The Reality of the Metaverse and the Impact of Bank Failures

Business Brain, the show for entrepreneurs, episode 431 for Wednesday, March 15, 2023. Greetings, folks, and welcome to Business Brain here at BusinessBrain show where we are using our business brains to dissect, decipher, understand the world around us, our worlds at home, our worlds at our businesses, pretty much everywhere. Because we find that our business brains are valuable for more than just business, but business matters too. Sponsors for this episode include Headspace, where you can go get Headspace. Try headspace free for 30 days by going to headspace.com brain30 brain30 talk more in depth about that shortly. For now, here in Austin, Texas, for South by Southwest, I'm Dave Hamilton and.

I'm still out here in Lafayette, California. I'm Shannon Jean. How you doing out there?

I'm doing all right. I, you know, I, I, I was in Las Vegas last week for podcast Movement, which was a great show. I had a, some good stuff there that I'm still sort of deciphering that we'll probably include into our workflows. It is good to attend the echo chamber every now and then, you know, just to, yeah, to, if I was in the echo chamber all the time, it would, it would, life would be boring. But it is, it is good to attend these, these shows that just sort of open things. I think you would appreciate podcast movement. We should, we should talk about that probably.

Yeah, I'd like to. I mean, we, we've, we've done a number of shows about the benefits of attending conferences and trade shows.

Yeah.

Up at BusinessBrain show. And I, I, I do agree. I, I had one this weekend, but I was a delegate for a political party that, since we don't talk politics on this show, it doesn't matter. But it was fascinating in itself and kind of an echo chamber like you talked about in some ways. But other ways always get you, you get to meet new people, make new contacts and I think they're highly valuable.

And learn some things. Yeah, for sure.

Oh, yeah. Definitely learn a lot.

So south by Southwest is, we've talked about it before on this show. It's really three, technically four conferences that happen sort of overlap and also in succession, rapid succession in a compressed period of time. And the one that is happening right now as we record this is wrapping up is what they call south by Southwest Interactive. It is the show at which back In, I think 2008, Twitter made its debut to the world and really like catapulted into the name brand, the household name brand that we know of today because it was a perfect place for that technology. We didn't really have any. Any social networks that were. Were worthwhile at the time. And here you are with all of these people that we'll call influencers, or at least technical, technically savvy journalists and marketers and all of that, wanting to know where everybody's going, what everybody's doing, especially after hours, but also even with the sessions. And so Twitter launching here, getting everybody to sign up, super smart. It became a moment. South by Southwest Interactive since then, and really all the way through its. Its history has just sort of reacted to and shined a light on what's happening in the world today. Very emerging stuff, right? So sometimes that social movements, sometimes it's technological movement, sometimes it's a combination of both. I went to two sessions this morning and I noticed a massive dichotomy, and that alone was like, okay, wait, there's something going on here, because we've got people on one side of an issue saying that this thing is worthless and you don't want to, you know, you want to stay away. And then literally 20 minutes later, a session where it is like, touting all the benefits and why the world is going to move this way. And it's all about Web3 blockchain and the metaverse. Okay, the first and I. So I think there's something here that we as business owners need to pay attention to. The. The first session was an interview with. It was called Popping the Web three Bubble. And it was an interview with. Yep. With Molly White, who is a software engineer, longtime Wikipedia editor, like, since she was like, 13 years old and now maintains the website. Web3 is going just great, which is a sarcastic title. Right. And so the session with her was all about how we need to be careful of. Of, you know, buying into the hype. Don't buy into the hype of web 3. Don't buy into the hype of Blockchain. I haven't seen a good use case for it. You know, I mean, and there are nuances to it. She is not just, like, categorically against it. She has very articulate specific reasons and arguments and examples of why, for the most part, she doesn't see value here. But. But there are certain things where she's like, well, no, okay, that was actually a good use of this. You know, like, there might be hope, but there's no practical uses in today's world.

