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SVB Hall of Shame

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Re: SVB Hall of Shame

#51

Post by viraptor »

kamikaz1k wrote: post #16
davidw wrote: post #6

Earlier quoted context omitted.

> The people in the VC community who triggered the bank run did the right thing by their startups. I don't really have a horse in this race, but: while the above argument makes sense, what about all their future startups? Everyone says nice things about how it was good to have this bank that understood startups and treated them well, and now that is all gone. And no one who had deposits lost their money anyway. It se…

You're right, but it is entirely prisoner's dilemma. The rational decision, when you know you cannot control how others will act, is to minimize the pain. If you saw the HN thread on Thursday, there were founders posting that they were told it will be fine. How do you think they were feeling on Friday? And it is not a personal decision, continuity of business is a pretty big deal. Nobody in the company would forgive…

> it is entirely prisoner's dilemma.

It is, but also it's even worse. The usual prisoner's dilemma is explained with 2 parties. In this case, it was thousands of parties with a choice of: a) do what's best for your business, b) bet that almost all the other parties with also choose b.

2-person prisoner's dilemma is a fun game theory exercise. "All the customers" prisoner's dilemma is a social "have you met other business people" exercise.

Re: SVB Hall of Shame

#52

Post by nkrisc »

davidw wrote: post #6
idopmstuff wrote: post #2

> The board was asleep at the switch. They are now unemployable. That's not really how this works. The CAO of the bank was CFO of Lehman. People in these positions just get credit for the fact that they had a front row seat for this sort of financial implosion, so they can (theoretically) help whoever else's board they join avoid that sort of thing. > But those players within the venture capital community who were si…

> The people in the VC community who triggered the bank run did the right thing by their startups. I don't really have a horse in this race, but: while the above argument makes sense, what about all their future startups? Everyone says nice things about how it was good to have this bank that understood startups and treated them well, and now that is all gone. And no one who had deposits lost their money anyway. It se…

A startup in the hand is worth two in the bush.

Re: SVB Hall of Shame

#53

Post by [deleted] »

idopmstuff wrote: post #2

> The board was asleep at the switch. They are now unemployable. That's not really how this works. The CAO of the bank was CFO of Lehman. People in these positions just get credit for the fact that they had a front row seat for this sort of financial implosion, so they can (theoretically) help whoever else's board they join avoid that sort of thing. > But those players within the venture capital community who were si…

[deleted]

Re: SVB Hall of Shame

#54

Post by [deleted] »

quesera wrote: post #37
rexreed wrote: post #18

Earlier quoted context omitted.

The best way to prevent a bank run is not to run. A stampede isn't caused by the movement of a lone animal, but by the herd. It's a classic feedback loop.

> The best way to prevent a bank run is not to run No, the only way to prevent a bank run is to get everyone else not to run. And since that's impossible, there's only one rational choice to make, which is to be first out the door. This is bad! But it's true.

[deleted]

Re: SVB Hall of Shame

#55

Post by acomjean »

kamikaz1k wrote: post #16
davidw wrote: post #6

Earlier quoted context omitted.

> The people in the VC community who triggered the bank run did the right thing by their startups. I don't really have a horse in this race, but: while the above argument makes sense, what about all their future startups? Everyone says nice things about how it was good to have this bank that understood startups and treated them well, and now that is all gone. And no one who had deposits lost their money anyway. It se…

You're right, but it is entirely prisoner's dilemma. The rational decision, when you know you cannot control how others will act, is to minimize the pain. If you saw the HN thread on Thursday, there were founders posting that they were told it will be fine. How do you think they were feeling on Friday? And it is not a personal decision, continuity of business is a pretty big deal. Nobody in the company would forgive…

FYI: prisoners dilemma is an interesting game theory experiment where you do better if everyone cooperates. You do better than your "opponent" if you don't. The wikipedia explains it well.

https://en.wikipedia.org/wiki/Prisoner%27s_dilemma

Re: SVB Hall of Shame

#56

Post by ineedasername »

simonh wrote: post #15
davidw wrote: post #6

Earlier quoted context omitted.

