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You are in charge of a startup and are responsible for its finances and the jobs of the people who work there. You can see that a bank run is starting. If you d
by simonh 4y ago
You are in charge of a startup and are responsible for its finances and the jobs of the people who work there. You can see that a bank run is starting. If you don’t pull out your money, what are the chances this will prevent the bank run happening?
- manquer 4y agoNobody is blaming any startup who took that decision, the rational decision is to take out the money. However it was not the rational decision for a fund to do so. You have a) substantially larger voice and also ability to coordinate for better outcomes, for a fund it is no longer a gamer theory 101 standard prisoner's dilemma. The larger funds could have - Banded together and made a joint statement ( like they were able to organize and do after the run) reassuring every startup of their confidence in the bank - Participated in the equity infusion into the bank - Organized and bought debt in the bank to give it liquidity - Simply moved their own money as new deposits into the bank. Just doing a joint statement - which wouldn't have costed them a single penny would have gone long way to reassure the markets and also gained the key guys a lot of clout and established their influence J P Morgan style.