Hope but not hype.

Hope but not. Yeah, yes, Keep. Keep the hope. Avoid the hype. Yeah, that's. That's a Great way of saying it. Then I saw a session literally 20 minutes later called the the Metaverse Mindset for Web3AI and the Future of Business. Now this was a keynote. So like I am and this is intentional here at south by Southwest. I am very much influenced by the curators, the people at south by Southwest who decide what is going to appear on stage. Right. Like lots of people apply to speak and they choose what they want the conference to be about by selecting the speakers. Which is fine, I get it. You know they've done fairly well over the years it shining. I mean they are held accountable by you know, the attendees who buy tickets. So, so they're, they're not just pulling this out of thin air. They're saying what are people going to want to hear about? So I will acknowledge that. But this session was, was a keynote by Sandy Carter. Sandy is currently the an SVP at Unstoppable Domains, driving Unstoppable Domains whole digital identity technology. So she is like digital identity being your blockchain proven confirmed actual identity on the web or you're on the, on the web 3 where you can you get to control who you are, what information people can see about you and with third party proof. Right. So got it. A great example if you want one of what a blockchain is actually really good for. Right. She was previously a VP for the public sector at Amazon Web Services. You know she has, she is a serious player in the tech, emerging tech market. So here's these two people who have. I would love to have seen a conversation between the two of them together.

Yeah, that's what they should have done.

Yeah, yeah, yeah. But, but it was just fascinating to experience this. And so you know Sandy, I think we need to not buy into the anti hype either. It's really, it's really easy for. I don't, I wanted to have this conversation today because I think my mindset on this is going to evolve. I mean this is like I haven't even had time to sleep after seeing these sessions. But I have, I have one business that's sort of related to blockchain stuff. Ish. Not really, but it's close enough. Right. It's in that world. But by and large everything else that I do, I've, I've kind of stayed away from it. It's easy to for us, especially us, you know, old guys to say that's new stuff, it's worthless, you know, and, and because we don't already use it and therefore we're not experts at it it's very easy to, to believe, to choose to believe the anti hype, right? The first session that I saw, right? It's like, oh, I don't know anything about that. That person's telling me I don't need to know anything. And so great.

It's like walk. It's like watching a documentary and one side convinces you, oh absolutely, that happened that way. And then the next day you watch another documentary and you're like, oh wow, that happened. Actually didn't happen that way, it happened this way.

Right.

And so both persuasive.

Well, but confirmation bias is, is a persuasive thing. And, and so by not being involved in this kind of business, it's easy for me to sit down and believe the naysayers, right? Like, you know, there's, there's enough examples of bad things that have happened. Don't bother with this, it's stupid, etc. Etc. Etc. Right? Watching this thing by Sandy Carter from Unstoppable domains, all the Pro Web 3 stuff. There is stuff happening here, right? She told a story about a friend's daughter who just had a birthday, I think 11 years old or something, and she asked her what she wanted for her birthday. And as a techno technological technologist, I'm embarrassed to say that I don't really even know what the heck she was talking about. But she, instead of saying oh, I want clothes or I want this, she asked for virtual dollars to be spent on Roblox, which is. Oh yeah, yeah, yeah, well, but like that's a thing.

Oh yeah, absolutely.

Forever 21, the clothing brand, is using Roblox to do all kinds of things and really bringing the experience there it, this is, there is, there is some fascinating stuff. IWC watches on their website, has a Web3 manifesto like, like this, this tells me that there's stuff happening.

Happening.

Yeah, yeah, right. You know, um, one thing that really she talked, you know, she's a, she's an excellent public speaker, which I love. She told us the five things that she was going to tell us and then she told us those five things in, you know, in a little more detail. One, two of the things really jumped out at me. One, people are the center of the metaverse. That was the one that really resonated with, with this whole, you know, where is AI going? To me. And I think the killer app for AI is a social network of sorts. Right. Conn. So when she said that it was like, okay, yeah, there's something to this. And then on the, on the blockchain side of it. Digital identity is a human right, not it. Which means digital identity is, is the term that we use for your identity that's, that's confirmed on the blockchain. But this whole thing about a human right is, is really saying your data is yours to control, not someone else's. Google's, you know, Facebook's. Right. So there's some, there's a there there folks.

