What Sam Bankman-Fried Never Understood
By Sander McComiskey ‘26
It is hard to conceive of a corporate spectacle more ridiculous than the collapse of cryptocurrency exchange FTX last November. Sparked by stunning incompetence, the 32 billion dollar firm imploded in less than a week and took whatever shred of legitimacy cryptocurrency retained down with it. But despite breathtaking tales of financial mismanagement, the most farcical detail of the debacle had nothing to do with cryptocurrency at all. Four days after FTX went up in smoke, a small Hollywood blog revealed that, for the last six months, legendary investigative journalist Michael Lewis had embedded himself into the life of FTX’s CEO and founder, Sam Bankman-Fried, giving him a front row seat to the chaos—and a movie deal.
Lewis, a former Salomon Brothers bond salesman, broke into journalism with an exposé of toxic Wall Street culture in its modern incipiency and cemented his authorial legacy with some of the most iconic nonfiction works of the 21st century—Moneyball, The Big Short, and The Blind Side. The characters Lewis ingrained in the public consciousness—from the cognitive psychologist Amos Tversky to Oakland Athletics general manager Billy Beane—have always been his authorial trademark. His next book has generated such fervent anticipation because, even in this glut of fascinating characters, his next protagonist stands out.
Bankman-Fried, the billionaire son of two Stanford Law professors, had enthralled the public with his slovenly dressed whiz-kid shtick, bolstered by his credentials as a top Democratic donor and renowned philanthropist. The initial heights of his public image made the eventual ruination of FTX and his arrest for securities fraud all the more shocking—his narrative less of an arc than an event horizon geodesic.
Much of Bankman-Fried’s appeal stemmed from his popularization of the trending philanthropic theory known as effective altruism, the brainchild of utilitarian philosophers William MacAskill and Peter Singer. At its core is a shockingly simple, even inarguable, proposition: people ought to use “evidence and reason to figure out how to benefit others as much as possible, and take action on that basis.” As will be the case for any theory with such a self-evident mantra, effective altruism in practice centers around the more controversial interpretations of this axiom and their sometimes unintuitive implications for human conduct.
Effective altruism’s devotees have revolutionized philanthropy in its image, promoting rigorous cost-benefit analyses that direct money where it can maximize the number of lives saved per dollar and popularizing the “earning to give” model, in which the best way for the capable to benefit society is to make as much money as possible—then give it all away. This is the philosophy that William MacAskill pitched to Bankman-Fried at a now-infamous lunch and that became the driving force in the young genius’s life, present as he succumbed to the siren song of quantitative trading fresh out of MIT and perched on his shoulder when he left Jane Street to create FTX in an explicit attempt to “make and give away a lot of money.”
FTX’s demise and the reputational immolation of its founder gave pundits new license to criticize not just Bankman-Fried but the movement he figureheaded, resulting in some insightful critiques of effective altruism. A commonly raised criticism following the collapse argued that effective altruists’ dispassionate utilitarianism neglects something fundamental to the human condition—that while its endpoints may optimize wellbeing in some strictly material sense, happiness is at least partly a product of innately unquantifiable inputs that do not spit out big numbers when plugged into a cost-benefit analysis. This is a valuable perspective, but a neglect of the intangibles seems a somewhat incomplete accusation to level against effective altruism, implicitly conceding that its vision for maximizing concrete global wellbeing is basically correct.
There is much to appreciate about effective altruism in its practical manifestations—when limited to platitudes about the value of generosity and heightened attention towards the relative impact of philanthropic options, it is clearly a force for good—but the broader worldview pushed by its acolytes is less impregnable. Effective altruism as a life-governing philosophy falls prey to two principal weaknesses: the brokenness of the “earning to give” model embraced by its acolytes and the consequences of directing a push for social improvement through elite philanthropy rather than state action. These flaws in the movement’s foundation eclipse its potential, leaving it unable to replace the more intuitive conceptions of socially beneficial lives that it seeks to supplant.
The earning to give ethic is the piece of effective altruism associated most closely with Bankman-Fried and, perhaps not coincidentally, the lowest-hanging fruit for a would-be critic. Many have pointed to the fraud perpetrated by earning to give’s most prominent disciple to demonstrate its inherent unworkability, but this criticism, to the extent that it links that fraud to effective altruism, is largely unfair. Every sizable movement will boast a certain number of unsavory adherents. That, for Bankman-Fried, effective altruism served as little more than an attractive front for a Ponzi scheme does not necessarily reflect on the theoretical validity of the movement.
Instead, imagine that the pre-November image of FTX was essentially correct. Maybe it was slightly overvalued, but the underlying business model was solid and fraud was nonexistent. Then, would Bankman-Fried’s professional and philanthropic path—a near-perfect realization of the ideals of the effective altruism movement—have been the most socially beneficial option for him to pursue? If we stipulate that he could have been equally successful (although not necessarily equally lucrative) in those other endeavors, it is hard to see how that would be the case.
While cryptocurrency’s techno-optimist libertarian packaging allowed its supporters to frame it as a revolutionary innovation, its financial mechanics were, as financial experts and pop stars alike noted, nothing new. Fundamentally, crypto was a recreation—albeit a dangerously unregulated and deviously advertised recreation—of the instruments and institutions that underpin the modern financial system. But more important than the mechanical congruence between crypto and the appendages of the financial system that venture light-years beyond the vital matching of potential borrowers and savers is a deeper resemblance: neither produces anything. Cryptocurrency, at its not-fraudulent best, sucked capital—monetary and human—away from the real economy. It brought no technological progress in the economic sense, no spillover effects on growth, no real improvements in the human condition. It created no wealth; it simply transferred it.
