The Tragedy of SBF

So, Sam Bankman-Fried has been found guilty on all counts, after the jury deliberated for just a few hours. His former inner circle all pointed fingers at him, in exchange for immunity or reduced sentences, and their testimony doomed him. The most dramatic was the testimony of Caroline Ellison, the CEO of Alameda Research (to which FTX gave customer deposits) and SBF’s sometime-girlfriend. The testimony of Adam Yedidia, my former MIT student, who Shtetl-Optimized readers might remember for our paper proving the value of the 8000th Busy Beaver number independent of the axioms of set theory, also played a significant role. (According to news reports, Adam testified about confronting SBF during a tennis match over $8 billion in missing customer deposits.)

Just before the trial, I read Michael Lewis’s much-discussed book about what happened, Going Infinite. In the press, Lewis has generally been savaged for getting too close to SBF and for painting too sympathetic a portrait of him. The central problem, many reviewers explained, is that Lewis started working on the book six months before the collapse of FTX—when it still seemed to nearly everyone, including Lewis, that SBF was a hero rather than villain. Thus, Going Infinite reads like tale of triumph that unexpectedly veers at the end into tragedy, rather than the book Lewis obviously should’ve written, a tragedy from the start.

Me? I thought Going Infinite was great. And it was great partly because of, rather than in spite of, Lewis not knowing how the story would turn out when he entered it. The resulting document makes a compelling case for the radical contingency and uncertainty of the world—appropriate given that the subject, SBF, differed from those around him in large part by seeing everything probabilistically all the time (infamously, including ethics).

In other contexts, serious commentators love to warn against writing “Whig history,” the kind where knowledge of the outcome colors the whole. With the SBF saga, though, there seems to be a selective amnesia, where all the respectable people now always knew that FTX—and indeed, cryptocurrency, utilitarianism, and Effective Altruism in their entirety—were all giant scams from the beginning. Even if they took no actions based on that knowledge. Even if the top crypto traders and investors, who could’ve rescued or made fortunes by figuring out that FTX was on the verge of collapse, didn’t. Even if, when people were rightly suspicious about FTX, it still mostly wasn’t for the right reasons.

Going Infinite takes the radical view that, what insiders and financial experts didn’t know at the time, the narrative mostly shouldn’t know either. It should show things the way they seemed then, so that readers can honestly ponder the question: faced with this evidence, when would I have figured it out?

Even if Michael Lewis is by far the most sympathetic person to have written about SBF post-collapse, he still doesn’t defend him, not really. He paints a picture of someone who could totally, absolutely have committed the crimes for which he’s now been duly convicted. But—and this was the central revelation for me—Lewis also makes it clear that SBF didn’t have to.

With only “minor” changes, that is, SBF could still be running a multibillion-dollar cryptocurrency empire to this day, without lying, stealing, or fraud, and without the whole thing being especially vulnerable to collapse. He could have donated his billions to pandemic prevention and AI risk and stopping Trump. He conceivably even could’ve done more good, in one or more of those ways, than anyone else in the world was doing. He didn’t, but he came “close.” The tragedy is all the greater, some people might even say that SBF’s culpability (or the rage we should feel at him, or at fate) is all the greater, because of how close he came.

I’m not a believer in historical determinism. I’ve argued before on this blog that if Yitzhak Rabin hadn’t been killed—if he’d walked down the staircase a little differently, if he’d survived the gunshot—there would likely now be peace between Israel and Palestine. For that matter: if Hitler hadn’t been born, if he’d been accepted to art school, if he’d been shot while running between trenches in WWI, there would probably have been no WWII, and with near-certainty no Holocaust. Likewise, if not for certain contingent political developments of the 1970s (especially, the turn away from nuclear power), the world wouldn’t now face the climate crisis.

Maybe there’s an arc of the universe that bends toward horribleness. Or maybe someone has to occupy the freakishly horrible branches of the wavefunction, and that someone happens to be you and me. Or maybe the freakishly improbable good (for example, the availability of Winston Churchill and Alan Turing to win WWII) actually balances out the freakishly improbable bad in the celestial accounting, if only we could examine the books. Whatever the case, again and again civilization’s worst catastrophes were at least proximately caused by seemingly minor events that could have turned out differently.

But what’s the argument that FTX, Alameda, and SBF’s planet-sized philanthropic mission “could have” succeeded? It rests on three planks:

First, FTX was actually a profitable business till the end. It brought in hundreds of millions per year—meaning fees, not speculative investments—and could’ve continued doing so more-or-less indefinitely. That’s why even FTX’s executives were shocked when FTX became unable to honor customer withdrawals: FTX made plenty of money, so where the hell did it all go?

Second: we now have the answer to that mystery. John Ray, the grizzled CEO who managed FTX’s bankruptcy, has successfully recovered more than 90% of the customer funds that went missing in 2022! The recovery was complicated, enormously, by Ray’s refusal to accept help from former FTX executives, but ultimately the money was still there, stashed under the virtual equivalent of random sofa cushions.

Yes, the funds had been illegally stolen from FTX customer deposits—according to trial testimony, at SBF’s personal direction. Yes, the funds had then been invested in thousands of places—incredibly, with no one person or spreadsheet or anything really keeping track. Yes, in the crucial week, FTX was unable to locate the funds in time to cover customer withdrawals. But holy crap, the rockets’ red glare, the bombs bursting in air—the money was still there! Which means: if FTX had just had better accounting (!), the entire collapse might not have happened. This is a crucial part of the story that’s gotten lost, which is why I’m calling so much attention to it now. It’s a part that I imagine should be taught in accounting courses from now till the end of time. (“This double-entry bookkeeping might seem unsexy, but someday it could mean the difference between you remaining the most sought-after wunderkind-philanthropist in the world, and you spending the rest of your life in prison…”)

Third, SBF really was a committed utilitarian, as he apparently remains today. As a small example, he became a vegan after my former student Adam Yedidia argued him into it, even though giving up chicken was extremely hard for him. None of it was an act. It was not a cynical front for crime, or for the desire to live in luxury (something SBF really, truly seems not to have cared about, although he indulged those around him who did). When I blogged about SBF last fall, I mused that I’d wished I’d met him back when he was an undergrad at MIT and I was a professor there, so that I could’ve tried to convince him to be more risk-averse: for example, to treat utility as logarithmic rather than linear in money. To my surprise, I got bitterly attacked for writing that: supposedly, by blaming a “merely technical” failure, I was excusing SBF’s far more important moral failure.

But reading Lewis confirmed for me that it really was all part of the same package. (See also here for Sarah Constantin’s careful explanation of SBF’s failure to understand the rationale for the Kelly betting criterion, and how many of his later errors were downstream of that.) Not once but over and over, SBF considers hypotheticals of the form “if this coin lands heads then the earth gets multiplied by three, while if it lands tails then the earth gets destroyed”—and always, every time, he chooses to flip the coin. SBF was so committed to double-or-nothing that he’d take what he saw as a positive-expected-utility gamble even when his customers’ savings were on the line, even when all the future good he could do for the planet as well as the reputation of Effective Altruism were on the line, even when his own life and freedom were on the line.

On the one hand, you have to give that level of devotion to a principle its grudging due. On the other hand, if “the Gambler’s Ruin fallacy is not a fallacy” is so central to someone’s worldview, then how shocked should we be when he ends up … well, in Gambler’s Ruin?

The relevance is that, if SBF’s success and downfall alike came from truly believing what he said, then I’m plausibly correct that this whole story would’ve played out differently, had he believed something slightly different. And given the role of serendipitous conversations in SBF’s life (e.g., one meeting with William MacAskill making him an Effective Altruist, one conversation with Adam Yedidia making him a vegan), I find it plausible that a single conversation might’ve set him on the path to a less brittle, more fault-tolerant utilitarianism.

Going Infinite shows signs of being finished in a hurry, in time for the trial. Sometimes big parts of the story seem skipped over without comment; we land without warning in a later part and have to reorient ourselves. There’s almost nothing about the apparent rampant stimulant use at FTX and the role it might have played, nor does Lewis ever directly address the truth or falsehood of the central criminal charge against SBF (namely, that he ordered his subordinates to move customer deposits from FTX’s control to Alameda’s). Rather, the book has the feeling of a series of magazine articles, as Lewis alights on one interesting topic after the next: the betting games that Jane Street uses to pick interns (SBF discovered that he excelled at those games, unfortunately for him and for the world). The design process (such as it was) for FTX’s never-built Bahamian headquarters. The musings of FTX’s in-house psychotherapist, George Lerner. The constant struggles of SBF’s personal scheduler to locate SBF, get his attention, and predict where he might go next.

When it comes to explaining cryptocurrency, Lewis amusingly punts entirely, commenting that the reader has surely already read countless “blockchain 101” explainers that seemed to make sense at the time but didn’t really stick, and that in any case, SBF himself (by his own admission) barely understood crypto even as he started trading it by the billions.

Anyway, what vignettes we do get are so vividly written that they’ll clearly be a central part of the documentary record of this episode—as anyone who’d read any of Lewis’s previous books could’ve predicted.

And for anyone who accuses me or Lewis of excusing SBF: while I can’t speak for Lewis, I don’t even excuse myself. For the past 15 years, I should have paid more attention to cryptocurrency, to the incredible ease (in hindsight!) with which almost anyone could’ve ridden this speculative bubble in order to direct billions of dollars toward the salvation of the human race. If I wasn’t going to try it myself, then at least I should’ve paid attention to who else in my wide social circle was trying it. Who knows, maybe I could’ve discovered something about the extreme financial, moral, and legal risks those people were taking on, and then I could’ve screamed at them to turn the ship and avoid those risks. Instead, I spent the time proving quantum complexity theorems, and raising my kids, and teaching courses, and arguing with commenters on this blog. I was too selfish to enter the world of crypto billionaires.

137 Responses to “The Tragedy of SBF”

  1. Sebastian Zimmer Says:

    I haven’t read the book, but I know some people involved with FTX and this does not match my understanding of the situation at all.

    >First, FTX was actually a profitable business till the end. It brought in hundreds of millions per year—meaning fees, not speculative investments—and could’ve continued doing so. That’s why even FTX’s executives were shocked when FTX became unable to honor customer withdrawals: FTX had plenty of money, so where the hell did it go?

    FTX was profitable because people wanted to trade on FTX, because Alameda was market making at a loss. If they had sane accounting practices (like not giving Alameda a virtually unlimited credit line) they wouldn’t have lost anyone’s money but they also would not have been nearly as successful.

    >Second: we now have the answer to that mystery. John Ray, the grizzled CEO who managed FTX’s bankruptcy, has successfully recovered more than 90% of the customer funds that went missing in 2022

    FTX deposits were supposed to be backed fully and 90% < 100%.

    If your bank lost 10% of your money would you think "what a nice bank, to save 90% of my money"?

    Also they got pretty lucky with that Anthropic investment, if it wasn't for the AI boom that 90% would be lower.

    Having said all this, I don't understand why people are using any of this to attack effective altruism. Just because SBF was using it cynically doesn't make the arguments invalid.

  2. Jay L Gischer Says:

    I’m not mad at you for anything Scott. My prior was that SBF really believed all that stuff he said, like Effective Altruism, etc. I see him as being wrong in a way that only very smart people are wrong: He believed in himself a little too much, is how I put it. He should use log utility rather than linear utility is another way to put it.

    I do not think that not trading crypto is a thing that is blameworthy. You did things that had positive social value. Trading crypto would have meant leaning in to and amplifying something you believed to be a bubble (You seem to imply that you thought it was a bubble at the time, I certainly did.). But that means scamming people at some level. You would be involved in fleecing … someone. Because they would be anonymous doesn’t make the act go away. So you drove on.

  3. Scott Says:

    Sebastian Zimmer #1: Again, I’ve said nothing to exonerate their criminal behavior in this universe. My interest is whether there are nearby universes where their master plan to save the world worked.

    If you’re right that people only wanted to trade on FTX because Alameda was a money-losing market maker, that would indeed undermine my argument. But did the zillions of retail investors brought in by Super Bowl commercials actually care about Alameda’s market-making role? Also, how should I reconcile this view with the fact that Alameda seems (in the end) not to have lost much money, and with better management might have lost none? Is it all down to the Anthropic investment?

  4. fred Says:

    Lots of “could’ve”, “should’ve”… which purpose isn’t to imagine some alternate fantasy history but to correct future behavior, i.e. “update one’s priors”, or “learn and adapt”.

    About the belief that the guy was so close to being so righteous, literally a single conversation away, a tiny nudge… for all we know a dozen such conversations already had taken place and the specific neural paths in his brain just weren’t as plastic, unlike the ones about chicken eating and the ones about the effort of changing one’s diet.
    In other words, exhibiting a capacity to change one’s mind in some areas, even at the cost of great effort (like suddenly listen to a health advice and start a strict work out habit… some people do love such challenge) doesn’t mean it extents to everything else that makes up that individual, especially core ethics and personality.
    I don’t follow the specifics of that case, but it’d be interesting to see what SBF himself has to say about his own past behavior, i.e. does he express regrets?

    “SBF differed from those around him by seeing everything probabilistically all the time”

    I bet he would share that with people living in a 17 sqmi area that’s being constantly pounded by artillery for weeks and weeks…

    (hey, you brought up “And the rockets’ red glare, the bombs bursting in air”, what a strange choice given the current events, it can’t be a coincidence)

  5. Scott Says:

    Jay Gischer #2: I simultaneously believe that

    (1) blockchains probably have at least some legitimate uses,
    (2) the dramatic rise in crypto values, starting around 2017, was clearly bubble-like and totally unmoored from those legitimate uses, and
    (3) if one could’ve bought low and sold high during the bubble, and donated the earnings to (say) pandemic prevention or preventing Trump-like candidates, that could’ve been a huge moral win.

  6. Michael Vassar Says:

    For how many years have I been going on, and at how much personal cost, to tell anyone who will listen that EA is a huge scam?!? Oh! I know, only to the point where SBF literally showed up at the house of my EA influencer and money manager friend a couple years ago
    to tell him to sever ties with my other EA friend, who has spent most of the last SEVERAL YEARS writing up in detail exactly how EA is a huge scam.
    And essentially all of his writing for years before and after have clarified that topic in scrupulous thoroughness. Go read about it!

