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suy  2yr ago (astralcodexten.substack.com)   Edited 2yr ago   4280 thread views

Scott Alexander on Sam Bankman-Fried, FTX and Effective Altruism

astralcodexten.substack.com

I made this a top level post because I think people here might want to discuss it but you can remove it if it doesn't meet your standards.

Edit: removed my opinion of Scott from the body

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I'm going to repost my comment from this:

If you think you’re better at it than all the VCs, billionaires, and traders who trusted FTX - and better than all the competitors and hostile media outlets who tried to attack FTX on unrelated things while missing the actual disaster lurking below the surface - then please start a company, make $10 billion, and donate it to the victims of the last group of EAs who thought they were better at finance than everyone else in the world. Otherwise, please chill.

Is Scott serious about this? This is like "you're not President! How dare you criticize the President?" Or like those Mormons on Usenet who told me that it doesn't matter that Mormons hide their secret ceremonies because if I wanted to know about them I could always spend a couple of years being a Mormon. (Which incidentally would also mean I could get punished for criticizing them, which defeats the whole purpose of wanting to know about them.)

"You must become a billionaire yourself or you have no right to criticize a billionaire" is an awful, awful, take and as a poisoning the well fallacy is symptomatic of the problems that got you guys into this mess in the first place. (And even when X is easier to do than becoming a billionaire, "you must do X or you don't get to criticize X" is an awful take. I probably could become a Mormon, but I shouldn't have to in order to say there's something I don't like about Mormonism.)

I think it's more like pointing out that there's no particular reason the EA charities should have been able to spot a fraud when the fraud went unspotted by a huge number of highly motivated traders whose job is, in part, to spot that sort of thing (so that they can either avoid it or make trades based around its existence).

I think that his point is not "you aren't allowed to criticize a billionaire unless you are a billionaire" but "you aren't allowed to criticize people swindled by a scammer when there's some billionaires swindled by them unless you are a billionaire".

Saying "you could have known ahead of time" implicitly criticizes the billionaires who were swindled and didn't know ahead of time, so the latter ends up being a special case of the former.

"but I was friendly with another FTX/Alameda higher-up around 2018, before they moved abroad. At the time they seemed like a remarkably kind, decent, and thoughtful person, and I liked them a lot."

Did Scott fuck Caroline Ellison? She was high up in the organisation, poly, and has a tumblr full of rat adjacent stuff.

https://twitter.com/AutismCapital/status/1591601671943393280

Reading it leaves me legitimately wondering if she embezzled $10 billion to get Sam to like her more than those Asian girls he was living with.

IIRC Scott has written about having very little interest in sex as reason for letting his trans gf (male) cuckold him. So I doubt it

I thoroughly regret clicking on that tweet and actually reading all the replies.

Well, then you're gonna regret reading the paragraph below even more, courtesy of some deranged mind on 4chan:

This. Normies can't understand the thrill of pinning the weasel. Night spent chasing an over amphetamined Caroline around the bean bag forts. Her squealing and gibbering, pouring sweat and on the verge of seizing. Your friends build up an intoxicating, delerious state with Talmudic chantings at the sidelines, hitting the Caroline-toy with brooms if she tries to escape. Sam would be giggling and laughing as the waves of methamphetamine pleasure seem to harmonize with the droning herbrew verses. He runs through the bean bag maze fat and portly, with his viagra powered penis a divining rod for the weasel. Sweat gushing down his face around his unfocused eyes he laughs and chortles until he gasps "Found you!". The Mathsweasel screeches defensively but Wankman Bankman is upon her in seconds. His penis thrusting blindly into her flank, leg, stomach and ribs unconcerened about anything but the motion. Eventually serendipity finds her mouth and the Cocktube Rodent is placated, sucking contently on Bankman's dehydrated dick.

Someone on Drama mentioned that this was a GVLDEN RETRIEVER tier shitpost, and I'd be inclined to agree...

Stop trying to turn this place into rdrama. It's not rdrama.

I don't know if this is report-worthy, but I'm gonna strongly request that people not repost (or write original) real-person porn fanfic here, even if intended as parody.

Please provide justifications for the request that are at least as strong as the impetus of the request itself.

  1. Trivially, places that allow RPF tend to get unpleasant pretty fast, in ways far broader than the RPF itself. That might be a correlation sorta thing, but it's still the sorta correlation that winks-and-points.

  2. It is, almost by definition, not merely spam or meaningless spam, but high-word-count meaningless spam. Eg, the above is a 160 words of self-described shitpost, and even by rat-sphere standards low-information-density.

  3. Saying false (or knowingly made-up) things is bad epistemology in this sort of context. You and I might know that Sam Hyde hasn't committed the most recent mass shooting, or that this was a joke; but there is no level of drama parody that someone won't use in a We Got 'Em sense.

  4. I didn't need that mental image. Which is funny on its own, fair. But a broader community standard of seeing who can wreck the greatest psychic damage in paragraph form isn't a great way to encourage understanding and debate. I'm not gonna say that the weird furry side automatically wins, since I know what makes rDrama cheer, but it's the sort of arms race that leads to civilian casualties.

Can we consider the possibility that all of this was vaporware?

  1. Most people don't know what FTX is

  2. Most people have no idea who SBF is

  3. Most people have never heard of EA

Scott Alexander seems to be devastated by something most people didn't even know was a thing, much less an important thing.

It doesn't matter that you personally don't know what is is. What matters is what the money guys care about. All the FTX money is gone. All these bloated charities are going to have to make cuts.

Not only charities. There are aftershocks through all crypto-system, and a lot of people that aren't affected directly are re-evaluating their stance towards crypto, which may lead to affecting even more people (imagine a major bank planning to invest in crypto - but then deciding to stay away - that'd probably lead to some reallocation of resources, somebody not getting a promotion, somebody fired maybe...)

Examples: https://www.bloomberg.com/news/articles/2022-11-14/ftx-fiasco-sparks-billions-of-dollars-of-outflows-from-exchanges https://www.bloomberg.com/news/articles/2022-11-15/ftx-latest-regulators-discuss-questioning-bankman-fried-in-us

It's way beyond just FTX customers and EA charities.

Yes, but this is perfectly consistent with FTX being a Ponzi scheme all along. It was never an important thing for humanity, some people were just duped into believing it was.

Depends on what you mean by vaporware.

If you're saying you and I, personally, should not give a shit about what happens to Silicon Valley venture capitalists--you're probably right. I'm nowhere near the area, didn't donate to or invest in anyone involved, have no personal connections, etc. This isn't some sort of 2008 collapse that will ever affect me personally. I posit that the same applies to 95+ percent of the commentators writing dramatic articles about What This Means For Rationalists and posting them here and elsewhere.

If you think Scott is wrong to be so devastated...I can't sign on to that. Seems to me his social and professional circles mean neither 1, 2, nor 3 apply. Insofar as I'm generally interested in reading what Scott has to say, I can feel sympathy, even though I can't empathize.

Yes, but this is what happens when you are conned. You feel betrayed for trusting someone or something only to realize that your bullshit detector isn't as good as you thought it was. The cognitive dissonance when you are forced to change paradigms is a personal struggle, but not something that changes the world in any way, only your perception of the world.

The goodness in the world isn't going to diminish because effective altruism turned out to be bullshit, only Scott's belief in the goodness in the world.

Many rationalists support crypto because they consider that it will help to avoid government control to buy nootropics, participate in prediction markets etc. My advice is that instead of supporting crypto it is better to lobby politicians to allow to do these things legally and openly. That may take longer time and be harder to achieve but it will be much better because negative externalities from crypto are too severe and damaging that they cancel all the benefits that crypto could give us.

Many of these things are legal in other countries and they are not as great as many rationalists think. I am in Latvia now; piracetam and phenibut are manufactured by a local pharmaceutical company here, they are not only legal but doctors routinely prescribe them. What I think about them is that their effectiveness is very low. Healthcare professionals consider them as low class antidepresants/anxiolytics. They have very few adverse effects but basically they do very little.

If 50% of antidepressant effect is due to placebo effect, then prescribing something to people with moderate depression/anxiety will have 50% improvement rate. Doctors initially select medicines with less side-effects and switch to more serious antidepresants when they are not effective. It would be good if other countries used them as well but in the big scheme, they matter very little that it is not worth to use crypto to illegally buy them.

piracetam and phenibut

prediction markets

Are you for real?

