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Sam Bankman-Fried, the disgraced founder of the FTX trading platform, was a member of two cults. Or, more accurately, he was a leading figure in two movements that outsiders regarded as cult. One of these movements I criticized relentlessly. The other where I belong.
The first is the cult of cryptocurrencies. I’ve made a little secret of the fact that while I think cryptography is anthropologically fascinating, its substance, so far, is almost entirely lacking. Blockchain and related innovations are sometimes described as an extraordinary technology looking for an ordinary use case. They’re also a glossary looking for a backbone: jargon-worthy pages (gm, ngmi, maxis, DeFi) which are, as of now, detached from any stable vision of the future in addition to the bet that certain assets will rise. Reinventing the casino and telling yourself that you will reinvent the world afterward requires the mind of a time traveling genius or the faith of a simple fanatic.
The second is the cult of effective altruism, a philosophy that seeks to do the most for the greatest number, now and in the future. Despite its controversies, I find EA (as it is often known) to be a compelling corrective to many modern day activists and philanthropists. If you want to give away cash, EA urges you to figure out how to make a difference to the most lives. If you want to find meaningful work, offer smart (maybe, sometimes, too smart) ideas on how to plow a career path that will create more value for the world than your likely replacement.
Before the sky fell on him, Bankman-Fried was fluent in the language of both movements. He was one of the wealthiest cryptocurrency founders in the world and the rare billionaire who publicly pledged to liquidate his personal wealth for the benefit of causes aligned with genuine altruism. This odd juxtaposition was too delightful for major news outlets to resist. In retrospect, the whole thing looks like a fraud nesting doll: an inaccurate crypto product, built on a frantic approach to protecting customers’ assets, wrapped up in a fraudulent effort to “wash philanthropy” of its ill-gotten wealth.
One question circulating in the aftermath of the fall of FTX is: to what extent should this scandal change our minds about cryptocurrencies and EA? Predictably, critics of both movements say the Bankman-Fried downfall should be the death knell for both causes.
In the days following the FTX bust, I was quick to believe that these were cryptocurrency tentpoles. In how many different ways had the promise of Web3 boosters been pulled down?
- Cryptocurrency proponents have hailed decentralization of finance – the idea that new financial institutions, built on the blockchain, can siphon money from the bottlenecks of state treasuries and central banks. But this fraud was perpetrated on its own centralized exchange, which gave SBF unusual authority to move client funds as it pleased.
- Another purported benefit of the blockchain was that it would make it easier to track money and trace where resources came from; however, with FTX, the authorities still don’t know where all the money has gone.
- Cryptocurrencies were supposed to give us confidence in a world without trust. Instead, FTX created a shadow banking system outside of federal insurance for checking accounts; in other words, it injected an unreliable institution into an otherwise trusted relationship between clients and their brokerage accounts.
In contrast, I was defensive on the issue of actual altruism. As the criticisms of EA poured in, I was certain the critics were being monstrously unfair. I thought: If every philosophy required sinlessness of all participants, there would be no philosophies left. AND: Blaming a philanthropic cause for its donors’ business ethics is simply nonsense; by definition, the money has already been earned when it is given. AND: Does anyone really think that the fraud in the Bahamas makes pandemic preparedness (a core cause of EA) less important to the world?
But I was thinking a lot with my heart, which isn’t necessarily the sort of thing effective altruists tend to promote. My mother died of pancreatic cancer in 2013, the same year EA philosopher Will MacAskill moved into my apartment in New York City, as a subtenant. At the very moment I felt emotionally gutted and existentially disarmed, I found his ethics to be an unexpected balm. I decided I wanted to honor my mother’s death with a large donation to a charity that would save lives, so that, in some cosmic equation, I could feel like I’d recovered a sense of purpose from a senseless tragedy. Effective altruism is often dismissed as a ersatz religion by its critics. But if religion is a tool for turning the chaos of life into stories of meaning, then EA has been more than just a philosophical reorientation for me, or a mere coping mechanism. It has filled a hole of religious dimensions in my life.
EA’s reputational implosion hit hard in another way: I interviewed Bankman-Fried in October about his approach to donating money. He didn’t tell me anything newsworthy, but he demonstrated a fluency with ideas of effective altruism that made him seem like a sincere believer. He was deeply nerdy and seemed very nice.
So consider this a confession. My immediate response to Bankman-Fried’s downfall was that it had everything to do with the absurdity of cryptocurrencies and nothing to do with the wisdom of EA. Over time, I realized how absurd that initial point of view was.
The FTX detonation should leave a dent in both crypto and EA movements. For cryptocurrencies, the lesson is simple: This quasi-cult, which talks about empowering the underprivileged, has proven eerily adept at centralizing wealth and decentralizing losses in an era of soaring interest rates. The story is long and the range of results is still wide. But for now, the ratio of “retirement funds lost” to “non-gambling use cases found” continues to grow.
I also think the scandal should force EA-aligned institutions to be much more critical of their lenders. This movement, which is so perceptive about outputs and outcomes, should be equally concerned about inputs and incomes. Where does this movement’s money come from? Who comes from? How can the reputation of EA’s backers affect EA’s reputation? These are questions that need answers.
Many effective altruists are fixated on the threat of advanced AI, including the so-called alignment problem: What if technologists build a large, powerful system that doesn’t do what we want or doesn’t care about what we want? A silly but useful example is we design advanced AI to make paper clips and the AI steals $1 trillion in banking assets to pay terrorists to acquire a fleet of weapons, with which they ransom governments of all major manufacturers of steel country to cede the entire world supply of steel. All of this, just to meet the AI’s initial parameters: making paper clips.
Today, EA institutions have an alignment problem. The effective altruists who help distribute SBF’s wealth built a large and powerful system whose central actor didn’t do what they wanted and ultimately didn’t seem to care what they wanted. Good intentions are useless in the face of bad outcomes: that’s the problem of alignment, utilitarianism and effective altruism all wrapped up in one sentence. But the opposite is also true: being good is part of doing good.
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