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?
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I think the most likely explanation is that at some point in the past they were a legitimate business that ran out of legitimate funds, probably due to their known penchant for highly leveraged bets. Then they deluded themselves into believing that if they dipped into customer accounts they could gamble their way out, return the customers money, and have nobody be the wiser. Cut forward some undefined span of time and the hole gradually grew to 8 billion dollars and the whole thing collapsed.
I mostly say this because most people aren't sociopaths and this seems like the most likely route this could have happened if Bankman is not a sociopath. If he is a sociopath and planned the elaborate fraud from the start, i guess nevermind. Feels less likely, though.
Anyway, I don't think we're looking at anything more or less than a polycule of stim-abusing rationalists with a gambling problem, good PR, and access to several billion dollars with which to gamble.
I think that the main lesson here is that you can't trust people just because they use lots of ingroup shibboleths and donate lots of money to charity, even though (to be honest) that would be kinda my first impulse.
Agree with all of this, seems pretty clear (as much as anything is clear at this point) that Alameda Research was deep in the hole with bad trades and SBF decided to try to help them gamble their way out of the hole with FTX customer money.
I do think there's a genuine EA angle here though. SBF did not believe in declining utility of money because he was going to use it to do good in the world. Saving ten lives in the developing world is ten times better than saving one life, in much the way that buying ten fancy cars is not ten times better than buying one fancy car. SBF was willing to take this to the extreme, even biting the bullet on St. Petersburg Paradox in his interview with Tyler Cowen:
So yeah -- he sees literally no moral limits to this style of gambling in our finite universe.
This is both a worldview that (a) is distinctly consistent with EA, and (b) encourages you to double or nothing (including, as in the hypothetical, with other people's stuff) until you bust. And now he took one too many double-or-nothing bets, and ended up with nothing.
I think the honest response to this disaster is to say "yeah, I gambled with customers' money, and it was the right thing to do because I had a better than even chance of pulling it off, and I would have used that money to do good in the world so there's no declining value to each dollar. Sure, I gambled with other people's money, but wouldn't you dive in the pond to save the drowning child even if your expensive suit were borrowed from an acquaintance? Well that's what I did, with a lot of people's suits, and it was the right thing to do."
Of course, utilitarians don't believe in honesty -- it's just one more principle to be fed into the fire for instrumental advantage in manufacturing
paperclipsmalaria nets.Now, who knows -- maybe he would have committed the same kind of fraud even if he had never heard of EA and were just a typical nerdy quant. But, when your whole ideology demands double-or-nothing bets with other people's interests, and when you say in interviews that you would follow your ideology and make double-or-nothing bets with other people's interests, and then you do make double-or-nothing bets with other people's interests, and one of those bets finally goes wrong... yeah, I think one can be forgiven for blaming your ideology.
There's a bunch of argument about what utilitarianism requires, or what deontology requires, and it seems sort of obvious to me that nobody is actually a utilitarian (as evidenced by people not immediately voluntarily equalizing their wealth), or actually a deontologist (as evidenced by our willingness to do shit like nonconsensually throwing people in prison for the greater good of not being in a crime-ridden hellhole.) I mean, really any specific philosophical school of thought will, in the appropriate thought experiment, result in you torturing thousands of puppies or letting the universe be vaporized or whatever. I don't think this says anything particularly deep about those specific philosophies aside from that it's apparently impossible to explicitly codify human moral intuitions but people really really want to anyway.
That aside, in real life self-described EAs universally seem to advocate for honesty based on the pretty obvious point that the ability of actors to trust one another is key to getting almost anything done ever, and is what stops society from devolving into a hobbesian war of all-against-all. And yeah, I guess if you're a good enough liar that nobody finds out you're dishonest then I guess you don't damage that; but really, if you think for like two seconds nobody tells material lies thinking they're going to get caught, and the obvious way of not being known for dishonesty long-term is by being honest.
As for the St. Petersberg paradox thing, yeah, that's a weird viewpoint and one that seems pretty clearly false (since marginal utility per dollar declines way more slowly on a global/altruistic scale than an individual/selfish one, but it still does decline, and the billions-of-dollars scale seems about where it would start being noticeable.) But I'm not sure that's really an EA thing so much as a personal idiosyncrasy.
There's a problem with that: a moral system that requires you to lie about certain object-level issues also requires you to lie about all related meta-, meta-meta- and so on levels. So for example if you're intending to defraud someone for the greater good, not only you shouldn't tell them that, but if they ask "what if you were in fact intending to defraud me, would you tell me?" you should lie, and if they ask "doesn't your moral theory requires you to defraud me in this situation?" you should lie, and if they ask "does your moral theory sometimes require lying, and if so, when exactly?" you should lie.
So when you see people espousing a moral theory that seems to pretty straightforwardly say that it's OK to lie if you're reasonably sure you're not getting caught, when questioned happily confirm that yeah, it's edgy like that, but then seem to realize something and walk that back, without providing any actual principled explanation for that, like Caplan claims Singer did, then the obvious and most reasonable explanation is that they are lying on the meta-level now.
And then there's Yudkowsky who actually understood the implications early enough (at least by the point SI rebranded as MIRI and scrubbed most of the stuff about their goal being creating the AI first) but can't help leaking stuff on the meta-meta-level, talking about this bayesian conspiracy that, like, if you understand things properly you must understand not only what's at stake but also that you shouldn't talk about it. See Roko's Basilisk for a particularly clear cut example of this sort of fibbing.
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