No, I need crypto to move assets out of an authoritarian country, to buy actual illegal drugs and VPN and bulletproof servers, to fund people doing unapproved research and in the extreme case, assassinations. I cannot rely on «lobbying politicians» who can easily score political points with the 95 IQ hoi polloi by throwing them some witches or saying they're «thinking of the children» or some such. No polity is deserving of my trust and vulnerability.

Societies with very well tracked money tend toward tyranny since Spartan times, and tyranny tends toward tracking of money streams; your approach is entirely dependent on trusting democratic procedures, but that is obviously impotent past some points of no return which are easily reached. This clown world logic of «let's force people to do everything in the public sphere instead of running underground, then they will negotiate a better equilibrium» is either naive or just a cynical cover for totalitarianism with extra steps. Likewise for its variations – let's disarm people so they become more active in civil politics and such. Let's prohibit medicine to promote healthy lifestyles while we're at it.

In reality, the absence of privacy, freedom to change one's state, and tools of personal agency such as weapons and means of exchange, reinforces the dominance of incumbent players, by shortening the feedback loop. It takes away the chances of small players to prepare something and come to the table with solid counteroffers, and rewards them for just shutting up and accepting the mainstream position, wherever it originates.

negative externalities from crypto are too severe and damaging

I believe that the emergence of domesticated peoples who can trust the polity is already a massive negative externality of economies of scale and organized state violence, and a dangerous step towards the eusocial attractor. It's incomparably worse than a little crime and some modest waste of electricity.

No, I need crypto to move assets out of an authoritarian country, to buy actual illegal drugs and VPN and bulletproof servers, to fund people doing unapproved research and in the extreme case, assassinations.

Talk about ambitions ;-)

Cyber crypto assassinations are something that happens in cyberpunk fiction and anarcho capitalist theory, there is no one documented case IRL of succesful online murder for hire.

To order assassinations, you need close and deep personal connections of the right kind, the opposite of crypto.

"Why are you so sad? Seeing my friend sad breaks my heart so much."

"Billy Bob is messing with your business and causes you so much trouble? Fortunately, I know some guys who know how to deal with such problems. No, I do not need anything, I will do everything for my friend."

...

Few days later, Billy Bob is found swimming in the nearby lake wearing concrete shoes. Everyone lives happily ever after.

Sounds like a market opportunity to me. Why aren’t there Bond-villain type organizations that kill for profit alone? Was RICO that effective?

Any hired killer who actually put themselves up online openly would get immediately arrested, and anybody who googles "hire killer online" will be led to a police honeypot and promptly arrested. Because duhhhh.

Maybe there are no Bond-villain type organizations? I mean, there are crime syndicates, but they do not need to retail their enforcement capabilities to any random Joe with a bitcoin. They want them for themselves, tightly controlled by their leadership. And those who would retail probably would end up taking an order from LEO and going to jail very soon. It's an inherent contradiction between having wide retail appeal and tight opsec.

Thanks. I can better understand the mind of crypto supporters.

I am not completely naive and understand that any government can become totalitarian very quickly. The recent pandemic is a prime example – how leaving your home to have a walk in a park suddenly became a punishable offence. And at that time I was in Spain that is known for quite liberal attitudes and yet the police stopped me to check if I really had a receipt from the closest grocery shop to justify my walk outside. I won't even start with vaccine mandates and other restrictions.

I just don't see how crypto can help. I only see that it is even more important to work collectively even now to maintain democratic norms, to allow debate and free choice. Pandemic restrictions were supported by majority of population, so it is not only the problem of politicians turning totalitarian but the lack of understanding and information by the whole population.

The same advice I give to those who already live in countries that are slowly turning totalitarian like Russia. People should be more active in re-establishing democratic norms instead of working on crypto. It was unfortunate that Iranian emigrants are capable of much wider protests abroad than Russian ones.

We had large protests years ago, to no avail. Bluntly, we shouldn't have bothered with protests at all. They are an instrument of negotiation within an already-mature democratic polity where the power has not separated substantially from the populace, and within its Overton window at that. They do not work against an entrenched, well-armed and competent (at this sort of thing) regime, and Russia routinely devolves into a state with such a regime. What we should have bothered with instead are kamikaze drones, and setting siloviki houses and cars on fire, like Ukrainians do with Kremlin appointees. That had worked once – for good or for ill. And crypto would have helped, but for the unwillingness to seriously try – because it's the only reliable means to transfer value untraceably over long distances, that's available to commoners and not just mafia.

I'm still kicking myself about it. Hopefully other people around the world take notes.

@crushedoranges speaks of serious no-nonsense men who don't fiddle around with crypto and, when totalitarianism approaches, take out cash etc. etc. Very cool – in a decade they'll be as weird as crypto enthusiasts if not more. Governments promoting Central Bank Digital Currencies, and nice organizations coordinating deplatforming on Paypal and other centralized platforms, will see to it. And you'll learn, too, that banknotes are unhygienic (do you want to kill granny?!), wasteful, enable criminality and so on; and seeing the cost of resistance and hurdles to financing and lobbying it, it may be that you'll learn to very sensibly repeat this received wisdom.

In my opinion, those serious men with their unwillingness to master even layman-friendly tech are fetishistic LARPers of a bygone era, coelacanths who exist solely at the sufferance of their regime and are unable to mount any organized resistance; as an untraceable means of exchange crypto is strictly superior to cash, allows more freedom, and for anyone with half a brain and serious concern about coercion the implication is clear.

I agree that protests sometimes have very little success or no success at all in near term. However, with time they can change collective minds more effectively than armed resistance. After the WWII many Latvians took the arms and waged guerrilla war against Soviet occupation (fondly remembered as Forest Brothers). They failed and had no impact at all. What changed everything was Gorbachev's glastnost (openness) policy, people were allowed to talk freely and they decided that they don't like the Soviet system anymore. Despite what you read in history books, that was the main reason why the Soviet Union ceased to exist.

Today I learned from my aging mother that during WWII as a small child she was a refugee in camps in Germany. She might remember some details wrong but when the war ended they were let out and they had to decide: stay in Germany or go back to Latvia. She said that they had no information, no understanding about global things and they were afraid to stay in Germany (after all, Germany had started the war), so they decided to return to Latvia. Today it sounds like a monumental mistake considering that Latvia remained occupied by the Soviet Union and how different the post-war development turned to be. This just illustrates that sometimes people make bad choices because genuinely they don't know better.

Ukraine is again a good example of that as well. Areas with greater Russian loyalties are much easier to conquer by Russia. Ukraine is in a bad shape but encroaching totalitarianism is much worse with potentially poor future outcomes. Beliefs that people have in Russia about the west are main reason why this war is happening at all. Protests can nudge people to change their minds better than weapons.

What changed everything was Gorbachev's glastnost (openness) policy, people were allowed to talk freely and they decided that they don't like the Soviet system anymore.

But that ultimately reveals the answer as to why the Soviet Union fell: for one critical moment, the Russians lifted the boot.

Fast-forward 30 years, and now everyone there is clamoring for re-application of said boot.

Not everyone, only people who are misinformed.

The communist party tried to put the lid back and a coop was staged against Gorbachev and army units were sent to the Baltic countries etc. They failed because people were not afraid to talk about it anymore.

I don't know why Russians willingly blinded themselves afterwards. Of course, it was the government that gradually started to control information and played on their nationalistic feelings. Most people who support Putin, do it because they favour Russian supremacy, they want to feel that Russia is the greatest nation on earth. Globalization robs you of that. As many critics say that people in the European Union have lost their roots and exchanged their culture to material goods. When one sees oneself as a true carrier of civilization and the rest of the world as rotten, one can justify all brutalities in Ukraine.

But the reality is that Russian culture is nothing special, based on the same things that people value all around the world.

Many rationalists support crypto because they consider that it will help to avoid government control to buy nootropics, participate in prediction markets etc. My advice is that instead of supporting crypto it is better to lobby politicians to allow to do these things legally and openly. That may take longer time and be harder to achieve but it will be much better because negative externalities from crypto are too severe and damaging that they cancel all the benefits that crypto could give us.

Many of us think crypto and decentralization are just good things in and of themselves.

