The Psychology of a Crypto Fraud | Effective Altruism and FTX
Something that is overlooked in the Sam Bankman-Fried and FTX Fraud saga is how Sam Bankman-Fried's philosophy, called effective altruism, was a major red flag that often went overlooked. Sam Bankman-Fried was involved in an ethical philosophy and community called effective altruism that’s recently gotten a lot of attention due to Sam's involvement and the FTX scandal.
Sam Bankman-Fried in particular was very influenced by this idea and it directly led to his career choices and founding of Alameda Research and FTX. The Scottish philosopher William MacAskill was heavily inspired by Peter Singer’s work and became an instrumental leader in the effective altruism movement and has written several books on the philosophy. MacAskill is also a very influential figure in Sam Bankman-Fried’s life as he directly influenced Sam’s career path.
Taking a step back though, the problem with this effective altruism approach and a purely utilitarian worldview in general is that it has an insufficient account of morality. Effective Altruism is focused on maximizing the good through charitable giving, but it’s conception of the good is definitionally limited. How do you actually decide what increases well being? This forces a utilitarian to make a calculus to try to answer the question, but moral questions like the value of life, human rights, and justice are not something that can simply be empirically calculated.
Another way of looking at this problem with Effective Altruism is that its utilitarian nature means that taken at face value, there are really no moral absolutes in effective altruism. Nothing is purely off-limits as long as it can be rationalized as benefiting the most amount of people. The ends can justify the means since the only factor in an action being moral to a utilitarian is the result being a net positive outcome.
Relating this back to Sam Bankman-Fried and the FTX fraud and bankruptcy, you can start to see how this ends justify the means mentality could easily lead to very immoral actions if you run into a person who’s arrogantly confident enough in their utilitarian calculations like SBF appears to have been. If Sam thought the end was good enough and he was looking at it from a purely utilitarian viewpoint, then using customer funds to keep Alameda Research alive so that he could continue to donate money to his causes might be a case where he would see the ends justifying the means.
Another way of thinking about it is that since utilitarianism and effective altruism only focus on outcomes for their decision making process, a sufficiently arrogant person that believes they are always capable of predicting the best outcomes is capable of doing some horrific things for the sake of what they perceive is the best outcome. If you get a full blown utilitarian that is confident enough in their maximization calculus, they have no qualms playing god with their decisions and that’s why Sam Bankman Fried's effective altruism beliefs should have been a red flag that people noticed. They directly contributed to the FTX fraud and collapse.
Timestamps:
0:00 The FTX and SBF Red Flag People Missed
1:42 What SBF Believe About Effective Altruism
4:17 How Effective Altruism led SBF to Found FTX
6:28 The Problems with Effective Altruism
15:36 How SBF's Effective Altruism led to the FTX Fraud
22:51 How EA Leaders Failed with Sam and FTX
24:13 Conclusion
Disclaimer: Opinions expressed in this video are my personal opinion and are for information and entertainment purposes only. It is not intended to be investment advice and you are responsible for doing research and making your own investment decisions. Seek a licensed professional for investment advice.
#ftx #sambankmanfried #fraud
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