Were it not for Donald Trump, the biggest trial in the US right now would undoubtedly be the federal case under way in a Manhattan courtroom against Sam Bankman-Fried. Just 12 months ago, the son of two Stanford professors was the toast of the financial world, feted on the celebrity circuit and one of the biggest donors in American politics. He had accumulated a $22.5 billion personal fortune before the age of 30 on the back of his cryptocurrency exchange FTX. But last November a run on the exchange revealed investor funds had been improperly transferred to Bankman-Fried’s own trading company. Now bankrupt, he faces fraud charges that could put him in jail for 60 years. There to observe it all was Michael Lewis – best-selling writer of Moneyball, The Big Short and The Fifth Risk – for his new book, Going Infinite: The Rise and Fall of a New Tycoon.
Michael Lewis on the rise and fall of Sam Bankman-Fried
Having already amassed a $26 billion fortune at 28, cryptocurrency entrepreneur Sam Bankman-Fried was the world's richest person under 30. He was also the most prominent advocate of the 'effective altruism' movement, pledging to donate millions of dollars to charities he judged would make the greatest positive difference. Then, it all came crashing down. Bankman-Fried is currently on trial in New York for fraud, after the collapse of his cryptocurrency exchange exposed the misuse of customer funds. But he is no ordinary greedy billionaire, says best-selling author Michael Lewis, who had already chosen Bankman-Fried as the subject of his next book before his fortunes changed. Lewis, whose previous books include Moneyball, The Big Short and Flash Boys, returns to the Inside Politics podcast to talk to Hugh Linehan about the highly unusual personality, methods and motivations of Sam Bankman-Fried. He also addresses the criticisms he himself has faced for his relatively favourable depiction of a man charged with conspiracy, money laundering and fraud.
I still struggle with the whole blockchain crypto thing. How did this world work for Sam Bankman-Fried?
He built a casino for crypto to be traded in. At the time I met him, the value of all crypto in the world was, I don’t know, $3 trillion. And now it’s maybe down to $1 trillion. It’s still a lot. And if he hadn’t screwed up his exchange, it would still be a very valuable business. When doubt creeps into the crypto world, it doesn’t creep, it runs. And there have been so many examples of these institutions unravelling that people are on a hair-trigger alert for a problem. [FTX] had essentially extended a free loan without the knowledge of the depositors to [Bankman-Fried’s] hedge fund.
Is that fraud?
Yes, it’s fraud. The only argument you can make is he hadn’t intended to do this and it’s very hard to argue that. Crypto collapsed in May and June of last year. And he had put a lot of money into illiquid investments. Five billion dollars of venture capital investments, for example, that just can’t be easily unwound. So, when the run happened in November, there’s some money still there. They repay five right away, but they freeze it with about 11 billion dollars still to be repaid. This is why it gets so messy.
But you think people might still get their money back?
Very possibly. But that doesn’t excuse it, or, oddly, have any effect on his legal future. He is quite likely to go to jail for a long time. It just makes it a little different from, oh, he stole the money. Because the money’s still there.
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He had set up these companies, first of all in Hong Kong, because they couldn’t really operate in the US. Then he shifted them all to the Caribbean, and from the description in the book, they’re mostly in their late twenties; they’re making billions of dollars. They’re living like students in expensive penthouse suites. And a lot of them are committed to a particular kind of philanthropy.
This is important. Effective altruism is born at Oxford on the heels of the financial crisis. A professor named Toby Ord makes the point that, at very little cost to himself, he could do dramatic good for people he doesn’t know. He makes a calculation that if he took half his salary for the rest of his career and effectively donated it, he could prevent 80,000 African children from suffering blindness. This begins a raft of calculations about the most efficient way to spend your philanthropy. They spin up an argument that the way to lead your life is to maximise the number of lives you save with your charity. And these philosophers go out and proselytise this idea to kids in the elite colleges who might go make a lot of money. The idea collides with Sam Bankman-Fried when he is a junior at MIT and he swallows it hook, line and sinker. The best thing you can do for others is save lives. And the most efficient way to do it is by making as much money as possible and donating it as effectively as possible. This idea appeals to people who are quantitative people.
Quantitative people like Bankman-Fried. who seem to entirely lack empathy. There’s this disjunction between the commitment to doing good and being entirely uninterested in other human beings
That’s not true for all of them. But it is very curious how little the effective altruists I met cared that much about other people personally, and how much they cared just about humanity. With one exception: they cared about each other. Cult is too strong a word, but it had cult-like qualities. They were driven by extreme rationality. So if you can make a better argument about what we should be doing, the cult might change. It changed right after Sam Bankman-Fried becomes a member. Someone says: let’s turn our attention to things that might wipe out humanity for all time. An engineered pathogen that’s so diabolical it kills everybody. Artificial intelligence, off the leash, finds a way to destroy us. Climate change, maybe. An asteroid strike. They make a list of these things. And they assign probabilities. Wiping out all of mankind is wiping out a lot of people, even if it’s a low probability. So how can you pay attention to living human beings in Africa?
