4 ms·

You're right, but it is entirely prisoner's dilemma. The rational decision, when you know you cannot control how others will act, is to minimize the pain. If y

You're right, but it is entirely prisoner's dilemma. The rational decision, when you know you cannot control how others will act, is to minimize the pain. If you saw the HN thread on Thursday, there were founders posting that they were told it will be fine. How do you think they were feeling on Friday? And it is not a personal decision, continuity of business is a pretty big deal. Nobody in the company would forgive you for missing their payroll, because you thought it was the ethical thing to do.

viraptor 4y ago
> it is entirely prisoner's dilemma. It is, but also it's even worse. The usual prisoner's dilemma is explained with 2 parties. In this case, it was thousands of parties with a choice of: a) do what's best for your business, b) bet that almost all the other parties with also choose b. 2-person prisoner's dilemma is a fun game theory exercise. "All the customers" prisoner's dilemma is a social "have you met other business people" exercise.
- zamnos 4y ago
  It's an iterated prisoners dilemma. The first prison was called SVB, the second is called Signature bank. Is First Republic Bank the third?
acomjean 4y ago
FYI: prisoners dilemma is an interesting game theory experiment where you do better if everyone cooperates. You do better than your "opponent" if you don't. The wikipedia explains it well. https://en.wikipedia.org/wiki/Prisoner%27s_dilemma https://en.wikipedia.org/wiki/Prisoner%27s_dilemma
- notch898a 4y ago
  Wouldn't this not be prisoner's dilemma then? If I pull my money out, I'm in the same spot as before with my money parked at a different bank. If I don't pull my money out, I'm either in the same spot as before or even worse off. In this case, starting from the perspective I have a choice (and thus the bank is still liquid), I can only do at best the same as I would have done if I pulled out.
- taco_philips 4y ago
  Prisoner's dilemma requires that the parties cannot communicate with each other.
  - the_gipsy 4y ago
    Communication is meaningless in prisoner's dilemma.
  - Nomentatus 4y ago
    The famous example illustrating PD created by Albert W. Tucker does have no communication - so that parties don't coordinate and cooperate with each other - but in this case with thousands of parties, there was no way to coordinate them all, or communicate with them all in time, or trust them all, so it still counts. It's possible to set up prisoner's dilemmas with communication, say in cases where it's a one off and the parties have every reason not to trust each other's word.
wahern 4y ago
> How do you think they were feeling on Friday? What does Friday matter? Friday was when the cynics would rejoice in righteous indignation. Monday was when responsible people were redeemed; when society through its government recognized that the real moral dilemma here was whether or not to vindicate the cynics. There is a solution to the Prisoner's Dilemma, and it's called civilization, known in the modern era as institutional government. Like their communist cousins, die-hard libertarians should be forced to live in truly libertarian countries (i.e. those with extremely weak governmental institutions where wealth is safeguarded primarily through a web of private arrangements) and only then be allowed to opine on what's rational. For some reason libertarians can't often be found in those countries; not by choice, at least; and certainly they don't park their wealth there.
benatkin 4y ago
On Friday I was feeling that Circle/USDC was wrong that those who initiated transfers on Thursday should have them completed even if others with uninsured (above $250K) lost theirs. From their article: https://www.google.com/amp/s/www.circle.com/blog/an-update-on-usdc-and-silicon-valley-bank%3fhs_amp=true https://www.google.com/amp/s/www.circle.com/blog/an-update-o... > We have reason to believe that under applicable FDIC policy, transfers initiated prior to a bank entering receivership would have otherwise been processed normally. In other words it shouldn't be entirely dependent on whether they were in the bank run. Earlier transfers, yeah. In a bank run situation people were rushing to the bank and tying up the phone lines. Panicking shouldn't be encouraged to such a degree as to make millions of dollars depend on it. The amount recoverable ended up not depending on whether an SVB customer attempted a late withdrawal. And that's good. I would have expected it even if depositors had to settle for a portion of their funds.
xoa 4y ago
>You're right, but it is entirely prisoner's dilemma. But part of what makes that whole bit of game theory interesting is that it has a lot more complexity then just the simple version. Yes in a plain prisoner's dilemma betray can make sense, but in an iterated prisoner's dilemma that's no longer true. That's been part of the debate around the whole debacle, for much of SV's history it was very much iterated, it wasn't just about any one company for VCs or even founders, there was some interest in the overall ecosystem. Some very successful people only found success after multiple failures, but success could pay for it all in the end. VCs too, maintaining the ecosystem mattered. In that sense, killing the goose laying the golden eggs, even if there is some short term payoff, is still clearly a poor idea. There was an HN piece sometime in the last few days I think talking about this and speculating/arguing that the rise of unicorns changed the community from iterated towards the more singular game. If it only took a single megahit to cash out forever, then incentives might be more towards selfishness vs thinking about the next company and the next after that. >If you saw the HN thread on Thursday, there were founders posting that they were told it will be fine. How do you think they were feeling on Friday? Sure, but how do you think they were feeling Monday? Or now? Zero threat to deposits after all for anyone including those who sat tight, but they lost a valuable service and icon, invited other problems and scrutiny, etc. While I'm sure lots will confidently say they did the right thing and that purely looking out for #1 was "responsible" I suspect there are at least a few who have some real regrets, even if SVB absolutely made very stupid choices as well.
- RyanGWU82 4y ago
  The Prisoners' Dilemma analogy was covered in Ben Thompson's Stratechery article this week: https://stratechery.com/2023/the-death-of-silicon-valley-bank/ https://stratechery.com/2023/the-death-of-silicon-valley-ban... He first made this argument in 2017 in an article about Uber: https://stratechery.com/2017/the-uber-dilemma/ https://stratechery.com/2017/the-uber-dilemma/
- zarzavat 4y ago
  I don’t understand how the iterated prisoner’s dilemma makes a difference. If you are a founder who withdrew all your company’s money, then your reputation is neutral or perhaps positive. You saved your company. You did “whatever it takes”. These are good qualities in a founder. If you are a founder who left your company’s money in SVB, nobody is going to give you a medal for that. Instead it exposes you to questions such as “Why did you have so much cash in one place?”. If depositors hadn’t gotten bailed out then you also face the collapse of your startup, your coworkers losing their jobs, etc. So this is definitely a much more negative outcome iterated or not.
jrmg 4y ago
If you saw the HN thread on Thursday, there were founders posting that they were told it will be fine. How do you think they were feeling on Friday? I mean, it was fine for them by Monday.

