Is SBF’s Effective Altruism Philosophy To Blame for the Fall of FTX?

Effective Altruism, the social movement and its heroes, have garnered a flurry of unwanted attention in the days since the fall of its most famous proponent and patron saint Sam Bankman-Fried, aka SBF.

What’s interesting about Bankman-Fried’s historic mismanagement of FTX’s funds is that the public, journalists and crypto people alike, have focused on the role of his personal philosophy — Effective Altruism (EA) — in the ultimate demise of FTX. Which in itself is a compelling case study. I mean, do we know what guiding philosophy Elon Musk has adopted, or what ideology Changpeng Zhao lives by? Their management styles are discussed, yes, but not their philosophies. So what makes Bankman-Fried and Effective Altruism different?

To understand why people blame Bankman-Fried’s philosophy for the fall of FTX, or to gauge whether this criticism is fair at all, it is important to understand what Effective Altruism is.

Founded by the Oxford philosopher William MacAskill, Effective Altruism is a moral crusade that requires its practitioners to do good deeds in the most rational and unsentimental way. One of its more controversial pillars is to, instead of working for charities, earn money by engaging in traditionally lucrative jobs, such as in finance, and donate it to those who need it the most. This school of thought eventually, and unsurprisingly, escaped Oxfordian hallways and landed in the tech-powered high-rise structures of silicon valley. 

Do you hear alarm bells go off? You should. Because, when has any problem, especially something like poverty that takes root in systemic injustices, disappeared by having money thrown at it? And let’s be real, when has Silicon valley done any actual good?

But, setting aside these fundamental flaws, in theory at least, the philosophy sounds harmless: work hard to make money to give it to the poor. Sounds altruistic enough. So, what went wrong?

The major failing, according to certain journalists, lies not in the ideology but in the culture of its flock. Because Bankman-Fried was basically a young millennial with a truckload of cash and very little experience, it was not surprising that he would monumentally screw up his financial venture. According to the senior members of EA, Bankman-Fried was deeply immature, and his myopic perspective led him to prison. It had,  they claim,  nothing to do with his philosophy. The profligacy and recklessness, they argue, are characteristics of the entire generation to which Bankman-Fried belongs. You would think they would have thought of that before making him their poster boy.

On the other hand, some assert, quite vehemently, that Bankman-Fried merely adorned the mask of benevolence to hide his vile desire for money and power. Perhaps the most evident proof of this lies in another code of this utilitarian philosophy – frugality. One of the cornerstones of the movement is that members should give up material abundance and use only what they need to live. Their lifestyle had to be their biggest marketing tool. And for a while, Bankman-Fried followed this to a T, or at least appeared to. In an interview with a popular, albeit slightly annoying Nuseir Yassin of Nas Daily, Bankman-Fried was hailed as the billionaire who dressed plainly and lived with 10 other roommates. What was conveniently kept out of the 5-minute segment ironically titled “most generous billionaire” was that Bankman-Fried and his roommates lived in a multi-million dollar penthouse in the Bahamas and traveled in a private jet. Honesty, evidently and retrospectively, wasn’t his strong suit.

Yet another theory is that everything Bankman-Fried committed, fraud included, was, in fact, in line with the EA philosophy. Bankman-Fried might have swindled seemingly well-off middle-class investors in western countries out of their hard-earned money; but if it was for something more useful, such as alleviating the poverty of the poorest in the developing world, was that such a bad thing? Otherwise put: the end justifies the means.

From this discourse, and many others online, it is clear that there are arguments to both support and refute that EA might have played a role in the demise of the FTX. It is entirely possible that Effective Altruism is, in its unadulterated form, dangerous and destructive. Yet, with someone as unscrupulous as Bankman-Fried involved, it’s hard to place the blame entirely on a school of thought. EA or no EA, the fact remains: a lot of money has disappeared and nothing good has come out of it. Well, not nothing. At least this will make for good TV; I know I’ll be all be watching out for that tell-all ten-part docu-fiction series on Netflix.