  7. Charles A Says:

    > None of it was an act. It was not a cynical front for crime, or for the desire to live in luxury (something SBF really, truly seems not to have cared about, although he indulged those around him who did).

    He lived in what has been reported to be possibly the most expensive private residence in all of the Bahamas. Gave luxury properties amd big salaries to his family members. MacAskill’s Effective Altruism organisation SBF was funding bought two castles.

    The 90% fund recovery is in a relatively large part illiquid tokens of their own creation out of thin air that likely can’t be converted back to money, and even if it can all be sold at the current price it is just shifting the eventual loss to someone else.

  8. Scott Says:

    Charles #7:

      He lived in what has been reported to be possibly the most expensive private residence in all of the Bahamas.

    And if you read the book, you’ll learn that he used virtually zero of the amenities (and didn’t go out on the beach once), a fact constantly remarked on by those around him. He also shared the residence with like 10 other Effective Altruists, which makes it seem much less extravagant.

      MacAskill’s Effective Altruism organisation SBF was funding bought two castles.

    Scott Alexander wrote recently about one of these “castles,” which was just a meeting space, and close to the best-value meeting space they were able to find.

    The problem seems like one of optics to me: people have this deep instinct to attack self-declared “altruists,” even ones doing 1000x more to help the world than they ever have, if they don’t live like monks or ascetics.

  9. Adam Treat Says:

    Scott #8,

    “And if you read the book, you’ll learn that he used virtually zero of the amenities (and didn’t go out on the beach once), a fact constantly remarked on by those around him.”

    Imelda Marcos also didn’t actually get much utility by wearing all of her shoes. The act of owning them was the point.

  10. Peter Gerdes Says:

    Entertaingly, probably the purest utilitarian move SBF could have made was to kill himself before the verdict and say he was doing it to minimize the negative blowback his situation was causing to the EA community (might even still be a net positive now).

    Now I’m not a believer in moral requirements (we all mix selfishness with altruism) so not blaming him for not doing it but it would have been an epic move.

  11. JimV Says:

    In my not-extensive reading of SBF news it sounded as if he lied repeatedly in his trial testimony and those lies were exposed in his cross-examination, leaving the jury visibly disgusted with him. Hence the conviction within five hours on all seven counts.

    On the other hand, I’ve read and admired some of Michael Lewis’s books, starting with “Liar’s Poker”. He is a good writer.

    On the third hand, I recall from “Liar’s Poker” that Michael Lewis flunked “Physics for Poets” in college, and was impressed with some financiers for their ability to bullshit, despite their evident morality deficits. That is, he has a weakness for colorful characters and tends to root for them, but may not be a a very capable analyst of technical matters.

    “Effective Altruism” seems like a typical con game story to me. My philosophy is, try to leave situations a little better than you found them. It is too complicated a universe to hope to optimize future outcomes.

    Anyway, I came here with a very bad impression of SBF, and you have managed to lighten it a little. It does you credit.

  12. Alex Says:

    > , where all the respectable people now always knew that FTX—and indeed, cryptocurrency, utilitarianism, and Effective Altruism in their entirety

    The crux of this stance (which I also hold, although not the part about EA so much) is that, yes, most respectable people *did* know this, but the people who didn’t (or who were getting rich and didn’t care) were *really, really loud*, as is often the case in this modern world. It is very much *not* a “hindsight bias”, it was just obvious: there was absolutely nothing surprising about this result, nor about the fact that the company that was paying all these celebrities to talk about it in, like, Superbowl ads… was both corrupt and incompetent.

    One can wonder about SBF’s utility function and understanding of Kelly all day, or one can pattern-match all of his rationalization to a simple “gambling addiction”, realize he’s an addicted idiot (albeit one with an extraordinarily. sophisticated apparatus of justification) and move on. The only difference between him and every other corrupt gambler who’s in the right time and place to win some big bets is that his rationalizations take the form of “effective altruism” instead of any of the classic reasons (greed, insecurity, need for attention, drug addiction).

  13. Charles A Says:

    Scott #8

    If a king lives in a palace with a heirarchical harem, with him at at the top, that makes it more a more opulent situation than if he lived alone, not less. And not exactly a cramped roommate flophouse situation. Whether that analogy applies is partly speculation though, based on fragments of stuff that has been reported.

    Even still, with lots of roommates, the most expensive private residence would still be a huge luxury for a supposedly strict effective altruist to take. And not using all the amenities but paying for their construction, upkeep, and exclusion from others to use, then bragging about it to an author writing a puff piece.. That is textbook conspicuous consumption.

  14. Scott Says:

    Alex #12: So would you confidently predict, for example, that Coinbase is also going to collapse?

  15. Charles A Says:

    Scott #8:

    Also, how does “virtually zero of the amenities” square with the tennis court confrontation mentioned in your post? Is that no longer an amenity, or took place somewhere else? I’m not saying an EA can’t play tennis, just trying to understand what making use of virtually zero amenities really means in practice.

  16. Kayla Says:

    It’s hard to sympathize with FTX employees who “lost everything,” when they had millions of dollars in FTX stock and apparently did not convert any of it into safer assets. Seems like failing to learn the lesson of Enron, not to mention the 101-level principle of diversification. I haven’t heard any public statements about why they did not diversify, is there some reason I’m not aware of why they couldn’t?

  17. Charles A Says:

    Scott #8
    > Scott Alexander wrote recently about one of these “castles,” which was just a meeting space, and close to the best-value meeting space they were able to find.

    When I picture Effective Altruist’s setting up the best value meeting space, it is something like putting up a Nissen hut on some nearby land, not buying a castle. At best Scott Alexander is praising their real estate speculation ability and if they really had an advantage in that they should do the deal, rent out the castle for other people to have their lavish castle conferences, and spend a fraction of the income on the Nissen hut for their much more modest “altruist” conferences.

    Isn’t EA supposed to be inspired by Peter Singer’s ideas?

  18. Scott Says:

    Kayla #16: The simplest explanation for why they didn’t diversify would be that they actually believed in it! I got not the slightest indication from Lewis’s book that anyone at FTX, with the possible exception of Caroline (and SBF himself?), regarded it as a house of cards that was about to collapse until the very last week.

  19. Timothy Johnson Says:

    “Civilization’s worst catastrophes were at least proximately caused by seemingly minor events that could have turned out differently.”

    Isn’t that exactly what you would expect? I don’t think there needs to be “an arc of the universe that bends toward horribleness” to explain it.

    Major catastrophes are generally unlikely because if they were easy to predict people would take action to prevent them. But there are lots of ways things can go wrong.

    Imagine 100 possible major catastrophes per year, each with a probability of 1%. In that case, you would expect that (a) a typical year would have one major catastrophe, and (b) the particular catastrophe that occurred would seem very unlikely in hindsight.

  20. Scott Says:

    Charles: I wasn’t there, but Lewis was, and you should probably at least read the book if you want to argue that he didn’t accurately relay what he saw!

    Yes, apparently they had meetings while playing tennis, but were otherwise almost unbelievably oblivious to their luxurious surroundings.

    I got no indications that SBF had a harem. The only relationship of SBF’s of any kind that I’ve seen mentioned, is the one with Caroline.

  21. Harvey Friedman Says:

    Scott: looking at your
    “if one could’ve bought low and sold high during the bubble, and donated the earnings to (say) pandemic prevention or preventing Trump-like candidates, that could’ve been a huge moral win.”

    I am in your living room and this is what I would be saying. And I want to be in your living room because of your great importance and influence as a scientist.

    Perhaps it should be mentioned that there are thousands of bubbles supporting wild returns in retrospect going back at least to the famed tulip craze. Leverage high tech stocks from the beginning? Amazon, Apple, Google, etc.

    One person’s idea of “saving the world” is another person’s idea of “ruining the world”. George Soros is a billionaire “do gooder” who basically is doing his best to “ruin the western world as we know it”. Furthermore, I think he knows this.

    Now I am deeply into your living room. Nice furniture, great books.

    I have absolutely no doubt that within ten years it will become common knowledge that the Democrat Party in this period is a true existential threat to the very existence of anything like the USA, even the USA that you likely love. The likely trigger point will be devastating atrocities committed in the USA from a fraction of the millions of illegals invited in from everywhere without meaningful vetting or follow up.

    Continuing now in your beautiful living room:

    Also no doubt that looking at stated policies and successes, Trump used to have a 70% approval in Israel (and they give him very prestigious prizes and if I recall right, have named streets and more in his name), and I would guess at this point going forward 70% would rise to 90%. And Trump will be regarded as having the greatest two terms in the recent history of the country.

    Now deeper into your living room.

    You said you have changed radically since the horrors under Hamas. I automatically assumed that you would have recognized the existential threat posed by Dems by now and the true relative – and vitally important – greatness of Trump in this environment. Wonder if you have rethought the fundamentals. Do you think that that the terrifying 48% figure you cited with such force, came about in a vacuum? (percentage of young people supporting Hamas vs. Israel). Do you think that the funding of Iran and therefore the funding of Israel’s mortal enemies on its borders came about in a vacuum? You think that Putin’s invasions came about in a vacuum? Do you think that California math initiatives and elsewhere came about in a vacuum? Do you think that extreme pornography in elementary school came about in a vacuum? (i have nothing against it for adults, I even write erotica but not for third graders). Do you think that the attack on merit in almost every context in American life, came about in a vacuum?

    I am interested in seeing how a super smart super important scientist has the flexibility of admitting they were totally wrong about fundamental social/political matters or become so wedded to outdated ideas that they cannot see what is going on.

    On a totally unrelated matter, I am still amused as to how you misjudged my 56 year program (tangible incompleteness) as it reaches an entirely overwhelming stage. I expect to see how flexible you are with that —- far LESS important matter —– later.

    If you think I am wrong about this I challenge you to either a one on one written debate or alternatively an entire blog on Trump as he is right in the center of things now on two incredibly visible and important several fronts both as the leading candidate for POTUS and with major efforts to throw him in prison for life. And according to Alan Dershowitz (lifelong Dem) through unconscionable attempted unconstitutional devastation of virtually the entire Judicial system. Do you think these happen in a vacuum?

  22. Charles A Says:

    The altruist castles was just one example, but part of a big pattern of lavish spending on status symbol stuff that they justified with it would bring in more money eventually. They should rename it to “Eventually Altruism.”

    Here was another example:

    > In 2022, we later find out, part of an Open Philanthropy grant was used to send Arete fellows and the University-wide EA group on a weekend trip to Essex Woods, a serene, Thoreauesque venue an hour north of campus that charges about $5,000 per night. According to GiveWell, donating $10,000 to the nonprofit Malaria Consortium could save the lives of five people.

  23. Adam Treat Says:

    Scott #19,

    I haven’t read the book so I have no basis for comparison, but I can say that your testimony about what the book says stands in stark contrast to what I’ve read about testimony from the trial.

    In particular, this article paints quite a different picture:

    About how early the fraud started and escalated:

    “Wang’s testimony suggests that the fraud at FTX started very early since the same day that allow_negative was switched on, Bankman-Fried tweeted that Alameda’s account “was like everyone else’s.”

    “The general sense I got, from the testimony of Bankman-Fried’s former friends, was that things just kept escalating. For instance, Alameda Research first had a negative balance in late 2019, Wang testified.”

    “Wang’s testimony revealed how the fraud got bigger, little by little. First, it was okay to dip into FTX’s profits. Then, it was okay to take more. Then, it was okay to take even more. First, it was a little line of credit just to provide liquidity. Then a bigger one. Then an effectively limitless one.”

    “Ellison testified to something similar, choking back tears: “When I started working at Alameda, I don’t think I would have believed you if you told me I would be sending false balance sheets to our lenders or taking customer money, but over time, it was something I became more comfortable with.”

    On SBF’s selfish (not altruistic) motivation:

    “What was the goal here? What was accomplished? Singh testified to more than a billion dollars spent on celebrity endorsements, which made FTX very famous — even though the futures platform didn’t operate in the US. The political donations gave Bankman-Fried influence in the highest echelons of power. Ellison testified to Bankman-Fried’s venture investments, which gave him more dominance in the tech world. At every turn, the scams at FTX and Alameda led back to making Bankman-Fried more important.”

    “It is easy to lie with words and harder to lie with money. Bankman-Fried went around telling people that he wanted to make a lot of money to give it away, an idea of the Effective Altruism movement that Bankman-Fried affiliated himself with — but the amount of money he funneled to his Paper Bird vehicle alone was ten times the size of his philanthropic spending as outlined by Easton. And it was all vastly outweighed by his investments — the places where he could prove he was very smart by investing in the right companies early.”

    Again, I didn’t read the book and thus have no basis for comparison, but perhaps the legal testimony under oath should also be taken into account?

  24. Scott Says:

    Adam Treat #23: On the spiraling fraud part, we have no disagreement.

    On the sincerity of SBF’s Effective Altruism, I was struck by the fact that he did give away most of his Jane Street earnings, even though, on utilitarian grounds, it would’ve been trivial to justify saving all the earnings in order to plow them back into his next ventures (Alameda and FTX, as it turned out). And there was, famously, a whole philanthropic arm in the Bahamas that was giving away hundreds of millions, and on its way to giving away billions, when it all came crashing down.

  25. Scott Says:

    Harvey #21: On Trump, suffice it to say that we have a Grand-Canyon-sized difference in perceptions of reality. Here in the reality I inhabit, I read how Trump’s cronies are already plotting how, once they get reelected next year, they’re going to fill the federal government with flunkies, pursue retribution against Trump’s critics, and invoke the Insurrection Act against domestic dissent, finally making the US into a full banana republic.

    I’ve always been a classical Enlightenment liberal and small-d democrat. That hasn’t changed. If I’ve been radicalized over the last month, it’s been only in realizing how far tens of thousands of American university students and professors have fallen from the values that I regarded as the absolute Enlightenment baselines (e.g., deliberately burning children alive is evil). My hatred of Hamas, and my hatred of Trump, who I regard as maybe 25% of the way from Enlightenment values to the “might makes right” values of Hamas, come from that same fundamental source.

