Plain English with Derek Thompson - Thanksgiving Mega-Pod: Bob Iger’s Power Grab, SBF’s Scandal, and Elon Musk’s Omnishambles

Episode Date: November 22, 2022

Today’s episode is a Thanksgiving feast of corporate scandal and media gossip. Derek kicks things off with a big-picture theory for why everything in tech and media seems to be falling apart at the same time. Then, we turn to the corporate shocker of the week: Bob Iger stunned the entertainment and media world by announcing his return to Disney as CEO, not even three years after the coronation of his hand-picked replacement, Bob Chapek. Matt Belloni of The Ringer and Puck joins to respond to some hot takes about the future of the streaming wars and the Mouse. Then, Derek revisits the FTX scandal. We're joined by Matthew Yglesias, author of the Slow Boring newsletter, to take a fresh look at the downfall of Sam Bankman-Fried by analyzing the philosophy he supported, or at least claimed to support: effective altruism. Host: Derek Thompson Guests: Matthew Belloni and Matthew Yglesias  Producer: Devon Manze Learn more about your ad choices. Visit podcastchoices.com/adchoices

An Instagram post gets an unexpected boost. A TikTok catches in the algorithm. Sometimes that's all it takes to launch someone into internet fame. But then what? This blew up is a new podcast documentary that reveals how social media stardom is made. It's a different kind of fame that's not always as glamorous as it looks. From Spotify and the Ringer Podcast Network, I'm Alyssa Boresnack. You can listen to This Blue Up on Spotify or wherever you get your podcasts.

Today's episode is a Thanksgiving feast of scandal and gossip. Bob Eiger is back as the CEO of Disney taking over for other Bob, Bob Chepec, and we've got the ringers Matt Bellany to take on my hottest takes about this corporate shocker. We're also taking a fresh look at the downfall of Sam Bankman-Fried and FTX by analyzing the philosophy he supported, or at least claimed to support, called Effective Altruism. I've got Matt Iglesias on the job there. But I want to start with a grand theory of 2022 chaos. When you read today's headlines, whether it's Eiger and the Disney challenges, the crypto

crash, the layoffs at meta, the layoffs at Amazon, Elon Musk's shock therapy at Twitter, this new age and technology, I think there is a single story, a single theory that ties it all together. I want to call it the interest rate theory of everything. This theory begins around 2007 with the housing crash. You have this huge downturn, a great recession, crazy high unemployment, an entire generation is fucked. The Federal Reserve drops interest rates to zero or near zero to help get the economy going again. And this does a few things.

On top of stimulating the economy, it reduces the cost of capital, and it moves institutional investment away from bonds toward higher rates of return. Meanwhile, venture capital blooms at the same time that the smartphone is becoming this universal omni gadget. Tech revenue is surging, especially for the big boys, Microsoft and Fang, that's Facebook, Apple, Amazon, Netflix, Google. In Silicon Valley, you've got billions of dollars that are flowing into consumer tech and social media apps. Everything that comes out of this period is either free or heavily subsidized by venture capital. Here's what I mean by that.

In 2015, if you hailed an Uber and that ride cost Uber $20 for the company to break even, you often paid something like $15. Who was paying the other $5? Venture Capital was paying the other $5. Why would they do that? Well, they wanted to dominate the world. Growth was more important than so-called unit economics. That is whether you turn a profit on each individual rider.

They would rather lose cheap money in the short term than fail to grow at all. You can tell the same story with something like streaming. As long as rates were low, investors were willing to give Netflix a ton of money even though they weren't profitable. And Netflix was willing to give us that money too by giving us a discount on their streaming service so that they could continue to expand at a loss. It's like low rates were this microclimate in which a certain kind of company bloomed. And those companies define the tech front. year. The pandemic created a really strange and brief oasis for tech. COVID accelerated internet use, social media companies hired like crazy, e-commerce exploded, basically fast forwarded into

the future by 10, 13 years. And it seemed like this tech fairy tale was just going to go on forever. But all along, as people were predicting this forever boom for tech, you know, oh, the roaring 20s are just going to be this heaven on earth for tech companies forever and ever. Suddenly something stranger was happening. As the New York Times, David Wallace Wells put it perfectly, a decade of loose money and low growth and low interest rates coming out of the Great Recession created a bull market in bullshit. A bull market in bullshit. So then you have this surge of post-pandemic inflation and rates rise. That means the end of easy money. All these companies suddenly have to hoard their cash and raise their prices. The narrative in markets has entirely flipped from growth

toward profits, from dominate the world to unit economics. That means the valuations for these tech companies suddenly crash and their profit earning ratios become pretty much normal. So what happens individually for these companies? Well, the price of Netflix goes up. The price for Uber rides goes up. The price for all these consumer tech apps that you use has to go up. Meanwhile, they have to cut costs so they have to fire thousands, sometimes tens of thousands of people at places like meta and Amazon. That is the world in which we live. The microclimate suddenly changed and the tech companies had to change to. So think about how this story connects to two of the major sagas, the major scandals in tech today.

Whatever Elon Musk is doing at Twitter and the changing of the guards, the changing of the Bob's at Disney, from Cheapac to Iger. Musk first. Elon Musk is the richest person in the world. Why? Largely because of Tesla stock. Tesla briefly became the most valuable car company on the planet. Not because it earns the most revenue, and not because it has the highest profit.

It has neither. Rather, because for many years, investors in a low-rate environment were valuing the company's future profits and future growth rather than its current profitability. Tesla would have been a valuable company no matter what, but low rates help to make its founder the richest man on the planet. Okay, that's why Elon Musk has a lot of money. How does the rate story explain what he's doing at Twitter? Well, you look at what he's doing, the chaos he's unleashing, firing 60% of the staff, abending the business. One reason he's doing this is that he has dramatically leveraged up, taken on a lot of debt, to overpay for an unprofitable company during a piece.

period of suddenly skyrocketing rates. That's really bad. It's really bad. As a general rule, one thing you do not want to do is go deep into debt to overpay for an unprofital enterprise during a period of suddenly skyrocketing rates. If you do that, if you find yourself in that position, what you're probably going to end up doing is slashing costs at that company to the bone, which, by the way, is exactly what Elon is doing in his very Elon-y way. It's the same thing with Disney. When rates were low, the company embarked on this very bold, once in a century strategy to pivot from traditional TV, a declining but profitable business, to streaming, a growing but unprofitable business. That is an incredibly risky thing to do in any environment,

but it's easier in a low rate environment because investors are happy to park their money with you, trust in the leadership, and say, okay, bet on future growth, this might work. But the world has changed. Now we've got rising rates, and investors need upfront returns, which makes This facelift, a very, very risky thing to do for Disney. That's why its stock is down 50% this year. That's why the stocks of all these companies that are in on the streaming game, Warner Brothers Discovery, Netflix, Disney, all of their stocks are way down. And it's one reason, not the whole reason, but one reason,

why Bob Cheypec is out and Bob Eiger is in at Disney. So this is my opening take. This is my grand theory. if you want to know why every story in tech and media is so frigging crazy all of a sudden, or specifically if you want to understand the deeper story behind the revenge of Bob Eager, the scandal of SBF, or the chaos of Elon Musk, I think this is a good place to start. Interest rates explain everything around me.

