On March 28, Sam Bankman-Fried, founder of the collapsed cryptocurrency trading company FTX, was sentenced to 25 years for defrauding hundreds of thousands of people.
Two years ago, the media touted Bankman-Fried as a financial genius and an inspiring philanthropist. He was considered a boy wonder who was using his financial company to save the world. He was on top of the world and fervently preached the importance of effective altruistic philanthropy.
Bankman-Fried’s goal at FTX was to make as much money as possible to help as many people as possible, changing the future of our world.
Then, in November 2022, FTX, the second-largest cryptocurrency exchange in the world, collapsed. Customers, investors and lenders lost around 11 billion dollars almost overnight. The downfall was a direct result of mismanagement, lack of liquidity, high-risk investing and a large number of withdrawals.
The year leading up to FTX’s demise was nothing more than a shell game that ended with Bankman-Fried’s arrest on December 12, 2022.
Still, to this day, the collapse of FTX and the fall of Bankman-Fried leave the public scratching their heads, wondering how someone who tirelessly talked about investing as much as possible into charities that would change the world could defraud hundreds of thousands of people. It would be foolish to assign the blame for the FTX catastrophe to one or two causes but one place to start is with Effective Altruism, the core philosophy that Bankman-Fried promoted.
Effective Altruism is a philosophical and social movement that emerged at the beginning of the twenty-first century. It advocates using evidence-based practices and reason to determine how one can most benefit society.
The chief proponents of Effective Altruism are philosophers Peter Singer and William MacAskill. However, it has become prevalent among Silicon Valley executives, the Artificial Intelligence community, and even billionaires like Elon Musk and Dustin Moskovitz.
While the movement sounds like utilitarianism, it goes beyond Jeremy Bentham’s objectivist moral calculus, which gave all stakeholders equal moral weight in an attempt to maximize societal goods. Effective Altruism shifts away from asking “what should we do” and focuses on why or how one acts.
The idea is that it is not enough to just do good. One needs to focus on doing the best things. This has been described as the “80/20 Principle” of doing good.
In short, one gets 80% of their success from 20% of their work. Therefore, one should prioritize that 20% that is the most effective in achieving good.
Beyond that, Effective Altruism thinking is based on four pillars: prioritizing the most effective methods, the impartiality of stakeholders (everyone gets counted equally), commitment to open truth-seeking (the philosophy is not committed to a specific ideology, religion or community), and the need for a collaborative spirit (we achieve more by working together than apart).
While Effective Altruism is very similar to utilitarianism, it does not argue that one is always obligated to do good. It also does not equate “the good” with the sum total of the well-being of individuals or society.
Most of this sounds great and if nothing else, Effective Altruism should make us think about how we do good, how effective we are, and how we can do better.
Unfortunately, like many prominent philosophical movements, the problem arises when we apply it directly to real-world issues. Effective Altruism is plagued with some distinct weaknesses.
First, the philosophy places a heavy emphasis on maximum impact. This encourages focusing on “big results” projects with a significant “Wow!” factor. The problem is that “big results” projects also come with high risk. Frequent failures offset the few successes. This type of thinking was seen in the high level of risk-taking among Bankman-Fried and executives at FTX.
Second, proponents of Effective Altruism have a shallow understanding of what the “good” is. The movement’s collaborative nature defies a shared agreement on metaphysical concepts like “the good.” What is good for me may not be good for you. Advocates of Effective Altruism, like most utilitarians, end up focusing on the avoidance of suffering because they have no agreement as to what “the good” is. This limits a focus on more ethereal goods like freedom, beauty, nobility, or spirituality.
Finally, Effective Altruism commits the prophetic fallacy. In short, advocates are looking for how they can impact society in the here and now but, more importantly, far into the future.
It is very arrogant to think that humans can predict more than ten years into the future, let alone 100 or 1,000 years. This perspective skews thinking about how decisions impact people who live in the here and now.
Therefore, the problem with Effective Altruism is not its goal but its focus or emphasis. Advocates of the philosophy are tempted by the next big and shiny thing and fail to apply cognitive humility in their attempt to make society and the world better.
This grandiose and arrogant thinking is pervasive throughout the tech industry and contributed to the downfall of Samuel Bankman-Fried and FTX.
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Senior Staff Chaplain and Clinical Ethicist at the Baptist Health Medical Center in Little Rock, Arkansas.