This is, bluntly, underpants gnomes logic.

I know you're an enthusiast, but liking (and seeing) those things as worthy of pursuit in of themselves does not make it true. There are a lot of X and Y things we can introduce into systems that exist, but would we want to? Is there a tangible, economic benefit? Is it cheaper? Is it better? Or, lacking in those two essential traits: is it the right thing to do regardless?

Forgoing the efficiencies and economies of scale of the current system is a cost. Trusting centralized institutions is extraordinarily cheap on scale. And sure, there may be a market of legitimate use - buying grey-market goods, sending funds to dissidents, etc. But that economic activity is a sliver of a sliver. That's not what advocates are pumping. They're envisioning a mass adoption across the whole economy - of which crypto's limitations and decentralization's costs would become rapidly apparent.

Crypto without exchanges is a currency without liquidity, a nightmare of passphrases and uncertainty of payment. If everyone self-custodies and that is the result, what value is the technology? How are you going to buy a pizza with your cold storage wallet?

At least underpants physically exist as a tangible good.

Trusting centralized institutions is extraordinarily cheap on scale.

This may be true, but as Aqouta pointed out, trust has to be earned. Doubly (or triply!) so when you are an institution in a democratic nation. The US Dollar is the world's reserve currency, and while I can grant that fiat currencies are not The Devil, the US Dollar is pretty much held up by confidence in the US Government (or perhaps its value is directly a measure of confidence, even).

So imagine what happens when the country I was born and raised in has been pissing away international goodwill, domestic goodwill, treasure, blood, and competence for practically the entirety of the 21st Century, while private industry finds new ways to exploit the bad decisions made by the Reagan and Clinton admins. Every 5-10 years, there's been some new bubble blowing up, whether that be in tech, housing, or even Crypto. Meanwhile, the Internet, a product of American innovation, has become the new agora, only to be colonized by the same corporate forces colluding with the government to ruin everything. (For God's sake, Visa and MasterCard are pushing Pixiv around. Pixiv! A Japanese company having to self-censor because it made the mistake of connecting itself to the West's payment-processing duopoly!)

I'd like a world, or at least a US, with strong regulations and well-considered laws enforced consistently, where dumb financial shenanigans and abridgement of our God-given rights in the name of profit never happened, but we do not live in that world. We live in the Cheems world instead.

I don't want to act like a defectbot, but our world is incredibly defective, and you do not cooperate with the defective.

Not that I have any true objection to what you just said, but the USD-market has its share of bad actors, then crypto is crawling with them. It would be charitable to say that most of the space is full of scams preying on dumb money.

Just because a system is bad doesn't make its alternative automatically better! Crypto enthusiasts are baffled at the lack of uptake of their ecosystem - it is because for the vast majority of users, they lose their entire investment or come away losing money. An unregulated, legally opaque market is the perfect environment for naive investors to lose their shirt.

(And being a 'grudger', in the defect/cooperative axis, is a suboptimal strategy.)

Every time I encounter a post like this I have to wonder if we live on the same planet. Have you just not been paying attention?

The center is failing. Absolutely necessary for life central entities are being turned against political enemies. Canadian truckers had their ability to transact removed. Websites have seen what were once bedrocks of the internet open up and swallow them whole at the behest of people who were obviously lying. And this is in the advanced and liberal world.

That you discount centralization risk can't even be described as a failure of imagination because it's happening publicly right in front of you. People are trying to sell you fire insurance in front of your burning home and you are calling them paranoid.

And we can talk about the other benefits if you want, zero cost public and programmable escrow, third party markets for proprietary licenses, cutting out nearly every conceivable middle man or censor for supporting content creators, much more. But you seem to place zero value on decentralization and I can't get you over that hump, you have no plan and don't want one. Good for you. Enjoy your bliss.

Crypto without exchanges is a currency without liquidity, a nightmare of passphrases and uncertainty of payment. If everyone self-custodies and that is the result, what value is the technology? How are you going to buy a pizza with your cold storage wallet?

I'm find with custodial exchanges existing, I think they're probably the correct option for most people in the mean time. But uncertainty of payment is not crypto, it's centralized entities that can unilaterally tell you to pound sand. And you buy your pizza with your hot wallet obviously, what an absurd question.

On Reddit I made a doomerpost when Trudeau declared his state of emergency. I pulled cash out of my credit union and waited. I'm certainly not uninformed of the problem. I even went to a convoy political meet-up quite recently.

And even in this self-selected audience of people who this is immediately relevant, I heard nothing about crypto. Crypto did not stop the chilling effect of the government declaring martial law. These are relatively affluent blue and white collars and they're keeping their money in relatively traditional investments (gold, real estate, small business) and not crypto. They still bank at Scotia, BMO, etc, for Christ's sake.

And it is because the benefits vastly outweigh the negatives. You can talk all day about things you value but revealed preference shows that most people do not hold the same interest in the technology or in the concept of decentralization. People want to know if it's convenient, cheap, and safe in the real world. If you are a normie with no idea of what crypto is you would have been better off trusting the system because political and free speech rights are secondary to, you know, making sure you don't lose everything to a rugpull.

People who prefer trustless systems are, on the whole, one part tech-libertarian and nine witches.

I also have a religion and that's fine. It still think that sometimes spending too much time, money and energy on religious activities can be a waste of human potential.

I'll take you seriously when you can successfully follow a 2 step guide for setting up a wallet.

Unnecessarily antagonistic. There was no need for this comment.

fair enough.

But FTX is not crypto. FTX was a mixture of the old and the new, which is precisely why it failed.

The whole point of crypto is to be completely detached from old systems, so there's zero surface of attack from government. If you use pure crypto (no exchange), then you are immune to these kinds of failures.

I cannot imagine how crypto could work without exchanges.

Once I wanted to install bitcoin wallet just for interest. At that time the wallet file size was 2 terabytes large. I decided not to waste my resources on this. The same is probably true for most people with the exception of a small number of motivated people.

Without exchanges bitcoin would never get to the usage levels it has now. If you want to buy drugs with bitcoin, the seller needs to be able to use those bitcoins to buy something else. Even today there is not much use for them and most likely one needs to use exchange to get another currency that one can use to buy legal things.

I understand the original idea was that everyone mines bitcoins with their own hardware and then engages in commerce with other people. In reality as soon as exchange was started, professional miners started earning real (fiat) money.

But even if bitcoin community had managed to ban exchanges (not really sure how) and had captured sufficiently large economy to be self-sufficient (I sell pizza for bitcoins that I use to buy drugs or whatever), the government would have controlled it, to collect taxes if not for other reasons. Did you know that you have to pay tax even for barter transactions?

There is nothing special about bitcoin as originally intended. It is nothing more than digital cash. That is not sufficient to avoid government control because the government controls physical things. Not fully, not entirely but sufficiently to make it hard enough to discourage the majority.

I cannot imagine how crypto could work without exchanges.

The exchanges don't need to work like the do now. The exchange could transfer the bitcoin to an external wallet, it doesn't need to be a wallet controlled by the exchange.

It's perfectly doable to buy bitcoins with Binance, and then transfer those to an external wallet you have 100% control of. That way if Binance disappears you still have your bitcoins.

I cannot imagine how crypto could work without exchanges.

Decentralized exchanges powered by smart contracts.

Once I wanted to install bitcoin wallet just for interest. At that time the wallet file size was 2 terabytes large. I decided not to waste my resources on this. The same is probably true for most people with the exception of a small number of motivated people.

You erroneously tried to set up a validator node. A crypto wallet is just a pair of 256 bit keys. You genuinely seem to not know anything at all about crypto, I find it strange that you are willing to comment so confidently on it.

What purpose a wallet will have if I cannot mine or otherwise participate in decentralized network with validations? No, I didn't make a mistake. I just decided that I don't have enough available resources for this.

You don't need a validation node to "participate in decentralized network with validations", much like how you don't need to own a supercomputer to run your code on one.

I am not sure what do you mean by this. Why would I even want to run some code on a supercomputer?

Why would I even want to run some code on a supercomputer?

From time to time I'm doing a work project that needs a lot of compute to properly converge. Now this isn't that common an occurrence, to the point that 95% of the time I'm not using one, but for the other 5% of the time it's absolutely necessary, unless I want to wait six months running the code on my office desktop, by which time the signal I'm investigating may well have disappeared. Hence we rent out compute time on a supercomputer from Amazon and this works well for the firm even though owning a supercomputer is not practical as 1) We're not in that line of business and 2) The majority of the time It'd be lying idle doing nothing.