viraptor 4y ago

> it is entirely prisoner's dilemma. It is, but also it's even worse. The usual prisoner's dilemma is explained with 2 parties. In this case, it was thousands of parties with a choice of: a) do what's best for your business, b) bet that almost all the other parties with also choose b. 2-person prisoner's dilemma is a fun game theory exercise. "All the customers" prisoner's dilemma is a social "have you met other business people" exercise.

zamnos 4y ago
It's an iterated prisoners dilemma. The first prison was called SVB, the second is called Signature bank. Is First Republic Bank the third?

acomjean 4y ago

FYI: prisoners dilemma is an interesting game theory experiment where you do better if everyone cooperates. You do better than your "opponent" if you don't. The wikipedia explains it well. https://en.wikipedia.org/wiki/Prisoner%27s_dilemma https://en.wikipedia.org/wiki/Prisoner%27s_dilemma

notch898a 4y ago
Wouldn't this not be prisoner's dilemma then? If I pull my money out, I'm in the same spot as before with my money parked at a different bank. If I don't pull my money out, I'm either in the same spot as before or even worse off. In this case, starting from the perspective I have a choice (and thus the bank is still liquid), I can only do at best the same as I would have done if I pulled out.
taco_philips 4y ago
Prisoner's dilemma requires that the parties cannot communicate with each other.
- the_gipsy 4y ago
  Communication is meaningless in prisoner's dilemma.
- Nomentatus 4y ago
  The famous example illustrating PD created by Albert W. Tucker does have no communication - so that parties don't coordinate and cooperate with each other - but in this case with thousands of parties, there was no way to coordinate them all, or communicate with them all in time, or trust them all, so it still counts. It's possible to set up prisoner's dilemmas with communication, say in cases where it's a one off and the parties have every reason not to trust each other's word.

