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This is a classic prisoner's dilemma and has been studied to death already. Pulling your money out is rational behavior as soon as there is any risk that you wo

This is a classic prisoner's dilemma and has been studied to death already. Pulling your money out is rational behavior as soon as there is any risk that you won't be able to in the future - yes, even if that behavior is what causes it. The subtext of your comment is that it would have been smarter to leave money in the bank. That's not how the world works. There's an interesting discussion around how social institutions can coordinate mutual non-defection (hint: it probably looks a lot like the recently announced "government guarantees deposits"). But "lol dumb VCs" just shows lack of understanding.

gmd63 4y ago
Explain how burning the system your community depends on to the ground when it wouldn't have burned otherwise is "rational"
- rashkov 4y ago
  Because there is no “community” in this situation, just individual actors in a life and death situation, running for the exits
  - gmd63 4y ago
    The bank provided many benefits unique to the startup/VC community, otherwise people would not have stashed dumb amounts of uninsured cash there. Those benefits are now gone.
myhf 4y ago
It may be rational to withdraw money from the bank (which raises risk for everyone), but it would be superrational [1] to buy 10-year bonds from the bank (which lowers risk for everyone). Yes it is dumb for VCs to not understand this basic principle. [1] https://en.wikipedia.org/wiki/Superrationality https://en.wikipedia.org/wiki/Superrationality
- stickfigure 4y ago
  This little round of prisoner's dilemma had thousands of participants. It would be irrational to assume all the other players are superrational.
boc 4y ago
Since you bring up game theory, the optimal strategy is to defect (withdraw your money) SECRETLY so that the bank has the highest chance of survival and your venture debt loans, relationships, etc all survive. Instead, some VCs PUBLICLY/LOUDLY withdrew their money and created a panic, which doomed the bank to a massive bank run.
462436347 4y ago
You're wrong: https://news.ycombinator.com/item?id=35103411 https://news.ycombinator.com/item?id=35103411 And how poorly does it reflect on the SV venture capital community that they couldn't muster that kind of cooperation?

gmd63 4y ago

Explain how burning the system your community depends on to the ground when it wouldn't have burned otherwise is "rational"

rashkov 4y ago
Because there is no “community” in this situation, just individual actors in a life and death situation, running for the exits
- gmd63 4y ago
  The bank provided many benefits unique to the startup/VC community, otherwise people would not have stashed dumb amounts of uninsured cash there. Those benefits are now gone.

myhf 4y ago

It may be rational to withdraw money from the bank (which raises risk for everyone), but it would be superrational [1] to buy 10-year bonds from the bank (which lowers risk for everyone). Yes it is dumb for VCs to not understand this basic principle. [1] https://en.wikipedia.org/wiki/Superrationality https://en.wikipedia.org/wiki/Superrationality

stickfigure 4y ago
This little round of prisoner's dilemma had thousands of participants. It would be irrational to assume all the other players are superrational.

boc 4y ago

Since you bring up game theory, the optimal strategy is to defect (withdraw your money) SECRETLY so that the bank has the highest chance of survival and your venture debt loans, relationships, etc all survive. Instead, some VCs PUBLICLY/LOUDLY withdrew their money and created a panic, which doomed the bank to a massive bank run.

462436347 4y ago

You're wrong: https://news.ycombinator.com/item?id=35103411 https://news.ycombinator.com/item?id=35103411 And how poorly does it reflect on the SV venture capital community that they couldn't muster that kind of cooperation?