Of course, given the depth of financial depravity on display here and the incredible thinness of the financial defense, one must also entertain the theory that they did do the due diligence, they were aware of how dangerous this was, and they invested anyhow for other reasons. And that those reasons are probably not good.
There have been many cases where companies go to great lengths to do accounting alchemy to fool even very smart auditors, but we are clearly not dealing with that here. Binance or whoever was offering to buy FTX out literally figured out within single-digit hours of looking at FTX's books that they were not interested. A person skilled in the art can literally glance at these books and figure out that they are worthless. I do not believe there is any credible theory that any investor could possibly have been unaware of these issues.
FTX's books don't so much have red flags as that they are printed on red flags, with ink derived from red flags, a custom-made red cover made out of more red flags, and each page, when opened, has pop-up red flags along with a little electronic speaker that plays Red Flag by Antigoni while you get sprayed with Red Flag perfume [1].
"FTX's books don't so much have red flags as that they are printed on red flags, with ink derived from red flags, a custom-made red cover made out of more red flags, and each page, when opened, has pop-up red flags along with a little electronic speaker that plays Red Flag by Antigoni while you get sprayed with Red Flag perfume [1]."
OMG - I'm dying here. You really shouldn't have buried that at the bottom of your reply because many will miss it. Perfectly written. I love it.
A Westerner arrives in the USSR. Walks absentmindedly along the street, boom, open manhole, falls down, climbs up all covered in sewage, shouts, furious: “What the hell? Couldn’t they have put up a red flag or something like normal people?” A passerby replies: “You’re from the airport?” “Yeah.” “You’ve seen the huge red flag on the roof, right?”
> I do not believe there is any credible theory that any investor could possibly have been unaware of these issues.
I'm not convinced that the issues that caused Binance to back out even existed the last time FTX raised outside capital (March 2022 according to Crunchbase). My understanding is that in March, FTX had a basically normal balance sheet for a crypto exchange, with roughly enough non-FTT assets to balance against its liabilities.
Alameda was an over-leveraged crypto hedge fund, which in hindsight wasn't great news for Alameda's investors or creditors. But there's a world where Alameda goes to zero but FTX is mostly fine. After all, FTX would automatically recalculate margin levels and liquidate assets as needed every 30 seconds. If they did that with Alameda like they would have for an arms length counterparty....I'm not going to say that FTX would have been unscathed - a lot of those loans seem to have been secured by FTT, plus Alameda seems to have made up a lot of FTX's trading volume - but the end result of incinerating billions of dollars' worth of customer deposits wasn't inevitable. IMO, FTX's fate wasn't sealed until its management team built a backdoor into its systems to siphon customers' assets to Alameda. And that probably didn't happen til summer, months after its last funding round.
It appears (although everything is unclear) that the 8bn hole was caused by customer dollar payments for ftx going to alameda as ftx didn’t actually have a bank account. For three years. So unclear it was ever good.
This alone is quite incredible. FTX, as a business, never actually existed. It was all just a smoke screen for his hedge fund.
Employees were stealing from the company, there were no internal controls...the rules for VC are...different. If you were on a Board and this happened on your watch, you would never work on another Board again. If you did this in PE, fired. If you invested in such a public company, very likely fired or irreparable damage to your reputation.
Sequoia are a huge fund, they are one of the doyens of the industry...it isn't even that they failed, they didn't even put in place the mechanism to try to protect their investor's money. It is unbelivable.
>Sequoia are a huge fund, they are one of the doyens of the industry...it isn't even that they failed, they didn't even put in place the mechanism to try to protect their investor's money. It is unbelivable.
Don't VCs typically expect 9 of 10 investments to fail, but for the one which succeeds to more than make up for the rest? From the VCs point of view, as long as the allocation to each company is balanced, does it even matter whether an investment resulted in 100% loss due to a scandalous fraud instead of "normal" company failure?
Yes, because the result here is that investor money has been stolen by employees.
Again, if you work at an equity fund and you invest in a company that was obviously fraudulent, your investors don't go: "Oh well, better luck next time...shit happens, amirite?". If this happens in a PE fund, where there is direct oversight, then I would suspect that the investors would remove you as a manager.
The only responsibility you have is to protect your shareholder's interests. Not only was this disregarded but Sequoia gave them the structure that allowed them to steal from their own investors.