I'm Derek Thompson. This is plain English. Our first guest today is Matt Bellany of the fantastic, Ringer podcast, The Town, and the also fantastic Puck newsletter, what I'm hearing. Matt, hello. Hi there. Thanks for having me. You've been potting all day on this extraordinary story of Bob two. Potting. I love that. Bob two taking over for Bob one. Yep, or Bob one taking over for Bob two. I hope you're hooked up to an IV and that you're ready for this game. What I thought what we would do is I'm going to throw five hot takes at you. And I want to

you to understand that I don't necessarily agree with all these opinions, but I think all of these takes are worth grappling with. They're all sort of floating in the takeosphere. So are you ready to play? Meet the takes? Bring it on. Absolutely. And if I can't answer, I will just throw it back in your face. Fantastic. Take number one, leave Chepec alone. Leave him alone. Bob Cheapek was made CEO of this company in February 2020 when the global pandemic was already a fait of complete. The worst time for a handoff ever. He was asked to execute an impossible strategy to navigate Disney from a cable TV business that was already declining but profitable to a streaming business that was growing but a money pit. Rising interest rates made that effort absolutely halacious. The shitty Star Wars movies

were basically all greenlit under Eiger. The competitors are also crashing in terms of stock valuation. Warner Discovery is a mess. Netflix is down 50% year-to-date. You can't say if there's any comp that's clearly lapping him, streaming is still a rough business, even though it's a great product. And by the way, who decided to make streaming the core initiative of Disney? It was Bob 1.

It was Iger. Leave Chepec alone and seen. Matt, the floor is yours. All right. The answer is none of those other companies is the Walt Disney Company. None of those other companies has the brand, the hundred years of beloved characters

and IP and the famous flywheel, Walt's flywheel, where the creative engine fuels the consumer products and the theme parks and the movies and the TV and now streaming and games and all of it. This is the marquee media company and it was being run by a guy who felt like a C plus B minus CEO.

There were missteps that had nothing to do with the financials. He got into a fight with the governor of Florida and misread his own. employees about what they would want their CEO to be talking about. He then got in a fight with Scarlett Johansson over money, a public fight. One of the biggest actresses in the world sued the company because of something Chepec told her. Then he just, one after another, the earnings calls. He was sort of tone deaf about the way they operate and was talking this past one about special events at Disneyland and the Oogie Boogie Bash when the company was literally

bleeding money on streaming. So this goes to the leadership question and the fact that Disney has always been separate from the rest of Hollywood and how it operates, who its leadership is, and how they execute. And this guy did not measure up on those measures. I have a very blunt follow-up question. Why is Bob Eiger so good at being CEO and so bad at succession planning? Have you ever talked to the guy? I mean... I actually did. I did. I had breakfast with him to talk about the first book.

book that I wrote, maybe five, six years ago. It was an off-the-record discussion, so I'm not sure I can, I mean, he didn't reveal any, like, grand secrets of the world. But yeah, I did talk to him. Why do you ask? He's smooth as butter. I mean, this guy, he would be a fentany. I mean, he was a weatherman. He started his career as a weatherman, a TV personality, came up on the creative side of the business, ended up running ABC, being involved some of their biggest hits, and then just kind of rose to the ranks and learned the business. And he, when, when the talent, in Hollywood talks about Bob Eiger, they talk about him as if he is one of their own. And keep in mind, this guy is all suit at this point. He's managing this business for margins and for the street,

but he's always kept that groundedness of this is a creative company. I mean, even today, he put out a memo to the staff where he basically fired the head of the distribution group and said that big changes are coming to this organization, but he did it by saying, I believe at the heart of this company is storytelling and a creative engine that is unrivaled in this business. That is exactly what people in Hollywood want to hear. Regardless of whether it's true or not, that is what they want to hear. And he's always been able to do that, even on earnings calls and in very precarious situations where he's dealing with international incidents in China or where a kid gets eaten by an alligator at Disney World. So he's awful, awful situations. Iger has always been the statesman that can can be this

beacon for employees. And that is the way they feel about him. And Bob, too, was not that. You answered the first half of my question, why is Bob Eiger so good at being CEO? You didn't answer the second half of the question, which is, why is Bob Eiger, who is so good at being CEO, so bad as succession planning? Like, he had people lined up who seemed much more in line with his persona, which is smooth creativity first. The numbers will follow the creatives. Why is Why did Sheapec, this number cruncher, become the CEO that Iger selected? That is one of the great mysteries of the world. And frankly, it is a big weakness of Bob Iger, is that he has not been able to both groom

and execute on a successor. And this is a guy who was going to retire three times and then unretired. And then he had era parents. And all of a sudden they were leaving the company. And these are people who came up at Disney and were lifers. and all of a sudden they're out. So I think really, if people talk about his legacy, his legacy is pretty unblemished on the deal side and the financials, but has a big hole on the succession side. And it's pretty clear at this point that the moment he named Chepec, he started having doubts.

I mean, he was out there saying negative things about Chepec almost from the moment that he named him. And I think that it has a lot to do with ego. Some of these guys get to be so big that they really can't envision anyone else doing that job. And I think Iger is one of those guys. He's got a healthy opinion of himself. And it's justified. I'm not saying he's showboating for no reason, but he's never been able to accept someone else as succeeding him.

Moving on is a skill. It's very difficult, I think, to climb that second mountain, especially when you're as successful as someone like Bob Iger at climbing that first mountain. And as I was listening to you and Bill Simmons talk in the podcast, I suppose you recorded last night right after this news broke, you were making a couple comparisons to Tom Brady. And I thought, you know, if Bob Eiger had been more successful in a second career,

if he had run for president, if he had been able to buy the Phoenix Suns, if he had done some other successful thing after being the CEO of Disney, this might not have happened. And so in a weird way, I found myself sort of slipping into the sort of imagined mind of Bob Chaypec, wishing that Bob Iger finds success at anything other than being a little. the ex-CEO of Disney, because as long as that's all Ba-Biger is, if he's just the ex-CEO of Disney who is a god in the industry, then every little slip-up that you make means that your understudy is your superior. It's a very, very strange situation to be in, and now it's a

situation that we find ourselves. I want to move on to take number two. Take number two is death by earnings call. This take is that Bob Chapec had bet on the razor's edge with the stock down and the streaming business burning cash, but if he's a... He could go back in time, and if he could redo the earnings call after the latest quarterly report and show remorse and understanding about the fact that the streaming business was losing $1.5 billion to quarterly basis and represent a clear plan to reduce those losses in the future and had espoused the right sort of emotional tenor on that call, he still might be CEO because the decision seems to been made that quickly. What say you match to death by earnings call?

I think there's some truth to that. We don't know if the numbers alone would have been the final straw, but I certainly don't think his performance on the call helped a lot. And I actually listened to it. I hadn't listened to the last couple earnings calls, and I had been told by people that Chepec just doesn't sound good. He doesn't sound like a leader, and he kind of doesn't get the tone that you need to strike in these things.

And I listened, and it was bizarre. It was totally bizarre. I'm not saying the guy needs to apologize for poor earnings. things. But when Disney misses their expectations, which rarely happens, you got to get into it. You got to explain it. You got to take responsibility. And you got to say how you're going to fix it. And Chepec just kind of pretended this was all part of the plan and let's move on to these great things we've got going on in the parks and let's move on to the CFO and let's move on to this. And it was very bizarre because you saw the analyst tweeting and you saw the stock. I mean, all of the futures were

just like, what? Going, you know, going sideways. And yet you listen to him and it didn't sound like that. And Lucas Shaw mentioned this on the town today, and we were talking about him. It's that Iger always had the ability to paper over those earnings calls with something. Something new, something different, some kind of good spin on what was going on. And for whatever reason, he pulled it off. Because it's not like the earnings that Disney had every quarter were great under Iger. I mean, I remember back in the early 2010s, when they were releasing, you know, gigantic bombs in the movie side. you know, John Carter and Tomorrowland with George Clooney. And, you know, they had a run there where, you know, Prince of Persia with Jake

Jillen-Hull, they had a run where they tried to do these big budget blockbuster movies that were not based on existing IP. And they flopped. And Iger would have to get on there and explain. And listen, he said, we're going to fix it. And you know how he fixed it? He brought in Allen Horn from Warner Brothers. He said, you know what, we're not doing that anymore.

We're going to only make the hits. We're only remaking our own IP or we're going to do. it on a grand scale with Marvel that people will show up for. And it worked. And he turned around the movie business and totally changed Hollywood. So that's what they wanted to hear on these earnings call. You want to hear vision. You want to hear someone with confidence. You want to have, you want to feel like this is my leader and people did not feel that way. What did Bob Chepec do that was so wrong? Like when you read all the analyst reports and you're just going to give me like, Derek, here is, Here are the top five things that most people think Bob Chaypec did that were so wrong.