You have a specific job but I don't. Although you could say that by posting here and on reddit I am probably using code that runs on some Amazon cloud services or whatever but that is too indirect.

I just wanted to see if I could be a part of bitcoin network without any extra expense by using my own laptop. It wasn't really possible.

FTX was a mixture of the old and the new, which is precisely why it failed.

I'd argue that FTX failed because it made risky bets with depositor funds without consent or disclosure, repeatedly; it could have been completely dollars or completely *coin and had the same problem.

Sure. I am not particularly interested in FTX blow-up. I am saying that whole crypto is misuse of talents and waste of energy, time and money(!). Sometimes we criticise that the smartest minds in Silicon Valley instead of searching for a cure of cancer and other good things, work hard on how to make people to click on ads. But crypto is much worse. Ads at least can help to connect sellers and buyers and improve economy and ultimately our standard of living. But what can crypto give us?

In comparison, Theranos failed and was fraudulent and many hundreds if not thousands of biopharma startups fail. But one of those gave us mRNA vaccine and another Harvoni (highly effective HepC treatment).

I'm very skeptical about crypto, and I agree that the majority of this crap tends to be scams or worse.

But I think people underestimate and badly underestimate the flaws and vulnerabilities in modern centralized systems. People elsewhere have pointed to the issues with financial centralization at time where governments are shutting down bank accounts of dissenters, but it's not the only one. If you don't pay Cloudflare or Akami their due, literally anyone on the internet can burn your site so bad it'll charge you rent. The hosting companies who literally name their company over free speech went from "A lot of people are for it, as long as it’s for them." to "The “Free Speech” in our company name is not a secret dog whistle to you." in less than a decade, and I still trust them better than almost all of the competition, which is to say I trust them a little less far than I can throw their entire server farm.

And there's endless piles of this stuff, in ways that might surprise you! The same clawback consumer protection mechanisms that patio11 argues in favor for traditional finance are why doing anything as a direct seller or commissioner online, no matter how safe and clean, risks getting absolutely steamrolled by chargebacks (and note that Stripe a) won't play with a lot of businesses and b) won't actually guarantee the protection so much as be better than getting fucked over all the time). E-mail and snail mail communication is getting sketchier. The not-very-subtle implication from many messages from OpenAI has been that every regulator anywhere near their field or general policing is breathing down their neck. Search is getting worse by the day; proving identity or ownership of digital media as anything less than a multi-million-dollar corporation is basically just shrug-world.

Again, I'm very skeptical: on top of the fraud, there's a deeper fault that crypto isn't there yet and might not be technically capable of getting there. The oracle problem alone makes a crypto-DNS just as vulnerable to centralization failures as traditional DNS, none of the extant chains can get even 1990-levels of compute power together at any latency, it's extremely vulnerable to poisoning, and it's never been particularly clear that the attempted solutions for any of the most trivial of the above problems actually work or could ever work even on toy models.

I'd also prefer more emphasis on atoms than bits -- I love that we're in a world where people are building transistors in their garage, or even marginal stuff like DIY haptics for VR. Getting away from digital providence for everything and anything worth doing would be another solution, albeit one that's probably even harder to solve.

But it's very nearly the only thing even trying to get close to a solution in this problem space. Maybe it'd be better if people realized it was a bad choice, and started fresh; maybe it's not a solvable problem in any way. It's weird to just dismiss the problem space as a whole.

I think that modern finance is complicated and may not be optimal but overall it is working fine. It could be improved but only by people who really understand how it works and what are the actual problems. The crypto essentially proposed to restore the gold standard in a digital format. It completely ignores all the reasons why the gold standard was rejected and tries to solve non-existant problems.

The second aspect that worries me is that most crypto supporters are so much against the government that it could be called anarchist movement. I agree that any government can become dictatorship. But the solution is to make sure it doesn't instead of creating society or any aspect (like finance) that doesn't need government at all.

But the solution is to make sure it doesn't instead of creating society or any aspect (like finance) that doesn't need government at all.

I'll make the same response I do to more general "but we live in and should reform society" ones: I don't think the math works out for it. You can and should make the democratic arguments where you can win them.

But the truth is you can't win them all. You probably can't even win a majority. Not just in the FCFromSSC sense that multipolar tolerance failed, but the deeper issue where even if it had survived, you need to get to 50%+1. The smallest minority is the individual, and for any politician is willing to serve a market of one, there's a few dozen businesses willing to take commissions for a thousandth of the price.

You cannot win every fight, it doesn't mean that we shouldn't put efforts to support democracy and freedom of speech.

I cannot blame EA or rationalists for not taking greater stance against the government restrictions including vaccine mandates. That's everyone's personal decision to choose the hill to die on. But I am annoyed for them to actually support restriction of speech during the pandemic out of fear from disease. When I tried to speak out in the beginning that forced lockdowns are extremely damaging and will not prevent the spread of covid significantly, they called me names. At the end I was vindicated and the governments that forced lockdowns and vaccine mandates and fired unvaccinated people from their jobs were proven wrong, and that's not even acknowledged properly.

Possibly we got into this situation because dissenting voices were subtly and unjustly suppressed on all levels, including on social media. Alex Berenson was kicked out from Twitter for saying that vaccine does not prevent the spread of infection when this information was already publicly known. I don't agree with everything he says but clearly the overzealous fact-checkers had no understanding of nuance and scientific details.

In spite of all these setbacks, I believe that the only way forward is to foster debate, free speech and democratic norms. We need to learn from these mistakes. It is not too late to fix Canadian customs law and make them to respect minorities. Concentrating too much on technical solutions makes us to lose the focus on these important aspects.

Some people are asking whether people who accepted FTX money should have “seen the red flags” or “done more due diligence”.

I find this stuff really obnoxious. Since when has it ever been the job of charities to investigate the businesses of the people donating them money? EA or not, what charity does this? It would be a ridiculous waste of time and money, it's not their job and specialization exists for a reason. People are talking like it's some deep failing that they didn't find him suspicious and refuse his money, but just how many legitimate donors should they be willing to refuse as "suspicious" for the sake of avoiding a criminal? Not that it would have been practical anyway, EA-endorsed charities are not some unified group and a lot of his "EA" donations were stuff like directly supporting political candidates who promised to do something about pandemic preparedness

We're not talking about Sequoia Capital, the venture-capital firm that has now written down $214 million in FTX equity, had access to internal information, and actually had a duty to their investors to try to avoid this sort of thing. Similarly we're not talking about their other institutional investors like Blackrock, the Ontario Teacher's Pension Plan, Tiger Global Management, Softbank Group, Lightspeed Venture Partners, and Temasek. We're not talking about the state of Miami selling them the naming rights to a stadium for $125 million dollars, giving them a lot more advertising than some blog posts saying "this billionaire supports EA, great!". Somehow EA is held to a much higher standard than any of these, even though it seems obvious to me that accepting donations should be held to dramatically lower standards than investing teacher's retirement money. EA should focus on effective charity, that is already a sufficiently-ambitious specialty, it shouldn't focus on doing unpaid amateur investment analysis trying to beat institutional investors at their own jobs for the sake of refusing donations that might turn out to be from a criminal.

We're not talking about the state of Miami selling them the naming rights to a stadium for $125 million dollars

This seems more like the charities than the others. There isn't really some fiduciary duty to investigate people giving you money in your legitimate business. If I sell books and some weirdo buys 10000 of my books, there's no reason for me to investigate why the weirdo is a book enthusiast who wants 10000 copies of "The Underpants Gnome"

Yes, I don't actually think it would be good if states selling stadium naming rights were expected to do that sort of investigation. Leave it for their investors and law enforcement. But I see people making arguments that EA charities accepting FTX's donations gave them advertising/credibility and this reflects EA being naive or short-sighted-utilitarians or whatever. Well a lot more people heard about FTX from the "FTX Arena" than by reading articles about philanthropy, and I'm not seeing articles on how the state of Miami must have been horribly naive to accept FTX's money.