I have never seen a situation like this that didn't end up in charges against the fund managers because it is such an egregious failure (this, of course, won't happen here...everyone here has donated far too much money...but I have seen this professionally).
It does matter, the risk calculation gets way worse once you start counting in the possibility of fraud. It's going to be 9/10 if each one of the 10 actually try their hardest to succeed. It's going to be 10/10 if fraud isn't prevented.
> It appears (although everything is unclear) that the 8bn hole was caused by customer dollar payments for ftx going to alameda as ftx didn’t actually have a bank account.
Despite the notional legal structure, I think the key thing is that FTX, FTX.US, Alameda Research, and the other 130 or so entities involved were mostly not, in any meaningful sense, distinct businesses, it was all just three grifters in a trenchcoat.
I wonder if those other reasons simply were the guy's background and pedigree. Silicon Valley is no different than Wall Street in its obsession with having the "right" educational background, having the "right" parents, having the "right" connections and so on. So many doors in corporate hiring can be bypassed with "Went to MIT" and "Stanford parents" and I wonder if they can also be bypassed by founders looking for investment.
That's at least one strong reason - VCs look at the person as much as the business.
Crypto was filled with sleazy car-salesman "investor" types at the time Alameda Research was looking for funding. So when in came someone with a Jane Street background and not a single flashy Ferrari in their driveway, the dam broke on VCs finally being able to pour money into the crypto space on a decent looking founder.
If that's how unsophisticated these VC operations are then I think we'll see a lot of them lose their shirts in the coming macroeconomic environment. Which will consequently make future funding rounds all the more difficult.
Sure, I'm just curious how we'll deal with interest payments on our debt, especially since our economy has evolved to thrive on low rates. The hikes are necessary, but I think they're going to kill a bunch of BS jobs, meanwhile we'll have to raise taxes to service the debt. Gonna be real interesting.
Sure, but we made the economy grow by keeping debt cheap. Now debt will be expensive and all signs point to the economy not growing in such an environment.
I am slightly baffled by this comment since my first impression of him was exactly "sleazy vibes". Not in the flashy Ferrari sense but because the look seemed to try so hard to be the opposite of flash - the nasty stretched out t-shirts, shorts and forever bed-head hair. It struck me as a contrived and something of a put on. Google "John Blutarsky Animal House." SBF appears to have patterned his look after Jon Belushi's character in that movie. I think you have to make an effort to look like that so consistently, especially when there are cameras around.
Well if it's so common as to be a kind of uniform isn't that the very definition of contrived? How else would you explain the phenomenon then, that slobs just naturally gravitate towards prop trading?
Plus both his parents are professors at Stanford Law school. I can see VCs having a natural bias towards "it would be unlikely for someone with this pedigree to operate so completely outside the law".
SBF had huge sleaze vibes, so I don't know if your logic applies.
> and not a single flashy Ferrari
the article mentions his $30 million dollar penthouse ... It seems the only place the flashy assets didn't exist was in the press coverage put out by organizations SBF gave money to...
SBF branding himself as an effective altruist and even purposely dressed in the silicon valley "genius" attire. His condo in the bahamas was after he hit it big and needed to be close to Washington to work on crypto regulation.
There's a huge gap between that and the majority of crypto founders at the time.
>the article mentions his $30 million dollar penthouse
the $30M penthouse in the Bahamas that was purchased using investor money and customer funds... he didn't own it at the time he received funding from these big name VCs, did he?
Don’t VC always say they invest in the founder not the company? It’s all about how that person makes them feel. Some argue that is why there is less diversity in VC funded companies.
It's like the "cultural fit" hiring criteria loophole, which allows companies to deliberately cloud their hiring decision-making by incorporating vague and bias-fraught inputs. It's a way that an organization can claim they have measurable, quantitative criteria, while allowing themselves to override that criteria with their gut feeling when they want to.
Just based off that news article with how much the VCs were delighted after a call with SBF while he was playing League of Legends it certainly seems like they base most of their investing off gut feeling and "vibe check" vs actual fiscal due diligence. Which is how charismatic quirky founders like Elizabeth Holmes, Adam Neumann and now SBF keep finagling big round raises.
This is an extraordinary number of high-profile companies which either failed to do due diligence, or were knowingly, deliberately doing shady dealings.
Not great to have to choose between incompetence and shadiness at any of those, but those are the two options, and each should be investigated for throwing their [customers'] money into an obvious scam.