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I started reading the book while also reading about the philanthropist Chuck Feeney, who died recently. Feeney gave away his whole fortune and ended up living in a rented apartment with a pull-down bed. That was a pretty good example of philanthropy at its best. This stuff? I don’t buy it
You’ll see I don’t make a great deal of effort to defend it, and I make some fun of it. But let’s, just for the hell of it, rather than you and me just ripping into it, let me try to defend it a little bit. It sure would be nice if people with vast resources did address the threat of pandemics. Governments aren’t doing it. And it was interesting that these people identified artificial intelligence as a problem years ago, and now all of a sudden it’s front of mind. It was monomaniacal. But where do people like this end up if they aren’t in this space? They tend to become libertarians. They elevate selfishness to a kind of principle or a religion. I think I’d prefer this.
Another way of looking at it is as a symptom of a modern disease. People are frustrated that it seems impossible to address big questions. And you have this new elite of super-rich people who accumulate unimaginable sums of money and assume ... that they can change the world for the better. Sam Bankman-Fried looks like the next stage in that evolutionary process
I think this is absolutely true. I’m not defending the world the way it is. I’m not really even defending effective altruists. But if you force me to make the argument, I’d say, well, at least it’s better that they care about humanity than that they don’t at all.
The book is very funny at times. It reads as a satire, in the style of Tom Wolfe, who’s a forebear of your sort of writing about money and power and hubris
It’s funny you say this. With Bankman-Fried, my first thought was, this is walking social satire. It’s preposterous. This kid who in any other time in history would have been a high school math teacher, who is clearly not understood by the people who are doing business with him and doesn’t particularly care about them. And overnight, because he has this pile of $22½ billion, becomes the centre of everybody’s attention. He becomes Biden’s second-biggest donor. He’s going to put a billion dollars into the presidential election. He’s talking about paying Donald Trump five billion dollars not to run for president. And negotiating with the Trump people about this.
Do you think that could have worked?
No, it wouldn’t have. You know what would have happened, right?
Trump would have taken the money and just run anyway
That’s exactly what he would have done. Yeah. It’s unenforceable. It’s probably also illegal, because I think it’s a bribe. And so I saw that he was insinuating himself into not just American politics, and not just global philanthropy, and not just global finance, but into global culture. Celebrities wanted to be his friend. Wall Street tycoons wanted to hear what he had to say.
That’s partly because he’s the richest young person in the world, but also because – and this is very Tom Wolfe – he’s the New Thing
Yeah, he’s the New Thing. Nobody understands this crypto business. And everybody’s worried about missing out on that.
There’s a hilarious sequence with Anna Wintour where she’s trying to get him to fund the Met Gala
The single worst-dressed person in the history of humanity, who looks like he’s fallen out of a dumpster, is thrown on to a Zoom call and on to his screen pops the queen of global fashion. Sam has no idea who she is. He’s googling her while he’s talking to her, and at the same time, whenever she’s on the screen, he’s trying to let her do all the talking, because he’s playing this video game. And so you’re hearing Anna Wintour describe in grand terms this Met Gala and how important it is to the world and blah, blah, blah. And on the screen, a minotaur is attacking a dragon and blood is flying everywhere. And the game is going so fast, and Sam is focused on that, and saying words to her, that kind of track the conversation, but it’s clear he’s not really even listening, until she’ll trick him, she’ll say what do you know about the Met Gala, and he’ll go, Oh, oh, interesting question. He’ll hit a button and up pops the Wikipedia page of the Met Gala. And he’ll skate through that. And then the minute he’s said enough that she’ll take over, he’s back to his game.
He’s the irritating teenager who won’t lift their head from their phone
I would say it’s worse. I think his brain couldn’t function doing one thing. It had become addicted to distraction. It took me a while to get used to being with him. He can’t do what you and I are doing right now. The way I interpreted it was he needed this reality of a video game at the same time he’s playing this other game, which is real life, which he’s decoded and reconstructed as a video game.
You’ve put yourself in the spotlight with this book and it’s caused some to look at your methods, the way you approach telling these stories, your relationship with your subjects. Some have been quite critical. What’s it like to be in the mix in that way?
I expected it. The mob had already decided instantly that he was a villain. So I knew that if I introduced nuance in a narrative, the people who had their own narrative, based on a lot less information than I had, were going to be outraged.
They think you’re advocating for him. In some cases, they think you’re part of his defence team
Yeah, which is silly because the only people in the courtroom who are going to get actual facts out of this [book] that are useful to them are the prosecutors. There’s going to be stuff that’s almost surely going to come up in the next couple of weeks from the book and the prosecutors will raise it.
A writer in the New Yorker magazine wrote: ‘In any Michael Lewis book, the immense satisfaction of narrative and detail are the table stakes. What differentiates this one, which may one day be regarded as either the pinnacle or the nadir of his career, is his personal exposure in the reputational market.’ Do you think there’s any truth in that?
Not really. Because it’s not like I say he’s innocent or guilty. I don’t render a verdict. You want him in jail, you’re going to get him in jail. I’m not going to keep him out of jail. He may go to jail for the rest of his life. There’s nothing I can do about that. But how you feel about it might be a little different if you know the whole story.
This is an edited transcript. The full interview can be heard on The Irish Times Inside Politics podcast
Going Infinite: The Rise and Fall of a New Tycoon is published by Allen Lane