Yeah, I, I think you, it's probably somewhere in the middle, of course, but don't ignore this. Yeah, yeah, yeah. I don't think you should. Anyone should ignore it. Especially, you know, we're coming up on a time where there's a huge influx of people entering the work, young people entering the workforce that I would call digital first. They grew up.

Yes.

Their first computer was, their, was a phone.

Right.

And they, they kind of. Everything is mobile. They bypassed the stuff we went through where it was transitioned to laptop and all this kind of stuff.

Well, I mean, yes, you're right. Phone. Mobile first is perhaps a good way of saying it. Yeah, I grew up digital first.

Yeah.

I'm one of the weird 50, you know, 50 somethings who grew up online.

Yeah. So, but, but I think that like my, my daughter asked me, when she was in high school, she asked me this question I'll never forget. She said, dad, why did you have a computer before the Internet?

Yeah.

Why would you have one? And, and I was, I was shocked. Like, well, of course we did these things, but, you know, it was so isolated and siloed from one another. And her whole experience, mobile or otherwise, was all, you know, online. So it is a fascinating discussion about the metaverse and virtual and this. But I do want to talk about a very timely issue that's hitting us hard in reality today, and that's bank failures and how they might impact your business.

You know, we talk here a lot on the show about self awareness and learning about ourselves and, and how that applies to our business brains so that we can have the proper perspective on stuff. And it's so easy to get caught up in doing things that we're not thinking about things. And that's not just true about business, it's true about our lives in general. Taking a minute to chill and focus and sort of let our thoughts process and go is super helpful. And Headspace, our sponsor here, helps that happen in a fantastic way. Through guided meditations, mindfulness practices, breathing and calming exercises, and so much more, the Headspace tools can help reduce anxiety. They can help boost your mood and help you sleep better. Headspace Combines scientifically proven benefits of meditation and mindfulness with modern practices through. Through their experienced meditation teachers. Headspace has stuff for no matter what you need. If you want like a quick on the go meditation for a few minutes, like they've got like a three minute meditation. They've also got much longer meditations. Their teachers are all. They're all great. I mean, I have, you know, some that I kind of gravitate to when I use it, but everyone that I've tried has brought me something. They've got the world's largest library of content with over a thousand hours of clinically proven mental health exercises. Headspace has definitely helped me and more than 100 million people worldwide. And they can help you too. Listen up. You do not want to miss this because we've arranged something special here. For a limited time, all of you can try headspace free for 30 days by going to headspace.com brain30 for 30 days. You won't find this offer anywhere else. You must use our link h e A-S-P-A c e.com brain30 to unlock all of Headspace free for 30 days. This is not something they normally do. Headspace.com brain30 and our thanks to Headspace for doing what they do and for sponsoring this episode. All right, you said something about banks, my friend.

I did. I hate banks. But they are. They are necessary. Evil.

To be fair, I want to make sure I get her name right. Yeah, Molly White, the. The anti, you know, blockchain person. She acknowledged that, you know, she and the blockchain proponents both agree on the problem to be solved. Like, we don't like the banks, so we just have different solutions proposed. Correct? Correct.

Yeah. And I get it, you know, you have to do banks, but like, when I'm thinking of, you know, cash and different things. So, you know, this last week we had a bank failure.

Silicon Valley bank really had three bank failures. Right?

Correct.

Yeah. Okay. Yeah.

