How the crypto bro exploited a fad to get rich and con the world
The most uplifting aspect of the Sam Bankman-fried story was always that he guided his way to a putative cryptocurrency fortune of more than $16 billion by following a philosophy of charitable giving known as “effective altruism.”
Interviewers were dazzled by Bankman-fried’s account of the epiphany he experienced over a lunch with Will Macaskill, around the time he was graduating from the Massachusetts Institute of Technology.
A British philosopher, Macaskill advocated a version of “effective altruism” asserting that, if life’s purpose was to do good, then the moral imperative is to make as much money as one can, and then give it away. Macaskill compressed this viewpoint into the edict, “earn to give.”
According to Bankman-fried, the encounter inspired him to alter his post-graduation goal away from joining a nonprofit and toward going into finance, eventually founding what was one of the world’s leading cryptocurrency firms, FTX.
The denouement of this story is now well-known. Bankman-fried’s crypto firm has collapsed in a whirlwind, amid indications that it may have defrauded customers who deposited their funds with FTX to buy cryptocurrencies. Billions of dollars are missing.
That points to the question of what the debacle says about “effective altruism” in principle and practice. The short answer is: nothing good.
FTX and effective altruism existed in a sort of symbiotic relationship. Bankman-fried posed as a world-beating philanthropist. During an appearance in May before a House committee, he boasted about personally committing to “donating 99% of his wealth.” Among other philanthropic initiatives, he testified, his firm had launched the FTX Future Fund to invest in “ambitious projects aiming to improve humanity’s long-term prospects.”
Effective altruism institutions that had depicted Bankman-fried as a star donor — including the Future Fund — are now acknowledging that they may not have the money to honor grants they had promised recipients.
Yet the siren call of Bankman-fried’s wealth blinded Macaskill and his colleagues to the void at the center of the cryptocurrency concept itself: It’s a field rife with fraud and chicanery and lacking any cogent case for its usefulness. That Bankman-fried would exploit his image as a philanthropist to obscure the flaws in his enterprise seems almost predetermined.
The entire Future Fund team resigned Nov. 10. Around the same time, leaders of the movement have felt obligated to state outright that the precept of earning to give “in no way justifies fraud,” as Macaskill tweeted.
The impulse to specify this obvious precept suggests the vacuousness at the heart of effective altruism.
There’s nothing new under the sun when it comes to laundering wrongdoing through conspicuous displays of spiritual piety or good works. Eminent philanthropic works and institutions such as the Ford and Rockefeller foundations and the 1,800 Carnegie libraries across the U.S. are products of their creators’ desire to wipe their slates clean for posterity.
The movement’s defense that it never aimed to inspire Bankman-fried or anyone else to commit fraud to assemble fortunes to give away — it only wants clean money — overlooks that the accumulation of great wealth is seldom morally neutral.
The concentration of enormous wealth in ever fewer hands increases inequality, because so much of millionaires’ and billionaires’ wealth has come at the expense of workers, customers, suppliers and communities. Timothy Noah of the New Republic incisively identifies the most distinctive feature of effective altruism as “the balletic deftness with which it tiptoes past targets likely to offend billionaires,” such as inequality.
Jeff Bezos’ pledge to give away most of his $121 billion fortune during his lifetime, for example, obscures salient facts about how he acquired that fortune in part by underpaying the employees of Amazon.com and, as has been widely reported, subjecting them to inhumane and abusive working conditions.
Then there’s the related question of whether we want a small cadre of rich people — the 1% of global population that controls nearly half the world’s wealth — to distribute their wealth according to their own personal preferences, as opposed to subjecting it to public, transparent judgments through government actions.
Among other issues, the rich tend to engage in charitable, tax-advantaged giving that reflects their own ideological preferences and personal interest, which may not reflect the public interest.
That’s why effective altruism, as a movement, tends to look like just another rationalization for the accumulation of wealth, in this case as the font of philanthropic efforts to benefit humanity into the limitless future.
There’s no reason to suppose that the promoters of effective altruism are anything but sincere in their convictions. As for the monied class that claims to believe in the movement, the jury is out. Interviewed via text messages by Kelsey Piper of Vox.com, Bankman-fried seemed to acknowledge, as Piper put it, that “the ethics stuff ” was “mostly a front.”
“Yeah,” he replied. “I mean that’s not all of it but it’s a lot . ... It’s what reputations are made of, to some extent.”
Bankman-fried rode that horse about as far as it could go before breaking down, and his trusting admirers saluted as he galloped past. Macaskill, for one, admits to being humiliated by the experience.
“Sam and FTX had a lot of goodwill — and some of that goodwill was the result of association with ideas I have spent my career promoting,” he tweeted in the aftermath. “If that goodwill laundered fraud, I am ashamed.”
But will he absorb the lesson that was already taught by Henry Ford, John D. Rockefeller and Andrew Carnegie among countless other financial barons — that the getting of money comes first, and the giving it away an afterthought? The lesson was there to be learned long before Sam Bankman-fried came on the scene, and he ignored it at his own peril.