What are those? Well, I mean, it's so easy in hindsight to go back and question certain things. But I would say the big thing in my mind was the investor day in 2020, where he got up in front of all these investors. Keep in mind, this is height of the pandemic, height of the Netflix stock boom, where all of these services are going through the roof and they're gaining subscribers and the stock markets going nuts on streaming. And he basically throws the kitchen sink at streaming. One after another, they announced Star Wars show, after Marvel show, after Star Wars movie,

after Disney branded movies, all for streaming. And the thinking was at the time, and I'm not saying that Chepec was making this up. I mean, Iger arguably set this all in motion before he left Disney. But he said, we're going to just go all in on streaming. This service is going to, we're going to spend billions of dollars. They've now sunk $8 billion into this streaming service. And they're going to go nuts for the next few years and we're going to grow. And the problem is a year later, the market sort of turned on this. And then by 16 months later, the market really turned on this. Yet here we are two years later and Disney's strategy had not really changed. It was still throwing the kitchen sink at streaming and just trying to justify it by saying, oh, we have a plan to have

the streaming service be profitable by 2024? Great. I have a feeling Iger is going to probably revise that now. But that was his plan and he said, we're going to get through it, but that's where you got these losses. So that's a big one. And then there was all the stuff that I mentioned about his tone-deaf demeanor and kind of disrespecting the creative community, did not reach out and have those relationships. It wasn't Scarlett Johansson. That was the biggest problem. It was her agency, CIA. They're the most powerful talent agency. They have the biggest clients, many of the Marvel stars and other Disney stars are CAA clients. And they were forced to sue over this movie.

CPEC couldn't just make a deal. So you've got, you know, Brian Lorde that head of CAA forcing him to give statements to the media about how awful Disney is. It's really hard to recover from that when the creative community sees where you take that stand. This actually leads me right into take number three. And take number three is Disney's soul was dead. So people like me, you know, we're like cold-blooded,

news analysts. We see everything at 30,000 feet. I'm not in the meetings about creativity or culture. I gave this open before I introduced you that was like eight minutes on how interest rates explain everything, explain the shift to streaming, explain why all these entertainment media stocks are down. But take number three says, F that. F all of that. Disney's movies were just getting worse. The products were just getting worse. The human relationships that you're describing were deteriorating. This was a people problem. It was a, it was a, it was a, warm-blooded problem period. The company had exhausted its creative soul, and it had been reduced to raising prices on things like amusement park tickets in a desperate attempt to make up for the fact

that they had lost their soul. What's your response to the Disney's soul was dead take? So I don't agree with the suggestion that the Disney creative output is somehow worse under JPEC. First of all, movies take a long time. They take two years. years typically start to finish. So we're now getting into the movies that were made under Chepec. We're not, you know, and overall, the television output from Disney is fine. The Marvel shows are fine. The Star Wars shows, hit and miss, but whatever. They've had a lot of hits on Hulu, and arguably the Hulu creative output is better. They did very well at the Emmys this year. So I don't buy that the content itself is worse. I mean, we can quibble on certain things. Where people have a

better point is on this soul of Disney question where it felt like one decision after another was made to pad the bottom line at the expense of the storytelling machine. It used to be that when you paid your money at the gate to get into Disneyland, that was where you paid your money. And it was insanely expensive and a churro would cost five bucks or whatever it costs. But when you paid your money, you were there. Chepec saw an opportunity. Iger always had the option to do this and chose not to. Chepex said, you know, we do these fast passes where people can reserve spots in line. People love that.

Why don't we just charge them? And all of a sudden, the biggest rides cost an extra $20 to get that fast pass. Jeannie Plus, their reservation system, costs an extra $20. It's nickel and diming people to raise that profit engine and pay for the streaming service, which was losing money. So they saw the parks as a way to price gouge, essentially, their customers and make money, especially coming out of COVID. And they did it. And that's one thing. The other thing is just, you know, Chepec, when he reorganized the company, he put everything under one distribution executive, this guy, Kareem Daniel. All of the decisions on where a movie or a show would be released, which were typically in the hands of the people who ran those entities, whether it's Hulu or Marvel or A.B.

or ESPN. All of that was changed into this distribution monster, and that would determine where it goes. So it really disenfranchised a lot of the creative executives. And the first thing Iger did today is he got rid of that. Kareem-Daniels gone. D-Med, which is Disney Media and Entertainment Distribution, that division is going to be completely overhauled. They're going to put creative back at the center of this company.

And you know, you could make the argument, and I'm sure Cheapak made it a hundred times that on a spreadsheet, it made more sense to do it the way he wanted. But that's the sole question. The soul of Disney is a creative enterprise. And it got away from that and people noticed. Yeah, in the memo that Iger released to the company, he said, quote, we're going to have a new structure that puts more decision-making back in the hands of our creative teams and rationalizes costs. So there's going to be cuts.

There's cuts everywhere across entertainment. Look at what's happening at meta, at Amazon, at Twitter. but also I feel like that was a very deliberate piece of wording that we're going to put decision-making back in the hands of creative teams. I have a fourth take, and as I'm reading back over these takes, they actually seem very... Shocker, you have a fourth take. I have five.

This, I realize they're sounding a little like anti-Iger, and I want to make it clear, because these takes are not necessarily my hardest-held opinions. I think I think Iger is one of the great CEO stories of the 24th, first century without question. I also think that this is a very, very strange move that is downstream of the fact that Iger dealt Chepec the hands that he played. And so I just, I think it's worth contextualizing this rather than making Cheapac seem like

an easy fall guy. I think that's absolutely fair. I think it's absolutely fair. But like I said, there is this extra element of personality and leadership qualities and strategic vision. and how do you change up the Iger playbook for the streaming age when you come out of COVID and the world is changed. They needed to shift and they didn't shift.

I think that's right. And that's why I wanted to talk to someone who has their finger on the pulse of Hollywood, not someone like me who sort of looks at it from afar and tries to rationalize certain moves. Okay, enough throat clearing. Take number four is Iger is in trouble. So when Bob Iger took over in the mid-2000s, I think he took over in 2005, is that right?

Thereabouts? Yes, he did. Yeah, 15 years. Disney's animated film division was famously floundering. And Iger acquires Pixar. He rejuvenates animated. And then he goes in basically the most successful shopping spree in entertainment history. He buys Marvel.

He buys Lucas films. He buys 21st Century Fox, acquires Hulu through that deal. That playbook is going to be very hard to duplicate here. The company has a ton of debt. I think it's going to struggle to move forward with an acquisition strategy. think, as Iger said in his memo, he's probably going to have to start with rationalizing costs, which is corporate speak for firing people and laying off parts of divisions. The Iger playbook that was so thrillingly successful between 2005 and 2020 cannot be run in the early 2020s.

Iger is in trouble. What say you? I think that's a fair point that you can't just keep playing the hits. And a lot of people reach out to me and said there's no reason why Iger would take this job unless he's got one big last deal up his sleep. You know, whether it's buying Netflix or buying a video game company or buying, excuse me, or buying TikTok or something like that. Oh, we're getting there. We're getting there. But it's much more difficult to do that. I mean, Iger's spending spree largely took place in a zero or very low interest rate environment. And there is a lot of debt, especially from the Fox deal. And some people have questioned whether that was the right move. I actually think it was pretty smart. And I don't think we've seen the full benefit.

of the Fox acquisition. I mean, Marvel hasn't even started to incorporate those Fox Marvel characters yet, and that's going to be a big deal. So I think that it's early days for that. But to just say that Iger is going to come in and start buying stuff, I think is a little naive. You can't just do that. Iger is also taking tremendous personal risk here. His legacy is as good as they come in media. I mean, this guy has a pristine image. I mean, so much so that he was talked about running for president. He wanted to be the ambassador to China, that didn't work out. I mean, this guy was in the upper echelon of all-time CEOs. He's putting a lot of that on the line now.