There are generally regulations around the operations of a charity. To quote from the Charities Governance Code in my own country:

Conflict of loyalties

A conflict of loyalties is when a charity trustee’s loyalty to another group could prevent them, or even just appear to prevent them, from making a decision in the best interests of the charity.

Example: This might happen when the charity trustee has joined the board as a nominee of a particular group, such as members in a particular county, a funding body, or staff.

This situation could cause the charity trustee to think that they should act in the interests of the group that nominated them, rather than the charity as a whole.

Exercising Control

Why this principle is important

All charities, no matter what their complexity, must abide by all legal and regulatory requirements that are relevant to the work they do. The charity trustees are responsible for making sure this happens. Charity trustees must understand that the governing document of a charity is a legally binding document in its own right.

The trustees are also responsible for a charity’s funds and any property or other assets that it holds. As much as is possible, they must also consider and reduce risks to which their charity is exposed.

Standards

Make sure you have appropriate financial controls in place to manage and account for your charity’s money and other assets.

Identify any risks your charity might face and how to manage these.

At a minimum, your board agendas should always include these items:

█ reporting on activities;

█ review of finances; and

█ conflicts of interests and loyalties.

There's a ton more of this stuff, but this gives you a taster. I'd be highly surprised if American charities weren't bound by similar constraints, and EA is a charitable body so it has to work under these kinds of regulations.

A lot of this will be "closing the stable door after the horse has bolted" but it won't hurt them to review their practices and see how they can tighten up assurances in future.

Since when has it ever been the job of charities to investigate the businesses of the people donating them money? EA or not, what charity does this? It would be a ridiculous waste of time and money, it's not their job and specialization exists for a reason. People are talking like it's some deep failing that they didn't find him suspicious and refuse his money, but just how many legitimate donors should they be willing to refuse as "suspicious" for the sake of avoiding a criminal?

I'd say about 1:1, at minimum, of avoiding donors who a) will make up a charity-redefining portion of the funds, and b) are more than slightly likely to collapse.

Yes, you can dial up the specificity until this exact problem is very rare, but the broader class of scuzzy rich or 'rich' people with reputational and financial risks that will disrupt your organization isn't even specific to charity, and has tremendous downside that at best set back causes and financials by years, if not simply scuppering entire organizations. And let's be direct: this will kill a good few charities, including a few pretty good ones. And risky investors, at least at levels where of donation that can close an org, are high enough a percentage of the field that I don't think this runs into the joint under- and over-diagnosis problems.

I don't want to make too much of past problems internal to LessWrong-sphere charities (and tbf, many like the embezzlement thing at early SIAI is genuinely different), or crypto (although there are so damn many), or the specific combination of the two (tbf, far more marginal 'criminality'... and still a big financial risk). But this is not some alien problem teleporting in from another dimension, which no one could have expected. Nor are we in the heady days where a crypto rug pull was unprecedented: you can look at the stats a week or three years ago. And the guy was regularly taking interviews and talking his willingness to take very high risk bets!

Maybe people were making these evaluations internally -- a /2% chance of fucking over your entire charitable giving organization against a 95% chance of having twice or five times the funding is an attractive bet for some people! -- and just rolled snake-eyes, and don't want to publicly admit it. Or maybe people were making these evaluations and guessed wrong, say, coming up with a /0.5% chance of FTX collapsing (whether as here, or just legal investment risks). But if you're getting a large portion of your funding from any crypto organization, this isn't just a risk someone somewhere was warning about: it was the default common knowledge.

It's acceptable to be wrong; but refusing to recognize that loses a lot of potential for growth.

Not that it would have been practical anyway, EA-endorsed charities are not some unified group and a lot of his "EA" donations were stuff like directly supporting political candidates who promised to do something about pandemic preparedness

That's a fair defense, if it turns out we're talking 50% or 25% or 10% of randomly selected EA charities, or the 10% of thirstiest ones, or the 10% most political-candidate ones. I don't think that sounds to be the case: Scott himself has to change some plans for future grants because of this! This estimate says 35% of 2022 EA (organization?) funding!

Somehow EA is held to a much higher standard than any of these, even though it seems obvious to me that accepting donations should be held to dramatically lower standards than investing teacher's retirement money.

That's a fairer defense, and the Ontario Pension Plan admins should be facing serious scrutiny, if not potential review of their licensing (if they have any), as should any who make serious crypto investment with other people's money and no extremely clear disclosure. And for people who are solely Effective Altruists, I can accept a certain level of naivete.

But a lot of the EA movement is LessWrong-sphere, or part of the broader rationality sphere. Nor were effected charities limited to EA-normie focuses like lead abatement; the Good Judgement Project is marked for a 300k grant, and Manifold Markets for half a million. That is, the people who were working to make this class of bet accurately. Now, that's necessarily going to be an aspirational thing... but it's good to notice when you've failed to meet your aspirations.

((The sportsball stadium thing is funny, but I don't think it's very wise to admit 'our movement for applied rationality is no better at predicting massive risks to our own interests than the corrupt organization that we've spent a decade using as an example for bad spending and quick ways to get a concussion'.))

And more importantly: EAs can walk away from the money. Someone who knows more than the market has to spend significant amounts of cash, at serious risk, over long periods of time, to make the millions that everyone's mentioning when motioning around EMH. Even the pensioner's funds, as wildly unethical as that was, have contractual or social obligations to get certain levels of increasingly hard to achieve return. Not to defense them, but this is a reason you can't consider their judgement at simple face value.

An EA organization has to... look at other funders? Which, according to Scott's claims here, were already thirsty for good causes to give money to? Scale down operations for a year? Maybe if you were talking a Pink Ribbon knockoff, where your failure means a thousand clones will come to fill the spot after you: Effective Altruism is supposed to, by definition, not be targeting the crowded fields. Risk aversion makes sense in a case where catastrophic failure has longer-term risk.

I'd say about 1:1, at minimum, of avoiding donors who a) will make up a charity-redefining portion of the funds, and b) are more than slightly likely to collapse.

Well ... there are two at-scale donors (moskowitz and SBF) ... so 1:1 refusal means zero donors?

The sportsball stadium thing is funny, but I don't think it's very wise to admit 'our movement for applied rationality is no better at predicting massive risks to our own interests than the corrupt organization that we've spent a decade using as an example for bad spending and quick ways to get a concussion'.

Or indeed, "turns out our much-lauded donor and funder was just as happy to have his company's name splashed all over the places we've used as examples of bad ways of donating money". Ouch, indeed.

That's a fairer defense, and the Ontario Pension Plan admins should be facing serious scrutiny, if not potential review of their licensing (if they have any), as should any who make serious crypto investment with other people's money and no extremely clear disclosure.

Should they though? I think the standard should be higher for institutional investors than for charities accepting donations, but that doesn't necessarily mean the standard for investors should be significantly higher than it already is. They're an easy target because they're partially sponsored by the government, but they were just doing the same thing that the entirely private investors were doing. And the private investors have an appetite for risk because ones that were too risk averse would get outcompeted and replaced in their roles by ones that pursued a more successful strategy. Sequoia Capital is a 50-year-old firm managing $85 billion, and while you could speculate that their employees have recently become less competent or too reckless it seems perfectly plausible that their decision-making here was just the same kind of decision-making that led to these investments:

Notable successful investments by Sequoia Capital include Apple, Cisco, Google, Instagram, LinkedIn, PayPal, Reddit, Tumblr, WhatsApp, and Zoom.

Meanwhile, charities accepting donations both have less to lose, since rather than outright losing an initial investment there's just any money/time wasted by planning around future funding that doesn't come and vague reputational concerns potentially affecting future donations, and more to gain, since you're outright getting money for nothing rather than trying to get a return for money you already have. There's a direct tradeoff between the two, if it's 35% of your funding you risk having wasted more money if it evaporates, while Sequoia obviously doesn't invest that much in a single company - but if you refuse you know you're out a whole 35% of your potential funding, whereas Sequoia can just invest their money in something else. If it's 100% of your funding because you've been soliciting funding for your new charity and they're the first donors to say yes, there's certainly a risk the money will dry up and destroy your charity if you can't find a substitute, but if you refuse there's a risk you won't find enough donations to begin with. You talk about it killing charities, but if a sudden loss of funding can do that how much is because of "less funds than expected" vs. just "less funds, same as if you had refused"?

