Until recently, he was one of the richest people in the world. Now Sam Bankman-Fried walked the abandoned buildings of his Bahamas-based financial empire, FTX. His employees had fled. The Bahamian police had his offices and employee homes on lockdown. Bankman-Fried wandered alone and bankrupt. Getting in the car, he remarked to the journalist Michael Lewis how funny it was: On Saturday, everything had been normal.
Sam would soon be arrested for embezzling customer funds saved in his financial exchange. He denies any wrongdoing.
Sam Bankman-Fried
According to Michael Lewis in Going Infinite, it’s not that Sam Bankman-Fried couldn’t read people. He could. They just couldn’t read him. His face was forever passive, whilst his brain calculated. This freaked people out. So, to make people feel more comfortable, he learned facial expressions. He mimicked emotional reactions in order to put others at ease.
This is not an uncaring attitude; quite the opposite. It’s just that Sam Bankman-Fried cared about people in a different kind of way. Sam was raised as a Utilitarian – someone who believes in maximising happiness and minimising pain in aggregate, over the whole of humanity.
Utilitarianism
Utilitarianism is the idea that we must calculate expected outcomes of all of our actions. Each action is judged based upon how much expected pleasure (minus pain) is produced.
Think of the population of the world like a great happiness-producing machine. Each action you perform should aim to maximise the amount of happiness that machine produces
Utilitarianism and Effective Altruism
When working as a trader at the firm Jane Street, Sam Bankman-Fried was contacted by William MacAskill.
MacAskill represents a relatively new movement in practical ethics called Effective Altruism. The central idea of Effective Altruism is that we are morally obligated to reduce suffering as much as possible. The way you should do this is with a high degree of rationality, considering and counting the consequences of each possible course of action.
If you become a doctor, for instance, you could save many lives over your career. However, if you become a banker and then give away your earnings, you could save many more. As John Lanchester characterises Effective Altruistic thinking: “EA [Effective Altruism] estimates the cost of saving a life as between $3000 and $5000. So a banker giving away millions across a career can save tens of thousands of lives.”
William MacAskill approached many young bankers, including Sam Bankman-Fried with a simple message: Earn to Give.
The Utilitarian calculation here is rather simple. Only the consequences of your actions matter. You can save most lives if you earn vast amounts of money then give it away. Therefore, you are obliged to earn to give.
The drowning child
51 years before Sam Bankman-Fried’s trading firm collapsed, an Australian Philosopher was shaking up the world of applied ethics. A world, by the way, he’d helped bring into being. It was 1972, and Utilitarian Philosopher Peter Singer had just published “Famine, Affluence and Morality”.
In his article, Singer argued that we have a moral obligation to save lives at the expense of what we might consider everyday luxuries. His argument turns on the distinction between obligatory and supererogatory actions in ethics.
Definition
An action that you must do.
Definition
An action that you could choose to do, and would be good of you to do, but that is not required of you
Suppose you were to buy yourself some new shoes. Nice shoes. You’ve saved up for them. Pleased with yourself, you take a walk through the park. Unfortunately, you come across a young child drowning in a pond. There is no-one else around, and no time to take off your new shoes.
The question is not whether you would sacrifice your new shoes to save the child. Of course you would. The question is whether doing so is obligatory or supererogatory. Again, thinks Singer, the answer is relatively obvious.
This isn’t just a thing you could do if you were a particularly nice person. Saving the drowning child is something you must do. It is obligatory.
Now, as a committed Utilitarian, there is no difference in the suffering of a child drowning in front of you, and a child dying thousands of miles away. The pain is the same. Your ability, at the sacrifice of new shoes, to do something about it is the same. So, your obligations are the same too.
It was arguments such as this that first spawned the Effective Altruism movement of William MacAskill, then convinced others like Sam Bankman-Fried.
If you are obligated to maximise universal happiness and minimise universal suffering, then your own wants, your own desires matter as little as if the drowning child were directly in front of you.
The downfall of an Effective Altruist
So, what went wrong? In one sense, the fall of Sam Bankman-Fried is a tale of highly intelligent, young and perhaps reckless people failing to keep track of their customer’s money. It’s about failures in corporate management. Sam Bankman-Fried established a crypto-trading firm, and a hugely successful cryptocurrency exchange called FTX. Customers deposited their money into FTX and bought crypto currency with it. But little did they know that when they deposited their fiat money, it actually went into Sam Bankman-Fried’s trading firm.
The initial, runaway success of FTX made Sam Bankman-Fried one of the richest people on the planet. And the bets placed by his trading firm made him richer still. He was on his way to earning enough to solve all of the world’s problems.
But then his customers got spooked. They wanted to withdraw their money from FTX. Money that wasn’t there. And after a desperate scramble to find the customer’s money that had been invested and forgotten, Sam Bankman-Fried had to give up the search and declare bankruptcy. Not long after he was arrested in the Bahamas and flown to the USA to stand trial for fraud.
On one level, this is corporate mismanagement. But there is something else to say here too. About the ethical structures guiding those at the very top of FTX.
The Ends Justify the Means
Utilitarianism is a consequentialist theory, meaning that it puts value only in the outcomes of an action. Sam Bankman-Fried’s ex-girlfriend described him as someone who would take the flip of a coin if the 50/50 chance was either a significant improvement in the world or the destruction of it. The chance of an extraordinarily positive outcome is worth the risk of a negative one. Similarly, the benefits of reduced suffering in the future through massive donations to charities perhaps justifies the means of betting with customers’ money.
In his book The Rebel, Albert Camus examines the causes of the failures in the French and Russian Revolutions. Looking specifically at the Marxist-inspired revolution of 1917, he argues that the fundamental mistake that led to the deaths of millions was the high aspirations of the country’s new leaders.
Lenin, then Stalin were true believers. Believers in the ideal communist future. And with that aim in place, with the future of a heavenly ideal in their sights, no current human suffering would stand in their way. Camus argues that when we focus only on the end result, we ignore the path to achieving it.
This, I would say, is not just the mistake made by early 20th Century Marxist Revolutionaries, but also by early 21st Century Effective Altruists.
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