Making Sense with Sam Harris - #303 — The Fall of Sam Bankman-Fried

Episode Date: November 15, 2022

Sam Harris discusses the recent Sam Bankman-Fried fiasco, the collapse of FTX, and the future of Effective Altruism. If the Making Sense podcast logo in your player is BLACK, you can SUBSCRIBE to gain access to all full-length episodes at samharris.org/subscribe.   Learning how to train your mind is the single greatest investment you can make in life. That’s why Sam Harris created the Waking Up app. From rational mindfulness practice to lessons on some of life’s most important topics, join Sam as he demystifies the practice of meditation and explores the theory behind it.

Welcome to the Making Sense Podcast. This is Sam Harris. Okay, well, I want to say something about the Sam Bankman Freed fiasco. As many of you know, I spoke to Sam once on the podcast. We also put that conversation on the Waking Up app. We've since removed it from the app because it really no longer belongs there, given what happened. But it's still on the podcast. It's episode 271, so you can find it there if you're interested. I'm not going to give a full account of what Bankman Freed did to destroy his reputation

and his wealth and the wealth of many investors and customers. It seems in record time. Many details are still coming in, and this is all being very well covered by the press, with schadenfreude and cynicism to spare, and that's a point I will return to. But briefly, Bankman Freed had made tens of billions of dollars trading cryptocurrency, and he had built one of the world's largest crypto exchanges, FTX, along with his own investment entity called Alameda

Research. And the connection between FTX and Alameda was always unclear, and this seems to have been, in retrospect, something that investors and the business press should have been more interested in. But my interest in Bankman Freed was entirely due to his stated commitment to effective altruism. He appeared to be the world's greatest example of what has been called earning to give in the EA community, which is setting out to make a lot of money for the express purpose of giving most or all of it away. And at the time I interviewed him, everything suggested that he was doing this. In any case, what seems to have happened last week is that

concerns over the financial health of FTX and its links to Alameda Research triggered, essentially, a run on the bank. FTX customers tried to withdraw their assets en masse, and this revealed an underlying problem at FTX. Unfortunately, Bankman Freed appears to have used customer assets that should have been safely stored there to fund risky investments through Alameda in a way that seems objectively shady and unethical. Whether or not it was also illegal, I don't think we know. All this happened outside of U.S. jurisdiction, as a majority of crypto trading in fact does. So whatever the legality or illegality, Bankman-Fries seems guilty of enormous financial malfeasance.

He appears to have lost something like $16 billion in customer assets. And then there were clearly moments where his public comments about the state of the business amounted to lies. These were lies that seemed calculated to reassure investors and customers that everything was fine when everything was really falling apart. Now, I have no idea when all the shady and unethical and probably illegal behavior started. Was he Bernie Madoff from the beginning? Or did he just panic in a financial emergency, thinking that he could use customer funds just this one time and then everything would be okay again. The truth is, I don't even know whether Bernie Madoff was Bernie Madoff from the beginning. I don't know whether he was a legitimate investor who was making his clients a

lot of money and then got underwater and then went Ponzi in an attempt to get back to dry land and then found that he never could. That wouldn't be good, obviously, but it's a very different picture than of a man who was an evil liar from the very beginning, just a pure sociopath who knew that he would be bankrupting vulnerable people every step along the way. Perhaps we know what's true about Madoff. I just haven't read very deeply about his case.

But the point is, I have no idea who Sam Bankman Freed was or is, really. And this morning, I went back and listened to the interview I did with him. And even with the benefit of hindsight, I don't detect anything about him that strikes me as insincere. I don't have any retrospective spidey sense that makes that conversation appear suddenly in a new light. Now, maybe I'm just a bad judge of character. That is totally possible. I've had people much closer to me than Sam Bankman Freed, who I've never met and only spoken to twice, once being on that podcast. I've had people much closer to me, people I've worked with, and people who are actual

friends, behave in very strange ways that have totally surprised me. And some of these people have large public platforms, and have done things in recent years that I consider quite harmful. platforms, and have done things in recent years that I consider quite harmful. I've commented about some of them, and I've held my tongue about others. And frankly, I'm still uncertain about the ethics here. What sort of loyalty does one owe a friend, or a former friend, when that person is creating great harm out in the world? Especially when you yourself have a public platform from which to comment on that harm, and are even being asked to comment. Is it appropriate to treat them differently than one would treat a stranger who is creating the same sort of harm? I don't know. You can probably guess some of the names here, but COVID alone has caused several of my friends

and former friends to say and do some spectacularly stupid things, and I haven't known what to do about that. However, my point is that I've been very surprised by much of this behavior, so perhaps I am a bad judge of character. However, in the case of Sam Bankman-Fried, I had no prior exposure to him. That podcast conversation was the first time I ever spoke to him. He was simply someone who had been ripped from the pages of Forbes magazine and promoted by the most prominent people in the effective altruist community, and I had no reason to suspect that he was doing anything shady behind closed doors. And it appears that many of the executives at FTX didn't know what he was doing. And the venture capitalists like Sequoia and Lightspeed and