I mean, he, you know, not that he would be tarnished forever, but if this doesn't work, it's a blemish. It's a, it's a postscript on that career that doesn't look very good if this doesn't work out. So I think he knows that. And I think he can't, he knows he can't just come in and just say, okay, we're doing, we know, we're doing what we did in 2012, because that seemed to work. It's a whole new ballgame. COVID changed everything. This interest rate in an economic environment changed everything. So I think that he's smart enough to recognize that and will not just go back to what he did.

Before we get to a rapid fire section, I'm going to be kicking myself if I don't make this point. There's a lot of people suggesting that Disney should have sold ESPN several years ago or should sell ESPN now. Maybe that's right. ESPN is incredibly valuable. It is profitable. Disney will make money doing that. But I think it's really important to point out that even though in news media, we, the press, talk about cable as if it's dead and talk about streaming as if it's the future, in earnings reports, the story is entirely reversed. In fact, in the last quarterly earnings reports, I just looked up in the 12 months, ending on October 2nd, The traditional TV business, which Disney in their reports called linear, made an operating

operating revenue of $8.5 billion. The streaming business in that same time, called Direct to Consumer in the earnings report, lost $4 billion. So $8.5 billion made in the so-called dead business, which is structurally shrinking, versus negative $4 billion in the future business, which is growing, but obviously not at a profitable rate. maybe just talk a little bit about reconciling these two points of view. On the one hand, activists investors telling Disney sell out of cable and the reality that cable is still among,

if not the most profitable part of their empire. Well, two things at work here. First, the streaming losses didn't used to be a problem because the stock market used to not care about that. Netflix was trading at multiples way higher than their actual income because everyone was saying this is a race to scale. Whoever gets to three, four, 500 million subscribers in streaming is going to win. So just spend what you got to spend. That is no longer the case.

Now analysts and the investment community, they want profits, they want to see your balance sheet and know that it makes sense. That's been the whole problem. The second thing here is that I don't see ESPN being sold. I just don't because

Eiger in the past, he has always seemed to want to figure out how to exploit their IP and their brands the best way they can via the most modern and up-to-date technologies, right? That is the history of Disney, taking Snow White and exploiting that 35 different ways from films to TV to Betamax to HBO to streaming. ESPN is a great business now. It is a declining linear business. It is a phentanyer business. It is a fantastic brand. And a lot of people crap on that brand and say, oh, what is ESPN without these sports rights? The sports rights are getting more and more expensive. They're just renting this. They don't actually own it. What is ESPN? I disagree. I think ESPN is a fantastic brand if you can

figure out how to transfer it to the digital world. They've already started with ESPN Plus, which is a fine service. It just doesn't have any A tier sports content because that is all tied up in the linear cable bundle. But that's starting to change. And these rights deals will come up. When the NBA deal comes up, ESPN is probably going to get games again. And Bob Iger and Adam Silver are good friends. I guarantee you he's going to say, you know what, we need a package of exclusive NBA games for ESPN Plus. And that's how you start doing it.

That's how you start transferring over that audience to the streaming world. And it's going to be expensive and there may be losses. but I just don't see Iger cutting bait on sports like that. I see him trying to make it work in the streaming world. I think I agree. All right, take isn't really a take. It's more like a rapid fire. I ask you very quick questions about possible acquisition or merger targets,

and you give me a rapid answer to it. We're going to, this is basically going to escalate in terms of weirdness. Number one, Netflix or some similar entertainment merger or acquisition. How plausible do you think that is in the next few years? I think it, first of all, consolidation in this industry is going to happen. Whether Disney will be involved in that or not is another question. Disney has already consolidated one of the original Hollywood movie studios by buying Fox. I mean, that was a huge deal.

I don't know that the regulatory market would be game for something like Apple Disney, which a lot of people have speculated if Apple tried to buy Disney. I think that might be something that the Biden administration or whoever follows him would take a close look at because Apple has such market power. But, you know, something like Paramount, maybe. Paramount's pretty cheap right now. You know, what do they have that Disney doesn't? Then you start getting into that. I mean, they don't want the linear networks. Their streaming service kind of sucks, although it's getting better.

They have franchises. They've got Mission Impossible. They've got Sonic the Hedgehog. They've got things that Disney could do something with. just depends on what that price would be. They've got a lot. They've got a studio lot in Hollywood that they could utilize. So there would be value there.

But I don't see Disney as being an acquirer of a business that it already is in. What I see if they do a deal, it would be for a video game company. I mean, that is something that Iger himself has failed, really. They're not a player in video games. They've tried many times. They bought Club Penguin. they had, you know, a number of other forays into attempts to make video games. And it didn't really work out.

Iger thought about buying Twitter. So that was a potential social distribution platform for Disney. Maybe he'll go after TikTok. I mean, that is something that at least is additive to their business, not just bulking up on what they already have. You are perfectly anticipating the next three items on my rapid fire list. They are in order. Snap, $17 billion in market cap, easily digestible by a company like Disney, which is closer to $170 billion.

You get that toehold in the social media space, but it's much less controversial, much less news outrage than the place like Twitter. The second thing I'd written down was bid for the possible sale of domestic TikTok. I do think it's plausible that underdivided government, Republicans and Democrats are going to work together to rest American TikTok away from the Communist Party of China, which, by the way, I think is a, absolutely wonderful idea. And the third thing I had written down is Nintendo. I have no idea if Nintendo is up for sale or if that makes any sense. But I'm thinking, you know, what is the brand of Disney? It is family-friendly entertainment that can work in many different revenue streams. Nintendo seems to kind of fit that, right? Yeah, I don't know the specifics about that company and whether they're closely held or not. I mean, I know that they are a foreign company, that that might be

a little problematic. But listen, what Iger did by buying Marvel was very interesting because what he recognized is that Disney at the time was doing really well with princess. He knew that the movies were doing great with attracting young girls. And Disney, for many consumers, meant the princess movies, you know, whether it was, you know, all of the legacy stuff like Little Mermaid or stuff that they'd made more recently, like Tangled. And he said, you know, we could be better with young boys. How can we do that? Marvel was young boys.

So the question they had, and obviously it turned into Marvel is for everyone, but the original impetus there, and I remember back when it happened was, this shores up Disney's problem with young boys. So what does, what do all these companies you mentioned bring to Disney? Snap obviously brings a much younger demo, and it's an interactive, a demo that is interacting online, and that Disney is not really reaching that well. That seems like something that could be really additive to them.

Something like TikTok, obviously, Disney's global, so they tend to not be interested in businesses that would just be for a domestic audience. So carving out that portion of TikTok might not be ideal for them. But who knows? They might see it as something that they could build upon. I mean, they bought, remember they bought the infrastructure of Major League Baseball's streaming service

when they wanted to build out Disney Plus. They bought Bamtech. And that was a key acquisition because MLB, for all of its problems, had created an amazing digital technology company that has been the backbone for actually a lot of streaming services. And Disney just bought it because they knew

that they needed that or they wanted it. It was additive to them. So that's the key question to be asking now is what is additive? And I think it's games and I think it's young people in digital. I have two more names for you. And we can do them quickly if you have to head out in a second.

The first is the sports category. I don't know what the regulatory environment would do if Disney tried to buy Major League Soccer, or if that's even possible. But I just had Major League Soccer and F1 written down. I looked at their annual earnings. It looks like they earn a small enough fraction of the Walt Disney company that some kind of acquisition wouldn't be absolutely ruinous to the bottom line of Disney. F1 might be kind of stretching it in terms of the overall size of the market.

