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Besides the trivially obvious recognition that people other than engineers work at companies (cooks, janitors, HR, etc.), realize also that, for example, Etsy’s

Besides the trivially obvious recognition that people other than engineers work at companies (cooks, janitors, HR, etc.), realize also that, for example, Etsy’s sellers may be affected since the account used to pay them was at SVB. Of course, I’m sure someone here will explain that obviously some lady selling bowls in Michigan should have done due diligence on her platform’s bank of choice to make sure that they didn’t have any maturity risk. Anything short of that really just fundamentally represents business incompetence and deserves to be wiped out since Peter Thiel decided to cause a run at the bank two layers removed from her. But that will teach the correct lessons and punish the right people! Clearly Thiel should be rewarded for prudently advising everyone to remove all funds, while janitors and craftspeople on Etsy alike will finally learn the importance of marking to market treasuries.

shadowgovt 4y ago
Actually, for almost all of these companies, cooks, janitors, etc are contracted employees and work for the contracting company, not the startup. The startup retains a contract for services. This allows them to keep those employees at arm's length and not have to pay the kind of salary and benefits that their "real" employees enjoy. It has also great bonuses in that if the "real" employees want to abuse the snot out of those contractors (including really vile stuff, obvious violations of the equal employment act), the tech company and the contracting company are heavily incentivized to "solve" the problem by removing the contracted employee from the position. Employees in that position, should they want to take action, have to go through multiple layers of red tape and ambiguous responsibility and risk upsetting the apple cart for all of their peers, because the tech company is always at Liberty to cancel the entire contract to avoid a "problem" contractor. The whole system is a little bit rotten. And yeah, it sure does suck for folks who are going to get bit as clients of Etsy because Etsy didn't hedge bets. Maybe Etsy learned a lesson.
- tolmasky 4y ago
  It really sucks for Etsy’s sellers so maybe… Etsy learned a lesson? Here’s the confused lesson by association argument again. The majority of your argument is around learning lessons, but you momentarily acknowledge that perhaps there are in fact people hurt here who it would be hard to accuse of deserving it due to a lack of due diligence, but you then immediately resolve the cognitive dissonance by reassuring yourself that perhaps that will make the lesson Etsy learns that much stronger. The majority of your argument revolves around the idea that only rich people in this “rotten system” will be affected, or that this is an important lesson. When it’s pointed out that there are many types of employees who aren’t rich, you say they don’t count because they’re contractors, ignoring that even if true, which I’m not necessarily granting, it still doesn’t matter since that contracting job will still probably disappear and there is a high likelihood that they can’t just be immediately positioned somewhere new. The rich developer may have an easier time landing a new position than the cook getting a new shift from the contracting company somewhere new. But I suppose that’s irrelevant, because the point about cooks being contractors actually had nothing to do with the topic at hand of whether they deserve to be colateral damage. Rather, it was meant to derail the conversation into a long digression about how these contracting agreements further prove how “rotten” these startups are… and thus deserve to learn a lesson about treasury performance.
  - shadowgovt 4y ago
    > It really sucks for Etsy’s sellers so maybe… Etsy learned a lesson? I hope so. I don't expect the sellers to have done anything different. Corporations, however, have a responsibility to manage their finances effectively. "We weren't smart enough in that space" is no more an excuse than it would be if sellers were having problems because Etsy's web infrastructure broke down due to lack of proper planning for redundancy and fault tolerance. And I never said nor implied that only rich people will be affected. But they're basically the only ones with power to do anything different here. The rest of us are along for the ride. Here's the question. Now that this happened, do the rest of us just accept that this is how it works? Because if we do, nothing changes, and we just get to sit back and wait for the whole system to unspool again. Or, we could stop treating the machine in California like it's better than a Vegas slot machine for most players and start building something better.
    - tolmasky 4y ago