  26. Ivo Says:

    > if FTX had just had better accounting (!), the entire collapse might not have happened

    It would still have happened, because the investments weren’t sufficiently liquid. Moreover, SBF stated multiple times that he would bet all of existence on 51:49 odds. He was apparently not familiar with the Kelly criterion and destined for ruin.

  27. Adam Treat Says:

    Scott #24,

    How much were his Jane Street earnings and when did he give these away? Of course, it is entirely possible that he *was* sincere at various points in his career and *not at all sincere* at other points.

    One of the things that gives me such great pause with the EA and rationalist community in general is such low priors for fooling oneself. People can make up all kinds of rational sounding utilitarian arguments that in fact betray tremendous self-deception where non-virtuous motives masquerade (even many times unconcsciously!) as virtuous. I wish more of this community would take Feynman’s admonition more seriously, “The first principle is that you must not fool yourself and you are the easist person to fool!”

    What was this philanthropic arm in the Bahamas and is it accounted for in the expert testimony of Easton who said the amount he funneled into his personal vehicle “Paper Bird” was alone ten times the size of his philanthropic spending?

  28. Tu Says:

    I told myself I would stop getting dragged into this conversation, but I guess I cannot resist. I will try to keep this short.

    First, Scott, excellent review of Going Infinite.

    On the question of whether or not you could have convinced SBF to change utility functions if-only-you-had-run-into-him-in-the-hallway at MIT and, in so doing, stopped the FTX fiasco from happening, I pointed out to you a year ago when you were musing about the same thing that it was not a lack of exposure to the virtues of Kelly betting that stopped Sam from adopting it. Indeed, part of his training at Jane Street (much of it, perhaps most?) consisted of understanding bankroll management and bet sizing. He had a professional obligation to understand it, he just chose not to do his homework.

    Taking a step back for a moment, and reflecting on the many battles I have fought in the comment sections of this blog and similar ones with effective altruists over this precise subject, a few things stand out to me.

    An axiom of the effective altruist worldview is that having 2 million dollars is twice as good as 1 million, because you can always just give that 1 million to someone who needs it just as much as you needed that first million. In this way, to value your own wealth logarithmically is therefore selfish, and indeed unethical.

    So far, so good! It is tempting to think that the above benign and trivial observation should have some direct bearing on how to flip coins the right way, but it doesn’t! Maybe it is not obvious why it doesn’t, and I will not waste more time and energy here explaining why than I already have.

    I just want to say three things:

    I do not understand the impulse to yield that Sam was right about bet-sizing in some narrow, technical sense, but just in a way that is unconventional and controversial. How is it acceptable to employ a strategy that is deterministically dominated by another in the limit?

    Having a stupid “utility function” wasn’t the only problem! Alameda sucked a trading and had no edge! Even if you are maximizing “linear” utility, you bet zero on a negative-expectation wager! Instead Sam bet 150 percent of his bankroll.

    As low as my estimation of Sam’s respect for the truth, basic curiosity, and general BS is, I will grant him one thing over many of his EA counterparts. Most of the time, when I get into a fight with and EA over the right way to flip coins, they conversation ends with something like,
    “well, I still think that having a linear expected utility function is the right thing to do, and that is why I started my startup instead of working for Goldman Sachs” or something similar, as if waddling around with a stupid utility function actually has any bearing at all on that decision. Sam, on the other hand, walked around talking a big game about flipping coins the wrong way, and actually did it!– you do have to kind of respect it?

  29. fred Says:

    It shows that managing billions of dollars of investment is extremely complicated, especially when you’re pretty inexperienced in your late twenties… too bad he couldn’t get advice from Bernie Madoff, heh.

  30. gentzen Says:

    Scott, I somehow got the impression that other people are slightly better than you at detecting fraudsters or trolls.

    So, Sam Bankman-Fried has been found guilty on all counts, after the jury deliberated for just a few hours. His former inner circle all pointed fingers at him, in exchange for immunity or reduced sentences, and their testimony doomed him.

    There might be good reasons why the jury only deliberated a few hours. There might be reasons beyond “in exchange for” for why it was easy for the prosecution to find witnesses that “pointed fingers at him”.

    It might be hard for you to hear this from random strangers on the internet. Maybe you should ask people from your private circle who you know and trust about their opinion. It might be possible that in this special case, they agree that all those random strangers on the internet do have some point.

  31. Scott Says:

    gentzen #30: While there’s no doubt that my troll-detecting skills need improvement, you seem to be reading things that aren’t there. I never said the jury was wrong to deliberate for just a few hours, nor did I say that SBF’s former executives didn’t have good public-spirited reasons to testify against him, in addition to the plea and immunity deals that they struck with SDNY.

  32. Mert Gokduman Says:

    Dear Dr. Aaronson,

    I hope this message finds you in good spirits.

    Just wanted to tell you it feels so good to see you write on this kind of thing again. Your commentary is very precious as it reflects meditation on what we do, what we can do differently, and for what reason in “quantitative” fields for lack of a better term. I look up to you as a prominent commentator on this matter and its intersection with policy questions and I look forward to your future posts with great anticipation.

    Best regards,
    Mert Gökduman

  33. gentzen Says:

    Scott #31: What I am reading and seeing is that lots of commenters here write stuff like
    #1: “I haven’t read the book, but I know some people involved with FTX and this does not match my understanding of the situation at all.”
    #4: “About the belief that the guy was so close to being so righteous, literally a single conversation away, a tiny nudge… for all we know a dozen such conversations already had taken place and the specific neural paths in his brain just weren’t as plastic, …”
    #7: “He lived in what has been reported to be possibly the most expensive private residence in all of the Bahamas. Gave luxury properties amd big salaries to his family members. MacAskill’s Effective Altruism organisation SBF was funding bought two castles.

    The 90% fund recovery is in a relatively large part illiquid tokens of their own creation out of thin air that likely can’t be converted back to money, and even if it can all be sold at the current price it is just shifting the eventual loss to someone else.”

    It is fine that you wrote stuff as part of your review of Michael Lewis’s much-discussed book “Going Infinite”. You make good points why the book is fine. But many commenters here object to stuff you wrote here that sound just a bit too much like defending SBF. I got the impression that those commenters do have a point.

  34. Ilya M. Says:

    > John Ray, the grizzled CEO who managed FTX’s bankruptcy, has successfully recovered more than 90% of the customer funds that went missing in 2022!

    This is not what John Ray is promising.

    “To be clear, the 90% number refers to the funds FTX is able to gain access to, rather than total customer deposits at the time of the exchange’s collapse.”

    For example, folks who withdrew funds within nine days prior to FTX’s collapse are subject to a 15% haircut.

  35. Tobias Maassen Says:

    In a way, SBF reminds me of Donald Trump. They are both belive they are financial geniuses who can save the world by breaking accounting rules. They both know they are perfect, every mistake is unimportant and not worth remembering. A little bit like the stereotypical delusional megalomaniac in kids cartoons.

    If you are sad about all the philantropy he will no longer do, I value this less than the damage he did in lobbying for his companies in DC. By now i think cryptocurrencies are one the worst inventions ever. They have tiny benefits over Goverment currencies, they cannot be meddled by the FED , but they also have huge disadvantages: privacy, energy consumption, throughput, antisemitic elites, forks, constantly new currencies, mandatory deflation, meddeling by the miners, …
    If you want to know more, watch Dan Olsons “Line goes up”. It has more Arguments than I can fit in one comment, or in one paper. It starts at NFTs, but it clearly shows they were only a small part of the problem, and SBF was way worse. No amount of effective altruism could have cancelled these sins, but he never semed to consider any cost or downside function.

    In a way I am happy he is stopped now, I just hope the other Cryptos get stopped as well.

  36. Ilya M. Says:

    My takeaway from Michael Lewis’s book is quite different, and sinister.

    It seems that you consider SBF as a fundamentally good person who would have stayed on the straight-and-narrow if only he had taken Econ 201. Having read the book, he looks to me a sociopath who found himself a philosophy that gave him excuse to trample on fellow human beings while feeling morally superior.

    In this sense, SBF is cut from the same cloth as Hitler, Pol Pot, or Osama bin Laden. Those folks were driven to commit unconscionable acts in service of some hare-brained ideology that promised everlasting happiness to future generations. “You cannot make an omelette without breaking eggs” is the most empowering phrase in the English language since it justifies pretty much everything if the ends are worthwhile.

  37. Scott Says:

    Ilya M. #36: On reflection, my claim is a disjunctive one. Either SBF needed much better ethics, or else he needed enough economics to understand the justification for the Kelly betting criterion. Enough rationality (and risk-aversion) in the service of a higher good can sometimes compensate for being an asshole. But partial, incomplete rationality combined with being an asshole is really asking for trouble. 😀

  38. Ilio Says:

    > SBF was so committed to double-or-nothing that he’d take what he saw as a positive-expected-utility gamble even (..) when all the future good he could do for the planet as well as (…)

    Scott, I think you miss one crucial point here that should ease your self-perceived guilt. Sure gambling looks like an obvious mistake, but in truth there are cases for which it’s completely rational to gamble.

    Say you enter a prediction contest that ends after some fixed time, the winner takes all, and losers don’t actually lose anything beside not winning. In this case, I claim the more competitors there are (and the shorter the duration of the contest), the higher the risk you need to take. Sure there’s a chance you will lose, but to win this kind of contest you need to be the biggest fool who won’t crash before the deadline.

    (If that sounds harsh, that’s actually how I won two of the three prediction contests I entered – a few thousands bucks in goodies and touristic tour, against a few hundreds participants, with a few dozens very good betters).

    At this point you probably boil with « but SBF was not in a contest with fake money! ». Sure. Except, suppose you believe there’s a (very very) high probability of a doomsday coming soon, and suppose you believe the only slim possibility of survival is to win big and fast, then throw money at EA organizations before doomsday happens. Look at the math, it’s the same.

    So, to recap, in my view you could not have convinced SBF, because the problem was not the strategy, it was the game he believed he was in.

  39. Doug K Says:

    like Jay L Gischer I didn’t invest in bitcoin/crypto because it seemed clear to me that:
    – it had no useful application
    – the sellers were wildly overpromising
    – the only way it could work to generate wealth was as a pyramid scheme.
    My own moral sense is that I should not invest, encourage and profit from a pyramid scheme, even though the profits would be donated to anti-Trump and similar good causes.. the moral calculus of EA does not convince me. It assumes away the complexities of how wealth is made, and the moral compromises that may be required.

    As John Godfrey Saxe wrote
    “Laws, like sausages, cease to inspire respect in proportion as we know how they are made”
    Wealth I think is similar. As Balzac wrote,
    “The secret of a great success for which you are at a loss to account is a crime that has never been found out, because it was well executed.”
    SBF’s execution appears to have been very weak indeed. The balance sheets I saw were generated in Open Office spreadsheets, not generally accepted as good accounting practice.

  40. Adam Treat Says:

    Scott #37,

    Removing SBF from the equation and speaking on a more general level, that disjunctive claim can be rendered as:

    In order to succeed in utilitarianism, either one needs sufficient ethics or else one needs sufficient rationality.

    I think this is wrong.To succeed at making the world a better place one needs at a minimum:

    1. The intention
    2. The knowledge and intelligence required
    3. The wisdom to discern what ‘a better place’ even means

    Bringing it back to SBF, I think it is defendable that at least for portions of his life he had #1 while most will agree that on the question of #2 and #3 he fell woefully short.

  41. Andrej Bogdanov Says:

    Chicken? No regrets about foregoing lobster, foie gras, sushi, and xiaolongbao yet agonizing over chicken? No wonder the utility calculations were way off.

  42. Scott Says:

    Charles A #17: There’s a historic country house or manor—almost like a castle—in Germany, which is now a computer science conference center called Schloss Dagstuhl. I used to go there every couple years, although I haven’t been in more than a decade.

    I can just imagine the braying of someone who wanted to portray this in the worst possible light: “these pampered academics, drinking beer late into the night in a SECLUDED CASTLE on the taxpayers’ dime!”

    Except that, when you’re there, it’s not actually that fancy. The whole thing’s probably cheaper that holding workshops in hotels, which would be the obvious alternative. And the quaintness and the isolation are really good for productive interaction. I wouldn’t begrudge any community something similar.

    All I’m saying is, I’d like to see some pictures of this Effective Altruist castle, inside and outside, before I judge.

  43. Seth Finkelstein Says:

    Scott, for whatever it’s worth, I’m going to go full-on cynic. I’m starting to believe that every intellectual or Rationalist-type or science/math, etc person should have survival training starting out with the first lesson:


    This is especially true when money is involved. And increases exponentially with the *amount* of money involved. Not making adequate use of this insight results in some of the most apologistic nonsense about shameless liars, who happen to trigger the tribal defensiveness here.

    These scammers are not misunderstood nerds just trying to do good (like you!) who are being persecuted by the mean nasty normies who don’t understand their sensitive aspirations. That’s the sob-story you’re being peddled by the Public Relations flacks they hired.

    If someone says “Yes, I have figured out buying a luxury castle is *rationally* the most cost-effective use of the money, and oh, this is soooo misunderstood by those moralists who are operating *emotionally*, and have personal resentment of this counter-intuitive conclusion of mathematical beauty” – anyone swallowing this immediately without the slightest skepticism is proof of the difference between intelligence and wisdom.

    Anyway, regarding “made fortunes by figuring out that FTX was on the verge of collapse, didn’t” – there’s a saying “The market can remain irrational longer than you can remain solvent”. Trading is hard, because there’s a lot of randomness in the world, and someone can be absolutely right in a general sense but be destroyed by bad timing. In short, don’t assume all knowledge can be profitably traded on, even if it’s correct.

    Note, it turns out that Bitcoin really did have a very real application: It is fairly useful for evading high-level controls on the flow of capital. I flat-out didn’t see this at the time. It is quite hard to understand even now, and definitely even harder to predict early on that it would work. I don’t think there’s any shame there. Again, professional traders try to do this all the time, it’s a very tough business (and see lesson 1 above about being lied to, if you ever think you have come up with a way around this).