But I wonder whether a company that has, that recognizes that even, ESPN as a part of its permanent future, might try to essentially vertically integrate by buying one of the sports that it is consistently competing to rent the rights of. That's category number one. Category number two is just completely insane. I don't know if you've seen all these AI images made from the text image program called Dali that are all over Twitter and all over the internet. There's another one called stable diffusion. Dali comes from open AI. In a world where, in a world where the future of entertainment is video games. and video games are made with text-to-image AI,

and there is an explosion of almost a YouTube of video games, where people are making their own video games using these AI functions, because it's just so easy to create moving virtual images. It's like buying the pickaxes and shovels in a gold rush if you own one of the companies whose tools are used to create that sort of bright, bizarre future of entertainment. So I've got sports on the one hand,

And weirdo AI, on the other hand, anything you want to say there? Yes. The Holy Grail right now on the first point is owning a sports league. I mean, Netflix has looked at that. They even looked at a surfing league, buying a surfing league, because they just wanted anything, anything they could own. The steel of the century was when the UFC sold to Endeavor. That company, which was a talent agency at the time,

they were smart and they bought the UFC. and now they own a sports league that's growing in popularity, and they do their television rights deals, and that's great. There's a lot of speculation that the WWE, which is a sports league, question mark, that is probably going to come up for sale in the next five to seven years, and that could be a huge asset for someone to buy. But there aren't a lot of sports leagues that just want to sell to the highest bidder and have their future be determined by a television network.

that's a really tough one. You'd have to spend a lot of money and all these companies are looking at it. I mean, you think Amazon wouldn't have just bought a sports league if they didn't, if they, you know, they have the money, but they couldn't do that. They had to rent the NFL rights for a billion dollars on Thursday nights.

And they're doing other deals like that. They're doing soccer deals. Maybe MLS. I mean, Apple did a deal with MLS to air their games and to control the rights to air their games in different markets. That's not a purchase agreement. That's a licensing. agreement. I mean, they may have an investment or something like that, but it's not like, I mean,

Apple is Apple. They could buy whatever they want, but they couldn't buy MLS. So that's, I think, a really tough proposition, unless you want to get into, you know, smaller leagues like bull riding or cornhole or whatever you want to, you know, and I don't know that Disney wants to get into that. Got it. Not even touching the AI thing, which frankly I consider probably very wise of you because it's just so crazy. Well, I'll give you an example, though. Disney has actually tried a version of that before. Back in 2014, they bought a company called Maker Studios, which was like this creator network of content creators would come together under Maker Studios,

and they would make videos for YouTube, and there would be a collective, and they would have an influence on how those videos were exploited. And Disney bought it for $500 million, and three years later, basically folded it into its digital division for almost nothing. This was not a real business. And they're going to need to figure out that direct relationship and how to take advantage of technology in a way that feels proprietary because Maker Studios definitely did not. Matt Bellany, thank you for your insights.

Thank you for your connections. It was a pleasure to speak to you and talk to you soon. All right. Thanks. Next up is my conversation with the writer Matthew Iglesias about the downfall of FTX and its CEO, Sam Bankman-Fried. It's a scandal that has shaken the world of crypto, but, also the world of effective altruism, or EA, which judging on your perspective is either

a very valuable philosophy, a curious but strange idea about the world, or an outright, dangerous cult. If you want the 101 breakdown of what happened to FDX, I would encourage you to listen to last week's podcast. The brief summary, now that we're here halfway through the episode, is that this guy, Sam Bankman Fried, who goes by SBF, was for a time the richest self-made billionaire 30 years or younger in the world. He seems to have built or sustained this wealth by running a Ponzi scheme involving a trading platform, FTX, a hedge fund, Alameda Research, and a bunch of shit coins that he used as shoddy collateral.

Reporting is now uncovered that his companies had neither accounting nor functioning human resources departments, had no roster of employees, that they made personal loans, this company did, to SBF and, his lieutenants upward of $1.5 billion, and that the company was run on shoestring, bubblegum, and a metric ton of stimulants. The executive tapped to guide FtX through bankruptcy wrote that the state of the company was the biggest mess he has ever seen. And this is the guy who unwound the assets of Enron. So, yeah, this is a complete cluster fuck. It's crash. has renewed questions about crypto's viability,

which takes no convincing from me. Listeners of this podcast, no, I've been curious but deeply dubious about crypto from the get-go. But it's also raised questions about the philosophical movement to which SBF belonged and to which he donated millions

and millions of ill-got dollars. As I said in the last show, I interviewed Sam about one month before the scandal broke, not about his business, but on the issue of effective altruism and the role that it plays in the world and in his philosophy.

I found him extremely nerdy, very jittery, weirdly eager to answer questions about pandemic risk and AI. The truth is, looking back, I find it pretty chilling to square the person that I met with the person that I'm reading about. And it's not because I put billionaires on a pedestal or because I think billionaires are so great. I do not think that at all. Rather, I have never really met someone who stole $16 billion. And it is kind of chilling to realize that I did meet him just weeks before that revelation. But more deeply, the question I want to answer in this podcast is, what is this movement, this philosophy at the center of the story, effective altruism? What does that philosophy stand for, apart from SBF?

And why would this group, this movement, climb into bed with this posth? with this possible fraudster. For the last week, I've been looking forward to, but also somewhat dreading having to answer these questions. Because the truth is, I like effective altruism. I'm certainly not one of its most vocal advocates, but as you'll hear, it's played an important role in my life that I think some of you might find a little surprising.

So it's important to me to both defend this philosophy where I think it deserves defending and to criticize it where I think it needs critique. or even outright condemnation. Our guest, Matthew Iglesias, is the author of the slow-boring newsletter. And now here's that conversation. Matt, welcome back to the podcast.

Hello, it's good to be here. So something that I try to do when I'm doing a show about a particularly controversial topic is I try to divide the podcast between what I call evidence and interpretation. That is, like, start with the facts. Let's describe reality as best we see it. And then, you know, I have strong opinions about this,

but I'm going to try to reserve those opinions and bias toward the end. So let's begin with a description of what effective altruism is. What is a useful brief definition of EA? I mean, at the highest level, right, the idea of EA is that I think people should be more altruistic and more cosmopolitan in their altruism, and they should also be more, I would say, like, rational, more like high scrutiny about what kind of. kind of altruism they are doing, that the thought of EA is that, you know, in its origins, is that most middle class people in wealthy countries could do a lot of good in the world

by giving large amounts of money away. And also that most philanthropic activity is really centered around sort of bolstering your status or helping out your community, whether that's literally the people who live near you or just people who think the same as you. And that we ought to be trying really hard to instead say, look, in an objective, impersonal sense, what is the way I can do the most good in the world? And the classic way that this comes about is, say, you know, someone has millions of dollars, and they graduated from Williams College, and they played lacrosse, and they feel really good about themselves, and they donate $1.5 million to improve the seating on the Williams lacrosse field. That sounds like a really lovely thing to do for your school. But if you do a kind of,

as you said, rationalist, kind of, let's say, utilitarian math, and say, wait, if you donated that exact same amount of money, $1.5 billion, to, let's say, deworming pills or malaria nets in sub-Saharan Africa, you might be expected to save hundreds, if not a thousand lives through that donation, as opposed to, in all likelihood, saving very few lives by reseeding the Williams lacrosse field. And so that's just one little way in which sort of this rationalist reframe of the generous instinct might help to achieve more good in the world rather than less. Exactly. And, you know, I mean, things like the lacrosse field are almost sort of obvious, right, that that's not super duper helpful. But I think something that you see a lot is, you know, Amazon or Jeff Bezos personally will give money to address homelessness in the Seattle area. And that's like a very serious issue and is a real form of do-goating. But it's also a kind of public relations, right, that you have a company. It has political interests in the community where it happens to be. operating. It's important to them to get the support of local stakeholders, of voters,

of their own employees. So they're doing stuff that connects to other people who they care about, whereas just on a dollar's term, I mean, as tragic as homelessness in the United States is, it seems almost obviously that it's going to be less cost effective than trying to help poor people in poor countries where things are much cheaper and your dollar can go further, but where it's not going to impact anyone who you necessarily care about, right? So that's the original impulse of EA is like, how do we, A, convince people to give more money away and B, to sort of think harder about where will that money really do the most good? And it's important to say that this is not just a philosophy.