SoftBank and Tiger Global and BlackRock, who gave him $2 billion, clearly didn't know what he was doing. And again, when I listen to my interview with him now, I don't detect anything that should have been a red flag to me. Of course, none of this diminishes the harm that Bankman Freed has caused. As far as I can tell, the accounting is still pretty murky, so it's not clear where the money actually went. But as I said, he appears to have lost something like $16 billion of customer funds. That's a lot of money. And it's quite possible that some people who listened to my podcast with him could have been so impressed by him and his story that they invested in or through FTX. I would certainly be unhappy to learn that that had happened,

and I would deeply regret any role that my podcast played there. But again, I just listened to the conversation this morning, and I still don't hear anything that should have caused me to worry that Sam Bankman-Fried or FTX was not what they seemed. Now, beyond the immediate financial harm he caused, Bankman-Fried has done great harm to the reputation of effective altruism. The revelation that the biggest donor in the EA universe was not what he seemed has produced bomb bursts of cynicism throughout tech and journalism, all of them quite understandable, but also quite

unwarranted. First, let me be clear about my own relationship to effective altruism. I've said this before, but I view EA as very much a work in progress, and I have never been identified with the movement or the community, and have only interacted with a few people in it, mostly by having them on my podcast. And as I said to Will McCaskill, the movement has always seemed somewhat cultic and too online for me to fully endorse. Some of its precepts seem a little dogmatic to me. What I've taken from effective altruism has really been quite simple and can be distilled to two points. The first is that some ways of helping to reduce suffering are far more effective than others, and we should care about those differences. For instance, it's quite possible

that trying to solve a problem by one method will be 10 or even 100 times more effective than trying to solve it by another. And in fact, some ways of trying to solve a problem will only make the problem worse. Now, this is such an obvious point that it seems insane that you would need a movement to get people to understand it. But prior to EA, most philanthropy seemed to be basically blind to any rational metrics of success. In fact, many charities are governed by perverse incentives. They can't afford to solve the problem they're ostensibly committed to solving,

because then they would go out of business. Effective altruism, at least in principle, would go out of business. Effective altruism, at least in principle, represents a clear-eyed view of what it takes to do good in the world and to prioritize the most effective ways of doing that good. The second principle, which more or less follows directly from the first, is that there's a difference between causes that make us feel good, that are sexy and subjectively rewarding to support, and those that reduce suffering and death most effectively. As I've discussed many times on the podcast, we are easily moved by a compelling story, particularly one with a single sympathetic protagonist, and we tend not to be moved at all by statistics. So if you tell me that one little girl fell down a well, and I can do something to save her right now,

well, I'm going to do more or less whatever it takes, especially if that girl lives just a few blocks away from my home. But if you tell me that 10,000 little girls fall down wells every year, and most of them live in Tanzania, I'm not sure what I'm going to do, but it's not going to sweep aside all my other priorities for the day. I might just go get some frozen yogurt in an hour. And if you do convince me to support a charity that is working in Tanzania to save these little girls, however big a check I write, the act of writing it is not going to be as subjectively rewarding as my helping my neighbors save one little girl.

It might be 10,000 times more effective, but it will be 10,000 times less rewarding. This is a bug, not a feature of our moral psychology. We are just not built to emotionally respond to data, and yet the data really do indicate the relative magnitude of human suffering. So on this point, effective altruism has convinced me to give in a way that is unsentimental, in that it can be divorced from the good feelings I want to get from supporting causes I'm emotionally connected to. It's caused me to commit in advance to give a certain amount of money away every year. In my case, a minimum of 10% of my pre-tax income. And in the case of waking up, a minimum of 10% of our profits. And to give this money to the most effective charities

we can find. As I've said before, I even said this in the intro to the episode with Sam Bankman-Fried, committing in advance to giving a certain percentage away to the most effective charities, and then giving whatever I want to less effective causes, to which I might be more emotionally attached, this has really transformed my ethical life for the better, because I now experience giving money to a children's hospital or to some person's GoFundMe page more or less like a guilty pleasure. It's like I'm splurging on myself. That money could be going to the most effective charities, but selfish bastard that I am,