An EA organization has to... look at other funders? Which, according to Scott's claims here, were already thirsty for good causes to give money to?

The reason why there was more funding than EA charities knew what to do with in the short term was because of FTX suddenly showing up and throwing around a bunch of money, if everyone had refused that wouldn't have been the case. If those other donors don't materialize for the current funding crunch would they have done so to begin with?

It seems like the tradeoffs here pretty strongly favor not being particularly picky about who you accept donations from. Sure if you know someone obtained money from criminality you don't accept the money, but if a dozen institutional investors and the police/SEC don't have a problem then why should you? Now, you could try to mitigate risk in other ways than refusing money outright, like saving more of the money rather than finding ways to spend it immediately, or better yet persuading them to give you a larger endowment rendering you more self-sufficient. But obviously this might not be possible and carries significant disadvantages, for one donors (especially EA donors) want to see actual results from their donations and evaluate your performance, not "we'll do some charity with this money someday". It transfers the risk of the donor having problems to a risk of the charity having problems, like becoming The Wikimedia Foundation with an enormous pile of cash and a huge stream of donations coming in while meanwhile only a tiny fraction gets spent on anything of value. That is after all one of the big problems EA sought to address, and unlike an incompetent/fraudulent for-profit company which eventually collapses to remove the problem, an incompetent/fraudulent charity can continue to waste people's donations indefinitely. I'm not saying that no improvement is possible, for instance maybe there are measures to be more resilient in case funding is lost, but I don't think it justifies extremely costly measures like outright refusing funding because the donor is in a risky field, and I don't think it reflects some deep problem with EA.

Should they though? I think the standard should be higher for institutional investors than for charities accepting donations, but that doesn't necessarily mean the standard for investors should be significantly higher than it already is.

Part of my argument is that this failed to meet the existing standards for institutional investors, at least for the pension funds -- I'm not (just) encouraging delicensing for encourage les autres, but because I'm extremely skeptical that this investment could have been made while honestly and completely complying with the Canadian principles for pension fund investments. (though I am not a lawyer, this is not legal advice, so on)

Sequoia Capital is a 50-year-old firm managing $85 billion, and while you could speculate that their employees have recently become less competent or too reckless...

Funny example! The current Sequoia Capital page on FTX is iso-standard lawyer speak, but the previous page was hilarious. I think I can make a pretty strong argument that the people investing 85 Billion USD to a guy who has a business plan worthy of the underpants gnomes and who plays League of Legends was not competent or prudent.

((During an investment meeting, specifically? Well, that too.))

There's a direct tradeoff between the two, if it's 35% of your funding you risk having wasted more money if it evaporates, while Sequoia obviously doesn't invest that much in a single company - but if you refuse you know you're out a whole 35% of your potential funding, whereas Sequoia can just invest their money in something else.

If you refuse 35% of your potential funding, you can go look for other funders. Very few charities are in a field where they just need or are capable of taking in infinite dollars, because either their goals are limited, or their ability to scale up is limited. This is pretty well-understood in EA and GiveWell circles: indeed, a number of GW top charities have been 'capped out' for years.

This also strikes the other direction. Sequoia isn't just investing less in any individual company than a charity was receiving from FTX Future, but it's devoting a lot less in FTX specifically. Sequoia put something like 210 million USD into FTX, which is absolutely embarrassing, and also well less than 1% of the specific Sequoia fund. The Ontario Teacher's Pension is almost an order of magnitude smaller on a percentage-of-assets measure. I don't think they did adequate due dilligence at this level of expenditure, and there are significant limitations to using models like the Kelly criterion even for investment funds, nevermind for charity, but the scope of the difference is a marker.

((Though not all 'conventional' hedge funds were that sober: Galois put nearly half of their bank on FTX, which would have been irresponsible to do for something like Apple.))

You talk about it killing charities, but if a sudden loss of funding can do that how much is because of "less funds than expected" vs. just "less funds, same as if you had refused"?

There are serious problems specific to having committed funds disappear on short notice, that are not present to not having the funds to start with. In the extremes, you've already bought crap from vendors and have to pay for it, signed leases, hired and/or moved people. Short of that case, there's still a bunch of softer commitments that have significant reputation or financial costs.

The reason why there was more funding than EA charities knew what to do with in the short term was because of FTX suddenly showing up and throwing around a bunch of money, if everyone had refused that wouldn't have been the case. If those other donors don't materialize for the current funding crunch would they have done so to begin with?

If we were talking about FTX-screwed charities as those which focused more on the Earning to Give side than the Rationality one, I think this would be a more plausible argument. My worry is not that someone got snookered: my worry is not even that someone focused on avoiding these risks got made a bad bet. But right now we're combining all of that with a 'whoops, shit happens, nothing we could have done'.

I think I can make a pretty strong argument that the people investing 85 Billion USD to a guy who has a business plan worthy of the underpants gnomes and who plays League of Legends was not competent or prudent.

I do find it funny how LOL is catching so many strays in this scandal. Like, its a popular video game. Some hopped up fake billionaire likes it, like the rest of the world of hopped up people.

Scott is posting some nuclear-grade copium here.

Edit: For a pretty good explanation of why I think so, see e.g. TheGodfatherBaritone's comment in the linked thread.

Maybe, but if you're not going to explain why you think so, then just saying so is objectionably low effort. Please don't do this.

OK, noted.

He's only human. This is a big (relatively) scandal and it hits home to where he has interests, where he has friends or people in the same circles, and where he was getting money from himself (if I'm right on that last one). Yet another sex scandal in the Catholic church? Means nothing to him, he can talk about it objectively. Financial scandal in politics? Ditto. Financial scandal in his neck of the woods? Here's why it's not our fault!

I can't blame him for reacting like this. Anyone who is on the outside and writing about this is tarring EA with the same brush of fraud and embezzlement and swindling, and it's going to take a while to get out from under and find out what happened when where to whom, not to mention all the organisations and people who were awarded grants from FTX money which has now gone up in smoke, and even worse for people who did get the money and now have no idea if they are going to be held liable for repaying it or what.

I can't stop thinking about this whole situation. These are, metaphorically, my people. They are about my age. They share my interests. They hang around similar online communities. Hell, SBF even looks and dresses like me (which is to say, poorly). How did they end up running a multi-billion dollar crypto empire? Was it just luck? Good market timing? Family ties and connections? I would have said that they're just smarter, but I think the events of the last week have shot holes in that hypothesis.

Why can't I get it out of my mind? Is it because I feel some sort of injustice at how the Ivy-league well-connected have life on easy mode? Is it because Caroline reminds me of the type of girl I always imagined I'd end up with but never met? Maybe it's just because there's nothing else going on in the world and this "happening" has expanded to fill my attention span. Hardly an idle moment goes by where I don't see that stupid wood nymph costume flash before my eyes or hear, "enormously valuable existence," "double or nothing coin flips and high leverage," go through my head.

It hasn't interfered with my normal productivity, but I don't think I watched a single minute of football this weekend.

Was it just luck? Good market timing? Family ties and connections?

A little bit of everything. They're smart kids, from well-connected families, who went into finance because that's where their families had connections and where you could earn a lot of money for "earn to give" and make yourself rich at the same time.

Had they been less well-connected, they'd probably have ended up staying at Jane Street and doing the 80,000 Hours thing. But because they had well-connected families backing them with networking and money, and were in the circles in the whole Silicon Valley/Bay Area/Rationalist/EA overlap where they could find VCs willing to throw money at them, and they had a Great Idea where Bankman-Fried noticed "hey, I can make money by setting up a crypto exchange to take advantage of the difference in rates!" - well, then Sam hired on his work pals, college pals, his and their current and ex-romantic partners, got set up, and took full advantage of the family connections.

And for a few years it went great, he was making money hand over fist, everyone was falling over themselves to laud how great he was, and he got ambitious. And the problems started when he couldn't keep all the plates spinning in the air, and where ordinary people would be cautious (one would hope) that pernicious Rationalist trait showed up about "the winning answer is the counter-intuitive one; the one that ordinary people would pick, the conservative, cautious one, is the loser. If it's a 49%/51% chance, go for the 51%!"

So he did think that he could fix it all by taking money out of accounts and moving it about and that would let them get over the immediate difficulty, then it would all go back to pure profit and he could put the money back and gain at the same time. No problem. High risk, sure, but he's not a normie, he's a smart guy who knows the art of winning.

