A friend had a spare ticket, so the evening before yesterday I heard Michael Lewis (Liar's Poker, Flash Boys) talk about Sam Bankman-Fried and the FTX crypto exchange disaster. I thought I'd post on Mastodon about it, but the words ran away a little, and now I have a blog post.
I went into it a little suspicious, since the book's had some not-great reviews, mostly focused on technical inaccuracies.
One thing that came across quickly is that Lewis's focus is on characters, and maybe a bit of stories. Deep technical details are way down the list. OTOH, he spent more than a year with SBF, so I expect his character insights to be pretty solid.
While Lewis was a literal investment bank bond salesman in the 1980s, it was surprising quite how out of touch he was with modern, technical Wall Street, particularly given Flash Boys. He talked about the "obscure" HFT companies you probably haven't heard of, and the entire list was either places it was suggested I interview at, or places I have friends at (I've never worked in HFT - feels too zero-sum).
Moving on to the weird aptitudes and behaviours of SBF, and it was quite "You don't hang out much with maths olympiad types, do you?". To be fair, SBF's social behaviour seemed extreme even by those standards. It was like he couldn't see the point of masking-style behaviour, even though most bright aspie types get that working out how to work effectively with others helps you get what you want.
Yet somehow this failure to comprehend effective interaction is made into a huge selling point. All his flaws are treated like, "wow, so unique". I remember the VC page that stayed up far too long after the FTX collapse talking about basically how impressed they were with his crappy attitude to risk management and self-centredness.
As Lewis spent a year with Bankman-Fried, you'd have expected him to have a pretty good read on him, but if he's hugely abnormal socially, does that cause an issue? Amusingly, it looks like Lewis believes he understands SBF because he's seen so much dishonest behaviour from him.
Let me break that apart a bit: What Lewis sees is a person who just does not think about what other people think. So, for example, during his external-facing work at FTX he's learnt that "people like you more if you say yes", so he just spends those meetings agreeing with everyone, even if he doesn't actually agree. In other cases, his partners would basically say "You're not going to run this algo unless we're around, right?", he'd agree, and then run it when they're not around. It's like he doesn't understand the value of being truthful to people, vs. saying whatever's expedient and assuming that everyone else has the memory of a goldfish.
Yet he's doing all this blatantly in front of Lewis, not hiding it. The same attitude of not modelling others' thoughts about his honesty applies to Lewis, so he doesn't have the mental framework to hide what he's doing from Lewis. It's all very On Bullshit - SBF is not so much a stragetic liar as like the toddler who'll tactically say whatever he thinks will get him what he wants, with no regards to the future. He's not trying to bend the truth, he just doesn't care about it.
Another factor that sounds like it would make Lewis's job harder is that SBF doesn't do facial feedback. For example, he wouldn't smile at a joke. Lewis said SBF resented having to perform these basic social behaviours, but when he started dealing with more people he actually started practising expressions in a mirror. This prompted a question from the talk's host about whether SBF felt emotions like other people did, and... is this where we are, still?! "Do autistic spectrum people have emotions?", really?
Anyway, the question of whether Lewis's assessment of SBF is credible is interesting because there are wildly differing opinions of Sam's motivations, and if Michael Lewis has an opinion based on a lot of personal exposure... is it right? Lewis thinks that Bankman-Fried's thing about effective altruism is genuine (while so many others think of it as a front for self-enrichment).
I think this is roughly based off SBF not having the subtlety to consistently lie about such a thing, but also because SBF doesn't really need money. There's been a fair amount of discussion of his weird lifestyle, but it seems to come down to him having an insane amount of money and nothing much to do with it, because he lives in his head and doesn't care much for material goods. Which I guess is consistent with the "doing it for effective altruism" story.
One thing that wasn't covered is how weird EA has become. Starting with "Maybe it makes more sense to earn a shedload of money and give it to help prevent schistosomiasis than volunteer in an animal sanctuary?" and getting to "We must spend millions upon millions defending against a hypothetical AI uprising!" is quite the ride.
I get the impression that Michael Lewis's view of "Did Sam Bankman-Fried commit fraud?" runs along similar lines to how SBF approached honesty: SBF didn't set out to commit fraud, he just didn't see the point in controls, didn't care about the laws, and just did whatever he liked. It's almost not even negligence, because that would imply that SBF understood he should have cared. It's like the concept of "bullshit", but for financial regulation compliance and controls.
There was just so much that Bankman-Fried didn't see the point of, and didn't do. He inherited a dislike of org charts from Jane Street (where a friend of mine is finding the aforementioned lack of clear organisational structure frustrating), leading to a very thorough tyranny of structurelessness at FTX. One of the weirdest things from the talk was finding out that the only actual org chart that exists was compiled secretly by the company therapist, as a way to make sense of the mess.
All this disorganisation and lack of controls leads to the question: Where were the adults in the room? Sam didn't believe in "old people", so they didn't have them. The need for experience is something that needs experience to realise! How did he get away with calling the shots like that? It looks like all the investors had fear of missing out, and FOMO is one of the driving factors behind venture capitalists behaviour, just like with Theranos. Don't ask too many questions. It's other people's money, anyway.
This in turn leads to another question that wasn't asked that evening: Who's responsible? He couldn't become a multi-billionaire in a year without leverage - people gave him money. Again, looks like those VCs that enabled the lack of controls. My suspicion is that the same feeling of "he's a character" that lead to Michael Lewis to start following SBF around for a year before FTX collapsed was also what drove the VCs to fund him. "Throw money at unusual people" is a substitute for "Throw money at competent and effective people", I guess.
One of Lewis's final thoughts seemed particularly poignant to me: Sam Bankman-Fried judged things by outcome rather than by intent. Against that background, for everything he's done, he's damaged the things he cares about and helped the things he dislikes. Ow.
Michael Lewis was entertainingly feisty. There were some good, interesting, and even funny audience questions. It was a fun, and even a little informative, evening.
Posted 2023-10-11.