There's a third option: FOMO. They didn't want to look stupid later for failing to invest in case FTX turned out to be the next big thing, so they took a gamble.
But doesnt FOMO-driven action require lack of due diligence? You may be right that it was indeed FOMO, but its not the FOMO that caused the error, it's the lack of DD that comes with FOMO.
I think that's a very good point. Though also think if I was doing a sort of PhD dissertation exploring the different aspects of malfeasance vs. incompetence that FOMO might ultimately be found as some flavor of incompetence. Though also have a dotted line in the tree diagram leading over to some branch of malfeasance as well.
This strikes me as unlikely. A VC does not look stupid for passing on an investment, even one that would've been successful. Do you think 90% of that list "looks stupid" for not having invested in Google? These big name VCs reached their status through vision, extreme due diligence, and of course luck; not from FOMOing into investments.
Based on my experience in SV startups, this is simply not true. VCs pay a ton of attention to what other VCs are doing and do in fact include what other VCs are doing as part of their decision-making process.
Well yes obviously businesses pay attention to what the competition is doing.
And there's no question it's much easier for founders to raise capital, after they've raised capital. But this is because of how our financial system works; it's much easier to loan (exchange for equity) money to someone who doesn't need it, than someone who desperately needs it. It's the same reason a billionaire can take out a loan 100x the size that you could ask for, at under 1/10th the rate.
But you're making a leap here by suggesting that VCs will make an investment and bypass due diligence simply because another VC invested. What I've seen in the startup world is confident founders are more likely to raise money, having received funding makes founders more confident thereby making investors confident, but for any significant sum of money due diligence might be expedited, but not skipped.
Temasek is a Singapore Government fund, so that's taxpayer money it lost to a savage grift. If it wasn't a one-party state where the opposition is suppressed, that might be uncomfortable for the government.
What blows my mind is that SBF is going to investors asking for money in his billion dollar "no you can't look at the books" crypto hedge fund while looking like he's playing hookie from his math class and playing video games during the pitch meeting and the supposedly very serious Wall Street types went "Wow! This guy is amazing! All the money he wants and more!".
>FTX's books don't so much have red flags as that they are printed on red flags, with ink derived from red flags, a custom-made red cover made out of more red flags, and each page, when opened, has pop-up red flags along with a little electronic speaker that plays Red Flag by Antigoni.
Agree that while "they got swept up in the moment" is a reasonable theory (Hanlon's razor and what not), it also seem very plausible that they knew it was risky but not how risky, and felt like there was still a positive expected value because they would be able sell their coins early (I saw a tweet about how a16z is still up 5x on it's crypto investments because of this[1]).
I suspect that's the most plausible, least "evil" theory. Although that still leaves them knowingly gambling that bigger fools, who they intend to take advantage of, will come along later, so I personally wouldn't consider that "good". But I also won't deny it's a dog-eat-dog world at that level and everyone playing at that level is already aware and taking that into account. In that case it just turns out they were the dogs eaten instead of the victors.
A cynical, but not entirely incorrect, take could be that greater fool theory is a pretty critical part of the VC model. The final fool in that process being when they offload to the public markets.
“Sam Bankman-Fried’s pitch to investors was not much of a pitch: It was a take-it-or-leave-it offer.
“In meetings to raise money for his cryptocurrency exchange FTX over the last year, the entrepreneur left little room for negotiation, two investors said. FTX was his company, Mr. Bankman-Fried told them, and he planned to run it with little oversight. Interested investors should ‘support him and observe,’ one investor who heard the pitch said.”
A meta reply to several of the commentors here is that we're not talking about JoeBob's Angel Investing who got lucky with his bait shack and has a few hundred thousand more than he knows what to do with to throw around. These are nominally the top tech investors in the world, along with lots of other people who should know what they are doing. Investing in a business in a KNOWN risky and volatile area calls for MORE due diligence, not less. If they didn't do it, we are certainly in the position of trying to figure out the exact distribution between stupid and evil. "Oh, poor us, we asked him to show us the books and he said 'no' and we just couldn't help but throw tens of millions of dollars at him" is bullshit. This isn't hopskotch at the local elementary school. The only even remotely sane conclusion to come to in that circumstance is not only "no", but a NO! yelled back over your shoulder as you flee as fast as your feet will take you.