Bullshitting about the trolley problem and similar thought experiments is harmless when it's just a bunch of people online like us. It becomes a problem when you are a trolley operator. And Bankman-Fried was a trolley operator. And instead of doing the normie thing, swallowing his pride, and admit he wasn't a genius at winning, he took the risks because that's what the decision theory outcomes say is the best strategy, and it all came down around him.

It might have been going to all come down around him anyway, but at least it would have been with his honesty intact.

How did they end up running a multi-billion dollar crypto empire?

Ambition, conscientiousness, and a thirst for working long and hard hours are all necessary factors. Moreso than intelligence.

No one factor is sufficient by itself though. You need all of them, plus luck, plus the right connections.

The term "there but for the grace of God go I," comes to mind.

Crypto in particular has made and lost many fortunes and the only common thread I've seen running through it all is appetite for/tolerance of risk.

You almost never see anyone make it big in Crypto using a measured, conservative strategy.

Hell, running an exchange is supposed to BE the only safe moneymaking strategy but we see where that has gotten them.

I think running the exchange was kinda safe (maybe not making them tons of money though).

What wasn’t safe was the Alameda trading firm.

What made it (probably) a crime was plundering the customer deposits of the safe business to prop up the risky trading firm.

If Alameda had been totally separate, they might even have managed to come out of that. But they were both tied so closely, nearly literally at neighbouring desks, that the problems of one swamped the other. And what is coming out about his habit of shifting funds from FTX wallets to Alameda and back is not looking good; his entire project was built on sand.

I think there's more than enough blame to go round, and it's not all on FTX/Friedman-Bank. The VCs, the regulators, the auditors/accountants - everyone should have been looking at this and wondering where it was all coming from. But the simple answer is greed: as long as the numbers looked right and the profits seemed to be rocketing up, nobody wanted to question the golden goose.

That's what I'm saying, though. Companies that are willing to just quietly run a functional exchange are doing pretty well (for now).

But so many in the space have a desire to place bigger and bigger bets rather than accepting consistent returns and tying on the trading firm to the exchange probably seemed like a GREAT idea for a while.

But so many in the space have a desire to place bigger and bigger bets rather than accepting consistent returns and tying on the trading firm to the exchange probably seemed like a GREAT idea for a while.

Indeed and I think this is the real problem for EA. The traditionalist critiques of utilitarianism that rationalists have been dismissing as "uncharitable straw-men" have been revealed as flesh and blood all along.

It's nice to see #5: various examples of EA-adjacent figures arguing that shady dealings aren't justifiable for effectiveness. A common thread in responses (such as the whole "Chernobyl" thread on the frontpage" has been that sort of suspicion of EA. They're utilitarians, which means they must be able to justify anything, and SBF is proof of what we all suspected was going on. No. This isn't Nam, this is bowling, there are rules. Thinking that EA cause area so-and-so is underserved is not license to steal/deceive/etc., and I'll be glad to have these statements the next time someone asserts that it is.

This doesn't really feel all that reassuring. MacAskill's "in the vast majority of cases" and Eliezer's "(For Humans)" are explicit caveats. Scott doesn't even bother making more concessions than "well shucks you can't do much good if you've made all the deontologists mad enough that they get in your way".

For all of them there's still an implicit out, that lying/cheat/stealing for the greater good is okay if you can get away with it. Eliezer goes the furthest to emphasize that, no, really, you won't get away with it, but he still leaves that out there. He has to.

So all it takes is a little narcissism for a 140 IQ altruist to rationalize that he can in fact part the 90 IQ rubes from their money and have them be none the wiser. Sure, amongst humans such a thing is unthinkable, but are those two even really the same species?

So all it takes is a little narcissism for a 140 IQ altruist to rationalize that he can in fact part the 90 IQ rubes from their money and have them be none the wiser. Sure, amongst humans such a thing is unthinkable, but are those two even really the same species?

Okay? How is this related to utilitarianism? If I'm just going to ignore all moral advice to make up rules and do whatever I feel like because I think I'm better than everybody else, I can do that as a deontologist or a utilitarian.

People with no care for morality are not in question. Of course it doesn't matter to them. They simply do as they will.

The people in question aren't ignoring any moral axioms of utilitarianism. Ends justify the means is fundamental to it. You can thus be a committed utilitarian and do evil simply via bad calculations.

Other moral systems fail in other ways. But a strict deontologist is not going to rob Peter to pay Paul.

Aside from the strictly amoral or immoral, one of the worst conceptual types is the one who knows a very long list of moral systems, from various flavors of deontology to different types of consequentialism to the ethics of many virtues, and applies the moral justification to fit his situation. In any given instance, he has a perfectly cogent explanation for why his choice was justifiable, and even an argument for why his justification was the best type for the context, and yet the central point of morality was lost along the way--fencing off bad choices from good ones. Different systems will have somewhat different fence patterns, but hotswapping fences to fit your behavior ends up destroying the concept and purpose of the fence.

This does sound like a neat rejection of Scott's deontology in the streets, utilitarianism in the sheets approach.

But I can't think of a coherent way for one to hot swap morality. For anyone's system to be coherent there must ultimately be some moral facts or axioms underlying it that reigns supreme in the meta-morality calculus.

People who think they're doing this are probably just utilitarians who think deontology is nothing more than rule utilitarianism by heuristic.

Committed theists don't have a backup morality for when God tells them to do evil. They either go whole hog or come up with biblical copes.

People who want the hodge podge pick virtue ethics.

Those caveats are critically important though, and are fairly universally endorsed by anyone who isn't a philosopher and takes things seriously.

For all of them there's still an implicit out, that lying/cheat/stealing for the greater good is okay if you can get away with it.

The explicit example on the EA forum was schindler. Another fun example is intelligence / spying, which is somewhat critical for a nation-state, especially during wars (which happen often), yet is lying/cheating/stealing.

"well but in those cases the greater good is just TOO IMPORTANT because it's an actually important thing" yeah that's the point, 'means' and 'ends' are both causes and effects that interact and mix together!

Eliezer goes the furthest to emphasize that, no, really, you won't get away with it, but he still leaves that out there. He has to.

Eliezer points out in MoR that perfect crimes probably happen all the time, and they just get ruled a suicide, or an electrical accident.

To be fair, the LessWrong, reddit, and tumblr ratspheres have also had lengthy periods at-best debating and at-worst lauding "dark arts" of rationality. On the other hand, as far as I know none of this group fell on the 'pro'-Dark Arts side.

...

#7 is worrying. Yes, it's very hard to mathematically discover deep fraud that all of the experts didn't. Yes, you're not going to go to jail over failing to discover this stuff, and to the extent people are trying to pay it back that's more out of ethics than legal or even social obligation. And, yes, you're going to have worse tools than the people who's job is to work on this all the time. But to borrow from Sonya, sometimes you have to think about this stuff, with your own brain, in your own head.

(And as much as you don't have as many tools or expertise as ProPublica, you also aren't facing as high a standard at noticing a problem, and your opponent isn't going to put as many resources into snookering you.)

And it's not like "going to jail" is the only failure mode! Even if the 'only' problem with FTX was a hair-brained scheme that was simply going to go bankrupt without any fraud, it kinda is a problem for the charities and business working with them. At minimum, there's tremendous loss of cash and face, and the wide variety of problems of busted financials people are facing right now, but there's also potential problems when you try to actually cash a check that doesn't exist for services you've already rendered. That's not limited to speculative finance giving to charity, or even to private business working with other private business: I've seen companies completely fucked over because a business or even government decided that they weren't going to pay a big and important bill after the company had already put thrown together a lot of purchases or even fully delivered a service. In the extremes, a very fraudy company can end up with their partner's self-funded and pre-existing assets confiscated by creditors, and even if the paperwork still has the original owners in the 'right', it's still years of legal fees and missing (and sometimes damaged) assets. (In really severe extremes, you find out that the sponsor you were looking at has ties to stationary bandits of the more immediate sense, or that starts to trigger FCPA.)

You absolutely need to consider this stuff.

It's possible (maybe likely) that people who did that sort of serious consideration would still have have shrugged and said it looks sane enough; it's possible (and perhaps likely) that people did do that consideration.