  44. Raoul Ohio Says:

    One might expect to make a profit in crypto by skimming some of the money flowing throught the system. There is in fact a large money flux, because crypto is the go-to conduit for kidnappers, drug dealers, pornographers, tax cheats, terrorists, etc.

    The usual banking safeguards are rarely applied in cryptoland because in the lines of work needing crypto, proof of ownership is frowned on. This makes it problematical for outsiders to make a safe investment. Thus investors are primarily of the “easy money — get rich quick” persuasion. This results in an ideal milieu for Ponzi schemes to sprout up.

    This brings us to FTX. When things were unraveling, SBF did a well known interview in which he explained how the business worked, and he exactly described a Ponzi scheme! He did fail to mention that they always collapse — maybe he didn’t know?

    Take home summary: everything in crypto is likely to be a scam, and any one would be wise to avoid it.

  45. Mitchell Porter Says:

    Ilya M. #34: The Investopedia article says that out of $8.7 billion shortfall at the time of the FTX bankruptcy, $6.9 billion had been recovered as of September. If that’s “actual” dollar value, then they already have 80% back. That’s a far cry from the complete wipeout everyone was talking about a year ago.

    It does make me wonder about the political dimension of FTX’s downfall. I feel like the SBF clan had a plan to survive the shakeout in crypto, by becoming one of a few tightly regulated exchanges, securing for themselves a permanent place in the financial firmament. To what extent did they lose the financial battle, because they lost a political battle?

  46. Tim Says:

    Scott #14: I don’t know about Coinbase. My sense is it’s always positioned itself as “the legit, non-shady, complies-with-the-law crypto exchange”. The fact that this can be a unique selling point is rather telling.

    But I am very confident that Binance, FTX’s big rival, is absolutely a pile of crooks and fraud. American financial regulators seem to have the same suspicion:

    Even if Coinbase is full of boy scouts, two out of three big exchanges would make for quite a bad track record for the industry. Not to mention the endless rugpulls and frauds that happen lower down the league tables.

    I suppose it’s not strictly logically necessary that cryptocurrencies, which were invented explicitly to get around centralisation, regulation and oversight, should attract an awful lot of people with an interest in doing exactly that for questionable reasons. But it certainly seems to be empirically true that there are a striking number of crooks in crypto land.

  47. OhMyGoodness Says:

    I found this concatenation amusing-

    “He could have donated his billions to pandemic prevention and AI risk and stopping Trump.”

    Is your hate for Trump so profound that you consider stopping him as rightfully included on a list of existential threats to mankind. There should be a fifth horseman of the apocalypse-Disease, War, Famine, Conquest, and Trump? I apologize but the extreme profundity of your emotions towards Trump always seems…well…unreasonably intense.

  48. anonymous Says:

    Scott, I appreciate that you are sticking your neck out and trying to gain a nuanced perspective, but I am a little surprised by this charitable take nonetheless. For example, how do you read the conversation where he seemed to admit that the altruism was basically just a front?

    Up until now I had read this and other behavior on his side, like disregarding his court orders and trying to manipulate and pay off people in order to win the in court of public opinion very much as a egotistical and sociopathic. The moral failings seemed much greater than the technical ones to me.
    Genuinely interested to hear your take.

  49. Charles A Says:

    Scott #42

    Castles, not castle. Two eventual altruist castles. Here’s the interior of the second castle they bought:

    Doesn’t look like what you would expect an effective altruist meeting place to look. The comparison to academic accommodations I think is unfair because those institutions don’t have the same kind of commitments to efficiency and optimization and utility/lives saved per donation as the effective altruists.

  50. Charles A Says:

    Scott #42

    There are a pictures of the first castle interior here:

    The gardens look like the kind of thing Veblen would write about.

  51. Scott Says:

    Charles A: Those do look pretty posh, although one needs to control for the fact that everything in Europe looks posh compared to the US! For comparison, here’s Schloss Dagstuhl.

    I’d pay attention to someone within Effective Altruism saying “no, here’s a cheaper meeting space that we should’ve bought instead.” What I react to more coldly are people doing little or nothing to alleviate the world’s suffering, monitoring the people who are trying to do something for any signs of insufficient asceticism. The latter seems too much like cope and rationalization.

    There’s a thing novice programmers do, where they make a big show of not “wasting” instructions that are going to take microseconds, even while they leave seconds on the table elsewhere. Scrimping a few hundred thousand here and there to signal that you’re lean and optimized, even while billions in pandemic prevention or famine relief or whatever get misallocated, seems philosophically similar.

  52. OhMyGoodness Says:

    Scott #51

    “although one needs to control for the fact that everything in Europe looks posh compared to the US”

    A counter example from Paris below

  53. AP Says:

    One of the things I most admire about you, Scott, is that you’re very close to your conscience. There are various “tells” that give this away. Two examples of people who are *not* are your radical leftist detractors and SBF. Both have confused their intellect for their conscience. Somehow you have not.

    Watching this whole debacle, one thing I note is that many people who have themselves unknowingly made that conflation now contemptuously judge SBF for doing essentially the same thing that they are doing. (Then again, contempt is itself a sign that one has lost contact with one’s conscience in the first place, so perhaps this isn’t surprising.)

    I’m sure there’s a lesson somewhere in here with regards to AI alignment, but I haven’t yet worked it out 🙂

    (Oh, and my entire criticism of EA movement boils down to that confusion. Unfortunately very hard to formalize, and thus to communicate to an EA or rationalist (though I managed to get there with some MIRI folks in Austin recently, to my surprise!).)

  54. AG Says:

    The tragedy of SBF has an element in common with the tragedy of ChatGPT: a Bayesian golem, having its roots in the Enlightenment project but ultimately undermining it.

  55. fred Says:

    What I’ve learned so far:
    it doesn’t matter how many castles you own as long as you’re still humble enough to wipe your ass with Ultra Soft Charmin™ toilet paper rather than 100$ bills or sheets of 17th century Venetian silk.

  56. J.D. Says:

    “For the past 15 years, I should have paid more attention to cryptocurrency, to the incredible ease (in hindsight!) with which almost anyone could’ve ridden this speculative bubble in order to direct billions of dollars toward the salvation of the human race.”

    In my personal estimation, it is unethical to knowingly participate (whether long or short**) in a speculative bubble, regardless of what you spend the ill-gotten gains on.

    Some flavors of utilitarianism purport to justify transferring money from millions of greedy and foolish speculators to yourself, under the theory that you will spend it on better things than those foolish and greedy people. But that sounds to me like motivated reasoning. I do not know how anyone could possibly have the data necessary to make such a utilitarian calculation. How do you know for sure that an extra few billion spent by you on (let’s say) AI safety research is going to increase the total utility of the world more than a million people paying their bills, or being able to retire earlier? How do you know that one of those poor dupes might not have otherwise spent their money educating a child who grows up to be the AI safety expert who actually saves the world?

    Where consequences are the only justification for an act, ignorance of the consequences means the act cannot be justified.

    ** One could argue that shorting a bubble can slow or pop the bubble and thereby reduce the damage. Of course, shorting irrational exuberance is a very risky game, both in the sense you could easily lose your shirt, but also because you risk creating a secondary bubble (like how the RMBS short-sellers in 2006/2007 fueled the synthetic CDO bubble that almost brought the world economy to its knees).

  57. Raoul Ohio Says:

    OhMyGoodness #52:

    What meetings were held in that venue?

  58. Ehud Barak Says:


    Is there any evidence at all for your assertion that if Rabin had lived, there would have been peace? Anyway, Rabin would have lost the election to Netanyahu by more than Peres did. A final-status agreement was far away in 1995. Five years later, Ehud Barak accepted the Clinton parameters and Arafat failed to accept them. I don’t see why Arafat would have said yes to Rabin.

  59. OhMyGoodness Says:

    Off topic-

    The Jordanians received agreement with the Israeli’s for an air drop of medical supplies to a Jordanian hospital in Gaza. The had to fly above the Hamas anti-aircraft envelope which increased the probability that the supplies would land off target and be seized by Hamas. They agreed with the Israeli’s to use a GPS driven steerable parachute system and the hospital did receive the supplies. Sorry for this but neat technology of which I was unaware.

  60. AF Says:

    “I’ve argued before on this blog that if Yitzhak Rabin hadn’t been killed—if he’d walked down the staircase a little differently, if he’d survived the gunshot—there would likely now be peace between Israel and Palestine.”

    I strongly disagree.

    First of all, Hamas existed at the time, and it had the same goals and murderous theology then as it has now. Also, then as now, it had far more support on the Palestinian street than the PLO/Fatah. If a peace agreement was signed between Israel and the PLO, Hamas would have taken over the new State of Palestine and ran the last 23 years (Second Intifada, several Gaza wars, the October 7 massacres) in fast forward and on a much larger scale.

    Second, I suspect Arafat was about as willing to make peace at the time as he was in the 2000 Camp David summit. The same sticking points that thwarted peace afterwards also thwarted peace in the mid-1990s: the “right of return”, Palestinian denial of Jewish history and the Jewish connection to the Land of Israel, massive increases in terrorism whenever Israel gave up territory, etc.

    Plus, there were (and still are) broader regional issues: even if moderate Sunni regimes could be persuaded to make peace, Khomeinist Iran and its proxies like Syria and Hezbollah would still do everything they can to destroy Israel. They would definitely be doing a lot to tip the scales within Palestinian society towards the anti-Israel extremists, the same as they did in our timeline.

    I don’t know about the other historical counterfactuals (in particular I don’t see how SBF could have been persuaded to avoid Gambler’s Ruin), but I have strong opinions about the prospects of the Israeli-Palestinian peace process and it irritated me enough to write this comment/rant.

  61. Scott Says:

    J.D. #56: I fail to see anything unethical about buying Bitcoin in 2011 and selling it in 2021. At the very worst, it’s like winning big at a casino. Of course, winning in this way wouldn’t itself do anything positive for the world (as creating a new product or company might), but you could then do all sorts of positive things with the money.

    And I say this even though it would’ve been much more convenient for me if it weren’t so … because I didn’t do it!

  62. Charles A Says:

    Scott #51

    > What I react to more coldly are people doing little or nothing to alleviate the world’s suffering, monitoring the people who are trying to do something for any signs of insufficient asceticism.

    Scott, this was all in response to your blog post characterizing SBF as an ascetic. When I pointed out he lived in the most expensive private residence in a nation state you replied he had roommates and didn’t use virtually any of the amenities (except apparently tennis which you couldn’t acknowledge without stealth-positing that it might have been only business tennis which I can’t disprove).

    I will admit the two castles are a small part of the budget of the EA organization, but they bent over backwards to justify them after exposed in a pretty stunning display. You cite a defense from someone I believe involved in grantmaking for the organization and I think that makes the defense less credible not more even if you say you will only pay attention to someone within Effective Altruism who disapproves of it.

    But, even if the castles are a small portion, I brought them up because they are indicative. I believe first learned about lower case effective altruism in the late aughts either directly from this blog or from it linking to others talking about it (lesswrong or maybe Aaron Swartz’s blog) and I had great respect for it. It talked about how most charities use the money on themselves and their own events and on growing their own organizations with an idea of eventually paying it out that seemingly never comes.

    In 2022 Center for Effective Altruism spent around 30% of their budget on events.

    From the Crimson article linked earlier some want to be more stealthy with the ostentatiousness:

    > “Don’t like including the actual words EA in the name of the space,” Levin (who, for his part, liked “Apollo”) wrote in the comments. “It increases the chances of hypocrisy charges (from people who haven’t thought much about the effects of nice offices on productivity) for getting a nice central office space while ostensibly being altruistic.”

    From what I originally read about lowercase effective altruism from this blog (directly or indirectly) in the late aughts, it was about mosquito nets and stuff, and I never would have thought it would be justifying fancy office space making the workers more efficient at putting together conferences, fundraisers, and recruiting events at opulent . The primary moral arguments were all condemning traditional charities for focusing on this kind of thing.

    I’m not coming down on the move from directly measurable things like mosquito nets to AI and pandemic risks.

    You can read things like:

    > For 2021, we have set a baseline budget of $5.60M and an expansion budget of $6.28M

    Spending more on expansion than anything else. That kind of thing is what I’m referring to with eventual altruism.

    You can argue the expansion did happen and they are in a better place to eventually give out the funds. That’s sort of true: benefiting from a massive financial fraud FTX that also bubbled all the way into the traditional banking system.

    I think you can probably make some argument FTX were a big part of eventually triggering a crypto-tied bailout of Silicon Valley Bank and others involved in crypto, with banks the banks having gotten involved in stablecoin (illiquid) interest harvesting schemes that turned upside down and will now be paid by all US depositors over time under the stealth bailout terms. Not to mention from recent reporting the whole industry likely acted as an on-ramp for funding sanctioned organizations like Hamas.

  63. LukasK Says:

    OhMyGoodness #47

    “Is your hate for Trump so profound that you consider stopping him as rightfully included on a list of existential threats to mankind.”

    That’s not Scott but SBF. According to Lewis’s book, AI alignment, pandemic prevention and stopping Trump were three existential risk prevention projects of SBF. He was planning to support Trump’s opponents within the Republican party and even went as far as to consider paying off Trump to not to run in the next elections (and apparently through some insiders got a price proposition).

  64. J.D. Says:

    Scott at 60: As I said, in my opinion, if you participated in Bitcoin because you believed it to be a speculative bubble and it would thus be a good way to get rich, that would be unethical. There were plenty of people who participated in Bitcoin because they thought it was a cool futuristic cipherpunk concept, or because they were paranoid about ‘fiat’ currency, or because they wanted to escape repressive regimes with some of their life’s savings, and I wouldn’t call those things unethical. I am not saying the mere fact of participating in Bitcoin in and of itself is unethical – the intent matters.

    Buying Bitcoin while believing it to be a speculative bubble is much the same as knowingly participating in a ponzi scheme, or knowingly getting in early on a MLM. You know (or at least believe) it is not actually producing anything of value for the world, it’s just enriching the few by impoverishing the many. And that’s not a good thing . . .in my opinion. The utilitarian counterargument (that the few could spend the money better than the many) is not very persuasive to me, for the reasons I outlined in my previous post.

