Effective Egoism

So many questions, and their answers will be harbored in the heart of a 30-year-old ex-millionaire in the Caribbean or in a correctional facility. The bankruptcy of the FTX crytpocurrency exchange, the merciless fall of its founder and crypto poster boy Sam Bankman Fried (SBF), and the investigations that will now ensue and probably take a long time – it's all starting to seem like a reality show along the lines of “The Big Short.”

How many more times do we have to watch a Ponzi scheme in conjunction with proprietary trading rob multiple investors of their invested assets before it becomes clear that the Next Big Thing is rarely created out of nothing? Now, eight billion missing dollars later, most people seem flabbergasted yet again. My goodness, how could this happen? There's a simple answer: Through a total lack of oversight and regulation on the one hand, and naive, deluded faith in supposed corporate miracles on the other.

The information that is now becoming public in bits and pieces points to a quasi-feudal system of self-enrichment by a small group of people who are connected with each other in manifold ways. They all live together in a luxury resort on the Bahamas, where they run two companies at the same time: FTX and a trading house called Alameda Research. That name sounds so scientific and charitable that nobody seemed bothered by the overly close business relationship between the two. SBF, along with a small group of confidants, made all the decisions according to the principle: Loyalty beats competence.

Now, it might sound like fun to run two companies from a polyamorous harem in Barbados. It's less fun when some eight million customers are screwed out of eight billion dollars. John Ray, the newly installed CEO of the FTX cryptocurrency exchange charged with steering what's left of the company through bankruptcy proceedings, says, “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.” And that's saying something, because among other things, John Ray also managed the Enron bankruptcy that razed the Texas energy company to the ground in 2001 – one of the largest economic scandals in US history.

US President Biden also fell for Sam Bankman-Fried’s trick

Much more interesting than the insane revelations of lack of oversight and control, combined with boundless hubris, is the scandal behind the crypto crash. SBF was not only the crypto prodigy, he was also the main protagonist in a movement that calls itself “effective altruism.” This philosophical and social movement focuses on more effective philanthropy, with a goal of using relief efforts to help as many people as possible in the most effective way. It has enjoyed a particularly vibrant resonance in Silicon Valley, and SBF has been its fixed star.

The 30-year-old described himself as amassing an incredible fortune not for himself, but to give it to those in need. That sounds great and like a real purpose. World-renowned investment firms like Sequoia Capital, millions of individual investors, yes, even the current US president fell for it. But now, the beautiful paint job having been chipped away, the entire facade has fallen with a tremendous thud. And on closer inspection, you have to admit there's nothing but a black hole where there used to be a fancy house of cards of self-marketing.

This whole naive cult of personality in the tech industry is really starting to get on my nerves. It's not a belief in the capabilities of a genius, it's a cult – fed by confused notions of omnipotence and infallibility, which a misguided Silicon Valley mindset awards to those who present themselves accordingly. Those mysterious nerds who indulge in effective egoism under the cloak of the common good, but in reality, don't care about anything beyond their business success.

How many more times do we want to be persuaded that a single person can save the world, if only they're determined and crazy enough? How many times do we still have to fall flat on our faces before we realize that there is indeed a correlation between experience and success?

The former governor of the Bank of England once said that if someone explains something to you about finance and it doesn't make sense, you should ask them to explain the argument again. And if their answer still doesn't make sense, you should turn tail and run.

It's so boring and fatiguing to hear the same stories again and again about ingenious entrepreneurs making the world a better place – only to watch their stories end in total disenchantment. Yes, effective altruists do exist. They are the many honest businessmen and women who create innovations, jobs, and prosperity – usually outside of the public spotlight.

Cover Image: Collage, Cointelegraph/Wikimedia Commons, Canva