There’s no shortage of media coverage on Sam Bankman-Fried. He’s a 29-year old, vegan, crypto billionaire who skyrocketed to cult status after capitalizing on the kimchi premium (no not the fermented food - the arbitrage on South Korean cryptocurrency pricing). He then went on to build one of the largest, fastest growing digital asset exchanges in the world called FTX. Yet as I read more and more about him, I began to realize that the mainstream press was missing a more foundational story. It was Bankman-Fried’s worldview that jumped out. The “Bentham of Crypto,” Bankman-Fried had built his operating philosophy on notions of effective altruism and utilitarianism as pioneered by Jeremy Bentham. Bankman-Fried isn’t out to just be the richest crypto billionaire. He’s out to have the largest possible positive impact on the world. And to the extent money can deliver that, he’ll keep earning it.
Sam Bankman-Fried, co-founder and chief executive officer of FTX, in Hong Kong, China, on Tuesday, ... [+]
Brendan Doherty: Sam, Welcome to Icons of Impact. For those not in crypto, they may not know you’ve built two explosive growth companies. Can you start by telling us about Alameda and FTX?
Sam Bankman-Fried: So, after graduating MIT I went to work at Jane Street Capital for about three and a half years. It was a wonderful work experience. I left Jane Street Capital to start on my own ideas and got into crypto.
The first business was Alameda, a crypto quantum trading firm. We saw that crypto was exhibiting all the signs that there would be a lot of demand for liquidity but with very little liquidity available. Everyone on the street was talking about crypto during that time. We were seeing huge price movements and inflows which clearly pointed to a lot of people from many different countries trying to buy many different varieties of crypto currencies using different acquisition methods. Despite how big it had become, it still had only been a few months. This meant that there had not been enough time for most of the buyers globally to onboard into the crypto ecosystem.
Doherty: So that was the opportunity you spotted, a lack of crypto infrastructure?
Bankman-Fried: Yes we were skeptical that there would be enough infrastructure to provide for the crypto market. This meant that demand would probably outstrip liquidity, and could lead to huge spreads on the market and really good trades. I got into crypto to see if what I expected would be true, and it was.
Doherty: So next came FTX?
Bankman-Fried: A year later we started to build out FTX. When I started in crypto exchanges, if you wanted to buy Apple AAPL -0.9%, an average user would buy from somewhere like Robinhood where it would then change hands through clearing firms and other institutions. In late 2018, the current platforms were a total mess. They were losing an average of a million dollars a day to customer assets due to not having any functional retention. To me that was just a symptom of the problem but not the core problem itself. So it seemed like a huge gap and a pretty big space in the market. I thought we could do better. I wanted to incorporate the buyer, the seller, and the exchange. So we launched FTX in spring of 2019 and built it from nothing to where it sits today as the fourth largest global crypto currency exchange based outside of China.
Trading trends and economic statistics.
Doherty: That is stunning growth. With that basis, I’d like to center the rest of our conversation on an area of your work that gets scant media coverage. You’re often in the press for your market-moving crypto trades and explosive growth. But I’m interested in something else, something much deeper: your worldview that animates all of the above. You’ve said you want FTX to have the largest possible positive impact on the world. Let’s begin there, where does that process start for you?
Bankman-Fried: So it depends on what the business is. For many of my friends their answer is to do unbelievably good things for the world just by working — choosing which organizations to work with and directly impacting important things. I think that piece often gets lost when effective altruism is talked about. For FTX, with all the focus on our entire budget, I think it’s easy to lose sight of who you give to and what is being done with those funds. But for me, the biggest piece of this is finding the most effective causes to donate to.
Doherty: You’ve previously talked about effective altruism as making the greatest amount of earnings to then be able to have the greatest amount of impact with that money afterward. I think there can be a tension in that. Some critics would say that thinking is part what got us into this economic inequality mess to start. How do you answer that tension?
Bankman-Fried: The one-two step is just an approximation. All the steps when getting to effective altruism have both a direct and indirect impact. You have to quantify the impact based on both those factors. There are a lot of professions that are bad for the world. Even if you can make a lot of money doing those professions, it may not be the right thing to do. So if the impact you have is negative, even if you are then using those proceeds to give back to effective charities, you shouldn’t get much credit for that. I think you need to be quantitative about the whole thing, to me that is the core of effective altruism. You are never going to be able to quantify the world perfectly but you can try to turn everything into a number.
