SVB Hall of Shame

>I don’t understand how the iterated prisoner’s dilemma makes a difference.

SVB isn't fungible, this isn't the case of "a bank is a bank", it was heavily used for a reason and that was it had developed specialized services, expertise, and culture around supporting startups. Losing it may mean that SV as a whole is permanently, or at least temporarily but significantly, impoverished. New startups may become harder to start and operate. This doesn't mean the end for existing businesses, certainly not already grown successful ones with stable income and sufficient size for in-house expertise, so in a singular game it's not a big deal. But to the extent VCs or founders care about the next game and the one after, the startups to come that don't yet exist even on napkins, they may now be worse off than if through cooperation SVB had been saved and reformed.

You're missing the entire point of iteration, that it's not just about this one game. Startups fail for all sorts of reasons, what has made SV successful long term wasn't the success or failure of any single startup but that there was an overall environment where it was straight forward to have new ones try again and again.

tobyjsullivan sibling wrote:

>Any research recommending alternative strategies for iterated games is almost certainly looking at repeating games between a consistent pair of players.

Historically though SV has indeed been relatively consistent players, from VCs to founders to employees to, well, services like SVB! Silicon Valley Bank was founded in 1983, not yesterday. What is that to Silicon Valley itself if not consistent?

The iterated game here is all the startups after the current batch. Where do VCs and founders go to and deal with in Fall 2023? In March 2024? Will it be exactly and perfectly as good as SVB, or better? If so then sure, no problem. If not, they've sacrificed advantage in future iterations for the short term.

RyanGWU82 wrote:

>The Prisoners' Dilemma analogy was covered in Ben Thompson's Stratechery article this week

Thank you! There it is, glad I can read it now. Much better than anything I wrote. And to add on for the future here is the HN discussion on it:

https://news.ycombinator.com/item?id=35134608

I don't blame them. It was irrational if they were omniscient beings with knowledge of what would happen.. they aren't.

90% of the criticism seems to be "depositors are never morally wrong for withdrawing money from a bank, so this website is bad".

But mostly this website's focus seems to be on the hypocrisy, e.g. the VCs who said "don't run on the bank" while telling their portfolio companies to run ASAP. That is much more obviously a moral wrong (to me at least).

I'm mostly basing this on the fact that the website explicitly said "You will be remembered for your hypocrisy." rather than "You will be remembered for running."

It is hard to tell is the aussie banks are in any better position. The debt leverage ratio of the big four are incredibly difficult to track down. The last figures I saw are from about 2015 and even then banks like Commonwealth bank were leverage at something like 60:1 however looking at the wikipedia I would put it at something closer to 20:1.

If that is true, between 1.7% - 5% of deposits being pulled out would mean they would have to start getting the cash from elsewhere - ie. Sell assets/bonds. That is just based on $72 billion cash to $1.2 Trillion assets.

However if this is the case, they have been in this position for a very long time and they seem to be very stable. It feels like there is some big piece of this I am possibly missing.

I look forward to others pointing out the weakness of this point of view and correct my grammar in a witty fashion. ;)