“People want an authority to tell them how to value things, but they choose this authority not based on facts or results –– they choose it because it seems authoritative or familiar.”
–Michael Lewis, The Big Short.
Renowned author Michael Lewis published his book, Going Infinite: The Rise and Fall of a New Tycoon, on the rise and fall of FTX on the first day of the trial of its notorious founder Sam Bankman-Fried (Bankman-Fried). The book has met with heavy criticism by commentators for its seemingly favorable portrayal of the millennial crypto founder.
It’s funny because at its core, the story of Bankman-Fried is a very old-school, Big Short-esque tale of a privileged actor who leveraged, for his own gain, our society’s predilection to make value judgements on people not due to their track record –– or as Lewis put it, “facts” –– but rather based off of a set of heuristics and approval from “sophisticated” people.
Bankman-Fried’s ability to convince those we trust to be the “smart people” of our society –– including Lewis –– is uncanny. But why did they fall for him?
Perhaps, it is because Bankman-Fried was someone they understood. He was an insider, who –– like them –– saw crypto as a community they could capitalize on, rather than an an ecosystem to nourish.
Fortune Magazine in their profile of Bankman-Fried, wrote that the Bay Area native doesn’t look like the most powerful man in crypto. But is that really true?
If anything, a 20-something year-old man oozing social awkwardness, an MIT degree, and poor fashion-sense is the wet dream of many a modern “sophisticated” tech investor. Bankman-Fried could easily be a character on the HBO show Silicon Valley.
Now compound that with his birthright –– two parents who are law professors at a modern basilica of commerce –– Stanford University, and you have almost messianic figure of modern capitalism.
One need not look further than the praise given to him by Kevin O’Leary, saying “I’m a big advocate for Sam because he has two parents that are compliance lawyers.” the Shark Tank investor said in 2022.
O’Leary continued: “If there’s ever a place I could be that I’m not going to get in trouble, it’s going to be at FTX.” We later found out that the Canadian investor was paid close to a million dollars an hour to be a public spokesperson for Bankman-Fried.
But beyond Bankman-Fried’s bona fides, the real selling point that captured investor attention was Bankman-Fried’s mission.
Not “effective altruism” –– subscribing to trendy, faux empathic movements is certainly a good marketing move for elite financiers. But, what really excited his investors was his belief that crypto wasn’t a serious industry worthy of building up, but rather a great opportunity to grab a bag load of money from gamblers.
As a Sequoia Capital’s venture capitalist put it in a now deleted profile on Bankman-Fried, “Yes, crypto eventually could replace money, and, yes, it can eventually decentralize the web,” the investor said.
He continued: “But all those things are not true today. And, so, what is the thing that people do today? They trade. And if people trade, and people like trading, what is the business model that will make tons of money? It would be an exchange.”
This quote shows that the investors of Bankman-Fried didn’t view the crypto community as serious. To them, crypto itself has the same societal significance to getting three sets of cherries in a row on a slot machine in a Vegas casino. Better to invest in the casino rather than the photos of cherries.
Agree or disagree with them, the crypto, and specifically the bitcoin subsection, of the community is serious with their goals. They are largely a set of libertarian, hyper-principled people. They are profoundly serious about their view on how blockchains can be used to liberate the currently unbanked, protect the value of one’s labor from ever increasing inflation, and connect people around the world through payments, and specifically remove government interference in money.
As Erik Voorhees’ puts it –– in what is now one of the final debates with Bankman-Fried –– “what we are doing here is in effect bringing the same separation that occurred between church and state to state and payments. In effect freeing people around the world.”
The earnesty of belief held by people like Voorhees doesn’t compute for people like Sequoia VC or Bankman-Fried. For them those beliefs were useful in that they got a community to work hard for close to no reward until the first few bitcoin bull runs. But the belief itself? For the jaded elite, a company mission often is a means to a single end: Enrich one’s bank account.
To them, a mission is as significant as making a “charity,” or going on a service trip in high school to look good for an ivy league admissions officer. It is just part of “the game.”
This is quite problematic, since their investments in immature crypto companies –– and overall childish behavior, like when FTX raised $420,690,000 from 69 investors –– is a large part of the reason the “crypto” industry isn’t respected by the general public.
Moreover, Bankman-Fried regularly made statements criticizing bitcoin, for being “slow, and bulky.” Keep in mind, the bitcoin community not only birthed crypto, but are –– for better or worse –– perhaps the most ideologically pure people in technology.
Moreover, Bankman-Fried sought to influence legislation that would impact the earnest bitcoiners. Since he was –– prior to FTX’s collapse –– one of the biggest Washington donors, he likely would succeed in lobbying the government to follow his view.
But this here is a form of colonization. The crypto community was a vibrant ecosystem prior to Bankman-Fried’s entry. It was a bunch of misfits that came together to build something that was unique and important. A chance to feel empowered in a system they feel marginalized in. For Bankman-Fried and his cohorts to come into it aiming to make a percentage off of the trading fees of investors –– rather than create products and businesses in the ethos of bitcoin –– was their original sin.
Should we be so surprised that it eventually fell apart?
A Silicon Socialist
In a similar vein to a young child who asks “why doesn’t the government just print more money and give it to the homeless?” –– Bankman-Fried’s claim to fame was to make a lot of money and give it away. Like some benevolent patrician. Andrew Carnegie in board shorts.
But was it really an authentic impulse for charity, or was his empathy just some kind of game strategy to increase his social capital?
In a phone call with crypto reporter Tiffany Fong, Bankman-Fried said that he donated as much money to Republicans as he did Democrats, but did so quietly in order to gain favor with journalists who he felt were predominantly left wing. In other words, Bankman-Fried manufactured a public persona of humanitarianism, but in reality his raison d’être was to gain more power and clout
His former business partner Anthony Scaramucci said that he saw Bankman-Fried as having a sort of “superiority complex.” So, perhaps in Bankman-Fried’s head he thought that he could single-handedly solve all of the world’s problems if only he had all of the money.
Whatever the truth may be –– what is it that made Bankman-Fried think that he had the right to use other’s money at his own discretion? Or for him to enter a space that he, once again, had close to nothing to do with creating. What made him think that he should be the authority who decides what aspects are kosher or haram? Or write legislation for it?
At its core is a belief he was the smartest person in the room. A belief certainly had the innate privilege to feel given his parents’ societal standing, and his undeniable analytical wit. But, what was missing in the matrix of Bankman-Fried was a soul. A soul that would allow for him to truly respect community that he was entering as a stranger.
History is filled with examples of people similar to Bankman-Fried, who rose to power promising to be stewards of a new, more fair utopia. When, in reality, the main change they’re looking for is to be the ones in power. Bankman-Fried took that trope and sprinkled in Silicon Valley culture.
As Michael Lewis writes, for Bankman-Fried, most of life is just some kind of game. One which –– if most legal experts are correct –– he won’t be getting any restarts on.
This is a guest post by Jacob Kozhipatt. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.