The Success Theory of Utilitarianism: The Rise and Fall of SBF

The cryptocurrency industry is always full of drama. In just two and a half years, the valuation of a startup can soar from $800 million to $32 billion, an increase of 4000%. However, what is even more surprising is that this company went from industry leader to near bankruptcy in less than a week. There are even jokes circulating online: Most people's performance this week exceeded that of a top trader who graduated from MIT.

And the protagonist of all this is the young man with the afro hairstyle - SBF.

Effective Altruist Tag

SBF cleverly branded himself as an "effective altruist", which not only gave people a preliminary impression of him but also truly became his life creed.

Altruism, egoism, and utilitarianism are all important viewpoints in Western ethics. Utilitarianism was founded by the British philosopher Jeremy Bentham, and its core idea is "the greatest happiness of the greatest number." SBF claims to be an effective altruist, which is more like an application of situational utilitarianism—ignoring the interests of the few for the sake of promoting the overall benefit according to specific circumstances.

Effective altruists consider cost-effectiveness when doing good, pursuing value maximization, but on the condition of not harming their own interests. Proponents of this theory argue that if it is possible to prevent bad things from happening at a low cost, then there is a moral obligation to do so. They even believe that rather than directly engaging in charitable work, it is better to pursue high-paying jobs and then make donations, as long as it results in more good being done in the end.

SBF is not only a believer in this theory but also a loyal practitioner. After the FTX crisis broke out, Ethereum founder Vitalik Buterin and Binance CEO CZ both keenly identified the problems. Vitalik criticized this doctrine for lacking a theoretical framework for the effective distribution of social capital, which could lead to reckless accumulation of wealth with the assumption that it would be donated later. CZ also expressed agreement, subtly mocking SBF's calculating approach.

As an effective altruist, SBF indeed achieved great success with this belief. However, it was precisely the obsession with this idea that led to the rapid collapse of FTX, bringing it to the brink of destruction.

The Source of Faith

SBF's belief in effective altruism stems from his teenage years. His mother is a professor at Stanford Law School, and by the age of 14, she noticed his interest in utilitarianism. This theory took root in SBF's mind early on.

During his time at MIT, SBF discussed topics such as utilitarianism, baseball, and politics on his blog, showcasing his thoughts. After graduation, under the guidance of effective altruism, he quickly accumulated reputation, status, and wealth, and his success story became widely known.

But with success, SBF's dedication to effective altruism reached a level that is difficult for ordinary people to understand. He joined an organization that committed to donating at least 10% of its income and planned to donate most of his wealth throughout his life. His company FTX also allocated 1% of its income to charity. During the 2020 election, SBF personally donated $5.2 million to Biden, second only to Bloomberg. Even during market downturns, he still pledged to donate $1 billion through his foundation.

In daily life, SBF strictly practices this philosophy. He is a vegetarian, sleeps only 4 hours every night, and squeezes into a bean bag chair in the office. The billionaire shares an apartment with others, hardly drinks alcohol, and does not go on vacations. These behaviors seem to shape an image of a "good person," but the things that good people do are not necessarily right.

Short-sighted Expansion

SBF's success has a certain element of luck, coinciding with the upward cycle after 2018. Continuous profits and accumulated success have also inflated his ego, making him believe even more that effective altruism is the key to victory. To reinforce this belief, he needs more actions to prove himself.

However, charity, politics, and business expansion all require a large amount of funding. This explains why he has been constantly seeking financing at high valuations over the past two years, with the fundamental reason being a short-sighted mentality. Continuous expansion and cross-industry ventures require substantial real funds.

When the overall crypto market was sluggish, there was a severe shortage of capital reserves. In order to achieve goals quickly, SBF began to conceal the company's financial reports and used platform tokens as collateral. Even after the crisis broke out, he tried to spread false information, claiming there was $10 billion in reserves, which instead exposed his panic.

The departure of company executives also indicates that internal differences have emerged, foreseeing the difficulties that FTX may face. The leaked financial report was likely the work of internal personnel, aimed at preventing SBF from pushing FTX into a deeper abyss.

It has been proven that this "sacrificing the car to save the commander" strategy has a certain effect. FTT did not drop to zero like LUNA, but instead returned to the 2020 level, indicating that FTX still has a chance of recovery. CZ halted the acquisition plan early, and Justin Sun's contact with FTX may be an attempt to join forces against Binance. The U.S. regulators have also issued warnings to prevent market monopolies.

Reflection and Action

In the face of the crisis, SBF began to awaken and proactively reflect. He first apologized for not communicating promptly with investors regarding the Binance acquisition, stating that this issue would not be finalized immediately. In a letter to employees, SBF mentioned the possibility of joint capital injection through FTX and FTX US, attempting to regain confidence.

On social media, SBF posted a lengthy reflection: "I'm sorry, this is the most important thing. I messed up, I should have done better." In terms of specific actions, there are reports that SBF is seeking up to $9.4 billion in bailout financing.

Conclusion

Whether utilitarianism or effective altruism, for individuals, it is merely a tool of thought. Seeking only profit is unacceptable, and detachment from reality is equally undesirable. Effective altruists often feel immense happiness when practicing their theories, but they inevitably tend to be overly optimistic, neglecting real-world issues.

Fortunately, SBF has begun to put down this "chicken soup" that has been simmering for nearly twenty years and return to reality. His success is by no means accidental, and the fate of FTX is not a foregone conclusion. Whether SBF can truly transform and start anew remains to be seen.