3 ms·

Ok, what are those steps?

slg 4y ago
From a high level perspective, mitigate the short term risk, understand the problem, and work on a long term solution. Short term risk can be mitigated by ensuring your companies have enough non-SVB cash on hand to make payroll. The seriousness of the problem can be better understood by communicating with other involved parties including the bank, the government, investors, and clients. A long term solution can include investing in the bank, buying assets from the bank, coordinating with other VCs to ensure no one panics and a bank run won't happen. He made a bad situation worse by jumping straight to pulling all his companies' money and telling everyone else to do the same. He basically dumped water on a grease fire then ran out of the house screaming without ever bothering to look for a fire extinguisher.
- twblalock 4y ago
  > The seriousness of the problem can be better understood by communicating with other involved parties including the bank, the government, investors, and clients. Doing that would just give everyone else the info they need to start a run on the bank. Then they get their money out and you are left holding the bag and everyone is mad at you for not warning them. If you know a bank is busted, and you tell other major investors, what do you think they would do? It only takes one person to freak out and the plan is ruined, and then you have your CEOs coming to you asking why the heck a board member who knew their bank was failing didn't help them get their money out. We know that is true because when the CEO of the bank told major investors about the problem, they started a run on the bank. Do you think they would have reacted differently to the bad news if Peter Thiel had told them about it rather than the CEO of the bank?
  - slg 4y ago
    There needed to be an adult in the room to coordinate a response that wasn't just everyone panicking. Thiel didn't necessarily need to be that adult himself, but his panicking eliminated the opportunity for anyone else to be that adult. The problem was fundamentally that everyone acted in their own best interest instead of coordinating a response that would have been in everyone's best interest.
    - twblalock 4y ago
      > The problem was fundamentally that everyone acted in their own best interest instead of coordinating a response that would have been in everyone's best interest. Yes, this is a well-known and unsolvable problem of human societies.
      - slg 4y ago
        We have solved it countless times in countless situations. What do you think the FDIC is for example?
- chmod600 4y ago
  "Short term risk can be mitigated by ensuring your companies have enough non-SVB cash on hand to make payroll." How do you do that without causing a bank run? Tell all the CFOs "Don't be alarmed, but you need to initiate a small wire transfer from SVB to anywhere else that will cover things like payroll and your electric bill for the next couple months. No big rush, just try to do that in the next 45 minutes. But walk, certainly don't run.".
  - slg 4y ago
    Effectively, yes. Tell them you are working on a solution to prevent this from growing into a bigger issue, but steps should be taken to mitigate risk if that attempt fails. I don't know why we expect everyone to behave like panicked children in this situation. The reason people panicked is because the messaging from Thiel told them to panic.

slg 4y ago

From a high level perspective, mitigate the short term risk, understand the problem, and work on a long term solution. Short term risk can be mitigated by ensuring your companies have enough non-SVB cash on hand to make payroll. The seriousness of the problem can be better understood by communicating with other involved parties including the bank, the government, investors, and clients. A long term solution can include investing in the bank, buying assets from the bank, coordinating with other VCs to ensure no one panics and a bank run won't happen. He made a bad situation worse by jumping straight to pulling all his companies' money and telling everyone else to do the same. He basically dumped water on a grease fire then ran out of the house screaming without ever bothering to look for a fire extinguisher.

twblalock 4y ago
> The seriousness of the problem can be better understood by communicating with other involved parties including the bank, the government, investors, and clients. Doing that would just give everyone else the info they need to start a run on the bank. Then they get their money out and you are left holding the bag and everyone is mad at you for not warning them. If you know a bank is busted, and you tell other major investors, what do you think they would do? It only takes one person to freak out and the plan is ruined, and then you have your CEOs coming to you asking why the heck a board member who knew their bank was failing didn't help them get their money out. We know that is true because when the CEO of the bank told major investors about the problem, they started a run on the bank. Do you think they would have reacted differently to the bad news if Peter Thiel had told them about it rather than the CEO of the bank?
- slg 4y ago
  There needed to be an adult in the room to coordinate a response that wasn't just everyone panicking. Thiel didn't necessarily need to be that adult himself, but his panicking eliminated the opportunity for anyone else to be that adult. The problem was fundamentally that everyone acted in their own best interest instead of coordinating a response that would have been in everyone's best interest.
  - twblalock 4y ago
    > The problem was fundamentally that everyone acted in their own best interest instead of coordinating a response that would have been in everyone's best interest. Yes, this is a well-known and unsolvable problem of human societies.
    - slg 4y ago
      We have solved it countless times in countless situations. What do you think the FDIC is for example?
chmod600 4y ago
"Short term risk can be mitigated by ensuring your companies have enough non-SVB cash on hand to make payroll." How do you do that without causing a bank run? Tell all the CFOs "Don't be alarmed, but you need to initiate a small wire transfer from SVB to anywhere else that will cover things like payroll and your electric bill for the next couple months. No big rush, just try to do that in the next 45 minutes. But walk, certainly don't run.".
- slg 4y ago
  Effectively, yes. Tell them you are working on a solution to prevent this from growing into a bigger issue, but steps should be taken to mitigate risk if that attempt fails. I don't know why we expect everyone to behave like panicked children in this situation. The reason people panicked is because the messaging from Thiel told them to panic.