and subjective happiness. Also, externally focused callings are more linked to eudaimonic outcomes than are internally focused callings, while internally focused callings are more linked to hedonic outcomes than are externally focused callings.

All this explains why the bureaucrat singing his song of childhood had finally found a life of meaning and happiness. These two vital ingredients had come together when he decided at last to seek the greater good, even if it was through just a small act over only a few months.

As for SVB leadership, their troubles are just starting. With investigators from the US Justice department converging on them, their good life of greed may well become not-so-good.

(Ramakrishna Nidumolu is a Professor of Organisational Behavior (Practice), Indian School of Business. This is an opinion piece and the views expressed are the author’s own. The Quint neither endorses nor is responsible for them.)