DTRH - Friday Footnotes 🐾 #1
SVB wrap / Is it over? / GPT-4 🤯
Happy Friday! Let’s take a quick look back at some of the interesting developments this week.
On Sunday the FDIC and Fed came out with a seemingly elegant and principled response to the SVB crisis. Seems to have done the trick (for now) as we didn’t see bank runs everywhere on Monday 🙌
FDIC - Full protection for all deposits for “systemic risk exceptions” (SVB and Signature Bank)
Investors (equity and unsecured debt) of the bank will not be protected. They were getting the upside from the business, they should also bear the downside
Any FDIC losses from protecting deposits will be funded by a special assessment (tax) on all US banks, instead of by the government (taxpayers)
An implication that the FDIC will do the same, if needed, for all banks (but maybe not, more below)
Strikes a nice balance of protecting consumers, not bailing out bank investors/mgmt, and not burdening taxpayers. Very different from the GFC bailouts
Is it over?
Massive bank runs seem to have been averted, but the story has a bit more (sadly). The below clip of a senator questioning Treasury Secretary Yellen (3 mins) is indicative of where this is heading:
The implication that the gov’t will fully protect deposits at all banks (especially the small) that fail, is what’s stopping bank runs. So it feels very odd that the government won’t outright say that or just fully insure all deposits. It’s keeping smaller banks and their customers in a state of limbo, which IMO defeats the purpose of the actions taken.
Case in point, I’m still hearing of customers of First Republic Bank (FRC) withdrawing their money, and FRC isn’t even that small. Additionally, FRC’s $30 billion “rescue package” was apparently just the Fed “asking” the big banks to temporarily deposits the outflows they received from FRC customers back into FRC. If true, seems like a half-measure and feels concerning (FRC’s stock agrees). What I hope we see in the coming days/weeks:
The government be explicit with their intentions or just fully insure all deposits
Otherwise large deposits (>250k) will all flow to the top banks. Maybe the gov’t wants this, but IMO it will hurt innovation in the banking sector
More transparency from banks on their Investments and Loans so customers can protect themselves
OpenAI’s GPT-4 is out 🤯
The current AI hype is a bit wild, but OpenAI’s release this week was profound and there are some real-world and near-term implications. Deeper dive on AI and LLMs coming soon
OpenAI released GPT-4 on Tuesday, its latest large multimodal model (the engine that powers ChatGPT). As expected, it’s bigger, faster and stronger than GPT-3. Trained on more data and uses >10x more parameters
Importantly, for the first time, you can also use images in your questions for GPT-4. The responses are still only in text
OpenAI quantified just how much smarter GPT-4 is (vs 3.5 and us 😥) by showing its exam results. ~90th percentile on the bar exam and the SAT
While these models aren’t displacing people just yet, they’re clearly starting to power tools that make us much more efficient. Autocomplete is really starting to catch my eye as simple prompts to GPT can finish what you would have written or generate a starting template (think Gmail’s autocomplete but on serious steroids). It’s already being integrating into a lot of the tech products through GPT’s API, Notion AI and Github Copilot are great examples. Below are a couple example of GPT-4 being used to generate full code for basic games like Snake and Tetris from simple prompts:
More to come on this. I will note, it’s interesting how OpenAI went from a non-profit that wanted to openly collaborate on AI (2015-2018), to a very for-profit company (taking a $10 billion Microsoft investment) that is being increasingly secretive with each model released. But I guess money talks 🤷♂️
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