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What were they supposed to do? They knew the clock is ticking. Whoever bailed first will be Ok and the last will be left hiding the bag. That goes for their por

What were they supposed to do? They knew the clock is ticking. Whoever bailed first will be Ok and the last will be left hiding the bag. That goes for their portfolio companies as well. This is game-theoretic decision making. I am a bit rusty on Nash equilibrium, so I am not sure if this was inevitable outcome.

Natsu 4y ago
If you map 'pull all your money' as defect and 'leave your deposits in the bank' as cooperate, you can make a case for it being a prisoner's dilemma, though I don't claim to know if everything would be okay if people didn't pull out. The Nash is to defect in the prisoner's dilemma. That's not the whole story, mind you, because there's a case for tit-for-tat and similar strategies in repeated games, but this looks like a one-shot game from what I know, so... yeah.
- zamnos 4y ago
  Prisoner's dilemma doesn't have a part where they take all the prisoners from the Silicon Valley Jail and move them to the First Republic jail with a bunch of other prisoners and ask them the same question, do they?
- startupsfail 4y ago
  But it is never a one-shot game. It is now a fact that “capital firms Peter Thiel’s Founders Fund, Coatue Management, Union Square Ventures and Founder Collective all advised their startups to pull their cash from the bank”. Valley is small. There is real loss of wealth now, because SVB is no more. And there’d be likely a ripple effect.
  - g42gregory 4y ago
    I suspect, there will be a bailout. Silicon Valley has very good relationship with the current White House. It would not be a stretch to make the case for a bailout. All the Government has to do is to provide $10-$30B (?) worth of liquidity of the next 2 - 3 years, until the rates will go down. Then, they could sell the whole fixed income portfolio.
    - dehrmann 4y ago
      The very strong argument for a bailout is if there isn't one, every company will look very hard at where their cash is, and shifting it around could cause more bank runs. With how fast this went, there needs to be something concrete on Monday.
    - dr_dshiv 4y ago
      And they’d make money on the bailout, right?
    - shawabawa3 4y ago
      What makes you think rates are going down in the next 2-3 years? Rates could continue going up and put SVB further underwater

Natsu 4y ago

If you map 'pull all your money' as defect and 'leave your deposits in the bank' as cooperate, you can make a case for it being a prisoner's dilemma, though I don't claim to know if everything would be okay if people didn't pull out. The Nash is to defect in the prisoner's dilemma. That's not the whole story, mind you, because there's a case for tit-for-tat and similar strategies in repeated games, but this looks like a one-shot game from what I know, so... yeah.

zamnos 4y ago
Prisoner's dilemma doesn't have a part where they take all the prisoners from the Silicon Valley Jail and move them to the First Republic jail with a bunch of other prisoners and ask them the same question, do they?
startupsfail 4y ago
But it is never a one-shot game. It is now a fact that “capital firms Peter Thiel’s Founders Fund, Coatue Management, Union Square Ventures and Founder Collective all advised their startups to pull their cash from the bank”. Valley is small. There is real loss of wealth now, because SVB is no more. And there’d be likely a ripple effect.
- g42gregory 4y ago
  I suspect, there will be a bailout. Silicon Valley has very good relationship with the current White House. It would not be a stretch to make the case for a bailout. All the Government has to do is to provide $10-$30B (?) worth of liquidity of the next 2 - 3 years, until the rates will go down. Then, they could sell the whole fixed income portfolio.
  - dehrmann 4y ago
    The very strong argument for a bailout is if there isn't one, every company will look very hard at where their cash is, and shifting it around could cause more bank runs. With how fast this went, there needs to be something concrete on Monday.
  - dr_dshiv 4y ago
    And they’d make money on the bailout, right?
  - shawabawa3 4y ago
    What makes you think rates are going down in the next 2-3 years? Rates could continue going up and put SVB further underwater