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0 pointsnotch898a3y ago0 comments

>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.

The (alleged) 'prime mover' you cite is FF. They (the fund itself) got ALL their money out [0]. FF also gave their portfolio companies a chance to get their money out by alerting them of problems with SVB. You cite a single company portfolio in FF that did not, yet no evidence they would have been able to get their money out had they not been alerted. There's no reason to believe the portfolio was worse off for being tipped off earlier than later, in the quite possible scenario FF wasn't even the first mover.

The claim that no one got money out in the run is plainly untrue. FF got their money out, Hustle Fund brags of pulling the trigger before it was too late. Non-zero transactions were made.

> first movers might be able to get more money out

First movers in a bank run get more money out than those at the end. This is basic principles of fractional reserve banking in a bank run. That you find this "factually incorrect" is absolutely mind bogglingly wrong. There is literally nothing to be gained to being at the end of the bank run, which is effectively where those who do nothing end.

Yes this isn't prisoner's dilemma for a variety of reasons, but since we agree it is not (and I never claimed it was) we'll not belabor that point.

The point is this. It is anything but "swift and extremely stupid" to see deteriorating bank financials that suggest you are at risk of a bank run or failure and transfer your money to a different bank. Doubly so for the second and beyond actors, who find themselves in a run and nothing to gain by letting everyone in front of them in line. Anyone who thinks otherwise is going on my "personal docket of people who are too stupid and impulsive to trust."

final note regarding 'participation.' : Once the bank run starts you have no choice not to 'participate.' You are a participant who can either try to get the money out before it's all gone or you are a participant who chooses to exercise the superior game theory or whatever of letting everyone else suck up the remaining liquidity.

[0] https://www.bloomberg.com/news/articles/2023-03-11/thiel-s-f...

0 comments

antics3y ago

Ok, I see a lot of points here but reading them I do not get the sense that you really understood what I wrote, and they don't seem to be connected to what you wrote before. So I guess the best option forward is to just go back to what you actually said so that you can try again:

> the question is if FF had done nothing, would they have been better off?

Yes. We know that FF did not get their portcos fully out in time, including the only company they need to return the fund. Their portfolio downside might be partially mitigated—they totally lose, let's say, 40% of seed-B portcos instead of 70%—but it doesn't really matter because a non-backstopped run kills 80% of seed-B startups immediately.

The rational move for companies is to pull out but for VC firms the rational move is to encourage people to stay.

notch898aOP3y ago

The whole house of cards you are relying on here is the bank run would not have happened had FF not made the move. The facts presented to not rise to such certainty.

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