Obligatory Sam Bankman-Fried Post

I have two lessons. There are more...but I have two.

If you’re not close to the tech or crypto world, it’s possible you may not have heard about the meltdown of FTX (the crypto currency exchange with all the Tom Brady, Larry David Super Bowl Commercials) and the scandalous ousting of founder and CEO Sam Bankman-Fried aka SBF. By now though, it’s pretty hard to imagine you’ve not heard at least something and wondered at least a little bit what it was. There’s plenty of places to get details by now. Here is a good one.

I sum it up for the continuity of this post:

A huge crypto exchange became insolvent and review of their finances showed significant gaps in accounting that would lead one to believe that the firm was much closer to a Ponzi scheme than anyone would have imagined. The CEO, the 30 year old son of two Stanford Law Professors SBF, who has graced the covers of magazines as the face of the future of money and tech, the next insert tech titan has melted down in ways that will make fodder for tabloids, criminal investigations and an eventual Michael Lewis book. By now, the entirety of the crypto and tech community has piled on. And it just keeps on playing out in strange social media posts and now public DM conversations.

Matt Levine’s very good post linked above

If you wrote a script like this, you wouldn’t be able to sell it because it’s both too unbelievable and entirely cliche at the same time. Which is hard to do. The details are still forming and they’re really too complex to lay out in a quick post like this. Moreover, the tech journo and newsletter world has this under control. They’ll be writing about this for the next thirty years.

Me? I have two lessons…and then I’m moving on.

First: The norms of responsibility matter. And not conforming to them alone is not a sign of genius. As we said in my old life, the uniform isn’t for the good days. It’s for the bad ones.

The world wanted SBF to be the quirky oddball genius that dressed like a grumpy 17 year old, never combed his hair and played video games while pitching to investors. They wanted those things to be evidence of a different way of thinking that would lead to him transforming the financial world. They wanted his roundabout “it’s complicated” answers to be deeper than we were in a way that only he could understand. We would catch up one day. But we weren’t there yet. In reality, they were shallower than we were. And in retrospect his mystical answers to direct questions also sounded like the exam essays one tries to write when they didn’t read the book.

While the piling on may make it seem that SBF was a sham through and through, devoid of useful thought, that’s not the case. His vision for what he wanted to create was compelling. It convinced some tremendously smart investment houses like Sequoia and Blackrock to invest. SBF saw a world powered by a sort of exchange that may one day transform the market places of the future. From there though, the norms we’ve established for the sorts of responsible adults required to run a large financial institution have to kick in. The discipline in the norms is also the discipline in building great things. This is counter to the mad genius narratives we like to spin.

We’re not all just winging it. And Einstein wasn’t a bad student.

The Steve Jobs and Elon Musks (my money is on Twitter being better 6 to 12 mos from now instead of worse) are notoriously weird people. Their personalities didn’t/don’t conform well to personal norms and that makes them, in many regards, kind of lousy people to be around. But the quirky non-conformity doesn’t extend into the building of new things. As notoriously odd as they are/were personally, they have extremely high standards for talent, product performance and the rules in which they run their organization. Tesla was early to declare work from home is over. Jobs put his staff at Apple under such pressure most mortals couldn’t handle it and he was left with a cult of unevenly productive managers that met absurdly efficient expectations. Spacex meets NASAs stringent quality and safety standards as they regularly launch rockets into outer space.

There is a bending of reality in the vision and expectations, but not in the work. Jobs’ reality distortion field, as his team referred to it when he would boldly say things with certainty that weren’t possible, wasn’t applied to the product outputs themselves or the company’s balance sheets. The products were real. The company’s performance was real. The work was real. The tag line was Think Different. It wasn’t work different. The work principles were surprisingly similar to the ones we’ve always had. Tim Cook, Jobs’ successor at Apple, is a procurement guy.

Here’s my point. When it comes to actually making things or building institutions, the people who really move the world forward are deeply, deeply committed to the work. To the norms. To the things that old successful stiffs believe. Have high standards. Don’t cut corners. There are no shortcuts. You can’t make something from nothing. This doesn’t mean new ideas or ways of working aren’t required. You can do things differently but not for different sake. It has to be different better. If you run a large financial institution it probably shouldn’t be run by a dozen kids on stimulants in a penthouse in the Bahamas because it has billions of dollars of people’s hard earned money in it. The balance sheet for FTX, by the way, ended up being a spreadsheet that looks like it was built by a dozen kids on stimulants in a penthouse in the Bahamas.

I was on a team that built a major SOCOM command out of a broom closet. And I’ve been on teams that have launched multiple successful software products. Those sound like very different things. And in function they are. But the process of creation was similar. First: A bold and clear vision. And then: Tons of tedious work. People who tell you that if you love your job you’ll never work a day in their life have never built something. You can love the vision. But if you love the work, all the work, there’s something wrong with you. You’ve got to do it anyway though. Insert common sense morality sayings about work and free lunches where appropriate.

The second lesson:

The humanities matter. (disclaimer: this is actually Hollis Robbins’ lesson, but I agree so much I’m willing to make it my own, with citation)

There’s one other point that I can’t seem to get away from. Things like FTX and crypto are part of the present and future world that’s been enabled by the amazing connectivity that technology has brought us over the last 40 years. It exists on Twitter and once did (sometimes still does) on Reddit and one day will more prominently on the blockchain. It’s a world enabled by acceleration in processing speed, automation and increasingly powerful machine learning and AI. The impact is that it decentralizes and broadens our focus. But, and this but keeps getting bigger for me the older I get and the longer I walk down this new path, it’s thin. Razor thin. And conspicuously devoid of the flesh and blood of human experience. There’s no literature in it. The stories that define us aren’t there. And there’s a cost to it.

It’s something I observed in 21st century warfare. As I was engaged in the battle chat rooms, reading daily networked intelligence reports and watching drone fed “kill tv” in preps for going out on missions in the dark viewed through the green glow of night vision without speaking to anyone other than my own team, I could feel it. I was living in ones and zeros. I was living in a video game. It left me starved for fine edges of the human experience. This was not Sigfried Sassoon’s muddy trenches bleeding the humanity of youth onto the soil in France. It was sterile in a way that led to a sort of rot. It was more than atrophy. I could feel myself sliding backwards.

What I did to stay connected with my own humanity wasn’t to connect online. That really wasn’t available. So I read the stories that define us. I read Moby Dick twice in a tent in East Africa. I felt Raskalnikov’s mania horrify me in Iraq. I ground through Cormac McCarthy in the bowels of a destroyer. There’s more to it than just romanticizing the humanities and the old ways. A murderer’s bloody sock and a doomed whaler tethered to his prey as the beast strangles him to death with the weight of the sea are things that live in me; no different than the make believe memories in Tyrel’s replicants yield a functioning being.

There’s basic utility to the humanities that we’re missing in the world right now. And it’s leaving us susceptible to the SBFs of the world. In the story that is your life there will be villains and heroes and con-men and love and heartbreak. How does one practice such things without the humanities? SBF was right. Problems are messy. People are messy. But solutions are not. And the gap between those things is the risk that floats around in the world that has always been and always will be.

That’s it; two lessons that the norms of work matter and so do the humanities are my lessons from the evolving SBF drama.