    Now, I am open to being convinced my opinion is wrong. But I agree with the finale of your OP – there are probably better things for you to be doing than arguing with commenters like me.

  65. Jay L Gischer Says:

    Scott #5:

    Given what I know about how blockchains can fail – for instance, the network can split (Bitcoin actually did this) – I do not see any value in them.

    I see value in encrypted chains of custody, sure. But a central authority seems really, really hard to avoid, and blockchains as implemented by Bitcoin operate on a “one computer, one vote” basis, which is hardly reliable.

    AND, I do not think that two wrongs can make a right. I do not think it appropriate to make a deal with the devil in order to do God’s will. There is suffering in the world, that sucks. There will always be suffering. Yes, we should try to reduce that suffering. And bilking unknown parties by trading bitcoin is going to create suffering, even if I spend the money to alleviate suffering.

  66. OhMyGoodness Says:

    Raoul #57

    Not these folks

  67. starspawn0 Says:

    I heard an interview a week or two ago on The Gray Area podcast (I listen to podcasts while driving, and The Gray Area is one I sometimes listen to). I didn’t actually listen to it all the way through, but the parts I heard Lewis did sound sympathetic to SBF:

    I generally have steered clear of cryptocurrency news, except if there is some compelling story like this. When I think “cryptocurrencies” I think the “Hodl on” Gorilla meme, John Mcafee, used car salesmen, tacky casinos, and those tattoo-wearing secretaries from the John Wick films — not the style of thing I am drawn to.


    Another compelling crypto story that might be brewing (and one day made into a Hollywood movie) is related to Ethereum. I can’t tell yet which side in the story is innocent, or even if any side is innocent. Some data points:

    “Ethereum Insider Drops Bombshell: ETH Founders’ Fraud Bigger than FTX Fraud”:

    Nerayoff’s attorney appears to be a guy named Michael Scotto, who had a lengthy career in the Manhattan District Attorney’s office and led its racketeering bureau. Here is what he recently tweeted (or what appeared on his twitter account):

    Then there are the tweets from November 2022 from Paul Graham that might be related (or maybe not?):

    Quote: “A person I have known for more than ten years, who I consider trustworthy, is convinced the cryptocurrency economy will shortly experience a systemic risk. I don’t know anything concrete, but if I were exposed, I would be concerned.”

    And then Vitalik Buterin responded:

    Quote: “I’m hearing through the grapevine that something important is about to happen. Please recognize the fact that my elite social connections to people who are early to know things make me cool, and please help me validate my self-image of coolness.”

    And Graham responded:

    Quote: “That’s an asshole thing to say. I didn’t pass on that message to look cool. I passed it on, with some reluctance, because the guy who wrote it asked me to. He thought it might help people who were overexposed to risky assets. I knew I’d get shit for posting it. But I didn’t think I’d get this kind of intellectual dishonesty from someone like you, whom I’d previously had the greatest respect for.”

    I don’t really know what to make of it, and whether all these pieces are part of a common story. Maybe it’s all just a big misunderstanding…

  68. Ilya M. Says:

    To Charles A #62:

    > For 2021, we have set a baseline budget of $5.60M and an expansion budget of $6.28M

    Spending more on expansion than anything else. That kind of thing is what I’m referring to with eventual altruism.

    Expansion budget is not budget for expansion. As the blog post that you cite elaborates, the baseline budget assumes no further hires or other increases, with a mid-range estimate for community building grantmaking. The expansion budget includes planned hires to support the activities set out above, and a higher estimate for community building grants.

    Basically, it’s the conservative and optimistic budgeting plans.

    As for spending 30% of their budget on events, this is what the CEAS is all about: “Our mission is to build a community of students and professionals acting on EA principles, by nurturing high-quality discussion spaces.” If anything, they can be criticized for not spending enough on the events, not too much.

  69. Scott Says:

    Seth Finkelstein #43 and others: While it might be true that I’m unusually trusting of people, I’m also unusually unforgiving, once it’s conclusively shown that someone lied to me.

    I’m extremely used to people telling me that all my supposed ideals are a sham—the comment-171 affair being only one example. If I want others to grant me the presumption that my ideals are real, then shouldn’t I extend that same presumption to SBF—especially given that, from a certain perspective, he bet his whole life on those ideals, and lost? (Bringing many others down with him, of course, as true-believers tend to do?)

    If SBF had a PR campaign to paint him in the best possible light, I think we can now say conclusively that that campaign was a total, unmitigated failure.

    Which is an additional reason to believe Michael Lewis’s more complicated portrayal: Lewis could’ve made the whole literary world happy, and avoided a lot of denunciation and ridicule, by just presenting SBF as a cackling con-man whose supposed altruistic ideals were merely a front for old-fashioned greed. What’s in it for Lewis, other than a desire to be true to what he saw?

  70. Charles A Says:

    Ilya M. #68

    Ok I misread that, I was searching for an earlier post I’ve read that detailed spending on growth and internal stuff and thought I had found it. I think the one I’m looking for might have been one of MacAskill’s posts on the effective altruism forum breaking down expenses and polling people about plans for the future. It may have been one of the other related organizations and not CEA because I thought it was bigger numbers than $30 million.

  71. bystander Says:

    You live your own life, you follow whatever you want to. It is not my business to comment on it. But you have asked, thus here is my reply: If you decide what to follow by rhetorical questions like “What’s in it for Lewis, other than a desire to be true to what he saw?”, then you are poised to follow shams all the time, b/c you suppose that other people are as honest as you are. They are not, ass. To have a chance to avoid shams, it is necessary to ask: “What is it that they try to gain or that they did wrong?”
    BTW I hope that non-nerd people either do not read your general opinions, or that they at least do not generalize it to other nerds.

  72. Joe Shipman Says:

    Scott #25:
    1) “they’re going to fill the federal government with flunkies, pursue retribution against Trump’s critics, and invoke the Insurrection Act against domestic dissent, finally making the US into a full banana republic.”
    In other words: I oppose Trump because I think he will weaponize the Federal Government against his opponents in the same way the Democrats have been doing.
    Trump might or might not be this vindictive but haven’t you been paying attention to the current censorship-industrial complex and the siccing of federal agencies against people and groups that stand in the way? Matt Taibbi is the person to follow to learn about this, please catch up on his journalism.
    2) “I’ve always been a classical Enlightenment liberal and small-d democrat. That hasn’t changed. If I’ve been radicalized over the last month, it’s been only in realizing how far tens of thousands of American university students and professors have fallen from the values that I regarded as the absolute Enlightenment baselines”
    I agree with this! But do you really want to blame Trump for these trends? Who REALLY has had significant influence on what happens at the universities, Democrats, or Republicans? In Harvey’s defense, he sees the Republicans as resisting these trends, while Democrats egg them on.

  73. Scott Says:

    bystander #71: I note that, for all your insults, you never engaged with the question. What’s in it for Lewis?

  74. Scott Says:

    J.D. #64: You advance an interesting moral theory, according to which profiting off Bitcoin can be either moral or immoral depending on whether you “really believed in it” or saw it as a Ponzi scheme (well, tulip bulbs would be a better analogy, since at least originally this was an “emergent behavior”).

    The thing is, I imagine almost everyone who’s traded Bitcoin has had a complicated mixture of beliefs—“sure, a $500 valuation made sense, but $10,000 is tulip-bulb territory, but I didn’t choose for it to become worth that much, and also maybe I’m wrong, who knows…”

    At what level of tulip-bulb-belief does crypto become immoral? Also, are blackjack and derivatives trading similarly immoral?

  75. Charles A Says:

    After digging up the castle pictures I got curious and I looked up some photos of the Sam Bankman-Fried penthouse, it isn’t frugal with or without amenities:

    Working out the numbers, even with 9 roommates (assuming none of them had additional luxury properties, which I don’t think is true) it would currently be valued at $3.5 million for each inhabitant, which would be enough over the median US or presumably non-vacation Bahamas property (divided by median household size) to purchase over 200 of Bankman-Fried’s much celebrated Toyota Priuses for each roommate, outdoing Oprah’s car giveaway by nearly an order of magnitude in the name of effective altruism =).

  76. Adam Treat Says:

    Joe Shipman #72,

    Show me one place where Biden or a member of his administration has advocated or called for using the DOJ to go after their political opposition for political purposes or for a retaliatory motive?

    Because I can show many such times where Trump has called for doing so, continues to call for doing so, has actually tried to do so and continues to say that he will again in the future. That doesn’t even count all the times members of his previous administration did so.

  77. sasquatch Says:

    In answer to the restated question posed by Scott in #73, I think what’s “in it” for Lewis is fairly simple: his desire to keep banging the drum that the world is not as clear cut as we all might think. And he is continually on the hunt for instances in which this is true.

    He seems to like topics where the staid, boring ‘conventional wisdom’ breaks down (or is circumvented/redirected in some way by people or macro- / micro- level world events) — thus elevating some number of scrappy-underdog-types to their day (or 15 mins) of fame and/or recognition.

    That’s “his brand” in my mind.. And this book (which I have not yet read) sounds like a somewhat desperate/hoarse(?) continuation of that trend — with a fair helping of tragedy sprinkled in.

    Maybe the desperation is false and merely comes from the way things ended up — though it sounds you consider that a strength (not a weakness). I’ll have to give it a read at some point (maybe once some time has passed — assuming we aren’t all slaving away in the MAGA mines or swirling somewhere around the upper stratosphere :-).

    I confess: I never finished “The Premonition” (let’s just call it case of pandemic-apocalypse reading fatigue)

  78. J.D. Says:

    Scott #74. All good questions. As I see it, profiting off a ponzi scheme or a speculative bubble is right or wrong depending on your knowledge and intentions.** To port criminal law terminology into ethics, the profiting is an ‘Actus Reus”(guilty act) but you need both that and a “Mens Rea” (a guilty mind) to be guilty/immoral.

    You are correct that sometimes there is a fuzzy border between the sets ‘Knew it was a bubble” and “Didn’t know it was a bubble”. For example, perhaps the person buying tulips/Bitcoin had a sneaking suspicion it was a bubble, but also had a shaky, hopeful credulity that the market could support such elevated prices. And if there are individuals in that fuzzy border I am quite willing to assign them a similarly fuzzy degree of culpability / immorality. But not everyone lives on that fuzzy border, especially not after Bitcoin had popped and reinflated several times.

    Your question about gambling is a very good one, but I think there are some crucial differences between gambling and speculative bubbles. The casino, while it certainly has an edge, could still lose, and the win/loss odds are public knowledge. But speculative bubbles are more like a game secretly rigged by the casino, where so long as the bubble inflates at all those early movers always gain at the expense of people left with the bag, who would never have grabbed the bag had they known their odds of loss were actually 100%.

    ** Note: I am not averse to utilitarian framing either, where the rightness or wrongness of an act depends on the foreseeable consequences of the act. I just can’t see how that justifies knowing participation in speculative bubbles, because based on endlessly repeated history the foreseeable consequences of bubbles are that a few gain at the expense of the suffering of many, which contradicts the ‘maximize overall utility’ tenet of utilitarianism. You being one of the few and using the ill-gotten gains to hopefully benefit humanity in the future is not a foreseeable consequence, it’s a rationalization.

  79. Shivam Says:

    What stops you from becoming a crypto billionaire now, to direct money into saving the human race?

  80. Scott Says:

    Shivam #79: Uhh, that you either need to be much earlier or have a very different personality than mine, or both?

  81. Shivam Says:

    Is it clear that you need to be earlier? Seems like it is still a very speculative market.

    If you really believe that it was selfish to have spent your time on complexity theory instead of on this, and that you don’t excuse yourself for it, why would you let your “personality” stop you from doing it now? Or at least from getting involved in other ways?

  82. Prasanna Says:

    The “real” problem facing the world today at “systems” level is autocratic regimes getting too powerful, ironically fueled by the laissez-faire nature of western capitalism.
    Case in point: Just observe the recent reaction to conflict in Israel from large Democracies vs autocracies who’s views matter in geopolitics. Those who are not directly connected to this conflict, like Japan and India, did denounce the terrorism in no uncertain terms.
    Here is another excellent article from mostly economic perspective, which also affects other decision making while it should not,World%20Trade%20Organization%20in%202001.

  83. Seth Finkelstein Says:

    Scott #69 – An oversimplified answer to your question, is that the appropriate amount of grant is roughly inverse to the incentives to lie. Your formulation “If I want others … shouldn’t I extend …” implicitly (actually, almost explicitly) assumes a symmetry which becomes a profound error given the sometimes *orders of magnitude* difference in stakes involved. That is, offhand comments about previous emotional experience, which are just social observations, are not in the same universe as multimillion-dollar Ponzi schemes. This is an *empirical* distinction, which can be DANGEROUSLY lost by people who have a favorite mode of reasoning of putting very disparate things into abstract categories, and then asking why they aren’t treated the same as they’ve been put into the same abstract category.

    I wouldn’t say the PR campaign of SBF is a complete failure. It’s gotten some prominent writers making excuses for him! That’s not trivial. Maybe it’ll get him a lighter sentence. Maybe it’ll help him scam again at a later time. Take what you can get. Or consider it like genetic-kin-altruism (honor among thieves?) – maybe it doesn’t help him now, but it’ll help the next fraudster, so he’s paying it forward.

    For “What’s in it for Lewis” – it could be any of a bunch of things, as other commenters have pointed out. Just to start, it’s not at all obvious that his best strategy is “cackling con-man” (again, the flaw – make an extremely simple model with little testing, find out world doesn’t match the model, decide the world must be wrong rather than the model is just too trivial). There’s a lot of that take. He could conceivably think he’s better off being “both-sides” and standing out that way, rather than one of a much larger crowd. Possibly SBF’s style got by Lewis’s BS-detector. He might have gotten fooled initially, and is wrestling with how to cope with it internally, trying for something like “He was on the right track and I was following correctly, but he went wrong later”. He might’ve started out writing one type of book, and decided a flawed book out fast was better than a much rewritten book out later (being yelled at can be good publicity). I’m not trying to peer into his soul and divine his true intent. Writers get things wrong for many reasons. Remember “Gell-Mann Amnesia”, forgetting how badly someone can report on a topic, even with the best of intentions.

