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The venture capitalist's dilemma

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Summary

This article examines the recent investor meltdown surrounding Silicon Valley Bank and the implications of the situation. It compares the situation to the Prisoner's Dilemma and the dilemma of the venture capitalists. It also looks at the investor class's response and how they shifted the conversation to the "little guy". It argues that venture capital serves the interests of capital more than the interests of people and suggests that alternative models should be considered in order to prioritize people over capital.

Q&As

What led to the investor meltdown surrounding Silicon Valley Bank?
When it became apparent to a small group of very powerful, very wealthy individuals that Silicon Valley Bank was on shaky footing, they had a choice to make. They could remain calm, urge the founders of companies they’d invested in to do the same, and hope the bank could weather the storm. Or, they could all pull their money out, urge their founders to do so also, and hope that they or their companies were not the ones left standing in the teller line when the liquidity dried up.

How did the investor class respond to the situation?
Faced with the choice between the more communal, cooperative choice and the self-serving, every-man-for-himself choice destined to end in a bank run, the investor class panicked, they received their proverbial “sentence” (the bank run), and then they walked up to the cell door and shouted at the guards “you can’t do this to us! you’ll ruin everything!” and the guards — long-time allies of the prisoners — said “you know what, they’re right” and handed the keys right on over.

What is the prisoner's dilemma in game theory?
The prisoner's dilemma in game theory refers to a scenario in which two prisoners arrested in connection to the same crime are each offered a bargain if they betray the other. Neither has any insight into which choice the other prisoner will make.

What criticisms were made of the investor class during the SVB crisis?
Criticisms of the investor class during the SVB crisis included that they had privatized profits and socialized losses, had contempt for employees and "the little guy", had demanded workers risk their lives for the sake of their employers during a global pandemic, had rampantly union-busted, had ruthlessly slashed jobs when interest rates began to increase, and had alluded to ways they could circumvent severance payments.

What alternative models to venture capital should be considered to prioritize the interests of people?
Alternative models to venture capital that should be considered to prioritize the interests of people include models that prioritize the interests of people over capital, models that prioritize societal benefit over large exits for investors, and models that prioritize low risk investments that hold promise and provide societal benefit.

AI Comments

👍 This article provides an interesting and thought-provoking perspective on the venture capitalist's dilemma. It is well-written and very informative.

👎 This article is quite long and complex, making it difficult to read and understand. The author also seems to have a negative opinion of venture capitalists, which may be off-putting for some readers.

AI Discussion

Me: It's about the implications of the venture capitalist's dilemma, particularly in light of the recent Silicon Valley Bank meltdown. It talks about how the investor class tends to privatize profits while socializing losses, and how they typically respond with self-serving, every-man-for-himself decisions. It also talks about how the investor class has faced a lot of criticism in recent years and how they tried to shift the conversation to concern for the "little guy" during the bank run.

Friend: Interesting. So, what are the implications of the article?

Me: Well, it suggests that the investor class has become a bit too powerful, and that we should consider alternative models that prioritize the interests of people, not just the interests of capital. It also implies that the investor class should be held accountable for their actions and should be more transparent about their decisions. Finally, it suggests that we should be more critical of the tech industry and the venture capitalists that drive it.

Action items

Research alternative models of venture capital that prioritize the interests of people.
Reach out to local representatives to voice your opinion on the venture capitalist's dilemma.
Follow the work of Edward Ongweso Jr. and other writers who are exploring the venture capitalist's dilemma.

Technical terms

Venture Capitalist: A venture capitalist is an investor who provides capital to companies with high growth potential in exchange for equity.
Silicon Valley Bank: Silicon Valley Bank is a financial services company based in Santa Clara, California. It provides banking, lending, and other financial services to technology and life sciences companies.
Prisoner's Dilemma: The prisoner's dilemma is a game theory scenario in which two prisoners are offered a bargain if they betray the other.
Bank Run: A bank run is a situation in which a large number of customers withdraw their deposits from a bank due to concerns about its solvency.
Fed's Not-a-Bailout: The Fed's not-a-bailout is a term used to describe the Federal Reserve's decision to provide liquidity to banks in order to prevent a financial crisis.
Hoi Polloi: Hoi polloi is a Greek term meaning "the many" or "the masses".
Extinction Level Event: An extinction level event is a catastrophic event that could cause the extinction of a species or the destruction of the planet.
Union-Bust: Union-busting is the practice of attempting to prevent workers from forming or joining a union.
Monopolies: A monopoly is a market structure in which a single firm has exclusive control over the supply of a good or service.
Elon Musk: Elon Musk is an entrepreneur and investor best known for founding Tesla, SpaceX, and SolarCity.
Sharpen Your Blades Boys: Sharpen your blades boys is a phrase used to encourage people to prepare for a difficult situation.
Metaverse: The metaverse is a virtual world created by the convergence of virtual reality, augmented reality, and artificial intelligence.