Every reasonable human being with money in SVB should be in this list.
SVB Hall of Shame
81–90 of 307 posts
Re: SVB Hall of Shame
#82All of this honor-amongst-thieves bellyaching is bullshit. I'm sorry. These are venture capitalists, emphasis on capitalist. The only thing they have ever or will ever care about is the amount of money a given action makes or loses them. That's it, full stop. SVB lent to these people knowing that full well, and knowing the risks of relying on VCs for their long bets. They are to blame for their choices.
I have sympathy for nobody in this debacle, except maybe the federal government for having to clean up the mess.
Re: SVB Hall of Shame
#83I’m not going to be using this site to guide my opinions of VCs, I don’t generally outsource that much of my opinion-making to 3rd parties. But it does broadly reflect my opinions, you could get a very rough “general direction” picture of how I think from reading it.
“It’s rational to join a bank run, VCs would have been negligent to their companies if they advised to stay”
I know! Believe it or not I have studied a fair bit of game theory, enough to go beyond “it was a prisoners dilemma” and analyze the SVB collapse as an iterated prisoners dilemma with variable information/reputation and a small number of rounds (in this case the amount of information/reputation broadcasting very quickly drove the whole population to “defect always” and the ecosystem rapidly collapsed).
I trust myself to be capable of assigning blame for the bank run correctly (broadly speaking: I. nobody started the run, everyone joined it; II. joining the run earlier is very slightly more blameful than joining the run later; III. being part of the run “loudly” is very significantly more blameful than being part of the run “quietly”).
That is maybe 20%, while the other 80% and thus the real albatross here is the demand to be made whole afterwards.
Roughly speaking the least blameful is “you’ll get 250k immediately, a substantial fraction soon, and almost all eventually; if this still kills your business let us know and we’ll try to arrange bridging finance”, while the most blameful is “the government must promise to make us whole on Monday morning or the contagion will spread; use taxpayer money if you have to, this is that important”.
Re: SVB Hall of Shame
#84Earlier quoted context omitted.
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
Wouldn't this not be prisoner's dilemma then? If I pull my money out, I'm in the same spot as before with my money parked at a different bank. If I don't pull my money out, I'm either in the same spot as before or even worse off.
In this case, starting from the perspective I have a choice (and thus the bank is still liquid), I can only do at best the same as I would have done if I pulled out.
Re: SVB Hall of Shame
#85Earlier quoted context omitted.
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 busi…
It's an iterated prisoners dilemma. The first prison was called SVB, the second is called Signature bank. Is First Republic Bank the third?
Re: SVB Hall of Shame
#86Why didn't more SVB depositors take advantage of the SVB offering for sweeping cash funds into insured accounts? https://prospect.org/economy/2023-03-13-silicon-valley-bank-... > Importantly, SVB was part of the network of cash sweep banks; it had an offer on its website about it. But according to Adam Levitin, there were only $469 million in reciprocal deposits, which is where cash sweep would show up. In other word…
Roku had nearly half a _billion_ uninsured at SVB! I get how a small startup maybe overlooks their cash management, but how do you get to the size of Roku and have that? Treasurer/CFO should be fired.
Re: SVB Hall of Shame
#87The single largest learning point from this experience was how entirely hollow the whole Silicon Valley libertarian ethos really was. And yet again, another group that claims to say "leave us be, take away restrictions and oversight we'll take care of ourselves, be more efficient an ask nothing of you", turnouts to be just another form of "leave us along so we can benefit, and then come save us when we need help". An…
You mean Welfaretarians.
Re: SVB Hall of Shame
#88Earlier 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…
What exactly did SVB do for startups that other banks could not?
The way I understand it, young people heading startups are often financially and businesswise naive, and SVB would hand-hold them through a lot of things they had to do regarding banking. You could walk in with your documents and they would set everything up for you with enthusiasm. This is difficult to find in classical banking.
Re: SVB Hall of Shame
#89Earlier quoted context omitted.
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 i…
The coordination difficulty is not symmetric.
You are on a boat that hit an iceberg. There are enough lifeboats for half the people. If everyone bails water together, you will just barely be able to keep the boat afloat.
What do you think is easier to coordinate - a dash to the lifeboats, or getting everyone to bail water?
Re: SVB Hall of Shame
#90Earlier quoted context omitted.
Not insolvent, illiquid. Calling SVB insolvent is like calling Elon Musk "poor" because his income this year was $0.
Illiquid to the point that you cannot satisfy your debts is essentially the definition of insolvent.
No, it really isn’t. It may lead to insolvency, but that is by no means a foregone conclusion and can play out in different ways.
At a simple scale, If I own a $200k home outright and have $50k in credit card debt that I cant pay then I file for bankruptcy, negotiate with creditors to sell my home and pay the debts, and come out with $150k in assets with no liabilities. I was always solvent.
This happens daily in the business world’s bankruptcy courts. (Of course some of them are also insolvent)