    Again, I think I fail to convey how lunatic some of the rationalization looks from outside. I can grasp why it happens, but it’s still astounding. The activists I know don’t sleep in tents, but advice on making sure you devote an appropriate amount to yourself is along lines of “Don’t burn out, you can’t help anyone if you get sick much less if you die, a divorce will make you ineffective if nothing else, etc.”. It would be a screaming alarm, a red flag the size of the side of a building, for someone to be going on about “Yes, this luxury castle is mathematically proven to be the best use of the money, proven by us who live in it …”. It really should prompt some serious examination of cognitive errors by well-meaning sincere rationalist-types, and it says some sad things that it doesn’t.

  84. OhMyGoodness Says:

    When a reporter asked SBF early on about his EA objectives he responded-I have been thinking about Malaria and nets and stuff. Okay. A cause celebre for EA has been provision of insecticide treated bad netting where malaria is endemic and so the assumption must be that these nets reduce the incidence of malaria based on evidence. What is this evidence? I am unable to locate it nor the belief that malaria bearing mosquitos feed predominantly during sleeping hours. These were (are) poorly supported beliefs.

    This paper presents a well designed study that found these nets provide no benefit in reducing the incidence of malaria.

    There are many commentaries that the feeding behavior of malaria bearing mosquitos is changing due to response to the presence of this netting. In order for this to be a well supported statement there needs to be a baseline high quality study before the presence of these nets to determine changes post the use of these nets. Where are those studies?

    My speculation is that the reduction in malaria is due to the wider environmental treatment with insecticides and accepting whatever other environmental impacts that result.

    This typifies my issue with the EA community. It can be uncharitably characterized is successful people acting on their beliefs that are not firmly grounded in reality. The main benefit is it allows them to feel they are accomplishing noble goals while in fact they are accomplishing little.

    Global advances result from acquisition of knowledge and not pursing Quixotic projects in conflict with the physical world. The focus on nets is desirable because no trade offs are involved as is the case with widespread environmental treatments. Very clean, very noble, and ineffective is of secondary importance.

  85. Danylo Yakymenko Says:

    Dear Scott, with all respect, it was quite sad to read your post with the excuses of SBF behavior (though I understand your motivations). On the other hand, I enjoyed reading commenters pointing you to the right direction.

    In your defence of SBF you take a dangerous path of employing arguments which are wrong and potentially harmful. Most of them were debunked in the comments, I just want to point out the fundamental ones:

    1. “Civilization’s worst catastrophes were at least proximately caused by seemingly minor events that could have turned out differently”.

    The born of Hitler is not an event that caused WWII. It was one of the millions and billions of events, the sum of which caused that. The ability of a rational mind is to make sense of the whole data – to see patterns and make predictions based on that. In the SBF story the pattern was there since the beginning. It’s not that a minor event has flipped SBF from holy to evil. We should learn that pattern instead of blaming minor events that caused the disaster.

    2. “if one could’ve bought low and sold high during the bubble, and donated the earnings to (say) pandemic prevention or preventing Trump-like candidates, that could’ve been a huge moral win” + “…the incredible ease (in hindsight!) with which almost anyone could’ve ridden this speculative bubble in order to direct billions of dollars toward the salvation of the human race.”.

    This is so naive I even felt jealous. Do you really think that speculative bubbles (driven entirely by selfishness – expectations of gains without meaningful efforts) could be turned into something good? Saving the world, really? Oh, please. That’s the pattern I’m talking about.

  86. anon85 Says:

    Scott, you’re wrong about the FTX funds recovered. It is not the case that 90% of the funds have been recovered.

    The article you link says that 90% *of the funds recovered* will be distributed to customers (the rest goes to other debtors, or to taxes, or to legal fees, etc.). The article also says that a large portion of the funds recovered came from… clawbacks from people withdrawing FTX funds last-minute. If you withdrew funds right before the collapse, bankruptcy law considers that unfair, so you have to give some back to share in the losses. The article says people who already withdrew 100% of their money in the weeks before collapse will have to *give back* 15% in order to share in the loss.

    This is very far from “all the money was there after all”. It very much wasn’t.

    Where did the money go, if FTX earned so much on fees? Well, Matt Levine has discussed some theories in his newsletters. One theory is that Alameda systematically lost it to FTX investors, which means that most FTX investors earned money on the platform (secretly subsidized by Alameda losing so much money), which is how FTX attracted customers in the first place (people realized they seem to be earning money there more than elsewhere). If this theory is true, then FTX was a glorified Ponzi scheme: customer deposits were used to subsidize customer returns, and the returns attracted more customers.

  87. anon85 Says:

    By the way, Scott, there is a market on FTX customer claims and they are selling at under 55 cents on the dollar. It’s a great investment opportunity if you believe FTX will find 90% of the missing funds.

  88. Scott Says:

    Danylo #85: Since you just state your opposition, and don’t really make any arguments, I’m not sure what I could say that could move the conversation forward.

    Of course every disaster has many overlapping causes—we can trace the causes all the way back to the Big Bang if we want. Typically, though, we’re interested in the “smallest” or “simplest” or “easiest” or “most proximate” change that would’ve prevented the disaster from happening (ideally, among those that wouldn’t have required supernatural foresight).

  89. clayton Says:

    just want to point out that a slightly different interpretation of this story is that SBF chose a *higher variance* strategy, and accrued enormous amounts of wealth during the time that he remained afloat, which was only possible because growth rates were high for a sustained period of time. If he had “just” pursued a Kelly strategy, he would have “just” done as well as the other firms and we wouldn’t have heard of him; and if he had pursued his Gambler’s-falla-gy during a time of lower growth rates, we also would never have heard of him.

    So I claim that it’s not just that he wanted to help that makes him noteworthy — it’s also that he made money off some macro-trend in a way that’s pretty easy to understand. I further claim this demotes his story from “tragic” to “kinda sad”

  90. Scott Says:

    anon85 #86: This is an important disagreement that ought to be resolvable one way or the other. You say one thing, Lewis says a completely different thing (and supports it with several pages of estimates), and it would seem that one of you has to be wrong!

    A couple notes:

    – At least a billion dollars were apparently stolen in hacks of FTX. You could still say that reflects poorly on FTX’s security, but it’s different from FTX itself stealing the money and then gambling it away.

    – At this point, a significant percentage of all the recoverable assets are also going to the lawyers!

  91. Scott Says:

    Alright, let me try one more time, and then I’ll close the thread soon.

    We all agree that SBF’s master plan to save the world ended in a spectacular, world-historic failure, and that SBF was personally at fault for it. The only question is which lessons to draw from the failure.

    I would draw lessons that include:

    – Tell the truth. Even if lying looks like it has a higher EV, the problem is that it turns you into a liar.
    – Try hard to anticipate and mitigate risks, rather than just naively maximizing expected utility.
    – If you’re going to be a utilitarian, understand the rationale for the Kelly betting criterion.
    – If you’re going to run a financial institution, friggin’ do the proper accounting, strictly segregate funds, don’t gamble with customer deposits, and put qualified people in charge.

    Lessons that have been seriously proposed that I would not draw include:

    – Don’t even try to be utilitarian, or to “save the world.”
    – It’s evil to try to make lots of money in finance in order to give it away.
    – Don’t take risks that others might call hubristic, or ever imagine you know things that others don’t.
    – Anyone who claims to be an “effective altruist” is almost certainly a con artist, especially if they don’t live like an ascetic.
    – The world should not have billionaires.
    – Cryptocurrency is nothing more than a giant scam.
    (I don’t say for certain that all of these are false, just that they’re not lessons we can draw from this particular episode.)

    Does anyone actually disagree with any of this? Are there major lessons that I missed?

  92. Scott Says:

    clayton #89: Yes, we’ve identified this as a crux. Lewis is clear as day that, if SBF had just made slightly different (and more ethical) choices, he would’ve easily weathered the crypto downturn and would still be running a multibillion-dollar empire. Others here claim that this is false, and that SBF was able to gain widespread attention only by creating a Ponzi scheme that would’ve collapsed in ruin no matter what.

    It would be nice if, before the thread closes, I could figure out which version of reality to believe!

  93. Adam Treat Says:

    Scott #88,

    I take no side in this debate only to point out that were Hitler not born – or other minor events – then, while it is true that *specific* disasters would have been averted it is also true that the actual consequences for the world – generically speaking – cannot be calculated because of the chaotic knock-on effects. We simply cannot know if it would have produced “a better world” according to utilitarian principles.

    All we have are heuristics (very poor ones) for actually calculating the specific consequences of our actions indefinitely into the future. I still maintain that the Buddha’s heuristics are the most rational.

    To play a broken record, it is the reluctance to fully internalize our own pathetic ability to see the consequences, that causes so many errors. We need wisdom, intelligence and ethics enough to admit we don’t know when we don’t know. Feynman’s maxim yada yada yada

  94. Danylo Yakymenko Says:

    Scott #91: When a next SBF-like person will come and say he collects crypto money to give them out for saving the world – would you buy it and recommend your followers to do the same? What’s the lesson here?

  95. J.D. Says:

    Scott #91: “Tell the truth. Even if lying looks like it has a higher EV, the problem is that it turns you into a liar.”

    Ah, Virtue Ethics enters the chat! This is a good lesson to draw, in my opinion. To that I would add ‘be careful with habitual gambling because all too often it leads to you becoming a degenerate gambler, and degenerate gamblers so rarely make the world better.’

    “It’s evil to try to make lots of money in finance in order to give it away.”

    Just in case that was aimed in my direction, that was not the argument I was making. Investing in companies that you think are going to produce valuable products to the world and thereby profiting (whether or not you then donate those profits to charity) is not, in my opinion, unethical in the way that knowingly ‘investing’ in a speculative bubble that only produces destruction is.

  96. clayton Says:

    Scott #92 — I think I’m saying something different than either of the two possibilities you highlight. If SBF had made the “slightly different (and more ethical)” decision to pursue the same strategy as everyone else (Kelly betting), his “wins” would not have been nearly as big. He only “won” because his high-variance strategy didn’t reach negative values (at least, to the notice of other people) for somewhat longer than average, which is only true because of some combination of statistical fluctuations and macro trends (which, just to clarify, I am not using as a euphemism for a Ponzi scheme).

    In other words, there may have been O(10) people who, in 2019, hit upon the “novel” strategy of “let’s maximize linear instead of log utility”, and all but one of them dipped negative quickly and/or without publicity. But there was one two-sigma fluctuation that captured everyone’s imagination. Even if I grant that he was a fundamentally nice guy (which seems very hard to confirm or refute at this point), I don’t think it’s tragic that he lost his shirt. It was inevitable. There was nothing special about it.

  97. fred Says:

    Intent in investment does matter, i.e. playing the stock market to do pure speculation is almost indistinguishable from a ponzi scheme (in terms of ethics), because often the “value” created is entirely emergent on the psychological manipulation and misleading of a larger group of more naive investors. The particulars of the company that’s at the center of the gamble almost don’t matter.
    Like the recent Gamestop thing.

  98. Scott Says:

    Danylo #94: For the most part, SBF wasn’t asking for money from anybody I know—he was throwing money at them! And I certainly don’t think the recipient of a grant has a moral obligation to study the grantmaker’s finances and balance sheets.

    If there’s ever another company like FTX that people in my social circles are considering working for, or investing in, or entrusting their money to—then clearly, obviously, at the very least, I’d advise them to carefully examine the question of how the new company is going to avoid FTX’s catastrophic failure modes.

  99. Scott Says:

    clayton #96: I see, thanks. I think I’d still basically collapse what you said into my second option. I.e., that contrary to what Lewis claims, SBF never actually had a sustainable way to make billions that he fumbled through lying and fraud, but just a temporary way whose dramatic collapse (if he continued with the same strategy) was nearly inevitable.

  100. Scott Says:

    Adam Treat #93: While I’m exceedingly well-aware of chaos, sensitive dependence on initial conditions, and the radical unknowability of the remote future, I’m still going to assassinate Hitler if you give me the time machine. 😀

  101. fred Says:

    “I’m still going to assassinate Hitler if you give me the time machine.”

    With the caveat that doing so would mean that, at a minimum, you and your close relatives wouldn’t exist?
    Me and my relatives wouldn’t exist either since my grandpa would never have been a POW for 5 years in Germany, etc.

    But, with a time machine, I would go assassinate Julius Caesar (responsible for the so-called “Celtic Holocaust”), in which case you wouldn’t have to even worry about killing Hitler.

  102. Aaron G Says:

    I find it frankly puzzling to me that so many people are fascinated with the psychological motivations of what drove Sam Bankman-Fried to take the actions he did.

    From what I have followed and read, SBF is in many ways very much like other financial criminals, in that he was highly charismatic, and his charisma no doubt inspired people to believe in the promise of cryptocurrencies, including the exchange FTX and his own crypto firm, Alameda, in spite of the dodgy nature pf cryptocurrencies to begin with.

    The fact that he didn’t live a life of debauchery does not fundamentally change this fact.

    The merits of effective altruism is an entirely separate discussion, and should not be linked to SBF.

  103. Tu Says:

    Scott #91:

    “Lessons that have been seriously proposed that I would not draw include:

    – Don’t even try to be utilitarian, or to “save the world.” ”

    As someone who is drawn to the effective altruist movement, who kind of drinks the earn-to-give koolaid, who does work in finance/ gamble for a living and give a lot of what I make away (although admittedly to more normie causes– like animal shelters and children’s hospitals– than some people would prefer), I do want to just chime in on this.

    In my experience you run into two different kinds of people in the effective altruism orbit. One kind, and probably the more common kind, is the kind of person who is moved/motivated by simple arguments in favor of giving away money you don’t really need to people who do. Once you have made the commitment to do so, adopting a utilitarian framework for the narrow purpose of where/who to give the money to can be useful/helpful.

    On the other you have people who call themselves utilitarians, and who claim that they have walked some logical/morale/ethical tightrope that ends with them being an effective altruist, calculating expected utilities for different visions of the future, and sort of of advocating for all of the effective-altruisticky things that kind of annoy, for lack of a better term, normal people the most.

