There's little to no comparison b/t the Silicon Valley model and current banking system model. In the banking system, risk is systemic, in the Silicon Valley m

There's little to no comparison b/t the Silicon Valley model and current banking system model. In the banking system, risk is systemic, in the Silicon Valley model, risk is localized. The two models are the inverse of each other. In SV, many relatively small investments are spread over lots of startups, with the expectation that something like ~90% will fail, ~9% will just break even, 0.99% will do well, and 0.01% will become the next Microsoft, Google, or Facebook. The small number of successes more than compensate for the huge number of failures, and the failures are not systemic and pose no risk to the greater economy. There is no apparent way for systemic risk or systemic fraud to undermine the system and put the entire global economy at risk. The banking system on the other hand is the definition of systemic risk. Every company in every industry depends on it, for short-term cash needs to long-term investment loans. If the banking system fails for some unrelated reason (say, too much bad mortgage debt used as collateral for too much prop-trading leverage, the financial crisis in a nutshell), then every company in every other industry is at risk of failure as well. Look at the history of banking and you see the same bubble-crisis-collapse played out over and over, to varying degrees of severity. From 1800 to 1929 there's a banking crisis literally almost every 10 years, with a few 15-20yr gaps. Read up on the history of banking crises [1] [2] and you can see it's endemic to the system. But that is clearly not the case with the startup ecosystem, because the risk model is the inverse of the banking system risk model. If those two mechanisms are failing us, as some people claim, I'd be genuinely curious to know why it fails specifically for banks while it works wonders in other industries such as tech. The banking system of late is really creating and concentrating debt, not wealth. They create assets like mortgage-backed instruments of various sorts, get them AAA-rated, then use them as ostensibly high-quality collateral on which to borrow even more. But when the cash flows on that collateral began to collapse in 2007/2008, it became apparent it wasn't AAA after all, and that it could not support so much leverage, and suddenly the entire system was at risk of insolvency and needed a government bailout, massive central bank support, and economic stimulus to prevent total collapse and all the collateral damage to other industries that entailed. Conversely, Silicon Valley concentrates equity and cash-flow-generating businesses, rather than debt, and high failure rates are expected and built into the financing model. Risk is limited to the risk-takers, and not the broader economy or government. 1. http://en.wikipedia.org/wiki/Banking_crisis http://en.wikipedia.org/wiki/Banking_crisis 2. http://www.economics.harvard.edu/files/faculty/51_This_Time_Is_Different.pdf http://www.economics.harvard.edu/files/faculty/51_This_Time_...