This last detail was by no means a vice of Bankman-Fried’s profession for effective altruists. FTX transferred immense sums from the wallets of duped cryptocurrency retail traders to Bankman-Fried’s, money he used to save lives. But missing from this calculus is a recognition that Bankman-Fried’s career enlarged an industry that was useless at best and predatory at worst (again, even without the fraud) and sucked in resources that could’ve been used to actually improve human conditions.
On their own, these direct negative consequences throw into question the unblushingly positive characterization of Bankman-Fried’s social impact before FTX’s collapse. But his career had another equally relevant, if less tangible, downside: its opportunity cost. Bankman-Fried’s decision to maximize his earnings and philanthropic capacity came at the expense of a host of careers with massive potential impact—for example, undertaking biomedical research on MRNA vaccines for cancer or developing more efficient clean energy technologies. By consigning his intellect to the pursuit of funding others’ attempts to do good, Bankman-Fried declined to attempt it himself.
This tradeoff is the most prominent blind spot of earning to give. The fundamental scarcity affecting societal wellbeing is not limited funding for nonprofits but a scarcity of resources—human resources forefront among them. Effective altruism’s prescription becomes increasingly unstable with scale: a world where more of the best and brightest are in the business of funding progress is a world where less are involved in actually achieving it. A Sam Bankman-Fried equally successful at doing good as the real Bankman-Fried was funding it would certainly create more social benefit than a genius spending his life fabricating profits to fund charitable efforts while also strengthening institutions damaging to society in the process.
It is worth reminding ourselves that the real Bankman-Fried faces a far darker calculus than our contrived character who operated within basic legal and ethical boundaries according to the earning to give philosophy and was, in many ways, a perfect realization of the tenets of the movement. This steel man construction is not an academic gesture towards evenhandedness—it is an attempt to create a representative agent of effective altruism, and in doing so, to criticize the theory rather than just a single devotee. If earning to give cannot claim victory even in this optimally modified scenario, when can it ever?
This extension of the Bankman-Fried critique rests upon the applicability of the previous criticism of the cryptocurrency industry to the most common lucrative careers for our intellectual elite. These jobs—finance and consulting forefront among them—are, for many, the only plausible ways to pursue earning to give, subjecting those potential effective altruists to the same line of criticism applied to Bankman-Fried.
Ultimately, effective altruism is notable less for what it successfully displaces than for what it leaves unchallenged: a toxic version of meritocratic culture that equates success and purpose with net worth in which those with the most potential to change the world succumb to the incentives to bolster the institutions most opposed to that goal.
While the career choices promoted by the earning to give model are concerning, they are not the only facet of effective altruism with worrying consequences when implemented at scale. The effective altruism movement is deeply intertwined with the nonprofit sector, as the “giving” side of earning to give requires someone to receive that funding and instrumentalize it to improve outcomes. And one of the movement’s most obviously positive effects is its popularization of rigorous per-dollar benefit analyses of philanthropic decisions, a valuable contribution given that nonprofits’ incentives often tend towards scale over efficiency. But effective altruism by design places an unusual level of emphasis on philanthropy and nonprofit action as opposed to the public sector as vectors for societal improvement, a prescription that collides poorly with current political realities.
The obstacle to implementation of the policies that we already know to maximize welfare is a lack of state capacity, both physical and political. Although more visible in poorer countries with weak and unstable governments, this assertion is no less true of wealthy democracies. In the United States, for example, the current inability of government to do as much as build a bus stop is the result of decades of bipartisan bureaucratic evisceration and the outsourcing of core government functions to nonprofits—it is irrelevant that the US boasts the world’s best funded philanthropies if the government cannot realize its massive potential to improve standards of living. How much would this dynamic worsen in a world where smart young people are discouraged from entering public service due to its low earning potential and where the flow of capital, human and financial, to the nonprofit sector leaves fewer resources for the government?
It is certainly possible that this privatization of progress reflects a certain realism within effective altruist circles. They may be understandably unable to imagine governments which toy with global financial crisis, risibly mismanage their finances, and repopulate themselves with tyrants transforming society for the better. These are grounded concerns; enacting change through political institutions is often extremely difficult. But on a large scale, nonprofit action simply cannot compare to the potential of the state to improve wellbeing.
Governments and the social contract exist at least in part because voluntary, everyone-wins cooperation can only take a society so far. Maximizing welfare necessitates compelling behavior and implementing policies that, despite being positive-sum, will have losers. A theory of societal improvement that places philanthropy at its core neglects the most effective tool at humanity’s disposal for the realization of altruistic ideals. Boring through hard boards may well be a frustratingly arduous exercise, but in the absence of any other plausible way to put holes in a piece of wood, that is no reason to stop drilling. Effective altruism’s focus on voluntary efforts to increase social welfare, the quality that gives it its unique moral appeal, ultimately dooms the efficacy of the approach on a large scale.
Perhaps the best unification of these criticisms of effective altruism is that the theory seems designed for only a single follower. Its prescriptions, while possibly reasonable in terms of marginal analysis, are unworkable at scale. But when advocating for the widespread adoption of a moral theory, the world it would create if a substantial portion of the populace embraced it is a critical consideration.
Ultimately, whether due to these diseconomies or to the various other criticisms surfaced in this article, effective altruism fails to add meaningfully to existing conceptions of how individuals can use their life to benefit others. If you want your career to be a force for good, choose a career that makes the world a better place. If you think societal action oriented towards solving the world’s problems is desirable, vote for it, or even better, take a public service job and work for it. Effective altruism’s attempts to create end runs around these truths may be the source of its appeal, but as a philosophy, they are also its downfall.