    Try to save the world.

    Try to be a utilitarian? I would say, maybe read some of the thoughtful criticisms about the difficultness problem associated with utilitarianism, apply the same attitude of intellectual humility and indeed “rationality” to utilitarianism that you do to everything else.

    Last, if you are going to talk about “expected utility”, and “maximizing” it as a policy, study the math! Maybe the correspondence between the expected area under some curve you cant see over a distribution you don’t know and what you actual want is weaker than your intuition tells you! Maybe if utilities diverge to + infinity under two different policies, faster doesn’t necessarily mean better! Maybe read some of Scott Aaronson’s writing about big numbers, to develop some intuition for how they might throw a wrench in some of your arguments.

  104. Scott Says:

    Tu #103:

      Maybe read some of Scott Aaronson’s writing about big numbers, to develop some intuition for how they might throw a wrench in some of your arguments.

    LOL, I’ll gladly endorse that advice!

    Personally, I don’t claim to be either a Bayesian or a utilitarian, because it’s too hard. But I certainly see the merit of trying to approximate one when possible.

  105. JimV Says:

    Counterpoint to OMG:

    Centers for Disease Control and Prevention (.gov) › malaria › reduction › itn

    “Insecticide-treated bed nets (ITNs) are a form of personal protection that has been shown to reduce malaria illness, severe disease, and death due to malaria in endemic regions.”

  106. Adam Treat Says:

    Scott #100,

    Ok, ok, I can understand that, but – and here is where the Buddhist heuristics come in – maybe instead of *killing* him you could instead kidnap him and drop him off in some village on the other side of the world or at a monastery or something. Short of that maybe you could figure out the least thing you could do to render him incapable of the his horrors that doesn’t involve you killing, lying, stealing, cheating, harming with body, speech or mind etc etc 😉

  107. DH Says:

    Thank you for sharing Sarah Constantin’s article on the Kelly criterion.

    I haven’t read the book yet, but I did listen to Michael Lewis’s podcast covering the trial. SBF’s surprising takes on betting came up a few times, specifically the 51%/49% bet to make earth twice as good/make it disappear, and that he would make that bet every time. Having a basic familiarity of the Kelly criterion, I couldn’t understand why this was presented as somehow highlighting SBF’S cold rationality, rather than as his apparent lack of understanding; especially given Lewis’s trading background.

    I still don’t understand how someone who made probability and betting a central part of his identity could get the Kelly criterion so wrong. But if he really held and applied these views, it’s hard to see how the story could end up in a different way.

    I agree with Clayton #96 : in a wildly volatile and regulated market, you would fully expect the biggest gainers to be people who are taking too much risk. You would also expect them to eventually go bust.

  108. AG Says:

    Lewis’s account of SBF life could be compared with an account of Hitler’s “struggle” ending at the height of his triumph, and written say in May 1940, before the full-scale Nazi atrocities (in particular the Holocaust) were committed and came to light (and there are such). Both accounts are instructive but woefully incomplete.

  109. Scott Says:

    fred #101: Yes, I’m well aware that assassinating Hitler would mean that everyone I’ve known (save the oldest ones, like my grandparents) would never even be born. I’d still do it though.

  110. fred Says:

    Adam Treat #106

    If the multiverse is a thing, there are already plenty branches without a baby Hitler, and also many branches with a baby Hitler where a copy of Scott Aaronson spontaneously materializes next to his crib.

    And if you don’t believe in the multiverse but believe in time machines, Scott just needs to interfere in the most minute manner prior to the conception of Hitler to cancel him, but then there’s nothing stopping some Hitler admirer from also traveling back in time to prevent the birth of Scott Aaronson in a similar manner.

    Of course, if you believe that only closed time loops can exist, then Scott’s traveling back in time at some point in our future will be one of the many things that cause the existence of Hitler as we know it.

  111. OhMyGoodness Says:

    JimV #105

    I am aware of what the CDC says, so what, show me the studies. I posted a study from arguably the top medical journal globally that says it’s not so.

  112. Scott Says:

    AG #108:

      Lewis’s account of SBF life could be compared with an account of Hitler’s “struggle” ending at the height of his triumph, and written say in May 1940

    Did you read it? It doesn’t end at the height of the triumph. “Rise and Fall” is right there in the title.

  113. OhMyGoodness Says:

    JimV # 105

    I am willing to wager whatever you choose that no epidemiological studies in the real world have shown the contrary.

    In order to be effective they must feed only at night and that just isn’t the case. Preferred feeding time is dusk and also feeed during the day. If you wrongly assume only night then effective

  114. JimV Says:

    OMG, did you read the paper? First paragraph:

    “Insecticide-treated bednets (ITNs) are effective in preventing malaria where vectors primarily bite indoors and late at night, but their effectiveness is uncertain where vectors bite outdoors and earlier in the evening. We studied the effectiveness of ITNs following a mass distribution in Haiti from May to September, 2012, where the Anopheles albimanus vector bites primarily outdoors and often when people are awake.”

    To repeat: Insecticide-treated bednets (ITNs) are effective in preventing malaria where vectors primarily bite indoors and late at night. (As in Africa.) (And from my experience, in other places.)

    In any case, and regardless of his failings, it was reasonable of SBF to take the word of the CDC.

  115. AG Says:

    I just got Lewis’s  book (prompted by your post) and am halfway through it (it is indeed an excellent read, as are all other books by Lewis I read).  The more accurate comparison would be an account of Nazi rule written, say, by Speer in late 1944, before the Nuremberg Trials took place.

  116. JimV Says:

    OMG, Google could be your friend. Try “Effectiveness of mosquito nets to prevent malaria”.


    Fighting malaria with long-lasting insecticidal nets (LLINs),per%20cent%20of%20global%20cases.

    “When mosquitoes try to bite someone sleeping under a LLIN, they are not only blocked by the netting, but also killed by the insecticide coating. Studies show that the use of LLINs reduced malaria incidence by 50 per cent in sub-Saharan Africa, in a region which accounts for more than 90 per cent of global cases.Feb 5, 2022”

  117. AG Says:

    To be clear, I am not equating SBF and Hitler despite certain superficial similarities (both were vegetarians and neither had a harem; both were the opposite of “risk-averse” and kept increasing the stakes spurred by the success of their initial gambles). My point rather is that SBF trial brought to light information unavailable hitherto, as did the Nuremberg Trials.

  118. Scott Says:

    AG #117: Thanks for clarifying that SBF isn’t “literally Hitler” by your lights! 🙂

  119. Joseph Shipman Says:

    I’m disturbed to see several people suggest that investing in a Ponzi that you think is probably a Ponzi is morally wrong, IF it is publicly traded and you don’t in any way try to encourage other people to invest in it! You are incurring a risk that the bottom will fall out soon rather than after you have gained significant profit. If you buy it at 50 and sell it at 75 because your estimates of the probability distribution of its path to collapse dictated that, and you not only have no intention of deceiving anyone else, but your trades are too small to move anything so you’re not “manipulating the market”, merely fulfilling pre-existing sell and buy orders of others, I don’t see the immorality here, all the risk is yours (including the risk of missing out because it actually went to 150 before crashing). (And no, it’s not immoral to sell to someone at 75, because they may, just like you, think it’s probably a Ponzi and hope to ride it up some ways.)

    It’s only wrong if you somehow KNOW it’s a Ponzi, because in that case you should be reporting that inside information of fraud to the SEC rather than profiting. Contrarily, if you don’t know, you shouldn’t be accusing people of fraud whom you don’t know are guilty.

  120. AG Says:

    Notwithstanding its validity, I am nearly as ill at ease with the argument that “With only “minor” changes, SBF could still be running a multibillion-dollar cryptocurrency empire to this day, without lying, stealing, or fraud, and without the whole thing being especially vulnerable to collapse”; as I am with the argument some historians make along the lines of “Hitler could have secured indefinitely his territorial gains of 1940, if only he not declared the war against the United States, deported the Western European Jews to Madagascar instead of exterminating them, and chose to direct Wehrmacht not eastwards but towards North Africa and Middle East.”

  121. Scott Says:

    AG #120: By constantly comparing to “literal Hitler,” you improperly stack the deck with negative affect (to put it extremely mildly) about another cryptocurrency exchange that could’ve continued to exist alongside Coinbase and Binance, had its founder not been so reckless.

  122. OyMyGoodness Says:

    Jim V #114

    Even if you assume that nets have been responsible for malaria fatality reduction, not environmental treatments nor latest medical treatments for infections. I still do not agree that it was an optimal use of funds for SBF. There are well established programs and organizations in place to distribute nets. I still propose that assuming effective nets but increasing insecticide resistance, successful individuals working at the cutting edge of technology would do better by funding additional research and development of novel approaches that provide long term solutions (vaccines, new approaches attacking the mosquitos, etc).

    The population of sub Saharan Africa increased from about 665 million in 2000 to an estimated 1.1 billion in 2019. Overall there is extreme poverty and so, unfortunately, temporarily reducing deaths due to malaria by say 200,000/year does little to address the extreme problems in Africa. These people are very bright and would do better to focus on big problems that can only be solved by novel approaches and not $10 nets that are at BEST temporarily effective until evolutionary pressures promote resistant individuals to supplant the non-resistant.

    In general you are right, it’s their money (except in the case of SBF) and they can listen to whomever they want and spend their money however they want. I can’t help but regret when the money isn’t used to develop novel approaches that could impact the overall well being of mankind.

    From Kenya-

    The study reports high indoor resting densities of An. gambiae and An. funestus, insecticide resistance, and persistence of malaria transmission indoors regardless of the use of long-lasting insecticidal nets (LLINs). These findings underline the difficulties of controlling malaria vectors resting and biting indoors using the current interventions. Supplemental vector control tools and implementation of sustainable insecticide resistance management strategies are needed in western Kenya.

    The study shows heterogeneity of Anophelines distribution, high outdoor malaria transmission, and peak biting activity by An. funestus (early morning) when humans are not protected by bed nets in the lowland sites. Additional vector control efforts targeting the behaviors of these vectors i.e using non-pyrethroids-based indoor residual spraying and spatial repellents outdoors are needed.

    From Nigeria that has highest malaria fatalities in world (25% of global total), highest density outdoors-

    Of the 4,317 female A. gambiae complex collected during the night bait catches, 3,543 (82.1%) were from outdoors and 774 (17.9%) from indoors during the three seasons. The maximum human-biting rate approached 25/h and the sporozoite rate was almost 3.0%.

    Malaria is the fifth leading cause of death in Africa.

  123. AG Says:

    Scott: It is my sense that there is no difference of opinion between you and me when it comes to “literal Hitler” (whose invocation in SBF context, notwithstanding repeated surfacing throughout this post is, I agree, ill-advised). While I have not finished Lewis’s book, it is my sense that he might be giving SBF too much of a benefit of the doubt, especially in light of what transpired during the trial.

  124. Seth Finkelstein Says:

    Scott#91: Well, lessons from individual case-studies can always be objected to, purely on the basis of n=1 (“from this particular episode”). But in terms of inferences leading to a world-model:

    “It’s evil to try to make lots of money in finance in order to give it away.”

    I’d put it as “fraught with peril, a road littered with skulls” (sometimes literally). I think that’s using “evil” here as a “boo-word”, so as not to consider the objection that this *tends* not to work. Among people who advocate this, their aggressive incuriousity to the many failure modes (“You can’t absolutely prove it won’t work!”) is a really big tip-off to me that it’s more about moral indulgence.

    “Don’t take risks that others might call hubristic, or ever imagine you know things that others don’t.”

    If you’re outside your domain of expertise, YES. This is a very good lesson indeed. Absolutely, if you’re a novice, DO NOT EVER IMAGINE you have come up with one weird financial trick that nobody in the entire industry has ever considered. That is hubris. A basic fallacy of people who really do know thing that others don’t in their vary narrow field of expertise, is to project that outside their extremely confined area.

    “Anyone who claims to be an “effective altruist” is almost certainly a con artist, especially if they don’t live like an ascetic.”

    Strawmanish. The probability of them being a con artist is proportional to the amount of money involved (trivial objection: “But it’s not 100.0%” – reply: “Who cares?”)

    “The world should not have billionaires.”

    I’m in favor of this one. Log social utility, diminishing returns, etc. This isn’t some sort of Bible story, “If you can find ten virtuous effective-altruist billionaires in the billionaire-city of Mammon-misery …”

    “Cryptocurrency is nothing more than a giant scam.”

    I’d put it at “little more”. Strongman version: “Cryptocurrency is full of scammers.”. The “little” vs “nothing” is that it has actual usefulness in terms of doing illegal things with money. Some people say that’s a good thing. But that intrinsically means it’s a magnet for crooks and fraudsters. The amount of energy which goes into denying this obvious point is another sign of why there’s a reasoning problem.

    “Are there major lessons that I missed?”

    The methods intended to avoid cognitive errors do not seem to work very well in practice. There’s some deep stuff here.

  125. J.D. Says:

    Joseph Shipman #119. Apologies for disturbing you, but I can’t agree with your judgment (well, maybe I can, but I would need to see a good argument to change my mind). Did you invest in the company _because_ you suspected it to be a ponzi scheme that you could “ride up” for a while? If that was a determinative factor in your decision to invest then in my opinion that is an immoral choice. You may be willing to be a cog (even if just a very small cog, purportedly) in a machine with the sole function of enriching the few by tricking and impoverishing the many, but I am not.

    Let my try to illustrate by extremal example – suppose the ‘machine’ is not a ponzi scheme, but is something far more evil, like a death camp. Would you be willing to be a cog (e.g. a clerk) in such a machine? What if you only “probably” thought those people were being murdered? What if your role as a clerk was “too small” to make any difference in outcome, and you were “merely fulfilling” the orders of others? If you are (as I suspect and hope) not willing to be a cog in such a machine, then as we come back down the scale of evil to ponzi schemes at what point do you jump back into willingness?