And lead that, that kind of first, you know, there was one smaller one and then, then so svb and then now they're looking at maybe First Republic having some issues. And I'm getting phone calls and emails from people I have financial relationships with telling me we're okay, our bank is fine, your investments are okay. You know, marketplaces that I sell on have emailed saying, hey, we don't keep our customer deposits there because my wife, who runs a Etsy business, you know, Etsy was worried on Friday that, hey, we can't distribute funds. So it got me thinking, you know, even if you don't bank at one of these banks. How does could it impact your business? Right. Because it could be a good customer that can't pay you. Right. If their bill is due and all of a sudden they're cash. Even if the. Okay, so we had this. It could have been much worse. The FDIC stepped in and said, look, we're going to make depositors whole. That's a whole other discussion, which is. Right.

Like what does that mean for the, for the insurance that they say they provide versus the insurance that they actually provide? I mean, it's supposed to be 250k per depositor. And they just confirmed that they'll cover way more than that.

Way more. But how long it takes to get that money is really in question. Right?

Yeah, but, but the fact that the US government has said yes, it's, it's backed like that, that changes. What's the expectation for the next time? I don't know, man.

I think they were concerned and yeah, I followed it pretty closely over the weekend and a few people that I listened to and they're on Twitter and everything else talking about they, the FDC had to do this because they did it with the big four banks in 2008. Yeah, correct.

Yeah.

And so if you don't protect the regional banks, depositors, not investors, not shareholders, not executives, they're, they're not protecting their investments, they're protecting depositors. Because if, if you don't protect depositors, everybody will leave the community and regional banks and go into the big four. And what it becomes is, you know, there are no local and regional banks. And I gotta say, if you have to deal with the bank and you do, local banks are just heads and tails, typically better because you have a person, more personal relationship.

You can actually have a human. Yeah, yeah.

A community relationship. When you walk in the door, somebody knows your name. It's. It's just easier to get things done and easier to solve a problem when you have one, which inevitably is going to happen.

Yeah, you will have a problem. And yeah, when you can have. When the problem starts and you at that moment have the ability to have a conversation with a human who knows you. It's night and day, Huge night and day.

If you do not have a personal relationship with a banker that can help you immediately after this show is over, you must find one at a new bank or your bank or whatever. Because if you wait until you have a problem like something happens like this, if you're a first or public bank, them and all of a sudden they're in trouble and you don't have anybody to call. That's a major problem. So you have to have somebody in your phone that you can dial up just to get through the red tape. And that's worth the effort, you know, at all times. So my first tip is you must have more than one bank. You know, even though you may love this one bank, but you need to have another one. And if you bank, you could go with one of the big fours and keep your cash reserves in there or something like that, but you, you have to do it.

I like it.

And you know, the other thing is a lot of this is about communication. If you, if you research the Silicon Valley bank thing, they, they communicated very, very poor, in a poor manner what was going on. And people freaked out. And you know, on Thursday, $42 billion was taken out of their bank.

Yeah.

And on, on Friday morning, they, they were insolvent. So, you know, everything's electronic. People are moving money quick, quick, quick. They're all freaking out. And they, they didn't communicate very well when they dropped this bomb on Wednesday that they needed to go raise or they wanted to raise a couple, you know, billions of dol. As a business owner, need to take that lesson and communicate. If you start having these problems or you think you're going to be impacted, who are your most important suppliers and if it's going to impact you, your ability to pay them on time or what they're expecting, you have to be proactive and let them know what's going on. And especially if it's out of your hands and it's not, you're like, wow, hey, you know, I'm not sure if we're going to be impacted, but.

Yeah, right.

We have this big build, this invoice that's due on Tuesday and I'm not sure what's going to happen on Monday or whatever. Being proactive is, you know, very, very important. Of course you should build up cash reserves when times are good and leave it alone. It's one of the hardest things for me that I always struggled with because I thought I could turn that cash into more money. But that's short term thinking.