It's not just a set of books, and it's not just a set of blogging networks. There is institutional heft behind effective altruism with organizations like open philanthropy, and even some associated with FTX itself. Let me just talk a little bit about the institutional ecosystem behind effective altruism. Yeah, exactly. So in the abstract, I mean, it's those ideas, right? In concrete terms, there's a few sort of key institutions. There's a group called Givewell that sort of directs people to highly cost-effective global

public health charities. There's the Open Philanthropy Institute, which was kind of, have spun off from Givewell. He's mostly Dustin Moskowitz's money. And who is Dustin Moskowitz? Oh, sorry. He was one of the Facebook co-founders, a rich guy. Then eventually, Sam Bankman-Fried, created the FTX Future Fund, which, while it burned

brightly, was probably the biggest giving institution in the world. And then there's a cluster of institutions in the UK centered around Oxford and the philosopher or Will McCaskill, the giving what we can pledge, the Center for Effective Altruism, which then organizes these conferences, EA global conferences around the world. And if you go to, I've been to one EA Global Conference, and you can see there that people,

there's a broad idea of effectiveness and altruism. But in practice, people are working on a handful of specific causes. So there's global public health, there's the welfare of animals, which EA's think is a sort of underwomen, rated kind of issue. And then there's these nexus of long-term considerations about sort of trying to prevent human extinction and distinctive ideas about where the big risks of extinction come from. And that's, I think, where Bankman Fried's money mostly went. And it's kind of what gets

I don't always say most controversial, but like less obvious, like, hey, good job, guys. And more like, really? Is that really what you think? And I'm going to get to long in just a second. I want to put a pin in where we are to talk about my own personal involvement with effective altruism. I told this story a little bit on the podcast, but I don't think I've told the full story. So just a little bit of a breathing room here. In 2012, 2013, my mom had been diagnosed with pancreatic cancer for which there is no cure. And at the same time, Will McCaskill, this philosopher involved with, and in many ways sort of the pope

of effective altruism, moved into my apartment in New York. This sounds like a really unlikely circumstance, but this is what happened. When my mom died, I really wanted to do something profoundly important to myself. Like sometimes people analogize EA to a religion.

I embraced that to the extent that my purposes for EA were quasi-religious. Like something chaotic and tragic, had happened to me, and I wanted to create meaning from it. So I wanted to donate a large amount of money in her honor, and I was very motivated by this question that will help to concretize my mind, which was, what is the most good that you can do with a certain donation? Let's just say $50,000. What's the most good that you can do in the world if you are going to give $50,000 to any cause in the world? I thought that was an absolutely, I thought it was an intellectually fascinating question,

an emotionally resonant question and a existentially meaningful question for me at the time. I talked to him about it. I talked to Givewell, that institution that you've already mentioned about it, and I gave this money to against malaria, which is a foundation that buys malaria nets

and very actively tracks their use and their efficiency, because sometimes malaria nets can be used in inefficient ways. Felt really good in the aftermath of having used a tragic moment in my life to do more good for the world, And since then, had a very glowing feeling about EA, especially as it related to this task of maximizing the good that is done from altruistic giving.

EA, I think, changed a little bit since my donation, which I think actually happened in 2014. Can you help, can you trace where you have seen, how you have seen EA change in the last, say, eight years from, give well to the institutions and ideas that it sometimes most loudly represents today? Yeah. So, you know, from the beginning, I think people ask questions like, well, are these kind of charities really the best thing we should be doing with money, or are there kind of like structural changes that need to be made in the world that are more important? And you saw open philanthropy started getting into policy advocacy in a number of domains, some of which sound kind of boring, But looking at what's the tractability of these causes, how neglected are they?

Can we make a big difference there? But this is a movement that in an important ways was founded by philosophers, and they think about big philosophical ideas. And more and more, I would say, at the leading edge of sort of EA theory, there was interest in this idea that we should care the most about the long-term future of humanity. And that that means, among other things, caring a lot about the development of artificial intelligence, the possibility of colonizing the galaxy with digital people and will those digital people be happy, worrying about will some kind of rogue AI lead to human extinction, or are there other kinds of threats of human extinction? Toby Ord, who's an important EA thinker, wrote a really interesting book called The Precipice that's about sort of his research into the possibilities of human extinction

and kind of how likely he thinks the different ones are. And when that book first came out, I read it. I thought this was really interesting subject, and I have been a little bit surprised over the years to see it kind of become an almost foundational EA text in which, you know, Ord's, says that an engineered pandemic is a more likely source of extinction than a comet strike. So preventing engineered pandemics is a signature EA cause, whereas the comet strike thing,

which I think is interesting in which EAs talk about, but they see as like a relatively low emphasis sort of subject area. Sam Bankmanfried comes along. He makes a lot of money. He starts spending a lot of money. And he is almost. exclusively interested in the long-termist piece of this. And so some people think that the global health stuff went away, and you could look at numbers, and that's not true. It's bigger than ever, but long-termist spending grew so rapidly because of essentially one very wealthy guy, but who was aligned with a lot of the movement's intellectual leaders, that as of this year, at least before FTX's collapse, long-termism had become.

a much, much longer sort of share of the spending. And, you know, your friend Will McCaskill wrote a book about long-termism, did a very high-profile book tour, got a lot of profiles of him written. And that was, I think, the first that most people ever heard of this movement. I mean, you and I maybe knew about Givewell 10 years ago. But a lot of people, the first time they ever heard about EA, would have been in a Will McCaskill profile in the New Yorker that was all about what we owe the future. And so people will have a very different sense of what this movement is than I've had over the years. And so we've reviewed what EA was or what it was represented by up until, say, 2015, 2016, Sam Bankman-Fried comes into the picture. And at the same time that he

becomes kind of the sun around which the EA funding system begins to revolve, EA tips a little bit more toward this sort of long-termist point of view. I want to pause before we go any deeper on the Sandbankman-Fried story to talk about the weaknesses that you perceived ineffective altruism even before this scandal. Annie Lowry wrote a great piece for The Atlantic

in which she argued that a weakness that she had perceived, which I might be retracing on this very show through no fault of your own, is that the movement was disproportionately popular among sort of, you know, left-centricy white guys and sort of like left-centricy white guys. and sort of like left-centric white guys

who were sort of tech-positive in a very self-same kind of way. And so it had a kind of homogenization problem. Did you have other issues with EA as a philosophy before this scandal was its own kind of comet from outer space? I mean, I don't have a ton of issues with the philosophy. I guess I would say that it's really compelling as a set of ideas about change at the margin.

Like, I really think the typical person could benefit the world a lot by being more altruistic, by trying to be more cosmopolitan in their altruism, by trying to be more long-termist in their altruism. Can you say what when you say more cosmopolitan in their altruism, what you mean by that? Like, caring more about the world as a whole rather than the place where they happen to live, right? That we in America, I think, are just all a little bit more selfish, more into things. that are happening in the United States of America and more into the short term than is objectively defensible. That said, you have, over time,

the growth of this EA movement, right? A really strong community of people who are kind of on the circuit of these EA events. They're working in EA organizations. And that's where I think the kinds of critiques that Annie was raising start to come out, right? Because then you ask, not, well, what are these ideas,

but what are these institutions? how do they function? And I think we know that like very homogenous institutions have sort of flawed decision making oftentimes, right? And you're asking, you're starting asking a hard question, which is like, who should I trust to do the work of determining whether this malaria net thing is a better use of money or some other nice sounding program that's in East Africa rather than West Africa, right? That's hard. When you get into who has correctly ascertained the probability that something will lead to human extinction. That's really hard. And then when you're asking, which team of AI researchers are the good AI researchers who are

trying to avert extinction and which are the bad ones who we want to stop or beat, right? That's a question that I always felt, as I think of myself as a pretty smart person, but I have no insight into a question like that. You are being asked to trust that the leaders of the community know what they're talking about when they make these kind of assertions. And that's very different from saying, like, how good are these ideas? It's like how healthy are these institutions, are these communities? And it was always, I think, a little bit questionable. And then when you see a big screw up, that it really makes you wonder. I think another criticism that people have of effective altruism, is that it philanthropy washes billionaires. You've mentioned that open philanthropy

was started by Descan Moskowitz, who's one of the co-founders, were the executives of Facebook. Obviously, FTC's Future Fund was started with the billions of dollars in wealth from Sam Bankman-Fried, who seems now to have gotten that wealth, or at least preserved it through illegal and possibly fraudulent means. To what extent do you think that the scandal around Sam-Bankman-Fried should make us more critical of EA's relationship to billionaires, or more specifically, to EA's relationship with this concept of earn to give, that one way you can help the world, this is one of Will McCaskill's early ideas,

that one way you can help the world is by making a lot of money in industry X, say, finance, and then giving a ton of money to charities so that you're essentially, your own sort of like one-man redistribution system, like taking the wealth created by in hedge funds and moving it over into malaria. To what extent does the scandal that we're seeing right now really should make us think twice about these aspects of the movement?