wahern 4y ago

> How do you think they were feeling on Friday? What does Friday matter? Friday was when the cynics would rejoice in righteous indignation. Monday was when responsible people were redeemed; when society through its government recognized that the real moral dilemma here was whether or not to vindicate the cynics. There is a solution to the Prisoner's Dilemma, and it's called civilization, known in the modern era as institutional government. Like their communist cousins, die-hard libertarians should be forced to live in truly libertarian countries (i.e. those with extremely weak governmental institutions where wealth is safeguarded primarily through a web of private arrangements) and only then be allowed to opine on what's rational. For some reason libertarians can't often be found in those countries; not by choice, at least; and certainly they don't park their wealth there.

benatkin 4y ago

On Friday I was feeling that Circle/USDC was wrong that those who initiated transfers on Thursday should have them completed even if others with uninsured (above $250K) lost theirs. From their article: https://www.google.com/amp/s/www.circle.com/blog/an-update-on-usdc-and-silicon-valley-bank%3fhs_amp=true https://www.google.com/amp/s/www.circle.com/blog/an-update-o... > We have reason to believe that under applicable FDIC policy, transfers initiated prior to a bank entering receivership would have otherwise been processed normally. In other words it shouldn't be entirely dependent on whether they were in the bank run. Earlier transfers, yeah. In a bank run situation people were rushing to the bank and tying up the phone lines. Panicking shouldn't be encouraged to such a degree as to make millions of dollars depend on it. The amount recoverable ended up not depending on whether an SVB customer attempted a late withdrawal. And that's good. I would have expected it even if depositors had to settle for a portion of their funds.

xoa 4y ago

>You're right, but it is entirely prisoner's dilemma. But part of what makes that whole bit of game theory interesting is that it has a lot more complexity then just the simple version. Yes in a plain prisoner's dilemma betray can make sense, but in an iterated prisoner's dilemma that's no longer true. That's been part of the debate around the whole debacle, for much of SV's history it was very much iterated, it wasn't just about any one company for VCs or even founders, there was some interest in the overall ecosystem. Some very successful people only found success after multiple failures, but success could pay for it all in the end. VCs too, maintaining the ecosystem mattered. In that sense, killing the goose laying the golden eggs, even if there is some short term payoff, is still clearly a poor idea. There was an HN piece sometime in the last few days I think talking about this and speculating/arguing that the rise of unicorns changed the community from iterated towards the more singular game. If it only took a single megahit to cash out forever, then incentives might be more towards selfishness vs thinking about the next company and the next after that. >If you saw the HN thread on Thursday, there were founders posting that they were told it will be fine. How do you think they were feeling on Friday? Sure, but how do you think they were feeling Monday? Or now? Zero threat to deposits after all for anyone including those who sat tight, but they lost a valuable service and icon, invited other problems and scrutiny, etc. While I'm sure lots will confidently say they did the right thing and that purely looking out for #1 was "responsible" I suspect there are at least a few who have some real regrets, even if SVB absolutely made very stupid choices as well.

RyanGWU82 4y ago
The Prisoners' Dilemma analogy was covered in Ben Thompson's Stratechery article this week: https://stratechery.com/2023/the-death-of-silicon-valley-bank/ https://stratechery.com/2023/the-death-of-silicon-valley-ban... He first made this argument in 2017 in an article about Uber: https://stratechery.com/2017/the-uber-dilemma/ https://stratechery.com/2017/the-uber-dilemma/
zarzavat 4y ago
I don’t understand how the iterated prisoner’s dilemma makes a difference. If you are a founder who withdrew all your company’s money, then your reputation is neutral or perhaps positive. You saved your company. You did “whatever it takes”. These are good qualities in a founder. If you are a founder who left your company’s money in SVB, nobody is going to give you a medal for that. Instead it exposes you to questions such as “Why did you have so much cash in one place?”. If depositors hadn’t gotten bailed out then you also face the collapse of your startup, your coworkers losing their jobs, etc. So this is definitely a much more negative outcome iterated or not.

jrmg 4y ago

If you saw the HN thread on Thursday, there were founders posting that they were told it will be fine. How do you think they were feeling on Friday? I mean, it was fine for them by Monday.