What Does the Collapse of FTX Teach Us About Entrepreneurship?

Sam Bankman-Fried’s downfall reveals a disturbing trend in the way we talk about entrepreneurs. To improve the tech ecosystem, we need to pay more attention to what leaders do rather than what they say.

Written by David Ryan Polgar
Published on Dec. 14, 2022
What Does the Collapse of FTX Teach Us About Entrepreneurship?
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What do Sam Bankman-Fried, Adam Neumann, and Elon Musk all have in common? They’re all classic, cold-hard capitalists who attempted to cloak their pursuit of personal wealth in the guise of altruism. Recent actions by all three of these onetime media darlings exposed extreme levels of self-interest, however, with FTX, WeWork, and Twitter all revealed to be run as playthings or piggybanks rather than billion-dollar businesses with appropriate oversight and checks on power.

Entrepreneurs like these promote their commitments to grand causes (e.g., Bankman-Fried as an Effective Altruist dedicated to giving away billions, Neumann as an elevator of consciousness, and Musk as a savior of free speech) to shield from public scrutiny of their business decisions. Also, garnering a reputation as an entrepreneur with a higher calling than making money can create far more personal wealth, so business leaders are incentivized to lean into this false narrative.

Sam Bankman-Fried and Effective Altruism

Bankman-Fried publicly promoted himself as an adherent of Effective Altruism, a philosophy that promotes accumulating wealth to enable support for charitable causes. His putative adherence to a social mission reduced scrutiny of his business, however, allegedly enabling him to enrich himself through a range of risky and deceptive practices.

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What Happened at FTX?

Sam Bankman-Fried hid a sloppy intermingling of companies involved in cryptocurrency that worked to enrich his personal wealth behind the veneer of a harmless, disheveled boy genius committed to bettering the world. Bankman-Fried’s public image, in my opinion, is not unrelated to his alleged financial shenanigans. Rather, it allowed the malfeasance to happen. Bankman-Fried masterfully played the media’s desired role of a crypto-savant-with-heart, and this caricature kept much of the public from noticing that his businesses handling billions in assets were run in comically unprofessional ways

Because we were told he wanted to give away his riches, he faced less scrutiny over how he was getting rich.

If, for example, Bankman-Fried wore a Zegna suit and a Patek Philippe watch as opposed to his just-rolled-out-of-bed look of shorts and a t-shirt, we may have questioned his intentions more. Instead, he played the character of someone too busy to care about his appearance because he was changing the world. During the prolonged crypto winter that brought into focus the outlandishness of swashbuckling crypto bros, Bankman-Fried transformed his image into that of an enlightened technologist who talked about regulation and gave generously to progressive causes. 

The myth-making covers the money-making, and the tech media has long been in the thrall of a savior complex that insists overconfident billionaires will save us with their individual ideas as opposed to understanding the importance of collective values and the trade-offs necessary for true progress. 

Sam Bankman-Fried’s rise happened because the media has a tendency to buoy charismatic leaders who evoke our stereotype of genius and who stick to a script about having a higher purpose than just making a buck. If the public focuses on the alleged long-term altruism, they’re less focused on the short-term profiteering. 


A Purpose Higher Than Profit?

Bankman-Fried, Neumann, and Musk have always clearly been ruthless leaders focused on maximizing their personal treasure troves, but all three of them did so by running a now well-worn media playbook where their intentions were hidden beneath layers of platitudes about the greater good.

Bankman-Fried likely would not have achieved his level of wealth and fame if not for his portrayal of himself as an acolyte of Effective Altruism, which is a philosophical and social movement focused on activities that benefit society. In practice, for someone like Sam Bankman-Fried, this means justifying massive, self-interested wealth accumulation allegedly to maximize the total amount of money that can eventually be dedicated to social causes. It’s Ayn Rand-meets-Gandhi. 

Instead of encouraging its adherents to do-good-by-being-good, Effective Altruism can easily become a do-good-by-doing-whatever-and-then-maybe-some-good philosophy. To that end, in a Vox interview earlier this year, Bankman-Fried encapsulated his approach as “Make a tremendous amount of money by any means necessary. Then give it all away by the best means possible.” 

In tech, we seem to like our Gordon Geckos dressed in Patagonia. And the media reports on their actions as a Hollywood-style hero’s journey rather than merely noting they’re pursuing profit. Sam Bankman-Fried didn’t want people to see him as a robber baron, so he styled himself with a touch of Robin Hood. But instead of stealing from the rich to give to the poor, he used Effective Altruism as a shield, claiming he was becoming rich to eventually give to the poor, perhaps, someday. 


Whither Twitter?

Or take the current fiasco at Twitter, where Elon Musk’s ascendance immediately led to two-thirds of the company’s staff being laid off in possible violation of federal regulations. He has further offered an ultimatum that the remaining third should prepare to work extremely long hours at a high intensity or resign. 

In most circumstances, people would view this type of slash-and-burn business as heartless and highly erratic. But because Musk justifies his actions as part of a high-minded defense of “free speech,” the cruelty may get a pass. Instead of a Scrooge, he positions himself as a selfless warrior risking his fame and fortune to defend one of the bedrock freedoms of American democracy. But as events continue to unfold, such as his anger at civil society groups exercising their own free speech rights by advocating for ad freezes on Twitter, this facade falls apart. 

Eventually, the altruistic mask always slips, exposing the ruthless entrepreneur underneath. 

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The Media Creates Characters Like Sam Bankman-Fried 

Likewise, Adam Neumann would never have achieved notoriety if he pitched WeWork as the simple real estate company it was. Instead, he crafted a narrative about his desire to change the world by fostering communal experiences that would elevate the human experience. Kind of lofty for a company that was effectively a sexier version of office space stalwart Regus. 

But Neumann hid the overconfidence and financial self-dealing that enriched him beneath an inspiring story about a do-gooder who also just happens to be a billionaire. Not coincidentally, stories about Neumann frequently mentioned his teenage years in an Israeli kibbutz. After all, how could someone who spent time in a commune be a cold-hearted profitmonger? That tidbit served his myth-making and helped to hide his true intentions. Honesty, however, would never have put Neumann on magazine covers or made him into a billionaire celebrity. 

Characters like Bankman-Fried, Musk, and Neumann don’t accomplish their goals alone. To a large extent, they all play the roles that they do because the media helps to run cover for entrepreneurs who claim noble intent, turning them into billionaires with reduced scrutiny. Sam Bankman-Fried was always honest about his intention to maximize his wealth, but because he successfully clouded his why, we didn’t pay close enough attention to what he was doing.

Here is a riddle: Do successful entrepreneurs happen to cover their profiteering motives with the gloss of a larger social mission, or do they succeed because they leverage a faux social cause? People like Bankman-Fried, Musk, and Neumann, clearly wouldnt have achieved their level of superstardom without their grandiose espoused goals. They each saw a successful media narrative, and they each took advantage of it to make themselves obscenely wealthy and reduce suspicion about their actions. So, to stop future Bankman-Fried types, we need to stop making the socially-conscious-entrepreneur such a lucrative path to fame and fortune. 

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