This is failure so profound that your brain is having trouble wrapping itself around it and you are thinking to yourself, surely they knew what they were doing and I'm just not seeing it? No. Have more confidence in yourself and less in others of supposed authority.
This isn't an isolated incident. Theranos had no product. Many investors invest in founders instead of the idea, thinking that good founders know when to pivot. Occasionally, a founder doubles down on a bad idea and hides that they've figured out it was a bad idea from investors, but it is hard to predict if a founder will do this ahead of time.
That said, my own opinion is that anybody who invests in the crypto space is either a scammer or a rube.
I like a good conspiracy theory, but it's unrealistic to expect that the investors knew about this.
If they did, they would know there'd be a 100% chance that it would blow up.
This is some serious balance sheet depravity. This is not like the CEO buying up companies with a conflict of interest, or billing the company for their private jet. All of that is plausibly legit.
When there are no financial controls at all, money is being looted, it will go down.
VC funds normally don't do due diligence so long as some other entity did it in the round, there is legit oversight on the board etc.. in this case, their own controls failed.
All of the funds who invested in FTX need a serious audit of policy.
This is a dereliction of responsibility, not just a 'bad bet' and so heads should roll. They probably won't though.
It isn't necessarily that Sequoia (or any of the other VCs) had dirty money to launder. It could have also been that they wanted to use clean money for unclean purposes.
To be clear: I'm just letting my mind wander in response to your question, not saying that's what happened.
It could be simple greed by incredibly simple-minded VCs or it could be something worse. Somebody asked what the something worse could be, and I replied.
We are learning more and more about all of this each day. There was massive fraud going on within FTX, and I don't think it's terribly far-fetched to believe that it wasn't contained within the company.
My best guess is that these VCs need to deploy so much capital that they don't really do due diligence, instead they go by "founder vibes" and "vision", a watered down version of "invest in the team, not the product". Sequoia, SoftBank, a16z all seem to be guilty of this.
Anecdotally, Chamath Palihapitiya, in the recent All-in Podcast [0], said that they met with SBF and as a condition to invest they wanted to get rid of dual class voting shares (or something like that) and a board. FTX leadership (not necessarily SBF) replied with "fuck you".
So I guess you have some VCs trying to do the right thing, but if founders can get capital with no strings attach elsewhere, then your ability to deploy that capital is hampered. Essentially, until recently there were was more capital than founders, so founders could just do whatever (and SBF did).
I would expect that this changes a bit with raising interest rates and a tech downturn, but a16z's $350M investment in Adam Neumann's newest Thing makes me think that we are still flush with money ready to be thrown at anyone that has the connections to get a coffee chat in Sand Hill Road.
>but a16z's $350M investment in Adam Neumann's newest Thing makes me think that we are still flush with money ready to be thrown at anyone that has the connections to get a coffee chat in Sand Hill Road.
They have loose morals.
Kevin O'Leary, of Dragon's Den fame, who is now a creditor in the FTX bankruptcy (ie wiped out) recently said in an interview that he would invest with SBF again.
The guy literally had money stolen from him. How do you even explain that?
It may be less about pride and and more about reputation management. It’s the same reason Trump never admits he’s wrong; it’s simply not strategically beneficial to do so.
its also possible that ego is simply a “Kahneman type 2 brain” manifestation of unconscious reputation management, kinda like how instinctively shrinking away from large scary animals is unconscious life expectancy preservation
I'm not entirely familiar with Theranos, but as far as I know, she only defrauded VCs - entities that are designed to take on risk (which can include Theranos-like fraud).
FTX defrauded average people, many of whom were lured by the big name ads, the friendships with Tom Brady, the marquee investors list.
Holmes "blood tests" were giving people useless results. This is LITERALLY putting lives in danger. She probably is guilty of the deaths of some unknown people, we'll never know. Holmes is just as sociopathic and despiclable as SBF, if not worse.
Chamath Palihapitiya has an uncanny ability of appearing when others are left holding the turd bags and then waxing some insight of how they foresaw something. All he cares about is being in the news cycle and making money, he did the same thing with the GameStop short squeeze..
Dead simple: Many VC's aren't very smart and/or ethical. How many major Silicon Valley scandals are VCs involved in? 100%. And for the most part they get a pass.
This end of the era of easy money is going to reveal that many of the "geniuses of our time" are nothing of the like.