Well, it's interesting, you know, because so Earn to Give was this early idea, right? Which is, you know, a lot of bright college students say, you know, I want to do good in the world. I don't want to go work for Gulp and Sachs. I don't want to work for McKinsey. I want to go, you know, work at a charitable organization, right? Work at some place that's doing good.

And the Earned to Give idea was, look, you know, if you, a particular bright person don't take that nonprofit job, somebody else who's like perfectly qualified will probably go do it. Like, jobs at nonprofits are a little bit weirdly hard to get, even though they don't pay that well, because there's a lot of idealistic young people. And what the world really has scarcity of is to go. go work at an investment bank and then give the money to the malaria charity that, like, is genuinely constrained by lack of money. EA moved away from earning to give as part of this transition, right?

Part of the thinking of long-termism was no, we really actually need you to go do direct work on stopping the AI apocalypse, but also that Sam Bankman-Fried and Dustin Moskowitz had all this money. And so we don't need all this earning to give. We can rely on a couple of billionaires. So I think that the people who are critical of the kind of reliance on these like billionaire whales are correct, but that that in some ways misunderstands the relationship to earning to give. And if anything, I think the logic of the situation points to a return to earning to give, to sort of encouraging people to think of private sector economic activity as a perfectly acceptable and good thing to do with your life, but that if you want to be like a good person, you should think about giving more of that money away

and that you need like a mass constituency of people who kind of go do these things. Otherwise, you're left with this reliance on billionaires. One of the really fascinating and strange things about Sam Bank and Freed is that most people that I recognize as fraudsters historically, like say Elizabeth Holmes, they just lied and lied and lied

in their public commentary about their business. And obviously, Bankman Freed lied specifically, likely to investors, about what was on his balance sheet. Surely when he was commenting on the financial security of FTX and Alameda research, those balance sheets contain huge whoppers. But what makes this case so interesting are all the times when he seems to have kind of told the truth, and we might have misinterpreted the truth that he told. So two cases here. One is most famously on the Odd Lots podcast. he described crypto generally as a kind of Ponzi scheme. And Matt Levine, the great Bloomberg essayist, said he came away from his conversation weirdly

bullish on FTX and Bankman Freed because his view was that if you talk to a crypto exchange operator and they're like, hey, crypto is changing the world, that's bad. But if you talk to someone who's a clear-eyed trader who says, I'm doing this because the numbers are going up, that might give him confidence that this. person has like a more a more rational view of what's happening in crypto. It's interesting looking back on it where it's like, you know, in a way, Bankman-Fried said exactly what he was doing, said that he was using the Ponzi mechanism of crypto in order to make as much money as possible without regard for ethics. How do you make sense of that Oddlotz interview,

now knowing everything that's come after it? I mean, it's fascinating. When I, when I, Matt, Bangman Fried, was a little bit after that Adlaughts interview, and he specifically told me that Matt Levine is the best writer on finance. So I was like, oh, okay, he's really not walking away from this. And I kind of thought, yeah, okay, well, this shows like he's a smart guy. He's not some kind of maniac. Now, when I step back and I think about it, you know, FTCS was doing all this marketing, right? They had FTCS arena down in Miami. They had this ad campaign. I'm in on crypto, et cetera, et cetera. he was telling this kind of Matt Levine audience, maybe you and me and other people who read this.

Like, Matt Levine is objectively speaking, an obscure person, but he's incredibly well known in like our circles because he's the best writer on obscure finance topics. But what he was telling the broad mass of consumers was you should trade cryptocurrency, right? Because that's the only way the business can work. And that is a reminder that there was this level of dishonesty that we could see right in front of us. We could see right in front of us that

he was telling elite media outlets. Yeah, this whole thing is full of scams and Ponzi schemes. And then he was paying Tom Brady and Bill Clinton and Tony Blair and Giselle Bunchin to all be like, hey, guys, go trade cryptocurrency. Right. And that's just not, it's not something we should be comfortable with, right, whether in a utilitarian calculus or any kind of calculus. Like, you, the best way to run a con is to convince other people that they're in on the con. And that's what he was doing, right? He was telling these inconsistent stories

to all different kinds of audiences, and we should have been able to see that. Yeah, do you think that, looking back, like, that reality is kind of catastrophic for effective altruism? Like, a movement that orients itself around being able to predict threats thousands of years in the future

can't see that their most important beneficiary is saying in plain view in front of tens or hundreds of thousands of people, the business that I am using to make billions of dollars that I'm giving away to effective altruism is essentially a kind of con. Like, obviously, retrospecting 2020, of course, but don't you think it is a really bad black eye for effective altruism that they failed to incorporate these open confessions by SBF into their own calculus. I mean, it absolutely, I think, raises really serious questions about the people who were collaborating with him most directly. You know, I mean, as I think we both said, I mean, I first got

interested in this malaria charity work, in this deworming, this stuff that Givewell does. And I should say, I mean, I give 10% of my subscriptions go to Givewell. I haven't changed that. He was not supporting those kind of global health interventions with his money. At the same time, I do think that the sort of proponents of long-termism were not just taking Sam Beckman-Fried's money, but were really associating with him and putting him forward as an example of what they wanted in the world. And they were building institutions on the theory that they were going to continue to have access to this money. And it does. I mean, it raises important questions about their judgment. And also that group of people has largely sort of gone dark.

since the scandal broke. And they have reasons. I mean, if you look on the EA forum or see what Center for Effective Altruism has said, you know, they need to look at the legal situation and what money needs to get clawed back, et cetera, et cetera. But I mean, very recently, we had this kind of splashy rollout of long-termist philosophy financed by Sam Beckman-fried. And now, you know, I'm sitting there looking like, I don't know, guys. A lot of trust was being asked in the good judgment of the people who've been looking at these causes. And when you show bad judgment, that calls into question your judgment about other things. There's one other way in which effective altruism and Sam Bankman-Fried's business philosophy intersect. And that is his comments in other interviews

and other podcasts that he was willing to take on extraordinary amounts of risk in order to maximize the number of billions of dollars that came into his possession that he could distribute for his definition of the good. Can you explain a little bit about his comments on his risk appetite and how EA sort of ladders up to that as well? Yeah, so what he said to me that I thought was hilarious was he told me, you know, the problem with most people is they get a few hundred million dollars and then they get conservative. And I was like, I'm not sure most people have that problem. But, you know, he said, well, the right thing to do if you are going to give your money away is to say, no, like, I want to keep taking risks, keep being hungry because you don't, with a normal person, apparently, you know, after your first $100 million, the next $100 million doesn't do you that much more good, right? That $1 billion, $10 billion, $20 billion, who cares?

