The most exciting aspect of Sam Bankman-Fried’s story has always been that he steered his way to a supposed cryptocurrency fortune of over $16 billion by following a philosophy of charitable giving known as “effective altruism.”
Interviewers were intrigued by Bankman-Fried’s account of an epiphany he had during a lunch with Will MacAskill, around the time he was graduating from MIT.
British philosopher MacAskill advocated a version of “effective altruism” asserting that if the purpose of life is to do good, then the moral duty is to make as much money as possible, and then give it away. MacAskill pressed this point of view into the ordinance, “Gaining the Bid.”
Sam and FTX had a lot of goodwill – and some of that goodwill was the result of being associated with ideas I’ve spent my career promoting… I’m ashamed.
– William MacAskill
According to Bankman-Fried, the encounter inspired him to change his goal after graduation away from joining a non-profit organization and toward finance, eventually founding one of the world’s leading cryptocurrency firms, FTX.
Adam Fisher, author of a snarky profile on Bankman-Fried published in September by venture firm Sequoia Capital that invested in FTX, He asked his subject how much money would be too much: “So, is five trillion all you can use to help the world?”
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The conclusion of this story is now known. Bankman-Fried’s crypto company has collapsed in a whirlwind, amid indications that it may have scammed customers who deposited money with FTX into buying cryptocurrencies. Billions of dollars are missing.
The company repairman who was hired to fix the disaster, John J. Third Ray, it’s from an operational standpoint, FTX has been a mess from top to bottom.
This refers to the question of what the catastrophe says about “effective altruism” in principle and practice. The short answer is: nothing good.
FTX and effective altruism exist in a kind of symbiotic relationship. Bankman Fried pretended to be a global philanthropist. During his appearance before a House committee in May, he boasted of a personal commitment to “donate 99% of his wealth.” Among other philanthropic initiatives, he said, his company launched the FTX Future Fund to invest in “ambitious projects aimed at improving humanity’s long-term prospects.”
Effective altruistic foundations that portrayed Bankman-Fried as a star donor — including the Future Fund — now admit that they may not have the money to honor the grants they promised their recipients. Some Bankman-Fried tributes have removed their dialogues from their websites; Similarly, Sequoia removed Fisher’s long piece from its website.
However, the siren call of Bankman-Fried fortune blinded MacAskill and his colleagues to the void at the center of the cryptocurrency concept itself: it is an area riddled with fraud and deception and lacking any convincing argument for its usefulness. Bankman-Fried’s use of his image as a philanthropist to hide the flaws in his organization seems almost predetermined.
The entire Future Fund team resigned on November 10. And about the same time, the leaders of the movement felt obligated to state explicitly that the principle of gain “No way justifies fraud,” MacAskill also tweeted.
The impulse to define this apparent principle points to the emptiness at the heart of effective altruism. Let’s take a look at what it’s all about.
First of all, there is nothing new under the sun when it comes to washing away infractions through apparent displays of spiritual piety or good deeds. Take, for example, the gilded robber baron Daniel Drew, one of the era’s preeminent manipulators and con artists, who rarely missed a Sunday in church or was seen in public without a well-thumbed prayer book on hand.
To outsiders, as reported by a biographer, Drew seemed “modest and humble, a good man, pious, reserved and humble to a fault.”
He established Drew Theological Seminary in Madison, NJ, with an ostentatious pledge of $500,000; The formal opening in 1867 was attended by “the largest group of Methodist intellectuals and theologians ever assembled”, including nine denominational bishops and four rectors.
But when the time came for Drew to fulfill the gift after nine years, he was broke. He died in 1879, still owing $250,000 towards his pledge, prompting the school into a panicked round of fundraising to avoid extinction.
The institution he founded lives on today as Drew University, with an associated theological school, but rather downplays how the original namesake benefactor made his money.
Other notable businesses and charities—the Ford and Rockefeller Foundations, the Carnegie Library’s 1,800 libraries across the United States—are also products of their creators’ desire to clear their slate for posterity.
The 236 millionaires and billionaires who have signed the Giving Pledge, a commitment to contribute most of their wealth to “tackle some of society’s most pressing problems,” essentially indicate their intentions in advance, without waiting for their will to be read. (Signatories include: Sam Bankman-Fried.)