I'm just helping a single individual who may have been the victim of an acid attack in Pakistan, right? It's hard to capture the psychology of this until you experience it, but it has transformed my thinking about many things, about wealth and charity and compassion. And exactly none of this is put in jeopardy by the discovery that Sam Bankman Freed was guilty of some terrible investment fraud. Again, I'm still not sure what happened with him, whether he was exactly what he seemed, but then freaked out in the midst of an emergency and started lying and stealing in an attempt to get out of it, or whether he's a pure con man. in an attempt to get out of it, or whether he's a pure con man. But neither of these possibilities has any implication for what I've taken from effective altruism. And the same would be true

if there were unhappy revelations yet to come from other prominent people in the EA community. This would be very depressing, but it would have no effect on how my thinking about ethics has changed for the better. Here's an analogy that might make this a little clearer. Imagine a very prominent scientist or a group of scientists is found to have faked their data. This happens from time to time. Imagine that the scientist in question has been so influential and the fraud was sustained for so long that a Nobel Prize now has to be rescinded, and an entire department at Harvard shuttered. Would this say anything about the legitimacy of science itself? Of course not. However, I'm now seeing a lot of people respond to the Bankman-Fried

debacle as though it reveals that the very idea of effective altruism was always a sham. It's as if people are concluding that no one is ever sincere in their attempts to help others, or that there are no better and worse ways of doing good in the world, certainly not where charity is concerned. It's all just virtue signaling and reputation laundering and sanctimony and lies. There appear to be many very selfish people who didn't much like hearing about someone giving most or all of his wealth away, who now feel totally vindicated in their selfishness. They seem to be thinking all those effective altruists were just pretending to be better than me, and they're not.

They're actually worse, right, because they can't be honest about their selfishness and hypocrisy. Over here in the real world, we're just all in it for ourselves, and that's fine, because that's all that's possible. Anyway, this is all just morbid and obtuse. Anyway, this is all just morbid and obtuse. Just as you can know that science is a legitimate enterprise because you can actually do science, you can know that effective altruism is legitimate because you can actually do it for the right reasons. As damaging as fraud can be in both domains,

no case of fraud can put either domain in question. Fraud has no logical relationship to either enterprise. Scientific frauds are not science. They're frauds. And the corrective to them is real science. Ethical frauds are not ethics. They're frauds. The corrective to them is real ethical behavior. The other crazy thing I'm seeing is that people are linking Bankman-Fries' behavior to the ethical philosophy of utilitarianism, as though a belief in this philosophy was bound to produce such behavior.

And everything I've heard said or seen written about this is pretty confused. I'm sure I'll talk more about this on future podcasts because it's important to get straight, but the short point I'll make here is that, in my view, the claim that utilitarianism, or more properly In my view, the claim that utilitarianism, or more properly, consequentialism, is bad amounts to a claim that it has bad consequences of some sort. But of course, if these consequences are worth caring about, they can be included in any fuller picture of consequentialism. My point, and I made this at length in my book, The Moral Landscape, which remains the most misunderstood book I've

ever written. My point is that everyone really is some form of consequentialist, even if they think they're not. You just have to listen to them talk long enough, and they start telling you about the consequences they really care about. Deontology, for instance, a version like Kant's categorical imperative, or virtue ethics, right? I think these positions entail covert claims about the consequences of certain ways of thinking, or acting, or being in the world. Anyway, I'll speak more about that at some point, but suffice it to say that if Sam Bankman Freed stole his customers' money and gambled it away, whatever rationale he may have had in his head, it would have been very easy to argue that this was wrong from the point of view of consequentialism.

Just look at the consequences. They're disastrous. They're disastrous for him and for his investors and customers and for anyone in his life who cares about him. I mean, just think about the consequences for his parents. His parents are both Stanford law professors. Now, assuming that neither had any idea what he was up to, and so they're not at all culpable for what happened. And who knows, they might actually have been involved. I know nothing about them, but I suspect not. Imagine how their lives changed last week. They have spent the last decade being congratulated, I suspect endlessly, for having produced such a marvelous and marvelously successful son.

Can you imagine? He got a degree in physics from MIT and then went on to make $30 billion for the purpose of giving it all away to charity and then expanded his influence into politics and among celebrities so that he could do even more good, ultimately. He's hanging with Bill Clinton and Tony Blair and Tom Brady and Gisele. But rather than being just a star fucker or an ordinary rich guy,

he is laser focused on making money to solve the world's most pressing problems. Can you imagine how proud his parents were? And now their son is the next Elizabeth Holmes? Or worse? I mean, you just have to consider the lives of these two people. And this is a fucking Greek tragedy. But of course, the harm has spread much further than that. Anyway, those are my thoughts at the moment.

I will definitely speak more about these issues on future podcasts, and I'd be happy to hear suggestions for anyone who I might speak with who could take the conversation in new directions. Thanks for listening. you