The stuff that Sequoia said about him is almost unreal. They talked like he was going to be the greatest entrepreneur in human history. All because he exploited a momentary arbitrage in Japanese Bitcoin exchanges. Then they gave him shitloads of money and acceded to not getting board seats. I honestly wonder if they were that trusting or they just wanted to maintain deniability.
The pitch deck you give to Sequioa partners is not a description of your current business. It's a proof of concept that shows how much the market you're entering is worth and a long term vision of how you can carve a significant piece out of it.
So you don't go in saying "hey look we can make a trillion dollars doing arbitrage between American, Japanese and Korean exchanges." You go in showing that your work doing the former proved the existence of a massive market for crypto securities and derivatives, and how you're uniquely positioned to capitalize on that market.
And if they believe in the existence of that market and the founders are able to execute they'll invest.
That's what they mean about investing in founders and teams.
> All because he exploited a momentary arbitrage in Japanese Bitcoin exchanges.
Originally the story was korean exchanges; he changed to saying Japanese, presumably after too many people pointed out the korean story was impossible. (The Japanese story was also more or less impossible, they could have made a bit of money maybe even millions but not the $10+bn he claimed)
They made ~$10-30m from the Japan arb from what I've read, mostly blew it, but it still got Alameda off the ground. The Korean arb was the initial goal but proved too difficult.
Both of these arbs were glaringly obvious and talked about constantly, but difficult to pull off due to banking hurdles in both countries.
The crypto space is full of projects with empty promises of future profits. If you're an investor looking at crypto projects, you're seeing hundreds of crypto pitches every year that are never going anywhere.
Then Alameda comes along showing actual profits from their early trading operations. Someone who as actually figured out how to make money in the crypto world without selling their own tokens (yet). Compared to all of the other dead-end projects these investors get pitched every day, this seems like the golden child. Someone who is actually turning a profit. Investors want to put their money into the golden child's profit machine and get a piece of that action.
SBF was also very successful in turning his early successes into a lot of momentum and social proof. He played investors and influencers against each other by bringing them all on within a short span of time. When this happens, investors go into FOMO / "me too" mode and just throw their money into the momentum, assuming some other investors have probably done the due diligence already.
See also all accounts of Twitter deal funding, which seemed to boil down to "I'm oversubscribed (lie), so you'd better say yes now and give me more money than you want."
Which is essentially all fundraising in a crowded market, but you would expect investors to be more sophisticated. Even accounting for selection bias (we're opining on the ones who invested).
I've had one of the mentioned firms invest in a place I was a partner at, and it surprises the hell out of me. I remember the investment guy would tell the rest of us "on Wednesday, wear a shirt and tie, X big name is coming" and that's what we'd do. And millions of questions about the strategy, though didn't know much about those details.
Current theory is there's some sort of investment U shape curve. Either people look the part and talk the part and get the part, or they look like they care so little that they must be the real deal. Wish I'd known this, because I am also able to play video games badly while wearing a T-shirt.
This is called countersignaling. Basically, if everybody else invests into doing X and somebody conspicuously does not, it's taken as a signal that they're so good that they don't need to.
There is an episode of the Silicon Valley series where the team tries to increase their VC funding by becoming increasingly toxic and abusive with the VCs they meet, and they end up signing with the biggest offer they got, after one of them literally puts his genitals on the table during negotiation.
Turns out this was hitting very close to the truth. That show was great to show how much a clown world SV can be.
They weren't investing on fundamentals, the books didn't matter. His close association and largesse with regulators, media, and politicians along with his cloak of EA made regulatory capture and the promise of monopoly-like profits possible.
VC's aren't stupid, even if they thought it was 80% likely he was an outright fraud, it's still worth the bet for a 20% chance at 50-100x returns.
It's strange to see EA credited as both the reason for why this went on for so long with no oversight, and then damned in a 'ding dong the witch is dead' manner after it fell apart.
When a confidence man and thief loudly and proudly shouts out a religious affiliation as his guiding star, we generally don't go ahead and condemn the religion for his behavior. (Doing so is a great way to get canceled. At most, we blame him for not being religious enough.)
The VC due diligence is not about corporate governance or a viable business model. Everyone does shady stuff to some extent and everyone aims to "exit" before turning in the first profitable quarter.
The due diligence is about the founder's connections and the ability to use them to skirt regulatory oversight. This checked out - both Sam and his girlfriend came from well-connected families and so far acted the part (including the massive political donations). Whether it's going to save them remains to be seen. I hope we won't sink to a new low of bailing out Ponzi schemes with taxpayer money, but I wouldn't be surprised too much.