      > I hope so. I don't expect the sellers to have done anything different. Corporations, however, have a responsibility to manage their finances effectively. Just so I understand correctly, if the seller has an LLC they made through legalzoom.com for their Etsy bowl business (which is very common and highly recommended), then does your sympathy for them immediately evaporate since they now have a “responsibility to manage their finances effectively”? Why exactly is the Etsy seller off the hook in this scenario? Is it a headcount requirement? If the Etsy seller LLC is 3 people (two sisters and their mom), now are they irresponsible for using Etsy? Are all those 3 person startups in YC different somehow? Only in that they make “useless” things and the Etsy people make “useful” things, and that translates to whether a corporation needs to be responsible? > Here's the question. Now that this happened, do the rest of us just accept that this is how it works? Because if we do, nothing changes, and we just get to sit back and wait for the whole system to unspool again. Accept that what is how it works? It depends on the solution. If the solution is providing temporary backstops to depositors so that a sale to another private bank can be more attractive, then I don’t think that’s anything earth shattering to accept? Especially considering it would probably result in a private solution happening faster at little to no cost to the taxpayer. If congress empowers the FDIC to claw back SVB share sales to help make depositors whole, I think that’s also not anything that people would have a problem accepting? Like part of the problem here is that completely different parties are lumped together and in this fury the only acceptable answer is “no help!” No one is arguing for SVB to be bailed out. Those shares are going to zero. That is a sufficient market result. Enabling a bunch of assets that still have value to be maximized to avoid the philosophical dilemma of our Etsy seller doesn’t seem to be the “end all” nightmare scenario it’s being chalked up to be here. If anything, maybe the focus should be on plummeting interest rates to zero making precisely the kinds of “full liquidity paid for checking accounts” become an endangered species in the first place. Or maybe then raising rates at break neck speed despite having questionable results on the inflation they’re targeting, while clearly affecting random pieces of the economy. > Or, we could stop treating the machine in California like it's better than a Vegas slot machine for most players and start building something better. It seems like choosing a random 30% of Silicon Valley companies to put in hard mode is a close approximation to the Vegas slot machine than fad imitating zero interest checking accounts that were in no way high risk irresponsible investments that had the chance to wildly benefit the depositors if the bet would have “paid off” vs. if it crashed to zero. Especially given the high likelihood that there are sufficient assets to make depositors either whole or almost whole, it seems even more the case that those disproportionately affected will be workers, and not companies. Not to even mention the fact that those most responsible (Thiel) aren’t going to suffer, nor are the mega tech companies that can easily survive this, and may even end up just absorbing some of these companies and consolidating even more. I am super curious as to what “something better” looks like though. Because right now, the world 6 months from now where a random subsection of tech and wine workers had their year ruined, while big tech companies and VCs are still doing just fine, doesn’t exactly seem like fertile ground for whatever amazing new system you have dreamed up.
deathhand 4y ago
Etys sellers who hold more than the FDIC insured limit? Yes the limit should be raised by a degree but we can't bail out everything all the time.
- tolmasky 4y ago
  That's not the situation here. Etsy holds seller payments in SVB in an account, that yes of course, is probably above the FDIC 250K limit since it represents the amount to be paid out to hundres if not thousands of sellers: https://www.nbcsandiego.com/news/business/etsy-warns-sellers-of-delay-in-processing-payments-due-to-silicon-valley-bank-collapse/3184323/ https://www.nbcsandiego.com/news/business/etsy-warns-sellers... Without derailing the discussion into whether Etsy "should have known better" (which to be clear is an argument that would be made in a simplified vacuum given the complexity of them probably just being an intermediary between a credit card processor and the sellers and thus it being fairly logistically complicated to set up that intermediary as some sort of multi-bank-account system or whatever), but regardless, even if that is the worst way to do it in the world, the point is that that's not the individual sellers' fault, and they shouldn't be punished for it. Again, as I mentioned in my comment, the position that "Well individual Etsy sellers should really do a financial analysis on the host platform's bank, quarterly, to account for interest rate changes, and if they independently conclude that that bank is unhealthy, they should pull their store off Etsy and... ???" is a bit hard to swallow, and I'm not sure if a world we really want to create.

