Rob Wiblin: What do people commonly get wrong about why you ended up having so much success in this area?
Sam Bankman-Fried: I think for a lot of people, they just don’t have a model for how it happened. It’s just sort of this weird property of the world; it’s a little bit inexplicable. I don’t know, it happens sometimes: you look at someone and they have incredible success, and you’re like, “Huh. That person is really successful.” It’s sort of like when people think about why was Elon Musk so successful, or why is Jeff Bezos so successful? Most people don’t really have an answer for that, because they don’t even see it so much as a question they’re asking. It just is this weird property of the world, that they were.
Sam Bankman-Fried: But my felt sense — from having been through a lot of it — the first thing is that, to the extent there are multiplicative factors in what’s going on (and I do think there are) that your ultimate “how well you do” is a product of a lot of different things. One thing that implies is that, if it’s a product of four different things, then in order to get anywhere near the peak, you need to do well sort of at all of them. You need to be pretty good at all of them. It’s a high bar.
Rob Wiblin: Yeah.
Sam Bankman-Fried: You can’t skip leg day, so to speak.
Rob Wiblin: What does that mean?
Sam Bankman-Fried: You can’t be like, “I’m going to be really good at some set of things and just ignore the others” — you just lose that multiplicative aspect of it. Obviously, some things are additive, and you can sort of ignore those.
Sam Bankman-Fried: So we had to be good on a number of different realms. We had to be really ambitious. That was an important part of it. It was just so, so, so easy for us to fail to accomplish what we did, if we just decided our goal was a lot lower. Or in a lot of ways, just getting lazy when we started doing well and being like, “Ah, we’ve done well. No point trying anymore.”
Sam Bankman-Fried: But also, just a lot of strategic decisions, where it’s like, “Are we willing to take any risk in our trading?” If the answer is no, it’s going to really limit the amount of trading we can do, but it is a safer thing to do. That’s an example of a question that we had to face and make decisions about. Another part of this was just aiming high and remembering that — not so much aiming high, but aiming to maximize expected value, is really what I’d say.
Rob Wiblin: If I remember, it seemed like in those early days, you were often doing things that created some risk of going bust, but offered the potential of making manyfold more money. That was kind of your modus operandi.
Sam Bankman-Fried: Yeah. I think the way I saw it was like, “Let’s maximize EV: whatever is the highest net expected value thing is what we should do.” As opposed to some super sublinear utility function, which is like, make sure that you continue on a moderately good path above all else, and then anything beyond that is gravy.
Sam Bankman-Fried: I do think those are probably the right choices, but they were scary. I think even more so than some chance of going bust, what they sort of entailed was that we had to have a lot of faith in ourselves almost — that they really would have had a significant chance of going bust if we didn’t play our cards exactly right. There were a lot of things that were balanced on a knife’s edge. Any amount of sloppiness would have been pretty bad. I also think it was a little bit of a thing of, could we play this really well?
Rob Wiblin: Just to back up and talk about the multiplicative model of entrepreneurship or productivity that you were talking about, this is the idea that your output is determined by multiplying together a whole bunch of different factors — like how good you are at all these different sub-skills of the thing that you’re trying to do. Which produces quite different results than what you get if you’re just adding together your skill in a bunch of different areas.
Sam Bankman-Fried: Yeah.
Rob Wiblin: Basically it means that you could be sabotaged by being extremely weak in any one area: if any of the things you’re multiplying together is zero or close to zero, then the whole project produces no output.
Sam Bankman-Fried: Yep.
Rob Wiblin: Do you want to elaborate on it a little bit more?
Sam Bankman-Fried: Yeah. I think it’s an important and a weird point. It’s not an absolute point. I don’t want to claim that in all cases, this is the right way to think about things or anything like that. What I’d say instead is something like, you should try and understand in which ways something is multiplicative — in which ways it is the case that, were that factor set really low, you’d be basically fucked. As opposed to, that’s just another factor among many.
Sam Bankman-Fried: What are some of those? One example of this, which I learned early on, is management. If you’re trying to scale something up big, and you’re very good at the object-level task but bad at managing people, and no one on the leadership team is good at managing people, it just becomes a mess. It almost doesn’t matter how good you are at the original thing — you’re not going to become great as a company. It’s really hard to substitute for that. It’s amazing how quickly things can go south, if organizational shit is not in a good state.
Sam Bankman-Fried: That was one example of a case where I originally didn’t particularly think of it as multiplicative, but I do think it was. And I learned that lesson eventually, that you can’t forget about that. I think there are a lot of other things like that that came up.
Rob Wiblin: Yeah. It’s a good example of the multiplicative effect. I suppose the multiplicative model is just kind of a model that can be helpful and is partially true and partially not true.
Sam Bankman-Fried: Yeah.
Rob Wiblin: But people have pointed out that founders falling out, or the original team growing a project coming to hate one another, is one of the main ways that a project fails. It’s a great example of how it kind of doesn’t matter how good a prototype they build or how good their accounting system was or their ops was — if the people working the project just end up despising one another, then it’s all for naught, basically.
Sam Bankman-Fried: Yeah. I think that’s basically right.
Rob Wiblin: I suppose there’s a few other things like that. And similarly, if they get on really well, but they’re terrible at designing a product, such that they’re never going to actually appeal to customers, then the whole thing is for naught again.
Sam Bankman-Fried: Yeah.
Rob Wiblin: It suggests that you kind of want an all-rounder or an all-rounder company or an all-rounder CEO. Well, at least that that’s better than someone who’s exceptional in one area and really weak in another. Do you think that’s a reasonable conclusion to draw?
Sam Bankman-Fried: Yeah, with some caveats. I think it’s mostly right, but you have to be careful if you think about it that way. Again, I do think this is a reasonable way to think about it, in many senses, but you have to be careful that you don’t overdo it. And in particular, so OK, you go for the all-rounder approach. You don’t want to be left with a generic pile of mush, right?
Sam Bankman-Fried: Part of this is again saying, in order to reach an extremely good outcome, you actually need a lot of things going very well. So some of this is sort of like, if you’re not in that case, you just are not going to end up in the extremely good outcome. That’s sort of how it is. It’s sort of sad, but true. I think part of this is as much saying that as anything else.
Rob Wiblin: Yeah. I guess a modified version is that hopefully, the whole reason you’ve chosen to go into entrepreneurship on project X is that you’re amazing at some aspect of that thing, because you had discretion over what you were going to go into. So, why not choose something where at least you’re extremely knowledgeable about the product or whatever. And then, having gotten a really high value for that, on the rest of the stuff you want to do well enough that it doesn’t sabotage the project.
Sam Bankman-Fried: Yeah. I think something like that. There are ways that you can try and cover for some of your flaws. There are things you can do to make it such that they matter less than they otherwise would. You can be a little bit strategic about that.
Sam Bankman-Fried: Now, it’s always sad when you’re in covering-your-ass mode, so to speak. That’s not where you would ideally want to be coming from. But some examples of that, that I do think can be helpful: one thing that you can do is, if you choose an area where you are the first mover by a lot — like a consumer-facing business, and where your depth of product knowledge is not very good, you can build an OK product, and you’re good at corporate strategy and shit — that can potentially work.
Sam Bankman-Fried: Because you might end up in a position where just the brand value of having been first is worth so much, that even if your product isn’t the best eventually, if it’s the best in an open area where there are no competitors, that might be enough to build up a pretty big head start. Obviously it’s better and worth a ton if you can also be great at product there, but that is an avenue you can try and play.
Sam Bankman-Fried and Rob Wiblin discusses this general idea on the 80,000 Hours podcast: