Sam Bankman-Fried and the imperfect calculus of effective altruism
I recently finished listening to the audiobook version of Number Go Up: Inside Crypto's Wild Rise and Staggering Fall by Zeke Faux. The subtitle tells it all: The book is about the craziness that was the first crypto bubble. (As Bitcoin's price hovers around $70,000, another bubble appears raring to pop.)
One of the more interesting parts of the book was Sam Bankman-Fried's perspective of effective altruism.
The Centre for Effective Altruism summarizes effective altruism as:
Effective altruism is the use of evidence and reason in search of the best ways of doing good.
— Source
Basically, effective altruism argues that you should pursue action that creates the most benefit to the most people. Becoming a billionaire is fine if you're giving your money away or using it in a way that helps the needy. It's okay to be a power-hungry egomaniac as long as you can cancel those traits out with generosity.
This delusion empowered Sam Bankman-Fried, the co-founder of Alameda Research and CEO of FTX, to justify the creation of what became history's largest Ponzi scheme. The ends justified the means, if he could give away some of his wealth to help others. The short-term considerations of ethics didn't matter nearly as much as the long-term gains from the potential results.
For the sake of this blog post, let's ignore the obvious possibility that everything Sam Bankman-Fried said was a lie, a distraction from the disastrous investment bubble he helped create. Let's take his views in good faith.
Bankman-Fried acted on the assumption of bad math. He looked only at results when doing his effective altruism math. But he fudged a couple other variables in his calculations: possibility and probability.
There was a possibility he'd pull off his grand ambitions and that it wouldn't all blow up in his face. But probability said he'd likely be unable to pull it off. Bankman-Fried leaned heavily on possibility (the potential success tells what was possible) while ignoring or downplaying probability—the likelihood that regulators would investigate his companies and reveal a house of cards.
Every day humans perform imperfect math, though we may be unaware. Every time you get on the road, your chances of dying in a car accident increase. But if you're unwilling to drive to work, there's a very real probability you'll lose your job. Even if you never explicitly articulate this point, you've calculated that the end result is worth the risk. Maybe you're swayed by the fact that millions of other people make the same decision every week day.
Math isn't my specialty. At best, I was a C math student in high school. But I can't deny the non-mathematical math we all perform every day. Sadly, there are other types of math we willingly ignore.
Too often, people want to live their lives in binary.
Never give up.
Follow your passion.
But sometimes giving up is the best thing you can do, because doing so frees you up for better opportunities. (That's the whole point of The Dip by Seth Godin.)
Scott Galloway echoes again and again that most of us shouldn't follow our passions. A better option is to become passionate about what you're good at.
Parroting platitudes seems to make life easier, but it tends to lead to time wasted on misguided endeavors.
A life well-lived involves some form of calculation. Let's make sure we're calculating the models worth considering.
