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I am a founder who had assets tied up in SVB. As someone with something to lose, I'm going to be honest that I think the people on this list mostly look incredi

by antics 4y ago

I am a founder who had assets tied up in SVB. As someone with something to lose, I'm going to be honest that I think the people on this list mostly look incredibly stupid—both at the time and in retrospect. And I think it's worth dwelling on why. * In a catastrophic (_i.e._, non-backstopped) bank run, _most_ deposits are not getting out of the bank. Especially when the deposit sizes are very large, as they are with corporate treasuries. * Thus, if a catastrophic bank run is already in progress you are unlikely to succeed at saving any of your portfolio treasuries. * BUT, if a catastrophic bank run is not in progress, the downside is that you lose 100% of portfolio treasuries because you started one. I am seeing a lot of people like Elizabeth Yin say that they are proud for telling everyone to pull the plug. I get it. They are on the side of their founders and they want to be helpful, and they believe decisive action helps. My message to all of those investors is that "makes swift but extremely stupid decisions" is not a quality that is admirable in a capital allocator. I don't think this rises to a moral failing but pretty much everyone on this list is going on my personal docket of people who are too stupid and impulsive to trust in emergency business contexts.

notch898a 4y ago
I had to parse this a few times to understand. I think your thesis is that an investor has multiple ventures in their portfolio. And many of those ventures park their treasuries at the same bank. And by telling them a run is happening, your thesis is some or none of those ventures pull their money out faster than others, and the stragglers of the portfolio can't due to the bank run started by the investor and/or other companies in the investor's portfolio?
- deleted 4y ago
  [deleted]
- antics 4y ago
  During a bank run, 0 withdrawals will complete. So if you warn portcos to withdraw _during_ the run, you save 0 treasuries. If you warn portcos to withdraw _before_ the run, you might trigger the run in which case you'd almost certainly lose 70% of portco treasuries. I'm proposing in neither case it makes sense to encourage portcos to move their money.
  - notch898a 4y ago
    I think there are a lot of details missing and presumptions from this model that could change the calculus, and it would be swift and stupid decision to bet that 0 withdrawals in a bank run are going to complete, or that the first actors are expected to lose a significant share of their money if a run is triggered.
    - antics 4y ago
      Ok let's play that out. FF is the prime mover in this bank run, and the most important investment in this generation of their portfolio is Rippling. But not only did Rippling get stuck in this mess, all of the customers of their flagship product (payroll) also got stuck. FF are incredibly smart. Their most important investment did not get out. They would have been better off not saying anything. QED. There is no hope arguing otherwise.
      - notch898a 4y ago
        I agree the best action is to not say anything to the public until all of their money is quietly taken out (if possible). The question is if FF had done nothing, would they have been better off? That's a hell of a bet to make, to assume that no one else is part of the run and that given the deteriorating financials that it won't be coming soon (even if inadvertently in the normal course of business).
        antics 4y ago
        Ok, I'm not sure where this is going. You previously argued that the first movers might be able to get more money out, and nonzero transactions might be processed during the run. Both are very plainly factually incorrect, even for the very first mover, even when that first mover is perhaps the most sophisticated actor in the entire sector, and even when it directly impacts the most important portco in the first mover's portfolio. This is not a prisoner's dilemma because there is no hope for the success case. The prisoner cooperates or not, and either way they go to jail. The only rational action is for all participants to not participate. If you have a point to make, now is the time to do it...

by antics 4y ago

notch898a 4y ago

I had to parse this a few times to understand. I think your thesis is that an investor has multiple ventures in their portfolio. And many of those ventures park their treasuries at the same bank. And by telling them a run is happening, your thesis is some or none of those ventures pull their money out faster than others, and the stragglers of the portfolio can't due to the bank run started by the investor and/or other companies in the investor's portfolio?

deleted 4y ago
[deleted]
antics 4y ago
During a bank run, 0 withdrawals will complete. So if you warn portcos to withdraw _during_ the run, you save 0 treasuries. If you warn portcos to withdraw _before_ the run, you might trigger the run in which case you'd almost certainly lose 70% of portco treasuries. I'm proposing in neither case it makes sense to encourage portcos to move their money.
- notch898a 4y ago
  I think there are a lot of details missing and presumptions from this model that could change the calculus, and it would be swift and stupid decision to bet that 0 withdrawals in a bank run are going to complete, or that the first actors are expected to lose a significant share of their money if a run is triggered.
  - antics 4y ago
    Ok let's play that out. FF is the prime mover in this bank run, and the most important investment in this generation of their portfolio is Rippling. But not only did Rippling get stuck in this mess, all of the customers of their flagship product (payroll) also got stuck. FF are incredibly smart. Their most important investment did not get out. They would have been better off not saying anything. QED. There is no hope arguing otherwise.
    - notch898a 4y ago
      I agree the best action is to not say anything to the public until all of their money is quietly taken out (if possible). The question is if FF had done nothing, would they have been better off? That's a hell of a bet to make, to assume that no one else is part of the run and that given the deteriorating financials that it won't be coming soon (even if inadvertently in the normal course of business).
      - antics 4y ago
        Ok, I'm not sure where this is going. You previously argued that the first movers might be able to get more money out, and nonzero transactions might be processed during the run. Both are very plainly factually incorrect, even for the very first mover, even when that first mover is perhaps the most sophisticated actor in the entire sector, and even when it directly impacts the most important portco in the first mover's portfolio. This is not a prisoner's dilemma because there is no hope for the success case. The prisoner cooperates or not, and either way they go to jail. The only rational action is for all participants to not participate. If you have a point to make, now is the time to do it...