site banner

FTX is Rationalism's Chernobyl

You may be familiar with Curtis Yarvin's idea that Covid is science's Chernobyl. Just as Chernobyl was Communism's Chernobyl, and Covid was science's Chernobyl, the FTX disaster is rationalism's Chernobyl.

The people at FTX were the best of the best, Ivy League graduates from academic families, yet free-thinking enough to see through the most egregious of the Cathedral's lies. Market natives, most of them met on Wall Street. Much has been made of the SBF-Effective Altruism connection, but these people have no doubt read the sequences too. FTX was a glimmer of hope in a doomed world, a place where the nerds were in charge and had the funding to do what had to be done, social desirability bias be damned.

They blew everything.

It will be said that "they weren't really EA," and you can point to precepts of effective altruism they violated, but by that standard no one is really EA. Everyone violates some of the precepts some of the time. These people were EA/rationalist to the core. They might not have been part of the Berkley polycules, but they sure tried to recreate them in Nassau. Here's CEO of Alameda Capital Caroline Ellison's Tumblr page, filled with rationalist shibboleths. She would have fit right in on The Motte.

That leaves the $10 billion dollar question: How did this happen? Perhaps they were intellectual frauds just as they were financial frauds, adopting the language and opinions of those who are truly intelligent. That would be the personally flattering option. It leaves open the possibility that if only someone actually smart were involved the whole catastrophe would have been avoided. But what if they really were smart? What if they are millennial versions of Ted Kaczynski, taking the maximum expected-value path towards acquiring the capital to do a pivotal act? If humanity's chances of survival really are best measured in log odds, maybe the FTX team are the only ones with their eyes on the prize?

20
Jump in the discussion.

No email address required.

What if they are millennial versions of Ted Kaczynski, taking the maximum expected-value path towards acquiring the capital to do a pivotal act?

Or maybe just taking the maximum expected-value path towards becoming insanely rich?

The collapse was dramatic but it's a consequence of the same high-risk strategy that had FTX valued at 32 billion USD a few months ago. If that's the upside then their actions can be rational even if the chance of success was quite low.

EDIT: Also SBF may have lost most of his money but according to this article he's still worth around $600 million US. So even if the company failed, rationalism still seems to have paid off for him personally.

He's going to be subject to decades of personal lawsuits, fines, and forfeitures. This admission also might be big enough to pierce the corporate veil and will certainly mean prosecution for everyone who knew.

Even if he is sued into oblivion, by his own metrics he can still believe he made the right choice. He was very up front about the whole thing being a huge gamble, with a low chance of success.

"Guys, we had a 51% chance of duplicating the Earth, the algorithms say we should take that chance! Newcomb's paradox! One-boxing! Maximise utility!"

Yep. The next ten years of this guy's life now belong to lawyers, both his and his victims. Maybe longer, depending on how the liability shakes out.