Effective altruism in its modern form originated in the work of the philosopher Peter Singer, whose initial influence stemmed from his advocacy of animal rights and expanded into the view that we all have a moral duty to prevent bad things from happening, if we can do so “without sacrificing anything nearly as important.” .
Singer’s most famous thought experiment involved the necessity of saving a drowning child, even if it meant muddying your clothes or even missing a crucial appointment. His argument was that there was nothing fundamentally different from saving that child and alleviating the suffering of children in faraway lands, for example by donating whatever money you have beyond what you need to support yourself and those who depend on you.
But life is more complex than that simple formula would suggest. It raises countless questions about how we prioritize problems to solve, who we owe responsibilities to, and how we consider the source of our donations. Singer himself acknowledged some of this complexity by engaging in conversations with his critics that resulted in the 640-page book Peter Singer Under Fire in 2009.
McCaskill expanded on the mistake he made in Bankman-Fred’s hood during that lunch by embracing what he calls “the long haul.” As he puts it in a recent book, What We Owe to the Future, the idea is that “positively influencing the future is a fundamental moral imperative of our time.”
He acknowledges that the future, whether a generation to come or thousands or even a million years, is “uncharted territory” where “we don’t know exactly what threats we’re going to face or even where exactly we’re trying to go.”
The word “exactly” carries a lot of weight in this line: the truth is, we don’t know anything About the threats we will face or where we are going.
There is a significant element of hand-waving that underlies the purported principles of effective altruism.
The Center for Effective Altruism, which MacAskill heads, says it is dedicated to “using evidence and reason to figure out how to benefit others as much as possible.” Is there a philanthropist anywhere on earth who ignores “evidence and reason” before deciding where to spend their money?
Turning to the movement’s defense that it never intended to inspire Bankman-Fried or anyone else to commit scams to accumulate fortunes to give away — it just wants clean money — the “earn for giving” camp ignores that the accumulation of significant wealth is rarely morally neutral.
The concentration of vast wealth in the hands of ever fewer people increases inequality, because so much of the fortunes of millionaires and billionaires have come at the expense of workers, customers, suppliers, and societies. Timothy Noah of The New Republic emphatically identifies the most defining feature of effective altruism as “the well-worn ingenuity with which it advances past targets likely to offend billionaires,” such as inequality.
Jeff Bezos has vowed to give away most of his $121 billion fortune during his lifetime, for example, withholding salient facts about how he acquired that wealth in part by underpaying Amazon.com employees and, as widely reported, subjugating them. Inhumane and abusive working conditions. (Balzac’s phrase, often paraphrased as “behind every great fortune lies a great crime,” is relevant here.)
Then there is the question of whether we want a small cadre of wealthy people — the 1% of the world’s population who control nearly half of the world’s wealth — to distribute their wealth according to their personal preferences, rather than subject it to public and transparent judgments through government action.
Among other issues, wealthy people tend to engage in tax-sanctioned charitable giving that reflects their ideological preferences and personal interests, which may not reflect the public interest.
This is why effective altruism, as a movement, tends to seem like just another justification for the accumulation of wealth, in this case as a line of philanthropic effort to benefit humanity in the infinite future.
There is no reason to assume that promoters of effective altruism are anything but sincere in their convictions. As for the financial class who claims to believe in the movement, the jury is out. Interviewed via text message by Kelsey Piper of Vox.com, Bankman-Fried seemed to admit that, as Piper put it, the “moral stuff” was “mostly a facade.”
He replied, “Yes.” “I mean that’s not the case All Of it but it’s a lot… It’s what a reputation is made of, in a sense.”
Bankman-Fried rode that horse as far as he could go before he collapsed, and his trusted admirers saluted as he galloped past. MacAskill, for one, admits he was humiliated by the experience.
He then tweeted: “Sam and FTX had a lot of goodwill – and some of that goodwill was the result of being associated with ideas I’ve spent my career promoting.” “If these good intentions wash away the fraud, I feel shame.”
But will he grasp the lesson already taught to Daniel Drew, Henry Ford, John D. Rockefeller, and Andrew Carnegie among countless other financial barons—that having money comes first, and giving it an afterthought? The lesson was there to be learned long before Sam Bankman-Fried appeared on the scene, and he ignored it at his own risk.