One under-discussed aspect of this: What shape does your utility curve look like for negative dollar returns?
I’ve been trying to figure out why SBF seems very much to have not just been risk-neutral in his business approach, but quite probably was actively risk-seeking, seeking to make correlated bets (mainly amounting to longs on crypto in general) that all crashed this year.
It seems quite possible to me that SBF saw the downside of Alameda/FTX losing $10B as not nearly as bad as the upside of them making $10B would be good. Consider:
Depositors losing their money means that you’re taking from people mostly in developed countries who likely have some cash to spare.
SBF’s parents are law professors who could probably help him legally if he ran into trouble.
Even if SBF and the rest of his leadership end up in jail, that’s only harm to a small number of people, compared to the many he could help in a positive situation.
The ensuing media firestorm has at least made a larger number of people aware of the ideas of EA, which are compelling on their own independent of the goodness of their practitioners.
To be clear, I’m not endorsing this perspective at all… I’m just trying to see if SBF could have been reasoning along these lines, even if he wasn’t doing so publicly.
For the rest of us, particularly those trying to act based on the funding being provided, I think it would have been far more helpful to actually examine the potential downside risk that SBF himself was already highlighting with his approach to risk.
This would have meant Rob asking questions like: “If you endorse these sort of high-risk double-or-nothing bets, and you’ve made it clear that you’re not letting up on that even now that you’ve made billions, should we anticipate a decent likelihood of hearing that FTX has gone bankrupt sometime soon?” Visualizing, and more broadly discussing that very real possibility would have hopefully muted the impact on the EA community when it actually came to pass. And then, after dwelling on the seemingly-zero downside possibility, the natural follow-up question would dive into SBF’s valuation of negative returns.
I feel like the story that Rob told fell into the classic winner’s fallacy mindset of highlighting a risk someone took seemingly after it was successful. The issue was that those risks weren’t just in the past.
One under-discussed aspect of this: What shape does your utility curve look like for negative dollar returns?
I’ve been trying to figure out why SBF seems very much to have not just been risk-neutral in his business approach, but quite probably was actively risk-seeking, seeking to make correlated bets (mainly amounting to longs on crypto in general) that all crashed this year.
It seems quite possible to me that SBF saw the downside of Alameda/FTX losing $10B as not nearly as bad as the upside of them making $10B would be good. Consider:
Depositors losing their money means that you’re taking from people mostly in developed countries who likely have some cash to spare.
SBF’s parents are law professors who could probably help him legally if he ran into trouble.
Even if SBF and the rest of his leadership end up in jail, that’s only harm to a small number of people, compared to the many he could help in a positive situation.
The ensuing media firestorm has at least made a larger number of people aware of the ideas of EA, which are compelling on their own independent of the goodness of their practitioners.
To be clear, I’m not endorsing this perspective at all… I’m just trying to see if SBF could have been reasoning along these lines, even if he wasn’t doing so publicly.
For the rest of us, particularly those trying to act based on the funding being provided, I think it would have been far more helpful to actually examine the potential downside risk that SBF himself was already highlighting with his approach to risk.
This would have meant Rob asking questions like: “If you endorse these sort of high-risk double-or-nothing bets, and you’ve made it clear that you’re not letting up on that even now that you’ve made billions, should we anticipate a decent likelihood of hearing that FTX has gone bankrupt sometime soon?” Visualizing, and more broadly discussing that very real possibility would have hopefully muted the impact on the EA community when it actually came to pass. And then, after dwelling on the seemingly-zero downside possibility, the natural follow-up question would dive into SBF’s valuation of negative returns.
I feel like the story that Rob told fell into the classic winner’s fallacy mindset of highlighting a risk someone took seemingly after it was successful. The issue was that those risks weren’t just in the past.