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Ben Thompson has a great take on this: https://stratechery.com/2023/the-death-of-silicon-valley-bank/ https://stratechery.com/2023/the-death-of-silicon-valley-b

Ben Thompson has a great take on this: https://stratechery.com/2023/the-death-of-silicon-valley-bank/ https://stratechery.com/2023/the-death-of-silicon-valley-ban... He makes the case that one factor of many in the success of SV was people played iterated games with the same people, which effectively built trust. Now the companies and stakes are so huge that it can be worth it to break that trust sometimes because the benefits of a single win (billions of dollars) can dwarf the downsides. It’s an insight that makes sense to me and something I wouldn’t have considered otherwise.

cheerioty 4y ago
Sadly enough, this makes a lot of sense to me and seems to be exactly what's happening.
- jongjong 4y ago
  How is the breakdown of trust a bad thing in this case? All that incestuous, unwarranted mutual trust and people helping each other only serves to shield the lazy and incompetent. What is that trust based on? It's based on nothing. For the most part, people in SV have no shared values aside from a desire to get rich at all costs (which is common, though maybe not universally shared). Such forms of trust should not exist. That kind of goal-oriented trust is the kind of trust you see in criminal organizations, not the kind of trust which drives a functioning society. Relationships should be founded on shared values, not shared goals. Because once most members of the group have reached their goals, what's left to bind them to the rest of the group? Nothing. Of course they will (and should) throw the rest of the group under the bus as soon as they are able. It's not the same group which initially signed up for anyway, it changed.
  - maxlamb 4y ago
    Trust is shared values, not shared goals.
    - jongjong 4y ago
      That's one interpretation but many people are incapable of separating the two so they have a different definition of trust. For example, if one has blackmail on someone else and both parties know it, the one who knows the dirt may feel that they 'trust' the other because of the fear that they instill in the other. E.g. I may say that I trust my bank with my money but, in fact, I have no shared values with them. I only trust them to the extent that I know that their executives are well off and they don't want to go to jail. I assume that they will do everything they can within the law to screw me over though, so my trust is limited.
      - maxlamb 4y ago
        I’m sorry but if you think someone won’t harm you only because you have dirt on them, then neither of you really trust each other. Trust means you are confident that other person will not harm you regardless of what you have.
  - ghusto 4y ago
    This is so blindingly accurate that it had to be downvoted. How telling.
gardenhedge 4y ago
Unless I am missing some important context, that paragraph makes no sense and gives no insight. What are the benefits of breaking a trust? Did someone make billions of dollars from the SVB collapse?
- 1attice 4y ago
  The article explains it with game theory. In game theory, there's a big difference between a so-called "iterated prisoner's dilemma" and a one-shot prisoner's dilemma. Call these IPD and OPD. Basically under the conditions of the past couple of decades, you could model Silicon Valley as an IPD. Under an IPD it always makes most sense to remain loyal. But because of macroeconomic and technological changes (what author calls 'The End of the Beginning'), Silicon Valley models more like an OPD these days. But under an OPD the winning strategy is to be self-interested. Anyone who has noticed the shift from IPD to OPD ahead of their peers is able to make big bucks -- if only at the cost of their reputations. (But again, we don't care about 'next time', this is a one-shot, so reputations are now next to worthless.) Specifically, with regard to SVB, depositors could have HODLed (if you will) as investors did for e.g. the run-up in GameStop. The article insinuates that in the past, under historic/IPD conditions in Silicon Valley, they probably would have. However, under contemporary conditions, OPD makes most sense, and most VCs, being savvy, sort of intuited this, and everyone tried to be the first out the door. There's a broader point as well, alluded to near the end of the article -- that even more broadly speaking, our whole civ is edging closer to being best modelled as an OPD, which in turn pushes more systems towards collapse, and in doing so, invites more regulations, which in turn tamp down on growth. So this article, if correct, comes with a gloomy forecast, and suggests that 'die fatten Jahre sind forbei' (the years of plenty are over) -- and not just for the Valley. Great article. Prescient and uncomfortable.
  - deleted 4y ago
    [deleted]

cheerioty 4y ago

Sadly enough, this makes a lot of sense to me and seems to be exactly what's happening.

jongjong 4y ago
How is the breakdown of trust a bad thing in this case? All that incestuous, unwarranted mutual trust and people helping each other only serves to shield the lazy and incompetent. What is that trust based on? It's based on nothing. For the most part, people in SV have no shared values aside from a desire to get rich at all costs (which is common, though maybe not universally shared). Such forms of trust should not exist. That kind of goal-oriented trust is the kind of trust you see in criminal organizations, not the kind of trust which drives a functioning society. Relationships should be founded on shared values, not shared goals. Because once most members of the group have reached their goals, what's left to bind them to the rest of the group? Nothing. Of course they will (and should) throw the rest of the group under the bus as soon as they are able. It's not the same group which initially signed up for anyway, it changed.
- maxlamb 4y ago
  Trust is shared values, not shared goals.
  - jongjong 4y ago
    That's one interpretation but many people are incapable of separating the two so they have a different definition of trust. For example, if one has blackmail on someone else and both parties know it, the one who knows the dirt may feel that they 'trust' the other because of the fear that they instill in the other. E.g. I may say that I trust my bank with my money but, in fact, I have no shared values with them. I only trust them to the extent that I know that their executives are well off and they don't want to go to jail. I assume that they will do everything they can within the law to screw me over though, so my trust is limited.
    - maxlamb 4y ago
      I’m sorry but if you think someone won’t harm you only because you have dirt on them, then neither of you really trust each other. Trust means you are confident that other person will not harm you regardless of what you have.
- ghusto 4y ago
  This is so blindingly accurate that it had to be downvoted. How telling.

gardenhedge 4y ago

Unless I am missing some important context, that paragraph makes no sense and gives no insight. What are the benefits of breaking a trust? Did someone make billions of dollars from the SVB collapse?

1attice 4y ago
The article explains it with game theory. In game theory, there's a big difference between a so-called "iterated prisoner's dilemma" and a one-shot prisoner's dilemma. Call these IPD and OPD. Basically under the conditions of the past couple of decades, you could model Silicon Valley as an IPD. Under an IPD it always makes most sense to remain loyal. But because of macroeconomic and technological changes (what author calls 'The End of the Beginning'), Silicon Valley models more like an OPD these days. But under an OPD the winning strategy is to be self-interested. Anyone who has noticed the shift from IPD to OPD ahead of their peers is able to make big bucks -- if only at the cost of their reputations. (But again, we don't care about 'next time', this is a one-shot, so reputations are now next to worthless.) Specifically, with regard to SVB, depositors could have HODLed (if you will) as investors did for e.g. the run-up in GameStop. The article insinuates that in the past, under historic/IPD conditions in Silicon Valley, they probably would have. However, under contemporary conditions, OPD makes most sense, and most VCs, being savvy, sort of intuited this, and everyone tried to be the first out the door. There's a broader point as well, alluded to near the end of the article -- that even more broadly speaking, our whole civ is edging closer to being best modelled as an OPD, which in turn pushes more systems towards collapse, and in doing so, invites more regulations, which in turn tamp down on growth. So this article, if correct, comes with a gloomy forecast, and suggests that 'die fatten Jahre sind forbei' (the years of plenty are over) -- and not just for the Valley. Great article. Prescient and uncomfortable.
- deleted 4y ago
  [deleted]