Going Infinite |
|
14 Oktober 2023
This is the first year since 2017 where I've achieved my goal of reading 50 books, and the 50th was titled with a significantly larger number: Going Infinite. I've reached the point now where I'll buy pretty much anything Michael Lewis publishes, and this is the 6th book of his that I've read. I pre-ordered it from Amazon without even knowing the subject and flew threw it in a couple days. Excitingly it turned out to be a biography of Sam Bankman-Fried through the fall of FTX and it's immediate aftermath. Interestingly, rather than a criminal, Lewis paints SBF, as he's known for short in financial circles, as socially awkward and careless. One finds oneself feeling sorry for the young man who had to teach himself how to smile at appropriate times in conversation. SBF also thought of life in terms of probability distributions and expectation values, which I can 100% relate to as that's how I think as well. Although SBF starts with different first principles from which he reasoned. Raised on utilitarian principles he thought in terms of outcomes, that is, his morality was not based on actions taken, but instead on the outcome of said actions. The ends justify the means. And then in college he became enamored with the theory of effective altruism. To sum it up, can a very intelligent person do more good becoming a doctor to underprivileged people in Africa or becoming an investment banker and making enough money to donate funds to support several doctors serving the underprivileged in Africa. As a utilitarian, SBF saw the latter option as superior, which is the gist of effective altruism. (If you immediately think of Elon Musk, I'll have another blog about that later). SBF built his inital seed money up as a traditional investment banker for Jane Street Capital in New York, and then left to found a fund purely for the purpose of effective altruism in Berkeley, California called Alameda Research. He had early successes and started hiring fellow effective altruists. But was it a business or a cult? $170 million in investments would lead one to see the former on face value, but shoddy accounting and careless leadership lead to misplacing a large sum of money. SBF's cavalier attitude toward what looked like a huge avoidable loss led half of the employees, including all of the senior leadership, to quit Alameda Research. Subsequently most investors asked for their money back. It looked like the end, but later the misplaced money was found. The employees who stayed felt vindicated and the some of the employees who quit apologized. This should have been a warning to SBF that accounting might be important, but it wasn't. Alameda Research went on to make incredible profits in subsequent years and SBF left California for Hong Kong. There he decided to create a crypto exchange, FTX, which was initially funded by Alameda and also wildly successful. Lewis not too subtly insinuates that part of the reason SBF went to Hong Kong was to escape his girlfriend, but she managed to follow him and hook back up. And now that he was working full time on FTX, he gave her the reins at FTX. It's worth pointing out at this point that SBF seemed to hire for idealogical agreement and intelligence as he created the cult, I mean business, around himself. And in addition to the complete lack of financial accounting there was no org chart either. Everyone reported to SBF, although his inner circle had more access than others. When Covid hit and SBF got locked down in Hong Kong, he didn't handle the restrictions well and went searching for a new base. He found it in the Bahamas, and construction of the cult compound, I mean corporate headquarters, was soon under way. There SBF's inner circle could live in a house together with equal living quarters and run his growing empire. At this point they stopped working on small projects to save lives and started working on existential threats to humanity. And what better way to multiple your buying power than to buy US Congressmen to direct American taxpayer money toward the causes you see as most important? FTX had incredible profits. Funneling these to Alameda Research bought him incredible power. And then in a single week last Autumn it all vanished and FTX filed for bankruptcy. What happened? A classic bank run: someone revealed FTX's lack of financial accounting and depositors rushed to withdraw money from FTX. FTX paid back a lot of them, but then they started to realize that there were billions of dollars that no one could find. FTX stopped paying depositors, most of the employees fled the Bahamas, and the competitors FTX had flown past in growth were only too happy to pile on the misery. I've only peripherally been following SBF's story in the news the past year (it's not the first crypto firm to blow up spectacularly), but it doesn't seem to be going well for him. And it seems at the end that Michael Lewis feels somewhat sorry for him.
