I just finished Michael Lewis’s controversial SBF book: Going Infinite. I could confirm that Michael Lewis has been influenced and definitely sympathized with SBF. In a nutshell, Michael Lewis thinks SBF lacks the mental capacity to understand how his action could hurt his customers but he didn’t intend to hurt them. He also thinks that SBF is proficient in calculating EV (expected value) and as a utilitarian SBF was just doing what could maximize the EV and in term he could use the money he makes to save lives. He is not greedy or material or thirsty for power. He is in deep trouble because he got caught using customer deposits. If he didn’t get caught at a time when the crypto prices are depressed, FTX might have still been around and might become THE most successful crypto exchange of the world. In that case, SBF could have accomplished his mission of saving the world. It’s unfortunate SBF didn’t get the opportunity to actually save the world. Otherwise, humanity could be at a different place.
Well, I understand where Michael Lewis is coming from through a pure utilitarian perspective. Utilitarians don’t care about right and wrong. They care about what achieves the maximal positive impact. They don’t care if people lie or steal as long as they can achieve maximal positive impact. In the case of SBF, he has no emotion or morals. He doesn’t feel anything when he lied or stole but his goal was to make the world a better place. Is this a crime? In Michael Lewis’s book, he doesn’t think so. But we will let the court deliver the final verdict.
My problem with SBF and his utilitarian mathematical framework is that it’s flawed and doomed to fail. First, how could anyone accurately quantify the impact and its associated probabilities? If you have some probability of saving one billion lives by investing money into preventing the AI Apocalypse but at the same time having some other probability of ruining 10 million customers' financial lives by stealing their deposits? How do you accurately quantify the probabilities and impact? The utilitarian math is an illusion, especially when there’s a trade off, i.e. avoiding imaginary AI Apocalypse vs. wiping out people’s life savings.
Second, even if SBF can accurately calculate the probabilities and EV, he is doomed to fail. His algorithm is to take the risk when the probability of failure is low. But he didn’t do enough to manage the risk when the low probability event did occur. The probability of “all customers demanding their deposits back at the same time” is close to zero except it’s an event that would wipe him out if he dips into customer deposits. He decided to dip into the customer deposit anyway. I suppose he thinks it's positive EV and the probability of “all customers demanding their deposits back at the same time” is basically zero. But if he keeps taking risks this way in life, after many many times, unless he dies young, eventually there will be a time such a near-zero probability event happens. What we witnessed in the SBF case is the unfolding of such a low-probability catastrophic event that wiped out his empire and countless people’s life savings. But if this catastrophe didn’t happen in November 2022, based on how SBF manages risks, it is deemed to happen sometime in the future.
SBF thought he was good at math but he surely didn’t learn enough about the absorbing state to avoid getting wiped out without any chance of bouncing back. If you ask me, my honest opinion is that SBF is a pathological liar and compulsive gambler. But if I were to be charitable, I would say SBF is a well-intentioned utilitarian who is bad at math. But this does not exonerate his actions and he must be held accountable.