Sam Bankman-Fried was the poster child for “effective altruism”. Now his supporters are heartbroken and critics are questioning his “strange” funding setup.
- Sam Bankman-Fried was a proponent of effective altruism: earning as much as possible to give away one’s fortune.
- With the collapse of FTX, plans to fund scholarships and a basic income program were shelved.
- Researchers and professors of business ethics have said he has damaged the movement he helped energize.
The collapse of Sam Bankman-Fried’s cryptocurrency exchange, FTX, has left a movement that promised to donate billions to charity in tatters, with commentators scratching their heads over its funding strategy.
Bankman-Fried had advocated effective altruism, a philosophy that calls on subscribers to earn as much as possible so they can give as much as possible to charities and causes that benefit the greatest number.
The 30-year-old, who was once one of the richest people in crypto, had has pledged to donate 99% of its earnings to charity every year.
He was a huge influence on the effective altruism movement, which counts Silicon Valley tech workers and Oxford University scholars among its fans.
Luke Kemp, a research associate at the University of Cambridge’s Center for Existential Risk, told Insider that Bankman-Fried was not just “the poster child”, but “the financial backbone of the movement”. .
The British non-profit association 80,000 hoursthat promotes effective altruism, estimated in 2021 that Bankman-Fried was personally responsible for about $16 billion in future contributions to effective altruism causes, about one-third of an estimated $46 billion total.
Bankman-Fried previously told Bloomberg he gave away $50 million in 2021.
“Some time ago I became convinced that our duty was to do all we could for the long-term global utility of the world,” Bankman-Fried said earlier this year when he signed the Giving Pledgea pledge by some of America’s wealthiest people to donate the majority of their money to charity.
In a interview to DealBook Summit On Wednesday, Bankman-Fried said he had thought about disease, animal welfare and pandemic prevention and “what could be done on a large scale to help mitigate them.”
“There are a lot of things that I think really have a huge impact on the world,” he said, “and ultimately that’s what matters most to me.”
But since FTX’s collapse, details have surfaced suggesting Bankman-Fried was living a lavish life; they say he has spent thousands of dollars a day on meals for FTX employees and owned a yacht worth millions of dollars. This contrasts sharply with the image created by Bankman-Fried: sleeping on a beanbag, wearing designer clothes, driving a Toyota Corolla and largely avoiding personal luxuries.
Bankman-Fried was the primary funder of Future Fund, a charitable project run by the FTX Foundation. After FTX has filed for bankruptcy protection mid-November, the entire Future Fund team — including Will MacAskill, the Oxford scholar considered a co-founder of effective altruism — resigned.
In a statement, the five said they were no longer able to do the work of the fund or process the grants and felt “devastated to say that it seems likely that there are many committed grants which the Future Fund will not be able to honour”.
“We are very sorry to have come to this,” they said, adding that “on a personal basis, we are exploring ways to help resolve this terrible situation.”
“We joined the Future Fund to support amazing people and projects,” they said, “and this result breaks our hearts.”
Funds website said it makes grants to nonprofits and individuals and invests in social impact businesses. He said the fund committed $160 million as of September 1, though it’s unclear how much of that has been shelled out.
The fund was also to provide money for a “future stock marketat MIT, where Bankman-Fried studied. The MIT Media Lab website said fellows would have received “a stipend and full tuition plus $25,000 per year in research fees for ambitious and benevolent that could not be achieved anywhere else”.
The first fellows were due to start in September 2023 – but in a statement on November 16, MIT’s Media Lab said it would not go ahead with the scholarship.
The New York Times reported that the Future Fund also had pledged $600,000 to Equity and Transformationanti-racism non-profit in Chicago, but the money never arrived. The association said on November 11 that he planned to use the funding for a guaranteed income trial in the city but had to delay its launch, in the hope that it could be funded by other donations.
Scientific groups that have received money from the Future Fund told Science magazine in mid-November that they were unsure of the future of their funding.
“We feel shaken”
Brian Berkey, associate professor of legal studies and business ethics at the Wharton School at the University of Pennsylvania, said the collapse of FTX had “absolutely” damaged the effective altruism movement.
“There is no doubt about it,” he said.
Kemp described the damage as both financial and reputational.
In a November 16 statement80,000 Hours said, “We feel shaken by recent events and not sure what to say or think.”
He said he would remove examples on his website where Bankman-Fried “was held up as a positive example of someone pursuing a high-impact career, since, to put it mildly, we no longer endorse that.”
Kemp argued that the collapse of FTX made the movement’s governance “so top-down and credulous that it was easily and enthusiastically exploited by a single individual who was in his twenties when he did it.”
Berkey added that it would give “ammunition” to longtime critics who see Bankman-Fried’s actions as tarnishing the whole movement.
Dustin Moskovitz, co-founder of Facebook and effective altruist, said in a Twitter thread on November 12 that “EA either encouraged Sam’s unethical behavior or provided practical justification for such actions”.
“Either it’s bad,” Moskovitz said.
He added, “I don’t know yet how we’re going to undo the damage Sam did and strengthen EA against other bad actors.”
Frank J. Oswald, lecturer in communication and ethics at Columbia University, was more optimistic about the future of effective altruism – he said he now had the opportunity to “refocus” and add moral constraints around the maximization of income and benefits.
A crypto bet
Kemp told Insider that it was “just mind-blowing” that the effective altruism movement was set up to receive a significant amount of funding from crypto, “an area notorious for being highly volatile and having a very high base rate. high in scams.”
“As a risk diversification strategy, it’s really weird and silly,” he added.
But Berkey said he thought Bankman-Fried would have weighed the potential risks and benefits when he decided to get into crypto.
“The most effective altruists would probably think there will be instances in which it’s worth taking the risk to fail and perhaps end up with nothing,” Berkey said, “if the upside potential and the probability of reaching this potential are high enough.”
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