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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Notes -
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.
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.
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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.
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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.
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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.
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.
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