> The people in the VC community who triggered the bank run did the right thing by their startups. I don't really have a horse in this race, but: while the above argument makes sense, what about all their future startups? Everyone says nice things about how it was good to have this bank that understood startups and treated them well, and now that is all gone. And no one who had deposits lost their money anyway. It se…

As individuals they couldn’t stop the bank run happening, so pulling out their money was the rational thing to do. If all the depositors could have got together in a room, they could all have agreed to keep their money in. That coordination wasn’t possible though.

This is incorrect. such coordination was possible and did happen, only in the opposite direction.

A relatively small group of VC firms effectively did coordinate the depositors very effectively to organize except it was to take money out

Saying coordination wasn’t possible is therefore incorrect. And had it not occurred, getting people to keep their money in would have been a moot point, the whole thing a non issue.

Re: SVB Hall of Shame

#57

Post by davesque »

Wait, they're trying to say that this was all the fault of the depositors? No, sorry. While I often find it hard to empathize with wealthy tech bros, I don't have much trouble at all imagining myself doing the same thing.

Re: SVB Hall of Shame

#58

Post by mrinfinite »

Wow, sad. The only thing a bank run can be on is on "DEMAND" deposits. If you have a savings account or negotiate a similar thing then no bank run possible. A bank checking (called Demand Deposits) are to be fulfilled on DEMAND.

How dare customers demand their demand deposits. how rude, right?

All the bank had to do was upsell their customers into savings accounts and then no bank run is possible.

Re: SVB Hall of Shame

#59

Post by lmm »

simonh wrote: post #15
davidw wrote: post #6

Earlier quoted context omitted.

> The people in the VC community who triggered the bank run did the right thing by their startups. I don't really have a horse in this race, but: while the above argument makes sense, what about all their future startups? Everyone says nice things about how it was good to have this bank that understood startups and treated them well, and now that is all gone. And no one who had deposits lost their money anyway. It se…

As individuals they couldn’t stop the bank run happening, so pulling out their money was the rational thing to do. If all the depositors could have got together in a room, they could all have agreed to keep their money in. That coordination wasn’t possible though.

And yet they were coordinated enough to tip off their mates to pull out.

In previous generations the industrial titans had a sense of nobless oblige, or at least pretended to; they knew their lucrative position came with responsibilities, and in times of crisis they would step up to do their share. Whereas when a crisis hits Silicon Valley, apparently you look after number 1 and when you reach out to the government it's not to ask how you can help but to ask them to bail you out.

Re: SVB Hall of Shame

#60

Post by wahern »

kamikaz1k wrote: post #16
davidw wrote: post #6

Earlier quoted context omitted.

> The people in the VC community who triggered the bank run did the right thing by their startups. I don't really have a horse in this race, but: while the above argument makes sense, what about all their future startups? Everyone says nice things about how it was good to have this bank that understood startups and treated them well, and now that is all gone. And no one who had deposits lost their money anyway. It se…

You're right, but it is entirely prisoner's dilemma. The rational decision, when you know you cannot control how others will act, is to minimize the pain. If you saw the HN thread on Thursday, there were founders posting that they were told it will be fine. How do you think they were feeling on Friday? And it is not a personal decision, continuity of business is a pretty big deal. Nobody in the company would forgive…

> How do you think they were feeling on Friday?

What does Friday matter? Friday was when the cynics would rejoice in righteous indignation. Monday was when responsible people were redeemed; when society through its government recognized that the real moral dilemma here was whether or not to vindicate the cynics.

There is a solution to the Prisoner's Dilemma, and it's called civilization, known in the modern era as institutional government. Like their communist cousins, die-hard libertarians should be forced to live in truly libertarian countries (i.e. those with extremely weak governmental institutions where wealth is safeguarded primarily through a web of private arrangements) and only then be allowed to opine on what's rational. For some reason libertarians can't often be found in those countries; not by choice, at least; and certainly they don't park their wealth there.

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