Or it highlights that VCs care more about relationships to the founders than ideas or abilities. We like to talk about a meritocracy when it's more about who did you room with at Stanford, MIT, etc...
They did plenty of due diligence to protect their own interests.
Their term sheets gave them a big chunk of the "limited supply" tokens. So even if the business model was trash, they could cash out well before the market for that coin collapsed.
It is similar to when investment banks underwrite stock issues; they purchase a chunk of the stock directly from the company at an agreed-upon price. The company gets guaranteed funds, and the bank is free to sell the shares on a secondary market and potentially pick up a profit.
What's missing in crypto are the safeguards that ensure that banks + companies do not collude on pump and dumps in the securities markets. These include quarterly financial audits and oversight from a watchdog agency like the SEC. Obviously they are far from perfect, but considering the anti-regulation nature of US business (even after the Great Depression), the fact they even exist is a small triumph.
The venture capitalists at Sequoia—the powerful investors behind Silicon Valley success stories like Google and PayPal—were certainly taken (or taken in) by him. Three months ago, one of the firm’s partners, Michelle Bailhe, offered a breathless take in a firm-sponsored story about SBF:
“Of the exchanges that we had met and looked at, some of them had regulatory issues, some of them were already public,” Bailhe wrote. “And then there was Sam.” FTX, Sequoia felt, was “Goldilocks-perfect.”
In colorful language, Sequoia partners reveled in their appreciation for his pitch for FTX.com as the center of all monetary transactions. In their own words:
Honestly, I think any "smart money" managers who invested in this should be ashamed. It's absolutely an indictment of their intelligence.
The basics of due diligence is:
* How is their record keeping of board decisions & financials?
* What board decisions and indemnities exist in those records that may have conflicts of interest or claims from other third parties? (FTX didn't even have a board)
* etc..
Furthermore, probably should raise every red flag ever for a reasonably intelligent person if some 20-somethings with a few years of experience claim they have the secret sauce to trade successfully under every possible market regime. It falls on its own implausibility and only reeks of hubris.
To understand most market regimes likely to occur, you likely need people in their late 50'ies onboard, or even older (there's a reason Buffett, Soros et al come out relatively unscathed out of most crises, while everyone else bleeds out).
Between this, Theranos, Elon getting co-investment and loans in his project to set 44 billion on fire and recent investor letter to Google to cut staff and damage their main engine of innovation
You can only conclude that there is a lot of dimb money out there. Some people made big money despite being idiots. Which means I have a chance as well!
the audits done in july 2021 were by armanino and prager metis, both of which are trying to expand into the digital asset space and would stand to benefit from continued growth and success by ftx. the implication i am making is that there was no way for the audits to be unbiased.
if the audits weren't junk, the company probably wouldn't have been big enough to cause such a mess
People sometimes forget that Enron’s collapse also took down their auditor, Arthur Anderson, which killed their audit business and spun the consulting business into what is now Accenture. The auditors in these situations are often as culpable as the companies.
depends on the stage, at some stages you are just pitching the growth (maybe even just the future growth), not the current financials, which may be terrible for any number of reasons.
Everyone can, vicariously, when the leaked SBF-CE tape drops tomorrow. Personally, I plan on staying off the internet all day so I don't accidentally see it.
Sam used the EA card and his generous donations to places like MIT's Media Lab in the same way Epstein did. This not only earned him tons of goodwill from the scientific community, but it also allowed him to rub shoulders with the likes of Tony Blair and Clinton. Who wouldn't want to invest in someone who is helping to make the world better and has all these aforementioned personalities and institutions helping to provide an air of legitimacy to his pursuits?
(Also, the guy who coined the term EA sat on the board of his FTX fund and was helping to facilitate deals with people like Elon Musk)
https://www.vox.com/future-perfect/23458282/effective-altrui...
How does this relate to effective altruism as a whole? SBF does these things... therefore this kind of behavior is endemic in the effective altruism community?
That its community idealized and gathered around a man with no moral center who thought their entire movement was both a joke and a way to avoid scrutiny for his ongoing frauds. That, at the least, gives an indication that its intellectual underpinnings are not solid.
