To the extent that any EA beliefs likely contributed to FTX’s collapse, I suspect that they are mostly related to the fact that typical EA risk attitudes, while normally correct, transfer poorly to the financial sector under human cognitive constraints. Specifically, I think that the finance industry is a special case where the recommendation to be more risk-seeking is wrong. This is because in most areas (e.g., media, innovation, charitable impact) the distribution of outcomes is right-tailed, but in finance it is left-tailed. As there is robust evidence that humans overweight the outcomes of recent events when forming their expectations, this will cause someone trying to optimise for impact in a risk-neutral way (as SBF seemingly tried to) to take on excessive risk in finance and not enough in other fields. This could be especially dangerous if SBF had internalised the meme that we should be more risk-seeking due to the distribution of outcomes being right-tailed. If my hypothesis is correct, it implies that it is especially important to know your risk environment when making decisions but there may not be many implications for most EA activities, as FTX operated in an atypical risk environment.
To the extent that any EA beliefs likely contributed to FTX’s collapse, I suspect that they are mostly related to the fact that typical EA risk attitudes, while normally correct, transfer poorly to the financial sector under human cognitive constraints. Specifically, I think that the finance industry is a special case where the recommendation to be more risk-seeking is wrong. This is because in most areas (e.g., media, innovation, charitable impact) the distribution of outcomes is right-tailed, but in finance it is left-tailed. As there is robust evidence that humans overweight the outcomes of recent events when forming their expectations, this will cause someone trying to optimise for impact in a risk-neutral way (as SBF seemingly tried to) to take on excessive risk in finance and not enough in other fields. This could be especially dangerous if SBF had internalised the meme that we should be more risk-seeking due to the distribution of outcomes being right-tailed. If my hypothesis is correct, it implies that it is especially important to know your risk environment when making decisions but there may not be many implications for most EA activities, as FTX operated in an atypical risk environment.