shadowgovt 4y ago

Actually, for almost all of these companies, cooks, janitors, etc are contracted employees and work for the contracting company, not the startup. The startup retains a contract for services. This allows them to keep those employees at arm's length and not have to pay the kind of salary and benefits that their "real" employees enjoy. It has also great bonuses in that if the "real" employees want to abuse the snot out of those contractors (including really vile stuff, obvious violations of the equal employment act), the tech company and the contracting company are heavily incentivized to "solve" the problem by removing the contracted employee from the position. Employees in that position, should they want to take action, have to go through multiple layers of red tape and ambiguous responsibility and risk upsetting the apple cart for all of their peers, because the tech company is always at Liberty to cancel the entire contract to avoid a "problem" contractor. The whole system is a little bit rotten. And yeah, it sure does suck for folks who are going to get bit as clients of Etsy because Etsy didn't hedge bets. Maybe Etsy learned a lesson.

tolmasky 4y ago
It really sucks for Etsy’s sellers so maybe… Etsy learned a lesson? Here’s the confused lesson by association argument again. The majority of your argument is around learning lessons, but you momentarily acknowledge that perhaps there are in fact people hurt here who it would be hard to accuse of deserving it due to a lack of due diligence, but you then immediately resolve the cognitive dissonance by reassuring yourself that perhaps that will make the lesson Etsy learns that much stronger. The majority of your argument revolves around the idea that only rich people in this “rotten system” will be affected, or that this is an important lesson. When it’s pointed out that there are many types of employees who aren’t rich, you say they don’t count because they’re contractors, ignoring that even if true, which I’m not necessarily granting, it still doesn’t matter since that contracting job will still probably disappear and there is a high likelihood that they can’t just be immediately positioned somewhere new. The rich developer may have an easier time landing a new position than the cook getting a new shift from the contracting company somewhere new. But I suppose that’s irrelevant, because the point about cooks being contractors actually had nothing to do with the topic at hand of whether they deserve to be colateral damage. Rather, it was meant to derail the conversation into a long digression about how these contracting agreements further prove how “rotten” these startups are… and thus deserve to learn a lesson about treasury performance.
- shadowgovt 4y ago
  > It really sucks for Etsy’s sellers so maybe… Etsy learned a lesson? I hope so. I don't expect the sellers to have done anything different. Corporations, however, have a responsibility to manage their finances effectively. "We weren't smart enough in that space" is no more an excuse than it would be if sellers were having problems because Etsy's web infrastructure broke down due to lack of proper planning for redundancy and fault tolerance. And I never said nor implied that only rich people will be affected. But they're basically the only ones with power to do anything different here. The rest of us are along for the ride. Here's the question. Now that this happened, do the rest of us just accept that this is how it works? Because if we do, nothing changes, and we just get to sit back and wait for the whole system to unspool again. Or, we could stop treating the machine in California like it's better than a Vegas slot machine for most players and start building something better.
  - tolmasky 4y ago
    > I hope so. I don't expect the sellers to have done anything different. Corporations, however, have a responsibility to manage their finances effectively. Just so I understand correctly, if the seller has an LLC they made through legalzoom.com for their Etsy bowl business (which is very common and highly recommended), then does your sympathy for them immediately evaporate since they now have a “responsibility to manage their finances effectively”? Why exactly is the Etsy seller off the hook in this scenario? Is it a headcount requirement? If the Etsy seller LLC is 3 people (two sisters and their mom), now are they irresponsible for using Etsy? Are all those 3 person startups in YC different somehow? Only in that they make “useless” things and the Etsy people make “useful” things, and that translates to whether a corporation needs to be responsible? > Here's the question. Now that this happened, do the rest of us just accept that this is how it works? Because if we do, nothing changes, and we just get to sit back and wait for the whole system to unspool again. Accept that what is how it works? It depends on the solution. If the solution is providing temporary backstops to depositors so that a sale to another private bank can be more attractive, then I don’t think that’s anything earth shattering to accept? Especially considering it would probably result in a private solution happening faster at little to no cost to the taxpayer. If congress empowers the FDIC to claw back SVB share sales to help make depositors whole, I think that’s also not anything that people would have a problem accepting? Like part of the problem here is that completely different parties are lumped together and in this fury the only acceptable answer is “no help!” No one is arguing for SVB to be bailed out. Those shares are going to zero. That is a sufficient market result. Enabling a bunch of assets that still have value to be maximized to avoid the philosophical dilemma of our Etsy seller doesn’t seem to be the “end all” nightmare scenario it’s being chalked up to be here. If anything, maybe the focus should be on plummeting interest rates to zero making precisely the kinds of “full liquidity paid for checking accounts” become an endangered species in the first place. Or maybe then raising rates at break neck speed despite having questionable results on the inflation they’re targeting, while clearly affecting random pieces of the economy. > Or, we could stop treating the machine in California like it's better than a Vegas slot machine for most players and start building something better. It seems like choosing a random 30% of Silicon Valley companies to put in hard mode is a close approximation to the Vegas slot machine than fad imitating zero interest checking accounts that were in no way high risk irresponsible investments that had the chance to wildly benefit the depositors if the bet would have “paid off” vs. if it crashed to zero. Especially given the high likelihood that there are sufficient assets to make depositors either whole or almost whole, it seems even more the case that those disproportionately affected will be workers, and not companies. Not to even mention the fact that those most responsible (Thiel) aren’t going to suffer, nor are the mega tech companies that can easily survive this, and may even end up just absorbing some of these companies and consolidating even more. I am super curious as to what “something better” looks like though. Because right now, the world 6 months from now where a random subsection of tech and wine workers had their year ruined, while big tech companies and VCs are still doing just fine, doesn’t exactly seem like fertile ground for whatever amazing new system you have dreamed up.

deathhand 4y ago

Etys sellers who hold more than the FDIC insured limit? Yes the limit should be raised by a degree but we can't bail out everything all the time.

tolmasky 4y ago
That's not the situation here. Etsy holds seller payments in SVB in an account, that yes of course, is probably above the FDIC 250K limit since it represents the amount to be paid out to hundres if not thousands of sellers: https://www.nbcsandiego.com/news/business/etsy-warns-sellers-of-delay-in-processing-payments-due-to-silicon-valley-bank-collapse/3184323/ https://www.nbcsandiego.com/news/business/etsy-warns-sellers... Without derailing the discussion into whether Etsy "should have known better" (which to be clear is an argument that would be made in a simplified vacuum given the complexity of them probably just being an intermediary between a credit card processor and the sellers and thus it being fairly logistically complicated to set up that intermediary as some sort of multi-bank-account system or whatever), but regardless, even if that is the worst way to do it in the world, the point is that that's not the individual sellers' fault, and they shouldn't be punished for it. Again, as I mentioned in my comment, the position that "Well individual Etsy sellers should really do a financial analysis on the host platform's bank, quarterly, to account for interest rate changes, and if they independently conclude that that bank is unhealthy, they should pull their store off Etsy and... ???" is a bit hard to swallow, and I'm not sure if a world we really want to create.