[ummonk]

It's not the only Nash equilibrium. The other Nash equilibrium is that everyone keeps their money in SVB. That would have also been the Pareto optimal Nash equilibrium.

The fact that VCs settled on the suboptimal Nash equilibrium actually reflects poorly on them as a community.

[bostik]

It's not an accident that the "V" is often read as "vulture". The only way to prevent someone from stabbing you in the back is to stab them first.

People often equate finance to gambling, because even the terminologies overlap: you don't make "risky investments", you "place bets". But that's too simplistic a take, because there are two MAJOR differences between finance and gambling.

1: In finance you gamble with other peoples' money. Not your own. And when your bets go the wrong way, you ruin lives of thousands of families. Not just your own.

2: If you manage to find a loophole and turn the letter of a contract against the spirit of the contract, in finance that's a cause for celebration and a big bonus. ("Well played.") In gambling, that's called a breach of regulations.

Both are amoral, highly utilitarian ecosystems.

[hatsunearu]

I don't see how keeping the money in SVB is another equilibrium; the payout matrix seems exactly like the prisoner's dilemma.

[mrcode007]

An INDIVIDUAL payoff. Not the global one. By your argument, nothing stops the nuclear powers from destroying themselves. Yet somehow in the 60s the nuclear powers figured out the mutually assured destruction is also a prisoner’s dilemma and they COOPERATE despite the individual payoff being greater.

[ummonk]

No, because if everyone else keeps their money in SVB and it avoids going under, there is no payoff for defecting - you simply disrupt your own operations for no reason by trying to switch banks.