SBF got tons of pushback in the EA community. He gave jobs to some of the actual thought leaders so they tried to give him some credit, but there are tons and tons of posts on the EA forum about how Sam's extreme focus on long termism made EA too easy to meme on, and even more posts about how his political shenanigans were likely to cause major issues for the movement.
These are the sketchy intellectual underpinnings I was mentioning. It's less an intellectual endeavor than a small rich white guy social club. Having a little money and hanging out in EA circles means I might get the ear of somebody with a lot of money; especially if I can somehow fit my elevator pitch into their MCU dreams.
I'm a believer that altruism should be as effective as possible, but there's little crossover between that and what most Effective Altruists are saying and doing. They seem to largely be either using money for direct world poverty alleviation (usually a very good thing, unless it has second-order effects) which is what gets mentioned (you know, goats or wells, nothing new), or using it as an excuse to waste money on their own idiosyncratic libertarian sci-fi fantasies but disguised as charity i.e. secular Scientologists.
I agree that the long termism stuff is largely not effective, but I take issue with your characterization of most effective altruists. Most EA's are just donating to the givewell general fund which I believe does reasonably well at researching and funding effective charities. They're very transparent unlike the long termists, you'd have no problem reading the white papers they publish to see if you agree with their conclusions on effectiveness. And if you don't you're free to do your own investigation and act on what you find. You'd still be an EA.
I do think it's unfortunate that the long termism get all the publicity, but I can't say I'm surprised. WHo wants to hear about boring old philanthropy? Saving humanity from the ai apocalypse much more interesting.
>That its community idealized and gathered around a man with no moral center
You make it sound like SBF was the prophet/leader of effective altruism, but I don't think that's the case. The wikipedia article certainly doesn't paint him as some sort of leader, and only gives a passing mention to SBF.
Using Wikipedia as a barometer doesn’t always works. In this case it probably wouldn’t work even if SBF was much bigger than he was with EA.
There’s a middle ground. He wasn’t a prophet but he wasn’t nobody either. He was a leading non-academic figure/celeb of EA that didn’t get too much pushback.
>There’s a middle ground. He wasn’t a prophet but he wasn’t nobody either. He was a leading non-academic figure/celeb of EA that didn’t get too much pushback.
That's the non-controversial opinion, but where does this leave OP's comment? Should we push back more on billionaires in movements? Should we assume that everyone who's in movements is in it for cynical reasons? Or maybe only billionaires? A new yorker article on effective altruism suggests that SBF got in before his crypto riches. How does that work? Did SBF suddenly turn cynical once his wealth crossed the $1B mark?
> Should we assume that everyone who's in movements is in it for cynical reasons?
This is an all-or-nothing fallacy.
Perhaps we should view facially "altruistic" movements much more skeptically. Indeed in hindsight it seems like membership is much more advantageous for virtue signaling than for being more "effective" with your altruism (is it really so hard to figure out who will do the most good with your money?)
And you refusing to quote the rest of my comment (which contains proposals that aren't "all-or-nothing") is... some sort of fallacy that I'm too lazy to look up.
>Perhaps we should view facially "altruistic" movements much more skeptically.
And how would being more skeptical have helped in this case? The New Yorker article described Bankman-Fried as being involved with EA since his MIT days. He was donating half his salary while working at Jane Street. His charitable activities when he was running FTX is a logical continuation of this. By all reasonable measures at the time, he wasn't doing it for "virtue signaling".
>Indeed in hindsight it seems like membership is much more advantageous for virtue signaling than for being more "effective" with your altruism (is it really so hard to figure out who will do the most good with your money?)
Is there a reason why effective altruists are being singled out here? Everything you said could be applied to all charitable giving.
it a symptom of underlying economic issues. There is so much economic disparity between the top of the economy and the economic have nots. the 0.001% are running out of places to put money. Money is being poured into iffy startups and new economic vehicles, crypto being at the intersection of those is particularly attractive to those with more money than they know what to do with. place like FTX WeWork and Theranos and more have millions thrown at them with little oversight or due diligence because why not they have to put money somewhere. bond interest rates have been historically low for years to the point where some governments were issuing negative interest rate bonds. If you have hundreds of millions and your alternative is to loose money twice over (once to interest rates and again to inflation) Why not throw it at long shot investments with potentially high returns, especially when you may be able to liquidate your shares before they companies crash.
After all, it is just a Junior University (Credit to my dad, a Cal alumnus, for that joke. Though I'm sure he got it from someone else back in his college days).