  126. AG Says:

    To make a less objectionable comparison, Lewis’s fascination with SBF is reminiscent of Othello repeatedly and unreservedly praising Iago as “honest” throughout the play, until the very end
    (with Iago’s approach ostensibly thoroughly rational and “scientific” throughout)

  127. AG Says:

    PS. #126 And therein may lie an answer to the question#69: “What’s in it for Lewis?”

  128. AG Says:

    And this, I trust, will remain my last comment in the public domain.  Calling SBF “sophisticated” is an understatement.  He might not be as sophisticated as Hamas appears to be.  But both are evil, to a lesser and exceedingly unfathomable degree, to the best of my judgement.

  129. OhMyGoodness Says:

    Just general info

    Anopheles is an ancient organism has been around since the Cretaceous. About 30 species transmit Plamodium to humans with Gambeia being most dangerous. They have different typical feeding behaviors. There are six chromosomes with a total of 250 million base pairs. The plasmodium parasite seems to improve sense of smell of host mosquitos and lower risk aversion.

    The plasmodium parasite that transmits to humans is a much younger organism with maximum estimated age of 2.5 million years.

    So, very old organisms that have successfully adapted along the way and will require novel clever approaches to neutralize their risk. Of course, the Bill Gates Foundation has taken the lead on this and they plan development of a monoclonal antibody treatment as a next step post development of their vaccine. This was the first malaria vaccine approved by the FDA but I don’t know any of the details.

  130. Anon Says:

    I see this all very differently to almost everyone else. Perhaps because I decided to start with the assumption that Sam is innocent and see if the evidence stayed consistent with that (spoiler: it did), whereas almost everyone else started with the assumption that he’s guilty. People see what they want to see, I suppose.

    Here’s how I see things:


    – I don’t even just mean “utilitarian good.” I mean by the standards of common-sense morality, I believe he is a good person. As he revoked Sam’s bail, the judge said, “He has gone up to the line over and over again.” This is how I see Sam. Someone trying to maximize good for others within the bounds of society’s side constraints.
    – He stayed vegan in jail even though that meant preparing for his trial on nothing but bread and occasionally peanut butter for months. (Honestly, I think he knew that was a very un-utilitarian move. If nothing else had convinced anyone that he was a good person, all was going to do is associate veganism with criminals and significantly weaken his ability to defend himself. This is not how “naive” act utilitarians behave.)
    – He worked 12- to 23-hour days and didn’t take vacation.
    – All the rumors of drinking, partying and polyamorous orgies turned out to be bs.
    – Prosecutors called him a “celebrity chaser.” FTX’s marketing budget was proportionally much smaller than its competitors’. Sam was an introvert who only put himself in the spotlight when his interviews started going weirdly well. He surreptitiously played video games to save himself from the utter boredom of meeting the head of Vogue. He may have told Caroline that people seemed to like his eccentric nerd look so he wasn’t about to change it, but it was still genuinely him (early Alameda employees complained about this “look” and a schoolfriend said that’s how he’d always been).
    – He didn’t indulge in flashy things for himself. He lived in a $40m penthouse with colleagues and their partners, but he was trying to incentivize people to move their lives to another country for him. (And Nishad admitted to taking the master suite and buying himself a $3.7m house with money he thought he was stealing from customers, after having called Sam’s apparent self-indulgence “evil.”)
    – Sam donated over half his Jane Street salary. People point to him “only” donating $160m as proof that he never intended to really donate anything beyond politics (somehow $40m is an insane amount to spend on accommodation for 10 ~billionaires but $160m is basically nothing when it’s donated). And yet his foundation got lambasted by EAs for spending money *too quickly.*
    – The rumors about him conspiring with other EAs from the start to steal customer funds, about him stashing money away for himself and about him skipping town also turned out to be bs.
    – Many people have tried their utmost to show that even just on day-to-day interpersonal terms, Sam is a lying asshole. But they’ve found very little. He constantly missed meetings he’d agreed to? It’s called reprioritizing and the way Michael Lewis tells it, Sam’s just conflict-averse and so doesn’t know what to say to someone insisting on a meeting other than “yup.” The EAs who left early Alameda and all the EAs they told about it “knew” he was a bad man? You’d be forgiven for writing it off as a typical founders’ tiff, as the EA investors did when they continued or began investing in him (including the head mutineer), or the many EA individuals and organizations did when they took his money. He once (once) shouted at an employee to “shut the fuck up”? The full line from Caroline is, “At one point Handi was talking a lot and wouldn’t be quiet and let other people talk, even after Sam had asked her a couple of times, so eventually he yelled at her to shut the fuck up.” His assistant even came out post-verdict with “Every time a witness or one of the prosecutors talked about Sam like he was a robot with no emotion, or that he was ruthless, I didn’t agree. He worked hard and was super-approachable. … I genuinely still believe that he wasn’t in it to make himself a fortune.”


    – This was his testimony. He’s been saying it since November 10, 2022.
    – No one testified otherwise. Caroline even said he “might not know” that a lot of it wasn’t reaching FTX and said she didn’t remember if she included the fiat funds when preparing spreadsheets for scenario planning with Sam in 2021.
    – Like everything at this ballooning startup, the accounting was utter chaos. Caroline said she tried to hire accountants at Alameda but they all left. She even described her “keeping track” of Alameda’s borrows from FTX “by mid-2022” as, “Not necessarily carefully, but to some extent.”
    – It’s understandable that Sam assumed that if Alameda was for some reason borrowing the fiat funds, someone would have added the liability to Alameda’s main account on FTX where all its other liabilities to FTX were tracked.


    – In her testimony, Caroline insisted Sam made all the big decisions at FTX.
    – The judge even thought it was so obvious that he chastised the prosecution for wasting time trying to prove it.
    – Fine. But if that’s the case, it’s reasonable for Sam to have been making decisions on the assumption that Caroline would do as he directed.


    – Because Sam owned all of them.
    – So Alameda didn’t need to post collateral on the exchange when borrowing like other customers did, because Sam (thought he) knew how much Alameda had and that he could take it if needed.
    – And it didn’t matter what ridiculously high number the devs picked to prevent Alameda almost getting accidentally liquidated again (a “scary” event that nearly passed costs on to customers rather than allowing Alameda to take the fall). Sam knew Alameda wouldn’t (knowingly) abuse it.
    – And it didn’t matter that there was no official segregated insurance fund. Sam knew that whatever random number was generated between x and y, he could cover it with his personal funds in an emergency (as indeed he did).


    – That wasn’t happening. Gary testified that they couldn’t even if they wanted to.
    – This was what Sam reassured people about. Alameda “sends orders and accesses customer information the same way other users do.”


    – Alameda was borrowing two or three billion through margin trading, but it was a huge customer. It was worth $40 billion.


    – But he’s not sure about this. In the early days of Alameda, they’d lost 10% of their transactions and then found them again weeks later. Caroline’s told him earlier that Alameda was bankrupt but then they realized they needed to fix a bug that was miscalculating by $8b. Nishad claimed that he himself didn’t know about the “$8b hole” until September, despite being in the June meeting where Sam is supposed to have “learned” of this hole.
    – Either way, Alameda’s net asset value is still $8-10b, so they can fill the hole, just not immediately. Sam is not in crisis mode yet.


    – Alameda is legally obliged to repay. As far as they know, Alameda is *not* legally obliged to refrain from borrowing more from FTX.
    – The alternative is filing for bankruptcy and lots of customers/lenders/investors losing money.
    – Sam would rather pay what urgently needs to be paid now and then get to work sorting out their accounting, fundraising, shutting down/replacing Alameda and trying to turn FTX back into a profitable business.
    – So he does.
    – Later, the fact that he didn’t fire Caroline at this point is taken as a sign of his guilt. The fact that she starts crying when he says it’s her fault and she sort of agrees is taken as a sign that he’s a big bad man.
    – Caroline also sends a “dishonest” balance sheet to lenders. In their testimonies, Sam and Caroline disagree somewhat on how much Sam really paid attention to that sheet.


    – Alameda’s balance sheet is leaked, which causes a bit of a stir.
    – CZ smells blood (possibly drawn by him) and deliberately causes the value of FTT to fall dramatically, disproportionately harming FTX and triggering a run on the exchange. CZ knows this will cost his own exchange money. But he really hates Sam.
    – By this point, Sam’s pretty confident that the $8b in the fiat@ account never made it to FTX. He worries that they’re approaching a liquidity crisis but thinks they might pull through.
    – He desperately tries to raise funds, even going cap in hand to CZ who agrees to buy FTX (causing Sam to stop fundraising from elsewhere) and then later “changes his mind.”
    – Under intense pressure from the incoming bankruptcy team who stand to gain over $100m from the gig, charging up to $2,165/hour, Sam files for bankruptcy. Or rather, he signs what he needs to sign to file FTX International for bankruptcy, changes his mind and asks the bankruptcy team not to file, but they refuse and also throw the completely separate and fully solvent FTX US into their bankruptcy basket while they’re at it.
    – The bankruptcy team refuse any of Sam’s repeatedly offered help in locating funds and refuse him access to any internal data (which sure would come in handy when trying to defend oneself in court), instead declaring that billions are missing. They even take his LinkedIn.
    – Sam drafts testimony for the US House Banking Committee. The day before he is due to testify, he gets arrested and then consents to voluntary extradition to another country who have decided they should be the ones to bring justice down on an allegedly fraudulent foreign business that had 0 US customers.


    – Everyone is dumbfounded by this.
    – No one considers it might be because he feels he has nothing to hide.


    – Everyone (judge included) says that the fact that the Anthropic investment helped with this in no way lessens the badness of Sam’s crimes, despite the common characterization that Sam “gambled away customer funds on risky trading strategies.”

    People want the world to be black and white. First they wanted to believe in Sam. Then when a lot of money apparently went missing, they wanted even more to believe that it had been stolen by a nasty, scheming, lying villain so that he could party with the rich and famous. Reality is not so simple. But the public perception of Sam seems to have been completely unaffected by a ton of relevant information coming to light that, to me, doesn’t look anything like guilt beyond reasonable doubt. Everyone goes around pretending that perception reflects reality. But people see what they want to see.

    Before anyone asks, no, I’m not Sam. Or his parents. Or Michael Lewis. Or even one of the witnesses for the prosecution who Michael Lewis says told him, “I think Sam is innocent.” I’m not getting paid to write this and I’ve never even spoken to Sam. But I guess it doesn’t really matter now anyway.

  131. wereatheist Says:

    Scott, let me first assert that Schloss Dagstuhl is not even close to the Black Forest.
    And I’d like to support the not-to-be-drawn-from-the-SBF-affair conclusion there better be no billionaires.
    Especially no hereditary ones.

  132. Scott Says:

    wereatheist #131: Oops, did I confuse it with Oberwolfach? Fixed now.

  133. AG Says:

    MFO — Mathematisches Forschungsinstitut Oberwolfach is not a castle (Schloss Elmau is).

  134. AG Says:

    “(According to news reports, Adam testified about confronting SBF during a tennis match over $8 billion in missing customer deposits.)”

    According to the news report linked, the testimony in question invoked a “talk on the *paddle* tennis courts” not a “tennis match”.

  135. AG Says:

    One reason I feel so strongly about this issue (and by now I did finish reading “going infinte”), is that many of those aged 18-24, who were defrauded by SBF and their ilk, are justly enraged at their ensuing plight, thereby contributing to 48% referenced in the opening to your previous post (it is the “established elites suffocating us” that these youths (e.g. Greta Thunberg) are against above all; they just happen to be in resonance with a much more sinister (but numerically inferior) anti-Israel outburst)

  136. JC Says:

    “one meeting with William MacAskill making him an Effective Altruist”

    I’m being picky, I know, but I’m not sure there was much serendipity here. What does “making him an Effective Altruist” mean exactly?

    Sam was already a utilitarian:

    One conversation with Ryan Carey made him into a “professional philanthropist” (now called “earning to give”):

    And he was going to find the Effective Altruism community sooner or later.

  137. Timothy Chow Says:

    Scott, I don’t follow your blog closely nowadays, but I did run across this blog post. Thanks for writing it. Until reading it, I had mostly ignored the SBF affair, assuming he was just another fraudster (which, in some sense, it sounds like he probably was). But I didn’t know about his disregard for Kelly-style bet-sizing, which I now find to be a fascinating aspect of the whole sordid business.

    I have a comment about effective altruism. Long before I realized that effective altruism was a “thing,” I was exposed to some of its ideas, via organizations such as GiveWell, and Dan Pallotta’s somewhat bizarre book, “Uncharitable.” Being interested in charitable giving my whole life (even when I was a kid), I find some of the tenets of effective altruism appealing. In particular, while I disagree with Pallotta on many points, I do agree with his point that traditional nonprofits are often forced to be inefficient, and sometimes even to undermine their own mission, in order to make donors happy.

    But my main comment is this: if you want to be an effective altruist, never claim to be motivated by altruism. Always insist that you are donating money purely for selfish reasons—i.e., to feel good about yourself. There are two reasons for this advice. The first is that if you insist that you are being selfish, it will go over much better with others. I exaggerate only slightly when I say that everyone hates self-proclaimed altruists, and will go to great lengths to criticize them and tear them down. By contrast, folks who amass enormous wealth via the profit motive but don’t claim to be trying to do the most possible good are generally revered as great philanthropists when they donate even a tiny fraction of what they have.

    The second reason is the more important one: You probably are motivated by selfishness more than you think. It is a principle of many major religions, but especially of the brand of Christianity that I follow, that we are all, at bottom, thoroughly sinful, and would be enslaved by our sin but for the grace of God. By all means, donate as much time and money as you can tolerate, and in private, try your darnedest to cultivate as altruistic a frame of mind as you can—but never claim (even to yourself) that you have succeeded. Remind yourself that there’s always a John Wesley or a Zell Kravinsky or a Charles Feeney out there who has gone much further than you have.

    There’s an xkcd comic about charity, in which Cueball is asked which he values more, playing a shoot-the-bad-guys video game, or donating toward mosquito nets and medicine for kids. My answer is that the two are equivalent; either way, I’m simply deluding myself that I’m saving the world. I believe that by steadfastly cultivating an acute awareness of one’s own sinfulness and insignificance, one reduces the risk of falling into the many traps that await the would-be altruist.