But if you're giving the money away, there are so many causes that could use your money that you ought to keep taking double or nothing bets with your fortune. I hadn't realized that he was telling me this in person. It turns out he said this in lots and lots of interviews. And to me, it's a baffling idea, or rather it's an idea that would make sense if you were giving all your, like, if you were literally giving the money away to like random low income people to say, sure, who cares? But if you're talking about building institutions that are supposed to combat long-term threats, I just don't understand how that works. I mean, I now know tons of people who are working in biosecurity and pandemic prevention who now have a problem because their grants are not going to get paid.

And that's like really bad. It's bad for them. It sets the cause back. It's going to leave pandemic prevention, I think, worse off than it was. before he ever showed up because spinning these things up and then shutting them down is very costly.

It's emotionally bruising. It discredits you intellectually. Even if there had been no fraud, right? Even if this has just been an honest gamble gone awry, that would be like a really bad end for everything. And he was quite open about this. And to me, it's like my biggest question. If I could get, you know, his top advisors

and stuff in a room, I'd be like, did nobody try to talk him out of this and just say like, you know, what, like, $3 billion is enough. We don't need 27, but it might all vanish tomorrow? I think a lot of my questions to you, I think, have at least tacitly assumed that SBF was an effective altruist who also likely committed fraud by stealing customer accounts, sending them to his hedge fund, and then losing them or stealing them personally for personal gain. And that's possible. It's also possible that the whole thing was affront. And he said,

almost as much in DMs to the Vox reporter Kelsey Piper, he seemed to indicate in their interview that he saw effective altruism as a kind of woke front that he could use in order to limit the number of critical questions and scrutinizing inquiries from like-minded, say, Democrats. Was that also your read of their exchange? Because the comments, I encourage everyone to read this article in Vox, his conversation with Kelsey.

It's very cryptic. It's very laconic. It's kind of hard to see exactly what he's trying to say. So this is where we're definitely going into the realm of interpretation rather than mere evidence. But what was your takeaway from that incredible conversation? So I thought that what he was saying was that he had previously endorsed a set of ethics, ethical norms, that are more kind of constraining than pure utilitarianism, right? That he had told Kelsey, like, you shouldn't do bad things just to make money

and give the money to good causes. And that he was saying that that was a fraud, not that the effective altruism was a fraud. I'm not sure, though. I mean, the text is open to different readings. Now, his life, though, it just holds up, right? if you examine the story of his life, his mother is an important legal theorist and philosopher, who's a proponent of consequentialist ethics. He met Will McCaskill and wanted to talk to him about effective altruism when he was a college student. By all accounts, he said that he was primarily

interested in animal welfare, and McCaskill suggested to him, you might want to consider earning to give instead. People he worked with at Jane Street, like say he was giving his money away at that time. As far as we can tell, in all the things that have come out, he's actually a vegan, right? Unlike Eric Adams and other people who kind of fake it, it seems to me to strain cojulity that this whole thing was like a long con in which he only pretended to care about this philosophy can I just stop you there and offer I'm not even sure that you're wrong. I frankly have no idea.

He is absolutely in his own zone of inscrutability for me. What he did was morally horrific and like that's the output. That's the outcome. The inputs, I have no idea what they are. But here's another way of looking at it. You have someone who has recognized

he will get extraordinarily positive media coverage by talking about being an effective altruist. And when you juxtapose that to the kind of media coverage, from, say, the New York Times or Vox, of other crypto bros, it's not nearly as positive. So he's a smart guy who makes a very clear calculation that if I talk about EA a lot, I won't get the same negative treatment that other crypto guys get.

Number one. Number two, where does he live in a $30-plus million dollar house in the Bahamas, in Nassau? Not the kind of home that you would think someone who earns to give, earns purely to give, would live in. That's millions of dollars that theoretically could be immediately put to use on buying malaria nets and deworming pills and spending on pandemic preparedness. You also just look at his own behavior, the fact that he stole customer funds and that for all we know, he may have stolen some of them for his own personal use. It's sort of, we're not entirely clear where some of this money is gone. So that's an all-jet history of SBF that you could tell, which suggests that, yes, maybe this guy

who is the son of consequentialist parents, who goes to MIT and is influenced by Will McCassel, gets rich, and over time, the instinct to remain rich overcomes the instinct to remain true to his philosophical priors. That is also plausible.

That's what I was going to say, that I don't think it makes much sense to think that the whole thing was a sham, but the question of, well, what happens, right? How does the story actually go? once he becomes a crypto trader, once he's starting this company in the Bahamas and you're buying mansions and you go from, look, the people who work as quants at these proprietary trading funds, they make good money, but it's different from billionaire money, right? The crazy thing about being

as rich as he was is that living in a $30 million Bahamas penthouse is completely consistent with giving away 98% of your net worth, right? It's just a stab. some of money. I do think that it is telling that so much was made, not just by him, but by EA institutions of his sort of allegedly modest lifestyle. You would hear a lot about him sleeping on the beanbag chair at the office and about him driving a Toyota Corolla. And I guess it's probably true that he drives the Toyota Corolla. But if you drive a Toyota Corolla, But if you drive a Toyota Corolla and you live in a $30 million condo, and the fact about you that's out there.

Right. I mean, you know, it's a question of like, what are you trying to tell people, you know, about the world? I mean, it's interesting. And we still don't really know what happened, obviously, with all the money downstream. I mean, I know some things that money went to. Some is known publicly. some I know from reporting and looking into it,

but we're talking about tens of millions of dollars in spending that has not been fully accounted for, and it seems foolish. I mean, I should say, I mean, I thought that guarding against pandemics was doing good work and was advocating for good causes. Obviously, knowing what I know now about how FTX was run, I am curious as to how guarding against pandemics was run.

You know, some of that money absolutely went to, good programs and important things. I wish I could vouch for all of it, but like, I can't. And as far as we know right now, nobody can. Just like nobody knows exactly what happened to the last few hundred million dollars worth of FTX customer deposits, right? They're these big known unknowns right now. You've said a couple times, and I think I agree with this point, that the leaders of effective altruism, the movement should have major doubts about their own behavior, their own public commentary and the myth that they helped to propagate that this guy was a fundamentally moral person who belonged with their movement and deserved to be considered essentially the kind of,

you know, major benefactor of effective altruism. What conclusion do you think effective altruism the philosophy should draw from this episode? I mean, I don't know, right? I mean, it's a this has always been the tricky thing about effective altruism. On some level, the big abstract ideas are ideas that have been kicking around for a long time. They're familiar from Peter Singer, Roberto Unger, other people like that. What the EA's tried to do was make this philosophy real, you know? And you don't normally think of philosophers as institution builders, right? It's a different kind of skill set. It's a different set of problems. I think it is honestly the most human and understandable thing in the world to see someone who shows up with a lot of money,

who's like, I want to support causes that you think are important, that you sincerely think are important and be like, this is a good guy. You know, I want him to see and prosper in the world. But it obviously did not work out well. And, you know, I think that it, to me, as somebody who also cares about these causes, has made me just much more skeptical of the institutions themselves

and of the institution building project. Because, you know, we should say he didn't give a lot of money to global public health. He did give a lot of money to pandemic prevention and some other long-termist stuff. And he gave money to community building, quote unquote, right? So a lot of these, and that's an area where the classic original, the E part of effective altruism, gets harder to say, right? What does it mean to be community building in a cost-effective way? It's so easy to actually reinvent everything that's dysfunctional about traditional charity, right? Like people spending money on a gala for themselves that could be going to the cause, right?

Well, is that community building? You know, who knows, right? And I think those are the kinds of questions that people who are interested in these issues are going to have to be asking of each other as a sort of try to rebuild from this. Personally, I see it as a good reason to go back to basics. in some ways. At the same time, if you really think that the world is, we're 10 years from midnight and rogue AI is going to take over the world, but you've got to keep working on that problem, right? It's like not a lot of chance to go back and rethink. But maybe that's how

we get into this mess. I think that's a good point to end on. Matt Iglesias, thank you very much. Thank you. And that's all we got for you today in this special Thanksgiving Megapod. Have a great holiday week, happy Thanksgiving. We are off at the end of the week. We'll be back next Tuesday. We'll talk to you then.