But I think just washing your hands and saying "well, The Experts flunked too" is not a great defense from a rationalist perspective, even if it's an acceptable excuse from the world of Effective Altruism or the broader world of charity funding (or, uh, legal defenses). At the trivial level, rationalism is about being able to make useful predictions, and unless this was somewhere on your failure map (even at a low probability) or you absolutely didn't care, this points to some failure modes. At the very least, this should be a learning experience, if an expensive one.

((Especially from a Bayesian perspective. When it comes to big exchanges, we're not in none-pizza-with-left-beef days, here. If your prior for anything talking crypto doesn't include a lot of potential for fraud, you've not been paying attention.))

Maybe that's the meaning of #9, but it doesn't really read that way.

think about this stuff, with your own brain, in your own head ... Even if the 'only' problem with FTX was a hair-brained scheme that was simply going to go bankrupt without any fraud

But FTX's business made sense, they were a crypto exchange that made money off of crypto trading, why would they go bankrupt without fraud?

Crypto exchanges in general can be perfectly legitimate (uh, modulo legal compliance), and maybe even simple. You trade one currency for another, take a small cut, and run your business's operating expenses from that cut. You can add some complexities, like shifting where your assets are based on expected future rates, or the weird self-minted stablecoin, or reasonable loans, or what have you, and it's not automatically going to collapse. But there are variants of that business that don't make sense.

FTX specially has a problem: that "small cut". Crypto exchanges aren't easy, between legal compliance, potential risk, the difficulty of safe storage of assets, and the complex question of reputation. But they're also not monopolies, by their very nature. There's an upper limit to how much can be extracted from a given amount of assets, before you either get competition or your customers go broke. Not quite the efficient market hypothesis, but that there's a lot more one-dollar bills than hundred-dollar bills laying on the sidewalk. And while FTX's bankroll was big, its publicly-known expenditures were tremendous even for its size, often with large upkeep costs and likely hidden costs.

FTX claimed one billion USD revenue for 2021, based off... depending on how you measure it, 300-700 billion USD-equivalent in trades. That's high as the current market goes, but not unreasonable, not hugely surprising for a publicly reported number. (there's some flaws in this 'lump of labor cash' fallacy sense, since a lot of those USD-equivalent trades are in weakly or unconvertable coins, but they're not-obvious enough that I can understand people not seeing them without a deeper examination.) That would make an estimated two billion USD expenditures as double revenue the year before, and the /160 million USD funding already marked for grants by FTX Future Fund would be /6% of revenue. Note: that's revenue, not income. Either of these individually would be major warning signs.

There are rare cases where this level of discrepancy can make sense -- if the expenditures are one-offs, or if they're an important part of getting an very near rapid growth state, or both, or where the company is in early stages of development with little total income compared to its potential. But FTX was talking about scaling many of these costs up (to 1 billion USD in the Future Fund!). And even if FTX could keep its revenue-per-trade constant, a healthy income/revenue ratio would take something like 1.2-trillion to 2.8-trillion USD in crypto trades. Even if you think this is possible, or even more likely than not, it's at least something that can go tango uniform.

In a perfect world, a truly ethical company have these sort of problems and a proclaimed reserve requirement would fold without bankruptcy, but in practice there's a ton of things where an ethical company might not even have realized exactly the day they'd gone into the red (though it'd probably not be eight or twenty billion dollars late, either, so that's definitely better).

((This isn't specific to crypto or to charity; in the business world, nutjobs willing to sink a lot of someone else's money that they'll 'make up with scale' are more common than anyone needs.))

Add your opinion on Scott back

Reading Scott's post about feeling anxious and betrayed made me think back to Zero HP Lovecraft's tweet about the quokka, the Australian mammal. I don't have much else to say besides how frustrating it is to see a full grown adult act so naively. Don't have much charity left for someone so easily manipulated.

I do think Scott tends to be ever so slightly on the neurotic/dramatic side. Especially with his "hiding under the bed gibbering" speak. But I don't think he is intellectually naive. Just outwardly neurotic in a way that is offputting for those who are highly disagreeable and not neurotic.

Let's take some of the heat off the EA types for the moment. There were lots of people happy to take FTX money, and lots of people investing in and trading with and being paid for services by FTX, and they were not all Rationalists or EA by any means.

The SEC looks like it might be coming in for a smack on the wrist, if rumours are to be believed.

I think you kinda underestimate how easy is to manipulate a grown adult outside of their area of expertise. Especially if the manipulation is towards the result that they want to achieve (which is how any skillful conman would do it). Especially if the target is commonly living in a low-threat environment where it's usually ok to trust people and most of people you encounter aren't actually out to get you. It's probably easier to manipulate a very smart professor than a very dumb prison inmate - because the latter won't just believe any word you say regardless of what you say, just on general principle that they don't know you.

I think the point is more about the degree of Scott's emotional investment, and the nature of his emotional reaction, rather than the mere fact that he made poor judgement calls in an area outside of his expertise.

People let other people down all the time, whether it's through malice or incompetence. The world is filled with unscrupulous individuals, especially the world of the rich and powerful and well-connected. Just because someone SAYS they follow the principles of EA and rationalism doesn't mean they're actually a good person. How could someone with Scott's erudition fail to realize that? How could he not be emotionally prepared for an outcome like that? I think that was the point of suy's comment.

I think it's matching the environment. In Scott's environment, most people aren't highly skilled sociopath conmen, so trusting people makes sense. The reverse side of it is that once in a while there will be a highly skilled sociopath conman that will totally take advantage. I'm not sure I can really tell this way is better than be eternally suspicious and distrusting and live all your life on guard against the conmen - but I think both models have their tradeoffs and both are plausible.

I think you kinda underestimate how easy is to manipulate a grown adult outside of their area of expertise.

Completely agree. I've devoted my previous posts to try to get people to doubt things they assume as 100% certain, and the end result is that no one wants to do that.

It seems pretty clear to me that even the most rational and intelligent people on the planet will believe whatever they want to believe as long as it feels good.

I think the point there was not that no one wants to do that, but no one wants to assign a profound importance to banalities.

Are you 100% certain it was a banality?

I'm 98.45730468302835030019% certain.

Good. So you accept it's possible there's importance in the nuance.

Considering things like Epstein's whole shtick, I have to wonder how on earth one makes themselves manipulation-proof. The only way I can think of is what I'm going to call the Hedgehog Method: become so guardedly anti-social that no one can get into your life enough to ruin it.

One good heuristic is to be slightly more suspicious of individuals with frizzy hair and strangely shaped ears/nose. It works for Epstein, Bankman, Weinstein, or even Sasha Baron Cohen.

Alright, you've been warned about derogatory tropes and antagonism, and you've been warned about darkly hinting weakman opinions about your outgroup. Now you're just being racist, which puts you under be no more antagonistic than is absolutely necessary and provide evidence in proportion to how partisan and inflammatory your claim might be.

Read the rules carefully and stop doing this sort of thing. This time you're getting a three-day ban.

I have to wonder how on earth one makes themselves manipulation-proof.

2:44 in this clip:

https://www.facebook.com/all4/videos/father-ted-best-of-mrs-doyle/2257104681223313/

"Maybe I like the misery!"

Honestly, just a reasonable awareness of bad actors is sufficient, when paired with a willingness to make that call if something is unusual. Speaking as a recovered quokka, it doesn't take much cynicism to protect yourself from threats above the level of, say, being on the hook for an extra appetizer. You just have to actually apply that whole reductionism thing and remember that defection and parasitism are proven strategies.

I hate to say it but yeah, that's been a viable strategy for me.

I have erected thick layers of defensive cynicism which leads me to constantly question other person's motivations, assume they are self interested and at best looking to extract money from me, that they will use any piece or private or personal information you divulge against me in this quest.

No hero worship. Nobody is going to intervene on my behalf, and likewise I feel less inclined to intervene on others' behalf if I do not expect reciprocation.

I am the tit-for-tat-with-forgiveness strategy made flesh.

There's been enough instances of my trust being earned and broken that I have to expect and prepare for it to occur more often than I' d like.

But the other side of this is that it leads me to place extra value on longstanding friendships that have stood the test of time, and become particularly protective of said relationships.

I don't prefer this way of being, but if I hadn't learned to stop being naive I'd have been blown up long ago.

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