Doherty: You made a great distinction earlier, that if someone like Elon is making billions off of Tesla TSLA -2.2%, that is not the same as Exxon making billions off fossil fuels. Both are reaping billions but the externalities are vastly different.
Bankman-Fried: Yeah, it's hard to argue that Tesla is doing world changing damage with it’s business. You could argue that Elon was doing enormous good by creating green technology. Or if you don't believe in Tesla, you can argue that it is just a waste of resources and the business will fizzle. But either way, Tesla is not what is destroying the world.
Doherty: Agree. Now let’s talk about philanthropy. What I see you doing is putting a different lens to philanthropy, particularly around the concept of crowdsourcing. What does it mean to engage your consumers, audience, and community in the decisions of the FTX foundation?
Bankman-Fried: So originally we designed it to give 1% of all the money that FTX made to charities, but that will not be the biggest factor in terms of how much I end up giving. We thought, is there a concrete public step we could take immediately? The point was to get people involved in the charitable process. So for example, users can help vote on where our foundation money goes. Users can also contribute towards the foundation and we’ve been really shocked, in a positive way. Some users have pledged $5.6 million. There are a lot of people in crypto who have made a lot of money over the last decade and they are naturally inclined to think on a global scale about what impact they can have. So I think there is a huge potential in crypto for people to be giving a lot to high impact causes. So this step was a way for people to easily start the process and get their feet wet.
Doherty: Let’s talk about utilitarianism, something you refer to a lot and underpins much of your thinking. Explain what it means to you and how it has changed your own actions in the world?
Bankman-Fried: What it means to me, when it’s all said and done, is I want to maximize every cent I can and aggregate net happiness in the world. You can think of that as your total happiness. It sounds sort of pathological or silly, of course you want to do something like that, but it is actually quite powerful and has really strong implications in a lot of cases. It's all aimed at this concept of “maximizing.” Some say, as long as you're doing no harm, then you've lived a good life. I believe it’s just as important that you find ways to help the world as that it is you you avoid doing evil. You should be thinking about what you're going to do with your life, and what options you have that will maximize putting the world into the best place.
Doherty: I read that your parents are law professors at Stanford. Did they influence your pull toward utilitarianism? Or is that something you came across on your own?
Jeremy Bentham, 1748 - 1832, English philosopher, jurist, and social reformer regarded as the
Bankman-Fried: Yes, they're both utilitarian, or at least utilitarian leaning. So I first got exposed to it when I was young.
Doherty: It always starts early! I pulled a couple interesting quotes of yours that I’d like to get your thoughts on. You’ve said, “Money is the unit of caring.” Tell me more about that?
Bankman-Fried: There are a lot of ways to do good in the world. One way is by giving money to good causes. This is not always a perfect way to think about it, but money is powerful and fungible. The nice thing about it is when you're trying to compare how much good two different interventions could have, you want to find a way to put those in the same unit, otherwise they’re just different concepts. There’s a huge advantage to coming up with some unit, any unit, declaring that everything is measured in that unit, and operationalizing that by a currency. Once you have money, how much good can you do with that money? That gives you a conversion from money to good. Then when you're trying to handle various tradeoffs you can think about it in terms of how much extra money will this be able to get for the best causes.
Doherty: Exactly, and it can be much more targeted to the precise needs. You’ve also said before, that you’re “notorious for taking on a new, somewhat sizable random project.” What’s that next project for you?
Bankman-Fried: There are a few that are not super public right now. FTX is doing a raise and it’s been taking a ton of my time. It is really sort of its own sub-project. But a lot of it is just thinking about what is the future of the company? What is the most ambitious future and how do I get from here to there? It is easy to get lulled into thinking that everything you do is all you can do — but you're not thinking more globally about everything you could do. When we think about FTX you could focus just on getting more of the core demographic of users, but that would be limiting the upside. I also want to think about how we can reach out to other demographics who haven’t historically been in our wheelhouse. What do we need to do to build a big, global brand while maintaining the sort of culture, reputation, and favorability that we have today. Those are things that are going to take a lot more concerted time and effort. They are really new things for us, but they are really important for getting to the most ambitious version of what FTX could be.
Doherty: I love that, we all need to think about what we could do in our most ambitious and fullest life, not just the one where we’re complacent. Thanks Sam, enjoyed our conversation.