Yeah. I mean, there's, I think there's a balance there. There is. You have to be conservative with some of your cash. And, and the way I look at that is I look at what are my receivables over the next, you know, 30, 60, 90 days, what are my expense, my predicted expenses over the next 30, 60, 90 days. Okay. You know, I Like to have cash on hand for some version of those 30, 60, 90 of expenses, even though I know that my receivables are likely to cover them. Right. I am always looking at least 60 days out and saying I have cash on hand. I am most comfortable when I can say I have cash on hand to cover 60 days or even 90 days of expenses, even if the receivables, well, dries up or gets delayed. Yeah, right. Yeah.

Now, this is good timing because we're going to, on Friday, we're going to do a cash flow episode which you don't want to miss. But like, I always just called it payroll cash. My most important asset was my people.

Yes.

And I had to have enough coverage, like you said, 30, 60, not whatever it is, to make sure everybody got paid. Because if they're not there, the business doesn't work.

Correct.

You know, and when times are good, you know, look at increasing your lines of credit with maybe a different bank than you, you know, maybe one of the big fours, maybe it's a B of A or a Wells Fargo. You get a line of credit. If you're a new business and you can't get a business line of credit, maybe you get a home equity line of credit if you own a house. Are very cheap, as you know, but they were very inexpensive. I know they've, you know, gone up a little bit, but a little.

But if things, it doesn't matter if things are good and you're. And when we say good, meaning you, you don't need to borrow money today, that's, that's why today is the best day to go get a business line of credit or some kind of line of credit. They aren't gonna, they are going to be less likely to give you that line of credit if you ask for it. The day that you need just won't happen.

And if you're in a rush and if you sound, I gotta have it this week or 10 days, what happens is you wind up going to other places that are far more expensive. Like, you know, you could have purchase order financing.

Yeah.

You know, it works and it's. I've done it, but it's very expensive. You can do lots of different things, you know, in an emergency. But the one thing I'll say about a line of credit, once you get it, you do need to draw it down. Even if you don't use it, you could draw it down and pay back in a week or two. Because when it comes time, I've had this happen where the bank would be like when it's time to renew, they say, well, you didn't really use it, so we're just not going to renew it this time. You don't want that to happen. You want to pull it out, you know, one or two times a year, you know, at some level, pay it back, you know, even if you just do it in a week. So you don't have, you know, much interest. But the bank wants to see the outflow. The bank wants to have a relationship with you that they can make a couple of percentage points. And if the bank doesn't, is not able to make, let's say, two points on you overall, on your overall relationship, they're not going to be as motivated to help you out. And so you want to let them make money. So if you get in a real pinch, you know, I don't recommend this, but if you. I've done it when I was really in a pinch with the business, you could sell a big asset to somebody, you know, and buy it back. If you, you know, with tell, hey, I'm going to sell it to you and buy it back within 30 days. Buy it back within 60 days. Whether that's. I've sold all the, the racking systems in my warehouse to somebody that, when I needed money many, many, many years ago, and then I bought it back, you know, 20 days later. There's, there's lots of ways you can do this again. You have to get creative, but you don't want to find yourself in that position. And.

No, that sounds like a move of desperation.

Oh, it is definitely a desperate move, but it's like, okay, you know, again, payroll money if you got to keep everything doing. So I'd love to hear if you've been impacted by any of this stuff that's going on. Let's, let's hope that, that things stay, you know, or stabilize a little bit. I think we're headed for some, some rough patches here. As, I mean, I'm talking about for the last year.

I think we're seeing those rough patches.

We are. This is.

That's what this is. Yeah, yeah, we are.

We are. So. Feedbackusinessbrain show, Tell us, you know, talk about your relationship with banks, tips that you recommend. We'll share them on the show, and if we share them, we'll enter you to win a MacBook Air that we're giving away this year.

Absolutely. Yeah. That's. Feedbackusinessbrain show and we want to hear from you folks. Hey, do me a favor. Keep living that, Sean. Life will ya. We'll see you next time.